Registration No. 33-16494
File No. 811-5281
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. _____ / /
POST-EFFECTIVE AMENDMENT NO. 12 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X /
ACT OF 1940
AMENDMENT NO. 12 / X /
OPPENHEIMER CHAMPION HIGH YIELD FUND
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(Exact Name of Registrant as Specified in Charter)
3410 South Galena Street
Denver, Colorado 80231
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(Address of Principal Executive Offices)
303-671-3200
-----------------------------
(Registrant's Telephone Number)
Andrew J. Donohue, Esq.
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box):
/ / Immediately upon filing pursuant to paragraph (b) of Rule 485
/ X / On February 1, 1994 pursuant to paragraph (b) of Rule 485
/ / 60 Days after filing pursuant to paragraph (a) of Rule 485
/ / On ______________ pursuant to paragraph (a) of Rule 485
The Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 promulgated under the
Investment Company Act of 1940; a Rule 24f-2 Notice for the Registrant's
fiscal year ended September 30, 1993, was filed on November 23, 1993.
<PAGE>
FORM N-1A
OPPENHEIMER CHAMPION HIGH YIELD FUND
Cross Reference Sheet
--------------------------
Part A of
Form N-1A
Item No. Prospectus Heading
- -------- ---------------------
1 Cover Page
2 Fund Expenses
3 Financial Highlights
4 Front Cover Page; The Fund and Its Investment Policies; Special
Investment Methods; Investment Restrictions; Appendix: Description
of Ratings
5 Management of the Fund; Back Cover; Additional Information - The
Custodian and the Transfer Agent; Fund Expenses
6 Dividends, Distributions and Taxes; Additional Information;
Management of the Fund
7 How to Buy Shares; Exchanges of Shares and Retirement Plans; Fund
Expenses
8 How to Redeem Shares
9 *
Part B of
Form N-1A
Item No. Heading in Statement of Additional Information
- -------- ----------------------------------------------
10 Cover Page
11 Cover Page
12 [Prospectus: The Fund and Its Investment Policies]
13 Investment Objective and Policies; Investment Restrictions
14 Investment Management Services; Trustees and Officers
15 Investment Management Services; Trustees and Officers -
Major Shareholders
16 Investment Management Services; Distribution and Service Plans;
Additional
Information
17 Investment Management Services; Brokerage - Portfolio
Transactions
18 Additional Information - Description of the Fund
19 Purchase, Redemption and Pricing of Shares; Automatic Withdrawal
Plan Provisions; Letters of Intent
20 Performance, Dividend and Tax Information
21 Distribution and Service Plans; Additional Information - General
Distributor's Agreement
22 Performance, Dividend and Tax Information
23 Financial Statements
_____________
* Not applicable or negative answer.
<PAGE>
Oppenheimer Champion High Yield Fund
3410 South Galena Street, Denver, CO 80231
Telephone 1-800-525-7048
Oppenheimer Champion High Yield Fund (the "Fund") is a mutual fund with
the primary investment objective of seeking a high level of current income
by investing mainly in a diversified portfolio of high yielding, lower
rated, fixed-income securities believed by the Fund's investment manager
not to involve undue risk. As a secondary objective, the Fund seeks
capital growth when consistent with its primary objective. An investment
in the Fund does not constitute a complete investment program and is not
appropriate for persons unwilling or unable to assume the high degree of
risk associated with investing in high yield, lower rated securities.
The Fund offers two classes of shares which may be purchased at a
price equal to their respective net asset value per share, plus a sales
charge. The investor may elect to purchase shares with a sales charge
imposed (1) at the time of purchase (the "Class A shares"), or (2) on a
contingent deferred basis (the "Class C shares"). Class C shares are also
subject to an asset-based sales charge. The contingent deferred sales
charge will be imposed on most redemptions of Class C shares within 12
months of purchase. These alternatives permit an investor to choose the
method of purchasing shares that is more beneficial to that investor
depending on the amount of the purchase, the length of time the investor
expects to hold the shares and other circumstances. See"How To Buy
Shares - Alternative Sales Arrangements" below for further details.
This Prospectus sets forth concisely information about the Fund that
a prospective investor should know before investing. A Statement of
Additional Information about the Fund (the "Additional Statement") dated
February 1, 1994, has been filed with the Securities and Exchange
Commission ("SEC") and is available without charge upon request to
Oppenheimer Shareholder Services (the "Transfer Agent"), P.O. Box 5270,
Denver, Colorado 80217, or by calling the Transfer Agent at the toll-free
number shown above. The Additional Statement (which is incorporated in
its entirety by reference in this Prospectus) contains more detailed
information about the Fund and its management, including more complete
information about certain risk factors.
Investors are advised to read and retain this Prospectus for future
reference. These securities may be considered to be speculative. Shares
of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the FDIC or any other agency,
and involve investment risks, including the possible loss of principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus is effective February 1, 1994.
Table Of Contents
Page
Fund Expenses
Financial Highlights
The Fund and Its Investment Policies
Special Investment Methods
Investment Restrictions
Management of the Fund
How To Buy Shares
Alternative Sales Arrangements
Class A Shares
Class A Sales Charge Table
Class A Contingent Deferred Sales Charge
Reduced Sales Charges for Class A Purchases
Class A Service Plan
Class C Shares
Class C Contingent Deferred Sales Charge
Class C Distribution And Service Plan
Purchase Programs for Class A And Class C Shares
AccountLink
PhoneLink
Asset Builder Plans
How To Redeem Shares
Regular Redemption Procedures
Telephone Redemptions
Check Writing
Distributions from Retirement Plans
Automatic Withdrawal And Exchange Plans
Repurchase
Reinvestment Privilege
General Information on Redemptions
Exchanges of Shares And Retirement Plans
Dividends, Distributions And Taxes
Fund Performance Information
Additional Information
Appendix A: Bond Ratings
<PAGE>
Fund Expenses
The following table sets forth the fees that an investor in the Fund
might pay and the expenses paid by the Fund during its fiscal year ended
September 30, 1993.
Shareholder Transaction Expenses Class A Shares Class C Shares
--------------- --------------------
Maximum Sales Charge on Purchases
(as a percentage of offering price) 4.75% None
Sales Charge on Reinvested Dividends None None
Maximum Contingent Deferred Sales
Charge on Redemptions None(1) 1.0%(2)
Redemption Fee None None
Exchange Fee $5.00 $5.00
Annual Fund Operating Expenses (as a percentage of average net assets)
Class A Shares Class C Shares
---------------- ----------------
Management Fees .70% .70%
12b-1 (Distribution and/or
Service Plan) Fees .25% 1.00%
Other Expenses .29% .29%
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Total Fund Operating Expenses 1.24% 1.99%
_______________________
(1) Certain Class A share purchases of $1 million or more are not subject
to front-end sales charges, but a contingent deferred sales charge
(maximum of 1.0%) is imposed on the proceeds of such shares redeemed
within 18 months of the end of the calendar month of their purchase,
subject to certain conditions. See "How to Buy Shares -- Class A
Contingent Deferred Sales Charge," below.
(2) A 1.0% contingent deferred sales charge is imposed on the proceeds
of Class C shares redeemed within 12 months of their purchase,
subject to certain conditions. See "How to Buy Shares - Class C
Contingent Deferred Sales Charge," below.
The purpose of this table is to assist an investor in understanding
the various costs and expenses that an investor in the Fund will bear
directly (shareholder transaction expenses) or indirectly (annual fund
operating expenses). The sales charge rate shown for Class A shares is
the current maximum rate applicable to purchases of Class A shares of the
Fund. Investors in Class A shares may be entitled to reduced sales
charges based on the amount purchased or the value of shares already owned
and may be subject to a contingent deferred sales charge in limited
circumstances (see "How to Buy Shares - Class A Contingent Deferred Sales
Charge"). Class C shares were not publicly sold during the Fund's fiscal
year ended September 30, 1993. The "Annual Fund Operating Expenses" as
to Class C shares are estimates based on amounts that would have been
payable during that period assuming that Class C shares were outstanding
during such fiscal year. The actual amount of such fees and expenses in
the current and future years will depend on a number of factors, including
the actual average net assets of Class C shares during such years. "Other
Expenses" includes such expenses as custodial and transfer agent fees,
audit, legal and other business operating expenses, but excludes
extraordinary expenses. For further details, see "Dual Class Methodology"
and the Fund's financial statements, both included in the Additional
Statement.
The following examples apply the above-stated expenses and the
current maximum sales charges to a hypothetical $1,000 investment in
shares of the Fund over the time periods shown below, assuming a 5% annual
rate of return on the investment. The amounts shown below are the
cumulative costs of such hypothetical $1,000 investment for the periods
shown and, except as indicated in lines 3 and 4, assume that the shares
are redeemed at the end of each stated period.
1 year 3 years 5 years 10 years(1)
1. Class A Shares $60 $85 $112 $190
2. Class C Shares $30 $62 $107 $232
3. Class A Shares, assuming
no redemption $60 $85 $112 $190
4. Class C Shares, assuming
no redemption $20 $62 $107 $232
- -------------------------
(1) Long-term shareholders of Class C shares could pay the economic
equivalent, through the asset-based sales charge imposed on Class C
shares, of more than the maximum front-end sales charges permitted
under applicable regulatory requirements.
These examples should not be considered a representation of past or
future expenses or performance. Expenses are subject to change and actual
performance and expenses may be less or greater than those illustrated
above.
<PAGE>
Financial Highlights
Selected data for a Class A share of the Fund outstanding throughout each
period.
The information in the table below has been audited by Deloitte &
Touche, independent auditors, whose report on the financial statements of
the Fund for the fiscal year ended September 30, 1993, is included in the
Additional Statement. No Class C shares were publicly issued during this
period, and therefore no information on Class C shares is reflected in the
table below or in the Fund's other financial statements.
<TABLE>
<CAPTION>
Year Ended September 30,
1993 1992 1991 1990 1989 1988+++
<S> <C> <C> <C> <C> <C>
<C>
Per Share Operating Data:
Net asset value, beginning of period $ 12.26 $ 11.49 $ 10.46 $ 11.53 $ 12.10 $ 11.43
Income from investment operations:
Net investment income 1.22 1.41 1.45 1.43 1.42+ 1.24
Net realized and unrealized gain (loss) on .64 .77 1.04 (1.08) (.43) .67
investments and foreign currencies
Total income from investment operations 1.86 2.18 2.49 .35 .99 1.91
Dividends and distributions to shareholders:
Dividends from net investment income (1.22) (1.41) (1.46) (1.42) (1.42) (1.24)
Distributions from net realized gain on -- -- -- -- (.14) --
investments
Total dividends and distributions to (1.22) (1.41) (1.46) (1.42) (1.56) (1.24)
shareholders
Net asset value, end of period $ 12.90 $ 12.26 $ 11.49 $ 10.46 $ 11.53 $ 12.10
Total Return, at Net Asset Value** 15.92% 19.94% 25.62% 3.13% 8.53%
17.29%
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $104,465 $47,125 $16,044 $13,910 $20,642
$18,579
Average net assets (in thousands) $ 73,334 $28,270 $14,057 $17,163 $21,349
$11,116
Number of shares outstanding at end of 8,096 3,844 1,397 1,330 1,790 1,535
period (in thousands)
Ratios to average net assets:
Net investment income 9.52% 11.60% 13.49% 12.92% 11.87%
11.50%*
Expenses 1.24% 1.35% 1.49% 1.40% 1.19%+
1.05%*
Portfolio turnover rate++ 116.2% 121.5% 114.8% 67.8% 98.5%
31.6%
</TABLE>
*Annualized.
**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. Sales charges are not reflected in the total returns.
+Net investment income would have been $1.41 per share absent the
voluntary expense reimbursement, resulting in an expense ratio of 1.25%.
++The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
Purchases and sales of investment securities (excluding short-term
securities) for the year ended September 30, 1993 were $104,698,062 and
$72,960,299, respectively.
+++For the period from November 16, 1987 (commencement of operations) to
September 30, 1988.
<PAGE>
The Fund And Its Investment Policies
The Fund is an open-end, diversified management investment company
organized in 1987 as a Massachusetts business trust. Its primary
objective is to earn a high level of current income by investing mainly
in a diversified portfolio of high yielding, lower-rated, fixed-income
securities (such as long-term debt and preferred stock issues) believed
by the Fund's investment adviser, Oppenheimer Management Corporation (the
"Manager"), not to involve undue risk. Nevertheless, because the Fund may
invest in lower-rated securities without limit, the Fund's investments
should be considered speculative. As a secondary objective, the Fund
seeks capital growth when consistent with its primary objective. There
can be no assurance that the Fund will achieve its objectives. The Fund's
investment policies and practices described below are not "fundamental"
policies unless a particular policy is identified as "fundamental."
"Fundamental" policies are those that cannot be changed without the
approval of a "majority," as defined in the Investment Company Act of 1940
(the "Investment Company Act"), of the Fund's outstanding voting
securities. The Fund's Board of Trustees may change non-fundamental
policies without shareholder approval.
Consistent with its primary investment objective, the Fund
anticipates that under normal conditions at least 65% of the value of its
total assets will be invested in high yield, fixed-income securities.
These include 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 U.S. Treasury securities having the same
maturity. The Fund's remaining assets may be held in cash or cash
equivalents (commercial paper, Treasury bills and other short-term U.S.
Government securities maturing in less than one year), or invested in
common stock and other equity securities (such as warrants and rights)
when such investments are consistent with the Fund's investment objectives
or are acquired as part of a unit consisting of a combination of fixed-
income securities and equity investments.
Ratings of Portfolio Investments
The high yield and high income sought by the Fund are ordinarily
associated with securities in the lower rating categories of securities
rating services. Such securities are those rated "Baa" or lower by
Moody's Investors Service, Inc. ("Moody's") or "BBB" or lower by Standard
& Poor's Corporation ("Standard & Poor's"). The Fund may invest in
securities rated as low as "C" by Moody's or "D" by Standard & Poor's,
which ratings indicate that the obligations are highly speculative and may
be in default. The Manager does not rely solely on the ratings of rated
securities in making investment decisions but also evaluates other
economic and business factors affecting the issuer. Appendix A to this
Prospectus describes the rating categories of securities in which the Fund
may invest. The Fund may also invest in unrated securities which, in the
opinion of the Manager, offer yields and risks comparable to rated
securities in which the Fund may invest.
As of September 30, 1993, the Fund's portfolio included corporate
bonds in the following Standard & Poor's rating categories (the amounts
shown are the dollar-weighted average values of the bonds in each category
measured as a percentage of the Fund's total assets): AAA, 3.62%; AA,
none; A, .81%; BBB, 2.07%; BB, 9.31%; B, 30.26%; CCC, 3.73%; CC, .65%; C,
none; D, .95%; and unrated, 13.27%. If a bond was not rated by Standard
& Poor's but was rated by Moody's, it is included in the comparable
Standard & Poor's category. Bonds shown as unrated were not rated by
either Moody's or Standard & Poor's. The relative proportion of
securities in the Fund's portfolio in particular rating categories will
vary over time, and the proportions listed above should not be viewed as
representing the Fund's current or future proportionate ownership of
securities in particular rating categories.
Risks and Rewards of High Yield Securities
The primary advantage of high yield securities is their relatively
higher investment return. High yield bonds offer a higher yield to
maturity than bonds with higher ratings, as compensation for holding an
obligation that may be subject to greater risk. During periods of falling
interest rates, the values of outstanding fixed-income securities
generally rise. Conversely, during periods of rising interest rates, the
values of such securities generally decline. The magnitude of these
fluctuations will generally be greater for securities with longer
maturities. Those changes will affect the values of the Fund's portfolio
securities, and therefore its net asset value per share. Further, because
of their high coupon rates, high yield securities are generally less price
sensitive to changes in interest rates than U.S. Treasury Securities.
However, high yield securities, whether rated or unrated, may be subject
to greater market fluctuations and risks of loss of income and principal
and have less liquidity than lower yielding, higher-rated fixed-income
securities.
Some of the principal risks of high yield securities include: (i)
limited liquidity and secondary market support, (ii) substantial market
price volatility resulting from changes in prevailing interest rates,
(iii) subordination of the holder's claims to the prior claims of banks
and other senior lenders in bankruptcy proceedings, (iv) the operation of
mandatory sinking fund or call/redemption provisions during periods of
declining interest rates, whereby the holder might receive redemption
proceeds at times when only lower-yielding portfolio securities are
available for investment, (v) the possibility that earnings of the issuer
may be insufficient to meet its debt service, and (vi) the issuer's low
creditworthiness and potential for insolvency during periods of rising
interest rates and economic downturn. Some high yield bonds pay interest
in kind rather than in cash. See "Investment Objective and Policies" in
the Additional Statement for a further discussion of the effect of
interest rate changes and about the selection of portfolio securities for
the Fund.
As a result of the limited liquidity of high yield securities, their
prices have at times experienced significant and rapid decline when a
significant number of holders of high yield securities simultaneously
decided to sell them. A decline is also likely in the high yield bond
market during an economic downturn. An economic downturn or an increase
in interest rates could severely disrupt the market for high yield
securities and adversely affect the value of outstanding securities and
the ability of the issuers to repay principal and interest. In addition,
in recent years there have been several Congressional attempts to limit
the use or limit tax and other advantages of high yield bonds. If
enacted, such proposals could adversely affect the value of these
securities and consequently the Fund's net asset value per share. For
example, federally insured savings and loan associations have been
required to divest their investments in high yield securities.
Temporary Investments
Under unusual market or economic conditions, for temporary defensive
purposes, the Fund may invest up to 100% of its assets in: (i) obligations
issued or guaranteed by the U.S Government, its instrumentalities or
agencies, (ii) certificates of deposit, (iii) bankers' acceptances and
other bank obligations, (iv) commercial paper rated in the highest
category by an established rating agency, or (v) securities rated "Baa"
or higher by Moody's or "BBB" or higher by Standard & Poor's. In the
alternative, the Fund may hold its assets in cash or cash equivalents.
While the Fund holds assets in cash, it has no income from such assets
while expenses continue. The yield on securities selected for defensive
purposes generally will be lower than the yield on lower-rated, fixed-
income securities.
Foreign Securities
The Fund may purchase debt and equity securities (which may be
denominated in U. S. dollars or in non-U. S. currencies) of companies
organized under the laws of countries other than the United States and
debt securities of foreign governments, that are traded on foreign
securities exchanges or in the foreign over-the-counter markets. The Fund
has no restriction on the amount of its assets that may be invested in
foreign securities, although it presently does not intend that such
investments will exceed 25% of its net assets. Securities of foreign
issuers that are represented by American Depository Receipts, or that are
listed on a U.S. securities exchange, or are traded in the U.S. over-the-
counter market are not considered "foreign securities" for this purpose
because they are not subject to many of the special considerations and
risks (discussed below and in the Additional Statement) that apply to
foreign securities traded and held abroad.
The Fund may purchase securities issued in any country, developed or
underdeveloped, where the Manager believes there is a potential to achieve
the Fund's investment objectives. Investments in securities of issuers
in non-industrialized countries generally involve more risk and may be
considered highly speculative. The Fund may convert U.S. dollars into
foreign currency, but only to effect securities transactions on a foreign
securities exchange and not to hold such currency as an investment. If
the Fund's securities are held abroad, the countries in which such
securities may be held and the sub-custodians holding them must be
approved by the Fund's Board of Trustees under applicable SEC rules.
Investment in foreign securities involves considerations and risks not
associated with investment in securities of U.S. issuers. Some of the
risks are the following: the values of foreign securities may be affected
by the lack of information available as to foreign issuers, or by changes
in currency rates, exchange control regulations or currency blockage,
expropriation or nationalization of assets, foreign taxes (including
withholding taxes), changes in governmental administration or economic or
monetary policy in the U.S. or abroad, or changed circumstances in
dealings between nations. In addition, it is generally more difficult to
obtain court judgments outside the United States. See "Foreign
Securities" in the Additional Statement for more information about the
risks and possible rewards of investing in foreign securities.
Portfolio Turnover
Generally, the Fund will not trade for short-term profits, but when
circumstances warrant, to take advantage of differences in securities
prices and yields or of fluctuations in interest rates, the Fund may sell
securities without regard to the length of time held. As most purchases
made by the Fund are principal transactions at net prices, the Fund incurs
little or no brokerage costs. Short-term trading may affect the Fund's tax
status (see "Tax Status of the Fund", below). The average maturity of the
investments in the Fund's portfolio is expected to fall between 7 and 15
years. The Fund anticipates it will invest in securities of longer
maturity as interest rates decline, and securities of shorter maturity as
interest rates rise.
Warrants and Rights
As a matter of fundamental policy, the Fund may invest up to 5% of
its assets in warrants and rights. No more than 2% of its assets may be
invested in warrants and rights that are not listed on The New York or
American Stock Exchanges (other than those that have been acquired in
units or attached to other securities). For further information, see
"Warrants and Rights" in the Additional Statement.
Zero Coupon Securities
The Fund may invest in zero coupon securities issued by the U.S.
Treasury. Zero coupon Treasury securities are: (i) U.S. Treasury notes
and bonds that have been stripped of their unmatured interest coupons and
receipts or (ii) certificates representing interests in such stripped debt
obligations or coupons. The Fund may also invest in zero coupon
securities issued by corporations. Corporate zero coupon securities are:
(i) notes or debentures that do not pay current interest and are issued
at substantial discounts from par value, or (ii) notes or debentures that
pay no current interest until a stated date one or more years in the
future, after which the issuer is obligated to pay interest until
maturity, usually at a higher rate than if interest were payable from the
date of issuance. 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. Corporate zero coupon securities are also
subject to the risk of the issuer's failure to pay interest and to repay
principal in accordance with the terms of the obligation. 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 a
dividend that includes such accrued income, depending upon the proportion
of shareholders who elect to receive dividends in cash rather than
reinvesting dividends in additional shares of the Fund. The Fund might
also sell portfolio securities to maintain portfolio liquidity. In either
case, cash distributed or held by the Fund and not reinvested in Fund
shares will hinder the Fund in seeking a high level of current income.
Asset-Backed Securities
The Fund may invest in securities that represent undivided fractional
interests in pools of consumer loans, similar in structure to mortgaged-
backed securities described below. Payments of principal and interest on
the underlying obligations 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 priority to other securities of the borrower. The degree of
credit enhancement varies, and generally applies, until exhausted, to only
a fraction of the asset-backed security's par value. If the credit
enhancement of an asset-backed security held by the Fund has been
exhausted, and if any required payments of principal and interest are not
made with respect to the underlying loans, the Fund may then experience
losses or delays in receiving payment and a decrease in the value of the
mortgage-backed security. Further details are set forth in the Additional
Statement under "Investment Objective and Policies -- Asset-Backed
Securities."
Mortgage-Backed Securities and CMOs
The Fund's investments may include securities which represent
participation interests in pools of residential mortgage loans, including
collateralized mortgage-backed obligations ("CMOs"), which may be issued
or guaranteed by (i) agencies or instrumentalities of the U.S. Government
(e.g., Ginnie Maes, Freddie Macs and Fannie Maes) or (ii) private issuers.
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 that are
collateralized by a 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 Fund may also invest in CMOs that are "stripped";
that is, the security is divided into two parts, one of which receives
some or all of the principal payments and the other which receives some
or all of the interest. Stripped securities that receive interest only
are subject to increased volatility due to interest rate changes, and have
the additional risk that if the principal underlying the CMO is prepaid,
which is more likely to happen if interest rates fall, the Fund will lose
the anticipated cash flow from the interest on the mortgages that were
prepaid. See "Mortgage-Backed Securities" in the Additional Statement for
more details. The Fund may also enter into "forward roll" transactions
with banks with respect to the mortgage-backed securities in which it may
invest. The Fund would be required to place cash, U.S. Government
securities or other high-grade debt securities in a segregated account
with its Custodian in an amount equal to its obligation under the roll.
Further details are set forth in the Additional Statement under "Mortgage-
Backed Securities."
Special Investment Methods
Loans of Portfolio Securities
To attempt to increase its income and for liquidity purposes, the
Fund may lend its portfolio securities (other than in repurchase
transactions) to brokers, dealers and other financial institutions meeting
certain specified credit conditions if the loan is collateralized in
accordance with applicable regulatory requirements and if, after any loan,
the value of securities loaned does not exceed 25% of the value of the
Fund's total assets. In connection with securities lending, the Fund
might experience risks of delay in receiving additional collateral, or
risks of delay in recovery of the loaned securities, or loss of rights in
the collateral should the borrower fail financially. The Fund presently
does not intend that the value of securities loaned will exceed 5% of the
value of the Fund's total assets in the coming year. See "Loans of
Portfolio Securities" in the Additional Statement for further information
on securities loans.
Repurchase Agreements
The Fund may acquire securities subject to repurchase agreements to
generate income for liquidity purposes to meet anticipated redemptions,
or pending the investment of proceeds from sales of Fund shares or
settlement of purchases of portfolio investments. The Fund's repurchase
agreements will be fully collateralized. However, if the seller of the
securities fails to pay the agreed-upon repurchase price on the delivery
date, the Fund's risks may include the costs of disposing of the
collateral for the agreement and losses that might result from any delays
in foreclosing on the collateral. There is no limit on the amount of the
Fund's net assets that may be subject to repurchase agreements having a
maturity of seven days or less. The Fund will not enter into a repurchase
agreement that will cause more than 15% of its net assets to be subject
to repurchase agreements having a maturity of more than seven days. See
"Repurchase Agreements" in the Additional Statement for further details.
Restricted and Illiquid Securities
The Fund will not purchase or otherwise acquire any security that may
be illiquid by virtue of the absence of a readily available market or
because its disposition would be subject to legal restrictions
("restricted securities") if, as a result, more than 15% of its net assets
would be invested in securities that are illiquid (including participation
interests, repurchase agreements maturing in more than seven days, OTC
options held by the Fund, and that portion of assets used to cover such
options). This policy does not limit purchases of restricted securities
eligible for resale to qualified institutional investors pursuant to Rule
144A under the Securities Act of 1933 that are determined to be liquid by
the Board of Trustees, or the Manager under Board-approved guidelines.
Such guidelines take into account trading activity for such securities and
the availability of reliable pricing information, among other factors.
The Fund currently intends to invest no more than 10% of its net assets
in illiquid and restricted securities, excluding securities eligible for
resale pursuant to Rule 144A that are determined to be liquid by the Board
of Trustees or by the Manager under board-approved guidelines. If there
is a lack of trading interest in particular Rule 144A securities, the
Fund's holdings of those securities may be illiquid. There may be
undesirable delays and additional expenses in selling such securities at
prices representing their fair value; see "Restricted and Illiquid
Securities" in the Additional Statement for further details.
Participation Interests
The Fund may acquire participation interests in senior, fully-secured
floating rate loans that are made primarily to U.S. companies (the
"borrower"). Such participation interests, which may take the form of
interests in, or assignments of, the loan, are acquired from banks that
have made loans or are members of a lending syndicate. The Fund may
purchase only those participation interests that mature in one year or
less, or, if maturing in more than one year, that have a floating rate
that is automatically adjusted at least once every year according to a
specified rate for such investments, such as the percentage of a bank's
prime rate. Participation interests are primarily dependent upon the
creditworthiness of the borrower for payment of interest and principal.
Such borrowers may have difficulty making payments and may have senior
securities rated as low as "C" by Moody's or "D" by Standard & Poor's.
In the event the borrower fails to pay scheduled interest or principal
payments, the Fund could experience a reduction in its income and might
experience a decline in the net asset value of its shares. Further
details are set forth in the Additional Statement under "Participation
Interests."
Writing Covered Calls
The Fund may sell ("write") call options to generate income through
the receipt of premiums from expired calls and any net profits from
closing purchase transactions. The Fund may write call options on debt
securities as a matter of fundamental policy only if the calls are listed
on a domestic securities or commodities exchange or quoted on the
automated quotation system of the National Association of Securities
Dealers, Inc. ("NASDAQ"). The Fund may also write calls on Interest Rate
Futures (discussed below) which must be covered by deliverable securities
or by liquid assets (e.g., cash, U.S. Government securities or other high
grade debt securities) segregated with the Fund's custodian to satisfy the
Futures contract. There is no limit on the amount of the Fund's assets
that may be subject to calls. As a matter of fundamental policy, all
calls written by the Fund on debt securities and Interest Rate Futures
must be "covered" while the call is outstanding (the Fund must own the
investment subject to the call or other securities acceptable for
applicable escrow requirements).
Hedging
For hedging purposes, the Fund may use certain call and put options,
Interest Rate Futures (described below), Forward Contracts (defined below)
and options on Interest Rate Futures and foreign currencies. All of the
foregoing are referred to as "Hedging Instruments." Hedging Instruments
may be used to attempt to (1) protect against declines in the market value
of the Fund's portfolio (generally due to an increase in interest rates),
(2) protect unrealized gains or limit unrealized losses in the value of
portfolio securities, (3) facilitate selling securities for investment
reasons, (4) establish a position in the debt securities markets as a
temporary substitute for purchasing particular debt securities, or (5)
reduce the risk of adverse currency fluctuations. The Fund will not use
Hedging Instruments for speculation. The Hedging Instruments the Fund may
use are described below and in greater detail under "Hedging Instruments"
in the Additional Statement.
-Purchasing Calls. As a matter of fundamental policy, the Fund may
purchase call options on debt securities or Interest Rate Futures
(discussed below), if the calls are listed on a domestic securities or
commodities exchange or quoted on NASDAQ. The Fund may purchase calls to
protect against the possibility that the Fund's portfolio will not
participate fully in an anticipated rise in the value of debt securities.
The Fund may also purchase calls in "closing purchase transactions" to
terminate its call obligations.
-Puts on Securities. The Fund may write and purchase put options on
debt securities (and write covered calls) but, as a matter of fundamental
policy, only if: (i) after any such purchase, the value of all options
(puts and calls) held by the Fund would not exceed 5% of the Fund's total
assets, (ii) the put is listed on a domestic securities or commodities
exchange or quoted on NASDAQ, and (iii) any put written on debt securities
is covered by segregated liquid assets with not more than 50% of the
Fund's assets subject to puts. In addition, puts on debt securities may
be written in the over-the-counter market. As a matter of fundamental
policy, the Fund will not write puts on Interest Rate Futures.
-Interest Rate Futures. The Fund may buy and sell certain futures
contracts, but, as a matter of fundamental policy, only if they relate to
debt securities ("Interest Rate Futures"). Interest Rate Futures obligate
the seller to deliver (and the purchaser to take) a specific type of debt
security at a specific future date for a fixed price. That obligation may
be satisfied by actual delivery of that security or by entering into an
offsetting contract to close out the futures position. At present, the
Fund does not intend to enter into Futures contracts and options on
Futures, if, after any such purchase, the sum of margin deposits on
Futures and premiums paid on Futures options would exceed 5% of the Fund's
total assets.
-Foreign Currency Options. The Fund may purchase and write puts and
calls on foreign currencies that are traded on a securities or commodities
exchange or quoted by major recognized dealers in such options, for the
purpose of protecting against declines in the dollar value of foreign
securities and against increases in the dollar cost of foreign securities
to be acquired. If a rise is anticipated in the dollar value of a foreign
currency in which securities to be acquired are denominated, the increased
cost of such securities may be partially offset by purchasing calls or
writing puts on that foreign currency. If a decline in the dollar value
of a foreign currency is anticipated, the decline in value of portfolio
securities denominated in that currency may be partially offset by writing
calls or purchasing puts on that foreign currency. However, in the event
of currency rate fluctuations adverse to the Fund's position, the Fund
would lose the premium it paid and transactions costs.
-Forward Contracts. The Fund may enter into foreign currency
exchange contracts ("Forward Contracts"), which obligate the seller to
deliver and the purchaser to take a specific amount of foreign currency
at a specific future date for a fixed price. The Fund may enter into a
Forward Contract in order to "lock in" the U.S. dollar price of a security
denominated in a foreign currency which it has purchased or sold but which
has not yet settled, or to protect against a possible loss resulting from
an adverse change in the relationship between the U.S. dollar and a
foreign currency. There is a risk that use of Forward Contracts may
reduce gain that would otherwise result from a change in the relationship
between the U.S. dollar and a foreign currency. Forward Contracts include
standardized foreign currency futures contracts which are traded on
exchanges and are subject to procedures and regulations applicable to
other Futures. The Fund may also enter into a Forward Contract to sell
a foreign currency denominated in a currency other than that in which the
underlying security is denominated. This is done in the expectation that
there is a greater correlation between the foreign currency of the Forward
Contract and the foreign currency of the underlying investment than
between the U.S. dollar and the currency of the underlying investment.
This technique is referred to as "cross hedging." The Fund may also
cross-hedge by entering into a Forward Contract to sell a foreign currency
and receive a second foreign currency, both of which differ from the
foreign currency in which the underlying security is denominated. This
is done in the expectation that there is a greater correlation between the
foreign currencies of the Forward Contract and the foreign currency of the
underlying investment than between the U.S. dollar and the foreign
currency of the underlying investment. The success of cross hedging is
dependent on many factors, including the ability of the Manager to
correctly identify and monitor the correlation between foreign currencies
and the U.S. dollar. To the extent that the correlation is not identical,
the Fund may experience losses or gains on both the underlying security
and the cross currency hedge.
The Fund will not speculate in Forward Contracts. There is no
limitation as to the percentage of the Fund's assets that may be committed
to foreign currency exchange contracts. The Fund does not enter into such
Forward Contracts or maintain a net exposure in such contracts to the
extent that the Fund would be obligated to deliver an amount of foreign
currency in excess of the value of the Fund's assets denominated in that
currency or enter into a "cross hedge" unless it is denominated in a
currency or currencies that the Manager believes will have price movements
that tend to correlate closely with the currency in which the investment
being hedged is denominated. See "Tax Aspects of Hedging Instruments and
Covered Calls" in the Additional Statement for a discussion of the tax
treatment of Forward Contracts.
- Interest Rate Swap Transactions. The Fund may enter into interest
rate swaps. In an interest rate swap, the Fund and another party exchange
their respective commitments to pay or receive interest on a security,
(e.g., an exchange of floating rate payments for fixed rate payments).
The Fund will not use interest rate swaps for leverage. Swap transactions
will be entered into only as to security positions held by the Fund. The
Fund may not enter into swap transactions with respect to more than 50%
of its total assets.
The Fund will segregate liquid assets (e.g., cash, U.S. Government
securities or other appropriate high grade debt obligations) equal to the
net excess, if any, of its obligations over its entitlements under the
swap and will mark that amount daily. See "Covered Calls and Hedging --
Interest Rate Swap Transactions" in the Additional Statement for details.
-Risks of Options and Futures Trading. "Hedging Instruments" in the
Additional Statement contains further information about the
characteristics, risks, tax effects, and possible benefits of options,
Forward Contracts, Interest Rate Futures and options on such Futures, and
the Fund's other limitations (which are not fundamental policies) on
investment in such Futures and options thereon. There are certain risks
in writing calls and puts. If a call written by the Fund is exercised,
the Fund forgoes any profit from any increase in the market price above
the call price of the underlying security on which the call was written.
In addition, the Fund could experience capital losses which might cause
previously distributed short-term capital gains to be re-characterized as
a non-taxable return of capital to shareholders. In writing puts, there
is a risk that the Fund may be required to take delivery of the underlying
security at a disadvantageous price. The principal risks of Futures
trading are: (i) possible imperfect correlation between the prices of the
Futures and the market value of the Fund's portfolio securities, (ii)
possible lack of a liquid secondary market for closing out a Futures
position, (iii) the need for additional skills and techniques beyond those
required for normal portfolio management, and (iv) losses on Futures
resulting from interest rate movements not anticipated by the Manager.
Investment Restrictions
The Fund has certain investment restrictions which, together with its
investment objectives, are fundamental policies. Under some of those
restrictions, the Fund cannot: (1) buy securities issued or guaranteed
by any one issuer (except the U.S. Government or any of its agencies or
instrumentalities) if, with respect to 75% of its total assets, more than
5% of the Fund's total assets would be invested in securities of that
issuer, or the Fund would then own more than 10% of that issuer's voting
securities; (2) borrow money in excess of 10% of the value of its assets
(the Fund may borrow only as a temporary measure for emergency purposes)
or make any investment at a time during which borrowing exceeds 5% of the
value of its assets; (3) concentrate investments to the extent of 25% of
its assets (at the time of investment) in any industry (there is no
limitation, however, as to investments in obligations issued by the U.S.
Government or any of its agencies or instrumentalities); for purposes of
this limitation, utilities will be divided into "industries" according to
their services (e.g., gas, gas transmission, electric and telephone
utilities will each be considered a separate industry); (4) make loans,
except through the purchase of portfolio securities subject to repurchase
agreements or through loans of portfolio securities as described above
under "Loans of Portfolio Securities"; (5) invest in commodities or
commodity contracts; however, the Fund may buy and sell any of the Hedging
Instruments which it may use as permitted by any of its other policies,
whether or not such Hedging Instrument is considered to be a commodity or
commodity contract, subject to the restrictions and limitations stated
under "Hedging" in this Prospectus; or (6) invest more than 5% of the
Fund's net assets in securities of companies (including predecessors) that
have operated less than three years. The percentage restrictions
described above and in the Additional Statement apply only at the time of
investment and require no action by the Fund as a result of subsequent
changes in value of the investment or the size of the Fund. A
supplementary list of investment restrictions is contained in "Investment
Restrictions" in the Additional Statement, which also contains further
information regarding the Fund's investment policies.
Management Of The Fund
The Fund's Board of Trustees has overall responsibility for the
management of the Fund under the laws of Massachusetts governing the
responsibilities of trustees of business trusts. Subject to the authority
of the Board of Trustees, the Manager is responsible for day-to-day
management of the Fund's business, supervises the investment operations
of the Fund and the composition of its portfolio and furnishes the Fund
advice and recommendations with respect to investments, investment
policies and the purchase and sale of securities pursuant to an investment
advisory agreement with the Fund (the "Agreement"). The monthly
management fee payable to the Manager under the terms of the Agreement is
computed as a percentage of the Fund's aggregate net assets as of the
close of business each day at the following annual rate: 0.70% of the
first $250 million of net assets, 0.65% of the next $250 million of net
assets, 0.60% of the next $500 million of net assets, and 0.55% of net
assets in excess of $1 billion. The Agreement contains provisions
relating to portfolio transactions, including the selection of brokers and
dealers when used for such transactions. Subject to the Agreement, the
Manager may consider sales of shares of the Fund and other funds advised
by the Manager or its affiliates as a factor in the selection of brokers
or dealers for the Fund's portfolio transactions. "Investment Management
Services" in the Additional Statement contains more information about the
Agreement, including a description of expense assumption arrangements,
exculpation provisions and brokerage practices of the Fund.
Ralph W. Stellmacher is a Senior Vice President of the Manager who
serves as the Portfolio Manager and a Vice President of the Fund. Since
the Fund's inception in November, 1987, he has been the person primarily
responsible for the day-to-day management of the Fund's portfolio. During
the past five years, Mr. Stellmacher has also served as an officer and
portfolio manager for other OppenheimerFunds. For more information about
the Fund's other officers and Trustees, see "Trustees and Officers" in the
Additional Statement.
The Manager has operated as an investment adviser since April 30,
1959. The Manager and its affiliates currently advise U.S. investment
companies with assets aggregating over $25 billion as of September 30,
1993, and having more than 1.8 million shareholder accounts. The Manager
is owned by Oppenheimer Acquisition Corp., a holding company owned in part
by senior management of the Manager, and ultimately controlled by
Massachusetts Mutual Life Insurance Company, a mutual life insurance
company that also advises pension plans and investment companies.
How To Buy Shares
Alternative Sales Arrangements
Two classes of shares of the Fund are offered under the Fund's
"Alternative Sales Arrangements." The investor may elect to purchase
shares with a sales charge imposed (i) at the time of purchase or on a
contingent deferred basis on redemption of shares purchased in amounts
over $1 million (the "Class A shares"), or (ii) on a contingent deferred
basis (the "Class C shares"). The contingent deferred sales charge will
be imposed on most redemptions of Class C shares within 12 months of
purchase. The Alternative Sales Arrangements permit an investor to choose
the method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor
expects to hold shares and other relevant circumstances. The Fund's
distributor, Oppenheimer Funds Distributor, Inc. (the "Distributor"), will
not knowingly accept any order for $1 million or more of Class C shares
of one or more of the "Eligible Funds" listed below in "Right of
Accumulation," on behalf of a single investor (not including dealer
"street name" or omnibus accounts) because it will generally be more
advantageous for such investors to purchase Class A shares of such
Eligible Fund(s) instead. Investors should understand that the purpose
and function of the deferred sales charge and asset-based sales charge
with respect to Class C shares are the same as those of the initial sales
charge with respect to Class A shares. Any financial intermediaries or
other person entitled to receive compensation for selling or servicing
Fund shares may receive different compensation with respect to one class
of shares than the other.
The two classes of shares each represent an interest in the same
portfolio of investments of the Fund. However, as described in this
Prospectus, each class has different shareholder privileges and features.
The net income attributable to Class C shares and the dividends payable
on Class C shares will be reduced by incremental expenses borne solely by
that class, including the asset-based sales charge to which Class C shares
are subject. For further information, see "Purchase, Redemption and
Pricing of Shares" in the Additional Statement.
The Fund's shares of either class may be purchased through any dealer
or broker which has a sales agreement with the Distributor, a subsidiary
of the Manager. There are two ways to make an initial investment: either
(1) complete an OppenheimerFunds New Account Application and mail it with
payment to the Distributor at P.O. Box 5270, Denver, Colorado 80217 (if
no dealer or broker is named in the Application, the Distributor will be
listed as the dealer of record), or (2) order the shares through your
dealer or broker. Be certain to specify whether you intend to purchase
Class A shares or Class C shares. If no such instructions are provided,
initial investments will be made in Class A shares and subsequent
investments will be made in the same class as the most recent previous
investment.
The minimum initial investment is $1,000, except as otherwise
described in this Prospectus. Subsequent purchases must be at least $25,
and may be made (1) through authorized dealers or brokers, (2) by
forwarding payment to the Distributor at the above address with the names
of all account owners, the account number and the name of the Fund, (3)
automatically through Asset Builder Plans, or (4) by telephone using
AccountLink described below. Under an Asset Builder Plan, Automatic
Exchange Plan, 403(b)(7) custodial plan or military allotment plan,
initial and subsequent investments must be at least $25. The minimum
initial and subsequent purchase requirements are waived on purchases made
by reinvesting dividends from any of the "Eligible Funds" listed in "Right
of Accumulation" below, or by reinvesting distributions from unit
investment trusts for which reinvestment arrangements have been made with
the Distributor. No share certificates will be issued for Class C shares,
and no share certificates will be issued for Class A shares unless
specifically requested in writing by an investor or the dealer or broker.
The net asset value per share of each class is determined as of 4:00
P.M. (all references to time in this Prospectus mean New York time) each
day The New York Stock Exchange is open (a "regular business day") by
dividing the value of the Fund's net assets attributable to that class by
the number of shares of that class outstanding. The Fund's Board of
Trustees has established procedures for valuing the Fund's securities.
In general, those valuations are based on market value, with special
provisions for: (i) securities (including restricted securities) not
having readily-available market quotations, (ii) short-term debt
securities and (iii) covered calls and Hedging Instruments. Further
details are in "Purchase, Redemption and Pricing of Shares" in the
Additional Statement. The net asset values per share of Class A and Class
C shares are expected to be substantially the same; however, from time to
time the net asset values of each class may differ due to differences in
expenses borne by each class, as discussed under "Dual Class Methodology"
in the Additional Statement.
All purchase orders received by the Distributor at its office in
Denver, Colorado prior to 4:00 P.M. on a regular business day are
processed at that day's offering price. However, an order received by the
Distributor from a dealer or broker after the offering price is determined
that day will receive such offering price if the order was received by the
dealer or broker from its customer prior to 4:00 P.M., and was transmitted
to and received by the Distributor prior to its close of business that day
(normally 5:00 P.M.). Purchase orders received on other than a regular
business day will be executed on the next regular business day. The
Distributor, in its sole discretion, may accept or reject any order for
purchase of the Fund's shares. 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 the Fund's best interest to do so.
Class A Shares
Class A Shares are sold at their offering price, which (as that term
is used in this Prospectus and the Additional Statement) is net asset
value plus a front-end sales charge, except that as to certain purchases
described below that are not subject to a front-end sales charge, the
offering price is net asset value. The offering price is determined as
of 4:00 P.M. each regular business day.
The table below shows the regular front-end sales charge rates for
Class A shares for a "single purchaser" (defined below), together with the
dealer discounts paid to authorized dealers and the agency commissions
paid to authorized brokers (collectively, "commissions"):
Front-End
Front-End Sales Charge as Commission
Sales Charge as Approximate as Percentage
Percentage of Percentage of of Offering
Amount of Purchase Offering Price Amount Invested Price
- ------------------ --------------- ------------------- ----------
Less than $50,000 4.75% 4.98% 4.00%
$50,000 or more
but less than $100,000 4.50% 4.71% 3.75%
$100,000 or more
but less than $250,000 3.50% 3.63% 2.75%
$250,000 or more
but less than $500,000 2.50% 2.56% 2.00%
$500,000 or more
but less than $1 million 2.00% 2.04% 1.60%
$1 million or more None* None* None*
- --------------------------------------
*See "Class A Contingent Deferred Sales Charge," below.
Under certain circumstances, commissions up to the amount of the
entire sales charge may be paid to dealers or brokers, who then may be
deemed to be "underwriters" as defined in the Securities Act of 1933.
Commission rates may vary among the funds for which the Manager and its
affiliates act as investment advisers.
The Distributor may advance up to 13 months' commissions to dealers
that have entered into special arrangements with the Distributor as to
purchases made by their clients under Oppenheimer Asset Builder Plans.
If a registered representative of a securities dealer sells more than $2.5
million of Class A shares of "Eligible Funds" other than "Money Market
Funds" (as that term is defined below) in a calendar year, the dealer firm
is eligible to send such representative, with a guest, to a three-day
sales conference (generally held in a resort), if one is sponsored and
held by the Distributor; or in lieu of sending such representative, that
firm may, at its option, receive the equivalent cash value of such award
as additional commission. The Distributor may, from time to time, enter
into arrangements with specific dealers whereby the Distributor may make
additional payments to that dealer based, in part, on that dealer meeting
certain sales criteria. Such additional payments may be based on sales
for a specific period of time, shares of certain or all of the "Eligible
Funds" held by the dealer and/or its customers or some combination
thereof.
Dealers whose sales of Class A shares of "Eligible Funds" other than
"Money Market Funds" under OppenheimerFunds-sponsored 403(b)(7) custodial
plans exceed a rate of $5 million per year, calculated per calendar
quarter, will receive monthly one-half of the Distributor's retained
commissions on such sales. Dealers whose sales of such plans exceed a
rate of $10 million per year, calculated per calendar quarter, will
receive the Distributor's entire retained commission on such sales.
-Class A Contingent Deferred Sales Charge. On certain purchases of
Class A shares of any one or more "Eligible Funds" by a "single purchaser"
(both terms are defined below in "Right of Accumulation") aggregating $1
million or more, the Distributor will pay authorized dealers a commission
equal to the sum of 1.0% of the first $2.5 million, 0.50% of the next $2.5
million and 0.25% of share purchases in excess of $5 million. However,
that commission will be paid only on the amount of those share purchases
in excess of $1 million that were not previously subject to a front-end
sales charge and dealer commission (the shares with respect to which this
commission is paid are called "Class A CDSC Shares"). A contingent
deferred sales charge (the "Class A CDSC") will be deducted from the
redemption proceeds of Class A CDSC Shares redeemed within 18 months of
the end of the calendar month of their purchase. The Class A CDSC shall
be an amount equal to 1.0% of the lesser of either (1) the aggregate net
asset value of the Class A CDSC shares (which does not include shares
acquired by reinvestment of dividends or capital gains distributions) or
(2) the original cost of the shares. However, the total Class A CDSC paid
on the redemption of those shares shall not exceed the aggregate
commissions paid to dealers on all Class A CDSC Shares of all Eligible
Funds purchased by that single purchaser.
The Class A CDSC does not apply to purchases at net asset value
described in "Other Circumstances" below and will be waived in the case
of redemptions of shares made for: (i) retirement distributions (or loans)
to participants or beneficiaries from retirement plans qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code") or from Individual Retirement Accounts ("IRAs"),
403(b)(7) plans, deferred compensation plans created under Section 457 of
the Internal Revenue Code or other employee benefit plans (collectively,
"Retirement Plans"); (ii) returns of excess contributions to such
Retirement Plans; (iii) Automatic Withdrawal Plan payments limited to no
more than 12% of the original account value annually; and (iv) involuntary
redemptions of shares by operation of law or under procedures set forth
in the Fund's Declaration of Trust or as adopted by the Board of Trustees
(collectively, "Involuntary Redemptions"). See "Transfer of Shares" in
"Purchase, Redemption and Pricing of Shares" in the Additional Statement
for further details.
Some or all of the proceeds of redeemed shares on which a Class A
CDSC was paid at the time of redemption and which are subsequently
reinvested under the "Reinvestment Privilege" (described below) may be
reinvested within 6 months of redemption without sales charge at net asset
value on the reinvestment date if the investor notifies the Distributor
that the privilege applies. Additionally, no Class A CDSC is charged on
exchanges, pursuant to the Fund's Exchange Privilege (described below),
of shares purchased subject to a Class A CDSC, except that if the Class
A shares acquired by exchange are redeemed within 18 months of the end of
the calendar month of the initial purchase of the exchanged shares, the
Class A CDSC will apply. In determining whether a Class A CDSC is
payable, and the amount of any such Class A CDSC, shares not subject to
a Class A CDSC are redeemed first, including shares purchased by
reinvestment of dividends and capital gains distributions, and then other
shares are redeemed in the order of purchase.
-Reduced Sales Charges for Class A Purchases. The sales charge rates
in the above table may be reduced as follows:
Right of Accumulation. In calculating the sales charge rate
applicable to current purchases of Class A shares, a "single purchaser"
(defined below) is entitled to cumulate current purchases with the greater
of: (1) amounts previously paid for, or (2) the current value (at offering
price) of Class A shares of certain other "Eligible Funds" and of the Fund
if sold subject to an initial sales charge and if the investment is still
held in one of the Eligible Funds. The Eligible Funds are those for which
the Distributor or an affiliate acts as the distributor and include the
following: (i) the Fund, Oppenheimer Time Fund, Oppenheimer Target Fund,
Oppenheimer Tax-Free Bond Fund, Oppenheimer New York Tax-Exempt Fund,
Oppenheimer California Tax-Exempt Fund, Oppenheimer High Yield Fund,
Oppenheimer U.S. Government Trust, Oppenheimer Total Return Fund, Inc.,
Oppenheimer Asset Allocation Fund, Oppenheimer Mortgage Income Fund,
Oppenheimer Discovery Fund, Oppenheimer Global Bio-Tech Fund, Oppenheimer
Global Environment Fund, Oppenheimer Global Growth & Income Fund,
Oppenheimer Pennsylvania Tax-Exempt Fund, Oppenheimer Global Fund,
Oppenheimer Fund, Oppenheimer Special Fund, Oppenheimer Equity Income
Fund, Oppenheimer Gold & Special Minerals Fund, Oppenheimer Investment
Grade Bond Fund, Oppenheimer Value Stock Fund, Oppenheimer Intermediate
Tax-Exempt Bond Fund, Oppenheimer Insured Tax-Exempt Bond Fund,
Oppenheimer Government Securities Fund, Oppenheimer Main Street Income &
Growth Fund, Oppenheimer Main Street California Tax-Exempt Fund,
Oppenheimer Florida Tax-Exempt Fund, Oppenheimer Strategic Income Fund,
Oppenheimer Strategic Income & Growth Fund, Oppenheimer Strategic
Investment Grade Bond Fund, Oppenheimer Strategic Short-Term Income Fund
and (ii) the following "Money Market Funds": Centennial Money Market
Trust, Centennial Tax Exempt Trust, Centennial Government Trust,
Centennial New York Tax Exempt Trust, Centennial California Tax Exempt
Trust, Centennial America Fund, L.P., Oppenheimer Money Market Fund, Inc.,
Daily Cash Accumulation Fund, Inc., Oppenheimer Cash Reserves and
Oppenheimer Tax-Exempt Cash Reserves. There is an initial sales charge
on the purchase of Class A shares of each Eligible Fund except Money
Market Funds (under certain circumstances described herein, redemption
proceeds of Money Market Fund shares may be subject to a CDSC). The
reduced sales charge applies only to current purchases.
The term "single purchaser" refers to: (i) an individual; (ii) an
individual and spouse purchasing shares of the Fund for their own account
or for trust or custodial accounts for their minor children; or (iii) a
fiduciary purchasing for any one trust, estate or fiduciary account,
including employee benefit plans created under Sections 401 or 457 of the
Internal Revenue Code, including related plans of the same employer. To
be entitled to a reduced sales charge under the Right of Accumulation, at
the time of purchase the purchaser must ask the Distributor for such
entitlement and provide the account number(s) for shares of Eligible Funds
owned by the "single purchaser," and the age of any minor children for
whom shares are held.
Letter of Intent. By initially investing at least $1,000 and
submitting a Letter of Intent (the "Letter") to the Distributor, a "single
purchaser" may purchase Class A shares of the Fund and other Eligible
Funds (other than the Money Market Funds) during a 13-month period at the
reduced sales charge rates, or at net asset value but subject to the Class
A CDSC, if applicable, applying to the aggregate amount of the intended
purchases stated in the Letter. The Letter may apply to purchases made
up to 90 days before the date of the Letter. The Fund and the Distributor
reserve the right to amend or terminate such program at any time without
prior notice. For further details, including escrow requirements, see
"Letter of Intent" in the Additional Statement.
Other Circumstances. No sales charge is imposed on Class A shares
of the Fund: (i) sold to the Manager or its affiliates, or to present or
former officers, trustees or directors and employees (and their "immediate
families," as defined in "Reduced Sales Charges" in the Additional
Statement) of the Fund, the Manager and its affiliates, and to retirement
plans established by them for employees; (ii) issued in plans of
reorganization, such as mergers, asset acquisitions and exchange offers,
to which the Fund is a party; (iii) sold to registered investment
companies or to separate accounts of insurance companies having an
agreement with the Manager or the Distributor; (iv) sold to dealers or
brokers that have a sales agreement with the Distributor, for their own
account or for retirement plans for their employees, or sold to employees
(and their spouses) of such dealers or brokers, or of banks, savings and
loan associations or credit unions that have entered into a sales
agreement with such dealer or broker or the Distributor (and are
identified to the Distributor by such dealer or broker); the purchasers
must certify to the Distributor at the time of purchase that such purchase
is for their own account (or for the benefit of such employees' spouse or
minor children); (v) sold to dealers, brokers or registered investment
advisers that have entered into an agreement with the Distributor
providing specifically for the use of shares of the Fund in particular
investment products made available to the clients of the dealer, broker
or registered investment adviser; or (vi) purchased by the reinvestment
of (a) loan repayments by a participant in a retirement plan for which the
Manager or its affiliates act as sponsor, or (b) dividends or other
distributions reinvested from the Fund or other "Eligible Funds" (other
than the Cash Reserves Funds) or unit investment trusts for which
reinvestment arrangements have been made with the Distributor. "Reduced
Sales Charges" in the Additional Statement discusses this policy.
-Class A Service Plan. The Fund has adopted a Service Plan (the
"Class A Plan") under Rule 12b-1 of the Investment Company Act pursuant
to which the Fund will reimburse the Distributor quarterly for a portion
of its costs incurred in connection with the personal service and
maintenance of accounts that hold Class A shares. The Distributor will
use such fees received from the Fund in their entirety: (i) to compensate
brokers, dealers, banks and other institutions ("Recipients") each quarter
for providing personal service and maintenance of accounts that hold Class
A shares; and (ii) to reimburse itself (to the extent authorized by the
Board of Trustees) for its other expenditures under the Plan and its
direct costs for personal service and maintenance of accounts. The Board
of Trustees has not presently authorized any reimbursement to the
Distributor under (ii) above. The services to be provided under the
Class A Plan include, but shall not be limited to, the following:
answering routine inquiries from the Recipient's customers concerning the
Fund, providing such customers with information on their investment in
Class A shares, assisting in the establishment and maintenance of accounts
or sub-accounts in the Fund, making the Fund's investment plans and
dividend payment options available, and providing such other information
and customer liaison services and the maintenance of accounts as the
Distributor or the Fund may reasonably request.
The Distributor will be reimbursed only for quarterly payments
made to each Recipient at a rate not to exceed 0.0625% (0.25% annually)
of the aggregate net asset value of Class A shares owned by the Recipient
or its customers. The Class A Plan has the effect of increasing annual
expenses of the Fund by up to 0.25% of its average annual net assets.
Class C Shares
Class C Shares are sold at net asset value per share without the
imposition of a sales charge at the time of purchase.
-Class C Contingent Deferred Sales Charge. A contingent deferred
sales charge (the "Class C CDSC") will be deducted from the redemption
proceeds of Class C shares redeemed within 12 months of their purchase
(not including shares purchased by reinvestment of dividends or capital
gains). The Class C CDSC shall be an amount equal to 1.0% of the lesser
of the then net asset value or the original purchase price of the Class
C shares being redeemed. Accordingly, no Class C CDSC will be imposed on
amounts representing increases in net asset value above the initial
purchase price (including increases due to reinvestment of dividends or
capital gains). In determining whether a Class C CDSC is payable and the
amount of any such CDSC, shares not subject to a CDSC are redeemed first,
including shares purchased by reinvestment of dividends and capital gains
distributions, and then other shares are redeemed in the order of
purchase.
Proceeds from the Class C CDSC are paid to the Distributor to
reimburse it for its expenses related to providing distribution-related
services to the Fund in connection with the sale of Class C Shares. The
combination of the Class C CDSC and the distribution fee retained by the
Distributor (as described under "Class C Distribution and Service Plan")
facilitates the sale of Class C Shares without a sales charge being
deducted at the time of purchase.
In determining the amount of the Class C CDSC that applies, all
purchases shall be considered as having been made on the first regular
business day of the month in which the purchase was made. The Class C
CDSC will be waived upon the request of the shareholder for redemptions
made for: (1) distributions to participants or beneficiaries from
Retirement Plans, which distributions are made either (a) under an
Automatic Withdrawal Plan (described under "How to Redeem Shares") after
the participant attains age 59-1/2, and which are limited to no more than
10% of the account value annually (determined in the first year, as of the
date the redemption request is received by the Transfer Agent, and in
subsequent years, as of the most recent anniversary of that date) or (b)
following the participant's or beneficiary's (i) "disability" (as defined
in the Internal Revenue Code) that occurs since the account was
established, or (ii) death; (2) redemptions other than from Retirement
Plans following the (i) death or (ii) complete disability (as evidenced
by a certificate from the U.S. Social Security Administration) of all
persons individually owning such shares of record and not as fiduciaries
or agents, that occurs since the account was established, and (3) returns
of excess contributions to such Retirement Plans. In addition, no CDSC
is imposed on Class C shares of the Fund (i) sold to the Manager or its
affiliates; (ii) sold to registered investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor; (iii) issued in plans of reorganization, such as mergers,
asset acquisitions and exchange offers to which the Fund is a party; or
(iv) redeemed in Involuntary Redemptions. See "Transfer of Shares" in
"Purchase, Redemption and Pricing of Shares" in the Additional Statement
for further details.
-Class C Distribution And Service Plan. The Fund has adopted a plan
of distribution (the "Class C Plan") under Rule 12b-1 of the Investment
Company Act, pursuant to which it will compensate the Distributor for its
services and costs incurred in connection with the distribution and
service of the Fund's Class C shares. Pursuant to the Class C Plan, the
Fund will pay the Distributor an asset-based sales charge of 0.75% per
annum plus a service fee of 0.25% per annum, each of which is computed on
the average net assets of Class C shares of the Fund, computed as of the
close of each regular business day. The Distributor will use the service
fee payment to compensate Recipients for providing personal service and
the maintenance of shareholder accounts that hold Class C shares, examples
of which are described under "Class A Service Plan." Service fee payments
by the Distributor to Recipients will be made (i) in advance for the first
year Class C shares are outstanding, following the purchase of shares, in
an amount equal to 0.25% of the net assets of the shares purchased by the
Recipient or its customers and (ii) thereafter, on a quarterly basis,
computed as of the close of business each regular business day at an
annual rate of 0.25% of the net asset value of Class C shares held in
accounts of the Recipient or its customers. Other terms and options under
the Class C Plan for payment of the service fee by the Distributor to
Recipients, and other terms and conditions of the Class C Plan are
described under "Distribution and Service Plans" in the Additional
Statement. Asset-based sales charges and service fees will be paid by the
Fund to the Distributor monthly and quarterly, respectively.
The Distributor currently expects to pay sales commissions from its
own resources to authorized dealers or brokers at the time of sale equal
to 0.75% of the purchase price of Fund shares sold by such dealer or
broker, and to advance the first year service fee of 0.25%. The Fund's
payments of service fees and asset-based sales charges to the Distributor
during the initial year that Class C shares are outstanding are intended
to allow the Distributor to recoup its payments of sales commissions,
advances of service fee payments to Recipients and its financing costs.
After the first year that Class C shares are outstanding, the Distributor
expects to pay the asset-based sales charge on such shares to authorized
dealers or brokers as an ongoing sales commission.
Asset-based sales charge payments are designed to permit an
investor to purchase shares of the Fund without the assessment of a front-
end sales load and at the same time permit the Distributor to compensate
brokers and dealers in connection with the sale of shares of the Fund.
The Distributor's actual distribution expenses for any given year may
exceed the aggregate of payments received pursuant to the Class C Plan and
contingent deferred sales charges, and such expenses will be carried
forward and paid in future years. The Fund will be charged only for
interest expenses, carrying charges or other financial costs that are
directly related to the carry-forward of actual distribution expenses.
For example, if the Distributor incurred distribution expenses of $4
million in a given fiscal year, of which $2,000,000 was recovered in the
form of contingent deferred sales charges paid by investors and $1,600,000
was reimbursed in the form of payments made by the Fund to the Distributor
under the Class C Plan, the balance of $400,000 (plus interest) would be
subject to recovery in future fiscal years from such sources.
The Class C Plan contains a provision that allows the Board to
continue the Fund's payments to the Distributor for certain expenses it
incurred for Class C shares sold prior to termination of the Class C Plan.
Pursuant to this provision, payment of the asset-based sales charge of up
to 0.75% per annum could continue after termination.
The Class C Plan has the effect of increasing annual expenses of
Class C shares of the Fund by up to 1.00% of its average annual net assets
from what its expenses would otherwise be. In addition, the Manager and
the Distributor may, under the Class C Plan, from time to time from their
own resources (which, as to the Manager, may include profits derived from
the advisory fee it receives from the Fund) make payments to Recipients
for distribution and administrative services they perform. For further
details, see "Distribution and Service Plans" in the Additional Statement.
Purchase Programs for Class A And Class C Shares
-AccountLink. OppenheimerFunds AccountLink is a means to link a
shareholder's Fund account with an account at a U.S. bank or other
financial institution that is an Automated Clearing House ("ACH") member.
AccountLink can be used to transmit funds by electronic funds transfers
for account transactions, including subsequent share purchases. The
minimum investment by AccountLink is $25. Purchases of up to $250,000 may
be made by telephone using AccountLink (the maximum is $100,000 if the
transaction is done by PhoneLink, described below). To speak to service
operators to initiate such purchases, call the Distributor at 1-800-852-
8457. All such calls will be recorded. To initiate such purchases
automatically using PhoneLink, call 1-800-533-3310. Shares will be
purchased on the regular business day the Distributor is instructed to
initiate the ACH transfer to buy the shares. Dividends will begin to
accrue on such shares on the day the Fund receives Federal Funds for such
purchase through the ACH system before 4:00 P.M., which is normally 3 days
after the ACH transfer is initiated. If such Federal Funds are received
after that time, dividends will begin to accrue on the next regular
business day after such Federal Funds are received.
AccountLink may also be used as a means of transmitting redemption
proceeds to a designated bank account (see "How to Redeem Shares") or to
transmit distributions paid by the Fund directly to a bank account (see
"Dividends and Distributions"). AccountLink privileges must be requested
on the application used to buy shares or the dealer settlement
instructions establishing the account, or on subsequent signature-
guaranteed instructions to Oppenheimer Shareholder Services, the Fund's
Transfer Agent, from all shareholders of record for an account, and such
privileges thereupon apply to each shareholder of record and the dealer
representative of record unless and until the Transfer Agent receives
written instructions from a shareholder of record canceling such
privileges. Changes of bank account information must be made by
signature-guaranteed instructions to the Transfer Agent by all
shareholders of record for an account. The Transfer Agent, the Fund and
the Distributor have adopted reasonable procedures to confirm that
telephone instructions under AccountLink (described above) and
"PhoneLink," "Telephone Redemptions" and the "Exchange Privilege"
(described below) are genuine, by requiring callers to provide the tax
identification number(s) and other account data and by recording such
calls and confirming such transactions in writing. If the Transfer Agent
and the Distributor do not use such procedures, they may be liable for
losses due to unauthorized transactions, but otherwise will not be liable
for losses or expenses arising out of telephone instructions reasonably
believed to be genuine. The Fund reserves the right to amend, suspend or
discontinue AccountLink privileges at any time without prior notice.
-PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system which enables shareholders of the Fund to initiate account
transactions automatically by telephone, including exchanges between
existing accounts (see "Exchange Privilege" below), redemptions (see "How
to Redeem Shares - Telephone Redemptions," below) and purchases (see
"AccountLink" above). PhoneLink transactions may be done automatically
using a touchtone telephone provided that the shareholder uses a Personal
Identification Number ("PIN") which may be obtained through PhoneLink by
calling 1-800-533-3310. If an account has multiple owners, the Transfer
Agent or the Distributor may rely on any instructions initiated through
PhoneLink using a PIN. The Fund reserves the right to amend, suspend or
discontinue PhoneLink privileges at any time without prior notice.
-Asset Builder Plans. Investors may purchase shares of the Fund
(and up to four other Eligible Funds) automatically under Asset Builder
Plans. With AccountLink, Asset Builder Plans may be used to make regular
monthly investments ($25 minimum) from the investor's account at a bank
or other financial institution. See "AccountLink," above for details.
To establish an Asset Builder Plan from a bank account, a check (minimum
$25) for the initial purchase must accompany the application. Shares
purchased by Asset Builder Plan payments from bank accounts are subject
to the redemption restrictions for recent purchases described in "How To
Redeem Shares." Asset Builder Plans also enable shareholders of
Oppenheimer Tax-Exempt Cash Reserves or Oppenheimer Cash Reserves to use
those accounts for monthly automatic purchases of shares of the Fund and
up to four other Eligible Funds.
There is a sales charge on the purchase of certain Eligible Funds,
and an application should be obtained from the Transfer Agent and
completed and a prospectus of the selected fund(s) (available from the
Distributor) should be obtained before initiating payments. The amount
of the Asset Builder investment may be changed or the automatic
investments terminated at any time by writing to the Transfer Agent. A
reasonable period (approximately 15 days) is required after receipt of
such instructions to implement them. The Fund reserves the right to
amend, suspend, or discontinue offering such plans at any time without
prior notice.
How To Redeem Shares
Regular Redemption Procedures
To redeem some or all shares in an account (whether or not
represented by certificates) under the Fund's regular redemption
procedures, a shareholder must send the following to the Fund's Transfer
Agent, Oppenheimer Shareholder Services, P.O. Box 5270, Denver, Colorado
80217 [send courier or Express Mail deliveries to 10200 E. Girard Avenue,
Building D, Denver, Colorado 80231]: (1) a written request for redemption
signed by all registered owners exactly as the shares are registered,
including fiduciary titles, if any, and specifying the account number and
the dollar amount or number of shares to be redeemed; (2) a guarantee of
the signatures of all registered owners on the written request or on the
share certificate or accompanying stock power, by a U.S. bank, trust
company, credit union or savings association, or a foreign bank having a
U.S. correspondent bank, or by a U.S.-registered dealer or broker in
securities, municipal securities or government securities, or by a U.S.
national securities exchange, registered securities association or
clearing agency; (3) any share certificates issued for any of the shares
to be redeemed; and (4) any additional documents which may be required by
the Transfer Agent for redemption by corporations, partnerships or other
organizations, executors, administrators, trustees, custodians, guardians,
or from an OppenheimerFunds-sponsored IRA or other Retirement Plan, or if
the redemption is requested by anyone other than the shareholder(s) of
record, or to demonstrate eligibility for waiver of the Class C CDSC on
the grounds of disability. Transfers of shares are subject to similar
requirements.
A signature guarantee is not required for redemptions of $50,000 or
less, requested by and payable to all shareholders of record to be sent
to the address of record for that account. To avoid delay in redemptions
or transfers, shareholders having questions about these requirements
should contact the Transfer Agent in writing or by calling 1-800-525-7048
before submitting a request. From time to time, the Transfer Agent, in
its discretion, may waive any or certain of the foregoing requirements in
particular cases. Redemption or transfer requests will not be honored
until the Transfer Agent receives all required documents in proper form.
Shareholders owning shares of both classes must specify whether they
intend to redeem Class A or Class C shares.
Telephone Redemptions
In addition to the regular redemption procedures set forth above, the
Fund permits shareholders and the dealer representative of record for an
account to redeem shares by telephone and to have the redemption proceeds
sent to the address of record for an account or, if AccountLink privileges
have been established, wired to an account at a financial institution.
To redeem shares by telephone through a service representative, call the
Transfer Agent at 1-800-852-8457. To use PhoneLink to redeem shares
automatically, without a service representative, call 1-800-533-3310.
Under either method of telephone redemptions, proceeds may be paid by
check or through AccountLink as described below. The Transfer Agent may
record any calls. Telephone redemptions may not be available if all lines
are busy, and shareholders would have to use the Fund's regular redemption
procedures described above. Requests received by the Transfer Agent prior
to 4:00 P.M. on a regular business day will be processed at the net asset
value per share determined that day. Telephone redemption privileges are
not available for newly-purchased (within the prior 15 days) shares, for
OppenheimerFunds-sponsored Retirement Plans, or for shares represented by
certificates.
Telephone redemption privileges apply automatically to each
shareholder and the dealer representative of record unless the Transfer
Agent receives cancellation instructions from the shareholder(s) of
record. If an account has multiple owners, the Transfer Agent may rely
on the instructions of any one owner. Telephone redemption privileges may
be amended, suspended or discontinued by the Fund at any time without
prior notice.
-Telephone Redemptions Paid by Check. If redemption proceeds are
paid by check, amounts up to $50,000 may be redeemed by telephone once in
each 7-day period. The check must be payable to the shareholder(s) of
record and sent to the address of record for the account. Telephone
redemptions paid by check are not available within 30 days of a change of
the address of record.
-Redemptions Paid through AccountLink. If AccountLink privileges
have been established for an account, any amount may be redeemed by
telephone, wire or written instructions to the Transfer Agent, and the ACH
transfer of the redemption proceeds to the designated bank account
normally will be initiated by the Transfer Agent on the next bank business
day after the redemption. There are no dollar or frequency limitations
on telephone redemptions sent to a designated bank account through
AccountLink. No dividends are paid on the proceeds of redeemed shares
awaiting transmittal by ACH transfer. See "AccountLink" under "How To Buy
Shares" for instructions on establishing this privilege.
Check Writing
Upon request, the Transfer Agent will provide shareholders whose
shares are not represented by certificates with forms of drafts ("checks")
payable through a bank selected by the Fund (the "Bank"). Check Writing
privileges are not available to accounts holding either Class C shares or
Class A shares subject to a CDSC. Checks may be made payable to the order
of anyone in any amount not less than $100, and will be subject to the
Bank's rules and regulations governing checks. The Transfer Agent will
arrange for such checks to be honored by the Bank after obtaining a
specimen signature card from the shareholder(s). A check should not be
written in an amount close to the total value of the account because the
Fund's net asset value fluctuates from day to day. If a check is
presented for an amount greater than the account value, it will not be
paid. The Fund will charge a handling fee of $10 for any check that is
not paid at the request of a shareholder or because of an insufficient
share balance or because the check was written for less than the stated
minimum. Shareholders of joint accounts may elect to have checks honored
with a single signature. Checks issued for one account in the Fund must
not be used if the shareholder's account has been transferred to a new
account or if the account number or registration has changed. Shares
purchased by check or Asset Builder payments within the prior 15 days may
not be redeemed by Check Writing. A check that would require the
redemption of some or all of the shares so purchased is subject to non-
payment.
When a check is presented for payment, the Fund will redeem a
sufficient number of full and fractional shares in the shareholder's
account to cover the amount of the check. This procedure enables the
shareholder to continue receiving dividends on those shares equalling the
amount being redeemed by check until the check is presented to the Fund.
Checks may not be presented for payment at the offices of the Bank or the
Fund's Custodian. This limitation does not affect the use of checks for
the payment of bills or cashing at other banks. The Fund reserves the
right to amend, suspend or discontinue offering Check Writing privileges
at any time without prior notice.
Distributions from Retirement Plans
Requests for distributions from OppenheimerFunds-sponsored IRAs,
403(b)(7) custodial plans, or pension or profit-sharing plans for which
the Manager or its affiliates act as sponsors should be addressed to
"First Interstate Bank of Denver, N.A., c/o Oppenheimer Shareholder
Services" at the above address, and must: (i) state the reason for the
distribution, (ii) state the owner's awareness of tax penalties if the
distribution is premature, and (iii) conform to the requirements of the
plan and the Fund's redemption requirements, above. Participants (other
than self-employed persons) in OppenheimerFunds-sponsored pension or
profit-sharing plans may not directly request redemption of their
accounts; the employer or plan administrator must sign the request.
Distributions from such plans are subject to additional requirements under
the Internal Revenue Code, and certain documents (available from the
Transfer Agent) must be completed before the distributions may be made.
Distributions from retirement plans are subject to withholding
requirements under the Internal Revenue Code, and IRS Form W-4P (available
from the Transfer Agent) must be submitted to the Transfer Agent with the
distribution request, or the distribution may be delayed. Unless the
shareholder has provided the Transfer Agent with a certified tax
identification number, the Internal Revenue Code requires that tax be
withheld from any distribution, even if the shareholder elects not to have
tax withheld. The Trustee, the Fund, the Distributor, the Manager and the
Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not
be responsible for any penalties assessed.
Automatic Withdrawal And Exchange Plans
Investors owning shares of the Fund valued at $5,000 or more can
authorize the Transfer Agent to redeem shares (minimum $50) automatically
on a monthly, quarterly, semi-annual or annual basis under an Automatic
Withdrawal Plan. Shares will be redeemed three business days prior to the
date requested by the shareholder for receipt of the payment. Automatic
withdrawals of up to $1,500 per monthly payment may be requested by
telephone if payments are by check payable to all shareholders of record
and sent to the address of record for the account (and if the address has
not been changed within the prior 30 days). Required minimum
distributions from OppenheimerFunds-sponsored retirement plans may not be
arranged on this basis. Payments are normally made by check, but
shareholders having AccountLink privileges (see "How To Buy Shares") may
arrange to have Automatic Withdrawal Plan payments transferred to the bank
account designated on the OppenheimerFunds New Account Application or
signature-guaranteed instructions. The Fund cannot guarantee receipt of
the payment on the date requested and reserves the right to amend, suspend
or discontinue offering such plans at any time without prior notice.
Because of the sales charge assessed on Class A share purchases,
shareholders should not make regular additional Class A purchases while
participating in an Automatic Withdrawal Plan. Class C shareholders
normally should not establish withdrawal plans because of the imposition
of the Class C CDSC on such withdrawals (except where the Class C CDSC is
waived as described above in "Class C Contingent Deferred Sales Charge").
For further details, refer to "Automatic Withdrawal Plan Provisions" in
the Additional Statement.
Shareholders can also authorize the Transfer Agent to exchange a
pre-determined amount of shares of the Fund for shares of up to five other
Eligible Funds (minimum purchase is $25 per fund account) automatically
on a monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. Exchanges made pursuant to such plans are otherwise
subject to the terms and conditions applicable to exchanges described in
"Exchange Privilege," below.
Repurchase
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price will be the net asset
value next computed after the receipt of an order placed by such dealer
or broker, except that orders received by the Distributor from dealers or
brokers after 4:00 P.M. on a regular business day will be processed at
that day's net asset value if such order was received by the dealer or
broker from its customer prior to 4:00 P.M. and was transmitted to and
received by the Distributor prior to its close of business that day
(normally 5:00 P.M.). Payment ordinarily will be made within seven days
after the Distributor's receipt of the required documents, with
signature(s) guaranteed as described above.
Reinvestment Privilege
Within six months of a redemption of Class A shares or of Class C
shares on which a Class C CDSC was paid, the investor may reinvest all or
part of the redemption proceeds in Class A shares of the Fund or any of
the Eligible Funds into which shares of the Fund are exchangeable as
described below. The reinvestment price will be the net asset value next
computed after the Transfer Agent receives the reinvestment order, and
will not be subject to sales charge, but only if the reinvestment order
requests this privilege. A realized gain on the redemption is taxable,
and reinvestment will not alter any capital gains tax payable on that
gain. If there has been a loss on the redemption, some or all of the loss
may not be tax deductible, depending on the timing and amount of the
reinvestment in the Fund. Under the Internal Revenue Code, if the
redemption proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another Eligible Fund within 90 days
of the payment of the sales charge, the shareholder's basis in the Fund
shares redeemed may not include the amount of the sales charge paid,
thereby reducing the loss or increasing the gain recognized from the
redemption. The Fund may amend, suspend or cease offering this
reinvestment privilege at any time as to shares redeemed after the date
of such amendment, suspension or cessation.
General Information on Redemptions
The redemption price will be the Fund's net asset value per share
next determined after the Transfer Agent receives redemption instructions
in proper form. The market value of the securities in the Fund's
portfolio is subject to daily fluctuations and the net asset value of the
Fund's shares will fluctuate accordingly. Therefore, the redemption value
may be more or less than the investor's cost. Under certain
circumstances, shares may be redeemed in kind (i.e., by payment in
portfolio securities). The Fund may involuntarily redeem small accounts
(if the account value has fallen below $200 for reasons other than market
value fluctuations) and may redeem shares in amounts sufficient to
compensate the Distributor for any loss due to cancellation of a share
purchase order; for details, see "Purchase, Redemption and Pricing of
Shares" in the Additional Statement. Under the Internal Revenue Code, the
Fund may be required to impose "backup" withholding of Federal income tax
at the rate of 31% from dividends, distributions and the proceeds of
redemptions (including exchanges), if the shareholder has not furnished
the Fund a certified tax identification number or has not complied with
provisions of the Code relating to reporting dividends.
Payment for redeemed shares is made ordinarily in cash and
forwarded within seven days of the Transfer Agent's receipt of redemption
instructions in proper form, except under unusual circumstances as
determined by the SEC. The Transfer Agent may delay forwarding a
redemption check for recently-purchased shares until the purchase payment
has cleared, which may take up to 15 or more days from the purchase date.
Such delay may be avoided if the shareholder arranges telephone or written
assurance satisfactory to the Transfer Agent from the bank on which the
payment was drawn. The Fund makes no charge for redemption. Dealers or
brokers may charge a fee for handling redemption transactions but such
charge can be avoided by requesting the redemption directly by the Fund
through the Transfer Agent. Under certain circumstances, the Class A and
Class C CDSCs described under "How To Buy Shares" may apply to the
proceeds of redemptions.
Exchanges Of Shares And Retirement Plans
Exchange Privilege
Shares of the Fund and of the other Eligible Funds listed under
"Right of Accumulation" may be exchanged at net asset value per share at
the time of exchange, without sales charge, if all of the following
conditions are met: (1) shares of the fund selected for exchange are
available for sale in the shareholder's state of residence; (2) the
respective prospectuses of the funds whose shares are to be exchanged and
acquired offer the Exchange Privilege to the investor; (3) newly-purchased
(by initial or subsequent investment) shares are held in an account for
at least seven days and all other shares at least one day prior to the
exchange; and (4) the aggregate net asset value of shares surrendered for
exchange is at least equal to the minimum investment requirements of the
fund whose shares are to be acquired.
In addition to the conditions stated above, shares of a particular
class of an Eligible Fund may be exchanged only for shares of the same
class of another Eligible Fund. If a Fund has only one class of shares
that is not otherwise denominated, its shares shall be considered "Class
A" shares for this purpose. Certain of the Eligible Funds offer Class A,
Class B and/or Class C shares, and a list can be obtained by calling the
Distributor at 1-800-525-7048, or by referring to "Purchase, Redemption
and Pricing of Shares" in the Additional Statement. Funds offering Class
C shares are referred to, as a group, as the "OppenheimerFunds Advisors
Portfolio". In addition, Class A shares of Eligible Funds may be
exchanged for shares of any Money Market Fund; shares of any Money Market
Fund purchased without a sales charge may be exchanged for shares of
Eligible Funds offered with a sales charge upon payment of the sales
charge (or, if applicable, may be used to purchase shares of Eligible
Funds subject to a CDSC); and shares of this Fund acquired by reinvestment
of dividends or distributions from any other Eligible Fund or from any
unit investment trust for which reinvestment arrangements have been made
with the Distributor may be exchanged at net asset value for shares of any
Eligible Fund. No CDSC is imposed on exchanges of shares subject to a
CDSC. However, when Class A shares acquired by exchange from Class A
shares purchased subject to a Class A CDSC are redeemed within 18 months
of the end of the calendar month of the initial purchase of the exchanged
Class A shares, the Class A CDSC is imposed on the redeemed shares (see
"Class A Contingent Deferred Sales Charge," above). Similarly, the Class
C CDSC is imposed on Class C shares redeemed within 12 months of the
initial purchase of the exchanged Class C shares (see "Class C Contingent
Deferred Sales Charge", above).
-How to Exchange Shares. An exchange may be made by either: (1)
submitting an OppenheimerFunds Exchange Authorization Form to the Transfer
Agent, signed by all registered owners, or (2) telephone exchange
instructions to the Transfer Agent by a shareholder or the dealer
representative of record for an account. The Fund may modify, suspend or
discontinue either of these exchange privileges at any time, and will do
so on 60 days' notice if such notice is required by regulations adopted
under the Investment Company Act. The Fund reserves the right to reject
telephone or written requests submitted in bulk on behalf of 10 or more
accounts. Telephone and written exchange requests must be received by the
Transfer Agent by 4:00 P.M. on a regular business day to be effected that
day. The number of shares exchanged may be less than the number requested
if the number requested would include shares subject to a restriction
cited above or shares covered by a certificate that is not tendered with
such request. Only the shares available for exchange without restriction
will be exchanged.
When Class C shares are redeemed to effect an exchange, the
priorities described in "How to Buy Shares" for the imposition of the
Class C CDSC will be followed in determining the order in which shares are
exchanged. Shareholders should take into account the effect of any
exchange on the applicability and rate of any CDSC that may be imposed in
the subsequent redemption of remaining shares. Shareholders owning shares
of both classes must specify whether they intend to exchange Class A or
Class C shares.
-Telephone Exchanges. Telephone exchange requests may either be
placed through a service representative by calling the Transfer Agent at
1-800-852-8457 or automatically by PhoneLink, by calling 1-800-533-3310.
If all telephone exchange lines are busy (which might occur, for example,
during periods of substantial market fluctuations), shareholders might not
be able to request telephone exchanges and would have to submit written
exchange requests. Telephone exchange calls may be recorded by the
Transfer Agent. Telephone exchanges are subject to the rules described
above. By exchanging shares by telephone, the shareholder is
acknowledging receipt of a prospectus of the fund to which the exchange
is made and that for full or partial exchanges, any special account
features such as Asset Builder Plans, Automatic Withdrawal or Exchange
Plans and retirement plan contributions will be switched to the new
account unless the Transfer Agent is otherwise instructed. Telephone
exchange privileges automatically apply to each shareholder of record and
the dealer representative of record unless and until the Transfer Agent
receives written instructions from the shareholder(s) of record canceling
such privileges. If an account has multiple owners, the Transfer Agent
may rely on the instructions of any one owner. The Transfer Agent
reserves the right to require shareholders to confirm in writing their
election of telephone exchange privileges for an account. Shares acquired
by telephone exchange must be registered exactly as the account from which
the exchange was made. Certificated shares are not eligible for telephone
exchange.
-General Information on Exchanges. Shares to be exchanged are
redeemed on the regular business day the Transfer Agent receives an
exchange request in proper form (the "Redemption Date"). Normally, shares
of the fund to be acquired are purchased on the Redemption Date, but such
purchases may be delayed by either fund up to five business days if it
determines that it would be disadvantaged by an immediate transfer of the
redemption proceeds. The Fund in its discretion reserves the right to
refuse any exchange request that will disadvantage it, for example if the
receipt of multiple exchange requests from a dealer might require the
disposition of securities at a time or at a price disadvantageous to the
Fund. No sales commissions are paid by the Distributor on exchanges of
shares (unless a front-end sales charge is assessed on the exchange).
The Eligible Funds have different investment objectives and
policies. For complete information, including charges and expenses, a
prospectus of the fund into which the exchange is being made should be
read prior to an exchange. A $5 service charge will be deducted from the
account to which the exchange is made to help defray administrative
costs. That charge is waived for telephone exchanges made by PhoneLink
between existing accounts. Dealers or brokers who process exchange orders
on behalf of customers may charge for their services. Those charges may
be avoided by requesting the Fund directly to exchange shares. For Federal
tax purposes, an exchange is treated as a redemption and purchase of
shares. (See "How to Redeem Shares - Reinvestment Privilege" above, for
a discussion of certain tax effects of exchanges.)
Pursuant to telephone exchange agreements with the Distributor,
certain dealers, brokers and investment advisers may exchange Fund shares
by telephone, subject to the terms of such agreements and the
Distributor's right to reject or suspend such telephone exchanges at any
time. Because of the restrictions and procedures under such agreements,
such exchanges may be subject to timing limitations and other restrictions
that do not apply to exchanges requested by shareholders directly, as
described above.
Retirement Plans
The Distributor has available: (i) forms of pension and profit-
sharing plans for corporations and self-employed individuals, (ii)
Individual Retirement Accounts ("IRAs"), including Simplified Employee
Pension Plans ("SEP IRAs") and Rollover-IRAs, and (iii) 403(b)(7) tax-
deferred custodial plans for employees of qualified employers. Loans are
permitted only from OppenheimerFunds 403(b)(7) custodial plan accounts
holding Class A shares. The minimum initial investment for pension and
profit-sharing plans is $250, and for IRAs also unless made under an Asset
Builder Plan. For further details, including the administrative fees, the
appropriate retirement plan should be requested from the Distributor. The
Fund reserves the right to discontinue offering its shares to such plans
at any time without prior notice.
Dividends, Distributions And Taxes
This discussion relates solely to Federal tax laws and is not
exhaustive; a qualified tax adviser should be consulted. The Fund's
dividends and distributions may also be subject to state and local
taxation. See the Additional Statement for more information on tax
aspects of the Fund's investments in Hedging Instruments and other tax
matters.
Dividends and Distributions
The Fund intends to declare dividends separately for Class A and
Class C shares from its net investment income, if any, on each regular
business day, and to pay such dividends monthly on or about the last
business day of the month (or such other day as the Fund's Board of
Trustees may determine). Such dividends will be payable on shares held
of record at the time of the previous determination of net asset value.
However, daily dividends on newly purchased shares will not be declared
or paid until such time as Federal Funds (funds credited to a member
bank's account at the Federal Reserve Bank) are available from the
purchase payment for such shares. Normally, purchase checks received from
investors are converted to Federal Funds on the next business day. If all
shares in an account are redeemed, all dividends accrued on shares in the
account will be paid together with the redemption proceeds. Dividends
will be declared on shares repurchased by a dealer or broker for four
business days following the trade date (i.e., to and including the day
prior to settlement of the repurchase).
In addition, distributions may be made annually in December out
of any net short-term or long-term capital gains from the sale of
securities, premiums from expired calls written by the Fund, and net
profits from Hedging Instruments and closing purchase transactions
realized in the twelve months ending October 31 of that year. Such
distributions are taxable to shareholders as ordinary income and when paid
are considered "dividends." Any long-term capital gains distribution will
be identified separately when paid and when tax information is distributed
by the Fund. The Fund may make a supplemental distribution of capital
gains and ordinary income following the end of its fiscal year. If net
capital losses are realized in any year, they are charged against
principal and not against net investment income, which is distributed
regardless of capital gains or losses. If prior distributions must be
recharacterized at the end of the fiscal year as a result of the effect
of the Fund's investment policies, shareholders may have a non-taxable
return of capital which will be identified in notices to shareholders.
The amount of the Fund's distributions, if any, may vary from time
to time, depending upon market conditions, the composition of the Fund's
portfolio and expenses borne by the Fund or borne separately by that
Class, as described under "Dual Class Methodology" in the Additional
Statement. Dividends are calculated in the same manner, at the same time
and on the same day for shares of each class. However, dividends on Class
C shares are expected to be lower than on Class A shares on a pro rata
basis as a result of the asset-backed sales charge on Class C shares, and
such dividends will also differ in amount as a consequence of any
difference in net asset value between Class A and Class C shares. There
is no fixed dividend rate and there can be no assurance as to the payment
of any dividends or the realization of any capital gains.
All dividends and capital gains distributions are automatically
reinvested in Fund shares at net asset value, as of a date selected by the
Board of Trustees, unless the shareholder asks the Transfer Agent in
writing to pay dividends or capital gains distributions in cash, or to
reinvest them in another Eligible Fund, as described in "Dividend
Reinvestment in Another Fund" in the Additional Statement. That request
must be received prior to the record date for a dividend to be effective
as to that dividend. Dividends and distributions may be automatically
transferred to a designated account at a financial institution under
AccountLink. See "AccountLink" in "How to Buy Shares" and the
OppenheimerFunds New Account Application for more details. Dividends,
distributions and the proceeds of the redemption of Fund shares
represented by checks returned to the Transfer Agent by the Postal Service
as undeliverable will be invested in shares of Oppenheimer Money Market
Fund, Inc., as promptly as possible after the return of such checks to the
Transfer Agent, in order to enable the investor to earn a return on
otherwise idle funds.
Tax Status of the Fund's Dividends and Distributions
Dividends paid by the Fund derived from net investment income or
net short-term capital gains are taxable to shareholders as ordinary
income, whether received in cash or reinvested. Long-term capital gains
distributions, if any, are taxable as long-term capital gains whether
received in cash or reinvested and regardless of how long Fund shares have
been held. An investor purchasing Fund shares immediately prior to the
declaration of a capital gains distribution will receive a distribution
subject to income tax, and the distribution will have the effect of
reducing the Fund's net asset value per share by the amount of the
distribution. For information as to "backup" withholding on dividends,
see "How To Redeem Shares."
Tax Status of the Fund
If the Fund qualifies as a "regulated investment company" under
the Internal Revenue Code, it will not be liable for Federal income taxes
on amounts paid by it as dividends and distributions. The Fund qualified
during its last fiscal year, and intends to so qualify in the current and
future fiscal years but reserves the right not to do so. However, the
Code contains a number of complex tests relating to qualification which
the Fund might not meet in any particular fiscal year. For example, if
the Fund derives 30% or more of its gross income from the sale of
securities held less than three months, the Fund may fail to qualify (see
"Tax Aspects of Hedging Instruments and Covered Calls" in the Additional
Statement for more information). If it did not so qualify, the Fund would
be treated for tax purposes as an ordinary corporation and receive no tax
deduction for payments made to shareholders.
Fund Performance Information
Yield and Total Return Information
From time to time the "standardized yield," "average annual total
return," "total return", and "total return at net asset value" and
"dividend yield" of an investment in each class of shares of the Fund may
be advertised. Under SEC rules, the Fund's yield is computed in a
standardized manner for mutual funds, by dividing the Fund's net
investment income per share earned during a 30-day base period by the
maximum offering price 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. A "dividend yield" or "distribution
return" may also be quoted on each class of the Fund's shares. Dividend
yield is based on the dividends of that class derived from net investment
income during a stated period, and distribution return includes dividends
from net investment income and from realized capital gains declared during
a given period. Yields and returns are calculated separately and will
differ for shares of each class, and the higher anticipated expenses of
Class C shares should result in shares of that class having lower yields
than Class A shares for the same period of time.
Total return is the change in value of a hypothetical investment in
a class of shares of the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested. The cumulative
total return measures the change in value over the entire period (for
example, ten years). An average annual total return shows the average
rate of return for each year in a period that would produce the cumulative
total return over the entire period. However, average annual total
returns do not show the actual year-by-year performance of a class of
shares. When total returns are quoted for Class A shares, they reflect
the payment of the maximum initial sales charge. Total returns may be
quoted at "net asset value," without considering the sales charge, and
those returns would be reduced if sales charges were deducted. When total
returns are shown for Class C shares, they reflect the effect of the
contingent deferred sales charge that applies to the period for which the
total return is shown, or else they may be shown based on the change in
net asset value without considering the sales charge. All total returns
are based on historical earnings and are not intended to predict future
performance. The Additional Statement contains more information about the
calculation of the performance data used by the Fund.
Management's Discussion of Performance. During the Fund's fiscal year
ended September 30, 1993, the Manager emphasized investment in high yield
securities perceived as undervalued and in industries sensitive to
economic expansion. Major areas of investment for the Fund included the
transportation, broadcasting and cable industries. A number of economic
factors influenced the performance of the high yield securities markets
during the Fund's fiscal year, including a low interest rate environment,
which dramatically increased the supply of high yield issues.
<PAGE>
Oppenheimer Champion High Yield Fund, Lehman Bros. Corporate Bond Index
and Salomon Bros. High Yield Market Index
Comparison of Change in Value of $10,000 Hypothetical Investment
Average Annual Total Return of Class A Shares at 9/30/93
1 Year 5 Years Life of Fund*
10.41% 13.24% 14.22%
*Since November 16, 1987.
[Chart comparing average annual total return of Class A shares of
Oppenheimer Champion High Yield Fund to performance of the Lehman Bros.
Corporate Bond and Solomon Bros. High Yield Market indices]
Past performance is not predictive of future performance.
The Lehman Brothers Corporate Bond Index is an unmanaged index of
publicly-issued nonconvertible investment grade corporate debt of U.S.
issuers, widely recognized as a measure of the U.S. fixed-rate corporate
bond market. The Salomon Brothers High Yield Market Index 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,
the market in which the Fund principally invests. Each Index includes a
factor for the reinvestment of interest but does not reflect expenses or
taxes. The Fund's return reflects the deduction of the current maximum
sales charge of 4.75% and includes reinvestment of all dividends and
capital gains distributions, but does not consider taxes. The Fund's
Class C shares were publicly sold commencing on or about December 1, 1993
and therefore no performance information for such shares is included
herein.
Additional Information
Description of the Fund and its Shares
The Fund's Board of Trustees is empowered to issue full and
fractional shares of one or more series and classes of series. Series
have separate assets and liabilities. Classes of a series represent an
interest in a particular series but, as explained in this Prospectus, each
class has different dividends, distributions and expenses, and may have
different net asset values. Shares of one series having two classes
(Class A and Class C) have been authorized, which constitute the shares
of beneficial interest described herein.
Shares of the Fund represent an interest in the Fund proportionately
equal to the interest of each other share of the same class and entitle
their holders to one vote per share (and a fractional vote for a
fractional share) on matters submitted to their vote. Only shareholders
of a particular class vote on matters affecting only that class. The
Trustees may divide or combine the shares of a class into a greater or
lesser number of shares without thereby changing the proportionate
beneficial interest in the Fund. Shares do not have cumulative voting
rights or preemptive or subscription rights. The Fund does not anticipate
holding annual meetings. Under certain circumstances, shareholders of the
Fund have the right to remove a Trustee. Although the Declaration of
Trust states that when issued, shares are fully-paid and non-assessable,
shareholders may be held personally liable as "partners" for the Fund's
obligations; however, the risk of a shareholder incurring any financial
loss is limited to the relatively remote circumstances in which the Fund
is unable to meet its obligations. See "Additional Information" in the
Additional Statement for details.
The Custodian and the Transfer Agent
The Custodian of the assets of the Fund is The Bank of New York. The
Manager and its affiliates presently have banking relationships with the
Custodian. See "Additional Information" in the Additional Statement for
further information. The Fund's cash balances in excess of $100,000 held
by the custodian are not protected by Federal deposit insurance. Such
uninsured balances may at times be substantial.
Oppenheimer Shareholder Services, a division of the Manager, acts
as the Fund's Transfer Agent and shareholder servicing agent on an at-cost
basis for the Fund and certain other open-end funds managed by the
Manager, and as transfer agent for unit investment trusts for the
accumulation of shares of one of such funds. Shareholders should direct
any inquiries to the Transfer Agent at the address or toll-free phone
number shown on the back cover of this Prospectus.
<PAGE>
APPENDIX A: BOND RATINGS
Description of Moody's Investors Service, Inc. Bond Ratings
Aaa: Bonds which are rated "Aaa" are judged to be the best
quality and to carry the smallest degree of investment risk. Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are likely to
change, the changes that can be expected are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated "Aa" are judged to be of high quality
by all standards. Together with the "Aaa" group, they comprise what are
generally known as "high-grade" bonds. They are rated lower than the best
bonds because margins of protection may not be as large as with "Aaa"
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-term
risks appear somewhat larger than those of "Aaa" securities.
A: Bonds which are rated "A" possess many favorable investment
attributes and are to be considered as upper-medium grade obligations.
Factors giving security to principal and interest are considered adequate
but elements may be present which suggest a susceptibility to impairment
sometime in the future.
The investments in which the Fund will principally invest will be
in the lower-rated categories described below.
Baa: Bonds which are rated "Baa" are 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: Bonds which are rated "Ba" are judged to have speculative
elements; their future cannot be considered well-assured. Often the
protection of interest and principal payments may be very moderate and not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B: Bonds which are rated "B" generally lack characteristics of
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa: Bonds which are rated "Caa" are of poor standing and may be
in default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds which are rated "Ca" represent obligations which are
speculative in a high degree and are often in default or have other marked
shortcomings.
C: Bonds which are rated "C" are the lowest rated class of bonds
and can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Description of Standard & Poor's Bond Ratings
AAA: "AAA" is the highest rating assigned to a debt obligation
and indicates an extremely strong capacity to pay principal and interest.
AA: Bonds rated "AA" also qualify as high-quality debt
obligations. Capacity to pay principal and interest is very strong, and
in the majority of instances they differ from "AAA" issues only in small
degree.
A: Bonds rated "A" have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to adverse effects
of change in circumstances and economic conditions.
The investments in which the Fund will principally invest will be
in the lower-rated categories, described below.
BBB: Bonds rated "BBB" are regarded as having an adequate
capacity to pay principal and interest. Whereas they normally exhibit
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
principal and interest for bonds in this category than for bonds in the
"A" category.
BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are
regarded, on balance, as predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with
the terms of the obligation. "BB" indicates the lowest degree of
speculation and "CC" the highest degree. While such bonds will likely
have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
C: Bonds on which no interest is being paid are rated "C".
D: Bonds rated "D" are in payment default and payment of interest
and/or repayment of principal is in arrears.
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER CHAMPION HIGH YIELD FUND
Graphic material included in Prospectus of Oppenheimer Champion
High Yield Fund: "Comparison of Total Return of Oppenheimer Champion High
Yield Fund, the Lehman Bros. Corp. Bond Index and the Salomon Bros. High
Yield Market Index - Change in Value of a $10,000 Hypothetical Investment"
A linear graph will be included in the Prospectus of Oppenheimer
Champion High Yield Fund (the "Fund") depicting the initial account value
and subsequent account value of a hypothetical $10,000 investment in the
Fund since November 16, 1987 to the end of each of the Fund's most
recently completed six fiscal years and comparing such values with the
same investments over the same time periods in the Lehman Bros. Corp. Bond
Index and the Salomon Bros. High Yield Market Index. Set forth below are
the relevant data points that will appear on the linear graph. Additional
information with respect to the foregoing, including descriptions of the
Lehman Bros. Corp. Bond Index and the Salomon Bros. High Yield Market
Index, is set forth in the Prospectus under "Fund Performance Information
- - Management's Discussion of Performance."
Salomon
Bros.
High
Lehman Bros. Yield
Fiscal Year Oppenheimer Champion Corp. Bond Market
(Period) Ended High Yield Fund S&P 500 Index Index
11/16/87 $ 9,525 $10,000 $10,000
09/30/88* 11,096 11,014 11,105
09/30/89 12,252 12,313 11,639
09/30/90 12,428 13,075 10,106
09/30/91 15,594 15,301 13,944
09/30/92 18,713 17,474 17,229
09/30/93 21,838 19,665 20,256
______________________
*For the period from November 16, 1987 (commencement of operations) to
September 30, 1988.
Investment Adviser Advisors Portfolio
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203 OPPENHEIMER
Distributor Champion High Yield Fund
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent Prospectus and
Oppenheimer Shareholder Services New Account Application
P.O. Box 5270 Effective February 1, 1994
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, NY 10015
Independent Auditors
Deloitte & Touche
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson & Adams, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in
this Prospectus or the Additional Statement, and if given or made, such
information and representations must not be relied upon as having been
authorized by the Fund, Oppenheimer Management Corporation, Oppenheimer
Funds Distributor, Inc. or any affiliate thereof. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any
of the securities offered hereby in any state to any person to whom it is
unlawful to make such offer in such state.
[Logo] OppenheimerFunds(R)
PR190.0194.N *Printed on recycled paper
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
OPPENHEIMER CHAMPION HIGH YIELD FUND
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
This Statement of Additional Information (the "Additional Statement")
is not a Prospectus. This Additional Statement should be read together
with the Prospectus dated February 1, 1994 (the "Prospectus") of
Oppenheimer Champion High Yield Fund (the "Fund"), which may be obtained
by written request to Oppenheimer Shareholder Services (the "Transfer
Agent"), P.O. Box 5270, Denver, Colorado 80217 or by calling the Transfer
Agent at the toll-free number shown above.
TABLE OF CONTENTS
Page
Investment Objective and Policies
Investment Restrictions
Trustees and Officers
Investment Management Services
Brokerage
Purchase, Redemption and Pricing of Shares
Distribution and Service Plans
Yield, Total Return and Tax Information
Additional Information
Automatic Withdrawal Plan Provisions
Letters of Intent
Independent Auditors' Report
Financial Statements
This Additional Statement is effective February 1, 1994.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Fund are described in
the Prospectus. Set forth below is supplemental information about these
policies. Certain capitalized terms used in this Additional Statement are
defined in the Prospectus.
The Fund seeks to attain its primary objective of a high level of
current income by investing mainly in a diversified portfolio of high
yield fixed-income securities. As a secondary objective, the Fund seeks
capital growth when consistent with its primary objective. High yield
bonds generally offer a higher yield to maturity than bonds with higher
ratings as compensation for holding an obligation perceived to be of
greater risk. The high yield opportunity has been the result of wide
yield spreads between high yield obligations and high grade obligations,
with actual losses resulting from default remaining low relative to the
values of outstanding high yield bonds. In addition to offering higher
absolute returns, high yield securities have greater potential than high-
grade bonds for better relative performance if their credit quality
improves.
The Fund's investment manager, Oppenheimer Management Corporation
(the "Manager"), evaluates the investment merits of fixed-income
securities primarily through the exercise of its own investment analysis.
This 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 its 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.
All fixed-income securities are subject to two types of risks:
credit risk and interest rate risk. Credit risk relates to the ability
of the issuer to meet interest or principal payments or both as they
become due. Generally, higher yielding bonds are subject to credit risk
to a greater extent than higher quality bonds. Interest rate risk refers
to the fluctuations in value of fixed-income securities resulting solely
from the inverse relationship between price and yield of fixed-income
securities. An increase in interest rates will tend to reduce the market
value of outstanding fixed-income investments, and a decline in interest
rates will tend to increase their value. In addition, debt securities
with longer maturities, which tend to produce higher yields, are subject
to potentially greater capital appreciation and depreciation from interest
rate changes than obligations with shorter maturities.
Fluctuations in the market value of fixed-income securities
subsequent to their acquisition will not affect cash income from such
securities but will be reflected in the Fund's net asset value. The
investments in which the Fund will principally invest will be in the lower
rating categories. The Fund may invest in securities rated as low as "C"
by Moody's or "D" by Standard & Poor's. The Manager will not rely solely
on the ratings assigned by rating services and may invest, without limit,
in unrated securities which offer, in the opinion of the Manager, yields
and risks comparable to those of rated securities in which the Fund may
invest.
Warrants and Rights. The Fund may, to the limited extent described in the
Prospectus, invest in warrants and rights. Warrants are options to
purchase equity securities at specific prices valid for a specific period
of time. Their prices do not necessarily move parallel to the prices of
the underlying securities. The amount paid for a warrant will be lost
unless the warrant is exercised prior to expiration. Rights are similar
to warrants but normally have a short duration and are distributed by
issuers to their shareholders. Warrants and rights have no voting rights,
receive no dividends and have no rights with respect to the assets of the
issuer.
Foreign Securities. Investments by the Fund in foreign securities offer
potential benefits not available from investing solely in securities of
domestic issuers, including the opportunity to invest in the securities
of foreign issuers that appear to offer growth potential, or to invest in
foreign countries with economic policies or business cycles different from
those of the U.S., or foreign stock markets that do not move in a manner
parallel to U.S. markets, thereby reducing fluctuations in portfolio
value.
Investing in foreign securities involves special additional risks and
considerations not typically associated with investing in securities of
issuers traded in the U.S. These include: reduction of income by foreign
taxes; fluctuation in value of foreign portfolio investments due to
changes in currency rates and control regulations (e.g. currency
blockage); transaction charges for currency exchange; lack of public
information about foreign issuers; lack of uniform accounting, auditing
and financial reporting standards comparable to those applicable to
domestic issuers; less volume on foreign exchanges than on U.S. exchanges;
greater volatility and less liquidity in foreign markets than in the U.S.;
less regulation of foreign issuers, stock exchanges and brokers than in
the U.S.; greater difficulties in commencing lawsuits against foreign
issuers; higher brokerage commission rates than in the U.S.; increased
risks of delays in settlement of portfolio transactions; possibilities in
some countries of expropriation or nationalization of assets, confiscatory
taxation, political, financial or social instability or adverse diplomatic
developments; and differences between the U.S. economy and foreign
economies. In the past, U.S. Government policies have discouraged certain
investments abroad by U.S. investors, through taxation or other
restrictions, and it is possible that such restrictions could be re-
imposed.
Asset-Backed Securities. The value of an asset-backed security is
affected by changes in the market's perception of the creditworthiness of
the servicing agent for the loan pool, the originator of the loans, or the
financial institution providing any credit enhancement, and is also
affected if a credit enhancement is exhausted. The risks of investing in
asset-backed securities derive from the dependency upon payment of the
underlying consumer loans by the individual borrowers, and the Fund would
generally have no recourse to the entity that originated the loans in the
event of default by a borrower. The underlying loans are subject to
prepayments which shorten the weighted average life of asset-backed
securities and may lower their return, in the same manner as described
below for prepayments of a pool of mortgage loans underlying mortgage-
backed securities.
Mortgage-Backed Securities. These securities represent participation
interests in pools of residential mortgage loans which may or may not be
guaranteed by agencies or instrumentalities of the U.S. Government. 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. The mortgage-
backed securities in which the Fund may invest may be backed by the full
faith and credit of the U.S. Treasury (e.g. direct pass-through
certificates of the Government National Mortgage Association); some are
supported by the right of the issuer to borrow from the U.S. Government
(e.g., obligations of Federal Home Loan Bank); and some are backed by only
the credit of the issuer itself. Any such guarantees do not extend to the
value of or yield of the mortgage-backed securities themselves or to the
net asset value of the Fund's shares.
The yield of a mortgage-backed security is based on the average
expected life of the underlying pool of mortgage loans. The actual life
of any particular pool will be shortened by any unscheduled or early
payments of principal and interest. Principal prepayments generally
result from the sale of the underlying property or the refinancing or
foreclosure of underlying mortgages. The occurrence of prepayments is
influenced by a wide range of economic, demographic and social factors
and, accordingly, it is not possible to predict accurately the average
life of a particular pool. Yield on such pools is usually computed by
using the historical record of prepayments for that pool, or, in the case
of newly-issued mortgages, the prepayment history of similar pools. The
actual prepayment experience of a pool of mortgage loans may cause the
yield realized by the Fund on the security backed by the pool to differ
from the yield calculated on the basis of the expected average life of the
pool.
Prepayments tend to increase during periods of falling interest
rates, while during periods of rising interest rates, prepayments will
most likely decline. When prevailing interest rates rise, the value of
a pass-through security may decrease as do the values of other debt
securities, but, when prevailing interest rates decline, the value of a
pass-through security is not likely to rise on a basis comparable to the
rise in value of other debt securities because of the prepayment feature
of pass-through securities. The Fund's reinvestment of scheduled
principal payments and unscheduled prepayments it receives may occur at
a time of higher or lower prevailing rates than the original investment,
thus affecting the yield of the Fund. Monthly interest payments received
by the Fund have a compounding effect which may increase the yield to
shareholders more than debt obligations that pay interest semi-annually.
Because of those factors, mortgage-backed securities may be less effective
than Treasury bonds of similar maturity at maintaining yields during
periods of declining interest rates. The Fund may purchase mortgage-
backed securities at a premium or at a discount. Accelerated prepayments
adversely affect yields for pass-through securities purchased at a premium
(i.e., at a price in excess of principal amount) and may involve
additional risk of loss of principal because the premium may not have been
fully amortized at the time the obligation is repaid. The opposite is
true for pass-through securities purchased at a discount.
The Fund may invest in "stripped" mortgage backed securities, in
which the principal and interest portions of the security are separated
and sold. Stripped mortgage-backed securities usually have at least two
classes each of which receives different proportions of interest and
principal distributions on the underlying pool of mortgage assets. One
common variety of stripped mortgage-backed security has one class that
receives some of the interest and most of the principal, while the other
class receives most of the interest and remainder of the principal. In
some cases, one class will receive all of the interest (the "interest-
only" or "IO" class), while the other class will receive all of the
principal (the "principal-only" or "PO" class). Interest only securities
are extremely sensitive to interest rate changes, and prepayments of
principal on the underlying mortgage assets. An increase in principal
payments or prepayments will reduce the income available to the IO
security. In other types of CMOs, the underlying principal payments may
apply to various classes in a particular order, and therefore the value
of certain classes or "tranches" of such securities may be more volatile
than the value of the pool as a whole, and losses may be more severe than
on other classes.
GNMA Certificates. Certificates of the Government National Mortgage
Association ("GNMA Certificates") are mortgage-backed securities which
evidence an undivided interest in a pool or pools of mortgages. The GNMA
Certificates that the Fund may purchase are of the "modified pass-through"
type, which entitle the holder to receive timely payment of all interest
and principal payments due on the mortgage pool, net of fees paid to the
"issuer" and GNMA, regardless of whether the mortgagor actually makes the
payments.
The National Housing Act authorizes GNMA to guarantee the timely
payment of principal and interest on securities backed by a pool of
mortgages insured by the Federal Housing Administration ("FHA") or
guaranteed by the Veterans Administration ("VA"). The GNMA guarantee is
backed by the full faith and credit of the U.S. Government. GNMA is also
empowered to borrow without limitation from the U.S. Treasury if necessary
to make any payments required under its guarantee.
The average life of a GNMA Certificate is likely to be substantially
shorter than the original maturity of the mortgages underlying the
securities. Prepayments of principal by mortgagors and mortgage
foreclosures will usually result in the return of the greater part of
principal investment long before the maturity of the mortgages in the
pool. Foreclosures impose no risk to principal investment because of the
GNMA guarantee, except to the extent that the Fund has purchased the
certificates at a premium in the secondary market.
FNMA Securities. The Federal National Mortgage Association ("FNMA") was
established to create a secondary market in mortgages insured by the FHA.
FNMA issues guaranteed mortgage pass-through certificates ("FNMA
Certificates"). FNMA Certificates resemble GNMA Certificates in that each
FNMA Certificate represents a pro rata share of all interest and principal
payments made and owed on the underlying pool. FNMA guarantees timely
payment of interest and principal on FNMA Certificates. The FNMA
guarantee is not backed by the full faith and credit of the U.S.
Government.
FHLMC Securities. The Federal Home Loan Mortgage Corporation ("FHLMC")
was created to promote development of a nationwide secondary market for
conventional residential mortgages. FHLMC issues two types of mortgage
pass-through securities ("FHLMC Certificates"): mortgage participation
certificates ("PCs") and guaranteed mortgage certificates ("GMCs"). PCs
resemble GNMA Certificates in that each represents a pro rata share of all
interest and principal payments made and owed on the underlying pool.
FHMLC guarantees timely monthly payment of interest on PCs and the
ultimate payment of principal. GMCs also represent a pro rata interest
in a pool of mortgages. However, these instruments pay interest semi-
annually and return principal once a year in guaranteed minimum payments.
The expected average life of these securities is approximately ten years.
The FHLMC guarantee is not backed by the full faith and credit of the U.S.
Government.
Loans of Portfolio Securities. The Fund may lend its portfolio securities
subject to the restrictions stated in the Prospectus. Under applicable
regulatory requirements (which are subject to change), the loan collateral
must, on each business day, at least equal the market value of the loaned
securities and must consist of cash, bank standby letters of credit, U.S.
Government securities, or other cash equivalents in which the Fund is
permitted to invest. To be acceptable as collateral, letters of credit
must obligate a bank to pay amounts demanded by the Fund if the demand
meets the terms of the letter. Such terms and the issuing bank must be
satisfactory to the Fund. In a portfolio securities lending transaction,
the Fund receives from the borrower an amount equal to the interest paid
or the dividends declared on the loaned securities during the term of the
loan as well as the interest on the collateral securities, less any
finders' or administrative fees the Fund pays in arranging the loan. The
Fund may share the interest it receives on the collateral securities with
the borrower as long as it realizes at least a minimum amount of interest
required by the lending guidelines established by its Board of Trustees.
The Fund will not lend its portfolio securities to any officer, Trustee,
employee or affiliate of the Fund or its Manager. The terms of the Fund's
loans must meet applicable tests under the Internal Revenue Code and
permit the Fund to reacquire loaned securities on five business days'
notice or in time to vote on any important matter.
Repurchase Agreements. In a repurchase transaction, the Fund acquires a
security from, and simultaneously resells it to, an approved vendor (a
U.S. commercial bank or the U.S. branch of a foreign bank having total
domestic assets of at least $1 billion or a broker-dealer with a net worth
of at least $50 million and which has been designated a primary dealer in
government securities) for delivery on an agreed-on future date. The
resale price exceeds the purchase price by an amount that reflects an
agreed-upon interest rate effective for the period during which the
repurchase agreement is in effect. The majority of these transactions run
from day to day, and delivery pursuant to the resale typically will occur
within one to five days of the purchase. Repurchase agreements are
considered "loans" under the Investment Company Act, collateralized by the
underlying security. The Fund's repurchase agreements require that at all
times while the repurchase agreement is in effect, the collateral's value
must equal or exceed the repurchase price to fully collateralize the loan.
Additionally, the Manager will impose creditworthiness requirements to
confirm that the vendor is financially sound and will continuously monitor
the collateral's value.
Restricted and Illiquid Securities. The expenses of registering
restricted securities (excluding securities that may be resold by the Fund
pursuant to Rule 144A, as explained in the Prospectus) may be negotiated
at the time such securities are purchased by the Fund. When registration
is required before the securities may be resold, a considerable period may
elapse between the decision to sell the securities and the time when the
Fund would be permitted to sell them. Thus, the Fund may not be able to
obtain as favorable a price as that prevailing at the time of the decision
to sell. The Fund may also acquire securities through private placements.
Such securities may have contractual restrictions on their resale, which
might prevent their resale by the Fund at a time when such resale would
be desirable.
Participation Interests. The Fund may invest in participation interests,
subject to the limitation on its net assets that may be invested in
illiquid investments. Participation interests provide the Fund an
undivided interest in a loan made by the issuing bank in the proportion
that the Fund's participation interest bears to the total principal amount
of the loan. No more than 5% of the Fund's net assets can be invested in
participation interests of the same issuing bank. The Fund must look to
the creditworthiness of the borrowing corporation, which is obligated to
make payments of principal and interest on the loan. In the event the
borrower fails to pay scheduled interest or principal payments, the Fund
would experience a reduction in its income and might experience a decline
in the net asset value of its shares. In the event of a failure by the
bank to perform its obligations in connection with the participation
agreement, the Fund might incur certain costs and delays in realizing
payment or may suffer a loss of principal and/or interest.
Brady Bonds. The Fund may invest in U.S. dollar-denominated,
collateralized Brady Bonds, as described in the Prospectus. These debt
obligations of foreign entities may be fixed-rate par bonds or floating
rate discount bonds and are generally collateralized in full as to
principal due at maturity by U. S. Treasury zero coupon obligations which
have the same maturity as the Brady Bonds. Brady Bonds are often viewed
as having three or four valuation components: (i) the collateralized
repayment of principal at final maturity; (ii) the collateralized interest
payments; (iii) the uncollateralized interest payments; and (iv) any
uncollateralized repayment of principal at maturity (these
uncollateralized amounts constitute the "residual risk"). In the event
of a default with respect to collateralized Brady Bonds as a result of
which the payment obligations of the issuer are accelerated, the zero
coupon Treasury securities held as collateral for the payment of principal
will not be distributed to investors nor will such obligations be sold and
the proceeds distributed. The collateral will be held by the collateral
agent to the scheduled maturity of the defaulted Brady Bonds, which will
continue to be outstanding, at which time the face amount of the
collateral will equal the principal payments which would have then been
due on the Brady Bonds in the normal course. In addition, in light of the
residual risk of Brady Bonds and, among other factors, the history of
defaults with respect to commercial bank loans by public and private
entities of countries issuing Brady Bonds, investments in Brady Bonds are
to be viewed as speculative.
Hedging Instruments. The Fund may employ one or more types of Hedging
Instruments, as defined in, and subject to the restrictions stated in, the
Prospectus. When hedging to attempt to protect against declines in the
market value of the Fund's portfolio, to permit the Fund to retain
unrealized gains in the value of portfolio securities which have
appreciated, or to facilitate selling securities for investment reasons,
the Fund may: (i) sell Interest Rate Futures, (ii) buy puts on such
Futures or on debt securities, or (iii) write covered calls on debt
securities or on Interest Rate Futures. When hedging to permit the Fund
to establish a position in the debt securities market as a temporary
substitute for purchasing particular debt securities (which the Fund will
normally purchase, and then terminate that hedging position), the Fund
may: (i) buy Interest Rate Futures, or (ii) buy calls on such Futures or
on debt securities. When hedging to protect against declines in the
dollar value of a foreign currency-denominated security, the Fund may: (a)
purchase puts on that foreign currency and on foreign currency Futures,
(b) write calls on that currency or on such Futures or (c) enter into
Forward Contracts at a lower rate than the spot ("cash") rate.
When the Fund writes an over-the-counter ("OTC") option, it will
enter into an arrangement with a primary U.S. Government securities
dealer, which would establish a formula price at which the Fund would have
the absolute right to repurchase that OTC option. This formula price
would generally be based on a multiple of the premium received for the
option, plus the amount by which the option is "in-the-money," that is,
exercisable below (for a put) or above (for a call) the market price of
the underlying security. For any OTC option the Fund writes, it will
treat as illiquid (for purposes of the limit on its assets that may be
invested in illiquid securities) the amount of assets used to cover OTC
options it has written, equal to the formula price for the repurchase of
the OTC option less the amount by which the OTC option is "in-the-money."
The Fund will also treat as illiquid any OTC option held by it. The
Securities and Exchange Commission is evaluating whether OTC options
should be considered liquid securities, and the procedure described above
could be affected by the outcome of that evaluation. Additional
information about the Hedging Instruments the Fund may use is provided
below.
Interest Rate Futures and Forward Contracts. The Fund may buy and
sell futures contracts relating to debt securities ("Interest Rate
Futures") and foreign currency exchange contracts ("Forward Contracts").
Interest Rate Futures obligate one party to deliver and the other to take
a specific debt security at a specified price on a specified date. No
money is paid or received upon the purchase or sale of an Interest Rate
Future. Upon entering into a futures transaction, the Fund will be
required to deposit an initial margin payment in cash or U.S. Treasury
bills with the futures commission merchant (the "futures broker"). The
initial margin will be deposited with the Fund's Custodian in an account
registered in the futures broker's name; however, the futures broker can
gain access to that account only under specified conditions. As the
Future is marked to market to reflect changes in its market value,
subsequent margin payments, called variation margin, will be paid to or
by the futures broker on a daily basis. Prior to expiration of the
Future, if the Fund elects to close out its position by taking an opposite
position, a final determination of variation margin is made, additional
cash is required to be paid by or released to the Fund, and any loss or
gain is realized. Although Interest Rate Futures, by their terms, call
for settlement by delivery or acquisition of debt securities, in most
cases the obligation is fulfilled by entering into an offsetting position.
All futures transactions are effected through a clearinghouse associated
with the exchange on which the contracts are traded.
A Forward Contract involves bilateral obligations of one party to
purchase, and another party to sell, a specific currency at a future date
(which may be any fixed number of days from the date of the contract
agreed upon by the parties), at a price set at the time the contract is
entered into. These contracts are traded in the interbank market
conducted directly between currency traders (usually large commercial
banks) and their customers. The Fund may use Forward Contracts to protect
against uncertainty in the level of future exchange rates. The use of
Forward Contracts does not eliminate fluctuations in the prices of the
underlying securities the Fund owns or intends to acquire, but it does fix
a rate of exchange in advance. In addition, although Forward Contracts
limit the risk of loss due to a decline in the value of the hedged
currencies, at the same time they limit any potential gain that might
result should the value of the currencies increase. The Fund will not
speculate with Forward Contracts or foreign currency exchange rates.
The Fund may enter into Forward Contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when
the Fund anticipates receipt of dividend payments in a foreign currency,
the Fund may desire to "lock-in" the U.S. dollar price of the security or
the U.S. dollar equivalent of such payment by entering into a Forward
Contract, for a fixed amount of U.S. dollars per unit of foreign currency,
for the purchase or sale of the amount of foreign currency involved in the
underlying transaction ("transaction hedge"). The Fund will thereby be
able to protect itself against a possible loss resulting from an adverse
change in the relationship between the currency exchange rates on the date
on which the security is purchased or sold, or on which the payment is
declared, and the date on which such payments are made or received.
The Fund may also use Forward Contracts to lock in the U.S. dollar
value of portfolio positions ("position hedge"). In a position hedge, for
example, when the Fund believes that foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a forward
sale contract to sell an amount of that foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in
such foreign currency, or when the Fund believes that the U.S. dollar may
suffer a substantial decline against a foreign currency, it may enter into
a forward purchase contract to buy that foreign currency for a fixed
dollar amount. In this situation the Fund may, in the alternative, enter
into a forward contract to sell a different foreign currency for a fixed
U.S. dollar amount where the Fund believes that the U.S. dollar value of
the currency to be sold pursuant to the forward contract will fall
whenever there is a decline in the U.S. dollar value of the currency in
which portfolio securities of the Fund are denominated ("cross-hedge").
The Fund's Custodian will place cash or U.S. Government securities
or other liquid high-quality debt securities in a separate account of the
Fund having a value equal to the aggregate amount of the Fund's
commitments under forward contracts entered into with respect to position
hedges and cross-hedges. That cash will not be otherwise available to the
Fund for investing while it is segregated. If the value of the securities
placed in the separate account declines, additional cash or securities
will be placed in the account on a daily basis so that the value of the
account will equal the amount of the Fund's commitments with respect to
such contracts. As an alternative to maintaining all or part of the
separate account, the Fund may purchase a call option permitting the Fund
to purchase the amount of foreign currency being hedged by a forward sale
contract at a price no higher than the forward contract price or the Fund
may purchase a put option permitting the Fund to sell the amount of
foreign currency subject to a forward purchase contract at a price as high
or higher than the forward contract price. Unanticipated changes in
currency prices may result in poorer overall performance for the Fund than
if it had not entered into such contracts.
The precise matching of the Forward Contract amounts and the value
of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of these securities between
the date the Forward Contract is entered into and the date it is sold.
Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot (i.e., cash) market (and bear the expense of
such purchase), if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some
of the foreign currency received upon the sale of the portfolio security
if its market value exceeds the amount of foreign currency the Fund is
obligated to deliver. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-
term hedging strategy is highly uncertain. Forward Contracts involve the
risk that anticipated currency movements will not be accurately predicted,
causing the Fund to sustain losses on these contracts and transactions
costs. The Fund may enter into Forward Contracts or maintain a net
exposure on such contracts only if: (1) the consummation of the contracts
would not obligate the Fund to deliver an amount of foreign currency in
excess of the value of the Fund's portfolio securities or other assets
denominated in that currency, or (2) the Fund maintains cash, U.S.
Government securities or liquid high-grade debt securities in a segregated
account in an amount not less than the value of the Fund's total assets
committed to the consummation of the contract.
At or before the maturity of a Forward Contract requiring the Fund
to sell a currency, the Fund may either sell a portfolio security and use
the sale proceeds to make delivery of the currency or retain the security
and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Fund will obtain, on
the same maturity date, the same amount of the currency that it is
obligated to deliver. Similarly, the Fund may close out a Forward
Contract requiring it to purchase a specified currency by entering into
a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would
realize a gain or loss as a result of entering into such an offsetting
Forward Contract under either circumstance to the extent the exchange rate
or rates between the currencies involved moved between the execution dates
of the first contract and offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because Forward Contracts are
usually entered into on a principal basis, no fees or commissions are
involved. Because such contracts are not traded on an exchange, the Fund
must evaluate the credit and performance risk of each particular
counterparty under a Forward Contract.
Although the Fund values its assets daily in terms of U.S. dollars,
it does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Fund may convert foreign currency from time
to time, and there are costs of such currency conversion. Foreign
exchange dealers do not charge a fee for conversion, but they do seek to
realize a profit based on the difference between the prices at which they
buy and sell various currencies. Thus, a dealer may offer to sell a
foreign currency to the Fund at one rate, while offering a lesser rate of
exchange should the Fund desire to resell that currency to the dealer.
Writing and Purchasing Calls. An additional reason for writing
options on a securities portfolio is to attempt to realize, through the
receipt of premiums, a greater return than would be realized on the
securities alone. When the Fund writes a call, it agrees, in return for
the premium, to sell the security underlying the call to a purchaser of
a corresponding call on the same security during the call period (usually
not more than 9 months) at a fixed exercise price (which may differ from
the market price of the underlying security), regardless of market price
changes during the call period. The Fund retains the risk of loss should
the price of the underlying security decline during the call period, which
loss may be offset to some extent by the premium received by the Fund.
The Fund may write and purchase calls on foreign currencies. A call
written on a foreign currency by the Fund is "covered" if the Fund owns
the underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a segregated
account by its custodian) upon conversion or exchange of other foreign
currency held in its portfolio. A call written by the Fund on a foreign
currency is for cross-hedging purposes if it is not covered, but is
designed to provide a hedge against a decline in the U.S. dollar value of
a security which the Fund owns or has the right to acquire and which is
denominated in the currency underlying the option due to an adverse change
in the exchange rate. In such circumstances, the Fund collateralizes the
option by maintaining in a
segregated account with the Fund's custodian, cash or Government
Securities in an amount not less than the value of the underlying foreign
currency in U.S. dollars marked-to-market daily.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." A
profit or loss will be realized, depending upon whether the net of the
option transaction costs and the premium received on the call written is
more or less than the price of the call subsequently purchased. A profit
may also be realized if the call expires unexercised, because the Fund
retains the underlying security and the premium received. Any such
profits are considered short-term capital gains for Federal income tax
purposes, and when distributed by the Fund are taxable as ordinary income.
If the Fund could not effect a closing purchase transaction due to lack
of a market, it would have to hold the callable securities until the call
expired or was exercised.
When the Fund buys a call (other than in a closing purchase
transaction), it pays a premium and, except as to calls on Interest Rate
Futures, has the right to buy the underlying investment from a seller of
a corresponding call on the same investment during the call period at a
fixed exercise price. The Fund benefits only if the call is sold at a
profit or if, during the call period, the market price of the underlying
investment is above the sum of the call price plus the transaction costs
and the premium paid for the call and the call is exercised. If the call
is not exercised or sold (whether or not at a profit), it will become
worthless at its expiration date and the Fund will lose its premium
payment and the right to purchase the underlying investment.
Calls on Interest Rate Futures are similar to calls on debt
securities or futures contracts except that all settlements are in cash
(rather than by the Fund's delivery of the underlying investment) and gain
or loss depends on changes in the index in question (and thus on price
movements in the debt securities market generally) rather than on price
movements in individual securities or futures contracts. The Fund may
also write calls on Futures without owning a futures contract or a
deliverable bond, provided that at the time the call is written, the Fund
covers the call by segregating in escrow an equivalent dollar amount of
liquid assets. The Fund will segregate additional liquid assets if the
value of the escrowed assets drops below 100% of the current value of the
Future. In no circumstances would an exercise notice require the Fund to
deliver a futures contract; it would simply put the Fund in a short
futures position, which is permitted by the Fund's hedging policies. When
the Fund buys a call on an Interest Rate Future it pays a premium. During
the call period, upon exercise of a call by the Fund, a seller of a
corresponding call on the same investment will pay the Fund an amount of
cash to settle the call if the closing level of the index or Future upon
which the call is based is greater than the exercise price of the call.
That cash payment is equal to the difference between the closing price of
the call and the exercise price of the call times a specified multiple
(the "multiplier") which determines the total dollar value for each point
of difference.
Writing and Purchasing Puts. A put option gives the purchaser the
right to sell, and the writer the obligation to buy, the underlying
investment at the exercise price during the option period. As noted above
under "Writing and Purchasing Calls," an additional reason for writing
options on a securities portfolio is to attempt to realize, through the
receipt of premiums, a greater return than would be realized on the
securities alone. Writing a put, covered by segregated liquid assets
equal to the exercise price of the put, has the same economic effect to
the Fund as writing a covered call.
The premium the Fund receives from writing a put option represents
a profit, as long as the price of the underlying investment remains above
the exercise price. However, the Fund has also assumed the obligation
during the option period to buy the underlying investment from the buyer
of the put at the exercise price, even though the value of the investment
may fall below the exercise price. If the put expires unexercised, the
Fund (as the writer of the put) realizes a gain in the amount of the
premium. If the put option is exercised, the Fund must fulfill its
obligation to purchase the underlying investment at the exercise price,
which will usually exceed the then market value of the underlying
investment at that time. In that case, the Fund may incur a loss, equal
to the sum of the sale price of the underlying investment and the premium
received minus the sum of the exercise price and any transaction costs
incurred.
When writing put options on securities, to secure its obligation to
pay for the underlying security, the Fund will deposit in escrow with its
Custodian liquid assets with a value equal to or greater than the exercise
price of the underlying securities. The Fund therefore forgoes the
opportunity of investing the segregated assets or writing calls against
those assets. As long as the obligation of the Fund as the put writer
continues, it may be assigned an exercise notice by the exchange or
broker-dealer through whom such option was sold, requiring the Fund to
take delivery of the underlying security against payment of the exercise
price. The Fund has no control over when it may be required to purchase
the underlying security, since it may be assigned an exercise notice at
any time prior to the termination of its obligation as the writer of the
put. This obligation terminates upon expiration of the put, or such
earlier time at which the Fund effects a closing purchase transaction by
purchasing a put of the same series as that previously sold. Once the
Fund has been assigned an exercise notice, it is thereafter not allowed
to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent an
underlying security from being put. Furthermore, effecting such a closing
purchase transaction will permit the Fund to write another put option to
the extent that the exercise price thereof is secured by the deposited
assets, or to utilize the proceeds from the sale of such assets for other
investments by the Fund. The Fund will realize a profit or loss from a
closing purchase transaction if the cost of the transaction is less or
more than the premium received from writing the option. As with writing
covered calls, any and all such profits described herein from writing puts
are considered short-term gains for Federal tax purposes, and when
distributed to the shareholders of the Fund, are taxable as ordinary
income.
When the Fund buys a put, it pays a premium and has the right to sell
the underlying investment to a seller of a put on a corresponding
investment during the put period at a fixed exercise price. Buying a put
on an investment the Fund owns enables the Fund to attempt to protect
itself during the put period against a decline in the value of the
underlying investment below the exercise price by selling the underlying
investment at the exercise price to a seller of a corresponding put. If
the market price of the underlying investment is above the exercise price
and, as a result, the put is not exercised or resold, the put will become
worthless at its expiration date and the Fund will lose its premium
payment and the right to sell the underlying investment; the put may,
however, be sold prior to expiration (whether or not at a profit).
Puts on Interest Rate Futures are similar to puts on debt securities
or futures contracts except that all settlements are in cash (rather than
by the Fund's delivery of the underlying investment) and gain or loss
depends on changes in the index in question (and thus on price movements
in the debt securities market generally) rather than on price movements
in individual securities or futures contracts. Purchasing a put on either
Futures or on securities it does not own permits the Fund either to resell
the put or, if applicable, to buy the underlying investment and sell it
at the exercise price. The resale price of the put will vary inversely
with the price of the underlying investment. If the market price of the
underlying investment is above the exercise price, and, as a result, the
put is not exercised, the put will become worthless on its expiration
date. In the event of a decline in price of the underlying investment,
the Fund could exercise or sell the put at a profit to attempt to offset
some or all of its loss on its portfolio securities. When the Fund
purchases a put on a Future or security not held by it, the put protects
the Fund to the extent that the prices of the underlying Future or
securities move in a similar pattern to the prices of the securities in
the Fund's portfolio.
Interest Rate Swap Transactions. Swap agreements entail both
interest rate risk and credit risk. The interest rate risk of a swap is
that the Fund will incur a net payment obligation as a result of movements
in interest rates. Credit risk arises from the possibility that the
counterparty will default. If the counterparty to an interest rate swap
defaults, the Fund's loss will consist of the net amount of contractual
interest payments that the Fund has not yet received. The Manager will
monitor the creditworthiness of counterparties to the Fund's interest rate
swap transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements. A master netting agreement provides that all swaps done
between the Fund and that counterparty under the master agreement shall
be regarded as parts of an integral agreement. If on any date amounts are
payable in the same currency in respect of one or more swap transactions,
the net amount payable on that date in that currency shall be paid. In
addition, the master netting agreement may provide that if one party
defaults generally or on one swap, the counterparty may terminate the
swaps with that party. Under such agreements, if there is a default
resulting in a loss to one party, the measure of that party's damages is
calculated by reference to the average cost of a replacement swap with
respect to each swap (i.e., the mark-to-market value at the time of the
termination of each swap). The gains and losses on all swaps are then
netted, and the result is the counterparty's gain or loss on termination.
The termination of all swaps and the netting of gains and losses on
termination is generally referred to as "aggregation."
Additional Information about Hedging Instruments and Their Use. The
Fund's Custodian, or a securities depository acting for the Custodian,
will act as the Fund's escrow agent, through the facilities of the Options
Clearing Corporation ("OCC"), as to the securities on which the Fund has
written options traded on exchanges or as to other acceptable escrow
securities, so that no margin will be required for such transactions. OCC
will release the securities on the expiration of the option or upon the
Fund's entering into a closing transaction. An option position may be
closed out only on a market which provides secondary trading for options
of the same series, and there is no assurance that a liquid secondary
market will exist for any particular option.
The Fund's option activities may affect its turnover rate and
brokerage commissions. The exercise of calls written by the Fund may
cause the Fund to sell related portfolio securities, thus increasing its
turnover rate in a manner beyond the Fund's control. The exercise by the
Fund of puts on debt securities may cause the sale of related investments,
also increasing portfolio turnover. Although such exercise is within the
Fund's control, holding a put might cause the Fund to sell the related
investment for reasons which would not exist in the absence of the put.
The Fund will pay a brokerage commission each time it buys or sells a put,
a call, or a related investment in connection with the exercise of a put
or call. Such commissions may be higher on a relative basis than those
which would apply to direct purchases or sales of the underlying
investments. Premiums paid for options are small in relation to the
market value of such investments and consequently, put and call options
offer large amounts of leverage. The leverage offered by trading in
options could result in the Fund's net asset value being more sensitive
to changes in the value of the underlying investment.
Regulatory Aspects of Hedging Instruments. The Fund must operate
within certain restrictions as to its short and long positions in Futures
and options thereon under a rule (the "CFTC Rule") adopted by the
Commodity Futures Trading Commission ("CFTC") under the Commodity Exchange
Act (the "CEA"), which exempts the Fund from registration with the CFTC
as a "commodity pool operator" (as defined under the CEA), if it complies
with the CFTC Rule. Under these restrictions the Fund will not, as to any
positions, whether short, long or a combination thereof, enter into
Futures and options thereon for which the aggregate initial margins and
premiums exceed 5% of the fair market value of its assets, with certain
exclusions as defined in the CFTC Rule. Under the restrictions, the Fund
also must, as to its short positions, use Futures and options thereon
solely for bona-fide hedging purposes within the meaning and intent of the
applicable provisions of the CEA.
Transactions in options by the Fund are subject to limitations
established by each of the exchanges governing the maximum number of
options which may be written or held by a single investor or group of
investors acting in concert, regardless of whether the options were
written or purchased on the same or different exchanges or are held in one
or more accounts or through one or more different exchanges or futures
brokers. Thus, the number of options which the Fund may write or hold may
be affected by options written or held by other entities, including other
investment companies having the same advisor as the Fund or having an
affiliated investment adviser. Position limits also apply to Futures.
An exchange may order the liquidation of positions found to be in
violation of those limits and may impose certain other sanctions. Due to
requirements under the Investment Company Act, when the Fund purchases a
Future, the Fund will maintain, in a segregated account or accounts with
its Custodian, cash or readily-marketable, short-term (maturing in one
year or less) debt instruments in an amount equal to the market value of
the securities underlying such Future, less the margin deposit applicable
to it.
Tax Aspects of Hedging Instruments and Covered Calls. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code. One of the tests for such qualification is that less than
30% of its gross income (irrespective of losses) must be derived from
gains realized on the sale of securities held for less than three months.
Due to this limitation, the Fund will limit the extent to which it engages
in the following activities, but will not be precluded from them: (i)
selling investments, including Futures, held for less than three months,
whether or not they were purchased on the exercise of a call held by the
Fund; (ii) writing calls on investments held less than three months; (iii)
purchasing calls or puts which expire in less than three months; (iv)
effecting closing transactions with respect to calls or puts purchased
less than three months previously; and (v) exercising puts held by the
Fund for less than three months.
Certain foreign currency exchange contracts ("Forward Contracts") in
which the Fund may invest are treated as "section 1256 contracts." Gains
or losses relating to section 1256 contracts generally are characterized
under the Internal Revenue Code as 60% long-term and 40% short-term
capital gains or losses. However, foreign currency gains or losses
arising from certain section 1256 contracts (including Forward Contracts)
generally are treated as ordinary income or loss. In addition, section
1256 contracts held by the Fund at the end of each taxable year are
"marked-to market" with the result that unrealized gains or losses are
treated as though they were realized. These contracts also may be marked-
to-market for purposes of the excise tax applicable to investment company
distributions and for other purposes under rules prescribed pursuant to
the Internal Revenue Code. An election can be made by the Fund to exempt
these transactions from this mark-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a position
making up a straddle is allowed only to the extent such loss exceeds any
unrecognized gain in the offsetting positions making up the straddle.
Disallowed loss is generally allowed at the point where there is no
unrecognized gain in the offsetting positions making up the straddle, or
the offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates that occur between the time the Fund
accrues interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the Fund
actually collects such receivables or pays such liabilities generally are
treated as ordinary income or ordinary loss. Similarly, on disposition
of debt securities denominated in a foreign currency and on disposition
of foreign currency forward contracts, gains or losses attributable to
fluctuations in the value of a foreign currency between the date of
acquisition of the security or contract and the date of disposition also
are treated as ordinary gain or loss. Currency gains and losses are
offset against market gains and losses before determining a net "Section
988" gain or loss under the Internal Revenue Code, which may increase or
decrease the amount of the Fund's investment company income available for
distribution to its shareholders.
Possible Risk Factors in Hedging. In addition to the risks with
respect to Futures and options discussed in the Prospectus and above,
there is a risk in using short hedging by selling Futures to attempt to
protect against decline in value of the Fund's portfolio securities (due
to an increase in interest rates) that the prices of such Futures will
correlate imperfectly with the behavior of the cash (i.e., market value)
prices of the Fund's securities. The ordinary spreads between prices in
the cash and futures markets are subject to distortions due to differences
in the natures of those markets. First, all participants in the futures
market are subject to margin deposit and maintenance requirements. Rather
than meeting additional margin deposit requirements, investors may close
futures contracts through offsetting transactions which could distort the
normal relationship between the cash and futures markets. Second, the
liquidity of the futures markets depends on participants entering into
offsetting transactions rather than making or taking delivery. To the
extent participants decide to make or take delivery, liquidity in the
futures markets could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures
markets are less onerous than margin requirements in the securities
markets. Therefore, increased participation by speculators in the futures
markets may cause temporary price distortions. If the Fund uses Hedging
Instruments to establish a position in the debt securities markets as a
temporary substitute for the purchase of particular debt securities (long
hedging) by buying Futures and/or calls on such Futures or on debt
securities, it is possible that the market may decline; if the Fund then
concludes not to invest in such securities at that time because of
concerns as to possible further market decline or for other reasons, the
Fund will realize a loss on the Hedging Instruments that is not offset by
a reduction in the price of the debt securities purchased.
INVESTMENT RESTRICTIONS
The Fund's significant investment restrictions are described in the
Prospectus. The following investment restrictions are also fundamental
policies of the Fund and, together with the fundamental policies described
in the Prospectus, cannot be changed without the vote of a "majority" of
the Fund's outstanding shares. Under the Investment Company Act, such
"majority" vote is defined as the vote of the holders of the lesser of:
(i) 67% or more of the shares present or represented by proxy at such
meeting, if the holders of more than 50% of the outstanding shares are
present or represented by proxy, or (ii) more than 50% of the outstanding
shares. Under these additional restrictions, the Fund cannot: (1) invest
in real estate, but the Fund may invest in debt securities secured by real
estate or interests therein or issued by companies, including real estate
investment trusts, which invest in real estate or interests therein; (2)
buy securities on margin or engage in short sales, except that the Fund
may make margin deposits in connection with any of the Hedging Instruments
which it may use as permitted by any of its other fundamental policies;
(3) mortgage, hypothecate or pledge any of its assets; however, this does
not prohibit the escrow arrangements contemplated in connection with the
use of Hedging Instruments; (4) underwrite securities of any issuer if
those officers and trustees or directors of the Fund or its adviser owning
individually more than 0.5% of the securities of such issuer together own
more than 5% of the securities of such issuer; (5) invest in mineral-
related programs or leases; (6) invest in companies for the primary
purpose of acquiring control of management thereof; or (7) invest in other
investment companies, except in connection with a merger, consolidation,
reorganization or acquisition of assets.
TRUSTEES AND OFFICERS
The Fund's Trustees and officers and their principal occupations and
business affiliations during the past five years are set forth below.
Each Trustee is a Trustee, Director or Managing General Partner of Daily
Cash Accumulation Fund, Inc., Centennial Money Market Trust, Centennial
Tax Exempt Trust, Centennial Government Trust, Centennial New York Tax
Exempt Trust, Centennial California Tax Exempt Trust, Oppenheimer Total
Return Fund, Inc., Oppenheimer Equity Income Fund, Oppenheimer High Yield
Fund, Oppenheimer Cash Reserves, Oppenheimer Tax-Exempt Cash Reserves,
Oppenheimer Variable Account Funds, Oppenheimer Main Street Funds, Inc.,
Oppenheimer Integrity Funds, Oppenheimer Strategic Income Fund,
Oppenheimer Strategic Income & Growth Fund, Oppenheimer Strategic
Investment Grade Bond Fund, Oppenheimer Strategic Short-Term Income Fund,
Centennial America Fund, L.P., Oppenheimer Insured Tax-Exempt Bond Fund,
Oppenheimer Intermediate Tax-Exempt Bond Fund, Oppenheimer Government
Securities Fund, and The New York Tax-Exempt Income Fund, Inc.
(collectively, the "Denver-based OppenheimerFunds"). Mr. Fossel is
President of each of the Denver-based OppenheimerFunds. As of December
31, 1993, the Fund's Trustees and officers in the aggregate beneficially
owned less than 1% of its outstanding shares.
ROBERT G. AVIS, Trustee*
One North Jefferson Avenue, St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G.
Edwards, Inc. (its parent holding company); Chairman of A.G.E. Asset
Management and A.G. Edwards Trust Company (its affiliated investment
adviser and trust company, respectively.)
WILLIAM A. BAKER, Trustee
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
CHARLES CONRAD, JR., Trustee
5301 Bolsa Avenue, Huntington Beach, California 92647
Vice President of McDonnell Douglas Ltd.; formerly associated with the
National Aeronautics and Space Administration.
JON S. FOSSEL, President and Trustee*
Two World Trade Center, New York, New York 10048-0203
Chairman, Chief Executive Officer and a Director of the Manager; President
and a Director of Oppenheimer Acquisition Corp. ("OAC"), the Manager's
parent holding company; President and a Director of HarbourView Asset
Management Corporation ("HarbourView"), a subsidiary of the Manager; a
Director of Shareholder Services, Inc. ("SSI") and Shareholder Financial
Services, Inc. ("SFSI"), transfer agent subsidiaries of the Manager;
formerly President of the Manager.
RAYMOND J. KALINOWSKI, Trustee
44 Portland Drive, St. Louis, Missouri 63131
Formerly Vice Chairman and a Director of A.G. Edwards, Inc., parent
holding company of A.G. Edwards & Sons, Inc. (a broker-dealer), of which
he was Senior Vice President.
C. HOWARD KAST, Trustee
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting
firm).
ROBERT M. KIRCHNER, Trustee
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
_____________________
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
NED M. STEEL, Trustee
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; formerly Senior Vice
President and a Director of Van Gilder Insurance Corp. (insurance
brokers).
JAMES C. SWAIN, Chairman and Trustee*
3410 South Galena Street, Denver, Colorado 80231
Vice Chairman of the Manager; President and a Director of Centennial Asset
Management Corporation ("Centennial"), an investment adviser subsidiary
of the Manager; formerly President and Director of Oppenheimer Asset
Management Corporation ("OAMC"), an investment adviser which was a
subsidiary of the Manager, and Chairman of the Board of SSI.
RALPH STELLMACHER, Vice President and Portfolio Manager
Two World Trade Center, New York, New York 10048
Senior Vice President of the Manager; an officer of other
OppenheimerFunds.
ANDREW J. DONOHUE, Vice President
Two World Trade Center, New York, New York 10048
Executive Vice President and General Counsel of the Manager and
Oppenheimer Funds Distributor, Inc. (the "Distributor"); an officer of
other OppenheimerFunds; formerly Senior Vice President and Associate
General Counsel of the Manager and the Distributor; Partner in, Kraft &
McManimon (a law firm); an officer of First Investors Corporation (a
broker-dealer) and First Investors Management Company, Inc. (broker-dealer
and investment adviser); director and an officer of First Investors Family
of Funds and First Investors Life Insurance Company.
GEORGE C. BOWEN, Vice President, Secretary and Treasurer
3410 South Galena Street, Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President and
Treasurer of the Distributor and HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a director of Centennial; Vice
President, Treasurer and Secretary of SSI and SFSI; an officer of other
OppenheimerFunds; formerly Senior Vice President/Comptroller and Secretary
of OAMC.
LYNN M. COLUCCY, Assistant Treasurer
3410 South Galena Street, Denver, Colorado 80231
Vice President and Assistant Treasurer of the Manager; an officer of other
OppenheimerFunds; formerly Vice President/Director of Internal Audit of
the Manager.
ROBERT G. ZACK, Assistant Secretary
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other OppenheimerFunds.
_____________________________
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Remuneration of Trustees. The officers of the Fund (including Messrs.
Fossel and Swain) are affiliated with the Manager and receive no salary
or fee from the Fund. During the Fund's fiscal year ended September 30,
1993, the remuneration (including expense reimbursements) paid to all
Trustees of the Fund (excluding Messrs. Fossel and Swain) for services as
Trustees and as members of one or more committees totaled $1,602. The
Fund has an Audit and Review Committee, comprised of William A. Baker
(Chairman), Charles Conrad, Jr. and Robert M. Kirchner. This Committee
meets regularly to review audits, audit procedures, financial statements
and other financial and operational matters of the Fund.
Major Shareholders. As of December 31, 1993, no person owns of record or
is known by the Fund to own beneficially 5% or more of the Fund's
outstanding shares.
INVESTMENT MANAGEMENT SERVICES
The Manager is wholly-owned by Oppenheimer Acquisition Corp. ("OAC"),
a holding company controlled by Massachusetts Mutual Life Insurance
Company. OAC is also owned in part
by certain of the Manager's directors and officers, some of whom serve as
officers of the Fund and two of whom (Messrs. Fossel and Swain) serve as
Trustees of the Fund.
The Investment Advisory Agreement between the Manager and the Fund
(the "Agreement") requires the Manager, at its expense, to provide the
Fund with adequate office space, facilities and equipment, and to provide
and supervise the activities of all administrative and clerical personnel
required to provide effective administration for the Fund, including the
compilation and maintenance of records with respect to its operations, the
preparation and filing of specified reports, and the composition of proxy
materials and registration statements for continuous public sale of shares
of the Fund. Expenses not expressly assumed by the Manager under the
Agreement or by the Distributor are paid by the Fund. The Agreement
lists examples of expenses paid by the Fund, the major categories of which
relate to interest, taxes, brokerage commissions, fees to Independent
Trustees, legal and audit expenses, custodian and transfer agent expenses,
share issuance costs, certain printing and registration costs, and non-
recurring expenses, including litigation. For the Fund's fiscal years
ended September 30, 1991, 1992 and 1993, the management fees paid by the
Fund to the Manager were $98,400, $197,844 and $513,057, respectively.
The Agreement contains no expense limitation. However, independently
of the Agreement, the Manager has undertaken that the total expenses of
the Fund in any fiscal year (exclusive of taxes, interest, brokerage
commissions, and any extraordinary non-recurring expenses, such as
litigation costs) shall not exceed the most stringent state regulatory
limitation on Fund expenses applicable to the Fund. The payment of the
management fee will be reduced so that at no time will there be any
accrued but unpaid liability under the above expense limitation. The
Manager reserves the right to amend or terminate this expense limitation
at any time.
The Agreement provides that in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard for its obligations and
duties thereunder, the Manager shall not be liable for any loss sustained
by reason of good faith errors or omissions on its part with respect to
any matters to which the Agreement relates. The Agreement permits the
Manager to act as investment adviser for any other person, firm or
corporation and to use the name "Oppenheimer" in connection with other
investment companies for which it may act as investment adviser. If the
Manager shall no longer act as investment adviser to the Fund, the right
of the Fund to use the name "Oppenheimer" as part of its name may be
withdrawn.
BROKERAGE
Portfolio Transactions. One of the duties of the Manager under the
Agreement is to arrange the portfolio transactions of the Fund. Portfolio
decisions are based upon recommendations of the Manager and the judgment
of the portfolio manager, under the supervision of executive officers of
the Manager. As most purchases made by the Fund are principal
transactions at net prices, the Fund incurs little or no brokerage costs.
The Fund deals directly with the selling or purchasing principal or market
maker without incurring charges for the services of a broker on its behalf
unless it is determined that a better price or execution may be obtained
by utilizing the services of a broker. Purchases of portfolio securities
from underwriters include a commission or concession paid by the issuer
to the underwriter, and purchases from dealers include a spread between
the bid and asked price.
The Fund seeks to obtain prompt execution of orders at the most
favorable net prices. Transactions are directed to brokers or dealers in
return for special research and statistical information as well as for
services rendered by such brokers or dealers in the execution of orders.
The allocation of transactions in order to obtain additional research
service permits the Manager to supplement its own research and analysis
activities and to make available to the Manager the views and information
of individuals and research staffs of other securities firms. The
research services provided by a particular broker may be useful only to
one or more of the advisory accounts of the Manager and its affiliates,
and investment research received for the commissions of these other
accounts may be useful both to the Fund and one or more of such other
accounts.
The Manager is authorized by the Agreement to employ such brokers or
dealers as may in its best judgment, based on all relevant factors,
implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" (prompt and reliable execution at the most favorable
price obtainable) of the Fund's portfolio transactions. Most purchases
made by the Fund are principal transactions at net prices, and the Fund
incurs little or no brokerage costs. The Board of Trustees has permitted
the Manager to use concessions on fixed price offerings to obtain
research, in the same manner as is permitted for agency transactions.
When brokerage costs are incurred, the Fund's policy is to pay a
reasonable commission in terms of the range and quality of the broker's
services which benefit the Fund, rather than always to seek the lowest
commission cost. The requirement to seek the lowest commission cost could
exclude the Fund and the Manager from information, analysis, research and
other services which are of value to the Fund, as well as proper
execution. In all cases, the Manager is required to be aware of the
broker's purported or "posted" commission rates, if any, as may be
applicable to the transaction, as well as other information available at
the time as to the level of commissions known to be charged in comparable
transactions by other qualified brokers. The Board of Trustees, including
the Independent Trustees of the Fund, annually review information
furnished by the Manager relative to the commissions paid to brokers
furnishing such services in an effort to ascertain that the amount of such
commission was reasonably related to the value or benefit of such
services.
The Fund pays a brokerage commission each time it writes a call or
put, purchases a call or put, effects a closing transaction, or purchases
or sells a security on the exercise of a call or put. Such option
commissions may be higher than those which would apply to direct purchases
and sales of portfolio securities. Transactions in underlying securities
will normally be executed by the same broker or dealer who executed the
original option transaction for the Fund. The Fund's Board of Trustees
has adopted a procedure permitting the combination of purchase or sale
transactions in instances in which more than one of the funds managed by
the Manager and its affiliates simultaneously elect to effect portfolio
transactions in the same security. It is recognized that in some cases
this procedure could have a detrimental effect on the price or volume of
such securities as far as the Fund is concerned. In other cases, however,
it is believed that the ability of the Fund to participate in volume
transactions will produce better execution for the Fund.
During the Fund's fiscal years ended September 30, 1991, 1992 and
1993, total brokerage commissions paid by the Fund (not including any
spreads or concessions on principal transactions on a net trade basis)
amounted to 0, $1,064 and $2,499. During the fiscal year ended September
30, 1993, $458 was paid to brokers as commissions in return for research
services (including special research, statistical information and
execution); the aggregate dollar amount of these transactions was
$115,258.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Determination of Net Asset Value Per Share. The net asset values per
share of Class A and Class C shares of the Fund are determined as of 4:00
p.m. each day The New York Stock Exchange (the "NYSE") is open, by
dividing the value of the Fund's net assets attributable to that class by
the total number of Fund shares of that class outstanding. The NYSE's
most recent holiday schedule (which is subject to change) states that it
will close New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. It may
also close on other days. Trading may occur in debt securities and in
foreign securities at times when
the NYSE is closed (including weekends and holidays, or after 4:00 P.M.
on a regular business day). Because the net asset values of the Fund will
not be calculated on such days, if debt securities and foreign securities
are traded at such times, the net asset value per share of Class A and
Class C shares may be significantly affected at times when shareholders
will not have the ability to purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the
valuation of its securities: (i) equity securities traded on a securities
exchange or on NASDAQ are valued at the last sale price on their primary
exchange or NASDAQ that day (or, in the absence of sales that day, at
values based on the last sale price of the preceding trading day, or
closing bid and asked prices); (ii) NASDAQ and other unlisted equity
securities for which last sale prices are not regularly reported but for
which over-the-counter market quotations are readily available are valued
at the highest closing bid price at the time of valuation, or, if no
closing bid price is reported, on the basis of a closing bid price
obtained from a dealer who maintains an active market in that security;
(iii) securities (including restricted securities) not having readily-
available market quotations are valued at fair value under the Board's
procedures; (iv) debt securities having a maturity in excess of 60 days
are valued at the mean between the asked and bid prices determined by a
portfolio pricing service approved by the Fund's Board of Trustees or
obtained from an active market maker in that security; (v) short-term debt
securities (having a remaining maturity of 60 days or less) are valued at
cost, adjusted for amortization of premiums and accretion of discounts;
and (vi) securities traded on foreign exchanges or in foreign over-the-
counter markets are valued as determined by a portfolio pricing service,
approved by the Board, based upon last sales prices reported on a
principal exchange or the mean between closing bid and asked prices, and
in each case reflecting prevailing rates of exchange to convert their
values to U.S. dollars. Foreign currency will be valued as close to the
time fixed for the valuation date as is reasonably practicable.
Trading in securities on European and Asian exchanges and over-the-
counter markets is normally completed before the close of the NYSE.
Events affecting the values of foreign securities traded in such markets
that occur between the time their prices are determined and the close of
the NYSE will not be reflected in the Fund's calculation of net asset
value unless the Board of Trustees or the Manager, under procedures
established by the Board, determines that the particular event would
materially affect the Fund's net asset value, in which case an adjustment
would be made. In the case of U.S. Government securities, corporate bonds
and all mortgage-backed securities, where last sale information is not
generally available, such pricing procedures may include "matrix"
comparisons to the prices for comparable investments on the basis of
quality, yield, maturity and other special factors involved. The Trustees
will monitor the accuracy of pricing services by comparing prices used
for portfolio evaluation to actual sales prices of selected securities.
Calls, puts and Futures are valued at the last sale prices on the
principal exchanges on which they were traded or on NASDAQ, as applicable,
or, if there are no sales that day, in accordance with (i) above. When
the Fund writes an option, an amount equal to the premium received by the
Fund is included in its Statement of Assets and Liabilities as an asset,
and an equivalent deferred credit is included in the liability section.
The deferred credit is adjusted ("marked-to-market") to reflect the
current market value of the option.
Dual Class Methodology. The methodology for calculating the net asset
value, dividends and distributions of the Fund's Class A and Class C
shares recognizes two types of expenses. General expenses that do not
pertain specifically to either class are allocated pro rata to the shares
of each class, based on the percentage of the net assets of such class to
the Fund's total net assets, and then equally to each outstanding share
within a given class. Such general expenses include (i) management fees,
(ii) legal, bookkeeping and audit fees, (iii) printing and mailing costs
of shareholder reports, Prospectuses, Additional Statements and other
materials for current shareholders, (iv) fees to unaffiliated Trustees,
(v) custodian expenses, (vi) share issuance costs, (vii) organization and
start-up costs, (viii) interest, taxes and brokerage commissions, and (ix)
non-recurring expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each outstanding
share within that class. Such expenses include (a) Distribution and
Service Plan fees, (b) incremental transfer and shareholder servicing
agent fees and expenses, (c) registration fees, and (d) shareholder
meeting expenses, to the extent that such expenses pertain to a specific
class rather than to the Fund as a whole.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Rights of
Accumulation and Letters of Intent because of the economies of sales
efforts and reduction in expenses realized by the Distributor, dealers and
brokers making such sales. No sales charge is imposed in certain
circumstances described in the Prospectus because the Distributor or
dealer or broker incurs little or no selling expenses. The term
"immediate family" refers to one's spouse, children, grandchildren,
parents, grandparents, parents-in-law, brothers and sisters, sons- and
daughters-in-law, a sibling's spouse and a spouse's siblings.
Redemptions. Information on how to redeem shares of the Fund is stated
in the Prospectus. The Prospectus states that payment for shares tendered
for redemption is ordinarily made in cash. However, if the Board of
Trustees determines that it would be detrimental to the best interests of
the remaining shareholders of the Fund to make payment wholly in cash, the
redemption price may be paid in whole or in part by a distribution in kind
of securities from the portfolio of the Fund in lieu of cash in conformity
with applicable SEC rules. The Fund has elected to be governed by Rule
18f-1 under the Investment Company Act, pursuant to which the Fund is
obligated to redeem shares solely in cash up to the lesser of $250,000 or
1% of the net assets of the Fund during any 90-day period for any one
shareholder. If shares are redeemed in kind, the redeeming shareholder
might incur brokerage or other costs in converting the assets to cash.
The method of valuing securities used to make redemptions in kind will be
the same as the method of valuing portfolio securities described above
under "Determination of Net Asset Value Per Share," and such valuation
will be made as of the same time the redemption price is determined.
The Fund's Board of Trustees has the right to cause the involuntary
redemption of shares held in any account if the aggregate net asset value
of such shares is less than $200 or such lesser amount as the Board may
establish. Should the Board elect to exercise this right, it may also
fix, in accordance with the Investment Company Act, the requirements for
any notice to be given to the shareholders in question (not less than 30
days), or may set requirements for permission to allow the shareholder to
increase the investment so that the shares would not be involuntarily
redeemed.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect
to reinvest all dividends and/or capital gains distributions in shares of
the same class of any of the other funds listed in the Prospectus as
"Eligible Funds," at net asset value without sales charge. Class C
shareholders should be aware that as of the date of this Additional
Statement, not all Eligible Funds offer Class C shares. The names of
these Funds are listed under "Exchanges of Class C Shares" below. To
elect this option, the shareholder must notify the Distributor in writing,
and either must have an existing account in the fund selected for dividend
reinvestment or must obtain a prospectus for that fund and application
from the Transfer Agent to establish an account. The investment will be
made at net asset value per share in effect at the close of business on
the payable date of the dividend or distribution. Dividends and
distributions from other Eligible Funds may be invested in shares of the
Fund on the same basis.
Cancellation of Purchase Orders. Cancellation of purchase orders for Fund
shares (for example, when checks submitted to purchase shares are returned
to the Fund unpaid) causes a loss to be incurred when the net asset value
of the Fund's shares on the date of cancellation is less than on the
purchase date; that loss is equal to the difference in net asset value
times the number of shares in the purchase order. The investor is
responsible for that loss. If the investor fails to compensate the Fund
for such loss, the Distributor will do so. The Fund may reimburse the
Distributor for that amount by redeeming shares from any account
registered in that investor's name, or the Distributor may seek other
redress.
Transfer of Shares. Shareholders owning shares of both classes must
specify whether they intend to transfer Class A or Class C shares. Shares
are not subject to the payment of a CDSC of either class at the time of
transfer (by absolute assignment, gift or bequest, not involving, directly
or indirectly, a public sale). The transferred shares will remain subject
to the CDSC, calculated as if the transferee shareholder had acquired the
transferred shares in the same manner and at the same time as the
transferring shareholder. If less than all shares held in an account are
transferred, and not all shares in the account would be subject to a CDSC
if redeemed at the time of transfer, then shares will be transferred in
the order described in "How to Buy Shares - Class C Contingent Deferred
Sales Charge" in the Prospectus for the imposition of the Class C CDSC on
redemptions.
Exchanges of Class C Shares. As stated in the Prospectus, shares of a
particular class of Eligible Funds having more than one class of shares
may be exchanged only for shares of the same class or another Eligible
Fund. All of the Eligible Funds offer Class A shares, but only the
following other Eligible Funds (referred to as "Advisors Portfolio" funds)
offer Class C shares:
Oppenheimer Target Fund
Oppenheimer Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Asset Allocation Fund
Oppenheimer U.S. Government Trust
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Cash Reserves
Oppenheimer Strategic Diversified Income Fund
DISTRIBUTION AND SERVICE PLANS
The Fund has adopted a separate Distribution Plan for each class of
shares of the Fund under Rule 12b-1 of the Investment Company Act,
pursuant to which the Fund will reimburse the Distributor for all or a
portion of its costs incurred in connection with the distribution and/or
servicing of shares of that class as described in the Prospectus. Each
Plan has been approved by a vote of (i) the Board of Trustees of the Fund,
including a majority of the "Independent Trustees", cast in person at a
meeting called for the purpose of voting on that Plan, and (ii) the
holders of a "majority" (as defined in the Investment Company Act) of the
shares of each class [for the Distribution and Service Plan for the Class
C shares (the "Class C Plan"), such vote having been cast by the Manager
as the sole initial holder of Class C shares of the Fund].
Each Plan shall, unless terminated as described below, continue in
effect from year to year but only as long as such continuance is
specifically approved at least annually by the Fund's Board of Trustees,
including the Independent Trustees, by a vote cast in person at a meeting
called for the purpose of voting on such continuance. Either Plan may be
terminated at any time by the vote of a majority of the Independent
Trustees or by the vote of the holders of a "majority" (as defined in the
Investment Company Act) of the outstanding shares of that class. Neither
Plan may be amended to increase materially the amount of payments to be
made unless such amendment is approved by the class affected by the
amendment. All material amendments must be approved by the Board and the
Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall
provide separate written reports to the Fund's Board of Trustees at least
quarterly for its review, detailing the amount of all payments made
pursuant to each Plan, the identity of each Recipient that received any
such payment, and the purpose of the payments. Each Plan further provides
that while it is in effect, the selection or replacement and nomination
of those Trustees of the Fund who are not "interested persons" of the Fund
is committed to the discretion of the Independent Trustees. This does not
prevent the involvement of others in such selection and nomination if the
final decision as to any such selection or nomination is approved by a
majority of such Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers did not exceed a minimum amount,
if any, that may be determined from time to time by a majority of the
Fund's Independent Trustees. Initially, the Board of Trustees has set the
fee at the maximum rate and set no minimum amount. The Plans permit the
Distributor and the Manager to make additional distribution payments to
Recipients from their own resources (including profits from advisory fees)
at no cost to the Fund. The Distributor and the Manager may, in their
sole discretion, increase or decrease the amount of distribution
assistance payments they make to Recipients from their own assets.
For the fiscal year ended September 30, 1993, payments under the
Class A Plan totaled $183,383, all of which was paid by the Distributor
to Recipients as reimbursement for services, including $19,008 paid to an
affiliate of the Distributor. Any unreimbursed expenses incurred with
respect to Class A shares for any fiscal quarter by the Distributor may
not be recovered under the Class A Plan in subsequent fiscal quarters.
Payments received by the Distributor under the Class A Plan will not be
used to pay any interest expense, carrying charges, or other financial
costs, or allocation of overhead by the Distributor.
The Class C Plan allows the service fee payment to be paid by the
Distributor to Recipients in advance for the first year Class C shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. The advance payment is based on the net assets of the Class
C shares sold. An exchange of shares does not entitle the Recipient to
an advance service fee payment. In the event Class C shares are redeemed
during the first year such shares are outstanding, the Recipient will be
obligated to repay a pro rata portion of such advance payment to the
Distributor. Although the Class C Plan permits the Distributor to retain
both the asset-based sales charges and the service fee on Class C shares,
or to pay Recipients the service fee on a quarterly basis, without payment
in advance, the Distributor intends to pay the service fee to Recipients
in the manner described above. A minimum holding period may be
established from time to time under the Class C Plan by the Board.
Initially, the Board has set no minimum holding period. All payments
under the Class C Plan are subject to the limitations imposed by the
National Association of Securities Dealers, Inc. Rules of Fair Practice.
The Class C Plan allows for the carry-forward of distribution expenses,
to be recovered from asset-based sales charges in subsequent fiscal
periods, as described in the Prospectus. During the fiscal year ended
September 30, 1993, no payments were made under the Class C Plan, as no
Class C shares were publicly issued prior to December 1, 1993.
The asset-based sales charge paid to the Distributor by the Fund
under the Class C Plan is intended to allow the Distributor to recoup the
cost of sales commissions paid to authorized brokers and dealers at the
time of sale, plus financing costs, as described in the Prospectus. Such
payments may also be used to pay for the following expenses in connection
with the distribution of Class C shares: (i) financing the advance of the
service fee payment to Recipients under the Class C Plan, (ii)
compensation and expenses of personnel employed by the Distributor to
support distribution of Class C shares, and (iii) costs of sales
literature, advertising and prospectuses (other than those furnished to
current shareholders) and state "blue sky" registration fees.
The Glass-Steagall Act and other applicable laws and regulations,
among other things, generally prohibit Federally-chartered or supervised
banks from engaging in the business of underwriting, selling or
distributing securities as principals. Accordingly, the Distributor may
pay banks only for sales made on an agency basis or for the performance
of administrative and shareholder servicing functions. In addition,
certain banks and financial institutions may be required to register as
dealers under state law. It is the understanding of the Manager and the
Distributor that the Glass-Steagall Act and other applicable laws and
regulations do not prohibit banks and other financial institutions from
providing the services described above. However, judicial or
administrative decisions or interpretations of such laws, as well as
changes in either Federal or state statutes or regulations relating to the
permissible activities of banks or their subsidiaries or affiliates, could
prevent certain banks from continuing to perform all or a part of their
selling or servicing activities. If a bank were so prohibited,
shareholders of the Fund who were clients of such bank would be permitted
to remain as shareholders, and if a bank could no longer provide those
service functions, alternate means for continuing the servicing of such
shareholders would be sought. In such event, shareholders serviced by
such bank might no longer be able to avail themselves of any automatic
investment or other services than being provided by such bank. The Board
of Trustees will consider appropriate modifications to the Fund's
operations, including discontinuance of payments under the Plan to such
institutions, in the event of any future change in such laws or
regulations which may adversely affect the ability of such institutions
to provide these services. It is not expected that shareholders would
suffer any adverse financial consequences as a result of any of those
occurrences.
YIELD, TOTAL RETURN AND TAX INFORMATION
Yield and Total Return and Other Performance Information. As described
in the Prospectus, from time to time the "standardized yield," "dividend
yield," "average annual total return," "total return" and "total return
at net asset value" of an investment in each class of shares of the Fund
may be advertised. An explanation of how yield and total returns are
calculated and the components of those calculations are set forth below.
No yield or total return calculations are presented below for Class C
shares because no shares of that class were publicly issued prior to
December 1, 1993.
The Fund's yield is calculated for a 30-day period using the
following formula set forth under SEC rules:
a-b 6
Yield = 2 ((---- + 1) -1)
cd
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of Fund shares outstanding during the
30-day period that were entitled to receive dividends.
d = the Fund's maximum offering price (including sales charge) per
share on the last day of the period, adjusted for undistributed
net investment income.
The "standardized yield" of a class for the 30-day period may differ
from its yield for any other period. The SEC formula assumes that the
yield for a 30-day period occurs at a constant rate for a six-month period
and is annualized at the end of the six-month period. This standardized
yield is not based on distributions paid by the Fund to shareholders in
the 30-day period, but is a hypothetical yield based upon the return on
the Fund's portfolio investments. The standardized yield on Class A
shares for the 30-day period ended September 30, 1993, was 7.17%.
The "average annual total return" of each class is an average annual
compounded rate of return. It is the rate of return based on factors
which include a hypothetical initial investment of $1,000 ("P" in the
formula below) over a number of years ("n") with an Ending Redeemable
Value ("ERV") of that investment, according to the following formula:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
The "total return" calculation uses the same factors, but does not
average the rate of return on an annual basis. Total return measures the
cumulative (rather than average) change in value of a hypothetical
investment over a stated period. Total return is determined as follows:
ERV - P
- ------- = Total Return
P
Both total return formulas assume (i) for Class A shares, the payment
of the Fund's maximum sales charge of 4.75% (as a percentage of the
offering price) on the initial investment ("P") and (ii) for Class C
shares, the payment of the 1.0% contingent deferred sales charge for the
first 12 months applied as described in the Prospectus. The formulas also
assume that all dividends and capital gain distributions during the period
are reinvested at net asset value per share, and that the investment is
redeemed at the end of the period. The "average annual total returns" on
an investment in Class A shares of the Fund (using the method described
above) for the one and five-year periods ended September 30, 1993, and for
the period from commencement of operations on November 16, 1987, to
September 30, 1993, were 10.41%, 13.24% and 14.22%, respectively. The
"total return" on Class A shares for the period from November 16, 1987,
to September 30, 1993, was 118.38%.
From time to time the Fund may also quote a "dividend yield" or a
"distribution return" for each class. Dividend yield is based on the
Class A or Class C dividends derived from net investment income during a
stated period and distribution return includes dividends derived from net
investment income and from realized short-term capital gains declared
during a stated period. Dividend yield is calculated as follows:
Under those calculations, the dividends and/or distributions for that
class declared during a stated period of one year or less (for example,
30 days) are added together, and the sum is divided by the maximum
offering price per share of that class) on the last day of the period.
When the result is annualized for a period of less than one year, the
"dividend yield" is calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
- ----------------------------------------------------
Max Offering Price of the Class (last day of period)
Divided by number of days (accrual period) x 365
From time to time similar calculations may also be made using the
Class A or Class C net asset value (instead of its maximum offering price)
at the end of the period. The dividend yield on Class A shares for the
30-day period ended September 30, 1993, was 10.60%, and the dividend yield
at net asset value was 11.13%.
From time to time the Fund may also quote a "total return at net
asset value" to describe the rate of return on an investment in Class A
or Class C shares of the Fund for a period of one year or less. It is
based on the difference in net asset value per share at the beginning and
the end of the period (without considering sales charge) and takes into
consideration the reinvestment of dividends and capital gains (as with
total return, described above). The total returns at net asset value on
Class A shares for the one year period ended September 30, 1993, and from
inception through September 30, 1993, were 15.92% and 129.27%
respectively.
From time to time the Fund may publish the ranking of its Class A or
Class C shares by Lipper Analytical Services, Inc. ("Lipper"), a widely-
recognized independent service, which monitors the performance of
regulated investment companies, including the Fund, and ranks their
performance for various period based on categories relating to investment
objectives. The performance of the Fund's classes is ranked against (i)
all such funds, and (ii) all other high current yield or fixed income
funds, and (iii) other such funds in the Fund's size category. The Lipper
performance analysis includes the reinvestment of capital gains
distributions and income dividends but does not take sales charges or
taxes into consideration.
From time to time the Fund may publish the ranking of its Class A or
Class C shares by Morningstar, Inc., an independent mutual fund monitoring
service, which ranks mutual funds, including the Fund, based upon the
Fund's three, five and ten-year average annual total returns (when
available) and a risk factor that reflects fund performance relative to
three-month U.S. Treasury bill monthly returns. Such returns are adjusted
for fees and sales loads. There are five ranking categories with a
corresponding number of stars: highest (5), above average (4), neutral
(3), below average (2) and lowest (1). Morningstar ranks the Fund in
relation to other rated high yield funds, and includes the maximum sales
charge as a factor in its ranking computations.
Yield and total return information may be useful to investors in
reviewing the Fund's performance. However, certain factors should be
considered before using such information as a basis for comparison with
other investments. An investment in Class A or Class C shares of the Fund
is not insured; its yield and total return are not guaranteed and normally
will fluctuate on a daily basis. Yield and total return for any given
past period are not an indication or representation by the Fund of future
yields or rates of return on its shares. The yield and total return of
the Class A and Class C shares of the Fund are affected by portfolio
quality, portfolio maturity, type of investments held and operating
expenses. When comparing yield and total return and investment risk of
an investment in Class A or Class C shares of the Fund with those of other
investment instruments, investors should understand that certain other
investment alternatives such as certificates of deposit, U.S. Government
Securities, money market instruments or bank accounts may provide yields
that are fixed or that may vary above a stated minimum, and also that bank
accounts may be insured.
Tax Status of the Fund's Dividends and Distributions. The Federal tax
treatment of the Fund's dividends and distributions is explained in the
Prospectus under the caption "Dividends, Distributions and Taxes."
Special provisions of the Internal Revenue Code govern the dividends-
received deduction for corporate shareholders. Long-term capital gains
distributions are not eligible for the deduction. In addition, the amount
of dividends paid by the Fund which may qualify for the deduction is
limited to the aggregate amount of qualifying dividends (generally
dividends from domestic corporations) which the Fund derives from its
portfolio investments held for a minimum period, usually 46 days. A
corporate shareholder will not be eligible for the deduction on dividends
paid on shares held by the shareholder for 45 days or less. To the extent
that the Fund derives a substantial portion of its gross income from
option premiums, interest income or short-term gains from the sale of
securities, or dividends from foreign corporations, its dividends will not
qualify for the deduction.
Under the Internal Revenue Code, by December 31 each year the Fund
must distribute 98% of its taxable investment income earned from January
1 through December 31 of that year and 98% of its capital gains realized
in the period from November 1 of the prior year to October 31 of that year
or else the Fund must pay an excise tax on the amounts not distributed.
While it is presently anticipated that the Fund's distributions will meet
those requirements, the Fund's Board and Manager might determine that in
a particular year it would be in the best interest of the Fund not to
distribute income or capital gains at the mandated levels and to pay the
excise tax on the undistributed amounts, which would reduce the amount
available for distribution to shareholders.
The Internal Revenue Code requires that a holder (such as the Fund)
of a zero coupon security accrue a portion of the discount at which the
security was purchased as income each year even though the Fund receives
no interest payment in cash on the security during the year. The Fund may
also from time to time receive payment-in-kind securities in lieu of cash
interest payments. As an investment company, the Fund must pay out
substantially all of its net investment income each year. Accordingly,
the Fund may be required to pay out as an income distribution each year
an amount which is greater than the total amount of cash interest the Fund
actually received. Such distributions will be made from the cash assets
of the Fund or by liquidation of portfolio securities, if necessary. If
a distribution of cash necessitates the liquidation of portfolio
securities, the Fund may realize a gain or loss from such sales. In the
event the Fund realizes net capital gains from such transactions, its
shareholders may receive a larger capital gain distribution than they
would have had in the absence of such transactions.
ADDITIONAL INFORMATION
Description of the Fund. The Fund's name originally was "Champion High
Yield Fund-USA," and was changed to its current name on October 19, 1990.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides
for indemnification and reimbursement of expenses out of its property for
any shareholder held personally liable for its obligations. The
Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a trust (such as the Fund) to
be held personally liable for the Fund's obligations as a "partner" under
certain circumstances, the risk of a Fund shareholder incurring any
financial loss on account of shareholder liability is highly unlikely and
is limited to the relatively remote circumstances in which the Fund would
be unable to meet the obligations described above. Any person doing
business with the Fund, and any shareholder of the Fund, agrees under the
Fund's Declaration of Trust to look solely to the assets of the Fund for
satisfaction of any claim or demand which may arise out of any dealings
with the Fund, and the Trustees shall have no personal liability to any
such person, to the extent permitted by law.
Shareholders have the right, upon the declaration in writing or vote
of two-thirds of the outstanding shares of the Fund, to remove a Trustee.
The Trustees will call a meeting of shareholders to vote on the removal
of a Trustee upon the written request of the holders of at least 10% of
the Fund's outstanding shares. If the Trustees receive a written request
from at least 10 shareholders (who have been shareholders at least six
months) holding in the aggregate shares of the Fund valued at $25,000 or
more or holding 1% or more of the Fund's outstanding shares, whichever is
less, that they wish to communicate with other shareholders to request a
meeting to remove a Trustee, the Trustees will then either make the Fund's
shareholder list available to the applicants or mail their communication
to all other shareholders at the applicants' expense, or the Trustees may
take such other action as set forth in Section 16(c) of the Investment
Company Act.
The Custodian and the Transfer Agent. The Custodian's responsibilities
include safeguarding and controlling the Fund's portfolio securities and
handling the delivery of such securities to and from the Fund. The
Manager has represented to the Fund that the banking relationships with
the Custodian have been and will continue to be unrelated to and
unaffected by the relationship between the Fund and the Custodian. It
will be the practice of the Fund to deal with the Custodian in a manner
uninfluenced by any banking relationship the Custodian may have with the
Manager and its affiliates.
Oppenheimer Shareholder Services, as Transfer Agent, is responsible
for maintaining the Fund's shareholder registry and shareholder accounting
records, and for shareholder servicing and administrative functions.
General Distributor's Agreement. Under the General Distributor's
Agreement between the Fund and the Distributor, the Distributor acts as
the Fund's principal underwriter in the continuous public offering of the
Fund's Class A and Class C shares. Expenses normally attributable to
sales (other than those paid under the Distribution and Service Plans),
including advertising and the cost of printing and mailing prospectuses
(other than those furnished to existing shareholders), are borne by the
Distributor. During the Fund's fiscal years ended September 30, 1991,
1992 and 1993, the aggregate amounts of sales charges on sales of the
Fund's Class A shares were $63,802, $382,287 and $1,401,952, respectively,
of which the Distributor and an affiliated broker-dealer retained in the
aggregate $15,825, $105,534 and $352,530 in those respective years.
Independent Auditors. The independent auditors of the Fund audit the
Fund's financial statements and perform other related audit services.
They also serve as auditors for the Manager and subsidiaries and for
certain other funds advised by the Manager.
AUTOMATIC WITHDRAWAL PLAN PROVISIONS
By requesting an Automatic Withdrawal Plan, the applicant agrees to
the terms and conditions applicable to such plans, as stated below and
elsewhere in the Application for such plans, the Prospectus and this
Additional Statement as they may be amended from time to time by the Fund
and/or the Distributor. When adopted, such amendments will automatically
apply to existing Plans.
Fund shares will be redeemed as necessary to meet withdrawal
payments. Shares acquired without a sales charge will be redeemed first
and thereafter, shares acquired with a sales charge will be redeemed to
the extent necessary. Depending upon the amount withdrawn, the investor's
principal may be depleted. Payments made to shareholders under such plans
should not be considered as a yield or income on an investment. Purchases
of additional shares concurrently with withdrawals are undesirable because
of sales charges on purchases. Accordingly, a shareholder may not
maintain an Automatic Withdrawal Plan while simultaneously making regular
purchases. The Fund reserves the right to amend, suspend or cease
offering such plans at any time without prior notice.
1. Oppenheimer Shareholder Services, the Transfer Agent of the
Fund, will administer the Automatic Withdrawal Plan (the "Plan") as agent
for the person (the "Planholder") who executed the Plan authorization and
application submitted to the Transfer Agent.
2. Certificates will not be issued for shares of the Fund purchased
for and held under the Plan, but the Transfer Agent will credit all such
shares to the account of the Planholder on the records of the Fund. Any
share certificates now held by the Planholder may be surrendered
unendorsed to the Transfer Agent with the Plan application so that the
shares represented by the certificate may be held under the Plan. Those
shares will be carried on the Planholder's Plan Statement.
3. Distributions of capital gains must be reinvested in shares of
the Fund, which will be done at net asset value without a sales charge.
Dividends may be paid in cash or reinvested.
4. Redemptions of shares in connection with disbursement payments
will be made at the net asset value per share in effect on the redemption
date.
5. Checks or ACH payments will be transmitted three business days
prior to the date selected for receipt of the monthly or quarterly payment
(the date of receipt is approximate), according to the choice specified
in writing by the Planholder.
6. The amount and the interval of disbursement payments and the
address to which checks are to be mailed may be changed at any time by the
Planholder on written notification to the Transfer Agent. The Planholder
should allow at least two weeks' time in mailing such notification before
the requested change can be put in effect.
7. The Planholder may, at any time, instruct the Transfer Agent by
written notice (in proper form in accordance with the requirements of the
then-current prospectus of the Fund) to redeem all, or any part of, the
shares held under the Plan. In such case, the Transfer Agent will redeem
the number of shares requested at the net asset value per share in effect
in accordance with the Fund's usual redemption procedures and will mail
a check for the proceeds of such redemption to the Planholder.
8. The Plan may, at any time, be terminated by the Planholder on
written notice to the Transfer Agent, or by the Transfer Agent upon
receiving directions to that effect from the Fund. the Transfer Agent
will also terminate the Plan upon receipt of evidence satisfactory to it
of the death or legal incapacity of the Planholder. Upon termination of
the Plan by the Transfer Agent or the Fund, shares remaining unredeemed
will be held in an uncertificated account in the name of the Planholder,
and the account will continue as a dividend-reinvestment, uncertificated
account unless and until proper instructions are received from the
Planholder, his executor or guardian, or as otherwise appropriate.
9. For purposes of using shares held under the Plan as collateral,
the Planholder may request issuance of a portion of his shares in
certificated form. Upon written request from the Planholder, the Transfer
Agent will determine the number of shares as to which a certificate may
be issued, so as not to cause the withdrawal checks to stop because of
exhaustion of uncertificated shares needed to continue payments. Should
such uncertificated shares become exhausted, Plan withdrawals will
terminate.
10. The Transfer Agent shall incur no liability to the Planholder
for any action taken or omitted by the Transfer Agent in good faith.
11. In the event that the Transfer Agent shall cease to act as
transfer agent for the Fund, the Planholder will be deemed to have
appointed any successor transfer agent to act as his agent in
administering the Plan.
LETTERS OF INTENT
In submitting a Letter of Intent to purchase Class A shares of the
Fund and other OppenheimerFunds at a reduced sales charge, the investor
agrees to the terms of the Prospectus, the Application used to buy such
shares, and the language of this Additional Statement as to Letters of
Intent, as they may be amended from time to time by the Fund. Such
amendments will apply automatically to existing Letters of Intent.
A Letter of Intent ("Letter") is the investor's statement of
intention to purchase Class A shares of the Fund (and other eligible
OppenheimerFunds sold with a sales charge) during the 13-month period from
the investor's first purchase pursuant to the Letter (the "Letter of
Intent period"), which may, at the investor's request, include purchases
made up to 90 days prior to the date of the Letter. The investor states
the intention to make the aggregate amount of purchases (excluding any
reinvestments of dividends or distributions or purchases made at net asset
value without sales charge), which together with the investor's holdings
of such funds (calculated at their respective public offering prices
calculated on the date of the Letter) will equal or exceed the amount
specified in the Letter to obtain the reduced sales charge rate (as set
forth in "How To Buy Shares" in the Prospectus) applicable to purchases
of shares in that amount (the "intended amount"). Each purchase under the
Letter will be made at the public offering price applicable to a single
lump-sum purchase of shares in the intended amount, as described in the
applicable prospectus.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of such fund shares on the last day of that period,
do not equal or exceed the intended amount, the investor agrees to pay the
additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow," below, as those terms may be amended from time
to time. The investor agrees that shares equal in value to 5% of the
intended amount will be held in escrow by the Fund's Transfer Agent
subject to the Terms of Escrow.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended amount, the commissions
previously paid to the dealer of record for the account and the amount of
sales charge retained by the Distributor will be adjusted to the rates
applicable to actual total purchases. If total eligible purchases during
the Letter of Intent period exceed the intended amount and exceed the
amount needed to qualify for the next sales charge rate reduction set
forth in the applicable prospectus, the sales charges paid will be
adjusted to the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid to the
dealer over the amount of commissions that apply to the actual amount of
purchases. The excess commissions returned to the Distributor will be
used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly
after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to refer to the Letter in placing any
purchase orders for the investor during the Letter of Intent period. All
of such purchases must be made through the Distributor.
Terms of Escrow
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in value
to 5% of the intended amount specified in the Letter shall be held in
escrow by the Fund's Transfer Agent. For example, if the intended amount
specified under the Letter is $50,000, the escrow shall be shares valued
in the amount of $2,500 (computed at the public offering price adjusted
for a $50,000 purchase). Any dividends and capital gain distributions on
the escrowed shares will be credited to the investor's account.
2. If the total minimum initial investment specified under the
Letter is completed within the 13-month Letter of Intent period, the
escrowed shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended amount
specified in the Letter, the investor must remit to the Distributor an
amount equal to the difference between the dollar amount of sales charges
actually paid and the amount of sales charges which would have been paid
if the total amount purchased had been made at a single time. Such sales
charge adjustment will apply to any shares redeemed prior to the
completion of the Letter. If such difference in sales charges is not paid
within twenty days after a request from the Distributor or the dealer,
the Distributor will, within sixty days of the expiration of the Letter,
redeem the number of escrowed shares necessary to realize such difference
in sales charges. Full and fractional shares remaining after such
redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the transfer agent of the Funds his attorney-in-fact to surrender
for redemption any or all escrowed shares.
5. The funds whose shares are eligible for purchase under the Letter
(or the holding of which may be counted toward completion of the Letter)
do not include any fund whose shares are sold without a Class A contingent
deferred sales charge unless (for the purpose of determining completion
of the obligation to purchase shares under the Letter) the shares were
acquired in exchange for shares of a fund (described as an "Eligible
Fund"in the Prospectus) whose shares were acquired by payment of a sales
charge.
6. Shares held in escrow hereunder will automatically be exchanged
for shares of another fund for which an exchange is requested as to the
shareholder's account, as described in the section of the Prospectus
entitled "Exchange Privilege;" and the escrow will be transferred to that
other fund.
Independent Auditors' Report
The Board of Trustees and Shareholders of Oppenheimer Champion High Yield
Fund:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Oppenheimer Champion High Yield
Fund as of September 30, 1993, the related statement of operations for the
year then ended, the statements of changes in net assets for the years
ended September 30, 1993 and 1992, and the financial highlights for the
period November 16, 1987 (commencement of operations) to September 30,
1993. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned at September 30, 1993 by correspondence
with the custodian and brokers; where replies were not received from
brokers, we performed other auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Oppenheimer
Champion High Yield Fund at September 30, 1993, the results of its
operations, the changes in its net assets, and the financial highlights
for the respective stated periods, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE
Denver, Colorado
October 21, 1993
<PAGE>
Statement of Investments September 30, 1993
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
<S> <S> <C> <C>
Repurchase Agreements--14.1%
Repurchase agreement with J.P. Morgan Securities, Inc., 3.30%, dated
9/30/93 and maturing 10/1/93, collateralized by U.S. Treasury Bills,
3.05%, 3/24/94, with a value of $15,004,194 (Cost $14,700,000) $14,700,000
$14,700,000
Long-Term Foreign Government Obligations--2.6%
Argentina (Republic of) Bonds, Bonos del Tesoro, Series II, 3.24%,
9/1/97(2)(4) 1,000,000 868,400
Brazil (Federal Republic of):
Bonds, Banco Do Nordeste Brasil, 10.375%, 11/6/95(3) 700,000
716,188
Interest Due and Unpaid Bonds, 8.75%, 1/1/01(2) 500,000
388,438
Venezuela (Republic of) Front-Loaded Coupon Reduction Bonds, Series B,
6%, 3/31/07(2) 1,000,000 692,812
Total Long-Term Foreign Government Obligations (Cost $2,725,645)
2,665,838
Long-Term Foreign Corporate Bonds and Notes--1.6%
International Semi-Tech Microelectronics, Inc., 0%/11.50% Sr. Sec.
Disc. Nts., 8/15/03(1) 1,000,000 480,000
Rogers Communications, Inc., 10.875% Sr. Debs., 4/15/04 600,000
658,500
Stelco, Inc.: 10.25% Debs., 4/30/96(5) 300,000+
208,037
10.40% Debs., 11/30/09(5) 200,000+ 128,023
Trizec Corp. Ltd., 10.25% Sr. Debs., 6/22/99(5) 500,000+
241,914
Total Long-Term Foreign Corporate Bonds and Notes (Cost $1,590,707)
1,716,474
Treasury--10.3%
U.S. Treasury Nts., 12.625%, 8/15/94 (Cost $10,879,688) 10,000,000
10,790,599
Mortgage/Asset-Backed Obligations--.6%
GSPI Corp., 10.15% Fst. Mort. Bonds, 6/24/10(3) (Cost $512,000) 500,000
595,000
Municipal Bonds and Notes--1.3%
Port of Portland, Oregon Taxable Special Obligation Revenue Bonds,
PAMCO Project, 9.20%, 5/15/22 500,000
577,978
San Joaquin Hills, California Transportation Corridor Agency Toll Road
Capital Appreciation Revenue Bonds, Jr. Lien, 0%, 1/1/28 13,500,000
744,822
Total Municipal Bonds and Notes (Cost $1,162,116) 1,322,800
U.S. Corporate Bonds and Notes--66.1%
Aerospace/Defense--1.3% GPA Delaware, Inc., 8.75% Gtd. Nts., 12/15/98 1,750,000
1,360,625
Automobiles,
Trucks and
Parts--1.4% Auburn Hills Trust, 14.875% Gtd. Exch. Ctfs., 5/1/20(2) 200,000
300,500
Envirotest Systems Corp., 9.625% Sr. Sub. Nts., 4/1/03 600,000
591,000
Sealed Power Technologies LP, 14.50% Sr. Sub. Debs., 5/15/99 500,000
546,250
1,437,750
Broadcast Media/
Cable TV--8.1%
Cablevision Systems Corp., 14% Sr. Sub. Debs., 11/15/03(2) 500,000
531,250
Continental Cablevision, Inc., 9.50% Sr. Debs., 8/1/13 750,000
761,250
Lamar Advertising Co., 11% Sr. Sec. Nts., 5/15/03 1,000,000
1,030,000
News America Holdings, Inc., 10.125% Gtd. Sr. Debs., 10/15/12 700,000
850,500
Panamsat LP/Panamsat Capital Corp.: 9.75% Sr. Sec. Nts., 8/1/00 500,000
511,250
0%/11.375% Sr. Sub. Disc. Nts., 8/1/03(1) 2,000,000
1,215,000
SCI Television, Inc., Bank Participation Interest Agreement, Series 2,
9/30/94*(3) 1,100,000 1,072,500
SFX Broadcasting, Inc., 11.375% Sr. Sub. Nts., 10/1/08 750,000
762,187
TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 1,000,000
1,185,000
Univision Television Group, Inc., 11.75% Sr. Sub. Nts., 1/15/01 500,000
542,500
Face Market Value
Amount See Note 1
Building
Materials--1.9% Pacific Lumber Co., 10.50% Sr. Nts., 3/1/03 $ 900,000
$ 909,000
Triangle Wire & Cable, Inc., 13.50% Sr. Nts., 1/15/02(3) 225,000
56,250
USG Corp.:
10.25% Sr. Sec. Nts., 12/15/02 850,000 869,125
8.75% Debs., 3/1/17 200,000 185,500
2,019,875
Chemicals/Plastics--1.4% Atlantis Group, Inc., 11% Sr. Nts., 2/15/03 600,000
624,000
Quantum Chemical Corp., 13% Sr. Sub. Debs., 3/15/04 800,000
880,000
1,504,000
Consumer Goods-- Amstar Corp., 11.375% Sr. Sub. Nts., 2/15/97 780,000
791,700
Manufacturing--3.1% Coleman Holdings, Inc., 0% Sr. Sec. Disc. Nts., 5/27/98(3) 2,000,000
1,210,000
Interco, Inc., 9% Sec. Nts., Series B, 6/1/04 700,000 694,750
Revlon Consumer Products Corp., 10.50% Sr. Sub. Nts., 2/15/03 500,000
482,500
3,178,950
Containers--Metal
and Glass--.8% Owens-Illinois, Inc., 11% Sr. Debs., 12/1/03 695,000
792,300
Containers--Paper--.3% Equitable Bag, Inc., 12.375% Sr. Nts., 8/15/02 150,000
116,250
Gaylord Container Corp., 0%/12.75% Sr. Sub. Disc. Debs., 5/15/05(1) 250,000
171,250
287,500
Financial/Insurance--2.5% Green Tree Financial Corp., 10.25% Sr. Sub. Nts., 6/1/02 600,000
696,000
Life Partners Group, Inc., 12.75% Sr. Sub. Nts., 7/15/02 700,000
824,250
Lomas Financial Corp., 9% Cv. Sr. Nts., 10/31/03 600,000
580,500
Navistar Financial Corp., 9.50% Medium-Term Nts., 6/1/96 500,000
529,495
2,630,245
Food and
Restaurants--4.4% ARA Group, Inc. (The), 12.50% Sub. Debs., 7/15/01 450,000
495,562
Di Giorgio Corp., 12% Sr. Nts., 2/15/03 600,000
636,000
Dr. Pepper/Seven-Up Cos., Inc., 0%/11.50% Sr. Sub. Disc. Nts.,
11/1/02(1) 477,000 351,788
Flagstar Corp., 10.75% Sr. Nts., 9/15/01 500,000
503,125
PMI Acquisition Corp., 10.25% Sr. Sub. Nts., 9/1/03 500,000
515,000
Restaurant Enterprises Group, Inc.: 12.25% Sr. Sub. Nts., 12/15/96* 400,000
366,000
12.75% Sub. Nts., 12/15/98* 1,000,000 505,000
RJR Nabisco, Inc., 15% Sub. Debs., 5/15/01 200,000
223,083
Royal Crown Corp., 9.75% Sr. Sec. Nts., 8/1/00 1,000,000
1,017,500
4,613,058
Gaming/Hotels--2.7% Aztar Corp., 11% Sr. Sub. Nts., 10/1/02 600,000
609,000
Marriott Corp., 10% Sr. Nts., Series L, 5/1/12 400,000
404,000
Resorts International, Inc., 0% Fst. Mort. Non-Recourse Pass-Through
Mort.-Backed Nts., 6/30/00 610,000 564,250
Station Casinos, Inc., 9.625% Sr. Sub. Nts., 6/1/03 500,000
490,625
Trump Castle Funding, Inc., 9.50% Units, 8/15/98(4) 1,012,000
796,360
2,864,235
Healthcare/Medical
Products--3.4% Alco Health Distribution Corp., 11.25% Sr. Debs., 7/15/05(4) 800,000
781,250
Epic Healthcare Group, Inc., 10.875% Sr. Sub. Nts., 6/1/03 1,000,000
1,020,000
Epic Holdings, Inc., 0%/12% Sr. Def. Cpn. Nts., 3/15/02(1) 500,000
336,250
Eye Care Centers of America, 12% Sr. Nts., 10/1/03(3) 700,000
701,750
Healthtrust, Inc.-The Hospital Co., 10.75% Sub. Nts., 5/1/02 600,000
666,000
Face Market Value
Amount See Note 1
U.S. Corporate Bonds and Notes (continued)
Home Building/
Development--3.5% Hovnanian K. Enterprises, Inc., 11.25% Gtd. Sub. Nts., 4/15/02 $ 450,000
$ 483,750
NVR, Inc., 11% Gtd. Sr. Nts., 4/15/03 750,000
757,500
Southdown, Inc., 14% Sr. Sub. Nts., Series B, 10/15/01 735,000
837,900
UDC Homes, Inc., 11.75% Sr. Nts., 4/30/03 1,500,000
1,545,000
3,624,150
Information
Technology--2.2% Bell & Howell Holdings Co., 0%/11.50% Debs., Series B, 3/1/05(1) 1,600,000
800,000
Berg Electronics Holdings Corp., 11.875% Sr. Sub. Debs., 5/1/03(3) 500,000
517,500
Businessland, Inc., 5.50% Sub. Debs., 3/1/07 805,000
285,775
Unisys Corp., 9.75% Sr. Nts., 9/15/16 600,000
616,500
2,219,775
Manufacturing--
Diversified--3.1% Foamex LP/Foamex Capital Corp., 11.25% Sr. Nts., 10/1/02 600,000
642,750
Imo Industries, Inc.: 12.25% Sr. Sub. Debs., 8/15/97 750,000
758,437
12% Sr. Sub. Debs., 11/1/01 500,000 506,250
Insilco Corp., 10.375% Sr. Sec. Nts., 7/1/97 550,000
555,500
Itel Corp., 13% Sr. Sub. Nts., 1/15/99 710,000 750,825
3,213,762
Metals/Mining--2.6% Addington Resources, Inc., 12% Sr. Sec. Nts., 7/1/95 425,000
441,469
Armco, Inc.: 13.50% Sr. Nts., 6/15/94 131,000
137,550
8.50% SF Debs., 9/1/01 275,000 266,750
Carbide/Graphite Group, Inc., 11.50% Sr. Nts., 9/1/03 1,000,000
1,008,750
Jorgensen (Earle M.) Co., 10.75% Sr. Nts., 3/1/00 400,000
413,000
Texas Industries, Inc., 12.875% Sub. Debs., 8/1/95 475,000
477,969
2,745,488
Miscellaneous--1.1% ECM Fund L.P.I., 14% Sub. Nts., 6/10/02(3) 1,112,605
1,162,672
Office Equipment--2.0%
Eastman, Inc.,
13% Sub. Nts.,
Series B,
12/15/02 700,000 889,000
Mosler, Inc., 11% Sr. Nts., Series A, 4/15/03(3) 1,250,000
1,231,250
2,120,250
Oil and
Gas--Equipment
and
Services--1.4% OPI International, Inc., 12.875% Gtd. Sr. Nts., 7/15/02 725,000
830,125
Transco Energy Co., 11.25% Sr. Nts., 7/1/99 600,000
682,500
1,512,625
Oil and
Gas--Exploration
and
Production--4.9% Bridge Oil (USA), 9.50% Sr. Nts., 8/15/00 1,000,000
987,500
Maxus Energy Corp.: 9.875% Nts., 10/15/02 100,000
107,250
11.50% Debs., 11/15/15 500,000 536,250
Mesa Capital Corp.: 0%/12.75% Disc. Nts., 6/30/96(1) 498,000
382,837
0%/12.75% Cv. Disc. Nts., 6/30/98(1) 49,000
89,854
0%/12.75% Sec. Disc. Nts., 6/30/98(1) 1,448,000
1,176,500
Presidio Oil Co.: 11.50% Sr. Sec. Nts., Series A, 9/15/00(3) 450,000
473,625
13.85% Sr. Gas Indexed Nts., Series A, 7/15/02(2)(3) 600,000
621,000
Triton Energy Corp., 0% Sr. Sub. Disc. Nts., 11/1/97 1,200,000
795,000
5,169,816
Oil and
Gas--Refining--.6% Wainoco Oil Corp., 12% Sr. Nts., 8/1/02 550,000
570,625
Railroads/Equipment--.9% Rio Grande Industries, Inc., 13.625% Sr. Sub. Nts., 5/15/95 500,000
500,000
Southern Pacific Transportation Co., 10.50% Sr. Sec. Nts., 7/1/99(3) 400,000
433,500
Amount See Note 1
U.S. Corporate Bonds and Notes (continued)
Retail--Food and
Drug--2.1% Duane Reade, 12% Sr. Nts., Series B, 9/15/02 $ 500,000 $
538,750
Kroger Co. (The), 0%/15.50% Jr. Sub. Disc. Debs., 10/15/08(1) 225,000
225,000
Purity Supreme, Inc., 11.75% Sr. Sec. Nts., Series B, 8/1/99 700,000
668,500
Revco D.S., Inc., 9.125% Sr. Nts., 1/15/00 700,000
736,750
2,169,000
Retail--Specialty--4.8% AnnTaylor, Inc., 0%/14.375% Sr. Sub. Disc. Nts., 7/15/99(1) 600,000
645,000
Brylane LP, 10% Sr. Sub. Nts., 9/1/03(3) 500,000
501,250
Finlay Enterprises, Inc., 0%/12% Sr. Disc. Nts., 5/1/05(1) 750,000
400,313
Musicland Group, Inc. (The), 9% Sr. Sub. Nts., 6/15/03 1,750,000 1,754,375
Payless Cashways, Inc., 14.50% Sr. Sub. Debs., 11/1/00 500,000
525,000
Zale Corp., 13.25% Sr. Nts., 4/15/01* 1,750,000 708,750
Zale Delaware Corp., 11% Sr. Sec. Nts., 6/1/00 500,000
516,250
5,050,938
Services--.9% Envirosource, Inc., 9.75% Sr. Nts., 6/15/03 1,000,000
970,000
Textiles/Apparel--1.8% Consoltex Group, Inc., 11% Gtd. Sr. Sub. Nts., Series A, 10/1/03(3) 500,000
501,250
Genesco, Inc., 10.375% Sr. Nts., 2/1/03 700,000
739,375
Synthetic Industries, Inc., 12.75% Sr. Sub. Debs., 12/1/02 650,000
679,250
1,919,875
Transportation--2.9% Greyhound Lines, Inc., 10% Sr. Nts., 7/31/01 795,000
816,863
Leaseway Transportation Corp., 13.25% Sub. Debs., 8/1/02* 1,250,000
1,043,750
Sea Containers Ltd.: 9.50% Sr. Nts., 7/1/03 500,000
496,250
12.50% Sr. Sub. Debs., 12/1/04 500,000 556,250
12.50% Sr. Sub. Debs., Series B, 12/1/04 100,000
111,500
3,024,613
Total U.S. Corporate Bonds and Notes (Cost $66,775,596)
69,062,314
Shares
Common
Stocks--.8%
ECM Fund L.P.I.(3) 75 75,000
Finlay Enterprises, Inc., Cl. A* 3,500 33,250
Harvard Industries, Inc., Cl. B* 15,000 112,500
Insilco Corp.* 14,769 169,844
LFC Holding Corp.* 3,150 56,700
Petrolane, Inc., Cl. B 35,910 372,566
USG Corp.* 2,743 58,632
Total Common Stocks (Cost $834,812) 878,492
Preferred
Stocks--2.1% Harvard Industries, Inc., Exch.(4) 17,818
443,223
K-III Communications Corp., Sr. Exch., Series B 5,804
593,482
Navistar International Corp., $6.00 Cv., Series G 15,000
840,000
Trizec Ltd., Sr. Cl. B, Series 3 25,000+ 29,946
Unisys Corp., $3.75 Cv., Series A 6,000 288,000
Total Preferred Stocks (Cost $2,165,697) 2,194,651
Units
Rights, Warrants and Certificates--.4%
Amerigas, Inc. Put Rts. 1,640 20,500
Gaylord Container Corp. Wts., Exp. 7/96 11,219
18,231
Hollywood Casino Corp. Wts., Exp. 4/98 1,904
397,936
Interco, Inc. Wts., Series 1, Exp. 8/99 8,655 12,982
Units See Note 1
U.S. Corporate Bonds and Notes (continued)
Rights, Warrants and Certificates (continued)
Purity Supreme, Inc. Wts., 8/97(3) 1,733 $ 35
Southdown, Inc. Wts., Exp. 10/96 2,000 15,000
Southland Corp. Wts., Exp. 3/96 300 1,069
Triangle Wire & Cable, Inc. Wts., Exp. 1/98(3) 2,250
23
UGI Corp. Wts., Exp. 3/98 4,750 6,531
Total Rights, Warrants and Certificates (Cost $113,173) 472,307
Total Investments, at Value (Cost $101,459,434) 99.9%
104,398,475
Other Assets Net of Liabilities .1 66,557
Net Assets 100.0% $104,465,032
+Face amount is reported in foreign currency.
*Non-income producing security.
(1)Represents a zero coupon bond that converts to a fixed rate of interest at
a designated future date.
(2)Represents the current interest rate for a variable rate security.
(3)Restricted security--See Note 5 of notes to financial statements.
(4)Interest or dividend is paid in kind.
(5)Securities with an aggregate market value of $577,974 are segregated
to collateralize outstanding forward foreign currency exchange
contracts. See Note 6 of notes to financial statements.
See accompanying notes to financial statements.
</TABLE>
Statement of Assets and Liabilities September 30, 1993
<TABLE>
<S> <S> <C>
Assets Investments, at value (cost $101,459,434)--see accompanying statement
$104,398,475
Unrealized appreciation on forward foreign currency exchange contracts--Note 6
19,489
Receivables:
Investments sold 2,266,643
Interest and dividends 1,856,373
Shares of beneficial interest sold 786,440
Other 6,998
Total assets 109,334,418
Liabilities Bank overdraft 640,553
Payables and other liabilities:
Investments purchased 3,471,146
Dividends 347,860
Shares of beneficial interest redeemed 289,988
Distribution assistance--Note 4 61,715
Other 58,124
Total liabilities 4,869,386
Net Assets $104,465,032
Composition of Paid-in capital $100,145,932
Net Assets
Accumulated net realized gain from investment and foreign currency transactions
1,360,570
Net unrealized appreciation of investments--Note 3 2,978,582
Net unrealized depreciation on translation of assets and liabilities
denominated in foreign currencies (20,052)
Net Assets--Applicable to 8,096,390 shares of beneficial interest outstanding $104,465,032
Net Asset Value and Redemption Price Per Share $ 12.90
Maximum Offering Price Per Share (net asset value plus sales charge of 4.75% of offering price) $
13.54
See accompanying notes to financial statements.
</TABLE>
Statement of Operations For the Year Ended September 30, 1993
<TABLE>
<S> <S> <C>
Investment Income Interest $ 7,629,109
Dividends 260,633
Total income 7,889,742
Expenses Management fees--Note 4 513,057
Distribution assistance--Note 4 183,383
Transfer and shareholder servicing agent fees--Note 4 99,064
Shareholder reports 43,898
Custodian fees and expenses 31,229
Registration and filing fees 16,579
Legal and auditing fees 14,223
Trustees' fees and expenses 1,602
Other 4,242
Total expenses 907,277
Net Investment Income 6,982,465
Realized and
Unrealized Gain
on Investments Net realized gain on investments 1,992,770
Net change in unrealized appreciation of investments:
Beginning of year 1,151,311
End of year--Note 3 2,978,582
Net change 1,827,271
Net Realized and Unrealized Gain on Investments 3,820,041
Net Increase in Net Assets Resulting from Operations Before Foreign Exchange Loss
10,802,506
Realized and
Unrealized
Foreign Exchange
Loss Net realized loss on foreign currency transactions (66,505)
Net change in unrealized depreciation on translation of assets and liabilities
denominated in foreign currencies:
Beginning of year (20,012)
End of year (20,052)
Net change (40)
Net Realized and Unrealized Foreign Exchange Loss (66,545)
Net Increase in Net Assets Resulting from Operations $10,735,961
See accompanying notes to financial statements
</TABLE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended September 30,
1993 1992
<S> <S> <C> <C>
Operations Net investment income $ 6,982,465 $ 3,280,620
Net realized gain on investments 1,992,770 967,976
Net realized loss from foreign currency transactions (66,505) (25,766)
Net change in unrealized appreciation or depreciation of
investments 1,827,271 577,590
Net change in unrealized appreciation or depreciation on
translation of assets and liabilities denominated in foreign
currencies (40) (18,709)
Net increase in net assets resulting from operations 10,735,961 4,781,711
Dividends to
Shareholders from
Net Investment Dividends from net investment income ($1.22 and $1.41 per share,
Income respectively) (6,982,465) (3,280,620)
Beneficial
Interest Net increase in net assets resulting from beneficial interest
Transactions transactions--Note 2 53,586,890 29,579,200
Net Assets Total increase 57,340,386 31,080,291
Beginning of year 47,124,646 16,044,355
End of year $104,465,032 $47,124,646
See accompanying notes to financial statements.
</TABLE>
Financial Highlights
<TABLE>
<CAPTION>
Year Ended September 30,
1993 1992 1991 1990 1989 1988+++
<S> <C> <C> <C> <C> <C>
<C>
Per Share Operating Data:
Net asset value, beginning of period $ 12.26 $ 11.49 $ 10.46 $ 11.53 $ 12.10 $ 11.43
Income from investment operations:
Net investment income 1.22 1.41 1.45 1.43 1.42+ 1.24
Net realized and unrealized gain (loss) on .64 .77 1.04 (1.08) (.43) .67
investments and foreign currencies
Total income from investment operations 1.86 2.18 2.49 .35 .99 1.91
Dividends and distributions to shareholders:
Dividends from net investment income (1.22) (1.41) (1.46) (1.42) (1.42) (1.24)
Distributions from net realized gain on -- -- -- -- (.14) --
investments
Total dividends and distributions to (1.22) (1.41) (1.46) (1.42) (1.56) (1.24)
shareholders
Net asset value, end of period $ 12.90 $ 12.26 $ 11.49 $ 10.46 $ 11.53 $ 12.10
Total Return, at Net Asset Value** 15.92% 19.94% 25.62% 3.13% 8.53%
17.29%
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $104,465 $47,125 $16,044 $13,910 $20,642
$18,579
Average net assets (in thousands) $ 73,334 $28,270 $14,057 $17,163 $21,349
$11,116
Number of shares outstanding at end of 8,096 3,844 1,397 1,330 1,790 1,535
period (in thousands)
Ratios to average net assets:
Net investment income 9.52% 11.60% 13.49% 12.92% 11.87%
11.50%*
Expenses 1.24% 1.35% 1.49% 1.40% 1.19%+
1.05%*
Portfolio turnover rate++ 116.2% 121.5% 114.8% 67.8% 98.5%
31.6%
</TABLE>
*Annualized.
**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. Sales charges are not reflected in the total returns.
+Net investment income would have been $1.41 per share absent the
voluntary expense reimbursement, resulting in an expense ratio of 1.25%.
++The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
Purchases and sales of investment securities (excluding short-term
securities) for the year ended September 30, 1993 were $104,698,062 and
$72,960,299, respectively.
+++For the period from November 16, 1987 (commencement of operations) to
September 30, 1988.
See accompanying notes to financial statements.
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies
Oppenheimer Champion High Yield Fund (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment adviser is
Oppenheimer Management Corporation (the Manager). The following is a
summary of significant accounting policies consistently followed by the
Fund.
Investment Valuation--Portfolio securities are valued at 4:00 p.m. (New
York time) on each trading day. Listed and unlisted securities for which
such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid
or asked price or the last sale price on the prior trading day. Long-term
debt securities are valued by a portfolio pricing service approved by the
Board of Trustees. Long-term debt securities which cannot be valued by the
approved portfolio pricing service are valued by averaging the mean
between the bid and asked prices obtained from two active market makers
in such securities.
Short-term debt securities having a remaining maturity of 60 days or less
are valued at cost (or last determined market value) adjusted for
amortization to maturity of any premium or discount. Securities for which
market quotes are not readily available are valued under procedures
established by the Board of Trustees to determine fair value in good
faith. Forward foreign currency contracts are valued at the forward rate
on a daily basis.
Security Credit Risk--The Fund invests in high yield securities, which may
be subject to a greater degree of credit risk, greater market fluctuations
and risk of loss of income and principal, and may be more sensitive to
economic conditions than lower yielding, higher rated fixed income
securities. The Fund may acquire securities in default, and is not
obligated to dispose of securities whose issuers subsequently default. At
September 30, 1993, securities with an aggregate market value of
$3,696,000, representing 3.38 of the Fund's total assets, were in default.
Foreign Currency Translation--The accounting records of the Fund are
maintained in U.S. dollars. Prices of securities denominated in non-U.S.
currencies are translated into U.S. dollars at the closing rates of
exchange. Amounts related to the purchase and sale of securities and
investment income are translated at the rates of exchange prevailing on
the respective dates of such transactions. The net gain or loss resulting
from changes in the foreign currency exchange rates is reported separately
in the Statement of Operations.
The Fund generally enters into forward foreign currency exchange contracts
as a hedge, upon the purchase or sale of a security denominated in a
foreign currency. In addition, the Fund may enter into such contracts as
a hedge against changes in foreign currency exchange rates on portfolio
positions. A forward exchange contract is a commitment to purchase or sell
a foreign currency at a future date, at a negotiated rate. Risks may arise
from the potential inability of the counterparty to meet the terms of the
contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
Repurchase Agreements--The Fund requires the custodian to take possession,
to have legally segregated in the Federal Reserve Book Entry System or to
have segregated within the custodian's vault, all securities held as
collateral for repurchase agreements. If the seller of the agreement
defaults and the value of the collateral declines, or if the seller enters
an insolvency proceeding, realization of the value of the collateral by
the Fund may be delayed or limited.
Federal Income Taxes--The Fund intends to continue to comply with
provisions of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income, including any net
realized gain on investments not offset by loss carryovers, to
shareholders. Therefore, no federal income tax provision is required.
Distributions to Shareholders--The Fund intends to declare dividends from
net investment income each day the New York Stock Exchange is open for
business and pay such dividends monthly. Distributions from net realized
gains on investments, if any, will be declared at least once each year.
Other--Investment transactions are accounted for on the date the
investments are purchased or sold (trade date) and dividend income is
recorded on the ex-dividend date. Discount on securities purchased is
amortized over the life of the respective securities, in accordance with
federal income tax requirements. Realized gains and losses on investments
and unrealized appreciation and depreciation are determined on an
identified cost basis, which is the same basis used for federal income tax
purposes. Dividends in kind are recognized as income on the ex-dividend
date, at the current market value of the underlying security. Interest on
payment-in-kind debt instruments is accrued as income at the coupon rate
and a market adjustment is made on the ex-date.
2. Shares of Beneficial Interest The Fund has authorized an unlimited
number of no par value shares of beneficial interest. Transactions in
shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Year Ended September 30, 1993 Year Ended September 30, 1992
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Sold 6,506,627 $ 82,210,524 2,700,090 $32,629,627
Dividends reinvested 345,523 4,361,170 145,393 1,751,906
Redeemed (2,599,817) (32,984,804) (398,321) (4,802,333)
Net increase 4,252,333 $ 53,586,890 2,447,162 $29,579,200
</TABLE>
3. Unrealized Gains and Losses on Investments
At September 30, 1993, net unrealized appreciation of investments of
$2,978,582 was composed of gross appreciation of $4,023,249, and gross
depreciation of $1,044,667.
4. Management Fees and Other Transactions with Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for an annual fee of .70
on the first $250 million of net assets, .65 on the next $250 million, .60
on the next $500 million and .55 on net assets in excess of $1 billion.
The Manager has agreed to reimburse the Fund if aggregate expenses (with
specified exceptions) exceed the most stringent applicable regulatory
limit on Fund expenses.
For the year ended September 30, 1993, commissions (sales charges paid by
investors) on sales of Fund shares totaled $1,401,952, of which $352,530
was retained by Oppenheimer Funds Distributor, Inc. (OFDI), a subsidiary
of the Manager, as general distributor, and by an affiliated
broker-dealer.
Oppenheimer Shareholder Services (OSS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund, and for other
registered investment companies. OSS's total costs of providing such
services are allocated ratably to these companies.
Under an approved plan of distribution, the Fund may expend up to .25 of
its net assets annually to reimburse OFDI for costs incurred in
distributing shares of the Fund, including amounts paid to brokers,
dealers, banks and other institutions. During the year ended September 30,
1993, OFDI paid $19,008 to an affiliated broker-dealer as reimbursement
for distribution-related expenses.
5. Restricted Securities
The Fund owns securities purchased in private placement transactions,
without
registration under the Securities Act of 1933 (the Act). The securities
are valued under methods approved by the Board of Trustees as reflecting
fair value. The Fund intends to invest no more than 10 of its net assets
(determined at the time of purchase) in restricted and illiquid
securities, excluding securities eligible for resale pursuant to Rule 144A
of the Act that are determined to be liquid by the Board of Trustees or
by the Manager under Board-approved guidelines. Restricted and illiquid
securities amount to $2,366,480, or 2.27 of the Fund's net assets, at
September 30, 1993.
<TABLE>
<CAPTION>
Valuation Per
Acquisition Cost Unit as of
Security Date Per Unit September 30, 1993
<S> <C> <C> <C>
Berg Electronics Holdings Corp., 11.875 Sr. Sub. Debs., 4/21/93 $ 100.00 $ 103.50
5/1/03+
Brazil (Federal Republic of) Bonds, Banco Do Nordeste Brasil, 4/27/93 $ 99.80 $ 102.31
10.375, 11/6/95+
Brylane LP, 10 Sr. Sub. Nts., 9/1/03+ 9/30/93 $ 100.25 $ 100.25
Coleman Holdings, Inc., 0Sr. Sec. Disc. Nts., 5/27/98+ 7/15/93-9/30/93 $ 60.18 $ 60.50
Consoltex Group, Inc., 11Gtd. Sr. Sub. Nts., Series A, 9/23/93 $ 100.00 $ 100.25
10/1/03+
ECM Fund L.P.I., 14 Sub. Nts., 6/10/0 24/14/92-7/28/92 $ 100.35 $ 104.50
ECM Fund L.P.I. Common Stock 4/14/92 $1,000.00 $1,000.00
Eye Care Centers of America, 12Sr. Nts., 10/1/03+ 9/28/93 $ 100.00 $ 100.25
GSPI Corp., 10.15 Fst. Mort. Bonds, 6/24/10+ 1/29/93 $ 102.40 $ 119.00
Mosler, Inc., 11Sr. Nts., Series A, 4/15/03+ 7/22/93-9/30/93 $ 99.50 $ 98.50
Presidio Oil Co:
11.50% Sr. Sec. Nts., Series A, 9/15/00+ 8/3/93 $ 100.00 $ 105.25
13.85Sr. Gas Indexed Nts., Series A, 7/15/02+ 8/9/93 $ 77.60 $ 103.50
Purity Supreme, Inc. Wts., Exp. 8/97 7/29/92 $ -- $ .02
SCI Television, Inc., Bank Participation Interest Agreement, 4/8/93 $ 92.00 $ 97.50
Series 2, 9/30/94
Southern Pacific Transportation Co., 10.50% Sr. Sec. Nts., 3/4/93 $ 100.00 $ 108.38
7/1/99+
Triangle Wire & Cable, Inc., 13.50Sr. Nts., 1/15/02 1/13/92 $ 100.00 $ 25.00
Triangle Wire & Cable, Inc. Wts., Exp. 1/98 1/13/92 $ -- $ .01
</TABLE>
+Transferable under Rule 144A of the Act.
6. Forward Foreign Currency Exchange Contracts
At September 30, 1993, the Fund had outstanding forward exchange currency
contracts to sell foreign currencies as follows:
<TABLE>
<CAPTION>
Expiration Contract Valuation as of Unrealized
Date Amount September 30, 1993 Appreciation
<S> <C> <C> <C> <C>
Canadian Dollar 11/8/93 $580,136 $560,647 $19,489
</TABLE>
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson & Adams, P.C.
1600 Broadway
Denver, Colorado 80202
OPPENHEIMER CHAMPION HIGH YIELD FUND
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Financial Highlights (See Part A): Filed herewith.
(2) Independent Auditors' Report (See Part B): Filed herewith.
(3) Statement of Investments (See Part B): Filed herewith.
(4) Statement of Assets and Liabilities (See Part B): Filed herewith.
(5) Statement of Operations (See Part B): Filed herewith.
(6) Statement of Changes in Net Assets (See Part B): Filed herewith.
(7) Notes to Financial Statements (See Part B): Filed herewith.
(8) Independent Auditors' Consent: Filed herewith.
(b) Exhibits
(1) Amended and Restated Declaration of Trust made as of 11/23/93 - Filed
with Post-Effective Amendment No. 11 to Registrant's Registration
Statement, 11/30/93, and incorporated herein by reference.
(2) Restated By-Laws as amended through 6/26/90 - Filed with Post-Effective
Amendment No. 9 to Registrant's Registration Statement, 1/29/92, and
incorporated herein by reference.
(3) Not applicable.
(4) (i) Specimen Class A Share Certificate: Filed herewith.
(ii) Specimen Class C Share Certificate: Filed herewith.
(5) Investment Advisory Agreement dated 10/22/90 - Filed with Post-Effective
Amendment No. 6 to the Registrant's Registration Statement, 1/25/91, and
incorporated herein by reference.
(6)(i) General Distributor's Agreement dated 10/13/92: Filed with Post-
Effective Amendment No. 10 to Registrant's Registration Statement, 1/28/93,
and incorporated herein by reference.
(ii) Prototype Oppenheimer Funds Distributor, Inc. Dealer Agreement: Filed
with Post-Effective Amendment No. 12 to the Registration Statement of
Oppenheimer Government Securities Fund (Reg. No. 33-02769), 12/2/92, and
incorporated herein by reference.
(iii) Prototype Oppenheimer Funds Distributor, Inc. Broker Agreement:
Filed with Post-Effective Amendment No. 12 to the Registration Statement of
Oppenheimer Government Securities Fund (Reg. No. 33-02769), 12/2/92, and
incorporated herein by reference.
(iv) Prototype Oppenheimer Funds Distributor, Inc. Agency Agreement: Filed
with Post-Effective Amendment No. 12 to the Registration Statement of
Oppenheimer Government Securities Fund (Reg. No. 33-02769), 12/2/92, and
incorporated herein by reference.
(v) Broker Agreement between Oppenheimer Funds Distributor, Inc. and
Newbridge Securities dated 10/1/86: Filed with Post-Effective Amendment
No. 25 to the Registration Statement of Oppenheimer Special Fund (Reg.
No. 2-45272), 11/1/86, and incorporated herein by reference.
(7) Not applicable
(8) Custody Agreement dated 10/6/92 between Registrant and The Bank of New
York: Filed with Post-Effective Amendment No. 10 to Registrant's
Registration Statement, 1/28/93, and incorporated herein by reference.
(9) Not applicable.
(10) Opinion and Consent of Counsel dated 9/30/87: Filed with Registrant's
Pre-Effective Amendment No. 2, 10/6/87, and incorporated herein by
reference.
(11) Not applicable.
(12) Not applicable.
(13) Investment Letter dated 10/1/87 from Champion Asset Management
Corporation to Registrant: Filed with Registrant's Post-Effective
Amendment No. 1, 4/28/88, and incorporated herein by reference.
(14) (i) Form of Individual Retirement Account Trust Agreement: Filed with
Post-Effective Amendment No. 21 to the Registration Statement of Oppenheimer
U.S. Government Trust (Reg. No. 2-76645), 8/25/93, and incorporated herein
by reference.
(ii) Form of Individual Retirement Account Plan (IRA): Filed with Post-
Effective Amendment No. 40 of Oppenheimer Time Fund (Reg. No. 2-39461),
11/1/88, and incorporated herein by reference.
(iii) Form of Tax-Sheltered Retirement Plan and Custody Agreement for
employees of public schools and tax-exempt organizations: Filed with Post-
Effective Amendment No. 22 of Oppenheimer Directors Fund (File No. 2-62240),
2/1/90, and incorporated herein by reference.
iv) Form of Simplified Pension IRA: Filed with Post-Effective Amendment No.
36 of Oppenheimer Equity Income Fund (File No. 2-33043), 10/23/91, and
incorporated herein by reference.
(15)(i) Service Plan and Agreement for Class A Shares dated 6/22/93 under
Rule 12b-1 of the Investment Company Act of 1940: Filed with Post-Effective
Amendment No. 11 to Registrant's Registration Statement, 11/30/93, and
incorporated herein by reference.
(ii) Distribution and Service Plan and Agreement for Class C Shares dated
6/22/93 under Rule 12b-1 of the Investment Company Act of 1940: Filed
with Post-Effective Amendment No. 11 to Registrant's Registration
Statement, 11/30/93, and incorporated herein by reference.
(16) Performance Data Computation Schedule: Filed herewith.
-- Powers of Attorney: Filed with Amendment No. 11 to Registrant's
Registration Statement, 11/30/93, and incorporated herein by reference.
Item 25. Persons Controlled by or Under Common Control with Registrant
None.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of December 31, 1993
Class A Shares of Beneficial Interest 6,873
Class C Shares of Beneficial Interest 73
Item 27. Indemnification
Reference is made to the provisions of Article SEVENTH of Registrant's
Declaration of Trust filed as Exhibit 24(b)(1) to this Registration
Statement.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person,
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
(a) Oppenheimer Management Corporation is the investment adviser of the
Registrant; it and affiliates act in the same capacity for other
registered investment companies as described in Parts A and B hereof.
(b) For information as to the business, profession, vocation or employment
of a substantial nature of each of the officers and directors of
Oppenheimer Management Corporation, reference is made to Part B of this
Registration Statement and to the registration on Form ADV filed by
Oppenheimer Management Corporation under the Investment Advisers Act of
1940, which is incorporated herein by reference.
Item 29. Principal Underwriter
(a) Oppenheimer Funds Distributor, Inc. is the distributor of Registrant's
shares. It is also the distributor of certain of the other registered
open-end investment companies for which Oppenheimer Management
Corporation is the investment adviser.
b) The information contained in the registration on Form BD of Oppenheimer
Funds Distributor, Inc. filed under the Securities Exchange Act of 1934,
is incorporated herein by reference.
(c) Not applicable.
Item 30. Location of Accounts and Records
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940
and rules promulgated thereunder are in the possession of Oppenheimer
Management Corporation at its offices at 3410 South Galena Street, Denver,
Colorado 80231.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Denver and State of Colorado on the 10th day of
January, 1994.
OPPENHEIMER CHAMPION HIGH YIELD FUND
/s/ James C. Swain*
By: --------------------------
James C. Swain, Chairman
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities on
the dates indicated:
Signatures: Title Date
/s/ James C. Swain* Chairman of the Board January 10, 1994
- ---------------------- of Trustees
James C. Swain
/s/ Jon S. Fossel* Trustee January 10, 1994
- ----------------------
Jon S. Fossel
/s/ George Bowen* Treasurer and January 10, 1994
- --------------------- Principal Financial
George Bowen and Accounting Officer
/s/ Robert G. Avis* Trustee January 10, 1994
- ----------------------
Robert G. Avis
/s/ William A. Baker* Trustee January 10, 1994
- ----------------------
William A. Baker
/s/ Charles Conrad, Jr.* Trustee January 10, 1994
- ----------------------
Charles Conrad, Jr.
/s/ Raymond J. Kalinowski* Trustee January 10, 1994
- ----------------------
Raymond J. Kalinowski
/s/ C. Howard Kast* Trustee January 10, 1994
- ----------------------
C. Howard Kast
/s/ Robert M. Kirchner* Trustee January 10, 1994
- ----------------------
Robert M. Kirchner
/s/ Ned M. Steel* Trustee January 10, 1994
- ---------------------------
Ned M. Steel
*By: /s/ Robert G. Zack
-------------------------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
FORM N-1A
OPPENHEIMER CHAMPION HIGH YIELD FUND
EXHIBIT INDEX
Item No. Description
24(a)(8) Independent Auditors' Consent
24(b)(4)(i) Specimen Class A Share Certificate
24(b)(4)(ii) Specimen Class C Share Certificate
24(b)(16) Performance Data Computation Schedule
Exhibit 24(a)(8)
INDEPENDENT AUDITORS' CONSENT
Oppenheimer Champion High Yield Fund:
We hereby consent to the use in Post-Effective Amendment No. 12 to
Registration Statement No. 33-16494 of our report dated October 21, 1993
appearing in the Statement of Additional Information, which is a part of
such Registration Statement, and to the reference to us under the caption
"Financial Highlights" appearing in the Prospectus, which is also a part
of such Registration Statement.
DELOITTE & TOUCHE
Denver, Colorado
January 18, 1994
Exhibit 24(b)(4)(i)
OPPENHEIMER CHAMPION HIGH YIELD FUND
Class A Share Certificate (8-1/2" x 11")
I. FRONT OF CERTIFICATE (All text and other matter lies within
decorative border)
(upper left) box with heading: NUMBER (OF SHARES)
(upper right) box with heading: CLASS A SHARES;
certificate number above
(centered
below boxes) Oppenheimer Champion High Yield Fund
A MASSACHUSETTS BUSINESS TRUST
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
box with number
CUSIP 683944102
(at left) is the owner of
(centered) FULLY PAID CLASS A SHARES OF
BENEFICIAL INTEREST OF
OPPENHEIMER CHAMPION HIGH YIELD FUND
(hereinafter called the "Fund"), transferable only on the
books of the Fund by the holder hereof in person or by
duly authorized attorney, upon surrender of this
certificate properly endorsed. This certificate and the
shares represented hereby are issued and shall be held
subject to all of the provisions of the Declaration of
Trust of the Fund to all of which the holder by acceptance
hereof assents. This certificate is not valid until
countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the signatures
of its duly authorized officers.
(at left Dated: (at right
of seal) of seal)
(signature) (signature)
Dated:
_______________________ ___________________
SECRETARY PRESIDENT
Exhibit 24(b)(4)(i)
Page 2
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER CHAMPION HIGH YIELD FUND
SEAL
1987
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMER SHAREHOLDER SERVICES
(A DIVISION OF OPPENHEIMER MANAGEMENT
CORPORATION)
Denver (Colo) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out
in full according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/GMA ________________
State
Additional abbreviations may also be used though not in the above list.
<PAGE>
Exhibit 24(b)(4)(i)
Page 3
_______________________________________________________________________
(Please print or type name and address of assignee)
______________________________________________________
________________________________________________ Class A Shares of
beneficial interest represented by the within certificate, and do
hereby irrevocably constitute and appoint ___________________________
Attorney to transfer the said shares on the books of the within named Fund
with full power of substitution in the premises.
Dated: ______________________
Signed: __________________________
___________________________________
(Both must sign if joint owners)
Signature(s) __________________________
guaranteed Name of Guarantor
by: _____________________________
Signature of Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
vertically to right correspond with the name(s) as written upon the
of above paragraph) face of the certificate in every particular
without alteration or enlargement or any change
whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature guarantee) prospectus of the Fund.
PLEASE NOTE: This document contains a watermark OppenheimerFunds
when viewed at an angle. It is invalid without this logotype
watermark.
_______________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY
Exhibit 24(b)(4)(ii)
OPPENHEIMER CHAMPION HIGH YIELD FUND
Class C Share Certificate (8-1/2" x 11")
I. FRONT OF CERTIFICATE (All text and other matter lies within
decorative border)
(upper left) box with heading: NUMBER (OF SHARES)
(upper right) box with heading: CLASS C SHARES;
certificate number above
(centered
below boxes) Oppenheimer Champion High Yield Fund
A MASSACHUSETTS BUSINESS TRUST
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
box with number
CUSIP 683944 201
(at left) is the owner of
(centered) FULLY PAID CLASS C SHARES OF
BENEFICIAL INTEREST OF
OPPENHEIMER CHAMPION HIGH YIELD FUND
(hereinafter called the "Fund"), transferable only on the
books of the Fund by the holder hereof in person or by
duly authorized attorney, upon surrender of this
certificate properly endorsed. This certificate and the
shares represented hereby are issued and shall be held
subject to all of the provisions of the Declaration of
Trust of the Fund to all of which the holder by acceptance
hereof assents. This certificate is not valid until
countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the signatures
of its duly authorized officers.
(at left Dated: (at right
of seal) of seal)
(signature) (signature)
Dated:
_______________________ ___________________
SECRETARY PRESIDENT
Exhibit 24(b)(4)(ii)
Page 2
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER CHAMPION HIGH YIELD FUND
SEAL
1987
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMER SHAREHOLDER SERVICES
(A DIVISION OF OPPENHEIMER MANAGEMENT
CORPORATION)
Denver (Colo) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out
in full according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA _____________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received ................. hereby sell(s), assign(s) and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
Exhibit 24(b)(4)(ii)
Page 3
_______________________________________________________________________
(Please print or type name and address of assignee)
______________________________________________________
________________________________________________ Class C Shares of
beneficial interest represented by the within Certificate, and do
hereby irrevocably constitute and appoint ___________________________
Attorney to transfer the said shares on the books of the within named Fund
with full power of substitution in the premises.
Dated: ______________________
Signed: __________________________
___________________________________
(Both must sign if joint owners)
Signature(s) __________________________
guaranteed Name of Guarantor
by: _____________________________
Signature of Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
vertically to right correspond with the name(s) as written upon the
of above paragraph) face of the certificate in every particular
without alteration or enlargement or any change
whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature guarantee) prospectus of the Fund.
PLEASE NOTE: This document contains a watermark OppenheimerFunds
when viewed at an angle. It is invalid without this logotype
watermark:
_______________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY
Oppenheimer Champion High Yield Fund
Exhibit 24(b)(16) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are calculated
as described below, on the basis of the Fund's distributions, which are
as follows:
Distribution Amount From Amount From Reinvestment
Reinvestment Investment Long or Short-Term Price
(Ex)Date Income Capital Gains
12/08/87 0.0749359 0.0000 11.390
12/31/87 0.0906312 0.0000 11.580
01/11/88 0.0435017 0.0000 11.600
02/08/88 0.1101632 0.0000 12.000
03/08/88 0.1140977 0.0000 12.060
04/11/88 0.1337696 0.0000 12.080
05/09/88 0.1101632 0.0000 12.050
06/08/88 0.1189806 0.0000 12.070
07/11/88 0.1287500 0.0000 12.190
08/08/88 0.1053904 0.0000 12.210
09/09/88 0.1224939 0.0000 12.120
10/10/88 0.1216102 0.0000 12.110
11/08/88 0.1122531 0.0000 12.080
12/08/88 0.1169233 0.0000 12.030
12/30/88 0.0856000 0.1400 11.840
01/10/89 0.0427944 0.0000 11.860
02/08/89 0.1184395 0.0000 11.830
03/08/89 0.1050970 0.0000 11.840
04/10/89 0.1321986 0.0000 11.750
05/08/89 0.1116532 0.0000 11.700
06/08/89 0.1197603 0.0000 11.850
07/11/89 0.1291361 0.0000 11.810
08/08/89 0.1034668 0.0000 11.830
09/11/89 0.1244246 0.0000 11.800
10/09/89 0.1056065 0.0000 11.520
11/08/89 0.1085000 0.0000 11.270
12/08/89 0.1079041 0.0000 11.310
12/29/89 0.1268311 0.0000 11.230
01/09/90 0.0394790 0.0000 11.230
02/08/90 0.1076700 0.0000 11.080
03/08/90 0.1068117 0.0000 10.920
04/09/90 0.1240533 0.0000 10.970
05/08/90 0.1166603 0.0000 10.870
06/08/90 0.1213904 0.0000 10.970
07/05/90 0.1050840 0.0000 11.000
08/08/90 0.1329772 0.0000 10.980
09/10/90 0.1205070 0.0000 10.760
10/10/90 0.1065238 0.0000 10.350
11/14/90 0.1253361 0.0000 10.040
12/12/90 0.0989020 0.0000 10.090
12/31/90 0.0677602 0.0000 10.090
01/09/91 0.0334956 0.0000 10.100
02/13/91 0.1426406 0.0000 10.330
03/13/91 0.1190719 0.0000 10.750
04/10/91 0.1157644 0.0000 11.010
05/08/91 0.1182808 0.0000 11.170
06/12/91 0.1267984 0.0000 11.160
07/10/91 0.1130507 0.0000 11.320
08/14/91 0.1556661 0.0000 11.410
09/11/91 0.1171589 0.0000 11.530
10/09/91 0.1209660 0.0000 11.550
11/13/91 0.1412882 0.0000 11.730
12/11/91 0.1050652 0.0000 11.540
12/31/91 0.0713153 0.0000 11.580
01/08/92 0.0331137 0.0000 11.720
02/12/92 0.1394176 0.0000 12.040
03/11/92 0.1142743 0.0000 12.180
04/08/92 0.1114858 0.0000 12.100
05/13/92 0.1208152 0.0000 12.170
06/10/92 0.1149839 0.0000 12.180
07/08/92 0.1118269 0.0000 12.160
08/12/92 0.1225576 0.0000 12.300
09/09/92 0.1068058 0.0000 12.250
10/14/92 0.1269119 0.0000 12.070
11/11/92 0.0925110 0.0000 11.990
12/09/92 0.0963249 0.0000 12.030
12/31/92 0.0972944 0.0000 12.010
01/13/93 0.0444903 0.0000 12.100
02/10/93 0.0964170 0.0000 12.330
03/10/93 0.0917997 0.0000 12.560
04/14/93 0.1209879 0.0000 12.670
05/12/93 0.0847282 0.0000 12.720
06/09/93 0.0836887 0.0000 12.900
06/30/93 0.0735387 0.0000 12.990
07/30/93 0.0896500 0.0000 13.050
08/31/93 0.0839568 0.0000 12.990
09/30/93 0.1179897 0.0000 12.900
1. AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 9/30/93:
The formula for calculating average annual total return is as follows:
1 ERV n
--------------- = n (---) - 1 = average annual total return
number of years P
Where: ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period
P = hypothetical initial investment of $1,000
Examples, assuming a maximum sales charge of 4.75%:
One Year Five Year Inception
$1,104.13 1 $1,861.92 .2 $2,183.82 .1702
(---------) - 1 = 10.41% (---------) - 1 = 13.24% (---------) - 1 =
14.22%
$1,000 $1,000 $1,000
2. TOTAL RETURNS FOR THE PERIODS ENDED 9/30/93:
The formula for calculating total return is as follows:
ERV - P
------- = Total Return
P
Examples:
Inception (at Maximum Sales Charge) Inception (at NAV)
$2,183.82 - $1,000 $2,292.72 - $1,000
-------------------- = 118.38% -------------------- = 129.27%
$1,000 $1,000
One Year (at NAV)
$1,159.19 - $1,000
-------------------- = 15.92%
$1,000
3. YIELD FOR THE 30-DAY PERIOD ENDED 9/30/93:
The Fund's yield is calculated using the following formula set
forth in the SEC rules:
a - b 6
Yield = 2 {(----- + 1) - 1}
cd
The symbols above represent the following factors:
a = Dividends and interest earned during the 30-day period.
b = Expenses accrued for the period (net of any expense
reimbursements).
c = The average daily number of Fund shares outstanding during
the 30-day period that were entitled to receive dividends.
d = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
Example:
$729,106.26 - $103,696.95 6
2 {(------------------------- + 1) - 1} = 7.17%
7,839,870 x $13.54
4. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 9/30/93:
The Fund's dividend yields are calculated using the following formula:
a/30 x 365
Dividend Yield = ----------
b or c
The symbols above represent the following factors:
a = The accrual dividend earned during the period.
b = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
c = The Fund's net asset value (excluding sales charge) per
share on the last day of the period.
Examples:
Dividend Yield $.1179897/30 x 365
at Maximum Offer ------------------ = 10.60%
$13.54
Dividend Yield $.1179897/30 x 365
at Net Asset Value ------------------ = 11.13%
$12.90
Oppenheimer Champion High Yield Fund
October 19, 1993
Page 5
5. VALUES OF INVESTMENTS FOR A 10-YEAR PERIOD AT VARIOUS ASSUMED
AVERAGE
ANNUAL RATES OF RETURN:
Amount of Value at
Investment Assumed Average Annual
Return
5% 10% 15% 20%
Single $1,000 $1,629 $2,594 $4,046 $6,192
Annual $1,000 13,208 17,533 23,350 31,151
Values are calculated assuming investment at the beginning of the
period (each year in the case of annual $1,000 investments) and
reinvestment of earnings at the end of each year.
