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. 17 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X /
ACT OF 1940
AMENDMENT NO. 17 / X /
OPPENHEIMER CHAMPION INCOME FUND
(Exact Name of Registrant as Specified in Charter)
6803 South Tucson Way
Englewood, Colorado 80012
(Address of Principal Executive Offices)
303-671-3200
(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc., Suite 3400
Two World Trade Center
New York, New York 10048-0203
(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 January 20, 1997 pursuant to paragraph (b) of Rule
485
/ / 60 days after filing pursuant to paragraph (a)(1) of
Rule 485
/ / On--------------, pursuant to paragraph (a)(1) of Rule
485
/ / 75 days after filing pursuant to paragraph (a)(2) of
Rule 485
/ / On--------------, pursuant to paragraph (a)(2) 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, 1996, was filed on
November 27, 1996.
<PAGE>
FORM N-1A
OPPENHEIMER CHAMPION INCOME FUND
Cross Reference Sheet
Part A of
Form N-1A
Item No. Prospectus Heading
- --------- ------------------
1 Front Cover Page
2 Expenses; A Brief Overview of the Fund
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; How the Fund is Managed -
Organization and History; Investment Objectives and
Policies; Investment Risks
5 How the Fund is Managed; Expenses; Back Cover
5A Performance of the Fund
6 How the Fund is Managed - Organization and History;
Dividends, Capital Gains and Taxes;Investment
Objectives and Policies; Shareholder Account Rules
and Policies
7 Shareholder Account Rules and Policies; How To Buy
Shares; How to Exchange Shares; Special Investor
Services; Service Plan for Class A Shares;
Distribution and Service Plan forClass B Shares;
Distribution and Service Plan for Class C
Shares; How to Sell Shares
8 How to Sell Shares; Special Investor Services
9 *
Part B of
Form N-1A
Item No. Heading in Statement of Additional Information
- --------- ----------------------------------------------
10 Cover Page
11 Cover Page
12 *
13 Investment Policies and Stategies; Other Investment
Techniques and Strategies; Other Investment
Restrictions
14 How the Fund is Managed - Trustees and Officers of
the Fund
15 How the Fund is Managed - Major Shareholders
16 How the Fund is Managed; Distribution and Service
Plans; Additional Information About the Fund; Back
Cover
17 Brokerage Policies of the Fund
18 Additional Information About the Fund
19 About Your Account - How to Buy Shares; How to
Sell Shares; How to Exchange Shares
20 Dividends, Capital Gains and Taxes
21 How the Fund is Managed; Brokerage Policies of the
Fund
22 Performance of the Fund
23 Financial Statements
_____________
* Not applicable or negative answer.
<PAGE>
Oppenheimer Champion Income Fund
Prospectus dated January 20, 1997
Oppenheimer Champion Income Fund is a mutual fund with the
primary investment objective of seeking a high level of current
income primarily by investing in a diversified portfolio of high-
yield, lower-rated, fixed-income securities (commonly known as
"junk bonds") believed by the Fund's investment manager not to
involve undue risk. In selecting securities for the Fund s
portfolio, the Fund s Manager balances the anticipated income
against the considerable risk that the issuer may fail to make
interest or principal payments on that security, as explained on
pages 13-15. As a secondary objective, the Fund seeks capital
growth when consistent with its primary objective.
The Fund may invest up to 100% of its assets in "junk bonds,"
which are securities that are speculative and involve greater
risks, including risk of default, than higher-rated securities. An
investment in the Fund is not a complete investment program and is
not appropriate for investors unable or unwilling to assume the
high degree of risk associated with investing in lower-rated, high-
yield securities. Investors should carefully consider these risks
before investing. Please refer to "Special Risks of Lower-Rated
Securities" on page 14.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and
keep it for future reference. You can find more detailed
information about the Fund in the January 20, 1997 Statement of
Additional Information. For a free copy, call OppenheimerFunds
Services, the Fund's Transfer Agent, at 1-800-525-7048, or write to
the Transfer Agent at the address on the back cover. The Statement
of Additional Information has been filed with the Securities and
Exchange Commission and is incorporated into this Prospectus by
reference (which means that it is legally part of this Prospectus).
Because of the Fund's investment policies and practices, the
Fund's shares may be considered to be speculative.
[ OppenheimerFunds logo ]
Shares of the Fund are not deposits or obligations of any bank, are
not guaranteed by any bank, are not insured by the F.D.I.C. or any
other agency, and involve investment risks, including the possible
loss of the principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
Contents
ABOUT THE FUND
3 Expenses
5 A Brief Overview of the Fund
7 Financial Highlights
10 Investment Objectives and Policies
13 Investment Risks
15 Investment Techniques and Strategies
21 How the Fund is Managed
22 Performance of the Fund
ABOUT YOUR ACCOUNT
27 How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
40 Special Investor Services
AccountLink
Automatic Withdrawal and Exchange
Plans
Reinvestment Privilege
Retirement Plans
42 How to Sell Shares
By Mail
By Telephone
By Check Writing
44 How to Exchange Shares
46 Shareholder Account Rules and Policies
48 Dividends, Capital Gains and Taxes
A-1 Appendix A: Description of Ratings
B-1 Appendix B: Special Sales Charge Arrangements
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of
its assets, administration, distribution of its shares and other
services, and those expenses are subtracted from the Fund's assets
to calculate the Fund's net asset value per share. All shareholders
therefore pay those expenses indirectly. Shareholders pay other
expenses directly, such as sales charges and account transaction
charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the
Fund's business operating expenses that you will bear indirectly.
The numbers below are based on the Fund's expenses during fiscal
year ended September 30, 1996.
Shareholder Transaction Expenses are charges you pay when
you buy or sell shares of the Fund. Please refer to "About Your
Account," starting on page 27 for an explanation of how and when
these charges apply.
Class A Class B Class C
Shares Shares Shares
- ------------------------------------------------------------------
Maximum Sales Charge
on Purchases (as a %
of offering price) 4.75% None None
- -----------------------------------------------------------------
Maximum Sales Charge
on Reinvested Dividends None None None
- -----------------------------------------------------------------
Maximum Deferred Sales None(1) 5% in the 1% if shares
Charge (as a % of the lower first year, redeemed
of the original offering declining to within 12
price or redemption 1% in the months of
proceeds) sixth year purchase (2)
and
eliminated
thereafter(2)
- --------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------
Redemption Fee None None None
(1) If you invest $1 million or more ($500,000 or more for
purchases by Retirement Plans as defined in Class A
Contingent Deferred Sales Charge on page 31) in Class A
shares, you may have to pay a sales charge of up to 1% if you
sell your shares within 18 calendar months from the end of the
calendar month during which you purchased those shares. See
"How to Buy Shares - Buying Class A Shares" below.
(2) See "How to Buy Shares - Buying Class B Shares" and "How to
Buy Shares - Buying Class C Shares" below.
Annual Fund Operating Expenses are paid out of the Fund's
assets and represent the Fund's expenses in operating its business.
For example, the Fund pays management fees to its investment
Advisor, OppenheimerFunds, Inc. (which is referred to in this
Prospectus as the "Manager"). The rates of the Manager's fees are
set forth in "How the Fund is Managed," below. The Fund has other
regular expenses for services, such as transfer agent fees,
custodial fees paid to the bank that holds the Fund's portfolio
securities, audit fees and legal expenses. Those expenses are
detailed in the Fund's Financial Statements in the Statement of
Additional Information.
Annual Fund Operating Expenses (as a percentage of average net
assets):
Class A Class B Class C
Shares Shares Shares
- -----------------------------------------------------------------
Management Fees 0.68% 0.68% 0.68%
- -----------------------------------------------------------------
12b-1 Plan Fees 0.24% 1.00% 1.00%
- -----------------------------------------------------------------
Other Expenses 0.25% 0.29% 0.25%
- -----------------------------------------------------------------
Total Fund Operating 1.17% 1.97% 1.93%
Expenses
The numbers in the table above are based on the Fund's
expenses in fiscal year ended September 30, 1996. These amounts
are shown as a percentage of the average net assets of each class
of the Fund's shares for that year. The 12b-1 Plan Fees for Class
A shares are service fees (which can go up to a maximum of 0.25% of
average annual net assets of that class). For Class B and Class C
shares, the 12b-1 Plan Fees are service fees (which can go up to a
maximum of 0.25% of average net assets of that class), and the
asset-based sales charge of 0.75%. These plans are described in
greater detail in "How to Buy Shares."
The actual expenses for each class of shares in future years
may be more or less than the numbers in the chart, depending on a
number of factors, including the actual value of the Fund's assets
represented by each class of shares.
Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples
shown below. Assume that you make a $1,000 investment in each class
of shares of the Fund, and that the Fund's annual return is 5%, and
that its operating expenses for each class are the ones shown in
the Annual Fund Operating Expenses table above. If you were to
redeem your shares at the end of each period shown below, your
investment would incur the following expenses by the end of 1, 3,
5 and 10 years:
1 year 3 years 5 years 10 years(1)
- -----------------------------------------------------------------
Class A Shares $59 $83 $109 $183
- -----------------------------------------------------------------
Class B Shares $70 $92 $126 $190
- -----------------------------------------------------------------
Class C Shares $30 $61 $104 $225
If you did not redeem your investment, it would incur the
following expenses:
1 year 3 years 5 years 10 years(1)
- -----------------------------------------------------------------
Class A Shares $59 $83 $109 $183
- -----------------------------------------------------------------
Class B Shares $20 $62 $106 $190
- -----------------------------------------------------------------
Class C Shares $20 $61 $104 $225
(1) In the first example, expenses include the Class A initial
sales charge and the applicable Class B or Class C contingent
deferred sales charge. In the second example, Class A
expenses include the initial sales charge but Class B and
Class C expenses do not include contingent deferred sales
charges. The Class B expenses in years 7 through 10 are based
on Class A expenses shown above, because the Fund
automatically converts your Class B shares into Class A shares
after 6 years. Because of the effect of the asset-based sales
charge and the contingent deferred sales charge on Class B and
Class C shares, long-term Class B and Class C shareholders
could pay the economic equivalent of an amount greater than
the maximum front-end sales charge allowed under applicable
regulations. For Class B shareholders, the automatic
conversion of Class B shares to Class A shares is designed to
minimize the likelihood that this will occur. Please refer to
"How to Buy Shares -- Buying Class B Shares" for more
information.
These examples show the effect of expenses on an investment,
but are not meant to state or predict actual or expected costs or
investment returns of the Fund, all of which may be more or less
than those shown.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below,
with references to the section of this Prospectus where more
complete information can be found. You should carefully read the
entire Prospectus before making a decision about investing in the
Fund. Keep the Prospectus for reference after you invest,
particularly for information about your account, such as how to
sell or exchange shares.
What Are the Fund's Investment Objectives? The Fund's
primary investment objective is to seek a high level of current
income primarily by investing in a diversified portfolio of high-
yield, lower-rated, fixed-income securities believed by the Manager
not to involve undue risk. The Fund has a secondary objective to
seek capital growth when consistent with its primary objective.
What Does the Fund Invest In? To seek high current income,
the Fund anticipates that under normal conditions (when the
financial markets are not in a volatile state or experiencing other
unusual market or financial conditions) at least 60% of its total
assets will be invested in high-yield, lower-rated fixed-income
securities, such as long-term debt (commonly referred to as "junk
bonds") and preferred stock issues. The Fund's remaining assets
may be invested in cash or cash equivalents, or in common stocks
and other equity securities when consistent with the Fund's
investment objectives or if acquired as part of a unit consisting
of a combination of fixed-income securities and equity investments.
The Fund may purchase debt and equity securities of U.S. and
foreign companies and governments although it presently does not
intend that foreign investments will exceed 25% of its net assets.
The Fund may also use hedging instruments and some derivative
investments to try to manage investment risks or increase income.
These investments are more fully explained in "Investment
Objectives and Policies," starting on page 10.
Who Manages the Fund? The Fund's investment Adviser is
OppenheimerFunds, Inc. The Manager (including a subsidiary) advises
investment company portfolios having over $62 billion in assets at
December 31, 1996. The Manager is paid an advisory fee by the
Fund, based on its assets. The Fund's portfolio manager, who is
employed by the Manager and who is primarily responsible for the
selection of the Fund's securities, is Ralph W. Stellmacher. The
Fund's Board of Trustees, elected by shareholders, oversees the
investment Advisor and the portfolio manager. Please refer to "How
the Fund is Managed," starting on page 21 for more information
about the Manager and its fees.
How Risky is the Fund? All investments carry risks to some
degree. The Fund may invest all or any portion of its assets in
high-yield, lower-rated fixed-income securities. The primary
advantage of high-yield securities is their relatively higher
investment return. However, such securities are considered
speculative and may be subject to greater market fluctuations and
risks of loss of income and principal and have less liquidity than
investments in higher-rated securities. Fixed-income securities
are also subject to interest rate risks and credit risks which can
negatively impact the value of the security and the Fund's net
asset value per share. There are certain risks associated with
investments in foreign securities, including those related to
changes in foreign currency rates, that are not present in domestic
securities. These changes affect the value of the Fund's
investments and its price per share. In the Oppenheimer funds
spectrum, the Fund is generally not as risky as aggressive growth
funds, but is more risky than investment grade bond funds. While
the Manager tries to reduce risks by diversifying investments, by
carefully researching securities before they are purchased for the
portfolio, and in some cases by using hedging techniques, there is
no guarantee of success in achieving the Fund's objectives and your
shares may be worth more or less than their original cost when you
redeem them. Please refer to "Investment Objectives and Policies"
and Investment Risks starting on page 10 for a more complete
discussion.
How Can I Buy Shares? You can buy shares through your
dealer or financial institution, or you can purchase shares
directly through the Distributor by completing an Application or by
using an Automatic Investment Plan under AccountLink. Please refer
to "How to Buy Shares" on page 27 for more details.
Will I Pay a Sales Charge to Buy Shares? The Fund offers the
individual investor three classes of shares. All classes have the
same investment portfolio, but different expenses. Class A shares
are offered with a front-end sales charge, starting at 4.75%, and
reduced for larger purchases. Class B shares and Class C shares
are offered without a front-end sales charge, but may be subject to
a contingent deferred sales charge if redeemed within 6 years or 12
months of purchase, respectively. There is also an annual asset-
based sales charge on Class B shares and Class C shares. Please
review "How to Buy Shares" starting on page 27 for more details,
including a discussion about factors you and your financial advisor
should consider in determining which class may be appropriate for
you.
How Can I Sell My Shares? Shares can be redeemed by mail
or by telephone call to the Transfer Agent on any business day, or
through your dealer or by writing a check against your current
account (available for Class A shares only). Please refer to "How
to Sell Shares" on page 42. The Fund also offers exchange
privileges to other Oppenheimer funds, described in "How to
Exchange Shares" on page 44.
How Has the Fund Performed? The Fund measures its performance
by quoting its yield and total returns, which measure historical
performance. Those yields and returns can be compared to the
yields and returns (over similar periods) of other funds. Of
course, other funds may have different objectives, investments, and
levels of risk. The Fund's performance can also be compared to
broad-based market indices and narrower market indices, which we
have done on page 25. Please remember that past performance does
not guarantee future results.
Financial Highlights
The table on the following pages presents selected financial
information about the Fund, including per share data and expense
ratios and other data based on the Fund's average net assets. This
information has been audited by Deloitte & Touche LLP, the Fund's
independent auditors, whose report on the Fund's financial
statements for the fiscal year ended September 30, 1996, is
included in the Statement of Additional Information.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
CLASS B
- --------------------------------------------------------------- ---------
PERIOD ENDED
YEAR ENDED SEPTEMBER 30,
SEPT. 30,
1996 1995 1994 1993
1992 1996(2)
=====================================================================
============================
===================================
<S> <C> <C> <C> <C>
<C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $12.47 $12.32 $12.90
$12.26 $11.49 $12.47
- -------------------------------------------------------------------------------------------------
- -----------------------------------
Income (loss) from investment
operations:
Net investment income 1.15 1.05 1.10
1.22 1.41 1.03
Net realized and unrealized
gain (loss) .44 .14 (.38)
.64 .77 .44
------ ------ ------
- ------ ------ ------
Total income from investment
operations 1.59 1.19 .72
1.86 2.18 1.47
- -------------------------------------------------------------------------------------------------
- -----------------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income (1.14) (1.04) (1.10)
(1.22) (1.41) (1.03)
Dividends in excess of net
investment income -- -- (.01)
-- -- --
Distributions in excess of net
realized gain -- -- (.19)
-- -- --
------ ------ ------
- ------ ------ ------
Total dividends and distributions
to shareholders (1.14) (1.04) (1.30)
(1.22) (1.41) (1.03)
- -------------------------------------------------------------------------------------------------
- -----------------------------------
Net asset value, end of period $12.92 $12.47 $12.32
$12.90 $12.26 $12.91
====== ====== ======
====== ====== ======
=====================================================================
============================
===================================
TOTAL RETURN, AT NET ASSET VALUE(4) 13.28% 10.09% 5.61%
15.92% 19.94% 12.20%
=====================================================================
============================
===================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $359,208 $255,139 $160,505
$104,465 $47,125 $82,052
- -------------------------------------------------------------------------------------------------
- -----------------------------------
Average net assets (in thousands) $305,638 $204,917 $135,431 $
73,334 $28,270 $33,189
- -------------------------------------------------------------------------------------------------
- -----------------------------------
Ratios to average net assets:
Net investment income 8.97% 8.45% 8.49%
9.52% 11.60% 7.90%(5)
Expenses 1.17% 1.18% 1.22%
1.24% 1.35% 1.97%(5)
- -------------------------------------------------------------------------------------------------
- -----------------------------------
Portfolio turnover rate(6) 95.0% 72.5% 108.0%
116.2% 121.5% 95.0%
</TABLE>
<TABLE>
<CAPTION>
CLASS C
- -------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1996 1995 1994(1)
=====================================================================
============================
======
<S> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $12.46 $12.32
$13.13
- -------------------------------------------------------------------------------------------------
- ------
Income (loss) from investment
operations:
Net investment income 1.06 .95
.75
Net realized and unrealized
gain (loss) .44 .13
(.60)
------ ------
- ------
Total income from investment
operations 1.50 1.08
.15
- -------------------------------------------------------------------------------------------------
- ------
Dividends and distributions
to shareholders:
Dividends from net
investment income (1.05) (.94)
(.77)
Dividends in excess of net
investment income -- --
-- (3)
Distributions in excess of net
realized gain -- --
(.19)
Total dividends and distributions
to shareholders (1.05) (.94)
(.96)
- -------------------------------------------------------------------------------------------------
- ------
Net asset value, end of period $12.91 $12.46
$12.32
====== ======
======
=====================================================================
============================
======
TOTAL RETURN, AT NET ASSET VALUE(4) 12.44% 9.16%
1.11%
=====================================================================
============================
======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $112,945 $64,932
$27,743
- -------------------------------------------------------------------------------------------------
- ------
Average net assets (in thousands) $ 89,416 $43,584
$13,693
Ratios to average net assets:
Net investment income 8.19% 7.63%
7.24%(5)
Expenses 1.93% 1.95%
1.94%(5)
- -------------------------------------------------------------------------------------------------
- ------
Portfolio turnover rate(6) 95.0% 72.5%
108.0%
</TABLE>
1. For the period from December 1, 1993 (inception of offering)
to September 30, 1994.
2. For the period from October 2, 1995 to September 30, 1996.
3. Less than $.005 per share.
4. Assumes a hypothetical initial investment on the business day
before the first day of the fiscal period (or inception of
offering), with all dividends and distributions reinvested in
additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one
full year.
5. Annualized.
6. The lesser of purchases or sales of portfolio securities for a
period, divided by the monthly average of the market value of
portfolio securities owned during the period. Securities with a
maturity or expiration date at the time of acquisition of one
year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities)
for the period ended September 30, 1996 were $590,516,268 and
$380,018,484, respectively.
<PAGE>
Investment Objectives and Policies
Objectives. The Fund has primary and secondary investment
objectives. The Fund's primary objective is to seek a high level
of current income primarily by investing in a diversified portfolio
of high-yield, lower-rated, fixed-income securities believed by 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. Since market risks are inherent in all
securities to varying degrees, there can be no assurance that the
Fund will achieve its objectives.
Investment Policies and Strategies. Consistent with its primary
investment objective of seeking a high level of current income, the
Fund anticipates that under normal conditions at least 60% of the
value of its total assets will be invested in high-yield, lower-
rated fixed-income securities. 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 with a maturity of
no more than 13 months), 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. The average
maturity of the investments in the Fund's portfolio is expected to
be 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.
The Fund may try to hedge against losses in the value of its
portfolio of securities by using hedging strategies and derivative
investments described below. The Fund's portfolio manager may
employ special investment techniques in selecting securities for
the Fund. These are also described below. More detailed
information may be found about them under the same headings in the
Statement of Additional Information.
Can the Fund's Investment Objectives and Policies Change? The
Fund has investment objectives, which are described above, as well
as investment policies it follows to try to achieve its objectives.
Additionally, the Fund uses certain investment techniques and
strategies in carrying out those investment policies. The Fund's
investment policies and techniques are not "fundamental" unless
this Prospectus or the Statement of Additional Information says
that a particular policy is "fundamental." The Fund's investment
objectives are fundamental policies.
Fundamental policies are those that cannot be changed without
the approval of a "majority" of the Fund's outstanding voting
shares. The term "majority" is defined in the Investment Company
Act of 1940 to be a particular percentage of outstanding voting
shares (and this term is explained in the Statement of Additional
Information). The Fund's Board of Trustees may change non-
fundamental policies without shareholder approval, although
significant changes will be described in amendments to this
Prospectus.
How the Fund's Portfolio Securities are Rated. As of
September 30, 1996, the Fund's portfolio included corporate bonds
in the following Standard & Poor s Corporation ( S&P ) rating
categories or if unrated, determined by the Manager to be
comparable to the category indicated (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): A,.55%; BBB,
3.57%; BB, 17.86%; B, 44.50%; CCC, 5.62%; CC, .39%; and D, .23%.
If a bond was not rated by S&P but was rated by Moody's Investors
Services ( Moody s ), it is included in the comparable S&P
category. The allocation of the Fund's assets in securities in the
different 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. Appendix A to this Prospectus
describes the rating categories.
Portfolio Turnover. The length of time the Fund has held
a security is not generally a consideration in investment
decisions. A change in the securities held by the Fund is known as
"portfolio turnover." As a result of the Fund's investment
policies and market factors, the Fund will trade its portfolio
actively to try to benefit from short-term yield differences among
debt securities and as a result the Fund's portfolio turnover may
be higher than other mutual funds. This strategy may involve
greater transaction costs from brokerage commissions and dealer
mark-ups. Additionally, high portfolio turnover may result in
increased short-term capital gains and affect the ability of the
Fund to qualify for tax deductions for payments made to
shareholders as a "regulated investment company" under the Internal
Revenue Code. See Tax Aspects of Covered Calls and Hedging
Instruments in the Statement of Additional Information. The Fund
qualified in its last fiscal year and intends to do so in the
coming year, although it reserves the right not to qualify.
Foreign Securities. The Fund may purchase debt and equity
securities (which may be denominated in U. S. dollars or in non-U.
S. currencies) issued or guaranteed by foreign companies or foreign
governments or their agencies. The Fund may invest up to 100% of
its assets in foreign securities. However, the Fund presently does
not intend that such investments will exceed 25% of its net assets.
The Fund may purchase securities of companies in any country,
developed or underdeveloped. Investments in securities of issuers
in underdeveloped and emerging market countries generally involve
more risk and may be considered highly speculative. Foreign
currency will be held by the Fund only in connection with the
purchase or sale of foreign securities.
Warrants and Rights. Warrants basically are options to
purchase stock at set prices that are valid for a limited period of
time. Rights are options to purchase securities, normally granted
to current holders by the issuer. 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 the Fund's assets may be invested in
warrants and rights that are not listed on The New York Stock
Exchange or American Stock Exchange. For further details about
these investments, see "Warrants and Rights" in the Statement of
Additional Information.
"When-Issued" and Delayed Delivery Transactions. The Fund
may purchase securities on a "when-issued" basis and may purchase
or sell securities on a "delayed delivery" basis. These terms
refer to securities that have been created and for which a market
exists, but which are not available for immediate delivery. There
may be a risk of loss to the Fund if the value of the security
declines prior to the settlement date.
The Fund may also enter into "forward roll" transactions with
banks or other buyers that provide for future delivery of the
mortgage-backed securities in which the Fund may invest. The Fund
will identify liquid securities, either debt or equity, to its
custodian bank in an amount equal to its purchase payment
obligation under the roll. Further details are set forth in the
Statement of Additional Information under "Mortgage-Backed
Securities."
Zero Coupon Securities. The Fund may invest in zero coupon
securities issued by the U.S. Treasury or by private issuers. In
general, zero coupon U.S. Treasury securities include U.S. Treasury
notes and bonds that have been "stripped" of their interest coupons
and certificates representing interests in such stripped debt
obligations. A zero coupon Treasury security pays no current
interest and trades at a deep discount from its face value. It
will be subject to greater market fluctuations from changes in
interest rates than interest-paying securities. The Fund accrues
interest on zero coupon securities without receiving the actual
cash. As a result of holding these securities, the Fund could
possibly be forced to sell portfolio securities to pay cash
dividends or meet redemptions. Zero coupon securities issued by
non-government issuers are similar to U.S. Government zero coupon
securities. They have an additional risk that the issuing company
may fail to pay interest or repay the principal on the obligation.
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 assets 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 asset-backed security. Further details are set forth in the
Statement of Additional Information.
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 guarantees do not extend to the value
or yield of the securities the Fund owns or to the Fund s net asset
value, but guarantee payments of the loans in the pool. Mortgage-
backed 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. The yield to maturity
on the class that receives only interest is extremely sensitive to
the rate of payment of the principal on the underlying mortgages.
Principal prepayments increase that sensitivity. Stripped
securities that pay interest only are therefore subject to greater
price volatility when interest rates change, and have the
additional risk that if the underlying mortgages are 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. Stripped securities that receive principal payments
only are also subject to increased volatility in price due to
interest rate changes and have the additional risk that the
security will be less liquid during demand or supply imbalances.
Investment Risks
All investments carry risks to some degree, whether they are
risks that market prices of the investment will fluctuate (this is
known as "market risk") or that the underlying issuer will
experience financial difficulties and may default on its obligation
under a fixed-income investment to pay interest and repay principal
(this is referred to as "credit risk"). These general investment
risks, and the special risks of certain types of investments that
the Fund may hold are described below. They affect the value of
the Fund's investments, its investment performance, and the prices
of its shares. These risks collectively form the risk profile of
th e Fund.
Because of the types of securities the Fund invests in and the
investment techniques the Fund uses, the Fund is designed for
investors who are investing for the long term. It is not intended
for investors seeking assured income or preservation of capital.
While the Manager tries to reduce risks by diversifying
investments, by carefully researching securities before they are
purchased, and in some cases by using hedging techniques, changes
in overall market prices can occur at any time, and because the
income earned on securities is subject to change, there is no
assurance that the Fund will achieve its investment objective.
When you redeem your shares, they may be worth more or less than
what you paid for them.
Special Risks of Lower-Rated Securities. The Fund invests
in higher-yielding, lower-rated debt securities, commonly known as
"junk bonds," because these securities generally offer higher
income potential than investment grade securities. There is no
restriction on the amount of the Fund's assets that could be
invested in these types of securities. Lower-rated securities are
also referred to as lower-grade securities. "Lower-grade" debt
securities are those rated below "investment grade," which means
they have a rating lower than "Baa" by Moody's or lower than "BBB"
by S&P or similar ratings by Fitch Investors Service, Inc., Duff &
Phelps, Inc. or another nationally recognized statistical rating
organization. The Fund may invest in securities rated as low as
"C" or "D" or which may be in default at the time the Fund buys
them. While securities rated "Baa" by Moody's or "BBB" by S&P are
investment grade and are not regarded as "junk bonds," those
securities may be subject to greater market fluctuations and risks
of loss of income and principal than higher grade securities and
may be considered to have certain speculative characteristics. The
Fund may invest in unrated securities that the Manager believes
offer yields and risks comparable to rated securities.
The Manager does not rely solely on ratings of securities by
rating agencies when selecting investments for the Fund, but
evaluates other economic and business factors as well. The Fund
may invest in unrated securities that the Manager believes offer
yields and risks comparable to rated securiites. High-yield,
lower-grade securities, whether rated or unrated, often have
speculative characteristics. Lower-grade securities have special
risks that make them riskier investments than investment grade
securities. They may be subject to greater market fluctuations and
risk of loss of income and principal than lower yielding,
investment grade securities. There may be less of a market for
them and therefore they may be harder to sell at an acceptable
price. There is a relatively greater possibility that the
issuer's earnings may be insufficient to make the payments of
interest and principal due on the bonds. The issuer's low
creditworthiness may increase the potential for its insolvency.
Further, a decline in the high-yield bond market is likely 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 issuers to repay principal and interest.
These risks mean that the Fund may not achieve the expected
income from lower-grade securities, and that the Fund's net asset
value per share may be affected by declines in value of these
securities. The Fund is not obligated to dispose of securities
when issuers are in default or if the rating of the security is
reduced. These risks are discussed in more detail in the Statement
of Additional Information.
Interest Rate Risks. Debt securities are subject to changes
in value due to changes in prevailing interest rates. When
prevailing interest rates fall, the values of outstanding debt
securities generally rise. Conversely, when interest rates rise,
the values of outstanding debt securities generally decline. The
magnitude of these fluctuations will be greater when the average
maturity of the portfolio securities is longer. Changes in the
value of securities held by the Fund means that the Fund s share
prices can go up or down when interest rates change because of the
effect of the change on the value of the Fund s portfolio of debt
securities.
Credit Risks. Debt securities are also subject to credit
risks. Credit risk relates to the ability of the issuer of a debt
security to make interest or principal payments on the security as
they become due. Generally, higher-yielding, lower-rated bonds
(which are the type of bonds the Fund invests in) are subject to
greater credit risk than higher-rated bonds. Securities issued or
guaranteed by the U.S. Government are subject to little, if any,
credit risk if they are backed by the "full faith and credit of the
U.S. Government," which in general terms means that the U.S.
Treasury stands behind the obligation to pay interest and
principal. While the Manager may rely to some extent on credit
ratings by nationally recognized rating agencies, such as S&P or
Moody's, in evaluating the credit risk of securities selected for
the Fund's portfolio, it may also use its own research and
analysis. However, many factors affect an issuer's ability to make
timely payments, and there can be no assurance that the credit
risks of a particular security will not change over time.
Stock Investment Risks. The Fund may also invest a limited
portion of its assets in common stocks and other equity securities
to help achieve its investment objectives. Accordingly, the value
of the Fund's portfolio will be affected to a certain degree by
changes in the stock markets. At times, the stock markets can be
volatile and stock prices can change substantially. This market
risk could affect the Fund's net asset value per share, which will
fluctuate as the values of the Fund's equity portfolio securities
change. Not all stock prices change uniformly or at the same time,
and other factors, not all of which can be predicted, can affect a
particular stock's prices.
Risks of Foreign Securities. Investing in foreign
securities, especially those issued in underdeveloped countries,
generally involves special risks. For example, foreign issuers are
not subject to the same accounting and disclosure requirements that
U.S. companies are subject to. The value of foreign investments
may be affected by changes in foreign currency rates, exchange
control regulations, expropriation or nationalization of a
company's assets, foreign taxes, delays in settlement of
transactions, changes in governmental economic or monetary policy
in the U.S. or abroad, or other political and economic factors. If
the Fund distributes more income during a period than it earns
because of unfavorable currency exchange rates, those dividends may
later have to be considered a return of capital. Some of the
foreign debt securities the Fund may invest in, such as emerging
market debt, have speculative characteristics. More information
about the risks and potential rewards of foreign securities is
contained in the Statement of Additional Information.
Special Risks of Emerging Market Countries. Investments in
emerging market countries may involve further risks in addition to
those identified above for investments in foreign securities.
Securities issued by emerging market countries and by companies
located in those countries may be subject to extended settlement
periods, whereby the Fund might not receive principal and/or income
on a timely basis and its net asset value could be affected. There
may be a lack of liquidity for emerging market securities; interest
rates and foreign currency exchange rates may be more volatile;
sovereign limitations on foreign investments may be more likely to
be imposed; there may be significant balance of payment deficits;
and their economies and markets may respond in a more volatile
manner to economic changes than those of developed countries.
Investment Techniques and Strategies
The Fund may also use the investment techniques and strategies
described below. These techniques involve certain risks. The
Statement of Additional Information contains more information about
these practices, including limitations on their use that are
designed to reduce some of the risks.
Repurchase Agreements. The Fund may enter into repurchase
agreements. In a repurchase transaction, the Fund buys a security
and simultaneously sells it to the vendor for delivery at a future
date. There is no limit on the amount of the Fund's net assets
that may be subject to repurchase agreements of seven days or less.
Repurchase agreements must be fully collateralized. However, if the
vendor fails to pay the resale price on the delivery date, the Fund
may incur costs in disposing of the collateral and may experience
losses if there is any delay in its ability to do so. The Fund will
not enter into a repurchase agreement that causes more than 10% of
its net assets to be subject to repurchase agreements having a
maturity beyond seven days, because such repurchase agreements may
be illiquid (See Illiquid and Restricted Securities ).
Temporary Defensive Investments. When the financial markets
are in a volatile state or experiencing other unusual market or
financial conditions, for temporary defensive purposes, the Fund
may invest all or a portion of its assets in defensive securities.
Securities selected for defensive purposes may include (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 S&P. 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.
Illiquid and Restricted Securities. Under the policies and
procedures established by the Fund's Board of Trustees, the Manager
determines the liquidity of certain of the Fund's investments.
Investments may be illiquid because of the absence of an active
trading market, making it difficult to value them or dispose of
them promptly at an acceptable price. A restricted security is one
that has a contractual restriction on its resale or which cannot be
sold publicly until it is registered under the Securities Act of
1933. The Fund will not invest more than 10% of its net assets in
illiquid or restricted securities (the Board may increase that
limit to 15%). The Fund's percentage limitation on these
investments does not apply to certain restricted securities that
are eligible for resale to qualified institutional purchasers. The
Manager monitors holdings of illiquid securities on an ongoing
basis and at times the Fund may be required to sell some holdings
to maintain adequate liquidity.
Participation Interests. The Fund may acquire participation
interests in loans that are made to U.S. or foreign companies (the
"borrower"). They may be interests in, or assignments of, the loan
and are acquired from banks or brokers that have made the loan or
are members of the lending syndicate. No more than 5% of the
Fund's net assets can be invested in participation interests of the
same borrower. The Manager has set certain creditworthiness
standards for issuers of loan participations, and monitors their
creditworthiness. The value of loan participation interests depends
primarily upon the creditworthiness of the borrower, and its
ability to pay interest and principal. Borrowers may have
difficulty making payments. If a borrower fails to make scheduled
interest or principal payments, the Fund could experience a decline
in the net asset value of its shares. Some borrowers may have
senior securities rated as low as "C" by Moody's or "D" by S&P, but
may be deemed acceptable credit risks. Participation interests are
subject to the Fund's limitations on investments in illiquid
securities. See "Illiquid and Restricted Securities."
Hedging. As described below, the Fund may purchase and
sell certain kinds of futures contracts, put and call options,
forward contracts, and options on futures, securities indices and
securities, or enter into interest rate swap agreements. These are
all referred to as "hedging instruments." The Fund does not use
hedging instruments for speculative purposes, and has limits on the
use of them, described below and in the Statement of Additional
Information. The hedging instruments the Fund may use are also
described in greater detail in "Other Investment Techniques and
Strategies" in the Statement of Additional Information.
The Fund may buy and sell options, futures and forward contracts
for a number of purposes. It may do so to try to manage its
exposure to the possibility that the prices of its portfolio
securities may decline, or to establish a position in the
securities market as a temporary substitute for purchasing
individual securities. It may do so to try to manage its exposure
to changing interest rates. Some of these strategies, such as
selling futures, buying puts and writing covered calls, hedge the
Fund's portfolio against price fluctuations.
Other hedging strategies, such as buying futures and call
options, tend to increase the Fund's exposure to the securities
market. Forward contracts are used to try to manage foreign
currency risks on the Fund's foreign investments. Foreign currency
options are used to try to protect against declines in the dollar
value of foreign securities the Fund owns, or to protect against an
increase in the dollar cost of buying foreign securities. Writing
covered call options may also provide income to the Fund for
liquidity purposes or to raise cash to distribute to shareholders.
Futures. The Fund may buy and sell futures contracts but, as
a matter of fundamental policy, only if they relate to (1)
securities indices (these are referred to as Financial Futures) and
(2) debt securities (these are referred to as Interest Rate
Futures). These types of Futures are described in "Hedging With
Options and Futures Contracts" in the Statement of Additional
Information.
Put and Call Options. The Fund may buy and sell certain kinds
of put options (puts) and call options (calls).
The Fund may buy calls on debt or equity securities, security
indices, foreign currencies, Interest Rate Futures, interest rate
and currency spreads, or to terminate its obligation on a call the
Fund previously wrote. The Fund may write (that is, sell) covered
call options. When the Fund writes a call, it receives cash (called
a premium). The call gives the buyer the ability to buy the
investment on which the call was written from the Fund at the call
price during the period in which the call may be exercised. If the
value of the investment does not rise above the call price, it is
likely that the call will lapse without being exercised, while the
Fund keeps the cash premium (and the investment).
The Fund may purchase put options. Buying a put on an investment
gives the Fund the right to sell the investment at a set price to
a seller of a put on that investment. The Fund can buy and sell
only puts that relate to (1) debt or equity securities, (2)
securities indices,(3) foreign currencies, (4) futures contracts,
or (5) interest rate and currency spreads.
The Fund may buy and sell puts and calls only if certain
conditions are met: (1) as a matter of fundamental policy, calls
the Fund buys or sells must be listed on a domestic securities or
commodities exchange, or quoted on the Automated Quotation System
( NASDAQ ) of the Nasdaq Stock Market, Inc.(and as a matter of non-
fundamental policy calls may be purchased or sold in the over-the-
counter market); (2) in the case of puts and calls on foreign
currency, they must be traded on a securities or commodities
exchange, or quoted by recognized dealers in those options; (3) as
a matter of fundamental policy, each call the Fund writes must be
"covered" while it is outstanding: that means the Fund owns the
investment on which the call was written; (4) as a matter of
fundamental policy, puts the Fund buys and sells must be listed on
a domestic securities or commodities exchange or quoted on NASDAQ
(and as a matter of non-fundamental policy, puts on securities may
be purchased or sold in the over-the-counter market) and any put
sold must be covered by segregated liquid assets with not more than
50% of the Fund's assets subject to puts; (5) the Fund may write
calls on Futures contracts it owns, but these calls must be covered
by securities or other liquid assets the Fund owns and segregates
to enable it to satisfy its obligations if the call is exercised;
and (6) a call or put option may not be purchased if the value of
all of the Fund's put and call options would exceed 5% of the
Fund's total assets. As a matter of fundamental policy, the Fund
will not write puts on Interest Rate Futures.
Forward Contracts. Forward contracts are foreign currency
exchange contracts. They are used to buy or sell foreign currency
for future delivery at a fixed price. The Fund uses them to try to
"lock in" the U.S. dollar price of a security denominated in a
foreign currency that the Fund has bought or sold, or to protect
against possible losses from changes in the relative values of the
U.S. dollar and a foreign currency. The Fund may also use "cross
hedging" where the Fund hedges against changes in currencies other
than the currency in which a security it holds is denominated.
Interest Rate Swaps. In an interest rate swap, the Fund
and another party exchange their right to receive or their
obligation to pay interest on a security. For example, they may
swap a right to receive floating rate payments for fixed rate
payments. The Fund enters into swaps only on securities it owns.
The Fund may not enter into swaps with respect to more than 25% of
its total assets. Also, the Fund will segregate liquid assets
(including equity and debt securities of any grade) to cover any
amounts it could owe under swaps that exceed the amounts it is
entitled to receive, and it will adjust that amount daily, as
needed.
Hedging instruments can be volatile investments and may
involve special risks. The use of hedging instruments requires
special skills and knowledge of investment techniques that are
different than what is required for normal portfolio management.
If the Manager uses a hedging instrument at the wrong time or
judges market conditions incorrectly, hedging strategies may reduce
the Fund's return. The Fund could also experience losses if the
prices of its futures and options positions were not correlated
with its other investments or if it could not close out a position
because of an illiquid market for the future or option.
Options trading involves the payment of premiums and has special
tax effects on the Fund. There are also special risks in particular
hedging strategies. For example, if a covered call written by the
Fund is exercised on an investment that has increased in value, the
Fund will be required to sell the investment at the call price and
will not be able to realize any profit if the investment has
increased in value above the call price. The use of forward
contracts may reduce the gain that would otherwise result from a
change in the relationship between the U.S. dollar and a foreign
currency. Interest rate swaps are subject to credit risks (if the
other party fails to meet its obligations) and also to interest
rate risks. The Fund could be obligated to pay more under its swap
agreements than it receives under them, as a result of interest
rate changes. These risks are described in greater detail in the
Statement of Additional Information.
Derivative Investments. The Fund can invest in a number of
different kinds of "derivative investments." The Fund may use
some types of derivatives for hedging purposes, and may invest in
others because they offer the potential for increased income and
principal value. In general, a "derivative investment" is a
specially-designed investment whose performance is linked to the
performance of another investment or security, such as an option,
future, index, currency or commodity. In the broadest sense,
derivative investments include exchange-traded options and futures
contracts (discussed in "Hedging," above).
The Fund may invest in different types of derivatives.
"Index-linked" or "commodity-linked" notes are debt securities of
companies that call for interest payments and/or payment on the
maturity of the note in different terms than the typical note where
the borrower agrees to make fixed interest payments and/or to pay
a fixed sum on the maturity of the note. Principal and/or interest
payments on an index-linked note depends on the performance of one
or more market indices, such as the S&P 500 Index. Principal
and/or interest payments on a commodity-linked note may depend on
the performance of an index of commodity futures, or on the
performance of individual commodities such as crude oil, gasoline,
natural gas, livestock, agricultural grains, or metals. The Fund
may invest in "debt exchangeable for common stock" of an issuer or
"equity-linked" debt securities of an issuer. At maturity, the
principal amount of the debt security is exchanged for common stock
of the issuer or is payable in an amount based on the issuer's
common stock price at the time of maturity. In either case there
is a risk that the amount payable at maturity will be less than the
expected principal amount of the debt.
The Fund may also invest in currency-indexed securities.
Typically, these are short-term or intermediate-term debt
securities having a value at maturity, and/or an interest rate,
determined by reference to one or more foreign currencies. The
currency-indexed securities purchased by the Fund may make payments
based on a formula. The payment of principal or periodic interest
may be calculated as a multiple of the movement of one currency
against another currency, or against an index. These investments
may entail increased risk to principal and increased price volatility.
Special Risks of Derivative Instruments. There are special
risks in investing in derivative investments. The company issuing
the instrument may fail to pay the amount due on the maturity of
the instrument. Also, the underlying investment or security might
not perform the way the Manager expected it to perform because the
financial markets, underlying securities, indices or other economic
variable may move in a direction not anticipated by the Manager.
Performance of derivative investments may also be influenced by
interest rate and stock market changes in the U.S. and abroad. All
of this can mean that the Fund will realize less principal or
income from the investment than expected. Certain derivative
investments held by the Fund may be illiquid. Please refer to
"Illiquid and Restricted Securities."
Other Investment Restrictions. The Fund has other investment
restrictions which are fundamental policies. Under these
fundamental policies, the Fund cannot do any of the following:
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;
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).
Unless the Prospectus states that a percentage restriction
applies on an ongoing basis, it applies only at the time the Fund
makes the investment, and the Fund need not sell securities to meet
the percentage limits if the value of the investment increases in
proportion to the size of the Fund. Other investment restrictions
are listed in Other Investment Restrictions in the Statement of
Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized in 1987 as a
Massachusetts business trust. The Fund is an open-end, diversified
management investment company, with an unlimited number of
authorized shares of beneficial interest.
The Fund is governed by a Board of Trustees, which is
responsible under Massachusetts law for protecting the interests of
shareholders. The Trustees meet periodically throughout the year
to oversee the Fund's activities, review its performance, and
review the actions of the Manager. "Trustees and Officers of the
Fund" in the Statement of Additional Information names the Trustees
and officers of the Fund and provides more information about them.
Although the Fund will not normally hold annual meetings of its
shareholders, it may hold shareholder meetings from time to time on
important matters, and shareholders have the right to call a
meeting to remove a Trustee or to take other action described in
the Fund's Declaration of Trust.
The Board of Trustees has the power, without shareholder
approval, to divide unissued shares of the Fund into two or more
classes. The Board has done so, and the Fund currently has three
classes of shares, Class A, Class B and Class C. All classes
invest in the same investment portfolio. Each class has its own
dividends and distributions and pays certain expenses which may be
different for the different classes. Each class may have a
different net asset value. Each share has one vote at shareholder
meetings, with fractional shares voting proportionally on matters
submitted to the vote of shareholders. Shares of each class may
have separate voting rights on matters in which interests of one
class are different from interests of another class, and shares of
a particular class vote as a class on matters that affect that
class alone. Shares are freely transferrable. Please refer to
"How the Fund is Managed" in the Statement of Additional
Information on voting of shares.
The Manager and Its Affiliates. The Fund is managed by the Manager,
OppenheimerFunds, Inc., which is responsible for selecting the
Fund's investments and handles its day-to-day business. The
Manager carries out its duties, subject to the policies established
by the Board of Trustees, under an Investment Advisory Agreement
which states the Manager's responsibilities. The Investment
Advisory Agreement sets forth the fees paid by the Fund to the
Manager and describes the expenses that the Fund is responsible to
pay to conduct its business.
The Manager has operated as an investment advisor since 1959.
The Manager and its affiliates currently manages investment
companies, including other Oppenheimer funds, with assets of more
than $62 billion as of December 31, 1996, and with more than 3
million shareholder accounts. The Manager is owned by Oppenheimer
Acquisition Corp., a holding company that is owned in part by
senior officers of the Manager and controlled by Massachusetts
Mutual Life Insurance Company.
Portfolio Manager. The Portfolio Manager of the Fund is Ralph
W. Stellmacher. He has been the person principally responsible for
the day-to-day management of the Fund's portfolio since the Fund's
inception in November, 1987. Mr. Stellmacher is a Senior Vice
President of the Manager and a Vice President of the Fund, and also
serves as an officer of other Oppenheimer funds. During the past
five years, Mr. Stellmacher has also served as an officer and
portfolio manager for other mutual funds managed by the Manager
(with the Fund, the "Oppenheimer funds").
Fees and Expenses. Under the Investment Advisory
Agreement, the Fund pays the Manager the following annual fees,
which decline on additional assets as the Fund grows: 0.70% of the
first $250 million of average annual 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 average annual net assets in excess of $1
billion. The Fund's management fee for its last fiscal year was
0.68% of average annual net assets for its Class A shares, Class B
shares and Class C shares.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal and
auditing costs. Those expenses are paid out of the Fund's assets
and are not paid directly by shareholders. However, those expenses
reduce the net asset value of the Fund s shares, and therefore are
indirectly borne by shareholders through their investment. More
information about the Investment Advisory Agreement and the other
expenses paid by the Fund is contained in the Statement of
Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. That section discusses how brokers and
dealers are selected for the Fund's portfolio transactions. When
deciding which brokers to use, the Manager is permitted by the
Investment Advisory Agreement to consider whether brokers have sold
shares of the Fund or any other funds for which the Manager serves
as investment advisor.
The Distributor. The Fund's shares are sold through
dealers, brokers and other financial institutions that have a
sales agreement with OppenheimerFunds Distributor, Inc., a
subsidiary of the Manager that acts as the Fund's Distributor. The
Distributor also distributes the shares of the other Oppenheimer
funds managed by the Manager and is sub-distributor for funds
managed by a subsidiary of the Manager.
The Transfer Agent. The Fund's transfer agent is
OppenheimerFunds Services, a division of the Manager, which acts as
the shareholder servicing agent for the Fund on an "at-cost" basis.
It also acts as the shareholder servicing agent for the other
Oppenheimer funds. Shareholders should direct inquiries about
their account to the Transfer Agent at the address and toll-free
number shown below under How to Sell Shares in this Prospectus
and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms
"total return," "average annual total return" and "yield" to
illustrate its performance. The performance of each class of shares
is shown separately, because the performance of each class of
shares will usually be different as a result of the different kinds
of expenses each class bears. These returns measure the
performance of a hypothetical account in the Fund over various
periods, and do not show the performance of each shareholder's
account (which will vary if dividends are received in cash, or
shares are sold or purchased). The Fund's performance data may
help you see how well your investment has done over time and to
compare it to other mutual funds or market indices, as we have done
below.
It is important to understand that the Fund's yields and total
returns represent past performance and should not be considered to
be predictions of future returns or performance. This performance
data is described below, but more detailed information about how
yields and total returns are calculated is contained in the
Statement of Additional Information, which also contains
information about other ways to measure and compare the Fund's
performance. The Fund's investment performance will vary over time,
depending on market conditions, the composition of the portfolio,
expenses and which class of shares you purchase.
Total Returns. There are different types of total returns used
to measure the Fund's performance. Total return is the change in
value of a hypothetical investment in the Fund over a given period,
assuming that all dividends and capital gains distributions are
reinvested in additional shares. The cumulative total return
measures the change in value over the entire period (for example,
ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the
cumulative total return over the entire period. However, average
annual total returns do not show the Fund's actual year-by-year
performance.
When total returns are quoted for Class A shares, normally the
current maximum initial sales charge has been deducted. Total
returns may also be quoted "at net asset value," without including
the sales charge, and those returns would be reduced if sales
charges were deducted. When total returns are shown for Class B
shares or Class C shares, normally the contingent deferred sales
charge that applies to the period for which total return is shown
has been deducted. However, total returns may also be quoted at
net asset value without considering the effect of the sales
charge, and those returns would be less if sales charges were
deducted.
Yield. Each class of shares calculates its yield by dividing
the annualized net investment income per share on the portfolio
during a 30-day period by the maximum offering price on the last
day of the period. The yield of each class will differ because of
the different expenses of each class of shares. The yield data
represents a hypothetical investment return on the portfolio, and
does not measure an investment return based on dividends actually
paid to shareholders. To show that return, a dividend yield may be
calculated. Dividend yield is calculated by dividing the dividends
of a class derived from net investment income during a stated
period by the maximum offering price on the last day of the period.
Yields and dividend yields for Class A shares reflect the deduction
of the maximum initial sales charge, but may also be shown based on
the Fund's net asset value per share. Yields for Class B and Class
C shares do not reflect the deduction of the contingent deferred
sales charge.
How Has the Fund Performed? Below is a discussion by the Manager
of the Fund's performance during fiscal year ended September 30,
1996, followed by a graphical comparison of the Fund's performance
to an appropriate broad-based market index and a narrower market
index.
Management's Discussion of Performance. The fiscal year
ended September 30, 1996 was a good year in general for the high
yield bond market. Although interest rates generally increased
during the year, a generally improving economy positively affected
the high yield bond market. With the exception of March, 1996, the
Fund experienced positive total returns at net asset value in each
month during 1996. During the first calendar quarter of 1996, the
Fund invested in bonds which had a shorter average maturity than
the general high yield market. Consequently, as interest rates
rose throughout the year, the Fund was less affected by interest
rates than other comparable high yield funds. The Fund also
benefitted by increasing its exposure to energy bonds which were
affected positively by higher prices in oil and gas and greater
profitability of energy bond issuers. Additionally, investments in
the high yield bonds of cyclical companies such as chemicals, paper
and forest products added to the positive performance of the Fund.
The Fund s portfolio and its portfolio manager s strategies are
subject to change.
Comparing the Fund's Performance to the Market. The graphs
below show the performance of a hypothetical $10,000 investment in
Class A, Class B and Class C shares of the Fund held until
September 30, 1996. In the case of Class A shares, performance is
measured from the Fund's inception on November 16, 1987. In the
case of Class B shares, performance is measured from the inception
of the class on October 2, 1995. In the case of Class C shares,
performance is measured from the inception of the class on December
1, 1993. In all cases, all dividends and capital gains
distributions were reinvested in additional shares. The graph
reflects the deduction of the 4.75% current maximum initial sales
charge on Class A shares.
The Fund's performance is compared to the performance of the
Lehman Brothers Corporate Bond Index and the Merrill Lynch High
Yield Master Index. 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 Merrill Lynch High
Yield Master Index is an index of below investment grade (ratings
are generally comparable to below BBB of S&P) U.S. corporate
issuers. It is widely recognized as a measure of the U. S.
corporate high yield bond market. Index performance reflects the
reinvestment of dividends but does not consider the effect of
capital gains or transaction costs, and none of the data below
shows the effect of taxes. Also, the Fund's performance reflects
the effect of Fund business and operating expenses. While index
comparisons may be useful to provide a benchmark for the Fund's
performance, it must be noted that the Fund's investments are not
limited to the securities in any one index. Moreover, the index
data does not reflect any assessment of the risk of the investments
included in the index.
Class A Shares
Comparison of Change in Value of $10,000 Hypothetical Investments
In:
Oppenheimer Champion Income Fund (Class A)
Lehman Brothers Corporate Bond Index and
Merrill Lynch High Yield Master Market
[Graph]
Average Annual Total Returns of Class A Shares of the Fund at
9/30/96(1)
1 Year 5 Year Life
7.90% 11.77% 12.65%
Class B Shares
Comparison of Change in Value of $10,000 Hypothetical Investments
In:
Oppenheimer Champion Income Fund (Class B)
Lehman Brothers Corporate Bond Index
Merrill Lynch High Yield Master Market
[Graph]
Average Annual Total Returns of Class B Shares of the Fund at
9/30/96(2)
Life
7.20%
Total returns and the ending account values in the graph show
change in share value and include reinvestment of all dividends and
capital gains distributions.
The average annual total returns and the ending account values in
the graphs reflect reinvestment of all dividends and capital gains
distributions.
1 The inception date of the Fund (Class A shares) was 11/16/87.
Performance information for the two indices in the graph begin on
11/1/87. The average annual total returns and ending account value
for Class A shares in the graph reflect the reinvestment of all
dividends and capital gains distributions and are shown net of the
applicable 4.75% maximum initial sales charge.
2 Class B shares of the Fund were first publicly offered on
10/2/95. The cumulativetotal return for Class B shares in the graph
reflects reinvestment of all dividend and capital gains
distributions and is shown net of the applicable 5% contingent
deferred sales charge, for the life-of-the-class. The ending
account value for Class shares in the graph is net of the
applicable 5% contingent deferred sales charge.
Graphs are not drawn to same scale.
Class C Shares
Comparison of Change in Value of $10,000 Hypothetical Investment
in:
Oppenheimer Champion Income Fund (Class C)
Lehman Brothers Corporate Bond Index
Merrill Lynch High Yield Master Market
[Graph]
Average Annual Total Return of the Fund at 9/30/96(3)
1 Year Life
11.44% 7.93%
Total returns and the ending account values in the graph show
change in share value and include reinvestment of all dividends and
capital gains distributions.
3. Class C shares were first publicly offered on 12/1/93. The
average annual total returns and the ending account value for Class
C shares in the graph reflect the reinvestment of all dividends and
capital gain distributions and are shown net of the applicable 1%
contingent deferred sales charge.
Past performance is not predictive of future performance.
<PAGE>
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors three different
classes of shares. The different classes of shares represent
investments in the same portfolio of securities but are subject to
different expenses and will likely have different share prices.
Class A Shares. If you buy Class A shares, you pay an
initial sales charge on investments up to $1 million (up to
$500,000 for purchases by Retirement Plans defined in Class A
Contingent Deferred Sales Charges on page 31). If you purchase
Class A shares as part of an investment of at least $1 million
($500,000 for Retirement Plans) in shares of one or more
Oppenheimer funds, you will not pay an initial sales charge but if
you sell any of those shares within 18 months of buying them, you
may pay a contingent deferred sales charge. The amount of that
sales charge will vary depending on the amount you invested. Sales
charge rates are described in "Buying Class A Shares" below.
Class B Shares. If you buy Class B shares, you pay no
sales charge at the time of purchase, but if you sell your shares
within six years of buying them, you will normally pay a contingent
deferred sales charge. That sales charge varies depending on how
long you own your shares as described in "Buying Class B Shares"
below.
Class C Shares. If you buy Class C shares, you pay no sales
charge at the time of purchase, but if you sell your shares within
12 months of buying them, you will normally pay a contingent
deferred sales charge of 1% as described in "Buying Class C Shares"
below.
Which Class of Shares Should You Choose? Once you decide that the
Fund is an appropriate investment for you, the decision as to which
class of shares is better suited to your needs depends on a number
of factors which you should discuss with your financial advisor.
The Fund's operating costs that apply to a class of shares and the
effect of the different types of sales charges on your investment
will vary your investment results over time. The most important
factors are how much you plan to invest and how long you plan to
hold your investment. If your goals and objectives change over
time and you plan to purchase additional shares, you should re-
evaluate those factors to see if you should consider another class
of shares.
In the following discussion, to help provide you and your
financial advisor with a framework in which to choose a class, we
have made some assumptions using a hypothetical investment in the
Fund. We used the sales charge rates that apply to Class A, Class
B and Class C shares and considered the effect of the annual asset-
based sales charge on Class B and Class C expenses (which, like all
expenses, will affect your investment return). For the sake of
comparison, we have assumed that there is a 10% rate of
appreciation in the investment each year. Of course, the actual
performance of your investment cannot be predicted and will vary,
based on the Fund's actual investment returns and the operating
expenses borne by each class of shares, and which class of shares
you invest in.
The factors discussed below are not intended to be investment
advice or recommendations, because each investor's financial
considerations are different. The discussion below of the factors
to consider in purchasing a particular class of shares assumes that
you will purchase only one class of shares and not a combination of
shares of different classes.
How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, knowing how
long you expect to hold your investment will assist you in
selecting the appropriate class of shares. Because of the effect
of class-based expenses, your choice will also depend on how much
you plan to invest. For example, the reduced sales charges
available for larger purchases of Class A shares may, over time,
offset the effect of paying an initial sales charge on your
investment (which reduces the amount of your investment dollars
used to buy shares for your account), compared to the effect over
time of higher class-based expenses on shares of Class B or Class
C for which no initial sales charge is paid.
Investing for the Short Term. If you have a short-term
investment horizon (that is, you plan to hold your shares for not
more than six years), you should probably consider purchasing Class
A or Class C shares rather than Class B shares, because of the
effect of the Class B contingent deferred sales charge if you
redeem in less than 7 years, as well as the effect of the Class B
asset-based sales charge on the investment return for that class in
the short-term. Class C shares might be the appropriate choice
(especially for investments of less than $100,000), because there
is no initial sales charge on Class C shares, and the contingent
deferred sales charge does not apply to amounts you sell after
holding them one year.
However, if you plan to invest more than $100,000 for the shorter
term, then the more you invest and the more your investment horizon
increases toward six years, Class C shares might not be as
advantageous as Class A shares. That is because the annual asset-
based sales charge on Class C shares will have a greater impact on
your account over the longer term than the reduced front-end sales
charge available for larger purchases of Class A shares. For
example, Class A might be more advantageous than Class C (as well
as Class B) for investments of more than $100,000 expected to be
held for 5 or 6 years (or more). For investments over $250,000
expected to be held 4 to 6 years (or more), Class A shares may
become more advantageous than Class C (and Class B). If investing
$500,000 or more, Class A may be more advantageous as your
investment horizon approaches 3 years or more.
For investors who invest $1 million or more, in most cases
Class A shares will be the most advantageous choice, no matter how
long you intend to hold your shares. For that reason, the
Distributor normally will not accept purchase orders of $500,000 or
more of Class B shares or $1 million or more of Class C shares from
a single investor.
Investing for the Longer Term. If you are investing for the
longer-term, for example, for retirement, and do not expect to need
access to your money for seven years or more, Class B shares may be
an appropriate consideration, if you plan to invest less than
$100,000. If you plan to invest more than $100,000 over the long
term, Class A shares will likely be more advantageous than Class B
shares or Class C shares, as discussed above, because of the effect
of the expected lower expenses for Class A shares and the reduced
initial sales charges available for larger investments in Class A
shares under the Fund's Right of Accumulation.
Of course, these examples are based on approximations of the
effect of current sales charges and expenses on a hypothetical
investment over time, using the assumed annual performance return
stated above, and therefore you should analyze your options
carefully.
Are There Differences in Account Features That Matter to You?
Because some account features may not be available to Class B or
Class C shareholders, you should carefully review how you plan to
use your investment account before deciding which class of shares
is better for you. For example, share certificates are not
available for Class B or Class C shares and if you are considering
using your shares as collateral for a loan, that may be a factor to
consider. Also, checkwriting privileges are not available for
Class B or Class C shares. Additionally, the dividends payable to
Class B and Class C shareholders will be reduced by the additional
expenses borne by those classes, such as the asset-based sales
charges described below and in the Statement of Additional
Information.
How Does It Affect Payments to My Broker? A salesperson, such
as a broker, or any other person who is entitled to receive
compensation for selling Fund shares may receive different
compensation for selling one class than for selling another class.
It is important that investors understand that the purpose of the
Class B and Class C contingent deferred sales charges and asset-
based sales charges is the same as the purpose of the front-end
sales charge on sales of Class A shares: to compensate the
Distributor for commissions it pays to dealers and financial
institutions for selling shares.
How Much Must You Invest? You can open a Fund account with a
minimum initial investment of $1,000 and make additional
investments at any time with as little as $25. There are reduced
minimum investments under special investment plans:
With Asset Builder Plans, Automatic Exchange Plans,
403(b)(7) custodial plans and military allotment plans, you can
make initial and subsequent investments for as little as $25; and
subsequent purchases of at least $25 can be made by telephone
through AccountLink.
Under pension, profit-sharing, 401(k) plans and Individual
Retirement Accounts (IRAs), you can make an initial investment of
as little as $250 (if your IRA is established under an Asset
Builder Plan, the $25 minimum applies), and subsequent investments
may be as little as $25.
There is no minimum investment requirement if you are buying
shares by reinvesting dividends from the Fund or other Oppenheimer
funds (a list of them appears in the Statement of Additional
Information, or you can ask your dealer or call the Transfer
Agent), or by reinvesting distributions from unit investment trusts
that have made arrangements with the Distributor.
How Are Shares Purchased? You can buy shares several ways
- -- through any dealer, broker or financial institution that has a
sales agreement with the Distributor, or directly through the
Distributor, or automatically from your bank account through an
Asset Builder Plan under the OppenheimerFunds AccountLink service.
The Distributor may appoint certain servicing agents as the
Distributor s agent to accept purchase and redemption orders. When
you buy shares, be sure to specify Class A, Class B or Class C
shares. If you do not choose, your investment will be made in
Class A shares.
Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "OppenheimerFunds Distributor, Inc." Mail it to P.O. Box
5270, Denver, Colorado 80217. If you don't list a dealer on the
application, the Distributor will act as your agent in buying the
shares. However, we recommend that you discuss your investment
first with a financial advisor, to be sure it is appropriate for
you.
Buying Shares Through OppenheimerFunds AccountLink. You
can use AccountLink to link your Fund account with an account at a
U.S. bank or other financial institution that is an Automated
Clearing House (ACH) member. You can then transmit funds
electronically to purchase shares, or have the Transfer Agent send
redemption proceeds, or transmit dividends and distributions to
yo ur bank account.
Shares are purchased for your account on AccountLink on the
regular business day the Distributor is instructed by you to
initiate the ACH transfer to buy shares. You can provide those
instructions automatically, under an Asset Builder Plan, described
below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. You should request AccountLink
privileges on the application or dealer settlement instructions
used to establish your account. Please refer to "AccountLink" below
for more details.
Asset Builder Plans. You may purchase shares of the Fund
(and up to four other Oppenheimer funds) automatically each month
from your account at a bank or other financial institution under an
Asset Builder Plan with AccountLink. Details are in the Statement
of Additional Information.
At What Prices Are Shares Sold? Shares are sold at the
public offering price based on the net asset value (and any initial
sales charge that applies) that is next determined after the
Distributor receives the purchase order in Denver, Colorado. In
most cases, to enable you to receive that day's offering price, the
Distributor or its designated agent must receive your order by the
time of day The New York Stock Exchange closes, which is normally
4:00 P.M., New York time, but may be earlier on some days (all
references to time in this Prospectus mean "New York time"). The
net asset value of each class of shares is determined as of that
time on each day The New York Stock Exchange is open (which is a
"regular business day").
If you buy shares through a dealer, the dealer must receive your
order by the close of The New York Stock Exchange, on a regular
business day and transmit it to the Distributor so that it is
received before the Distributor's close of business that day, which
is normally 5:00 P.M. The Distributor in its sole discretion may
reject any purchase order for the Fund's shares.
Special Sales Charge Arrangements for Certain Persons. Appendix B
to this Prospectus sets forth conditions for the waiver of, or
exemption from, sales charges or the special sales charge rates
that apply to purchases of shares of the Fund (including purchases
by exchange) by a person who was a shareholder of one of the Former
Quest for Value Funds (as defined in that Appendix).
Buying Class A Shares. Class A shares are sold at their offering
price, which is normally net asset value plus an initial sales
charge. However, in some cases, described below, purchases are not
subject to an initial sales charge, and the offering price will be
the net asset value. In some cases, reduced sales charges may be
available, as described below. Out of the amount you invest, the
Fund receives the net asset value to invest for your account. The
sales charge varies depending on the amount of your purchase. A
portion of the sales charge may be retained by the Distributor and
allocated to your dealer as a commission. The current sales
charge rates and commissions paid to dealers and brokers are as
follows:
Amount Front-End Front-End
of Sales Charge Sales Charge Commission as
Purchase As a Percentage of As a Percentage Percentage
of Offering Price of Amount Offering Price
Invested
- --------------------------------------------------------------------
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%
- -----------------------------------------------------------------------
The Distributor reserves the right to reallot the entire commission
to dealers. If that occurs, the dealer may be considered an
"underwriter" under Federal securities laws.
Class A Contingent Deferred Sales Charge. There is no initial
sales charge on purchases of Class A shares of any one or more of
the Oppenheimer funds in the following cases:
purchases aggregating $1 million or more.
purchases by a retirement plan qualified under sections 401(a)
or 401(k) of the Internal Revenue Code, by a non-qualified deferred
compensation plan (not including Section 457 plans), employee
benefit plan, group retirement plan (see How to Buy Shares-
Retirement Plans in the Statement of Additional Information for
further detail), an employee s 403(b)(7) custodial plan, SEP IRA,
SARSEP, or SIMPLE plan (all of these plans are collectively
referred to as Retirement Plans ), that: (1) buys shares costing
$500,000 or more or (2) has, at the time of purchase, 100 or more
eligible participants, or (3) certifies that it projects to have
annual plan purchases of $200,000 or more.
purchases by an OppenheimerFunds Rollover IRA if the purchases
are made (1) through a broker, dealer, bank or registered
investment advisor that has made special arrangements with the
Distributor for these purchases, or (2) by a direct rollover of a
distribution from a qualified retirement plan if the administrator
of that plan has made special arrangements with the Distributor for
those purchases;
purchases by a retirement plan qualified under section 401(a)
if the retirement plan has total assets of $500,000 or more.
The Distributor pays dealers of record commissions on those
purchases in an amount equal to (i) 1.0% for non-Retirement Plan
accounts; and (ii) for Retirement Plan accounts, 1.0% of the first
$2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of
purchases over $5 million. That commission will be paid only on
those purchases that were not previously subject to a front-end
sales charge and dealer commission. No sales commission will be
paid to the dealer, broker or financial institution on sales of
Class A shares purchased with the redemption proceeds of shares of
a mutual fund offered as an investment option in a Retirement Plan
in which Oppenheimer funds are also offered as investment options
under a special arrangement with the Distributor if the purchase
occurs more than 30 days after the addition of the Oppenheimer
funds as an investment option to the Retirement Plan.
If you redeem any of those shares within 18 months of the end of
the calendar month of their purchase, a contingent deferred sales
charge (called the "Class A contingent deferred sales charge") will
be deducted from the redemption proceeds. That sales charge will be
equal to 1.0% of either (1) the aggregate net asset value of the
redeemed shares (not including shares purchased by reinvestment of
dividends or capital gain distributions) or (2) the original
offering price (which is the original net asset value) of the
redeemed shares, whichever is less. However, the Class A
contingent deferred sales charge will not exceed the aggregate
commissions the Distributor paid to your dealer on all Class A
shares of all Oppenheimer funds you purchased subject to the Class
A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is
payable, the Fund will first redeem shares that are not subject to
the sales charge, including shares purchased by reinvestment of
dividends and capital gains, and then will redeem other shares in
the order that you purchased them. The Class A contingent deferred
sales charge is waived in certain cases described in "Waivers of
Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on
exchanges of shares under the Fund's Exchange Privilege (described
below). However, if the shares acquired by exchange are redeemed
within 18 months of the end of the calendar month of the purchase
of the exchanged shares, the contingent deferred sales charge will
apply.
Special Arrangements With Dealers. The Distributor may
advance up to 13 months' commissions to dealers that have
established special arrangements with the Distributor for Asset
Builder Plans for their clients.
Reduced Sales Charges for Class A Share Purchases. You may be
eligible to buy Class A shares at reduced sales charge rates in one
or more of the following ways:
Right of Accumulation. To qualify for the lower sales charge
rates that apply to larger purchases of Class A shares, you and
your spouse can add together Class A and Class B shares you
purchase for your individual accounts, or jointly, or for trust or
custodial accounts on behalf of your children who are minors. A
fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit
plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A
and Class B shares of the Fund and other Oppenheimer funds to
reduce the sales charge rate that applies to current purchases of
Class A shares. You can also count Class A and Class B shares of
Oppenheimer funds you previously purchased subject to an initial or
contingent deferred sales charge to reduce the sales charge rate
for current purchases of Class A shares, provided that you still
hold your investment in one of the Oppenheimer funds. The value of
those shares will be based on the greater of the amount you paid
for the shares or their current value (at offering price). The
Oppenheimer funds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from
the Distributor. The reduced sales charge will apply only to
current purchases and must be requested when you buy your shares.
Letter of Intent. Under a Letter of Intent, if you purchase
Class A shares or Class A shares and Class B shares of the Fund and
other Oppenheimer funds during a 13-month period, you can reduce
the sales charge rate that applies to your purchases of Class A
shares. The total amount of your intended purchases of both Class
A and Class B shares will determine the reduced sales charge rate
for the Class A shares purchased during that period. This can
include purchases made up to 90 days before the date of the Letter.
More information is contained in the Application and in "Reduced
Sales Charges" in the Statement of Additional Information.
Waivers of Class A Sales Charges. The Class A sales charges
are not imposed in the circumstances described below. There is an
explanation of this policy in "Reduced Sales Charges" in the
Statement of Additional Information.
Waivers of Initial and Contingent Deferred Sales Charges for
Certain Purchasers. Class A shares purchased by the following
investors are not subject to any Class A sales charges:
the Manager or its affiliates;
present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced
Sales Charges" in the Statement of Additional Information) of the
Fund, the Manager and its affiliates, and retirement plans
established by them for their employees;
registered management investment companies, or separate
accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose;
dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees;
employees and registered representatives (and their
spouses and minor children) of dealers or brokers described above
or financial institutions that have entered into sales arrangements
with such dealers or brokers (and are identified to the
Distributor) or with the Distributor; the purchaser must certify to
the Distributor at the time of purchase that the purchase is for
the purchaser's own account (or for the benefit of such employee's
spouse or minor children);
dealers, brokers or registered investment advisors that
have entered into an agreement with the Distributor providing
specifically for the use of shares of the Fund in particular
investment products or employee benefit plans made available to
their clients (those clients may be charged a transaction fee by
their dealer, broker, financial intermediary or advisor for the
purchase or sale of Fund shares);
(1) investment advisors and financial planners who
charge an advisory, consulting or other fee for their services and
buy shares for their own accounts or the accounts of their clients,
(2) Retirement Plans and deferred compensation plans and trusts
used to fund those Plans (including, for example, plans qualified
or created under sections 401(a), 403(b) or 457 of the Internal
Revenue Code), and "rabbi trusts" that buy shares for their own
accounts, in each case if those purchases are made through a broker
or agent or other financial intermediary that has made special
arrangements with the Distributor for those purchases; and (3)
clients of such investment advisors or financial planners who buy
shares for their own accounts may also purchase shares without
sales charge but only if their accounts are linked to a master
account of their investment advisor or financial planner on the
books and records of the broker, agent or financial intermediary
with which the Distributor has made such special arrangements (each
of these investors may be charged a fee by the broker, agent or
finan cial intermediary for purchasing shares);
directors, trustees, officers or full-time employees of
OpCap Advisors or its affiliates, their relatives or any trust,
pension, profit sharing or other benefit plan which beneficially
owns shares for those persons;
accounts for which Oppenheimer Capital is the investment
advisor (the Distributor must be advised of this arrangement) and
persons who are directors or trustees of the company or trust which
is the beneficial owner of such accounts;
any unit investment trust that has entered into an
appropriate agreement with the Distributor;
a TRAC-2000 401(k) plan (sponsored by the former Quest for
Value Advisors) whose Class B or Class C shares of a Former Quest
for Value Fund were exchanged for Class A shares of that Fund due
to the termination of the Class B and C TRAC-2000 program on
November 24, 1995; or
qualified retirement plans that had agreed with the
former Quest for Value Advisors to purchase shares of any of the
Former Quest for Value Funds at net asset value, with such shares
to be held through DCXchange, a sub-transfer agency mutual fund
clearinghouse, provided that such arrangements are consummated and
share purchases commenced by December 31, 1996.
Waivers of Initial and Contingent Deferred Sales Charges in
Certain Transactions. Class A shares issued or purchased in the
following transactions are not subject to Class A sales charges:
shares issued in plans of reorganization, such as mergers,
asset acquisitions and exchange offers, to which the Fund is a
party;
shares purchased by the reinvestment of loan repayments by a
participant in a retirement plan for which the Manager or its
affiliates acts as sponsor;
shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds
(other than Oppenheimer Cash Reserves) or unit investment trusts
for which reinvestment arrangements have been made with the
Distributor;
shares purchased and paid for with the proceeds of shares
redeemed in the past 12 months from a mutual fund (other than a
fund managed by the Manager or any of its subsidiaries) on which an
initial sales charge or contingent deferred sales charge was paid
(this waiver also applies to shares purchased by exchange of shares
of Oppenheimer Money Market Fund, Inc. that were purchased and paid
for in this manner); this waiver must be requested when the
purchase order is placed for your shares of the Fund, and the
Distributor may require evidence of your qualification for this
waiver; or
shares purchased with the proceeds of maturing principal of
units of any Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for
Certain Redemptions. The Class A contingent deferred sales charge
is also waived if shares that would otherwise be subject to the
contingent deferred sales charge are redeemed in the following
cases:
to make Automatic Withdrawal Plan payments that are limited
annually to no more than 12% of the original account value;
involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (see "Shareholder Account
Rules and Policies," below);
if, at the time a purchase order is placed for Class A shares
that would otherwise be subject to the Class A contingent deferred
sales charge, the dealer agrees in writing to accept the dealer's
portion of the commission payable on the sale in installments of
1/18th of the commission per month (and no further commission will
be payable if the shares are redeemed within 18 months of
purchase);
for distributions from TRAC-2000 401(k) plan sponsored by
the Distributor due to the termination of the TRAC-2000 program; or
for distributions from Retirement Plans, deferred compensation
plans or other employee benefit plans for any of the following
purposes: (1) following the death or disability (as defined in the
Internal Revenue Code) of the participant or beneficiary (the death
or disability must occur after the participant s account was
established); (2) to return excess contributions; (3) to return
contributions made due to a mistake of fact; (4) hardship
withdrawals, as defined in the plan; (5) under a Qualified Domestic
Relations Order, as defined in the Internal Revenue Code; (6) to
meet the minimum distribution requirements of the Internal Revenue
Code; (7) to establish substantially equal periodic payments as
described in Section 72(t) of the Internal Revenue Code; (8) for
retirement distributions or loans to participants or beneficiaries;
(9) separation from service; (10) participant-directed redemptions
to purchase shares of a mutual fund (other than a fund managed by
the Manager or its subsidiary) offered as an investment option in
a Retirement Plan in which Oppenheimer funds are also offered as
investment options under a special arrangement with the
Distributor; or (11) plan termination or in-service
distributions , if the redemption proceeds are rolled over directly
to an OppenheimerFunds IRA.
Service Plan for Class A Shares. The Fund has adopted a
Service Plan for Class A shares to reimburse the Distributor for a
portion of its costs incurred in connection with the personal
service and maintenance of accounts that hold Class A shares.
Reimbursement is made quarterly at an annual rate that may not
exceed 0.25% of the average annual net assets of Class A shares of
the Fund. The Distributor uses all of those fees to compensate
dealers, brokers, banks and other financial institutions quarterly
for providing personal service and maintenance of accounts of their
customers that hold Class A shares and to reimburse itself (if the
Fund's Board of Trustees authorizes such reimbursements, which it
has not yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering
customer inquiries about the Fund, assisting in establishing and
maintaining accounts in the Fund, making the Fund's investment
plans available and providing other services at the request of the
Fund or the Distributor. Payments are made by the Distributor
quarterly at an annual rate not to exceed 0.25% of the average
annual net assets of Class A shares held in accounts of the service
providers or their customers. The payments under the Plan increase
the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of
Additional Information.
Buying Class B Shares. Class B shares are sold at net asset
value per share without an initial sales charge. However, if Class
B shares are redeemed within 6 years of their purchase, a
contingent deferred sales charge will be deducted from the
redemption proceeds. That sales charge will not apply to shares
purchased by the reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge will be based
on the lesser of the net asset value of the redeemed shares at the
time of redemption or the original offering price (which is the
original net asset value). The contingent deferred sales charge is
not imposed on the amount of your account value represented by the
increase in net asset value over the initial purchase price. The
Class B contingent deferred sales charge is paid to the Distributor
to reimburse its expenses of providing distribution-related
services to the Fund in connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies
to a redemption, the Fund redeems shares in the following order:
(1) shares acquired by reinvestment of dividends and capital gains
distributions, (2) shares held for over 6 years, and (3) shares
held the longest during the 6-year period. The contingent deferred
sales charge is not imposed in the circumstances described in
"Waivers of Class B and Class C Sales Charges" below. The amount of
the contingent deferred sales charge will depend on the number of
years since you invested and the dollar amount being redeemed,
according to the following schedule:
Years Since Contingent Deferred Sales
Beginning of Month Charge on Redemptions in
in Which Purchase that Year (As % of
Amount Order Was Accepted Subject to
Charge)
0 - 1 5.0%
1 - 2 4.0%
2 - 3 3.0%
3 - 4 3.0%
4 - 5 2.0%
5 - 6 1.0%
6 and following None
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of
the month in which the purchase was made.
Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to
Class A shares. This conversion feature relieves Class B
shareholders of the asset-based sales charge that applies to Class
B shares under the Class B Distribution and Service Plan, described
below. The conversion is based on the relative net asset value of
the two classes, and no sales load or other charge is imposed. When
Class B shares convert, any other Class B shares that were acquired
by the reinvestment of dividends and distributions on the converted
shares will also convert to Class A shares. The conversion feature
is subject to the continued availability of a tax ruling described
in "Alternative Sales Arrangements - Class A, Class B and Class C
Shares" in the Statement of Additional Information.
Buying Class C Shares. Class C shares are sold at net asset
value per share without an initial sales charge. However, if Class
C shares are redeemed within 12 months of their purchase, a
contingent deferred sales charge of 1.0% will be deducted from the
redemption proceeds. That sales charge will not apply to shares
purchased by the reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge will be based
on the lesser of the net asset value of the redeemed shares at the
time of redemption or the original offering price (which is the
original net asset value). The contingent deferred sales charge is
not imposed on the amount of your account value represented by the
increase in net asset value over the initial purchase price. The
Class C contingent deferred sales charge is paid to compensate the
Distributor for its expenses of providing distribution-related
services to the Fund in connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies
to a redemption, the Fund redeems shares in the following order:
(1) shares acquired by reinvestment of dividends and capital gains
distributions, (2) shares held for over 12 months, and (3) shares
held the longest during the 12-month period.
Distribution and Service Plans for Class B and Class C
Shares. The Fund has adopted Distribution and Service Plans for
Class B and Class C shares to compensate or reimburse the
Distributor for its services and costs in distributing Class B and
Class C shares and servicing accounts. Under the Plans, the Fund
pays the Distributor an annual "asset-based sales charge" of 0.75%
per year on Class B shares that are outstanding for 6 years or less
and on Class C shares. The Distributor also receives a service fee
of 0.25% per year under each plan. If either Plan is terminated by
the Fund, the Board of Trustees may allow the Fund to continue
payments of the service fee and asset-based sales charge to the
Distributor for distributing shares before the Plan was terminated.
Under each Plan, both fees are computed on the average of the
net asset value of shares in the respective class, determined as of
the close of each regular business day during the period. The
asset-based sales charge and service fees increase Class B and
Class C expenses by up to 1.00% of the net assets per year of the
respective class.
The Distributor uses the service fee to compensate dealers for
providing personal services and account maintenance services for
accounts that hold Class B or Class C shares. Those services are
similar to those provided under the Class A Service Plan, described
above. The Distributor pays the 0.25% service fee to dealers in
advance for the first year after Class B or Class C shares have
been sold by the dealer and retains the service fee paid by the
Fund in that year. After the shares have been held for a year, the
Distributor pays the service fees to dealers on a quarterly basis.
The asset-based sales charge allows investors to buy Class B
shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell those shares. The Fund
pays the asset-based sales charges to the Distributor for its
services rendered in distributing Class B shares. Those payments
are at a fixed rate that is not related to the Distributor s
expenses. The services rendered by the Distributor include paying
and financing the payment of sales commissions, service fees and
other costs of distributing and selling Class B shares.
The Distributor pays sales commissions of 3.75% of the
purchase price of Class B shares to dealers from its own resources
at the time of sale. Including the advance of the service fee, the
total amount paid by the Distributor to the dealer at the time of
sale of Class B shares is therefore 4.00% of the purchase price.
The Distributor retains the Class B asset-based sales charge.
The Distributor currently pays sales commissions of 0.75% of
the purchase price of Class C shares to dealers from its own
resources at the time of sale. Including the advance of the
service fee, the total amount paid by the Distributor to the dealer
at the time of sale of Class C shares is therefore 1.00% of the
purchase price. The Distributor plans to pay the asset-based sales
charge as an ongoing commission to the dealer on Class C shares
that have been outstanding for a year or more.
The Distributor's actual expenses in selling Class B and Class
C shares may be more than the payments it receives from contingent
deferred sales charges collected on redeemed shares and from the
Fund under the Distribution and Service Plans for Class B and Class
C shares. Therefore, those expenses may be carried over and paid
in future years. At September 30, 1996, the end of the Class B
Plan year, the Distributor had incurred unreimbursed expenses under
the Class B Plan of $3,224,469(equal to 3.93% of the Fund's net
assets represented by Class B shares on that date), which have been
carried over into the present Plan year. At September 30, 1996, the
end of the Class C Plan year, the Distributor had incurred
unreimbursed expenses under the Class C Plan of $1,300,506(equal to
1.15% of the Fund's net assets represented by Class C shares on
that date), which have been carried over into the present Plan
year.
Waivers of Class B and Class C Sales Charges. The Class B and
Class C contingent deferred sales charges will not be applied to
shares purchased in certain types of transactions nor will it apply
to Class B and Class C shares redeemed in certain circumstances as
described below. The reasons for this policy are in "Reduced Sales
Charges" in the Statement of Additional Information.
Waivers for Redemptions in Certain Cases. The Class B and Class
C contingent deferred sales charges will be waived for redemptions
of shares in the following cases, if the Transfer Agent is notified
that these conditions apply to the redemption:
distributions to participants or beneficiaries from Retirement
Plans, if the distributions are made (a) under an Automatic
Withdrawal Plan after the participant reaches age 59-1/2, as long
as the payments are no more than 10% of the account value annually
(measured from the date the Transfer Agent receives the request),
or (b) following the death or disability (as defined in the
Internal Revenue Code) of the participant or beneficiary (the death
or disability must have occurred after the account was
established);
redemptions from accounts other than Retirement Plans
following the death or disability of the last surviving shareholder
including a trustee of a grantor trust or revocable living trust
for which the trustee is also the sole beneficiary(the death or
disability must have occurred after the account was established,
and for disability you must provide evidence of a determination of
disability by the Social Security Administration);
returns of excess contributions to Retirement Plans;
distributions from retirement plans to make substantially
equal periodic payments as permitted in Section 72(t) of the
Internal Revenue Code that do not exceed 10% of the account value
annually, measured from the date the Transfer Agent receives the
request;
shares redeemed involuntarily, as described in "Shareholder
Account Rules and Policies," below; or
distributions from OppenheimerFunds prototype 401(k) plans (1)
for hardship withdrawals; (2) under a Qualified Domestic Relations
Order, as defined in the Internal Revenue Code; (3) to meet minimum
distribution requirements as defined in the Internal Revenue Code;
(4) to make "substantially equal periodic payments" as described in
Section 72(t) of the Internal Revenue Code; or (5) for separation
from service.
Waivers for Shares Sold or Issued in Certain Transactions. The
contingent deferred sales charge is also waived on Class B and
Class C shares sold or issued in the following cases:
shares sold to the Manager or its affiliates;
shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with
the Manager or the Distributor for that purpose; and
shares issued in plans of reorganization to which the Fund is
a party.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund
account to your account at your bank or other financial institution
to enable you to send money electronically between those accounts
to perform a number of types of account transactions. These
include purchasing shares by telephone (either through a service
representative or by PhoneLink, described below), automatic
investments under Asset Builder Plans, and sending dividends and
distributions or Automatic Withdrawal Plan payments directly to
your bank account. Please call the Transfer Agent for more
information.
AccountLink privileges should be requested on the Application you
use to buy shares, or on your dealer's settlement instructions if
you buy your shares through your dealer. After your account is
established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent.
AccountLink privileges will apply to each shareholder listed in the
registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent
receives written instructions terminating or changing those
privileges. After you establish AccountLink for your account, any
change of bank account information must be made by signature-
guaranteed instructions to the Transfer Agent signed by all
shareholders who own the account.
Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase
shares in amounts up to $250,000 through a telephone
representative, call the Distributor at 1-800-852-8457. The
purchase payment will be debited from your bank account.
PhoneLink. PhoneLink is the OppenheimerFunds automated
telephone system that enables shareholders to perform a number of
account transactions automatically using a touch-tone phone.
PhoneLink may be used on already-established Fund accounts after
you obtain a Personal Identification Number (PIN), by calling the
special PhoneLink number: 1-800-533-3310.
Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have
established AccountLink privileges to link your bank account with
the Fund, to pay for these purchases.
Exchanging Shares. With the OppenheimerFunds Exchange
Privilege, described below, you can exchange shares automatically
by phone from your Fund account to another Oppenheimer funds
account you have already established by calling the special
PhoneLink number. Please refer to "How to Exchange Shares," below,
for details.
Selling Shares. You can redeem shares by telephone
automatically by calling the PhoneLink number and the Fund will
send the proceeds directly to your AccountLink bank account.
Please refer to "How to Sell Shares," below for details.
Automatic Withdrawal and Exchange Plans. The Fund has several
plans that enable you to sell shares automatically or exchange them
to another Oppenheimer fund account on a regular basis:
Automatic Withdrawal Plans. If your Fund account is worth
$5,000 or more, you can establish an Automatic Withdrawal Plan to
receive payments of at least $50 on a monthly, quarterly, semi-
annual or annual basis. The checks may be sent to you or sent
automatically to your bank account on AccountLink. You may even set
up certain types of withdrawals of up to $1,500 per month by
telephone. You should consult the Statement of Additional
Information for more details.
Automatic Exchange Plans. You can authorize the Transfer
Agent to exchange an amount you establish in advance automatically
for shares of the same class of up to five other Oppenheimer funds
on a monthly, quarterly, semi-annual or annual basis under an
Automatic Exchange Plan. The minimum purchase for each Oppenheimer
funds account is $25. These exchanges are subject to the terms of
the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A
or Class B shares of the Fund, you have up to 6 months to reinvest
all or part of the redemption proceeds in Class A shares of the
Fund or other Oppenheimer funds without paying a sales charge.
This privilege applies to Class A shares that you purchased subject
to an initial sales charge and to Class A or Class B shares on
which you paid a contingent deferred sales charge when you redeemed
them. This privilege does not apply to Class C shares. You must
be sure to ask the Distributor for this privilege when you send
your payment. Please consult the Statement of Additional
Information for more details.
Retirement Plans. Fund shares are available as an investment for
your retirement plans. If you participate in a plan sponsored by
your employer, the plan trustee or administrator must make the
purchase of shares for your retirement plan account. The
Distributor offers a number of different retirement plans that can
be used by individuals and employers:
Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable
organizations
SEP-IRAs (Simplified Employee Pension Plans) for small
business owners or people with income from self-employment
Pension and Profit-Sharing Plans for self-employed persons and
other employers
401(k) prototype retirement plans for businesses
Please call the Distributor for the OppenheimerFunds plan
documents, which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account by selling
(redeeming) some or all of your shares on any regular business day.
Your shares will be sold at the next net asset value calculated
after your order is received and accepted by the Transfer Agent.
The Fund offers you a number of ways to sell your shares: in
writing, or by using the Fund's checkwriting privilege or by
telephone. You can also set up Automatic Withdrawal Plans to
redeem shares on a regular basis, as described above. If you have
questions about any of these procedures, and especially if you are
redeeming shares in a special situation, such as due to the death
of the owner, or from a retirement plan, please call the Transfer
Agent first, at 1-800-525-7048, for assistance.
Retirement Accounts. To sell shares in an OppenheimerFunds
retirement account in your name, call the Transfer Agent for a
distribution request form. There are special income tax withholding
requirements for distributions from retirement plans and you must
submit a withholding form with your request to avoid delay. If your
retirement plan account is held for you by your employer, you must
arrange for the distribution request to be sent by the plan
administrator or trustee. There are additional details in the
Statement of Additional Information.
Certain Requests Require a Signature Guarantee. To protect
you and the Fund from fraud, certain redemption requests must be in
writing and must include a signature guarantee in the following
situations (there may be other situations also requiring a
signature guarantee):
You wish to redeem more than $50,000 worth of shares and
receive a check
The redemption check is not payable to all shareholders listed
on the account statement
The redemption check is not sent to the address of record on
your account statement
Shares are being transferred to a Fund account with a
different owner or name
Shares are redeemed by someone other than the owners (such as
an Executor)
Where Can I Have My Signature Guaranteed? The Transfer Agent
will accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union
or savings association, or by a foreign bank that has a U.S.
correspondent bank, or by a U.S. registered dealer or broker in
securities, municipal securities or government securities, or by a
U.S. national securities exchange, a registered securities
association or a clearing agency. If you are signing on behalf of
a corporation, partnership or other business, or as a fiduciary,
you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that
includes:
Your name
The Fund's name
Your Fund account number (from your account statement)
The dollar amount or number of shares to be redeemed
Any special payment instructions
Any share certificates for the shares you are selling
The signatures of all registered owners exactly as the account
is registered, and
Any special requirements or documents requested by the
Transfer Agent to assure proper authorization of the person asking
to sell shares.
Use the following address for requests by mail: Send courier or
Express Mail requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue,
Denver, Colorado 80217 Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative
of record may also sell your shares by telephone. To receive the
redemption price on a regular business day, your request must be
received by the Transfer Agent or its agent by the close of The New
York Stock Exchange that day, which is normally 4:00 P.M., but may
be earlier on some days. Shares held in an OppenheimerFunds
retirement plan or under a share certificate may not be redeemed by
telephone.
To redeem shares through a service representative, call 1-
800-852-8457
To redeem shares automatically on PhoneLink, call 1-800-
533-3310
Whichever method you use, you may have a check sent to the
address on the account statement, or, if you have linked your Fund
account to your bank account on AccountLink, you may have the
proceeds transferred to that bank account.
Telephone Redemptions Paid by Check. Up to $50,000 may be
redeemed by telephone once in any 7-day period. The check must be
payable to all owners of record of the shares and must be sent to
the address on the account statement. This service is not
available within 30 days of changing the address on an account.
Telephone Redemptions Through AccountLink. There are no
dollar limits on telephone redemption proceeds sent to a bank
account designated when you establish AccountLink. Normally the ACH
transfer to your bank is initiated on the business day after the
redemption. You do not receive dividends on the proceeds of the
shares you redeemed while they are waiting to be transferred.
Check Writing. To be able to write checks against your Fund
account, you may request that privilege on your account Application
or you can contact the Transfer Agent for signature cards, which
must be signed (with a signature guarantee) by all owners of the
account and returned to the Transfer Agent so that checks can be
sent to you to use. Shareholders with joint accounts can elect in
writing to have checks paid over the signature of one owner. If
you previously signed a signature card to establish checkwriting in
one of the other Oppenheimer funds, you may call 1-800-525-7048 to
request check writing for an account in this Fund that has the same
registration as that other fund account.
Checks can be written to the order of whomever you wish, but
may not be cashed at the Fund's bank or custodian.
Check writing privileges are not available for accounts holding
Class B shares or Class C shares, or Class A shares that are
subject to a contingent deferred sales charge.
Checks must be written for at least $100.
Checks cannot be paid if they are written for more than your
account value.
Remember: your shares fluctuate in value and you should not write
a check close to the total account value.
You may not write a check that would require the Fund to redeem
shares that were purchased by check or Asset Builder Plan payments
within the prior 15 days.
Don't use your checks if you changed your Fund account number.
Selling Shares Through Your Dealer. The Distributor has made
arrangements to repurchase Fund shares from dealers and brokers on
behalf of their customers. Brokers or dealers may charge for that
service. Call your dealer for more information about this
procedure. Please refer to Special Arrangements
for Repurchase of Shares from Dealers and Brokers
in the Statement of Additional Information for
more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
Oppenheimer funds at net asset value per share at the time of
exchange, without sales charge. To exchange shares, you must meet
several conditions:
Shares of the fund selected for exchange must be available
for sale in your state of residence.
The prospectuses of this Fund and the fund whose shares you
want to buy must offer the exchange privilege.
You must hold the shares you buy when you establish your
account for at least 7 days before you can exchange them; after the
account is open 7 days, you can exchange shares every regular
business day.
You must meet the minimum purchase requirements for the fund
you purchase by exchange.
Before exchanging into a fund, you should obtain and read its
prospectus.
Shares of a particular class of the Fund may be exchanged only
for shares of the same class in the other Oppenheimer funds. For
example, you can exchange Class A shares of this Fund only for
Class A shares of another fund. At present, Oppenheimer Money
Market Fund, Inc. offers only one class of shares which are
considered to be "Class A shares" for this purpose. In some cases,
sales charges may be imposed on exchange transactions. Please
refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
Exchanges may be requested in writing or by telephone:
Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the
Transfer Agent at the addresses listed in "How to Sell Shares."
Telephone Exchange Requests. Telephone exchange requests may
be made either by calling a service representative at 1-800-852-
8457 or by using PhoneLink for automated exchanges, by calling 1-
800-533-3310. Telephone exchanges may be made only between accounts
that are registered with the same name(s) and address. Shares held
under certificates may not be exchanged by telephone.
You can find a list of Oppenheimer funds currently available for
exchanges in the Statement of Additional Information or obtain one
by calling a service representative at 1-800-525-7048. That list
can change from time to time.
There are certain exchange policies you should be aware of:
Shares are normally redeemed from one fund and purchased from
the other fund in the exchange transaction on the same regular
business day on which the Transfer Agent receives an exchange
request that is in proper form by the close of the New York Stock
Exchange that day, which is normally 4:00 P.M. but may be earlier
on some days. However, either fund may delay the purchase of
shares of the fund you are exchanging into up to 7 days if it
determines it would be disadvantaged by a same-day transfer of the
proceeds to buy shares. For example, the receipt of multiple
exchange requests from a dealer in a "market-timing" strategy might
require the disposition of securities at a time or price
disadvantageous to the Fund.
Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange
request that will disadvantage it, or to refuse multiple exchange
requests submitted by a shareholder or dealer.
The Fund may amend, suspend or terminate the exchange
privilege at any time. Although the Fund will attempt to provide
you notice whenever it is reasonably able to do so, it may impose
these changes at any time.
For tax purposes, exchanges of shares involve a redemption of
the shares of the Fund you own and a purchase of the shares of the
other fund, which may result in a capital gain or loss. For more
information about taxes affecting exchanges, please refer to "How
to Exchange Shares" in the Statement of Additional Information.
If the Transfer Agent cannot exchange all the shares you
request because of a restriction cited above, only the shares
eligible for exchange will be exchanged.
The Distributor has entered into agreements with certain
dealers and investment advisors permitting them to exchange their
clients shares by telephone. These privileges are limited under
those agreements and the Distributor has the right to reject or
suspend those privileges. As a result, exchanges may be subject to
notice requirements, delays and other limitations that do not apply
to shareholders who exchange their shares directly by calling or
writing the Transfer Agent.
Shareholder Account Rules and Policies
Net asset value per share is determined for each class of
shares as of the close of The New York Stock Exchange, which is
normally 4:00 P.M. but may be earlier on some days, on each day the
Exchange is open by dividing the value of the Fund's net assets
attributable to a y the number of shares of that class that are
outstanding. The Fund's Board of Trustees has established
procedures to value the Fund's securities to determine net asset
value. In general, securities values are based on market value.
There are special procedures for valuing illiquid and restricted
securities, and obligations for which market values cannot be
readily obtained. These procedures are described more completely
in the Statement of Additional Information.
The offering of shares may be suspended during any period in
which the determination of net asset value is suspended, and the
offering may be suspended by the Board of Trustees at any time the
Board believes it is in the Fund's best interest to do so.
Telephone transaction privileges for purchases, redemptions
or exchanges may be modified, suspended or terminated by the Fund
at any time. If an account has more than one owner, the Fund and
the Transfer Agent may rely on the instructions of any one owner.
Telephone privileges apply to each owner of the account and the
dealer representative of record for the account unless and until
the Transfer Agent receives cancellation instructions from an owner
of the account.
The Transfer Agent will record any telephone calls to verify
data concerning transactions and has adopted other procedures to
confirm that telephone instructions are genuine, by requiring
callers to provide tax identification numbers and other account
data or by using PINs, and by confirming such transactions in
writing. If the Transfer Agent does not use reasonable procedures
it may be liable for losses due to unauthorized transactions, but
otherwise neither the Transfer Agent nor the Fund will be liable
for losses or expenses arising out of telephone instructions
reasonably believed to be genuine. If you are unable to reach the
Transfer Agent during periods of unusual market activity, you may
not be able to complete a telephone transaction and should consider
placing your order by mail.
Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From
time to time, the Transfer Agent in its discretion may waive
certain of the requirements for redemptions stated in this
Prospectus.
Dealers that can perform account transactions for their
clients by participating in NETWORKING through the National
Securities Clearing Corporation are responsible for obtaining their
clients' permission to perform those transactions and are
responsible to their clients who are shareholders of the Fund if
the dealer performs any transaction erroneously.
The redemption price for shares will vary from day to day
because the value of the securities in the Fund's portfolio
fluctuates, and the redemption price, which is the net asset value
per share, will normally be different for Class A, and Class C
shares. Therefore, the redemption value of your shares may be more
or less than their original cost.
Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the
shareholder under the redemption procedures described above) within
7 days after the Transfer Agent receives redemption instructions in
proper form, except under unusual circumstances determined by the
Securities and Exchange Commission delaying or suspending such
payments. For accounts registered in the name of a broker-dealer,
payment will be forwarded within 3 business days. The Transfer
Agent may delay forwarding a check or processing a payment via
AccountLink for recently purchased shares, but only until the
purchase payment has cleared. That delay may be as much as 10 days
from the date the shares were purchased. That delay may be avoided
if you purchase shares by certified check or arrange to have your
bank provide telephone or written assurance to the Transfer Agent
that your purchase payment has cleared.
Involuntary redemptions of small accounts may be made by the
Fund if the account value has fallen below $200 for reasons other
than the fact that the market value of shares has dropped, and in
some cases involuntary redemptions may be made to repay the
Distributor for losses from the cancellation of share purchase
orders.
Under unusual circumstances, shares of the Fund may be
redeemed "in kind," which means that the redemption proceeds will
be paid with securities from the Fund's portfolio. Please refer to
"How to Sell Shares" in the Statement of Additional Information for
more details.
"Backup Withholding" of Federal income tax may be applied at
the rate of 31% from dividends, distributions and redemption
proceeds (including exchanges) if you fail to furnish the Fund a
certified Social Security or Employer Identification Number when
you sign your application, or if you violate Internal Revenue
Service regulations on tax reporting of income.
The Fund does not charge a redemption fee, but if your dealer
or broker handles your redemption, they may charge a fee. That fee
can be avoided by redeeming your Fund shares directly through the
Transfer Agent. Under the circumstances described in "How to Buy
Shares," you may be subject to a contingent deferred sales charge
when redeeming certain Class A, Class B and Class C shares.
To avoid sending duplicate copies of materials to households,
the Fund will mail only one copy of each annual and semi-annual
report to shareholders having the same last name and address on the
Fund's records. However, each shareholder may call the Transfer
Agent at 1-800-525-7048 to ask that copies of those materials be
sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A,Class
B and Class C shares from net investment income on each regular
business day and pays those dividends to shareholders monthly.
Normally, dividends are paid on or about the last business day of
every month, but the Board of Trustees can change that date.
Distributions may be made monthly from any net short-term capital
gains the Fund realizes in selling securities. Dividends paid on
Class A shares generally are expected to be higher than for Class
B and Class C shares because expenses allocable to Class B and
Class C shares will generally be higher. There is no fixed
dividend rate and there can be no assurance as to the payment of
any dividends.
Capital Gains. The Fund may make distributions annually in December
out of any net short-term or long-term capital gains, and the Fund
may make supplemental distributions of dividends and capital gains
following the end of its fiscal year which is September 30th.
Long-term capital gains will be separately identified in the tax
information the Fund sends you after the end of the calendar year.
Short-term capital gains are treated as dividends for tax purposes.
There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are
reinvested. For other accounts, you have four options:
Reinvest All Distributions in the Fund. You can elect to
reinvest all dividends and long-term capital gains distributions in
additional shares of the Fund.
Reinvest Long-Term Capital Gains Only. You can elect to
reinvest long-term capital gains in the Fund while receiving
dividends by check or sent to your bank account on AccountLink.
Receive All Distributions in Cash. You can elect to receive
a check for all dividends and long-term capital gains distributions
or have them sent to your bank on AccountLink.
Reinvest Your Distributions in Another Oppenheimer Fund
Account. You can reinvest all distributions in another Oppenheimer
fund account you have established.
Taxes. If your account is not a tax-deferred retirement account,
you should be aware of the following tax implications of investing
in the Fund. Long-term capital gains are taxable as long-term
capital gains when distributed to shareholders. It does not matter
how long you held your shares. Dividends paid from short-term
capital gains and net investment income are taxable as ordinary
income. Distributions are subject to federal income tax and may be
subject to state or local taxes. Your distributions are taxable
when paid, whether you reinvest them in additional shares or take
them in cash. Every year the Fund will send you and the IRS a
statement showing the amount of each taxable distribution you
received in the previous year.
"Buying a Distribution . If you buy shares on or just
before the date the Fund declares a capital gains distribution, you
will pay the full price for the shares and then receive a portion
of the price back as a capital gain.
Taxes on Transactions. Share redemptions, including
redemptions for exchanges, are subject to capital gains tax. A
capital gain or loss is the difference between the price you paid
for the shares and the price you received when you sold them.
Return of Capital. In certain cases distributions made by
the Fund may be considered a non-taxable return of capital to
shareholders. If that occurs, it will be identified in notices to
shareholders. A non-taxable return of capital may reduce your tax
basis in your Fund shares.
This information is only a summary of certain federal tax
information about your investment. More information is contained
in the Statement of Additional Information, and in addition you
should consult with your tax advisor about the effect of an
investment in the Fund on your particular tax situation.
<PAGE>
APPENDIX A: DESCRIPTION OF RATINGS
Categories of Rating Services
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 Corporation 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.
Fitch Investors Service, Inc.
Investment Grade Bond Ratings
AAA Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected
by reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated "AAA."
Because bonds rated in the "AAA" and "AA" categories are not
significantly vulnerable to foreseeable future developments, short-
term debt of these issuers is generally rated "F-1+."
A Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal
is considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with
higher ratings.
BBB Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely to
have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher
ratings.
Speculative Grade Bond Ratings
BB Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can
be identified which could assist the obligor in satisfying its debt
service requirements.
B Bonds are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the
probability of continued timely payment of principal and interest
reflect the obligor's limited margin of safety and the need for
reasonable business and economic activity through out the life of
the issue.
CCC Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
CC Bonds are minimally protected. Default in payment of interest
and/or principal seems probable over time.
C Bonds are in imminent default in payment of interest or
principal.
DDD, DD and D Bonds are in default on interest and/or principal
payments. Such bonds are extremely speculative and should be
valued on the basis of their ultimate recovery value in liquidation
or reorganization of the obligor. "DDD" represents the highest
potential for recovery on these bonds, and "D" represents the
lowest potential for recovery.
Plus (+) Minus (-) Plus and minus signs are used with a rating
symbol to indicate the relative position of a credit within the
rating category. Plus and minus signs, however, are not used in
the "AAA," "DDD," "DD," or "D" categories.
Duff & Phelps' Ratings
Long-Term Debt and Preferred Stock
AAA Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free US Treasury debt.
AA+, AA & AA- High credit quality protection factors are strong.
Risk is modest but may vary slightly from time to time because of
economic conditions.
A+, A & A- Protection factors are average but adequate. However,
risk factors are more variable and greater in periods of economic
stress.
BBB+, BBB & BBB- Below average protection factors but still
considered sufficient for prudent investment. Considerable
variability in risk during economic cycles.
BB+, BB & BB- Below investment grade but deemed to meet
obligations when due. Present or prospective financial protection
factors fluctuate according to industry conditions or company
fortunes. Overall quality may move up or down frequently within
the category.
B+, B & B- Below investment grade and possessing risk that
obligations will not be met when due. Financial protection factors
will fluctuate widely according to economic cycles, industry
conditions and/or company fortunes. Potential exists for frequent
changes in the rating within this category or into a higher of
lower rating grade.
CCC Well below investment grade securities. Considerable
uncertainty exists as to timely payment of principal interest or
preferred dividends. Protection factors are narrow and risk can be
substantial with unfavorable economic industry conditions, and/or
with unfavorable company developments.
DD Defaulted debt obligations issuer failed to meet scheduled
principal and/or interest payments.
DP Preferred stock with dividend arreages.
APPENDIX B
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent deferred sales charge rates and
waivers for Class A, Class B and Class C shares of the Fund
described elsewhere in this Prospectus are modified as described
below for those shareholders of (i) Quest for Value Fund, Inc.,
Quest for Value Growth and Income Fund, Quest for Value Opportunity
Fund, Quest for Value Small Capitalization Fund and Quest for Value
Global Equity Fund, Inc. on November 24, 1995, when
OppenheimerFunds, Inc. became the investment advisor to those
funds, and (ii) Quest for Value U.S. Government Income Fund, Quest
for Value Investment Quality Income Fund, Quest for Value Global
Income Fund, Quest for Value New York Tax-Exempt Fund, Quest for
Value National Tax-Exempt Fund and Quest for Value California Tax-
Exempt Fund when those funds merged into various Oppenheimer funds
on November 24, 1995. The funds listed above are referred to in
this Prospectus as the "Former Quest for Value Funds." The waivers
of initial and contingent deferred sales charges described in this
Appendix apply to shares of the Fund (i) acquired by such
shareholder pursuant to an exchange of shares of one of the
Oppenheimer funds that was one of the Former Quest for Value Funds
or (ii) received by such shareholder pursuant to the merger of any
of the Former Quest for Value Funds into an Oppenheimer fund on
November 24, 1995.
Class A Sales Charges
Reduced Class A Initial Sales Charge Rates for Certain Former
Quest Shareholders
Purchases by Groups, Associations and Certain Qualified
Retirement Plans. The following table sets forth the initial sales
charge rates for Class A shares purchased by a "Qualified
Retirement Plan" through a single broker, dealer or financial
institution, or by members of "Associations" formed for any purpose
other than the purchase of securities if that Qualified Retirement
Plan or that Association purchased shares of any of the Former
Quest for Value Funds or received a proposal to purchase such
shares from OCC Distributors prior to November 24, 1995. For this
purpose only, a "Qualified Retirement Plan" includes any 401(k)
plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a
single employer.
Eligible Employees Front-End Front-End Commission
or Members Sales Sales as
Charge Charge
Percentage as a as a of
Offering
Percentage Percentage Price
Offering of Amount
Price Invested
- ---------------------------------------------------------------------
9 or fewer 2.50% 2.56% 2.00%
- ---------------------------------------------------------------------
At least 10 but not
more than 49 2.00% 2.04% 1.60%
For purchases by Qualified Retirement plans and Associations
having 50 or more eligible employees or members, there is no initial
sales charge on purchases of Class A shares, but those shares are
subject to the Class A contingent deferred sales charge described on
page 31 of this Prospectus.
Purchases made under this arrangement qualify for the lower of
the sales charge rate in the table based on the number of eligible
employees in a Qualified Retirement Plan or members of an Association
or the sales charge rate that applies under the Rights of
Accumulation described above in the Prospectus. In addition,
purchases by 401(k) plans that are Qualified Retirement Plans qualify
for the waiver of the Class A initial sales charge if they qualified
to purchase shares of any of the Former Quest For Value Funds by
virtue of projected contributions or investments of $1 million or
more each year. Individuals who qualify under this arrangement for
reduced sales charge rates as members of Associations, or as eligible
employees in Qualified Retirement Plans also may purchase shares for
their individual or custodial accounts at these reduced sales charge
rates, upon request to the Fund's Distributor.
Special Class A Contingent Deferred Sales Charge Rates. Class A
shares of the Fund purchased by exchange of shares of other
Oppenheimer funds that were acquired as a result of the merger of
Former Quest for Value Funds into those Oppenheimer funds, and which
shares were subject to a Class A contingent deferred sales charge
prior to November 24, 1995 will be subject to a contingent deferred
sales charge at the following rates: if they are redeemed within 18
months of the end of the calendar month in which they were purchased,
at a rate equal to 1.0% if the redemption occurs within 12 months of
their initial purchase and at a rate of 0.50 of 1.0% if the
redemption occurs in the subsequent six months. Class A shares of
any of the Former Quest for Value Funds purchased without an initial
sales charge on or before November 22, 1995 will continue to be
subject to the applicable contingent deferred sales charge in effect
as of that date as set forth in the then-current prospectus for such
fund.
Waiver of Class A Sales Charges for Certain Shareholders. Class A
shares of the Fund purchased by the following investors are not
subject to any Class A initial or contingent deferred sales charges:
Shareholders of the Fund who were shareholders of the AMA Family of
Funds on February 28, 1991 and who acquired shares of any of the
Former Quest for Value Funds by merger of a portfolio of the AMA
Family of Funds.
Shareholders of the Fund who acquired shares of any Former Quest
for Value Fund by merger of any of the portfolios of the Unified
Funds.
Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions. The Class A contingent deferred sales charge will not
apply to redemptions of Class A shares of the Fund purchased by the
following investors who were shareholders of any Former Quest for
Value Fund:
Investors who purchased Class A shares from a dealer that is or was
not permitted to receive a sales load or redemption fee imposed on a
shareholder with whom that dealer has a fiduciary relationship under
the Employee Retirement Income Security Act of 1974 and regulations
adopted under that law.
Participants in Qualified Retirement Plans that purchased shares of
any of the Former Quest For Value Funds pursuant to a special
"strategic alliance" with the distributor of those funds. The Fund's
Distributor will pay a commission to the dealer for purchases of Fund
shares as described above in "Class A Contingent Deferred Sales
Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge Waivers
Waivers for Redemptions of Shares Purchased Prior to March 6,
1995. In the following cases, the contingent deferred sales charge
will be waived for redemptions of Class A, B or C shares of the Fund
acquired by merger of a Former Quest for Value Fund into the Fund or
by exchange from an Oppenheimer fund that was a Former Quest for
Value Fund or into which such fund merged, if those shares were
purchased prior to March 6, 1995: in connection with
(i) distributions to participants or beneficiaries of plans qualified
under Section 401(a) of the Internal Revenue Code or from custodial
accounts under Section 403(b)(7) of the Code, Individual Retirement
Accounts, deferred compensation plans under Section 457 of the Code,
and other employee benefit plans, and returns of excess contributions
made to each type of plan, (ii) withdrawals under an automatic
withdrawal plan holding only either Class B or C shares if the annual
withdrawal does not exceed 10% of the initial value of the account,
and (iii) liquidation of a shareholder's account if the aggregate net
asset value of shares held in the account is less than the required
minimum value of such accounts.
Waivers for Redemptions of Shares Purchased on or After March 6,
1995 but Prior to November 24, 1995. In the following cases, the
contingent deferred sales charge will be waived for redemptions of
Class A, B or C shares of the Fund acquired by merger of a Former
Quest for Value Fund into the Fund or by exchange from an Oppenheimer
fund that was a Former Quest For Value Fund or into which such fund
merged, if those shares were purchased on or after March 6, 1995, but
prior to November 24, 1995: (1) distributions to participants or
beneficiaries from Individual Retirement Accounts under
Section 408(a) of the Internal Revenue Code or retirement plans under
Section 401(a), 401(k), 403(b) and 457 of the Code, if those
distributions are made either (a) to an individual participant as a
result of separation from service or (b) following the death or
disability (as defined in the Code) of the participant or
beneficiary; (2) returns of excess contributions to such retirement
plans; (3) redemptions other than from retirement plans following the
death or disability of the shareholder(s) (as evidenced by a
determination of total disability by the U.S. Social Security
Administration); (4) withdrawals under an automatic withdrawal plan
(but only for Class B or C shares) where the annual withdrawals do
not exceed 10% of the initial value of the account; and
(5) liquidation of a shareholder's account if the aggregate net asset
value of shares held in the account is less than the required minimum
account value. A shareholder's account will be credited with the
amount of any contingent deferred sales charge paid on the redemption
of any Class A, B or C shares of the Fund described in this section
if within 90 days after that redemption, the proceeds are invested in
the same Class of shares in this Fund or another Oppenheimer fund.
Special Dealer Arrangements
Dealers who sold Class B shares of a Former Quest for Value Fund to
Quest for Value prototype 401(k) plans that were maintained on the
TRAC-2000 recordkeeping system and that were transferred to an
OppenheimerFunds prototype 401(k) plan shall be eligible for an
additional one-time payment by the Distributor of 1% of the value of
the plan assets transferred, but that payment may not exceed $5,000
as to any one plan.
Dealers who sold Class C shares of a Former Quest for Value Fund to
Quest for Value prototype 401(k) plans that were maintained on the
TRAC-2000 recordkeeping system and (i) the shares held by those plans
were exchanged for Class A shares, or (ii) the plan assets were
transferred to an OppenheimerFunds prototype 401(k) plan, shall be
eligible for an additional one-time payment by the Distributor of 1%
of the value of the plan assets transferred, but that payment may not
exceed $5,000.
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER CHAMPION INCOME FUND
Graphic material included in Prospectus of Oppenheimer Champion
Income Fund: "Comparison of Change in Value of a $10,000 Hypothetical
Investment in: Oppenheimer Champion Income Fund, Lehman Bros.
Corporate Bond Index and Merrill Lynch High Yield Master Index.
A linear graph will be included in the Prospectus of Oppenheimer
Champion Income Fund (the "Fund") depicting the initial account value
and subsequent account value of a hypothetical $10,000 investment in
the Fund through 9/30/96 from, in the case of Class A shares, the
period since the inception of the Fund (11/16/87) and in the case of
Class B and Class C shares, the period from the inception of each
class (Class B, 10/2/95 and Class C, 12/1/93). The graph will
compare such values with hypothetical $10,000 investments over the
same time periods in the Lehman Bros. Corporate Bond Index and the
Merrill Lynch High Yield Master 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. Corporate Bond Index and the Merrill
Lynch High Yield Master Index, is set forth in the Prospectus under
"Performance of the Fund - Comparing the Fund's Performance to the
Market."
Merrill
Lynch
Fiscal Oppenheimer Lehman High
Period Champion Bros. Yield
Ended Income Fund A Corp. Bond Index Master Index
11/16/87 $ 9,525 $10,000 $10,000
09/30/88* $11,096 $11,014 $12,168
09/30/89 $12,054 $12,313 $16,178
09/30/90 $12,428 $13,075 $14,683
09/30/91 $15,594 $15,302 $19,248
09/30/92 $18,714 $17,530 $21,374
09/30/93 $21,839 $19,665 $24,146
09/30/94 $23,066 $18,783 $25,034
09/30/95 $25,393 $21,975 $32,471
09/30/96 $28,766 $23,018 $39,070
*For the period from November 16, 1987 (commencement of operations)
to September 30, 1988.
Merril
l Oppenheimer Lynch
Fiscal Period Champion Lehman Bros High
Ended Income Fund B Corp. Bond Index Yield
Master
Index
10/2/95* $10,000 $10,000 $10,000
9/30/96 $10,720 $10,475 $12,032
* Class B shares of the Fund were first publicly offered on October
2, 1995.
.
Merrill Oppenheimer
Lynch
Fiscal Period Champion Lehman Bros High
Ended Income Fund C Corp. Bond Index Yield
Master
Index
12/1/93* $10,000 $10,000 $10,000
09/30/94 $10,112 $ 9,622 $10,256
09/30/95 $11,038 $11,256 $13,303
09/30/96 $12,410 $11,791 $16,006
*Class C shares of the Fund were first publicly offered on December
1, 1993.
<PAGE>
Oppenheimer Champion Income Fund
6803 South Tucson Way
Englewood, Colorado 80012
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, NY 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, broker, salesperson or any other person has been
authorized to give any information or to make any representations
other than those contained in this Prospectus or the Statement of
Additional Information, and if given or made, such information and
representations must not be relied upon as having been authorized by
the Fund, OppenheimerFunds, Inc., OppenheimerFunds Distributor, Inc.
or any affiliate thereof. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any state to any person to whom it is
unlawful to make such offer in such state.
PR0190.001.----*Printed on recycled paper
<PAGE>
Oppenheimer Champion Income Fund
6803 South Tucson Way
Englewood, Colorado 80012
1-800-525-7048
Statement of Additional Information dated January 20, 1997
This Statement of Additional Information of Oppenheimer Champion
Income Fund is not a Prospectus. This document contains additional
information about the Fund and supplements information in the
Prospectus dated January 20, 1997. It should be read together with
the Prospectus, which may be obtained by writing to the Fund's
Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver,
Colorado 80217 or by calling the Transfer Agent at the toll-free
number shown above.
TABLE OF CONTENTS
Page
About the Fund
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . . . . 2
Investment Policies and Strategies. . . . . . . . . . . . . . . . . . . . 2
Other Investment Techniques and Strategies. . . . . . . . . . . . . . . . 9
Other Investment Restrictions . . . . . . . . . . . . . . . . . . . . . .21
How the Fund is Managed. . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Organization and History. . . . . . . . . . . . . . . . . . . . . . . . .23
Trustees and Officers of the Fund . . . . . . . . . . . . . . . . . . . .24
The Manager and Its Affiliates. . . . . . . . . . . . . . . . . . . . . .28
Brokerage Policies of the Fund . . . . . . . . . . . . . . . . . . . . . . . .30
Performance of the Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Distribution and Service Plans . . . . . . . . . . . . . . . . . . . . . . . .36
About Your Account
How To Buy Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
How To Sell Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
How To Exchange Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
Dividends, Capital Gains and Taxes . . . . . . . . . . . . . . . . . . . . . .51
Additional Information About the Fund. . . . . . . . . . . . . . . . . . . . .52
Financial Information About the Fund
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . .54
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
Appendix: Corporate Industry Classifications. . . . . . . . . . . . . . . . A-1
<PAGE>
ABOUT THE FUND
Investment Objectives And Policies
Investment Policies and Strategies. The investment objectives and
policies of the Fund are described in the Prospectus. Set forth below
is supplemental information about those policies and the types of
securities in which the Fund invests, as well as the strategies the
Fund may use to try to achieve its objectives. Capitalized terms
used in this Statement of Additional Information have the same
meaning as those terms have 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 generally considered to be of greater risk.
However, actual losses resulting from the default of high yield bonds
has been low relative to the outstanding values of those 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 advisor, OppenheimerFunds, Inc. (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 historical 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.
Investment Risks of Fixed-Income Securities. All fixed-
income securities are subject to one or more of the following types
of risks: credit risk, interest rate risk and foreign exchange risk.
Credit risk relates to the ability of the issuer to meet interest or
principal payments on a security as they become due. Generally,
higher yielding lower-grade bonds are subject to credit risk to a
greater extent than lower yielding, investment grade 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 outstanding fixed-income securities. An increase
in prevailing interest rates will generally reduce the market value
of already-issued 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 changes in their prices
from changes in interest rates than obligations with shorter
maturities. Fluctuations in the market value of fixed-income
securities after the Fund buys them will not affect the interest
payable on those securities, nor the cash income from such
securities. However, those price fluctuations will be reflected in
the valuations of these securities and therefore the Fund's net asset
values. Foreign exchange risk refers to the fluctuation in value of a
foreign currency in which certain investments of the Fund are
denominated compared to the U. S. dollar.
As stated in the Prospectus, 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 or other recognized rating services. 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.
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.
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.
Zero Coupon Securities. The Fund may invest in zero coupon
securities issued by the U.S. Treasury or by private issuers, such as
corporations. Zero coupon U.S. Treasury securities include: (1) U.S.
Treasury bills without interest coupons, (2) U.S. Treasury notes and
bonds that have been stripped of their unmatured interest coupons and
(3) receipts or certificates representing interests in such stripped
debt obligations or coupons. These securities usually trade at a
deep discount from their face or par value and will be subject to
greater fluctuations in market value in response to changing interest
rates than debt obligations of comparable maturities that make
current payments of interest. However, the yield to maturity on a
zero coupon security is "locked in" if the security is held to
maturity. If a zero coupon security is held to maturity, there is no
risk of having to reinvest periodic interest payments in securities
having lower rates.
Because the Fund accrues taxable income from zero coupon
securities without receiving cash, the Fund may be required to sell
portfolio securities in order to pay dividends or redemption proceeds
for its shares, which require the payment of cash. This will depend
on several factors: the proportion of shareholders who elect to
receive dividends in cash rather than reinvesting dividends in
additional shares of the Fund, and the amount of cash income the Fund
receives from other investments and the sale of shares. In either
case, cash distributed or held by the Fund that is not reinvested by
investors in additional Fund shares will hinder the Fund from seeking
current income.
Warrants and Rights. The Fund may, to the limited extent
described in the Prospectus, invest in warrants and rights. 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. Warrants and
rights have no voting rights, receive no dividends and have no rights
with respect to the assets of the issuer.
Foreign Securities. As noted in the Prospectus, the Fund
may invest in securities (which may be denominated in U.S. dollars or
non-U.S. currencies) issued or guaranteed by foreign corporations,
certain supranational entities (described below) and foreign
governments or their agencies or instrumentalities, and in securities
issued by U.S. corporations denominated in non-U.S. currencies.
"Foreign securities" include equity and debt securities of companies
organized under the laws of countries other than the United States
and debt securities of foreign governments that are traded on foreign
securities exchanges or in the foreign over-the-counter markets.
Securities of foreign issuers that are represented by American
Depository Receipts or other Receipts that are listed on a U.S.
securities exchange or traded in the U.S. over-the-counter markets
are not considered "foreign securities" for the purpose of the Fund's
investment allocations, because they are not subject to many of the
special considerations and risks, discussed below, that apply to
foreign securities traded and held abroad.
Because the Fund may purchase securities denominated in foreign
currencies, a change in the value of such foreign currency against
the U.S. dollar will result in a change in the amount of income the
Fund has available for distribution. Because a portion of the Fund's
investment income may be received in foreign currencies, the Fund
will be required to compute its income in U.S. dollars for
distribution to shareholders, and therefore the Fund will absorb the
cost of currency fluctuations. After the Fund has distributed
income, subsequent foreign currency losses may result in the Fund's
having distributed more income in a particular fiscal period than was
available from investment income, which could result in a return of
capital to shareholders.
Investing in foreign securities offers the Fund potential
benefits not available from investing solely in securities of
domestic issuers, including the opportunity to invest in foreign
issuers that appear to offer growth potential, or in foreign
countries with economic policies or business cycles different from
those of the U.S., or to reduce fluctuations in portfolio value by
taking advantage of foreign stock markets that do not move in a
manner parallel to U.S. markets. If the Fund's portfolio securities
are held abroad, the sub-custodians or depositories holding them must
be approved by the Fund's Board of Trustees to the extent that
approval is required under applicable rules of the Securities and
Exchange Commission.
Risks of Foreign Investing. 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 or
loss of certificates for portfolio securities; possibilities in some
countries of expropriation or nationalization of assets, confiscatory
taxation, political, financial or social instability or adverse
diplomatic developments; and unfavorable differences between the U.S.
economy and foreign economies. In the past, U.S. Government
policies have discouraged certain investments abroad by U.S.
investors, through taxation or other restrictions, and it is possible
that such restrictions could be re-imposed.
Special Risks of Emerging Market Countries. Investments in
emerging market countries may involve further risks in addition to
those identified above for investments in foreign securities.
Securities issued by emerging market countries and by companies
located in those countries may be subject to extended settlement
periods, whereby the Fund might not receive principal and/or income
on a timely basis and its net asset value could be affected. There
may be a lack of liquidity for emerging market securities because
emerging markets generally have smaller, less developed trading
markets and exchanges (so that the Fund may not be able to dispose of
those securities rapidly and at a reasonable price); interest rates
and foreign currency exchange rates may be more volatile; sovereign
limitations on foreign investments may be more likely to be imposed;
there may be significant balance of payment deficits; and their
economies and markets may respond in a more volatile manner to
economic changes than those of developed countries.
Asset-Backed Securities. These securities, issued by
trusts and special purpose corporations, are backed by pools of
assets, primarily automobile and credit-card receivables and home
equity loans, which pass through the payments on the underlying
obligations to the security holders (less servicing fees paid to the
originator or fees for any credit enhancement). The value of an
asset-backed security is affected by changes in the market's
perception of the asset backing the security, the creditworthiness of
the servicing agent for the loan pool, the originator of the loans,
or the financial institution providing any credit enhancement, and is
also affected if any credit enhancement has been exhausted. Payments
of principal and interest passed through to holders of asset-backed
securities are typically supported by some form of credit
enhancement, such as a letter of credit, surety bond, limited
guarantee by another entity or having a priority to certain of the
borrower's other securities. The degree of credit enhancement
varies, and generally applies to only a fraction of the asset-backed
security's par value until exhausted. 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 experience losses or
delays in receiving payment. The risks of investing in asset-backed
securities are ultimately dependent upon payment of consumer loans by
the individual borrowers. As a purchaser of an asset-backed
security, the Fund would generally have no recourse to the entity
that originated the loans in the event of default by a borrower. The
underlying loans are subject to prepayments, which shorten the
weighted average life of asset-backed securities and may lower their
return, in the same manner as described above for prepayments of a
pool of mortgage loans underlying mortgage-backed securities.
However, asset-backed securities do not have the benefit of the same
security interest in the underlying collateral as do 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 "I/O" class),
while the other class will receive all of the principal (the
"principal-only" or "P/O" 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 I/O 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.
Ginnie Mae Certificates. Certificates of the Government
National Mortgage Association ("Ginnie Mae Certificates") are
mortgage-backed securities which evidence an undivided interest in a
pool or pools of mortgages. The Ginnie Mae 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 Ginnie Mae, regardless of whether the mortgagor actually
makes the payments.
The National Housing Act authorizes Ginnie Mae 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
Ginnie Mae guarantee is backed by the full faith and credit of the
U.S. Government. Ginnie Mae 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 Ginnie Mae 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 Ginnie Mae guarantee, except to the extent
that the Fund has purchased the certificates at a premium in the
secondary market.
Federal National Mortgage Association ( Fannie Mae )
Securities. The Federal National Mortgage Association ("Fannie Mae")
was established to create a secondary market in mortgages insured by
the FHA. Fannie Mae issues guaranteed mortgage pass-through
certificates ("Fannie Mae Certificates"). Fannie Mae Certificates
resemble Ginnie Mae Certificates in that each Fannie Mae Certificate
represents a pro rata share of all interest and principal payments
made and owed on the underlying pool. Fannie Mae guarantees timely
payment of interest and principal on Fannie Mae Certificates. The
Fannie Mae guarantee is not backed by the full faith and credit of
the U.S. Government.
Federal Home Loan Mortgage Corporation ( Freddie Mac )
Securities. The Federal Home Loan Mortgage Corporation ("Freddie
Mac") was created to promote development of a nationwide secondary
market for conventional residential mortgages. Freddie Mac issues
two types of mortgage pass-through securities ("Freddie Mac
Certificates"): mortgage participation certificates ("PCS") and
guaranteed mortgage certificates ("GMCs"). PCS resemble Ginnie Mae
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 Freddie Mac guarantee is not backed by
the full faith and credit of the U.S. Government.
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 borrower. 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 to public and private entities of countries issuing Brady
Bonds, investments in Brady Bonds are to be viewed as speculative.
Other Investment Techniques and Strategies
Loans of Portfolio Securities. To attempt to increase its
income, the Fund may lend its portfolio securities (other than in
repurchase transactions) to brokers, dealers and other financial
institutions. These loans are limited to not more than 25% of the
Fund s net assets. Under applicable regulatory requirements (which
are subject to change), the loan collateral on each business day must
at least equal the value of the loaned securities and must consist of
cash, bank letters of credit or securities of the U.S. Government
(or its agencies or instrumentalities). To be acceptable as
collateral, letters of credit must obligate a bank to pay amounts
demanded by the Fund if the demand meets the terms of the letter.
Such terms and the issuing bank must be satisfactory to the Fund.
When it lends securities, the Fund receives from the borrower an
amount equal to the dividends declared or interest paid on the loaned
securities during the term of the loan as well as the interest on
securities used as collateral less any finders fees, administrative
or other fee the Fund pays in connection with the loan. Either type
of interest may be shared with the borrower. The Fund may also pay
reasonable finder's, custodian and administrative or other fees. The
terms of the Fund's loans must meet applicable tests under the
Internal Revenue Code and must permit the Fund to reacquire loaned
securities on five days' notice or in time to vote on any important
matter. The Fund presently does not loan portfolio securities but if
it should, the Fund does not expect that the value of securities
loaned will exceed 5% of the value of the Fund s total assets.
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 repayment obligation. Additionally, the Manager
will impose creditworthiness requirements to confirm that the vendor
is financially sound and will continuously monitor the collateral's
value.
Restricted and Illiquid Securities. To enable the Fund to
sell restricted securities not registered under the Securities Act of
1933, the Fund may have to cause those securities to be registered.
The expenses of registration of restricted securities may be
negotiated by the Fund with the issuer at the time such securities
are purchased by the Fund, if such registration is required before
such securities may be sold publicly. When registration must be
arranged because the Fund wishes to sell the security, a considerable
period may elapse between the time the decision is made to sell the
securities and the time the Fund would be permitted to sell them. The
Fund would bear the risks of any downward price fluctuation during
that period. The Fund may also acquire, through private placements,
securities having contractual restrictions on their resale, which
might limit the Fund's ability to dispose of such securities and
might lower the amount realizable upon the sale of such securities.
The Fund has percentage limitations that apply to purchases of
restricted securities, as stated in the Prospectus. Those percentage
restrictions do not limit purchases of restricted securities that are
eligible for sale to qualified institutional purchasers pursuant to
Rule 144A under the Securities Act of 1933, provided that those
securities have been determined to be liquid by the Board of Trustees
of the Fund or by the Manager under Board-approved guidelines. Those
guidelines take into account the trading activity for such securities
and the availability of reliable pricing information, among other
factors. If there is a lack of trading interest in a particular Rule
144A security, the Fund's holding of that security may be deemed to
be illiquid.
"When-Issued" and Delayed Delivery Transactions. The Fund
may purchase securities on a "when-issued" basis, and may purchase or
sell such securities on a "delayed delivery" basis. Although the
Fund will enter into such transactions for the purpose of acquiring
securities for its portfolio or for delivery pursuant to options
contracts it has entered into, the Fund may dispose of a commitment
prior to settlement. "When-issued" or "delayed delivery" refers to
securities whose terms and indenture are available and for which a
market exists, but which are not available for immediate delivery.
When such transactions are negotiated, the price (which is generally
expressed in yield terms) is fixed at the time the commitment is
made, but delivery and payment for the securities take place at a
later date. Such securities may bear interest at a lower rate than
longer-term securities. The commitment to purchase a security for
which payment will be made on a future date may be deemed a separate
security and involve a risk of loss if the value of the security
declines prior to the settlement date. During the period between
commitment by the Fund and settlement (generally not more than 120
days from the date the offer is accepted), no payment is made for the
securities purchased by the purchaser, and no interest accrues to the
purchaser from the transaction. Such securities are subject to
market fluctuation; the value at delivery may be less than the
purchase price. The Fund will identify to its custodian liquid
assets at least equal to the value of purchase commitments until
payment is made.
The Fund will engage in when-issued transactions in order to
secure what is considered to be an advantageous price and yield at
the time of entering into the obligation. When the Fund engages in
when-issued or delayed delivery transactions, it relies on the buyer
or seller, as the case may be, to consummate the transaction.
Failure of the buyer or seller to do so may result in the Fund losing
the opportunity to obtain a price and yield considered to be
advantageous. At the time the Fund makes a commitment to purchase or
sell a security on a when-issued or forward commitment basis, it
records the transaction and reflects the value of the security
purchased, or if a sale, the proceeds to be received, in determining
its net asset value. If the Fund chooses to (i) dispose of the right
to acquire a when-issued security prior to its acquisition or (ii)
dispose of its right to deliver or receive against a forward
commitment, it may incur a gain or loss.
To the extent the Fund engages in when-issued and delayed
delivery transactions, it generally will do so for the purpose of
acquiring or selling securities consistent with its investment
objective and policies and not for the purposes of investment
leverage. The Fund generally enters into such transactions with the
intention of actually receiving or delivering the securities,
although (as noted above), when-issued securities and forward
commitments may be sold prior to settlement date. In addition,
changes in interest rates before settlement in a direction other than
that expected by the Manager will affect the value of such securities
and may cause a loss to the Fund.
When-issued transactions and forward commitments allow the Fund
a technique to use against anticipated changes in interest rates and
prices. For instance, in periods of rising interest rates and
falling prices, the Fund might sell securities in its portfolio on a
forward commitment basis to attempt to limit its exposure to
anticipated falling prices. In periods of falling interest rates and
rising prices, the Fund might sell portfolio securities and purchase
the same or similar securities on a when-issued or forward commitment
basis, thereby obtaining the benefit of currently higher cash yields.
Hedging. The Fund may use hedging instruments for the
purposes described in the Prospectus. When hedging to attempt to
protect against declines in the market value of the Fund's portfolio,
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 or Financial Futures (together with Interest Rate
Futures, "Futures"), (ii) buy puts on securities indices or on
securities, (iii) write covered calls on securities, securities
indices or on Futures, or (iv) purchase Futures to hedge the value of
certain assets whose values decline as interest rates decline. 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 Futures, or
(ii) buy calls on Futures, securities indices or on 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, (b) write calls on that currency or (c) enter
into Forward Contracts.
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.
The Fund's strategy of hedging with Futures and options on
Futures will be incidental to the Fund's investment activities in the
underlying cash market. In the future, the Fund may employ hedging
instruments and strategies that are not presently contemplated but
which may be developed, to the extent such investment methods are
consistent with the Fund's investment objectives, and are legally
permissible and disclosed in the Prospectus. Additional information
about the hedging instruments the Fund may use is provided below.
Futures. The Fund may buy and sell Interest Rate Futures
and Financial Futures. 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. The contracts obligate the seller to
deliver, and the purchaser to take, cash to settle the futures
transaction or to enter into an offsetting contract. No physical
delivery of the securities underlying the index is made on settling
the futures obligation. No monetary amount is paid or received by the
Fund on the purchase or sale of 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 certain specified
conditions. As the Future is marked to market (that is, its value on
the Fund's books is changed) to reflect changes in its market value,
subsequent margin payments, called variation margin, will be paid to
or by the futures broker on a daily basis. 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.
Financial Futures are similar to Interest Rate Futures except
that settlement is made in cash, and net gain or loss on options on
Financial Futures depends on price movements of the securities
included in the index. The strategies which the Fund employs
regarding Financial Futures are similar to those described herein
with regard to Interest Rate Futures.
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. 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 enter into
a Forward Contract in order to "lock in" the U.S. dollar price of a
security denominated in a foreign currency which it has purchased or
sold but which has not yet settled, or to protect against a possible
loss resulting from an adverse change in the relationship between the
U.S. dollar and a foreign currency.
There is a risk that use of Forward Contracts may reduce the
gain that would otherwise result from a change in the relationship
between the U.S. dollar and a foreign currency. To attempt to limit
its exposure to loss under Forward Contracts in a particular foreign
currency, the Fund limits its use of these contracts to the amount of
its assets denominated in that currency or denominated in a closely-
correlated 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 other than that in which the underlying security is
denominated. This is done in the expectation that there is a
significant correlation between the foreign currency of the forward
contract and the foreign currency of the underlying investment.
This technique is referred to as "cross hedging." A cross hedge may
be established with the U.S. dollar as the base currency or with
another currency closely correlated with the U. S. dollar as the base
currency.
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 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.
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 Covered Calls and
Hedging Instruments" below for a discussion of the tax treatment of
foreign currency exchange contracts.
The Fund may enter into Forward Contracts with respect to
specific transactions. For example, when the Fund enters into a
contract for the purchase or sale of a security denominated in a
foreign currency, or when the Fund anticipates receipt of dividend
payments in a foreign currency, the Fund may desire to "lock-in" the
U.S. dollar price of the security or the U.S. dollar equivalent of
such payment by entering into a Forward Contract, for a fixed amount
of U.S. dollars per unit of foreign currency, for the purchase or
sale of the amount of foreign currency involved in the underlying
transaction ("transaction hedge"). The Fund will thereby be able to
protect itself against a possible loss resulting from an adverse
change in the relationship between the currency exchange rates during
the period between the date on which the security is purchased or
sold, or on which the payment is declared, and the date on which such
payments are made or received.
The Fund may also use Forward Contracts to lock in the U.S.
dollar value of portfolio positions ("position hedge"). In a
position hedge, for example, when the Fund believes that foreign
currency may suffer a substantial decline against the U.S. dollar, it
may enter into a forward sale contract to sell an amount of that
foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency, or when
the Fund believes that the U.S. dollar may suffer a substantial
decline against a foreign currency, it may enter into a forward
purchase contract to buy that foreign currency for a fixed dollar
amount. In this situation the Fund may, in the alternative, enter
into a forward contract to sell a different foreign currency for a
fixed U.S. dollar amount (or for a fixed amount of another currency
closely correlated with the U.S. dollar) 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 to cover its short
positions. 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.
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. Contracts are not traded on an
exchange and therefore, the Fund must evaluate the credit and
performance risk of each particular counterparty under a Forward
Contract.
Although the Fund values its assets daily in terms of U.S.
dollars, it does not intend to convert its holdings of foreign
currencies into U.S. dollars on a daily basis. The Fund may convert
foreign currency from time to time, and investors should be aware of
the costs of currency conversion. Foreign exchange dealers do not
charge a fee for conversion, but they do seek to realize a profit
based on the difference between the prices at which they buy and sell
various currencies. Thus, a dealer may offer to sell a foreign
currency to the Fund at one rate, while offering a lesser rate of
exchange should the Fund desire to resell that currency to the
dealer.
The Fund will not enter into such Forward Contracts or maintain
a net exposure to such contracts where the consummation of the
contracts would obligate the Fund to deliver an amount of foreign
currency in excess of the value of the Fund s portfolio securities or
other assets denominated in that currency or another currency that is
also the subject of the hedge. The Fund, however, in order to avoid
excess transactions and transaction costs, may maintain a net
exposure to Forward Contracts in excess of the value of the Fund s
portfolio securities or other assets denominated in these currencies
provided the excess amount is covered by liquid, high-grade debt
securities, denominated in any currency, at least equal at all times
to the amount of such excess.
Writing and Purchasing Calls. As described in the
Prospectus, the Fund may write covered calls. When the Fund writes a
call on an investment, it receives a premium and agrees to sell the
callable investment to a purchaser of a corresponding call during the
call period at a fixed exercise price (which may differ from the
market price of the underlying investment) regardless of market price
changes during the call period. To terminate its obligation on a
call it has written, the Fund may purchase a corresponding call in a
"closing purchase transaction." A profit or loss will be realized,
depending upon whether the net of the amount of option transaction
costs and the premium received on the call the Fund has written is
more or less than the price of the call the Fund subsequently
purchased. A profit may also be realized if the call lapses
unexercised because the Fund retains the underlying investment and
the premium received. Those profits are considered short-term
capital gains for Federal income tax purposes, as are premiums on
lapsed calls, and when distributed by the Fund are taxable as
ordinary income. If the Fund could not effect a closing purchase
transaction due to the lack of a market, it would have to hold the
callable investment until the call lapsed or was exercised.
The Fund may 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.
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 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." The Fund will not invest more than 25%
of its assets in interest rate swap transactions.
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 is
required to operate within certain guidelines and restrictions with
respect to its use of futures and options thereon as established by
the Commodities Futures Trading Commission ("CFTC"). In particular,
the Fund is excluded from registration as a "commodity pool operator"
if it complies with the requirements of Rule 4.5 adopted by the CFTC.
The Rule does not limit the percentage of the Fund's assets that may
be used for Futures margin and related option premiums for a bona
fide hedging position. However, under the Rule the Fund must limit
its aggregate initial futures margin and related option premiums to
no more than 5% of the Fund's net assets for hedging strategies that
are not considered bona fide hedging strategies under the Rule.
Transactions in options by the Fund are subject to limitations
established by each of the exchanges governing the maximum number of
options which may be written or held by a single investor or group of
investors acting in concert, regardless of whether the options were
written or purchased on the same or different exchanges or are held
in one or more accounts or through one or more different exchanges or
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 advisor.
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 (although it reserves the right not to
qualify). That qualification enables the Fund to "pass through" its
income and realized capital gains to shareholders without the Fund
having to pay tax on them. This avoids a "double tax" on that income
and capital gains, since shareholders normally will be taxed on the
dividends and capital gains they receive from the Fund (unless the
Fund's shares are held in a retirement account or the shareholder is
otherwise exempt from tax). One of the tests for the Fund's
qualification as a regulated investment company is that less than 30%
of its gross income must be derived from gains realized on the sale
of securities held for less than three months. To comply with that
30% cap, the Fund will limit the extent to which it engages in the
following activities, but will not be precluded from them: (i)
selling investments, including Stock Index Futures, held for less
than three months, whether or not they were purchased on the exercise
of a call held by the Fund; (ii) purchasing options which expire in
less than three months; (iii) effecting closing transactions with
respect to calls or puts written or purchased less than three months
previously; (iv) exercising puts or calls held by the Fund for less
than three months; or (v) writing calls on investments held less than
three months.
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 and timing of gains (or losses) recognized 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.
Risks of Hedging With Options and Futures. An option
position may be closed out only on a market that provides secondary
trading for options of the same series, and there is no assurance
that a liquid secondary market will exist for any particular option.
In addition to the risks associated with hedging that are discussed
in the Prospectus and above, there is a risk in using short hedging
by selling Futures to attempt to protect against declines in the
value of the Fund's portfolio securities (due to an increase in
interest rates) that the prices of such Futures will correlate
imperfectly with the behavior of the cash (i.e., market value) prices
of the Fund's securities. The ordinary spreads between prices in the
cash and futures markets are subject to distortions, due to
differences in the natures of those markets. First, all participants
in the futures markets are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit
requirements, investors may close out futures contracts through
offsetting transactions which could distort the normal relationship
between the cash and futures markets. Second, the liquidity of the
futures markets depends on participants entering into offsetting
transactions rather than making or taking delivery. To the extent
participants decide to make or take delivery, liquidity in the
futures markets could be reduced, thus producing distortion. Third,
from the point of view of speculators, the deposit requirements in
the futures markets are less onerous than margin requirements in the
securities markets. Therefore, increased participation by
speculators in the futures markets may cause temporary price
distortions.
The risk of imperfect correlation increases as the composition
of the Fund's portfolio diverges from the securities included in the
applicable index. To compensate for the imperfect correlation of
movements in the price of the securities being hedged and movements
in the price of the hedging instruments, the Fund may use hedging
instruments in a greater dollar amount than the dollar amount of
securities being hedged if the historical volatility of the prices of
the securities being hedged is more than the historical volatility of
the applicable index. It is also possible that if the Fund has used
hedging instruments in a short hedge, the market may advance and the
value of securities held in the Fund's portfolio may decline. If that
occurred, the Fund would lose money on the hedging instruments and
also experience a decline in value in its portfolio securities.
However, while this could occur for a very brief period or to a very
small degree, over time the value of a diversified portfolio of
securities will tend to move in the same direction as the indices
upon which the hedging instruments are based.
If the Fund uses hedging instruments to establish a position in
the securities markets as a temporary substitute for the purchase of
individual securities (long hedging) by buying Futures and/or calls
on such Futures, on securities or on securities indices, it is
possible that the market may decline. If the Fund then concludes not
to invest in securities at that time because of concerns as to a
possible further market decline or for other reasons, the Fund will
realize a loss on the hedging instruments that is not offset by a
reduction in the price of the securities purchased.
Other Investment Restrictions
The Fund's most significant investment restrictions are set
forth in the Prospectus. There are additional investment
restrictions that the Fund must follow that are also fundamental
policies. Fundamental policies and the Fund's investment objectives
cannot be changed without the vote of a "majority" of the Fund's
outstanding voting securities. Under the Investment Company Act,
such a "majority" vote is defined as the vote of the holders of the
lesser of: (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 advisor 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;
(7) invest in other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of
assets;
(8) 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;
(9) 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";
(10) invest in commodities or commodity contracts; however, the
Fund may buy and sell any of the Hedging Instruments and commodity-
linked notes which it may use as permitted by any of its other
policies, whether or not such Hedging Instrument or note is
considered to be a commodity or commodity contract, subject to the
restrictions and limitations stated under "Hedging" and in this
Prospectus; or
(11) invest more than 5% of the Fund's net assets in securities
of companies (including predecessors) that have operated less than
three years.
For purposes of the Fund's policy not to concentrate described
under "Other Investment Restrictions" in the Prospectus, the Fund has
adopted the industry classifications set forth in the Appendix to
this Statement of Additional Information. This is not a fundamental
policy.
How the Fund Is Managed
Organization and History. Prior to October 1, 1995, the name of the
Fund was Oppenheimer Champion High Yield Fund. As a Massachusetts
business trust, the Fund is not required to hold, and does not plan
to hold, regular annual meetings of shareholders. The Fund will hold
meetings when required to do so by the Investment Company Act or
other applicable law, or when a shareholder meeting is called by the
Trustees. Shareholders have the right, upon the declaration in
writing or vote of two-thirds of the outstanding shares of the Fund,
to remove a Trustee. The Trustees will call a meeting of
shareholders to vote on the removal of a Trustee upon the written
request of the record holders of 10% of its outstanding shares. In
addition, if the Trustees receive a request from at least 10
shareholders (who have been shareholders for at least six months)
holding shares of the Fund valued at $25,000 or more or holding at
least 1% of the Fund's outstanding shares, whichever is less, stating
that they wish to communicate with other shareholders to request a
meeting to remove a Trustee, the Trustees will then either make the
Fund's shareholder list available to the applicants or mail their
communication to all other shareholders at the applicants' expense,
or the Trustees may take such other action as set forth under Section
16(c) of the Investment Company Act.
Each Share of the Fund represents an interest in the Fund
proportionately equal to the interest of each other share of the same
class and entitle the holder to one vote per share (and a fractional
vote for a fractional share) on matters submitted to their vote at
shareholders' meetings. Shareholders of the Fund vote together in
the aggregate on certain matters at shareholders' meetings, such as
the election of Trustees and ratification of appointment of auditors
for the Fund. Shareholders of a particular series or class vote
separately on proposals which affect that series or class, and
shareholders of a series or class which is not affected by that
matter are not entitled to vote on the proposal.
The Trustees are authorized to create new series and classes of
series. The Trustees may reclassify unissued shares of the Fund or
its series or classes into additional series or classes of shares.
The Trustees may also divide or combine the shares of a class into a
greater or lesser number of shares without thereby changing the
proportionate beneficial interest of a shareholder in the Fund.
Shares do not have cumulative voting rights or preemptive or
subscription rights. Shares may be voted in person or by proxy.
The Fund's Declaration of Trust contains an express disclaimer
of shareholder or Trustee liability for the Fund's obligations, and
provides for indemnification and reimbursement of expenses out of its
property for any shareholder held personally liable for its
obligations. The Declaration of Trust also provides that the Fund
shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the Fund and satisfy any
judgment thereon. Thus, while Massachusetts law permits a
shareholder of a business trust (such as the Fund) to be held
personally liable as a "partner" under certain circumstances, the
risk of a Fund shareholder incurring financial loss on account of
shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its
obligations described above. Any person doing business with the
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.
And Officers Of The Fund. The Fund's Trustees and officers and
their principal occupations and business affiliations during the past
five years are set forth below. All of the Trustees are also
Trustees, Directors or Managing General Partners of Centennial
America Fund, L.P., Centennial California Tax Exempt Trust,
Centennial Government Trust, Centennial Money Market Trust,
Centennial New York Tax Exempt Trust, Centennial Tax Exempt Trust,
Daily Cash Accumulation Fund, Inc., Oppenheimer Cash Reserves,
Oppenheimer Equity Income Fund, Oppenheimer Integrity Funds,
Oppenheimer International Bond Fund, Oppenheimer High Yield Fund,
Oppenheimer Limited-Term Government Fund, Oppenheimer Main Street
Funds, Inc., Oppenheimer Strategic Income Fund, Oppenheimer Strategic
Income & Growth Fund, Oppenheimer Municipal Fund, Oppenheimer Total
Return Fund, Inc., Oppenheimer Variable Account Funds, Panorama
Series Fund, Inc. and The New York Tax-Exempt Income Fund, Inc., (the
"Denver-based Oppenheimer funds"), except for Mr. Fossel and Ms.
Macaskill who are not Trustees or Directors Oppenheimer Integrity
Funds, Oppenheimer Strategic Income Fund, Oppenheimer Variable
Account Funds and Panorama Series Fund, Inc. Mr. Fossel also is
not a trustee of Centennial New York Tax Exempt Trust and he is not a
Managing General Partner of Centennial America Fund, L.P. Ms.
Macaskill is President and Mr. Swain is Chairman of the Denver-based
Oppenheimer funds. Messrs. Bishop, Bowen, Donohue, Farrar and Zack
hold similar positions as officers of all such funds. As of January
10, 1997, the Trustees and officers of the Fund as a group owned less
than 1% of the Fund's outstanding Class A shares, none of the Fund's
outstanding Class B shares and none of the Fund's outstanding Class C
shares. The foregoing statement does not reflect ownership of shares
held of record by an employee benefit plan for employees of the
Manager (for which plan two of the Trustees and officers listed
below, Ms. Macaskill and Mr. Donohue, are trustees), other than the
shares beneficially owned under that plan by the officers of the Fund
listed below.
ROBERT G. AVIS, Trustee*; Age 65
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 advisor and trust company, respectively).
WILLIAM A. BAKER, Trustee; Age 81
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
CHARLES CONRAD, JR., Trustee; Age 66
1501 Quail Street, Newport Beach, California 92660
Chairman and Chief Executive Officer of Universal Space Lines,
Inc. (A space services management company); formerly, Vice
President of McDonnell Douglas Space Systems Co. and associated
with National Aeronautics and Space Administration.
JON S. FOSSEL, Trustee*; Age 54
Box 44 Mead Street, Waccabuc, New York 10597
Member of the Board of Governors of the Investment Company
Institute (a national trade association of investment
companies), Chairman of the Investment Company Institute
Education Foundation; Formerly Chairman and a director of
OppenheimerFunds, Inc. (the Manager ); formerly President and a
director of Oppenheimer Acquisition Corp.("OAC"), the Manager s
parent holding company; formerly a director of Shareholder
Services, Inc. ("SSI") and Shareholder Financial Services, Inc.
( SFSI ), transfer agent subsidiaries of .
SAM FREEDMAN, Trustee; Age 56
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly, Chairman and Chief Executive Officer of
OppenheimerFunds Services (a transfer agent); Chairman, Chief
Executive Officer and a director of SSI; Chairman, Chief Executive
Officer and director of SFSI; Vice President and a director of
OAC and a director of the Manager.
RAYMOND J. KALINOWSKI, Trustee; Age 67
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc.(a computer
products training company), 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 a Senior
Vice President.
C. HOWARD KAST, Trustee; Age 75
2552 E. Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an
accounting firm).
ROBERT M. KIRCHNER, Trustee; Age 75
7500 East Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
BRIDGET A. MACASKILL, President and Trustee*; Age 48
Two World Trade Center, New York, New York 10048-0203
President, Chief Executive Officer and a director of the
Manager and HarbourView Asset Management Corporation
( HarbourView ), a subsidiary of the Manager; Chairman and a
director of SSI and SFSI; President and a director of OAC and
Oppenheimer Partnership Holdings Inc., a holding company subsidiary
of the Manager; a director of Oppenheimer Real Asset Management ,
Inc. ( Real Asset ); formerly an Executive Vice President of the
Manager.
NED M. STEEL, Trustee; Age 81
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; Director of
Visiting Nurse Corporation of Colorado; formerly Senior Vice
President and a director of the Van Gilder Insurance Corp.
(insurance brokers).
JAMES C. SWAIN, Chairman, Chief Executive Officer and Trustee*;
Age 63
6803 South Tucson Way, Englewood Colorado 80012
Vice Chairman of the Manager; formerly President and a director
of Centennial Management Corporation, an investment advisor
subsidiary of the Manager ( Centennial ) and formerly Chairman
of the Board of SSI.
ANDREW J. DONOHUE, Vice President and Secretary; Age 46
Two World Trade Center, New York, New York 10048-0203
Executive Vice President and General Counsel of the Manager and
OppenheimerFunds Distributor, Inc. (the Distributor");
President and a director of Centennial; Executive Vice
President, General Counsel and a director of HarbourView, SFSI,
SSI and Oppenheimer Partnership Holdings Inc.; President and a
director of Real Asset; General Counsel of OAC; Executive Vice
President, Chief Legal Officer and a director of MultiSource
Services, Inc. (A broker-dealer); an officer of other
Oppenheimer funds; 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 advisor); director
and an officer of First Investors Family of Funds and First
Investors Life Insurance Company.
GEORGE C. BOWEN, Vice President, Treasurer and Assistant Secretary;
Age 60
6803 South Tucson Way, Englewood Colorado 80012
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; Treasurer of OAC; Vice President and Treasurer
of Real Asset; Chief Executive Officer, Treasurer and a director
of MultiSource Services, Inc.; an officer of other Oppenheimer
funds.
RALPH STELLMACHER, Vice President and Portfolio Manager; Age 37
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager; an officer of other
Oppenheimer funds.
ROBERT G. ZACK, Assistant Secretary; Age 48
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 Oppenheimer funds.
ROBERT J. BISHOP, Assistant Treasurer; Age 38
6803 South Tucson Way, Englewood Colorado 80012
Vice President of the Manager/Mutual Fund Accounting; an officer
of other Oppenheimer funds; formerly a Fund Controller for the
Manager, prior to which he was an Accountant for Yale &
Seffinger, P.C., an accounting firm, and previously an
Accountant and Commissions Supervisor for Stuart James Company,
Inc., a broker-dealer.
SCOTT T. FARRAR, Assistant Treasurer; Age 31
6803 South Tucson Way, Englewood Colorado 80012
Vice President of the Manager/Mutual Fund Accounting; an
officer of other Oppenheimer funds; formerly a Fund Controller
for the Manager, prior to which he was an International Mutual
Fund Supervisor for Brown Brothers, Harriman Co., a bank, and
previously a Senior Fund Accountant for State Street Bank &
Trust Company.
_____________________
*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 and
certain Trustees of the Fund (Ms. Macaskill and Mr. Swain) who are
affiliated with the Manager receive no salary or fee from the Fund.
Mr. Fossel did not receive any salary or fees from the Fund prior to
January 1, 1997. The remaining Trustees of the Fund received the
compensation shown below. Mr. Freedman became a Trustee June 27, 1996
and received no compensation from the Fund before that date. The
compensation from the Fund was paid during fiscal year ended
September 30, 1996. The compensation from all of the other Denver-
based Oppenheimer funds includes the Fund and is compensation
received as a director, trustee, managing general partner or member
of a committee of the Board of those funds during the calendar year
1996. Compensation is paid for services in the positions listed
beneath their names:
Total Compensation
Aggregate From All
Compensation Denver-based
Name and Position from the Fund Oppenheimer funds1
Robert G. Avis $488 $58,003
Trustee
William A. Baker $675 $79,715
Audit and Review
Committee Chairman
and Trustee
Charles Conrad, Jr. $592 $74,717
Audit and Review
Committee Member
and Trustee
Sam Freedman $230 $29,502
Trustee
Raymond J. Kalinowski $599 $74,173
Risk Management Oversight
Committee Member and
Trustee
C. Howard Kast $599 $74,173
Risk Management
Oversight Committee Member
and Trustee
Robert M. Kirchner $629 $74,717
Audit and Review
Committee Member
and Trustee
Ned M. Steel $488 $58,003
Trustee
1 For the 1996 calendar year.
Major Shareholders. As of January 10, 1997, no person
owns of record or is known by the Fund to own beneficially 5% or more
of the Fund as a whole or the Fund's outstanding Class A, Class B or
Class C shares, except Merrill Lynch Pierce Fenner & Smith Inc., 4800
Deer Lake Drive East, Floor 3, Jacksonville, Florida 32246, which was
the record owner of 629,623.118 Class B shares (approximately 7.09%
of Class B shares outstanding) and 1,741,204.272 Class C shares
(approximately 17.76% of the Class C shares then outstanding).
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled
by Massachusetts Mutual Life Insurance Company. OAC is also owned in
part by certain of the Manager's directors and officers, some of whom
serve as officers of the Fund and two of whom (Ms. Macaskill and Mr.
Swain) serve as Trustees of the Fund.
The Manager and the Fund have a Code of Ethics. It is designed
to detect and prevent improper personal trading by certain employees,
including portfolio managers, that would compete with or take
advantage of the Fund's portfolio transactions. Compliance with the
Code of Ethics is carefully monitored and strictly enforced by the
Manager.
The Investment Advisory Agreement. The Investment Advisory
Agreement between the Manager and the Fund requires the Manager, at
its expense, to provide the Fund with adequate office space,
facilities and equipment, and to provide and supervise the activities
of all administrative and clerical personnel required to provide
effective corporate administration for the Fund, including the
compilation and maintenance of records with respect to its
operations, the preparation and filing of specified reports, and 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
Investment Advisory Agreement or by the Distributor are paid by the
Fund. The Investment Advisory Agreement lists examples of expenses
paid by the Fund, the major categories of which relate to interest,
taxes, brokerage commissions, fees to certain Trustees, legal and
audit expenses, custodian and transfer agent expenses, share issuance
costs, certain printing and registration costs, and non-recurring
expenses, including litigation. For the Fund's fiscal years ended
September 30, 1994, 1995 and 1996, the management fees paid by the
Fund to the Manager were, $1,026,200, $1,728,602 and $2,902,865,
respectively.
The Investment Advisory Agreement contains no expense
limitation. However, because of state regulations limiting the fund
expenses that previously applied, the Manager had voluntarily
undertaken that the Fund s total expenses in any fiscal year
(including the investment advisory fee but exclusive of taxes,
interest, brokerage commissions, distribution plan payments and any
extraordinary non-recurring expenses, including litigation) would not
exceed the most stringent state regulatory limitation applicable to
the Fund. Due to changes in federal securities laws, such state
regulations no longer apply and the Manager s undertaking is
therefore inapplicable and has been withdrawn. During the Fund s
last fiscal year, the Fund s expenses did not exceed the most
stringent state regulatory limit and the voluntary undertaking was
not invoked.
The Investment Advisory Agreement provides that in the absence
of willful misfeasance, bad faith, gross negligence or reckless
disregard of 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
Investment Advisory Agreement relates. The Agreement permits the
Manager to act as investment advisor 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
advisor. If the Manager shall no longer act as investment advisor to
the Fund, the right of the Fund to use the name "Oppenheimer" as part
of its name may be withdrawn.
The Distributor. Under its General Distributor's Agreement
with the Fund, the Distributor acts as the Fund's principal
underwriter in the continuous public offering of the Fund's Class A,
Class B and Class C shares but is not obligated to sell a specific
number of shares. Expenses normally attributable to sales (other
than those paid under the Distribution and Service Plans, but
including advertising and the cost of printing and mailing
prospectuses, other than those furnished to existing shareholders)
are borne by the Distributor. During the Fund's fiscal years ended
September 30, 1994,1995 and 1996, the aggregate amount of sales
charge on sales of the Fund's Class A shares was $2,343,545,
$2,642,892 and $2,709,849, respectively, of which the Distributor and
an affiliated broker-dealer retained $595,684, $650,296 and $693,681
in those respective years. For the fiscal years ended September
30, 1996, the contingent deferred sales charge collected by the
Distributor on the redemption of Class B shares totaled $59,696. For
the fiscal year ended September 30, 1996, the contingent deferred
sales charge collected by the Distributor on the redemption of Class
C shares totaled $40,138. During the fiscal year ended September 30,
1996, the sales charges advanced to brokers-dealers by the
Distributor on sales of the Fund s Class B shares totaled
$2,801,916, of which $38,875 was paid to an affiliated broker-
dealer. During the fiscal year ended September 30, 1996, the sales
charges advanced to brokers-dealers by the Distributor on sales of
the Fund s Class C shares totaled $680,794, of which $7,587 was paid
to an affiliated broker-dealer. For additional information about
distribution of the Fund's shares and the payments made by the Fund
to the Distributor in connection with such activities, please refer
to "Distribution and Service Plans," below.
The Transfer Agent. OppenheimerFunds Services, the Fund's
transfer agent, is responsible for maintaining the Fund's shareholder
registry and shareholder accounting records, and for shareholder
servicing and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of
the duties of the Manager under the Investment Advisory Agreement is
to arrange the portfolio transactions for the Fund. The Investment
Advisory Agreement contains provisions relating to the employment of
broker-dealers ("brokers") to effect the Fund's portfolio
transactions. In doing so, the Manager is authorized by the
Investment Advisory Agreement to employ broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment
Company Act, as may, in its best judgment based on all relevant
factors, implement the policy of the Fund to obtain, at reasonable
expense, the "best execution" (prompt and reliable execution at the
most favorable price obtainable) of such transactions. The Manager
need not seek competitive commission bidding but is expected to
minimize the commissions paid to the extent consistent with the
interest and policies of the Fund as established by its Board of
Trustees.
Under the Investment Advisory Agreement, the Manager is
authorized to select brokers that provide brokerage and/or research
services for the Fund and/or the other accounts over which the
Manager or its affiliates have investment discretion. The
commissions paid to such brokers may be higher than another qualified
broker would have charged if a good faith determination is made by
the Manager that the commission is fair and reasonable in relation to
the services provided. Subject to the foregoing considerations, the
Manager may also consider sales of shares of the Fund and other
investment companies managed by the Manager or its affiliates as a
factor in the selection of brokers for the Fund's portfolio
transactions.
Although the Manager may use brokers to execute transactions for
the Fund, many of the trades contemplated by the Manager will be
conducted directly with dealers. Dealer transactions are considered
principal transactions because dealers trade directly for their own
account from their own inventory of securities. Consequently, dealer
trades or principal transactions do not involve brokerage
commissions.
Description of Brokerage Practices Followed by the Manager.
Subject to the provisions of the Investment Advisory Agreement and
the procedures and rules described above, allocations of brokerage
are generally made by the Manager's portfolio traders based upon
recommendations from the Manager's portfolio managers. In certain
instances, portfolio managers may directly place trades and allocate
brokerage, also subject to the provisions of the Investment Advisory
Agreement and the procedures and rules described above. In either
case, brokerage is allocated under the supervision of the Manager's
executive officers. Transactions in securities other than those for
which an exchange is the primary market are generally done with
principals or market makers. Brokerage commissions are paid
primarily for effecting transactions in listed securities and
otherwise only if it appears likely that a better price or execution
can be obtained. When the Fund engages in an option transaction,
ordinarily the same broker will be used for the purchase or sale of
the option and any transaction in the securities to which the option
relates. When possible, concurrent orders to purchase or sell the
same security by more than one of the accounts managed by the Manager
or its affiliates are combined. The transactions effected pursuant
to such combined orders are averaged as to price and allocated in
accordance with the purchase or sale orders actually placed for each
account.
The research services provided by a particular broker may be
useful only to one or more of the advisory accounts of the Manager
and its affiliates, and investment research received for the
commissions of those other accounts may be useful both to the Fund
and one or more of such other accounts. Such research, which may be
supplied by a third party at the instance of a broker, includes
information and analyses on particular companies and industries as
well as market or economic trends and portfolio strategy, receipt of
market quotations for portfolio evaluations, information systems,
computer hardware and similar products and services. If a research
service also assists the Manager in a non-research capacity (such as
bookkeeping or other administrative functions), then only the
percentage or component that provides assistance to the Manager in
the investment decision-making process may be paid in commission
dollars. The Board of Trustees permits the Manager to use
concessions on fixed price offerings to obtain research, in the same
manner as is permitted for agency transactions. The Board also
permits the Manager to use stated commissions on secondary fixed-
income trades to obtain research where the broker has represented to
the Manger that (i) the trade is not from the broker's own inventory,
(ii) the trade was executed by the broker on an agency basis at the
stated commission, and (iii) the trade is not a riskless principal
transaction.
The research services provided by brokers broaden the scope and
supplement the research activities of the Manager, by making
available additional views for consideration and comparisons, and by
enabling the Manager to obtain market information for the valuation
of securities held in the Fund's portfolio or being considered for
purchase. The Manager provides information to the Board of Trustees
as to the commissions paid to brokers furnishing such services
together with the Manager s representation that the amount of such
commission was reasonably related to the value or benefit of such
services.
During the Fund's fiscal years ended September 30, 1994,1995 and
1996, total brokerage commissions paid by the Fund (not including any
spreads or concessions on principal transactions on a net trade
basis) amounted to $6,760, $41,266 and $18,000, respectively. During
the fiscal year ended September 30, 1996, $902 was paid to brokers as
commissions in return for research services; the aggregate dollar
amount of these transactions was $309,209. The transactions giving
rise to those commissions were allocated in accordance with the
Manager's internal allocation procedures.
Performance of the Fund
Yield and Total Return Information. As described in the
Prospectus, from time to time the "standardized yield," "dividend
yield," "average annual total return," "cumulative total return,"
"average annual total return at net asset value" and "total return at
net asset value" of an investment in a class of shares of the Fund
may be advertised. An explanation of how these total returns are
calculated for each class and the components of those calculations is
set forth below.
The Fund's advertisements of its performance data must, under
applicable rules of the Securities and Exchange Commission, include
the average annual total returns for each advertised class of shares
of the Fund for the 1, 5, and 10-year periods (or the life of the
class, if less) ending as of the most recently-ended calendar quarter
prior to the publication of the advertisement. This enables an
investor to compare the Fund's performance to the performance of
other funds for the same periods. However, a number of factors should
be considered before using such information as a basis for comparison
with other investments. An investment in the Fund is not insured; its
returns and share prices are not guaranteed and normally will
fluctuate on a daily basis. When redeemed, an investor's shares may
be worth more or less than their original cost. Returns for any given
past period are not a prediction or representation by the Fund of
future returns. The returns of each class of shares of the Fund are
affected by portfolio quality, the type of investments the Fund holds
and its operating expenses allocated to the particular class.
Standardized Yields
Yield. The Fund's "yield" (referred to as "standardized
yield") for a given 30-day period for a class of shares is calculated
using the following formula set forth in rules adopted by the
Securities and Exchange Commission that apply to all funds that quote
yields:
(a-b) 6
Standardized 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 shares of that class outstanding
during the 30-day period that were entitled to receive
dividends.
d = the maximum offering price per share of that class on the
last day of the period, adjusted for undistributed net
investment income.
The standardized yield of a class of shares for a 30-day period
may differ from its yield for any other period. The SEC formula
assumes that the standardized 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 actual
distributions paid by the Fund to shareholders in the 30-day period,
but is a hypothetical yield based upon the net investment income from
the Fund's portfolio investments calculated for that period. The
standardized yield may differ from the "dividend yield" of that
class, described below. Additionally, because each class of shares
is subject to different expenses, it is likely that the standardized
yields of the Fund's classes of shares will differ. For the 30-day
period ended September 30, 1996, the standardized yields for the
Fund's Class A, Class B and Class C shares were 7.89%, 7.50% and
7.53%, respectively.
Dividend Yield and Distribution Return. From time to time the
Fund may quote a "dividend yield" or a "distribution return" for each
class. Dividend yield is based on the dividends paid on shares of a
class from dividends derived from net investment income during a
stated period. Distribution return includes dividends derived from
net investment income and from realized capital gains declared during
a stated period. 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
The maximum offering price for Class A shares includes the
maximum front-end sales charge. For Class B or Class C shares, the
maximum offering price is the net asset value per share, without
considering the effect of contingent deferred sales charges.
From time to time similar yield or distribution return
calculations may also be made using the Class A net asset value
(instead of its maximum offering price) at the end of the period. The
dividend yields on Class A shares for the 30-day period ended
September 30, 1996, were 8.24% and 8.65% when calculated at maximum
offering price and at net asset value, respectively. The dividend
yield on Class B and Class C shares for the 30-day period ended
September 30, 1996, were 7.88% and 7.91%, respectively, when
calculated at net asset value.
Total Return Information
Average Annual Total Returns. The "average annual total
return" of each class is an average annual compounded rate of return
for each year in a specified number of years. It is the rate of
return based on the change in value of a hypothetical initial
investment of $1,000 ("P" in the formula below) held for a number of
years ("n") to achieve an Ending Redeemable Value ("ERV") of that
investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
Cumulative Total Returns. The cumulative "total return"
calculation measures the change in value of a hypothetical investment
of $1,000 over an entire period of years. Its calculation uses some
of the same factors as average annual total return, but it does not
average the rate of return on an annual basis. Cumulative total
return is determined as follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current
maximum sales charge of 4.75% (as a percentage of the offering price)
is deducted from the initial investment ("P") (unless the return is
shown at net asset value, as described below). For Class B shares,
payment of a contingent deferred sales charge of 5.0% for the first
year, 4.0% for the second year, 3.0% for the third and fourth year,
2.0% for the fifth year and 1.0% for the sixth year, and none
thereafter, is applied, as described in the Prospectus. For Class C
shares, the payment of the 1% contingent deferred sales charge for
the first 12 months is applied, as described in the Prospectus.
Total returns also assume that all dividends and capital gains
distributions during the period are reinvested to buy additional
shares at net asset value per share, and that the investment is
redeemed at the end of the period. The "average annual total
returns" on an investment in Class A shares of the Fund for the one
and five year periods ended September 30, 1996 and for the period
from November 16, 1987 through September 30, 1996 were 7.90%, 11.77%
and 12.65%, respectively. The cumulative "total return" on Class A
shares for the period from November 16, 1987 through September 30,
1996 was 187.65%. The cumulative total return on Class B shares for
the period from October 2, 1995 through September 30, 1996 was 7.20%.
The cumulative total return on Class C shares for the period from
December 1, 1993 through September 30, 1996 was 24.11%.
Total Returns at Net Asset Value. From time to time the Fund
may also quote an average annual total return at net asset value or a
cumulative total return at net asset value for Class A, Class B or
Class C shares. Each is based on the difference in net asset value
per share at the beginning and the end of the period for a
hypothetical investment in that class of shares (without considering
front-end or contingent deferred sales charges) and takes into
consideration the reinvestment of dividends and capital gains
distributions. The cumulative total return at net asset value of the
Fund's Class A shares for the one year period ended September 30,
1996 and the period from November 16, 1987 through September 30, 1996
was 13.28% and 202.00%, respectively. The cumulative total return at
net asset value for Class B shares for the period from October 2,
1995 through September 30, 1996 was 12.20%. The cumulative total
return at net asset value for Class C shares for the period from
December 1, 1993 through September 30, 1996 was 24.11%.
Total return information may be useful to investors in reviewing
the performance of the Fund's Class A, Class B or Class C shares.
However, when comparing total return of an investment in Class A,
Class B or Class C shares of the Fund with that of other
alternatives, investors should understand that as the Fund invests in
high yield securities, its shares are subject to greater market risks
than shares of funds having other investment objectives and that the
Fund is designed for investors who are willing to accept greater risk
of loss in the hopes of realizing greater gains.
Other Performance Comparisons. From time to time the Fund may publish
the ranking of its Class A, Class B or Class C shares by Lipper
Analytical Services, Inc. ("Lipper"), a widely-recognized independent
service. Lipper monitors the performance of regulated investment
companies, including the Fund, and ranks their performance for
various periods based on categories relating to investment
objectives. The performance of the Fund's classes are ranked against
(i) all other funds (excluding money market funds), (ii) all other
high current yield fixed income funds and (iii) all other such funds
in a specific size category. The Lipper performance rankings are
based on total returns that include the reinvestment of capital gain
distributions and income dividends but do not take sales charges or
taxes into consideration.
From time to time the Fund may publish the star ranking of the
performance of its Class A, Class B or Class C shares by Morningstar,
Inc., an independent mutual fund monitoring service. Morningstar
ranks mutual funds in broad investment categories: domestic stock
funds, international stock funds, taxable bond funds, municipal bond
funds, based on risk-adjusted total investment returns. The Fund is
ranked among taxable bond funds. Investment return measures a fund's
or class s one, three, five and ten-year average annual total returns
(depending on the inception of the fund or class) in excess of 90-day
U.S. Treasury bill returns after considering the fund s sales charges
and expenses. Risk measures a fund s or class s performance below
90-day U.S. Treasury bill returns. Risk and investment return are
combined to produce star rankings reflecting performance relative to
the average fund in a fund's category. Five stars is the "highest"
ranking (top 10%), four stars is "above average" (next 22.5%), three
stars is "average" (next 35%), two stars is "below average" (next
22.5%) and one star is "lowest" (bottom 10%). The current star
ranking is the fund s or class s 3-year ranking or its combined 3-and
5-year ranking (weighted 60%/40%, respectively, or its combined 3-,5-
and 10-year ranking (weighted 40%, 30% and 30%, respectively),
depending on the inception of the fund or class. Rankings are
subject to change monthly.
The Fund may also compare its performance to that of other funds
in its Morningstar Category. In addition to its star rankings,
Morningstar also categorizes and compares a fund s 3-year performance
based on Morningstar s classification of the fund s investments and
investment style, rather than how a fund defines its investment
objective. Morningstar s four broad categories (domestic equity,
international equity, municipal bond and taxable bond) are each
further subdivided into categories based on types of investments and
investment styles. Those comparisons by Morningstar are based on the
same risk and return measurements as its star rankings but do not
consider the effect of sales charges.
The total return on an investment in the Fund's Class A, Class B
or Class C shares may be compared with performance for the same
period of the Lehman Brothers Corporate Bond Index and the Salomon
Brothers High Yield Market Index. 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.
Investors may also wish to compare the Fund's Class A, Class B
or Class C return to the returns on fixed income investments
available from banks and thrift institutions, such as certificates of
deposit, ordinary interest-paying checking and savings accounts, and
other forms of fixed or variable time deposits, and various other
instruments such as Treasury bills. However, the Fund's returns and
share price are not guaranteed by the FDIC or any other agency and
will fluctuate daily, while bank depository obligations may be
insured by the FDIC and may provide fixed rates of return, and
Treasury bills are guaranteed as to principal and interest by the
U.S. government.
From time to time, the Fund's Manager may publish rankings or
ratings of the Manager (or Transfer Agent) or the investor services
provided by them to shareholders of the Oppenheimer funds, other than
performance rankings of the Oppenheimer funds themselves. Those
ratings or rankings of shareholder/investor services by third parties
may compare the OppenheimerFunds' services to those of other mutual
fund families selected by the rating or ranking services and may be
based upon the opinions of the rating or ranking service itself,
based on its research or judgment, or based upon surveys of
investors, brokers, shareholders or others.
The performance of the Fund's Class A, Class B or Class C shares
may also be compared in publications to (i) the performance of
various market indices or to other investments for which reliable
performance data is available, and (ii) to averages, performance
rankings or other benchmarks prepared by recognized mutual fund
statistical services.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares and
Distribution and Service Plans for Class B and Class C shares under
Rule 12b-1 of the Investment Company Act, pursuant to which the Fund
makes payment to the Distributor 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 B shares (the "Class B
Plan") and Class C shares (the "Class C Plan"), such votes were cast
by the Manager as the sole initial holder of Class B and Class C
shares of the Fund.
In addition, under the Plans, the Manager and the Distributor,
in their sole discretion, from time to time, may use their own
resources (which, in the case of the Manager, may include profits
from the advisory fee it receives from the Fund), to make payments at
no cost to the Fund to brokers, dealers or other financial
institutions (each is referred to as a "Recipient" under the Plans)
for distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion, increase
or decrease the amount of payments they make from their own resources
to Recipients.
Unless terminated as described below, each Plan continues 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. Each Plan may be terminated at any time by the vote of
a majority of the Independent Trustees or by the vote of the holders
of a "majority" (as defined in the Investment Company Act) of the
outstanding shares of that class. No 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. In addition,
because Class B shares of the Fund automatically convert into Class A
shares after six years, the Fund is required by a Securities and
Exchange Commission rule to obtain the approval of Class B as well as
Class A shareholders for a proposed amendment to the Class A Plan
that would materially increase the payments under the Class A Plan.
Such approval must be by a "majority" (as defined in the Investment
Company Act), of the Class A and Class B shares voting separately by
class. 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 for which the payments
were made. The report for the Class C Plan shall also include the
Distributor's distribution costs for that quarter, and such costs for
previous fiscal periods that have been carried forward, as explained
in the Prospectus and below. Those reports will be subject to the
review and approval of the Independent Trustees in the exercise of
their fiduciary duty. Each Plan further provides that while it is in
effect, the selection 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.
For the fiscal year ended September 30, 1996, payments under the
Class A Plan totaled $748,429, all of which was paid by the
Distributor to Recipients as reimbursement for services, including
$28,869 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 B and Class C Plans allow the service fee payment to
be paid by the Distributor to Recipients in advance for the first
year such shares are outstanding, and thereafter on a quarterly
basis, as described in the Prospectus. The advance payment is based
on the net assets of the shares sold. An exchange of shares does not
entitle the Recipient to an advance service fee payment. In the
event shares are redeemed during the first year such shares are
outstanding, the Recipient will be obligated to repay a pro rata
portion of such advance payment to the Distributor.
Although the Class B and the Class C Plans permit the
Distributor to retain both the asset-based sales charges and the
service fees on Class B and 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 B and Class C Plan by the Board.
Initially, the Board has set no minimum holding period. All payments
under the Class B and Class C Plans are subject to the limitations
imposed by the Conduct Rules of the National Association of
Securities Dealers, Inc. on payments of asset-based sales charges and
service fees.
The Class B Plan provides for the Distributor to be compensated
at a flat rate, whether the Distributor's distribution expenses are
more or less than the amount paid by the Fund during that period.
Such payments are made in recognition that the Distributor (i) pays
sales commissions to authorized brokers and dealers to authorized
brokers and dealers at the time of sale and pays service fees as
described in the Prospectus, (ii) may finance such commissions and/or
the advance of the service fee payment to Recipients under those
Plans, (iii) employs personnel to support distribution of shares, and
(iv) may bear the costs of sales literature, advertising and
prospectuses (other than those furnished to current shareholders) and
state "blue sky" registration fees. For the fiscal year ended
September 30, 1996, payments under the Class B Plan totaled $328,699,
$323,036 of which was retained by the Distributor and none of which
was paid to an affiliate of the Distributor. At fiscal year ended
September 30, 1996, the Distributor
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. For the
fiscal year ended September 30, 1996, payments under the Class C Plan
totaled $893,787, $507,536 of which was retained by the Distributor
and $7,548 of which was paid to an affiliate of the Distributor.
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.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares.
The availability of three classes of shares permits 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.
Investors should understand that the purpose and function of the
deferred sales charge and asset-based sales charge with respect to
Class B and Class C shares are the same as those of the initial sales
charge with respect to Class A shares. Any salesperson or other
person entitled to receive compensation for selling Fund shares may
receive different compensation with respect to one class of shares
than another. The Distributor will not accept (i) any order for
$500,000 or more of Class B or (ii) any order for $1 million or more
of Class C shares on behalf of a single investor (not including
dealer "street name" or omnibus accounts) because generally it will
be more advantageous for that investor to purchase Class A shares of
the Fund instead.
The three classes of shares each represent an interest in the
same portfolio investments of the Fund. However, each class has
different shareholder privileges and features. The net income
attributable to Class B and Class C shares and the dividends payable
on Class B and Class C shares will be reduced by incremental expenses
borne by those classes, including the asset-based sales charge to
which Class B and Class C shares are subject.
The conversion of Class B shares to Class A shares after six
years is subject to the continuing availability of a private letter
ruling from the Internal Revenue Service, or an opinion of counsel or
tax advisor, to the effect that the conversion of Class B shares does
not constitute a taxable event for the holder under Federal income
tax law. If such a revenue ruling or opinion is no longer available,
the automatic conversion feature may be suspended, in which event no
further conversions of Class B shares would occur while such
suspension remained in effect. Although Class B shares could then be
exchanged for Class A shares on the basis of relative net asset value
of the two classes, without the imposition of a sales charge or fee,
such exchange could constitute a taxable event for the holder, and
absent such exchange, Class B shares might continue to be subject to
the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends
and distributions of the Fund's Class A, Class B and Class C shares
recognizes two types of expenses. General expenses that do not
pertain specifically to any class are allocated pro rata to the
shares of each class, based on the percentage of the net assets of
such class to the Fund's total assets, and then equally to each
outstanding share within a given class. Such general expenses
include (i) management fees, (ii) legal, bookkeeping and audit fees,
(iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other
materials for current shareholders, (iv) fees to 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 (i) Distribution and/or Service Plan fees, (ii)
incremental transfer and shareholder servicing agent fees and
expenses, (iii) registration fees and (iv) shareholder meeting
expenses, to the extent that such expenses pertain to a specific
class rather than to the Fund as a whole.
Determination of Net Asset Value Per Share. The net asset values per
share of Class A, Class B and Class C shares of the Fund are
determined as of the close of business of The New York Stock Exchange
on each day that the Exchange is open, by dividing the value of the
Fund's net assets attributable to that class by the number of shares
of that class outstanding. The Exchange normally closes at 4:00
P.M., New York time, but may close earlier on some days (for example,
in case of weather emergencies or on days falling before a holiday).
The Exchanges most recent annual holiday schedule (which is subject
to change) states that it will close on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. It may also close on other days.
Trading may occur in debt securities and in foreign securities when
the Exchange is closed (including weekends and holidays). Because
the Fund's net asset values will not be calculated on those days, the
Fund's net asset value per share may be significantly affected on
such days when shareholders may not purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally as follows: (i) equity
securities traded on a U.S. securities exchange or on NASDAQ for
which last sale information is regularly reported are valued at the
last reported sale price on their primary exchange or NASDAQ that day
(or, in the absence of sales that day, at values based on the last
sale prices of the preceding trading day or closing "bid" prices that
day); (ii) securities traded on a foreign securities exchange are
valued generally at the last sales price available to the pricing
service approved by the Fund's Board of Trustees or to the Manager as
reported by the principal exchange on which the security is traded at
its last trading session on or immediately preceding the valuation
date, or at the mean between "bid" and "ask" prices obtained from the
principal exchange or two active market makers in the security on the
basis of reasonable inquiry; (iii) long-term debt securities having a
remaining maturity in excess of 60 days are valued based on the mean
between the "bid" and "ask" prices determined by a portfolio pricing
service approved by the Fund's Board of Trustees or obtained by the
Manager from two active market makers in the security on the basis of
reasonable inquiry; (iv) debt instruments having a maturity of more
than 397 days when issued, and non-money market type instruments
having a maturity of 397 days or less when issued, which have a
remaining maturity of 60 days or less are valued at the mean between
the "bid" and "ask" prices determined by a pricing service approved
by the Fund's Board of Trustees or obtained by the Manager from two
active market makers in the security on the basis of reasonable
inquiry; (v) money market debt securities that had a maturity of no
more than 397 days when issued that have a remaining maturity of 60
days or less are valued at cost, adjusted for amortization of
premiums and accretion of discounts; and (vi) securities (including
restricted securities) not having readily-available market quotations
are valued at fair value determined under the Board's procedures. If
the Manager is unable to locate two market makers willing to give
quotes (see (ii), (iii) and (iv) above), the security may be priced
at the mean between the "bid" and "ask" prices provided by a single
active market maker (which in certain cases may be the "bid" price if
no "ask" price is available).
Trading in securities on European and Asian exchanges and over-
the-counter markets is normally completed before the close of the New
York Stock Exchange. Events affecting the values of foreign
securities traded in securities markets that occur between the time
their prices are determined and the close of the New York Stock
Exchange will not be reflected in the Fund's calculation of net
asset value unless the Board of Trustees or the Manager, under
procedures established by the Board of Trustees, determines that the
particular event is likely to effect a material change in the value
of such security. Foreign currency, including forward contracts,
will be valued at the closing price in the London foreign exchange
market that day as provided by a reliable bank, dealer or pricing
service. The values of securities denominated in foreign currency
will be converted to U.S. dollars at the closing price in the London
foreign exchange market that day as provided by a reliable bank,
dealer or pricing service.
Puts, calls and Futures are valued at the last sales price on
the principal exchange on which they are traded or on NASDAQ, as
applicable, as determined by a pricing service approved by the Board
of Trustees or by the Manager. If there were no sales that day,
value shall be the last sale price on the preceding trading day if it
is within the spread of the closing "bid" and "ask" prices on the
principal exchange or on NASDAQ on the valuation date, or, if not,
value shall be the closing "bid" price on the principal exchange or
on NASDAQ on the valuation date. If the put, call or future is not
traded on an exchange or on NASDAQ, it shall be valued at the mean
between "bid" and "ask" prices obtained by the Manager from two
active market makers (which in certain cases may be the "bid" price
if no "ask" price is available).
AccountLink. When shares are purchased through AccountLink, each
purchase must be at least $25.00. Shares will be purchased on the
regular business day the Distributor is instructed to initiate the
Automated Clearing House transfer to buy shares. Dividends will
begin to accrue on shares purchased by the proceeds of ACH transfers
on the business day the Fund receives Federal Funds for the purchase
through the ACH system before the close of The New York Stock
Exchange. The Exchange normally closes at 4:00 P.M., but may close
earlier on certain days. If Federal Funds are received on a business
day after the close of the Exchange, the shares will be purchased and
dividends will begin to accrue on the next regular business day. The
proceeds of ACH transfers are normally received by the Fund 3 days
after the transfers are initiated. The Distributor and the Fund are
not responsible for any delays in purchasing shares resulting from
delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced
sales charge rate may be obtained for Class A shares under Right of
Accumulation and Letters of Intent because of the economies of sales
efforts and expenses realized by the Distributor in making such
sales. No sales charge is imposed in certain circumstances described
in the Prospectus because the Distributor incurs little or no selling
expenses. The term "immediate family" refers to one's spouse,
children, grandchildren, parents, grandparents, parents-in-law,
brothers and sisters, sons-and daughters-in-law, siblings, a
sibling's spouse, a spouse's siblings, aunts, uncles, nieces and
nephews.
The Oppenheimer funds. The Oppenheimer funds are those mutual
funds for which the Distributor acts as the distributor or the sub-
distributor and include the following:
Limited Term New York Municipal Fund*
Oppenheimer Bond Fund for Growth
Oppenheimer Bond Fund
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Champion Income Fund
Oppenheimer Developing Markets Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer Disciplined Value Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Equity Income Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer International Bond Fund
Oppenheimer International Growth Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Growth Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street California Municipal Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer New York Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest for Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Growth & Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer U.S. Government Trust
Oppenheimer Value Stock Fund
Oppenheimer World Bond Fund
Rochester Fund Municipals*
the following "Money Market Funds":
Centennial Money Market Trust
Centennial Government Trust
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Daily Cash Accumulation Fund, Inc.
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
______________________
* Shares of the Fund are not presently exchangeable for shares of
these funds.
There is an initial sales charge on the purchase of Class A
shares of each of the Oppenheimer funds except Money Market Funds
(under certain circumstances described herein, redemption proceeds of
Money Market Fund shares may be subject to a contingent deferred
sales charge).
Letters of Intent. A Letter of Intent (referred to as a
"Letter") is an investor's statement in writing to the Distributor of
the intention to purchase Class A shares of the Fund (or Class A and
Class B shares of the Fund (and other Oppenheimer funds) during a 13-
month period (the "Letter of Intend period"), which may, at the
investor's request, include purchases made up to 90 days prior to the
date of the Letter. The Letter states the investor's intention to
make the aggregate amount of purchases of shares which, when added to
the investor's holdings of shares of those funds, will equal or
exceed the amount specified in the Letter. Purchases made by
reinvestment of dividends or distributions of capital gains and
purchases made at net asset value without sales charge do not count
toward satisfying the amount of the Letter. A Letter enables an
investor to count the Class A and Class B shares purchased under the
Letter to obtain the reduced sales charge rate on purchases of Class
A shares of the Fund (and other Oppenheimer funds) that applies under
the Right of Accumulation to current purchases of Class A shares.
Each purchase of Class A shares under the Letter will be made at the
public offering price (including the sales charge) that applies to a
single lump-sum purchase of shares in the amount intended to be
purchased under the Letter.
In submitting a Letter, the investor makes no commitment to
purchase shares, but if the investor's purchases of shares within the
Letter of Intent period, when added to the value (at offering price)
of the investor's holdings of shares on the last day of that period,
do not equal or exceed the intended purchase amount, the investor
agrees to pay the additional amount of sales charge applicable to
such purchases, as set forth in "Terms of Escrow," below (as those
terms may be amended from time to time). The investor agrees that
shares equal in value to 5% of the intended purchase amount will be
held in escrow by the Transfer Agent subject to the Terms of Escrow.
Also, the investor agrees to be bound by the terms of the Prospectus,
this Statement of Additional Information and the Application used for
such Letter of Intent, and if such terms are amended, as they may be
from time to time by the Fund, that those amendments will apply
automatically to existing Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer funds
by OppenheimerFunds prototype 401(k) plans under a Letter of Intent,
the Transfer Agent will not hold shares in escrow. If the intended
purchase amount under the Letter entered into by an OppenheimerFunds
prototype 401(k) plan is not purchased by the plan by the end of the
Letter of Intent period, there will be no adjustment of commissions
paid to the broker-dealer or financial institution of record for
accounts held in the name of that plan.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended purchase amount, the
commissions previously paid to the dealer of record for the account
and the amount of sales charge retained by the Distributor will be
adjusted to the rates applicable to actual purchases. If total
eligible purchases during the Letter of Intent period exceed the
intended purchase amount and exceed the amount needed to qualify for
the next sales charge rate reduction set forth in the applicable
prospectus, the sales charges paid will be adjusted to the lower
rate, but only if and when the dealer returns to the Distributor the
excess of the amount of commissions allowed or paid to the dealer
over the amount of commissions that apply to the actual amount of
purchases. The excess commissions returned to the Distributor will
be used to purchase additional shares for the investor's account at
the net asset value per share in effect on the date of such purchase,
promptly after the Distributor's receipt thereof.
In determining the total amount of purchases made under a
Letter, shares redeemed by the investor prior to the termination of
the Letter of Intent period will be deducted. It is the
responsibility of the dealer of record and/or the investor to advise
the Distributor about the Letter in placing any purchase orders for
the investor during the Letter of Intent period. All of such
purchases must be made through the Distributor.
Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in
value up to 5% of the intended purchase amount specified in the
Letter shall be held in escrow by the Transfer Agent. For example,
if the intended purchase amount is $50,000, the escrow shall be
shares valued in the amount of $2,500 (computed at the public
offering price adjusted for a $50,000 purchase). Any dividends and
capital gains distributions on the escrowed shares will be credited
to the investor's account.
2. If the intended purchase amount specified under the Letter
is completed within the thirteen-month Letter of Intent period, the
escrowed shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period
the total purchases pursuant to the Letter are less than the intended
purchase amount specified in the Letter, the investor must remit to
the Distributor an amount equal to the difference between the dollar
amount of sales charges actually paid and the amount of sales charges
which would have been paid if the total amount purchased had been
made at a single time. Such sales charge adjustment will apply to
any shares redeemed prior to the completion of the Letter. If such
difference in sales charges is not paid within twenty days after a
request from the Distributor or the dealer, the Distributor will,
within sixty days of the expiration of the Letter, redeem the number
of escrowed shares necessary to realize such difference in sales
charges. Full and fractional shares remaining after such redemption
will be released from escrow. If a request is received to redeem
escrowed shares prior to the payment of such additional sales charge,
the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes
and appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of a Letter)
include (a) Class A shares sold with a front-end sales charge or
subject to a Class A contingent deferred sales charge, (b) Class B
shares of other Oppenheimer funds acquired subject to a contingent
deferred sales charge, and (c) Class A shares or Class B shares
acquired in exchange for either (i) Class A shares of one of the
other Oppenheimer funds that were acquired subject to a Class A
initial or contingent deferred sales charge or (ii) Class B shares of
one of the other Oppenheimer funds that were acquired subject to a
contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be
exchanged for shares of another fund to which an exchange is
requested, as described in the section of the Prospectus entitled
"How to Exchange Shares," and the escrow will be transferred to that
other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must
accompany the application. Shares purchased by Asset Builder Plan
payments from bank accounts are subject to the redemption
restrictions for recent purchases described in "How To Sell Shares,"
in the Prospectus. Asset Builder Plans also enable shareholders of
Oppenheimer Cash Reserves to use those accounts for monthly automatic
purchases of shares of up to four other Oppenheimer funds.
There is a front-end sales charge on the purchase of certain
Oppenheimer funds, or a contingent deferred sales charge may apply to
shares purchased by Asset Builder payments. An application should be
obtained from the Distributor, completed and returned, and a
prospectus of the selected fund(s) should be obtained from the
Distributor or your financial advisor before initiating Asset Builder
payments. The amount of the Asset Builder investment may be changed
or the automatic investments may be terminated at any time by writing
to the Transfer Agent. A reasonable period (approximately 15 days)
is required after the Transfer Agent's receipt of such instructions
to implement them. The Fund reserves the right to amend, suspend, or
discontinue offering such plans at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for
the Fund's shares (for example, when a purchase check is returned to
the Fund unpaid) causes a loss to be incurred when the net asset
value of the Fund's shares on the cancellation date is less than on
the purchase date. That loss is equal to the amount of the decline
in the net asset value per share multiplied by the number of shares
in the purchase order. The investor is responsible for that loss.
If the investor fails to compensate the Fund for the loss, the
Distributor will do so. The Fund may reimburse the Distributor for
that amount by redeeming shares from any account registered in that
investor's name, or the Fund or the Distributor may seek other
redress.
Retirement Plans. In describing certain types of employee
benefit plans that may purchase Class A shares without being subject
to the Class A contingent deferred sales charge, the term "employee
benefit plan" means any plan or arrangement, whether or not
"qualified" under the Internal Revenue Code, including, medical
savings accounts, payroll deduction plans or similar plans in which
Class A shares are purchased by a fiduciary or other person for the
account of participants who are employees of a single employer or of
affiliated employers, if the Fund account is registered in the name
of the fiduciary or other person for the benefit of participants in
the plan.
The term "group retirement plan" means any qualified or non-
qualified retirement plan (including 457 plans, SEPs, SARSEPs, 403(b)
plans, and SIMPLE plans) for employees of a corporation or a sole
proprietorship, members and employees of a partnership or association
or other organized group of persons (the members of which may include
other groups), if the group has made special arrangements with the
Distributor and all members of the group participating in the plan
purchase Class A shares of the Fund through a single investment
dealer, broker or other financial institution designated by the
group.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and
conditions for redemptions set forth in the Prospectus.
Check writing. When a check is presented to the Bank for
clearance, the Bank will ask the Fund to redeem a sufficient number
of full and fractional shares in the shareholder's account to cover
the amount of the check. This enables the shareholder to continue
receiving dividends on those shares 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 to obtain cash at other
banks. The Fund reserves the right to amend, suspend or discontinue
offering check writing privileges at any time without prior notice.
Payments "In Kind". The Prospectus states that payment for
shares tendered for redemption is ordinarily made in cash. However,
the Board of Trustees of the Fund may determine that it would be
detrimental to the best interests of the remaining shareholders of
the Fund to make payment of a redemption order wholly or partly in
cash. In that case the Fund may pay the redemption proceeds in whole
or in part by a distribution "in kind" of securities from the
portfolio of the Fund, in lieu of cash, in conformity with applicable
rules of the Securities and Exchange Commission. The Fund has
elected to be governed by Rule 18f-1 under the Investment Company
Act, pursuant to which the Fund is obligated to redeem shares solely
in cash up to the lesser of $250,000 or 1% of the net assets of the
Fund during any 90-day period for any one shareholder. If shares are
redeemed in kind, the redeeming shareholder might incur brokerage or
other costs in selling the securities for cash. The method of valuing
securities used to make redemptions in kind will be the same as the
method the Fund uses to value its portfolio securities described
above under "Determination of Net Asset Values Per Share" and that
valuation will be made as of the time the redemption price is
determined.
Involuntary Redemptions. The Fund's Board of Trustees has the
right to cause the involuntary redemption of the shares held in any
account if the aggregate net asset value of those shares is less than
$200 or such lesser amount as the Board may fix. The Board of
Trustees will not cause the involuntary redemption of shares in an
account if the aggregate net asset value of the shares has fallen
below the stated minimum solely as a result of market fluctuations.
Should the Board elect to exercise this right, it may also fix, in
accordance with the Investment Company Act, the requirements for any
notice to be given to the shareholders in question (not less than 30
days), or the Board may set requirements for granting permission to
the Shareholder to increase the investment, and set other terms and
conditions so that the shares would not be involuntarily redeemed.
Reinvestment Privilege. Within six months of a redemption, a
shareholder may reinvest all or part of the redemption proceeds of
(i) Class A shares that you purchased subject to an initial sales
charge or the Class A contingent deferred sales charge when you
redeemed them, or (ii) Class B shares that were subject to the Class
B contingent deferred sales charge when you redeemed them. This
privilege does not apply to Class C shares. The reinvestment may be
made without sales charge only in Class A shares of the Fund or any
of the other Oppenheimer funds into which shares of the Fund are
exchangeable as described below, at the net asset value next computed
after the Transfer Agent receives the reinvestment order. The
shareholder must ask the Distributor for that privilege at the time
of reinvestment. Any capital gain that was realized when the shares
were redeemed is taxable, and reinvestment will not alter any capital
gains tax payable on that gain. If there has been a capital loss on
the redemption, some or all of the loss may not be tax deductible,
depending on the timing and amount of the reinvestment. Under the
Internal Revenue Code, if the redemption proceeds of Fund shares on
which a sales charge was paid are reinvested in shares of the Fund or
another of the Oppenheimer funds within 90 days of payment of the
sales charge, the shareholder's basis in the shares of the Fund that
were redeemed may not include the amount of the sales charge paid.
That would reduce the loss or increase the gain recognized from the
redemption. However, in that case the sales charge would be added to
the basis of the shares acquired by the reinvestment of the
redemption proceeds. The Fund may amend, suspend or cease offering
this reinvestment privilege at any time as to shares redeemed after
the date of such amendment, suspension or cessation.
Transfers of Shares. Shares of any class are not subject to the
payment of a contingent deferred sales charge at the time of transfer
to the name of another person or entity (whether the transfer occurs
by absolute assignment, gift or bequest, not involving, directly or
indirectly, a public sale). The transferred shares will remain
subject to the contingent deferred sales charge, calculated as if the
transferee shareholder had acquired the transferred shares in the
same manner and at the same time as the transferring shareholder. If
less than all shares held in an account are transferred, and some but
not all shares in the account would be subject to a contingent
deferred sales charge if redeemed at the time of transfer, the
priorities described in the Prospectus under "How to Buy Shares" for
the imposition of the Class B or Class C contingent deferred sales
charge will be followed in determining the order in which shares are
transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, 401(k)
plans or pension or profit-sharing plans should be addressed to
"Trustee, OppenheimerFunds Retirement Plans," c/o the Transfer Agent
at its address listed in "How To Sell Shares" in the Prospectus or on
the back cover of this Statement of Additional Information. The
request must: (i) state the reason for the distribution; (ii) state
the owner's awareness of tax penalties if the distribution is
premature; and (iii) conform to the requirements of the plan and the
Fund's other redemption requirements. Participants (other than self-
employed persons maintaining a plan account in their own name) in
OppenheimerFunds-sponsored prototype pension, profit-sharing or
401(k) plans may not directly redeem or exchange shares held for
their account under those plans. The employer or plan administrator
must sign the request. Distributions from pension and profit sharing
plans are subject to special requirements under the Internal Revenue
Code and certain documents (available from the Transfer Agent) must
be completed before the distribution may be made. Distributions from
retirement plans are subject to withholding requirements under the
Internal Revenue Code, and IRS Form W-4P (available from the Transfer
Agent) must be submitted to the Transfer Agent with the distribution
request, or the distribution may be delayed. Unless the shareholder
has provided the Transfer Agent with a certified tax identification
number, the Internal Revenue Code requires that tax be withheld from
any distribution even if the shareholder elects not to have tax
withheld. The Fund, the Manager, the Distributor, the Trustee and
the Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will
not be responsible for any tax penalties assessed in connection with
a distribution.
Special Arrangements for Repurchase of Shares from Dealers and
Brokers. The Distributor is the Fund's agent to repurchase its
shares from authorized dealers or brokers on behalf of their
customers. The shareholder should contact the broker or dealer to
arrange this type of redemption. The repurchase price per share will
be the net asset value next computed after the Distributor receives
the order placed by the dealer or broker, except that if the
Distributor receives a repurchase order from a dealer or broker after
the close of The New York Stock Exchange on a regular business day,
it will be processed at that day's net asset value if the order was
received by the dealer or broker from its customers prior to the time
the Exchange closes (normally, that is 4:00 P.M., but may be earlier
on some days) and the order was transmitted to and received by the
Distributor prior to its close of business that day (normally 5:00
P.M.). Ordinarily, for accounts redeemed by a broker-dealer under
this procedure, payment will be made within three business days after
the shares have been redeemed upon the Distributor's receipt of the
required redemption documents in proper form, with the signature(s)
of the registered owners guaranteed on the redemption document as
described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of
the Fund valued at $5,000 or more can authorize the Transfer Agent to
redeem shares (minimum $50) automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Withdrawal Plan.
Shares will be redeemed three business days prior to the date
requested by the shareholder for receipt of the payment. Automatic
withdrawals of up to $1,500 per month may be requested by telephone
if payments are to be made by check payable to all shareholders of
record and sent to the address of record for the account (and if the
address has not been changed within the prior 30 days). Required
minimum distributions from OppenheimerFunds-sponsored retirement
plans may not be arranged on this basis. Payments are normally made
by check, but shareholders having AccountLink privileges (see "How To
Buy Shares") may arrange to have Automatic Withdrawal Plan payments
transferred to the bank account designated on the OppenheimerFunds
New Account Application or signature-guaranteed instructions. The
Fund cannot guarantee receipt of a payment on the date requested and
reserves the right to amend, suspend or discontinue offering such
plans at any time without prior notice. Because of the sales charge
assessed on Class A share purchases, shareholders should not make
regular additional Class A share purchases while participating in an
Automatic Withdrawal Plan. Class B and Class C shareholders should
not establish withdrawal plans because of the imposition of the
contingent deferred sales charge on such withdrawals (except where
the contingent deferred sales charge is waived as described in the
Prospectus under "Waivers of Class B Contingent Deferred Sales
Charge" or in "Waivers of Class C Contingent Deferred Sales Charge").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such
plans, as stated below and in the provisions of the OppenheimerFunds
Application relating to such Plans, as well as the Prospectus. These
provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, such amendments will automatically apply
to existing Plans.
Automatic Exchange Plans. Shareholders can authorize the
Transfer Agent (on the OppenheimerFunds Application or signature-
guaranteed instructions) to exchange a pre-determined amount of
shares of the Fund for shares (of the same class) of other
Oppenheimer funds automatically on a monthly, quarterly, semi-annual
or annual basis under an Automatic Exchange Plan. The minimum amount
that may be exchanged to each other fund account is $25. Exchanges
made under these plans are subject to the restrictions that apply to
exchanges as set forth in "How to Exchange Shares" in the Prospectus
and below in this Statement of Additional Information.
Automatic Withdrawal Plans. Fund shares will be redeemed
as necessary to meet withdrawal payments. Shares acquired without a
sales charge will be redeemed first and shares acquired with
reinvested dividends and capital gains distributions will be redeemed
next, followed by shares acquired with a sales charge, to the extent
necessary to make withdrawal payments. Depending upon the amount
withdrawn, the investor's principal may be depleted. Payments made
under withdrawal plans should not be considered as a yield or income
on your investment.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the
"Planholder") who executed the Plan authorization and application
submitted to the Transfer Agent. The Transfer Agent and the Fund
shall incur no liability to the Planholder for any action taken or
omitted by the Transfer Agent in good faith to administer the Plan.
Certificates will not be issued for shares of the Fund purchased for
and held under the Plan, but the Transfer Agent will credit all such
shares to the account of the Planholder on the records of the Fund.
Any share certificates held by a Planholder may be surrendered
unendorsed to the Transfer Agent with the Plan application so that
the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans,
distributions of capital gains must be reinvested in shares of the
Fund, which will be done at net asset value without a sales charge.
Dividends on shares held in the account may be paid in cash or
reinvested.
Redemptions of shares needed to make withdrawal payments will be
made at the net asset value per share determined on the redemption
date. Checks or AccountLink payments of the proceeds of Plan
withdrawals will normally be transmitted three business days prior to
the date selected for receipt of the payment (receipt of payment on
the date selected cannot be guaranteed), according to the choice
specified in writing by the Planholder.
The amount and the interval of disbursement payments and the
address to which checks are to be mailed or AccountLink payments are
to be sent may be changed at any time by the Planholder by writing to
the Transfer Agent. The Planholder should allow at least two weeks'
time in mailing such notification for the requested change to be put
in effect. The Planholder may, at any time, instruct the Transfer
Agent by written notice (in proper form in accordance with the
requirements of the then-current Prospectus of the Fund) to redeem
all, or any part of, the shares held under the Plan. In that case,
the Transfer Agent will redeem the number of shares requested at the
net asset value per share in effect in accordance with the Fund's
usual redemption procedures and will mail a check for the proceeds to
the Planholder.
The Plan may be terminated at any time by the Planholder by
writing to the Transfer Agent. A Plan may also be terminated at any
time by the Transfer Agent upon receiving directions to that effect
from the Fund. The Transfer Agent will also terminate a Plan upon
receipt of evidence satisfactory to it of the death or legal
incapacity of the Planholder. Upon termination of a Plan by the
Transfer Agent or the Fund, shares that have not been redeemed from
the account will be held in uncertificated form in the name of the
Planholder, and the account will continue as a dividend-reinvestment,
uncertificated account unless and until proper instructions are
received from the Planholder or his or her executor or guardian, or
other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the Class A shares in
certificated form. Certificates for Class B and Class C shares will
not be issued. Upon written request from the Planholder, the
Transfer Agent will determine the number of shares for which a
certificate may be issued without causing the withdrawal checks to
stop because of exhaustion of uncertificated shares needed to
continue payments. However, should such uncertificated shares become
exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the
Fund, the Planholder will be deemed to have appointed any successor
transfer agent to act as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of
Oppenheimer funds having more than one class of shares may be
exchanged only for shares of the same class of other Oppenheimer
funds. Shares of the Oppenheimer funds that have a single class
without a class designation are deemed "Class A" shares for this
purpose. All Oppenheimer funds offer Class A Class B and Class C
shares except Oppenheimer Money Market Fund, Inc., 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., and Daily Cash
Accumulation Fund, Inc., which only offer Class A shares and
Oppenheimer Main Street California Municipal Fund, which only offers
Class A and Class B shares (Class B and Class C shares of Oppenheimer
Cash reserves are generally available only by exchange from the same
class of shares of other Oppenheimer funds or through
OppenheimerFunds sponsored 401(k) plans). A current list showing
which funds offer which class can be obtained by calling the
Distributor at 1-800-525-7048.
For accounts established on or before March 8, 1996 holding
Class M shares of Oppenheimer Bond Fund for Growth, Class M shares
can be exchanged only for Class A shares of other Oppenheimer funds,
including Rochester Fund Municipals and Limited Term New York
Municipal Fund. Class A shares of Rochester Fund Municipals or
Limited Term New York Municipal Fund acquired on the exchange of
Class M shares of Oppenheimer Bond Fund for Growth may be exchanged
for Class M shares of that fund. For accounts of Oppenheimer Bond
Fund for Growth established after March 8, 1996, Class M shares may
be exchanged for Class A shares of other Oppenheimer funds except
Rochester Fund Municipals and Limited Term New York Municipals.
Exchanges to Class M shares of Oppenheimer Bond Fund for Growth are
permitted from Class A shares of Oppenheimer Money Market Fund, Inc.
or Oppenheimer Cash Reserves that were acquired by exchange from
Class M shares. Otherwise no exchanges of any class of any
Oppenheimer fund into Class M shares are permitted.
Class A shares of Oppenheimer funds may be exchanged at net
asset value for shares of any Money Market Fund. Shares of any Money
Market Fund purchased without a sales charge may be exchanged for
shares of Oppenheimer funds offered with a sales charge upon payment
of the sales charge (or, if applicable, may be used to purchase
shares of Oppenheimer funds subject to a contingent deferred sales
charge). However, shares of Oppenheimer Money Market Fund, Inc.
purchased with the redemption proceeds of shares of other mutual
funds (other than funds managed by the Manager or its subsidiaries)
redeemed within the 12 months prior to that purchase may subsequently
be exchanged for shares of other Oppenheimer funds without being
subject to an initial or contingent deferred sales charge, whichever
is applicable. To qualify for that privilege, the investor or the
investor's dealer must notify the Distributor of eligibility for this
privilege at the time the shares of Oppenheimer Money Market Fund,
Inc. are purchased, and, if requested, must supply proof of
entitlement to this privilege. No contingent deferred sales charge
is imposed on exchanges of shares of either class purchased subject
to a contingent deferred sales charge. However, when Class A shares
acquired by exchange of Class A shares of other Oppenheimer funds
purchased subject to a Class A contingent deferred sales charge are
redeemed within 18 months of the end of the calendar month of the
initial purchase of the exchanged Class A shares, the Class A
contingent deferred sales charge is imposed on the redeemed shares
(see "Class A Contingent Deferred Sales Charge" in the Prospectus).
The Class B contingent deferred sales charge is imposed on Class B
shares acquired by exchange if they are redeemed within 6 years of
the initial purchase of the exchanged Class B shares. The Class C
contingent deferred sales charge is imposed on Class C shares
acquired by exchange if they are redeemed within 12 months of the
initial purchase of the exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an
exchange, the priorities described in "How To Buy Shares" in the
Prospectus for the imposition of the Class B or the Class C
contingent deferred sales charge will be followed in determining the
order in which the shares are exchanged. Shareholders should take
into account the effect of any exchange on the applicability and rate
of any contingent deferred sales charge that might be imposed in the
subsequent redemption of remaining shares. Shareholders owning
shares of more than one class must specify whether they intend to
exchange Class A, Class B or Class C shares.
The Fund reserves the right to reject telephone or written
exchange requests submitted in bulk by anyone on behalf of more than
one account. The Fund may accept requests for exchanges of up to 50
accounts per day from representatives of authorized dealers that
qualify for this privilege. In connection with any exchange request,
the number of shares exchanged may be less than the number requested
if the exchange requested would include shares subject to a
restriction cited in the Prospectus or this Statement of Additional
Information or would include shares covered by a share certificate
that is not tendered with the request. In those cases, only the
shares available for exchange without restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either
have an existing account in, or open an account and obtain and
acknowledge receipt of a prospectus of, the fund to which the
exchange is to be made. For full or partial exchanges of an account
made by telephone, any special account features such as Asset Builder
Plans, Automatic Withdrawal Plans, Check writing, if available, and
retirement plan contributions will be switched to the new account
unless the Transfer Agent is instructed otherwise. If all telephone
lines are busy (which might occur, for example, during periods of
substantial market fluctuations), shareholders might not be able to
request exchanges by telephone and would have to submit written
exchange requests.
Shares to be exchanged are redeemed on the regular business day
the Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed
by either fund up to five business days if it determines that it
would be disadvantaged by an immediate transfer of the redemption
proceeds. The Fund reserves the right, in its discretion, to refuse
any exchange request that may disadvantage it (for example, if the
receipt of multiple exchange requests from a dealer might require the
disposition of portfolio securities at a time or at a price that
might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have
different investment objectives, policies and risks, and a
shareholder should assure that the Fund selected is appropriate for
his or her investment and should be aware of the tax consequences of
an exchange. For federal income tax purposes, an exchange
transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above,
discusses some of the tax consequences of reinvestment of redemption
proceeds in such cases. The Fund, the Distributor, and the Transfer
Agent are unable to provide investment, tax or legal advice to a
shareholder in connection with an exchange request or any other
investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Dividends will be payable on shares
held of record at the time of the previous determination of net asset
value. 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 three business days following
the trade date (i.e., to and including the day prior to settlement of
the repurchase).
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. 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 the current year or else the Fund must pay an excise
tax on the amounts not distributed. While it is presently
anticipated that the Fund'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.
Dividend Reinvestment in Another Fund. Shareholders of the Fund
may elect to reinvest all dividends and/or capital gains
distributions in shares of the same class of any of the other
Oppenheimer funds (except Oppenheimer Cash Reserves) listed in
"Reduced Sales Charges," above, at net asset value without sales
charge. To elect this option, the shareholder must notify the
Transfer Agent in writing and either must have an existing account in
the fund selected for reinvestment or must obtain a prospectus for
that fund and an application from the Transfer Agent to establish an
account. The investment will be made at the net asset value per
share in effect at the close of business on the payable date of the
dividend or distribution. Dividends and/or distributions from
certain of the Oppenheimer funds may be invested in shares of this
Fund on the same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's
assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities 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.
Independent Auditors. The independent auditors of the Fund audit the
Manager's and the Fund's financial statements and perform other
related audit services. They also act as auditors for certain other
funds advised by the Manager and its affiliates.
<PAGE>
INDEPENDENT AUDITORS' REPORT
=====================================================================
===========
The Board of Trustees and Shareholders of Oppenheimer Champion
Income Fund:
We have audited the accompanying statement of assets and
liabilities, including the statement of investments, of
Oppenheimer Champion Income Fund as of September 30, 1996, the
related statement of operations for the year then ended, the
statements of changes in net assets for the years ended September
30, 1996 and 1995, and the financial highlights for the period
October 1, 1991 to September 30, 1996. These financial statements
and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with
generally accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements and financial highlights
are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation
of securities owned at September 30, 1996 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 Income Fund at
September 30, 1996, 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.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
October 21, 1996
5 Oppenheimer Champion Income Fund
<PAGE> 6
STATEMENT OF INVESTMENTS September 30, 1996
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1) SEE NOTE 1
=====================================================================
===================================
=======================
<S> <C>
<C>
MORTGAGE-BACKED OBLIGATIONS--1.7%
- --------------------------------------------------------------------------------------------------------
- -----------------------
Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security:
Trust 240, Cl. 2, 10.317%--12.256%, 9/1/23(2) $
6,939,318 $ 2,397,318
Trust 257, Cl. 2, 15.355%, 2/1/24(2)
1,541,277 534,390
- --------------------------------------------------------------------------------------------------------
- ----------------
Government National Mortgage Assn., 6%, 10/15/26(3)
2,200,000 2,182,125
- --------------------------------------------------------------------------------------------------------
- ----------------
Morgan Stanley Capital I, Inc., Commercial Mtg.
Pass-Through Certificates, Series 1996-C1, Cl. E, 7.51%, 2/1/28(4)(5)
1,513,000 1,182,031
- --------------------------------------------------------------------------------------------------------
- ----------------
Mortgage Capital Funding, Inc., Multifamily Mtg.
Pass-Through Certificates, Series 1996-MC1, Cl. G, 7.15%, 6/15/06(5)
1,250,000 945,703
- --------------------------------------------------------------------------------------------------------
- ----------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1994-C2, Cl. E, 8%, 4/25/25
472,282 458,557
Series 1995-C1, Cl. F, 6.90%, 2/25/27
388,591 320,588
- ------------------------------------------------------------------------------------------------------------------
- ------
Salomon Brothers Mortgage Securities VII, Series 1996-C1, Cl. E,
9.18%, 1/20/06
704,000 608,960
- --------------------------------------------------------------------------------------------------------
- ----------------
Structured Asset Securities Corp., Multiclass Pass-Through
Certificates, Series 1995-C4, Cl. E, 8.849%, 6/25/26(4)(5)
799,806 651,842
------------
Total Mortgage-Backed Obligations (Cost $8,879,903)
9,281,514
=====================================================================
===================================
=======================
U.S. GOVERNMENT OBLIGATIONS--4.7%
- --------------------------------------------------------------------------------------------------------
- -----------------------
U.S. Treasury Nts., 8.875%, 11/15/97 (Cost $26,328,125)
25,000,000 25,804,672
=====================================================================
===================================
=======================
FOREIGN GOVERNMENT OBLIGATIONS--10.5%
- --------------------------------------------------------------------------------------------------------
- -----------------------
Argentina (Republic of):
New Money Bonds, 6.50%, 10/25/99(4)
116,666 113,167
Sr. Unsec. Unsub. Bonds, 7.625%, 7/5/99 NLG
2,095,000 1,236,711
Treasury Bills, Zero Coupon, 12.117%, 1/17/97(6) ARP
1,000,000 979,375
Treasury Bills, Zero Coupon, 10.156%, 11/15/96(6) ARP
500,000 496,095
Unsec. Unsub. Bonds, 11.50%, 8/14/01 GBP
340,000 535,210
- --------------------------------------------------------------------------------------------------------
- ----------------
Banco Estado Minas Gerais, 8.25%, 2/10/00
1,950,000 1,837,875
- --------------------------------------------------------------------------------------------------------
- ----------------
Banco Hipotecario Nacional (Argentina) Medium-Term Nts.,
10.625%, 8/7/06(7)
1,000,000 1,012,500
- --------------------------------------------------------------------------------------------------------
- ----------------
Banco Nacional de Comercio Exterior SNC International Finance BV Gtd.:
Nts., 8%, 8/5/03
700,000 626,500
Registered Bonds, 11.25%, 5/30/06
2,500,000 2,621,875
- --------------------------------------------------------------------------------------------------------
- ----------------
Brazil (Federal Republic of):
Debs., 6%, 9/15/13
750,000 521,250
Nts., Banco Estado Minas Gerais, 7.875%, 2/10/99
1,300,000 1,238,250
- --------------------------------------------------------------------------------------------------------
- ----------------
Buenos Aires (Province of) Bonds, 10%, 3/5/01 DEM
1,064,000 727,580
- --------------------------------------------------------------------------------------------------------
- ----------------
Bulgaria (Republic of):
Front-Loaded Interest Reduction Bearer Bonds, Tranche A, 2.25%, 7/28/12(7)
4,950,000 1,628,859
Interest Arrears Bonds, 6.688%, 7/28/11(7)
5,340,000 2,456,400
- --------------------------------------------------------------------------------------------------------
- ----------------
Canada (Government of) Real Return Debs., 4.517%, 12/1/21(8) CAD
5,200,000 3,940,976
- --------------------------------------------------------------------------------------------------------
- ----------------
Central Bank of Costa Rica Interest Claim Bonds, Series B, 6.344%, 5/21/05(4)
153,481 148,110
- --------------------------------------------------------------------------------------------------------
- ----------------
Cia Energetica de Sao Paulo Gtd. Unsec. Bonds, 9.25%, 5/10/01 DEM
1,110,000 746,482
- --------------------------------------------------------------------------------------------------------
- ----------------
Denmark (Kingdom of) Bonds:
8%, 11/15/01 DKK
3,770,000 704,493
8%, 3/15/06 DKK
6,140,000 1,122,839
</TABLE>
6 Oppenheimer Champion Income Fund
<PAGE> 7
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1) SEE NOTE 1
- --------------------------------------------------------------------------------------------------------
- -----------------------
<S> <C>
<C>
FOREIGN GOVERNMENT OBLIGATIONS
(CONTINUED)
Ecuador (Republic of) Disc. Bonds, 6.50%, 2/28/25(4) $
560,000 $ 348,600
- --------------------------------------------------------------------------------------------------------
- ----------------
Finland (Republic of) Bonds, 7.25%, 4/18/06 FIM
2,000,000 454,971
- --------------------------------------------------------------------------------------------------------
- ----------------
Hashemite Kingdom of Jordan:
Disc. Bonds, 6.625%, 12/23/23(4)
1,250,000 965,625
Interest Arrears Bonds, 6.625%, 12/23/05(4)
1,100,000 976,250
- --------------------------------------------------------------------------------------------------------
- ----------------
Ireland (Government of) Bonds, 9.25%, 7/11/03 IEP
1,710,000 3,135,690
- --------------------------------------------------------------------------------------------------------
- ----------------
Italy (Republic of):
Sr. Unsec. Unsub. Global Bonds, 0.777%, 7/26/99(4) JPY
137,000,000 1,236,536
Treasury Bonds, Buoni del Tesoro Poliennali, 10.50%, 7/15/00 ITL
1,795,000,000 1,280,163
- --------------------------------------------------------------------------------------------------------
- ----------------
New South Wales Treasury Corp. Gtd. Bonds, 12%, 12/1/01 AUD
2,835,000 2,670,761
- --------------------------------------------------------------------------------------------------------
- ----------------
Norwegian Government Bonds, 9.50%, 10/31/02 NOK
11,645,000 2,061,753
- --------------------------------------------------------------------------------------------------------
- ----------------
Panama (Republic of):
Debs., 6.629%, 5/10/02(4)
484,615 465,231
Interest Reduction Bonds, 3.50%, 7/17/14(9)
1,825,000 1,147,469
- --------------------------------------------------------------------------------------------------------
- ----------------
Poland (Republic of) Treasury Bills, Zero Coupon:
21.656%, 10/2/96(6) PLZ
1,440,000 511,883
21.635%, 11/20/96(6) PLZ
2,790,000 968,433
- --------------------------------------------------------------------------------------------------------
- ----------------
Portugal (Republic of) Gtd. Bonds,
Obrigicion do tes Medio Prazo, 11.875%, 2/23/00 PTE
185,000,000 1,351,494
- --------------------------------------------------------------------------------------------------------
- ----------------
PT Hutama Karya, Zero Coupon Medium-Term Nts.:
17.514%, 3/19/97(6) IDR
2,600,000,000 1,037,414
17.668%, 3/26/97(6) IDR
2,500,000,000 995,048
- --------------------------------------------------------------------------------------------------------
- ----------------
Russia (Government of) Interest Nts., 6.547%, 12/29/49(3)(4)
1,600,000 1,029,500
- --------------------------------------------------------------------------------------------------------
- ----------------
Sweden (Kingdom of) Bonds, Series 1030, 13%, 6/15/01 SEK
14,700,000 2,767,033
- --------------------------------------------------------------------------------------------------------
- ----------------
Telecomunicacoes Brasileiras SA Bonds, 13%, 2/5/99 ITL
1,500,000,000 1,031,709
- --------------------------------------------------------------------------------------------------------
- ----------------
United Kingdom Treasury Nts., 13%, 7/14/00 GBP
2,165,000 4,057,480
- --------------------------------------------------------------------------------------------------------
- ----------------
United Mexican States Bonds, 10.375%, 1/29/03 DEM
5,145,000 3,562,083
- --------------------------------------------------------------------------------------------------------
- ----------------
Venezuela (Republic of):
Disc. Bonds, Series DL, 6.625%, 12/18/07(4)
2,000,000 1,660,000
Front-Loaded Interest Reduction Bonds, Series A, 6.375%, 3/31/07(4)
825,000 695,578
New Money Bonds, Series B, 6.625%, 12/18/05(4)
1,250,000 1,042,187
Total Foreign Government Obligations (Cost $56,381,425)
58,147,438
=====================================================================
===================================
=======================
LOAN PARTICIPATIONS--0.8%
- --------------------------------------------------------------------------------------------------------
- -----------------------
Algeria (Republic of) Reprofiled Debt Loan Participation,
Tranche A, 6.625%, 9/4/06(4)(5)
2,000,000 1,392,500
- --------------------------------------------------------------------------------------------------------
- ----------------
Colombia (Republic of) 1989--1990 Integrated
Loan Facility Bonds, 6.563%, 7/1/01(4)(5)
314,319 298,604
- --------------------------------------------------------------------------------------------------------
- ----------------
Jamaica (Government of) 1990 Refinancing
Agreement Nts., Tranche B, 6.312%, 11/15/04(4)(5)
654,093 546,168
- --------------------------------------------------------------------------------------------------------
- ----------------
Morocco (Kingdom of) Loan Participation Agreement,
Tranche A, 6.437%, 1/1/09(4)
1,700,000 1,337,156
- --------------------------------------------------------------------------------------------------------
- ----------------
Trinidad & Tobago Loan Participation Agreement,
Tranche B, 1.772%, 9/30/00(4)(5) JPY
126,436,052 1,010,353
-----------
Total Loan Participations (Cost $4,202,881)
4,584,781
</TABLE>
7 Oppenheimer Champion Income Fund
<PAGE> 8
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1) SEE NOTE 1
=====================================================================
===================================
=======================
<S> <C>
<C>
MUNICIPAL BONDS AND NOTES--0.3%
- --------------------------------------------------------------------------------------------------------
- -----------------------
San Joaquin Hills, California Transportation Corridor Agency
Toll Road Capital Appreciation Revenue Bonds, Jr. Lien,
Zero Coupon, 9%, 1/1/28 (Cost $862,253)(6)
$13,500,000 $ 1,406,025
=====================================================================
===================================
=======================
CORPORATE BONDS AND NOTES--74.5%
- --------------------------------------------------------------------------------------------------------
- -----------------------
BASIC INDUSTRY--11.9%
- --------------------------------------------------------------------------------------------------------
- -----------------------
CHEMICALS--2.0%
Acetex Corp., 9.75% Sr. Sec. Nts., 10/1/03
2,820,000 2,791,800
- --------------------------------------------------------------------------------------------------------
- ----------------
Arcadian Partner LP, 10.75% Sr. Nts., Series B, 5/1/05
880,000 972,400
- --------------------------------------------------------------------------------------------------------
- ----------------
NL Industries, Inc., 11.75% Sr. Sec. Nts., 10/15/03
3,750,000 3,956,250
- --------------------------------------------------------------------------------------------------------
- ----------------
Terra Industries, Inc., 10.50% Sr. Nts., Series B, 6/15/05
2,630,000 2,820,675
- --------------------------------------------------------------------------------------------------------
- ----------------
Texas Petrochemicals Corp., 11.125% Sr. Sub. Nts., 7/1/06(10)
515,000 544,612
-----------
11,085,737
- --------------------------------------------------------------------------------------------------------
- -----------------------
CONTAINERS--0.5%
U.S. Can Co., 13.50% Sr. Sub. Nts., 1/15/02
2,500,000 2,656,250
- --------------------------------------------------------------------------------------------------------
- -----------------------
METALS/MINING--1.7%
Carbide/Graphite Group, Inc. (The), 11.50% Sr. Nts., 9/1/03
1,819,000 1,996,352
- --------------------------------------------------------------------------------------------------------
- ----------------
Kaiser Aluminum & Chemical Corp., 9.875% Sr. Nts., 2/15/02
1,780,000 1,824,500
- --------------------------------------------------------------------------------------------------------
- ----------------
Royal Oak Mines, Inc., 11% Sr. Sub. Nts., 8/15/06(10)
5,175,000 5,356,125
- --------------------------------------------------------------------------------------------------------
- ----------------
UCAR Global Enterprises, Inc., 12% Sr. Sub. Nts., 1/15/05
325,000 372,937
9,549,914
=====================================================================
===================================
=======================
PAPER--6.5%
APP International Finance Co. BV, 11.75% Gtd. Sec. Nts., 10/1/05
2,400,000 2,517,000
- --------------------------------------------------------------------------------------------------------
- ----------------
Asia Pulp & Paper International Finance Co.,
Zero Coupon Asian Currency Nts., 16.551%, 5/15/97(6) IDR
700,000,000 271,314
- --------------------------------------------------------------------------------------------------------
- ----------------
Buckeye Cellulose Corp.:
8.50% Sr. Sub. Nts., 12/15/05
280,000 273,000
9.25% Sr. Sub. Nts., 9/15/08
4,315,000 4,347,362
- --------------------------------------------------------------------------------------------------------
- ----------------
Container Corp., 9.75% Gtd. Sr. Nts., 4/1/03
500,000 508,750
- --------------------------------------------------------------------------------------------------------
- ----------------
Domtar, Inc., 11.25% Debs., 9/15/17(5)
190,000 200,849
- --------------------------------------------------------------------------------------------------------
- ----------------
Florida Coast Paper Co. LLC,
12.75% First Mtg. Nts., 6/1/03(10)
1,880,000 2,039,800
- --------------------------------------------------------------------------------------------------------
- ----------------
Gaylord Container Corp.:
11.50% Sr. Nts., 5/15/01
375,000 399,844
12.75% Sr. Sub. Disc. Debs., 5/15/05
3,000,000 3,307,500
- --------------------------------------------------------------------------------------------------------
- ----------------
Indah Kiat International Finance Co. BV, 12.50% Sr. Sec. Gtd. Nts.,
Series C, 6/15/06
2,540,000 2,755,900
- --------------------------------------------------------------------------------------------------------
- ----------------
Malette, Inc., 12.25% Sr. Sec. Nts., 7/15/04
1,285,000 1,387,800
- --------------------------------------------------------------------------------------------------------
- ----------------
QUNO Corp., 9.125% Sr. Nts., 5/15/05
2,050,000 2,070,500
- --------------------------------------------------------------------------------------------------------
- ----------------
Repap Wisconsin, Inc., 9.25% First Priority Sr. Sec. Nts., 2/1/02
1,000,000 1,012,500
- --------------------------------------------------------------------------------------------------------
- ----------------
Riverwood International Corp.:
10.25% Sr. Nts., 4/1/06
2,830,000 2,858,300
10.875% Sr. Sub. Nts., 4/1/08
4,135,000 4,093,650
- --------------------------------------------------------------------------------------------------------
- ----------------
SD Warren Co., 12% Sr. Sub. Nts., 12/15/04
2,750,000 2,980,312
- --------------------------------------------------------------------------------------------------------
- ----------------
Stone Container Corp.:
10.75% First Mtg. Nts., 10/1/02
2,650,000 2,789,125
9.875% Sr. Nts., 2/1/01
500,000 505,000
- --------------------------------------------------------------------------------------------------------
- ----------------
Tembec Finance Corp., 9.875% Gtd. Sr. Nts., 9/30/05
1,825,000 1,770,250
-----------
36,088,756
</TABLE>
8 Oppenheimer Champion Income Fund
<PAGE> 9
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1) SEE NOTE 1
- --------------------------------------------------------------------------------------------------------
- -----------------------
<S> <C>
<C>
STEEL--1.2%
AK Steel Corp., 10.75% Sr. Gtd. Nts., 4/1/04
$1,800,000 $ 1,971,000
- --------------------------------------------------------------------------------------------------------
- ----------------
Armco, Inc., 8.50% Sinking Fund Debs., 9/1/01
267,000 262,327
- --------------------------------------------------------------------------------------------------------
- ----------------
Bar Technologies, Inc., 13.50% Gtd. Bonds, 4/1/01
750,000 757,500
- --------------------------------------------------------------------------------------------------------
- ----------------
Republic Engineered Steels, Inc., 9.875% First Mtg. Nts., 12/15/01
1,350,000 1,299,375
- --------------------------------------------------------------------------------------------------------
- ----------------
WCI Steel, Inc., 10.50% Sr. Gtd. Nts., Series B, 3/1/02
1,900,000 2,090,000
-----------
6,380,202
- --------------------------------------------------------------------------------------------------------
- -----------------------
CONSUMER RELATED--13.8%
- --------------------------------------------------------------------------------------------------------
- -----------------------
CONSUMER PRODUCTS--3.2%
Coinstar, Inc., Units (each unit consists of $1,000 principal
amount of 0%/13% Sr. Sub. Disc. Nts., 10/1/06 and one warrant
to purchase seven ordinary shares)(3)(5)(11)(12)
2,025,000 1,391,195
- --------------------------------------------------------------------------------------------------------
- ----------------
Coleman Holdings, Inc., Zero Coupon Sr. Sec. Disc. Nts.,
Series B, 9.52%, 5/27/98(6)
4,580,000 3,915,900
- --------------------------------------------------------------------------------------------------------
- ----------------
E & S Holdings Corp., 10.375% Sr. Sub. Nts., 10/1/06(10)
1,650,000 1,687,125
- --------------------------------------------------------------------------------------------------------
- ----------------
Harman International Industries, Inc., 12% Sr. Sub. Nts., 8/1/02
2,400,000 2,628,000
- --------------------------------------------------------------------------------------------------------
- ----------------
International Semi-Tech Microelectronics, Inc.,
0%/11.50% Sr. Sec. Disc. Nts., 8/15/03(12)
5,050,000 3,093,125
- --------------------------------------------------------------------------------------------------------
- ----------------
Iron Mountain, Inc., 10.125% Sr. Sub. Nts., 10/1/06(3)
650,000 663,812
- --------------------------------------------------------------------------------------------------------
- ----------------
Samsonite Corp., 11.125% Sr. Sub. Nts., 7/15/05
960,000 1,017,600
- --------------------------------------------------------------------------------------------------------
- ----------------
TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05(10)
3,160,000 3,578,700
-----------
17,975,457
- --------------------------------------------------------------------------------------------------------
- -----------------------
FOOD/BEVERAGES/TOBACCO--1.4%
Consolidated Cigar Corp., 10.50% Sr. Sub. Nts., 3/1/03
2,845,000 3,001,475
- --------------------------------------------------------------------------------------------------------
- ----------------
Cott Corp., 9.375% Sr. Nts., 7/1/05
3,885,000 3,904,425
- --------------------------------------------------------------------------------------------------------
- ----------------
Foodbrands America, Inc., 10.75% Sr. Sub. Nts., 5/15/06
815,000 839,450
-----------
7,745,350
- --------------------------------------------------------------------------------------------------------
- -----------------------
HEALTHCARE--3.1%
Capstone Capital Corp., 10.50% Cv. Sub. Debs., 4/1/02
340,000 442,850
- --------------------------------------------------------------------------------------------------------
- ----------------
Magellan Health Services, Inc., 11.25% Sr. Sub. Nts., Series A, 4/15/04
5,420,000 5,934,900
- --------------------------------------------------------------------------------------------------------
- ----------------
Multicare Cos., Inc. (The), 12.50% Sr. Sub. Nts., 7/1/02
2,500,000 2,781,250
- --------------------------------------------------------------------------------------------------------
- ----------------
Quorum Health Group, Inc., 11.875% Sr. Sub. Nts., 12/15/02
750,000 830,625
- --------------------------------------------------------------------------------------------------------
- ----------------
Tenet Healthcare Corp., 10.125% Sr. Sub. Nts., 3/1/05
4,750,000 5,171,562
- --------------------------------------------------------------------------------------------------------
- ----------------
Total Renal Care, Inc., 0%/12% Sr. Sub. Disc. Nts., 8/15/04(12)
1,935,000 2,048,681
------------
17,209,868
- --------------------------------------------------------------------------------------------------------
- -----------------------
HOTEL/GAMING--3.3%
Arizona Charlie's, Inc., 12% First Mtg. Nts., Series A, 11/15/00(5)
275,000 189,750
- --------------------------------------------------------------------------------------------------------
- ----------------
Boyd Gaming Corp., 10.75% Sr. Sub. Nts., Series B, 9/1/03
1,500,000 1,584,375
- --------------------------------------------------------------------------------------------------------
- ----------------
California Hotel Finance Corp., 11% Sr. Sub. Nts., 12/1/02
800,000 840,000
- --------------------------------------------------------------------------------------------------------
- ----------------
Capital Gaming International, Inc., Promissory Nts., 8/1/95(13)
7,500 --
- --------------------------------------------------------------------------------------------------------
- ----------------
Capitol Queen & Casino, Inc., 12% First Mtg. Nts., Series A, 11/15/00(5)(13)
100,000 70,000
- --------------------------------------------------------------------------------------------------------
- ----------------
Empress River Casino Finance Corp., 10.75% Sr. Gtd. Nts., 4/1/02
2,000,000 2,160,000
- --------------------------------------------------------------------------------------------------------
- ----------------
Grand Casinos, Inc., 10.125% Gtd. First Mtg. Nts., 12/1/03
2,500,000 2,478,125
- --------------------------------------------------------------------------------------------------------
- ----------------
Griffin Gaming & Entertainment, Inc., 8.015% First Mtg.
Non-Recourse Pass-Through Nts., 6/30/00(4)
1,010,000 954,450
</TABLE>
9 Oppenheimer Champion Income Fund
<PAGE> 10
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1) SEE NOTE 1
- --------------------------------------------------------------------------------------------------------
- ---------------------
<S> <C>
<C>
HOTEL/GAMING
(CONTINUED)
HMC Acquisition Properties, Inc., 9% Sr. Nts., 12/15/07
$1,210,000 $ 1,155,550
- --------------------------------------------------------------------------------------------------------
- --------------
HMH Properties, Inc., 9.50% Sr. Sec. Nts., Series B, 5/15/05
2,470,000 2,488,525
- --------------------------------------------------------------------------------------------------------
- --------------
Majestic Star Casino LLC (The), 12.75% Sr. Sec. Nts., 5/15/03(10)
1,035,000 1,138,500
- --------------------------------------------------------------------------------------------------------
- --------------
Mohegan Tribal Gaming Authority, 13.50% Sr. Sec. Nts., 11/15/02
2,075,000 2,614,500
- --------------------------------------------------------------------------------------------------------
- --------------
Players International, Inc., 10.875% Sr. Nts., 4/15/05
510,000 507,450
- --------------------------------------------------------------------------------------------------------
- --------------
Rio Hotel & Casino, Inc., 10.625% Sr. Sub. Nts., 7/15/05
700,000 733,250
- --------------------------------------------------------------------------------------------------------
- --------------
Showboat Marina Casino Partnership/Showboat Marina
Finance Corp., 13.50% First Mtg. Nts., 3/15/03
650,000 705,250
- --------------------------------------------------------------------------------------------------------
- --------------
Station Casinos, Inc., 9.625% Sr. Sub. Nts., 6/1/03
520,000 507,000
- --------------------------------------------------------------------------------------------------------
- --------------
Trump's Castle Funding, Inc., 13.875% Sub. Nts., 11/15/05(14)
46 44
-----------
18,126,769
- --------------------------------------------------------------------------------------------------------
- ---------------------
RESTAURANTS--0.7%
Carrols Corp., 11.50% Sr. Nts., 8/15/03
2,360,000 2,472,100
- --------------------------------------------------------------------------------------------------------
- --------------
Foodmaker, Inc.:
9.25% Sr. Nts., 3/1/99
1,390,000 1,393,475
9.75% Sr. Sub. Nts., 6/1/02
165,000 162,525
-----------
4,028,100
- --------------------------------------------------------------------------------------------------------
- ---------------------
TEXTILE/APPAREL--2.1%
Clark-Schwebel, Inc., 10.50% Sr. Nts., 4/15/06(10)
3,200,000 3,328,000
- --------------------------------------------------------------------------------------------------------
- --------------
Consoltex Group, Inc., 11% Sr. Sub. Gtd. Nts., Series B, 10/1/03
900,000 886,500
- --------------------------------------------------------------------------------------------------------
- --------------
Polymer Group, Inc., 12.25% Sr. Nts., 7/15/02
526,000 574,655
- --------------------------------------------------------------------------------------------------------
- --------------
PT Polysindo Eka Perkasa, 13% Sr. Nts., 6/15/01
260,000 286,650
- --------------------------------------------------------------------------------------------------------
- --------------
Synthetic Industries, Inc., 12.75% Sr. Sub. Debs., 12/1/02
2,800,000 3,038,000
- --------------------------------------------------------------------------------------------------------
- --------------
WestPoint Stevens, Inc., 9.375% Sr. Sub. Debs., 12/15/05
3,370,000 3,386,850
-----------
11,500,655
- --------------------------------------------------------------------------------------------------------
- ---------------------
ENERGY--10.2%
- --------------------------------------------------------------------------------------------------------
- ---------------------
AmeriGas Partners LP, 10.125% Sr. Nts., 4/15/07
320,000 334,800
- --------------------------------------------------------------------------------------------------------
- --------------
Chesapeake Energy Corp.:
10.50% Sr. Nts., 6/1/02
3,200,000 3,404,000
9.125% Sr. Nts., 4/15/06
2,215,000 2,203,925
- --------------------------------------------------------------------------------------------------------
- --------------
DeepTech International, Inc., 12% Sr. Sec. Nts., 12/15/00
2,402,000 2,438,030
- --------------------------------------------------------------------------------------------------------
- --------------
Falcon Drilling Co., Inc.:
8.875% Sr. Nts., Series B, 3/15/03
4,900,000 4,838,750
9.75% Sr. Nts., Series B, 1/15/01
400,000 410,000
- --------------------------------------------------------------------------------------------------------
- --------------
Ferrellgas LP/Ferrellgas Finance Corp., 10% Sr. Nts., 8/1/01
1,400,000 1,456,000
- --------------------------------------------------------------------------------------------------------
- --------------
Ferrellgas Partners LP, 9.375% Sr. Sec. Nts., 6/15/06(10)
2,190,000 2,206,425
- --------------------------------------------------------------------------------------------------------
- --------------
Gerrity Oil & Gas Corp., 11.75% Sr. Sub. Nts., 7/15/04
3,750,000 4,017,187
- --------------------------------------------------------------------------------------------------------
- --------------
J. Ray McDermott SA, 9.375% Sr. Sub. Bonds, 7/15/06
4,090,000 4,182,025
- --------------------------------------------------------------------------------------------------------
- --------------
Mariner Energy, Inc., 10.50% Sr. Sub. Nts., 8/1/06(10)
3,415,000 3,534,525
- --------------------------------------------------------------------------------------------------------
- --------------
Maxus Energy Corp., 11.50% Debs., 11/15/15
500,000 522,500
- --------------------------------------------------------------------------------------------------------
- --------------
Mesa Operating Co.:
0%/11.625% Gtd. Sr. Sub. Disc. Nts., 7/1/06(12)
5,840,000 3,766,800
10.625% Gtd. Sr. Sub. Nts., 7/1/06
1,260,000 1,330,875
</TABLE>
10 Oppenheimer Champion Income Fund
<PAGE> 11
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1) SEE NOTE 1
- --------------------------------------------------------------------------------------------------------
- ---------------------
<S> <C>
<C>
ENERGY
(CONTINUED)
Nuevo Energy Co., 12.50% Sr. Sub. Nts., 6/15/02 $
560,000 $ 604,800
- --------------------------------------------------------------------------------------------------------
- --------------
OPI International, Inc., 12.875% Sr. Gtd. Nts., 7/15/02
1,225,000 1,353,625
- --------------------------------------------------------------------------------------------------------
- --------------
Petroleum Heat & Power Co., Inc.:
12.25% Sub. Debs., 2/1/05
1,376,000 1,522,200
9.375% Sub. Debs., 2/1/06
1,770,000 1,692,562
- --------------------------------------------------------------------------------------------------------
- --------------
Santa Fe Energy Resources, Inc., 11% Sr. Sub. Debs., 5/15/04
3,330,000 3,696,300
- --------------------------------------------------------------------------------------------------------
- --------------
TransTexas Gas Corp., 11.50% Sr. Sec. Gtd. Nts., 6/15/02
3,845,000 4,094,925
- --------------------------------------------------------------------------------------------------------
- --------------
Triton Energy Corp.:
0%/9.75% Sr. Sub. Disc. Nts., 12/15/00(12)
2,400,000 2,436,000
Zero Coupon Sr. Sub. Disc. Nts., 10.394%, 11/1/97(6)
3,200,000 2,968,000
- --------------------------------------------------------------------------------------------------------
- --------------
United Meridian Corp., 10.375% Sr. Sub. Nts., 10/15/05
1,100,000 1,174,250
- --------------------------------------------------------------------------------------------------------
- --------------
Vintage Petroleum, Inc., 9% Sr. Sub. Nts., 12/15/05
2,435,000 2,416,737
-----------
56,605,241
- --------------------------------------------------------------------------------------------------------
- ---------------------
FINANCIAL SERVICES--4.1%
- --------------------------------------------------------------------------------------------------------
- ---------------------
BANKS & THRIFTS--1.1%
First Nationwide Escrow Corp., 10.625% Sr. Sub. Nts., 10/1/03(10)
1,950,000 2,040,188
- --------------------------------------------------------------------------------------------------------
- --------------
First Nationwide Holdings, Inc., 9.125% Sr. Sub. Nts., 1/15/03
1,800,000 1,777,500
- --------------------------------------------------------------------------------------------------------
- --------------
Ocwen Financial Corp., 11.875% Nts., 10/1/03
1,600,000 1,678,500
- --------------------------------------------------------------------------------------------------------
- --------------
Siam City Bank Co. Ltd., Zero Coupon Debs., 11.084%, 10/31/96(3)(6) THB
5,000,000 194,952
- --------------------------------------------------------------------------------------------------------
- --------------
Siam Commercial Bank Public Ltd., Zero Coupon Debs.,
10.581%, 11/18/96(3)(6) THB
7,800,000 302,500
-----------
5,993,640
- --------------------------------------------------------------------------------------------------------
- ---------------------
DIVERSIFIED FINANCIAL--1.0%
ECM Fund, L.P.I., 14% Sub. Nts., 6/10/02(5)
348,179 384,738
- --------------------------------------------------------------------------------------------------------
- --------------
GPA Delaware, Inc., 8.75% Gtd. Nts., 12/15/98
4,010,000 4,050,100
- --------------------------------------------------------------------------------------------------------
- --------------
GPA Holland BV, 8.94% Medium-Term Nts., Series C, 2/16/99
700,000 710,500
- --------------------------------------------------------------------------------------------------------
- --------------
Lomas Financial Corp., 9% Cv. Sr. Nts., 10/31/03(5)(13)
600,000 123,000
-----------
5,268,338
- --------------------------------------------------------------------------------------------------------
- ---------------------
INSURANCE--2.0%
American Life Holding Co., 11.25% Sr. Sub. Nts., 9/15/04
2,220,000 2,514,150
- --------------------------------------------------------------------------------------------------------
- --------------
Chartwell Re Holdings Corp., 10.25% Sr. Nts., 3/1/04
477,000 506,216
- --------------------------------------------------------------------------------------------------------
- --------------
Life Partners Group, Inc., 12.75% Sr. Sub. Nts., 7/15/02
3,000,000 3,281,250
- --------------------------------------------------------------------------------------------------------
- --------------
Reliance Group Holdings, Inc., 9.75% Sr. Sub. Debs., 11/15/03
3,750,000 3,829,688
- --------------------------------------------------------------------------------------------------------
- --------------
Terra Nova Insurance (UK) Holdings PLC, 10.75% Sr. Nts., 7/1/05
720,000 808,442
-----------
10,939,746
- --------------------------------------------------------------------------------------------------------
- ---------------------
HOUSING RELATED--1.7%
- --------------------------------------------------------------------------------------------------------
- ---------------------
BUILDING MATERIALS--0.7%
American Standard, Inc.:
0%/10.50% Sr. Sub. Disc. Debs., 6/1/05(12)
2,075,000 1,914,188
10.875% Sr. Nts., 5/15/99
1,000,000 1,070,000
- --------------------------------------------------------------------------------------------------------
- --------------
Building Materials Corp., 0%/11.75% Sr. Deferred Coupon Nts., Series B, 7/1/04(12)
750,000 607,500
- --------------------------------------------------------------------------------------------------------
- --------------
Pacific Lumber Co., 10.50% Sr. Nts., 3/1/03
60,000 59,400
-----------
3,651,088
</TABLE>
11 Oppenheimer Champion Income Fund
<PAGE> 12
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1) SEE NOTE 1
- --------------------------------------------------------------------------------------------------------
- ----------------------
<S> <C>
<C>
HOMEBUILDERS/
REAL ESTATE--1.0%
First Place Tower, Inc.:
9.22% First Mtg. Bonds, 12/15/05 CAD
375,500 $ 298,380
Units (each unit consists of one $10 principal amount of 8.50%
cv. sub. debs., 12/15/15 and 40 common shares)(11) CAD
225,830 294,247
- --------------------------------------------------------------------------------------------------------
- --------------
NVR, Inc., 11% Sr. Gtd. Nts., 4/15/03
900,000 936,000
- --------------------------------------------------------------------------------------------------------
- --------------
Saul (B.F.) Real Estate Investment Trust, 11.625% Sr. Sec. Nts., Series B, 4/1/02
1,375,000 1,464,375
- --------------------------------------------------------------------------------------------------------
- --------------
Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A, 12/1/11(5)
2,200,000 1,771,000
- --------------------------------------------------------------------------------------------------------
- --------------
U.S. Home Corp., 9.75% Sr. Nts., 6/15/03
760,000 763,800
-----------
5,527,802
- --------------------------------------------------------------------------------------------------------
- ---------------------
MANUFACTURING--3.1%
- --------------------------------------------------------------------------------------------------------
- ---------------------
AEROSPACE/ELECTRONICS/
COMPUTERS--1.1%
Businessland, Inc., 5.50% Sub. Debs., 3/1/07(5)
805,000 483,000
- --------------------------------------------------------------------------------------------------------
- --------------
Tracor, Inc., 10.875% Sr. Sub. Nts., 8/15/01
3,420,000 3,608,100
- --------------------------------------------------------------------------------------------------------
- --------------
UNC, Inc., 11% Sr. Sub. Nts., 6/1/06(10)
2,000,000 2,090,000
-----------
6,181,100
- --------------------------------------------------------------------------------------------------------
- ---------------------
AUTOMOTIVE--2.0%
Aftermarket Technology Corp., 12% Sr. Sub. Nts., Series B, 8/1/04
1,650,000 1,806,750
- --------------------------------------------------------------------------------------------------------
- --------------
Foamex LP/Foamex Capital Corp., 9.50% Sr. Sec. Nts., 6/1/00
200,000 203,000
- --------------------------------------------------------------------------------------------------------
- --------------
Hayes Wheels International, Inc., 11% Sr. Sub. Nts., 7/15/06
3,775,000 4,001,500
- --------------------------------------------------------------------------------------------------------
- --------------
JPS Automotive Products Corp., 11.125% Sr. Nts., 6/15/01
300,000 310,500
- --------------------------------------------------------------------------------------------------------
- --------------
Lear Corp., 9.50% Sub. Nts., 7/15/06
2,725,000 2,854,438
- --------------------------------------------------------------------------------------------------------
- --------------
Penda Corp., 10.75% Sr. Nts., Series B, 3/1/04
975,000 950,625
- --------------------------------------------------------------------------------------------------------
- --------------
SPX Corp., 11.75% Sr. Sub. Nts., 6/1/02
950,000 1,047,375
-----------
11,174,188
- --------------------------------------------------------------------------------------------------------
- ---------------------
MEDIA--11.6%
- --------------------------------------------------------------------------------------------------------
- ---------------------
BROADCASTING--3.2%
American Radio Systems Corp., 9% Sr. Sub. Nts., 2/1/06
1,500,000 1,453,125
- --------------------------------------------------------------------------------------------------------
- --------------
Argyle Television, Inc., 9.75% Sr. Sub. Nts., 11/1/05
1,450,000 1,460,875
- --------------------------------------------------------------------------------------------------------
- --------------
Granite Broadcasting Corp., 9.375% Sr. Sub. Nts., Series A, 12/1/05
1,050,000 1,023,750
- --------------------------------------------------------------------------------------------------------
- --------------
New World Communications Group Holding Corp.,
Zero Coupon Sr. Disc. Nts., Series B, 11.457%, 6/15/99(6)
1,030,000 824,000
- --------------------------------------------------------------------------------------------------------
- --------------
Outlet Broadcasting, Inc., 10.875% Sr. Sub. Nts., 7/15/03
1,000,000 1,109,206
- --------------------------------------------------------------------------------------------------------
- --------------
Paxson Communications Corp., 11.625% Sr. Sub. Nts., 10/1/02
5,345,000 5,665,700
- --------------------------------------------------------------------------------------------------------
- --------------
SFX Broadcasting, Inc., 10.75% Sr. Sub. Nts., 5/15/06
1,575,000 1,649,813
- --------------------------------------------------------------------------------------------------------
- --------------
Sinclair Broadcast Group, Inc., 10% Sr. Sub. Nts., 9/30/05
2,430,000 2,454,300
- --------------------------------------------------------------------------------------------------------
- --------------
Univision Television Group, Inc., 11.75% Sr. Sub. Nts., 1/15/01
500,000 532,500
- --------------------------------------------------------------------------------------------------------
- --------------
Young Broadcasting, Inc., 9% Sr. Sub. Nts., 1/15/06
1,500,000 1,417,500
-----------
17,590,769
- --------------------------------------------------------------------------------------------------------
- ---------------------
CABLE TELEVISION--5.4%
American Telecasting, Inc., 0%/14.50% Sr. Disc. Nts., 6/15/04(12)
2,453,211 1,846,041
- ------------------------------------------------------------------------------------------------------------------
- ----
Australis Media Ltd., Units (each unit consists of $1,000 principal
amount of 0%/14% Sr. Sub. Disc. Nts., 5/15/03 and one warrant to
purchase 57.721 ordinary shares)(11)(12)
1,100,000 665,500
- --------------------------------------------------------------------------------------------------------
- --------------
Bell Cablemedia PLC:
0%/11.875% Sr. Disc. Nts., 9/15/05(12)
4,830,000 3,308,550
0%/11.95% Sr. Disc. Nts., 7/15/04(12)
2,800,000 2,149,000
</TABLE>
12 Oppenheimer Champion Income Fund
<PAGE> 13
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1) SEE NOTE 1
- --------------------------------------------------------------------------------------------------------
- ---------------------
<S> <C>
<C>
CABLE TELEVISION
(CONTINUED)
Cablevision Industries Corp., 9.25% Sr. Debs., Series B, 4/1/08 $
400,000 $ 412,000
- --------------------------------------------------------------------------------------------------------
- --------------
Cablevision Systems Corp.:
10.75% Sr. Sub. Debs., 4/1/04
1,700,000 1,761,625
9.875% Sr. Sub. Debs., 2/15/13
215,000 209,625
9.875% Sr. Sub. Nts., 5/15/06
410,000 412,050
- --------------------------------------------------------------------------------------------------------
- --------------
Century Communications Corp., 11.875% Sr. Sub. Debs., 10/15/03
700,000 751,625
- --------------------------------------------------------------------------------------------------------
- --------------
Continental Cablevision, Inc., 11% Sr. Sub. Debs., 6/1/07
270,000 305,384
- --------------------------------------------------------------------------------------------------------
- --------------
EchoStar Communications Corp., 0%/12.875% Sr. Disc. Nts., 6/1/04(12)
3,375,000 2,674,688
- --------------------------------------------------------------------------------------------------------
- --------------
International CableTel, Inc.:
0%/10.875% Sr. Deferred Coupon Nts., 10/15/03(12)
160,000 122,000
0%/11.50% Sr. Deferred Coupon Nts., Series A, 2/1/06(12)
2,150,000 1,295,375
0%/12.75% Sr. Deferred Coupon Nts., 4/15/05(12)
3,448,000 2,336,020
- --------------------------------------------------------------------------------------------------------
- --------------
People's Choice TV Corp.:
0%/13.125% Sr. Disc. Nts., 6/1/04(12)
1,770,000 1,097,400
Units (each unit consists of $1,000 principal amount of 0%/13.125%
Sr. Disc. Nts., 6/1/04 and one warrant to purchase 1.427 shares
of common stock)(11)(12)
950,000 591,375
- --------------------------------------------------------------------------------------------------------
- --------------
Rogers Cablesystems Ltd., 11% Sr. Sub. Gtd. Debs., 12/1/15
1,200,000 1,236,000
- --------------------------------------------------------------------------------------------------------
- --------------
TeleWest PLC:
0%/11% Sr. Disc. Debs., 10/1/07(12)
4,395,000 2,834,775
9.625% Sr. Debs., 10/1/06
1,500,000 1,496,250
- --------------------------------------------------------------------------------------------------------
- --------------
TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07
1,575,000 1,749,634
- --------------------------------------------------------------------------------------------------------
- --------------
United International Holdings, Inc.:
0%/14% Sr. Disc. Nts., 5/15/06(10)(12)
1,749,000 944,460
Zero Coupon Sr. Sec. Disc. Nts., Series B, 12%, 11/15/99(6)
1,410,000 987,000
Zero Coupon Sr. Sec. Disc. Nts., 12.50%, 11/15/99(6)
925,000 647,500
-----------
29,833,877
- --------------------------------------------------------------------------------------------------------
- ---------------------
DIVERSIFIED MEDIA--1.5%
Ackerley Communications, Inc., 10.75% Sr. Sec. Nts., Series A, 10/1/03
2,800,000 2,940,000
- --------------------------------------------------------------------------------------------------------
- --------------
Heritage Media Corp., 8.75% Sr. Sub. Nts., 2/15/06
835,000 795,338
- --------------------------------------------------------------------------------------------------------
- --------------
News America Holdings, Inc., 10.125% Sr. Gtd. Debs., 10/15/12
700,000 789,399
- --------------------------------------------------------------------------------------------------------
- --------------
Panamsat LP/Panamsat Capital Corp.:
0%/11.375% Sr. Sub. Disc. Nts., 8/1/03(12)
3,930,000 3,576,300
9.75% Sr. Sec. Nts., 8/1/00
400,000 424,000
-----------
8,525,037
- --------------------------------------------------------------------------------------------------------
- ---------------------
ENTERTAINMENT/FILM--0.3%
Imax Corp., 7% Sr. Nts., 3/1/01(9)
1,700,000 1,666,000
- --------------------------------------------------------------------------------------------------------
- ---------------------
PUBLISHING/PRINTING--1.2%
Bell & Howell Co. (New), 0%/11.50% Sr. Disc. Debs., Series B, 3/1/05(12)
4,070,000 2,869,350
- --------------------------------------------------------------------------------------------------------
- --------------
Hollinger International Publishing, Inc., 9.25% Sr. Sub. Gtd. Nts., 2/1/06
1,870,000 1,823,250
- --------------------------------------------------------------------------------------------------------
- --------------
K-III Communications Corp., 10.625% Sr. Sec. Nts., 5/1/02
2,100,000 2,199,750
-----------
6,892,350
- --------------------------------------------------------------------------------------------------------
- ---------------------
OTHER--2.0%
- --------------------------------------------------------------------------------------------------------
- ---------------------
ENVIRONMENTAL--0.2%
Mid-American Waste Systems, Inc., 12.25% Sr. Sub. Nts., 2/15/03(5)(13)
1,900,000 1,187,500
</TABLE>
13 Oppenheimer Champion Income Fund
<PAGE> 14
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1) SEE NOTE 1
- --------------------------------------------------------------------------------------------------------
- ---------------------
<S> <C>
<C>
SERVICES--1.8%
Borg-Warner Security Corp., 9.125% Sr. Sub. Nts., 5/1/03
$3,000,000 $ 2,906,250
- --------------------------------------------------------------------------------------------------------
- --------------
Imo Industries, Inc., 11.75% Sr. Sub. Nts., 5/1/06(10)
2,250,000 2,351,250
- --------------------------------------------------------------------------------------------------------
- --------------
Protection One Alarm Monitoring, Inc.:
0%/13.625% Sr. Disc. Nts., 6/30/05(12)
4,750,000 4,251,250
6.75% Cv. Sr. Sub. Nts., 9/15/03
595,000 584,959
-----------
10,093,709
- --------------------------------------------------------------------------------------------------------
- ---------------------
RETAIL--3.3%
- --------------------------------------------------------------------------------------------------------
- ---------------------
SPECIALTY RETAILING--0.6%
Brylane LP/Brylane Capital Corp., 10% Sr. Sub. Nts., Series B, 9/1/03
1,000,000 1,005,000
- --------------------------------------------------------------------------------------------------------
- --------------
Finlay Fine Jewelry Corp., 10.625% Sr. Nts., 5/1/03
1,485,000 1,509,131
- --------------------------------------------------------------------------------------------------------
- --------------
United Stationers Supply Co., 12.75% Sr. Sub. Nts., 5/1/05
900,000 981,000
-----------
3,495,131
- --------------------------------------------------------------------------------------------------------
- ---------------------
SUPERMARKETS--2.7%
Grand Union Co., 12% Sr. Nts., 9/1/04
5,082,000 5,151,878
- --------------------------------------------------------------------------------------------------------
- --------------
Kash 'N Karry Food Stores, Inc., 11.50% Sr. Nts., 2/1/03(14)
2,155,000 2,165,775
- --------------------------------------------------------------------------------------------------------
- --------------
Penn Traffic Co., 11.50% Sr. Nts., 4/15/06
1,590,000 1,419,075
- --------------------------------------------------------------------------------------------------------
- --------------
Purity Supreme, Inc., 11.75% Sr. Sec. Nts., Series B, 8/1/99
275,000 294,282
- --------------------------------------------------------------------------------------------------------
- --------------
Ralph's Grocery Co.:
10.45% Sr. Nts., 6/15/04
2,835,000 2,898,788
10.45% Sr. Nts., 6/15/04
2,980,000 3,047,050
-----------
14,976,848
- --------------------------------------------------------------------------------------------------------
- ---------------------
TRANSPORTATION--1.6%
- --------------------------------------------------------------------------------------------------------
- ---------------------
AIR TRANSPORTATION--0.3%
Atlas Air, Inc., 12.25% Pass-Through Certificates, 12/1/02
1,500,000 1,601,250
- --------------------------------------------------------------------------------------------------------
- ---------------------
RAILROADS--0.4%
Transtar Holdings LP/Transtar Capital Corp.,
0%/13.375% Sr. Disc. Nts., Series B, 12/15/03(12)
3,200,000 2,420,000
- --------------------------------------------------------------------------------------------------------
- ---------------------
SHIPPING--0.9%
Gearbulk Holding Ltd., 11.25% Sr. Nts., 12/1/04
2,850,000 3,063,750
- --------------------------------------------------------------------------------------------------------
- --------------
Trans Ocean Container Corp., 12.25% Sr. Sub. Nts., 7/1/04
1,480,000 1,733,450
-----------
4,797,200
- --------------------------------------------------------------------------------------------------------
- ---------------------
UTILITIES--11.2%
- --------------------------------------------------------------------------------------------------------
- ---------------------
ELECTRIC UTILITIES--1.7%
CalEnergy Co., Inc.:
0%/10.25% Sr. Disc. Nts., 1/15/04(12)
3,860,000 3,946,850
9.50% Sr. Nts., 9/15/06(10)
900,000 914,625
- --------------------------------------------------------------------------------------------------------
- --------------
Centragas Natural Gas Transmission System, 10.65% Sr. Sec. Bonds, 12/1/10(10)
482,634 511,441
- --------------------------------------------------------------------------------------------------------
- --------------
El Paso Electric Co., 9.40% First Mtg. Bonds, Series E, 5/1/11
4,000,000 4,140,000
-----------
9,512,916
- --------------------------------------------------------------------------------------------------------
- ---------------------
TELECOMMUNICATIONS--9.5%
360 Communications Co.:
7.125% Sr. Nts., 3/1/03
550,000 533,507
7.50% Sr. Nts., 3/1/06
550,000 527,558
- --------------------------------------------------------------------------------------------------------
- --------------
A+ Network, Inc., 11.875% Sr. Sub. Nts., 11/1/05
3,015,000 2,999,925
- --------------------------------------------------------------------------------------------------------
- --------------
American Communications Services, Inc.:
0%/12.75% Sr. Disc. Nts., 4/1/06(12)
1,650,000 882,750
0%/13% Sr. Disc. Nts., 11/1/05(12)
725,000 416,875
- --------------------------------------------------------------------------------------------------------
- --------------
CellNet Data Systems, Inc., 0%/13% Sr. Disc. Nts., 6/15/05(5)(12)
500,000 313,750
</TABLE>
14 Oppenheimer Champion Income Fund
<PAGE> 15
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1) SEE NOTE 1
- --------------------------------------------------------------------------------------------------------
- ---------------------
<S> <C>
<C>
TELECOMMUNICATIONS
(CONTINUED)
Cellular Communications International, Inc.,
Zero Coupon Sr. Disc. Nts., 12.249%, 8/15/00(6)
$6,335,000 $ 4,038,563
- --------------------------------------------------------------------------------------------------------
- --------------
Cellular, Inc., 0%/11.75% Sr. Sub. Disc. Nts., 9/1/03(12)
2,250,000 1,912,500
- --------------------------------------------------------------------------------------------------------
- --------------
Comunicacion Celular SA, 0%/13.125% Sr. Deferred Coupon Bonds, 11/15/03(12)
2,000,000 1,240,000
- --------------------------------------------------------------------------------------------------------
- --------------
Geotek Communications, Inc., 12% Cv. Sr. Sub. Nts., 2/15/01
2,000,000 2,200,000
- --------------------------------------------------------------------------------------------------------
- --------------
GST Telecommunications, Inc., 0%/13.875% Cv. Sr. Sub. Disc. Nts., 12/15/05(10)(12)
407,000 345,278
- --------------------------------------------------------------------------------------------------------
- --------------
GST USA, Inc., 0%/13.875% Bonds, 12/15/05(12)
3,256,000 1,847,780
- --------------------------------------------------------------------------------------------------------
- --------------
Horizon Cellular Telephone LP/Horizon Finance Corp.,
0%/11.375% Sr. Sub. Disc. Nts., 10/1/00(12)
3,888,000 3,756,780
- --------------------------------------------------------------------------------------------------------
- --------------
Hyperion Telecommunications, Inc., 0%/13% Sr. Disc. Nts., 4/15/03(10)(12)
855,000 525,825
- --------------------------------------------------------------------------------------------------------
- --------------
In-Flight Phone Corp., 0%/14% Sr. Disc. Nts., 5/15/02(12)
850,000 293,250
- --------------------------------------------------------------------------------------------------------
- --------------
IntelCom Group (USA), Inc.:
0%/12.50% Gtd. Sr. Disc. Nts., 5/1/06(12)
435,000 270,788
0%/13.50% Sr. Disc. Nts., 9/15/05(12)
4,360,000 2,937,550
- --------------------------------------------------------------------------------------------------------
- --------------
MFS Communications Co., Inc., 0%/9.375% Sr. Disc. Nts., 1/15/04(12)
5,930,000 5,010,850
- --------------------------------------------------------------------------------------------------------
- --------------
Omnipoint Corp., 11.625% Sr. Nts., 8/15/06(10)
3,045,000 3,189,638
- --------------------------------------------------------------------------------------------------------
- --------------
Petersburg Long Distance, Inc.:
9% Cv. Sub. Nts., 6/1/06(10)
200,000 238,000
Units (each unit consists of $1,000 principal amount of 0%/14% Sr. Disc. Nts.,
6/1/04 and one warrant to purchase 34 ordinary shares)(11)(12)
1,450,000 1,189,000
- --------------------------------------------------------------------------------------------------------
- --------------
PriCellular Wireless Corp.:
0%/12.25% Sr. Sub. Disc. Nts., 10/1/03(12)
4,060,000 3,308,900
0%/14% Sr. Sub. Disc. Nts., 11/15/01(12)
460,000 433,550
- --------------------------------------------------------------------------------------------------------
- --------------
Rogers Cantel, Inc., 9.375% Sr. Sec. Debs., 6/1/08
3,000,000 2,992,500
- --------------------------------------------------------------------------------------------------------
- --------------
Sprint Spectrum LP/Sprint Spectrum Finance Corp.,
0%/12.50% Sr. Disc. Nts., 8/15/06(12)
3,210,000 1,897,913
- --------------------------------------------------------------------------------------------------------
- --------------
Teleport Communications Group, Inc.:
0%/11.125% Sr. Disc. Nts., 7/1/07(12)
8,350,000 5,385,750
9.875% Sr. Nts., 7/1/06
625,000 644,531
- --------------------------------------------------------------------------------------------------------
- --------------
USA Mobile Communications, Inc. II, 14% Sr. Nts., 11/1/04
500,000 568,750
- --------------------------------------------------------------------------------------------------------
- --------------
Western Wireless Corp., 10.50% Sr. Sub. Nts., 6/1/06
2,790,000 2,866,725
------------
52,768,786
------------
Total Corporate Bonds and Notes (Cost $401,441,675)
413,049,574
</TABLE>
<TABLE>
<CAPTION>
Shares
=====================================================================
===================================
=====================
<S>
<C> <C>
COMMON STOCKS--0.3%
- --------------------------------------------------------------------------------------------------------
- ---------------------
Capstone Capital Corp.
222 4,662
- --------------------------------------------------------------------------------------------------------
- --------------
EchoStar Communications Corp., Cl. A(15)
1,895 51,639
- --------------------------------------------------------------------------------------------------------
- --------------
ECM Fund, L.P.I.(5)
75 75,375
- --------------------------------------------------------------------------------------------------------
- --------------
Equitable Bag, Inc.(5)(15)
2,261 5,652
- --------------------------------------------------------------------------------------------------------
- --------------
Finlay Enterprises, Inc.(15)
2,333 29,162
- --------------------------------------------------------------------------------------------------------
- --------------
Grand Union Co.(15)
1,767 11,265
- --------------------------------------------------------------------------------------------------------
- --------------
Hollywood Casino Corp.(15)
10,000 48,750
- --------------------------------------------------------------------------------------------------------
- --------------
Kash 'N Karry Food Stores, Inc.(15)
4,500 110,531
- --------------------------------------------------------------------------------------------------------
- --------------
New World Communications Group, Inc., Cl. A(15)
2,001 46,273
- --------------------------------------------------------------------------------------------------------
- --------------
Omnipoint Corp.(5)(15)
50,000 1,383,438
- --------------------------------------------------------------------------------------------------------
- --------------
Triangle Wire & Cable, Inc.(5)(15)
9,500 9,500
-----------
Total Common Stocks (Cost $1,159,540)
1,776,247
</TABLE>
15 Oppenheimer Champion Income Fund
<PAGE> 16
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES
SEE NOTE 1
=====================================================================
===================================
=====================
<S> <C>
<C>
PREFERRED STOCKS--1.5%
- --------------------------------------------------------------------------------------------------------
- ---------------------
Cablevision Systems Corp.:
11.125% Exchangeable Preferred Stock, Series M(14)
4,170 $ 406,575
8.50% Cum. Cv., Series I
44,000 1,083,500
- --------------------------------------------------------------------------------------------------------
- --------------
California Federal Bank, 10.625% Non-Cum., Series B
5,040 555,660
- --------------------------------------------------------------------------------------------------------
- --------------
Earthwatch, Inc., 12% Cv. Sr. Preferred Stock, Series C(5)(14)
110,000 1,144,000
- --------------------------------------------------------------------------------------------------------
- --------------
El Paso Electric Co., 11.40% Series A Preferred Stock(14)
14,250 1,638,750
- --------------------------------------------------------------------------------------------------------
- --------------
Fidelity Federal Bank, 12% Non-Cum. Exchangeable
Perpetual Preferred Stock, Series A
20,000 555,000
- --------------------------------------------------------------------------------------------------------
- --------------
First Nationwide Bank, 11.50% Non-Cum.
11,700 1,325,025
- --------------------------------------------------------------------------------------------------------
- --------------
K-III Communications Corp., $11.625 Exchangeable, Series B(14)
8,185 820,578
- --------------------------------------------------------------------------------------------------------
- --------------
SDW Holdings Corp., 15% Cum. Sr. Exchangeable Preferred Stock(5)(15)
28,120 984,200
-----------
Total Preferred Stocks (Cost $7,757,314)
8,513,288
</TABLE>
<TABLE>
<CAPTION>
UNITS
=====================================================================
===================================
=====================
<S>
<C> <C>
RIGHTS, WARRANTS AND CERTIFICATES--0.3%
- --------------------------------------------------------------------------------------------------------
- ---------------------
American Communications Services, Inc. Wts., Exp. 11/05(5)
725 50,750
- --------------------------------------------------------------------------------------------------------
- --------------
American Telecasting, Inc. Wts.:
Exp. 6/99
5,500 24,750
Exp. 8/00(5)
850 19,550
- --------------------------------------------------------------------------------------------------------
- --------------
Ames Department Stores, Inc.:
Excess Cash Flow Payment Certificates, Series AG-7A(5)
6,200 62
Litigation Trust(5)
19,829 198
- --------------------------------------------------------------------------------------------------------
- --------------
Australis Media Ltd. Wts., Exp. 5/00
190 1
- --------------------------------------------------------------------------------------------------------
- --------------
Becker Gaming, Inc. Wts., Exp. 11/00(5)
12,500 3,125
- --------------------------------------------------------------------------------------------------------
- --------------
Casino America, Inc. Wts., Exp. 11/96
1,631 --
- --------------------------------------------------------------------------------------------------------
- --------------
CellNet Data Systems, Inc. Wts., Exp. 6/05(10)
4,000 63,000
- --------------------------------------------------------------------------------------------------------
- --------------
Cellular Communications International, Inc. Wts., Exp. 8/03(5)
5,120 89,600
- --------------------------------------------------------------------------------------------------------
- --------------
Comunicacion Celular SA Wts., Exp. 11/03(5)
2,000 10,000
- --------------------------------------------------------------------------------------------------------
- --------------
Federated Department Stores, Inc.:
Cl. C Wts., Exp. 12/99
6,741 85,948
Cl. D Wts., Exp. 12/01
6,741 87,633
- --------------------------------------------------------------------------------------------------------
- --------------
Furniture Brands International, Inc., Series 1 Wts., Exp. 8/99
14,540 103,598
- --------------------------------------------------------------------------------------------------------
- --------------
Gaylord Container Corp. Wts., Exp. 11/02
1,174 8,512
- --------------------------------------------------------------------------------------------------------
- --------------
Hyperion Telecommunications, Inc. Wts., Exp. 4/01(5)
855 8,550
- --------------------------------------------------------------------------------------------------------
- --------------
In-Flight Phone Corp. Wts., Exp. 8/02(5)
1,600 --
- --------------------------------------------------------------------------------------------------------
- --------------
IntelCom Group, Inc. Wts., Exp. 9/05(5)
17,655 278,066
- --------------------------------------------------------------------------------------------------------
- --------------
Jewel Recovery LP, Participation Units of Limited Partners' Interest
1,985 --
- --------------------------------------------------------------------------------------------------------
- --------------
Omnipoint Corp. Wts., Exp. 11/00(5)
8,000 221,350
- --------------------------------------------------------------------------------------------------------
- --------------
People's Choice TV Corp. Wts., Exp. 6/00(5)
1,770 1,770
- --------------------------------------------------------------------------------------------------------
- --------------
Protection One, Inc. Wts.:
Exp. 11/03(5)
28,000 224,000
Exp. 6/05
15,200 205,200
- --------------------------------------------------------------------------------------------------------
- --------------
SDW Holdings Corp., Cl. B Wts., Exp. 12/06(5)
2,812 36,556
- --------------------------------------------------------------------------------------------------------
- --------------
Terex Corp. Rts., Exp. 7/97(5)
300 30
- --------------------------------------------------------------------------------------------------------
- --------------
Trizec Corp. Wts., Exp. 7/99
1,985 3,133
-----------
Total Rights, Warrants and Certificates (Cost $293,790)
1,525,382
</TABLE>
16 Oppenheimer Champion Income Fund
<PAGE> 17
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1) SEE NOTE 1
=====================================================================
===================================
=====================
<S> <C>
<C>
STRUCTURED INSTRUMENTS--2.5%
- --------------------------------------------------------------------------------------------------------
- ---------------------
Bayerische Landesbank Girozentrale, New York Branch:
14% CD Linked Nts., 12/17/96 (indexed to the cross currency rates of
Greek Drachma and European Currency Unit) $
1,000,000 $ 984,400
6.28% Deutsche Mark Currency Protected Yield Curve CD, 7/25/97
500,000 490,125
- --------------------------------------------------------------------------------------------------------
- --------------
Canadian Imperial Bank of Commerce, New York Branch:
14% CD Linked Nts., 11/25/96 (indexed to the cross currency rates of
Greek Drachma and European Currency Unit)
2,300,000 2,271,020
17% CD Linked Nts., 4/2/97 (indexed to the Russian Federation GKO,
Zero Coupon, 3/26/97)
2,000,000 1,988,000
- --------------------------------------------------------------------------------------------------------
- --------------
Internationale Nederlanden Bank NV, Prague Branch,
Zero Coupon Promissory Nts., 10.516%, 4/28/97(6) CZK
26,000,000 908,501
- --------------------------------------------------------------------------------------------------------
- --------------
Internationale Nederlanden (U.S.) Capital Holdings Corp.:
Zero Coupon Chilean Peso Linked Nts., 11.813%, 6/23/97(6)
1,000,000 908,100
Zero Coupon Chilean Peso Linked Nts., 11.741%, 6/24/97(6)
2,000,000 1,815,600
Zero Coupon Indian Rupee Linked Nts., 15.672%, 12/20/96(6)
250,000 241,275
- --------------------------------------------------------------------------------------------------------
- --------------
Salomon Brothers, Inc., Zero Coupon Brazilian Credit Linked Nts.,
12.61%--12.886%, 1/3/97 (indexed to the Brazilian National Treasury Nts.,
Zero Coupon, 1/2/97)(6)
1,900,000 1,846,990
- --------------------------------------------------------------------------------------------------------
- --------------
Swiss Bank Corp., New York Branch, 6.05% CD Linked Nts., 6/20/97
(indexed to the closing Nikkei 225 Index on 1/23/97, 5 yr. & 3 mos.
Japanese Yen Swap rate & New Zealand Dollar)
1,100,000 1,088,835
- --------------------------------------------------------------------------------------------------------
- --------------
United Mexican States Linked Nts., 11/27/96 (indexed to the greater of
Cetes Option Amount or USD LIBOR Option Amount, 11/27/96)
900,000 1,096,125
-----------
Total Structured Instruments (Cost $13,535,800)
13,638,971
</TABLE>
<TABLE>
<CAPTION>
DATE STRIKE
CONTRACTS
=====================================================================
===================================
=====================
<S> <C> <C>
<C> <C>
PUT OPTIONS PURCHASED--0.0%
- --------------------------------------------------------------------------------------------------------
- ---------------------
Bulgaria (Republic of):
Front-Loaded Interest Reduction Bearer Bonds,
Tranche A, 2.25%, 7/28/12 Put Opt. 10/96 $28.125
2,400 7,200
Front-Loaded Interest Reduction Bearer Bonds,
Tranche A, 2.25%, 7/28/12 Put Opt. 10/96 $28.75
2,400 6,000
Interest Arrears Bonds, 6.688%,
7/28/11 Put Opt. 10/96 $40.875
2,600 1
- --------------------------------------------------------------------------------------------------------
- --------------
Interest Arrears Bonds, 6.688%,
7/28/11 Put Opt. 10/96 $41.375
2,600 10
Italy (Republic of) Treasury Bonds,
Buoni del Tesoro Poliennali,
9.50%, 5/1/01 Put Opt. 7/97 $99.96
2,029 14,004
- --------------------------------------------------------------------------------------------------------
- --------------
Swiss Franc Put Opt. 10/96 1.22 CHF
6,327,868 168,897
-----------
Total Put Options Purchased (Cost $336,085)
196,112
</TABLE>
17 Oppenheimer Champion Income Fund
<PAGE> 18
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1) SEE NOTE 1
=====================================================================
===================================
======================
<S> <C>
<C>
REPURCHASE AGREEMENT--0.8%
- --------------------------------------------------------------------------------------------------------
- ----------------------
Repurchase agreement with PaineWebber, Inc., 5.62%, dated 9/30/96,
to be repurchased at $4,400,687 on 10/1/96, collateralized by U.S. Treasury
Bonds, 6.75%, 8/15/26, with a value of $4,330,975 and U.S. Treasury Nts.,
6.125%, 5/15/98, with a value of $161,827 (Cost $4,400,000)
$4,400,000 $ 4,400,000
- --------------------------------------------------------------------------------------------------------
- ---------------------
TOTAL INVESTMENTS, AT VALUE (COST $525,578,792)
97.9% 542,324,004
- --------------------------------------------------------------------------------------------------------
- ---------------------
OTHER ASSETS NET OF LIABILITIES
2.1 11,881,399
- ---------- ------------
NET ASSETS
100.0% $554,205,403
========== ============
</TABLE>
1. Face amount is reported in U.S. Dollars, except for those denoted in
the following currencies:
ARP --Argentine Peso IEP --Irish Punt
AUD --Australian Dollar ITL --Italian Lira
CAD --Canadian Dollar JPY --Japanese Yen
CHF --Swiss Franc NLG --Netherlands Guilder
CZK --Czech Koruna NOK --Norwegian Krone
DEM --German Deutsche Mark PLZ --Polish Zloty
DKK --Danish Krone PTE --Portuguese Escudo
FIM --Finnish Markka SEK --Swedish Krona
GBP --British Pound Sterling THB --Thai Baht
IDR --Indonesian Rupiah
2. Interest-Only Strips represent the right to receive the monthly
interest payments on an underlying pool of mortgage loans. These
securities typically decline in price as interest rates decline. Most
other fixed-income securities increase in price when interest rates
decline. The principal amount of the underlying pool represents the
notional amount on which current interest is calculated. The price of
these securities is typically more sensitive to changes in prepayment
rates than traditional mortgage-backed securities (for example, GNMA
pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future
cash flows.
3. When-issued security to be delivered and settled after September 30,
1996.
4. Represents the current interest rate for a variable rate security.
5. Identifies issues considered to be illiquid--See Note 8 of Notes to
Financial Statements.
6. For zero coupon bonds, the interest rate shown is the effective yield
on the date of purchase.
7. A sufficient amount of securities has been designated to cover
outstanding written call options, as follows:
<TABLE>
<CAPTION>
FACE SUBJECT EXPIRATION EXERCISE PREMIUM
MARKET VALUE
TO CALL DATE PRICE RECEIVED
SEE NOTE 1
- --------------------------------------------------------------------------------------------------------
- ------------
<S> <C> <C> <C> <C>
<C>
Call Option on Banco Hipotecario Nacional
(Argentina) Medium-Term Nts., 10.625%, 8/7/06 1,000,000 8/00 $100.00 $ 9,200
$ 16,000
- --------------------------------------------------------------------------------------------------------
- ------------
Call Option on Bulgaria (Republic of)
Front-Loaded Interest Reduction Bearer Bonds,
Tranche A, 2.25%, 7/28/12 2,400,000 12/96 32.75 18,000
61,200
- --------------------------------------------------------------------------------------------------------
- ------------
Call Option on Bulgaria (Republic of)
Front-Loaded Interest Reduction Bearer Bonds,
Tranche A, 2.25%, 7/28/12 2,400,000 12/96 32.125 13,680
64,800
- --------------------------------------------------------------------------------------------------------
- ------------
Call Option on Bulgaria (Republic of) Interest
Arrears Bonds, 6.688%, 7/28/11 2,600,000 11/96 45.375 16,900
29,900
- --------------------------------------------------------------------------------------------------------
- ------------
Call Option on Bulgaria (Republic of) Interest
Arrears Bonds, 6.688%, 7/28/11 2,600,000 11/96 45.188 16,900
32,500
-------
--------
$74,680
$204,400
=======
========
</TABLE>
8. Indexed instrument for which the principal amount and/or interest due
at maturity is affected by the relative value of a foreign index.
9. Represents the current interest rate for an increasing rate security.
10. Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
has been determined to be liquid under guidelines established by the
Board of Trustees. These securities amount to $36,627,517 or 6.61% of
the Fund's net assets, at September 30, 1996.
11. Units may be comprised of several components, such as debt and
equity and/or warrants to purchase equity at some point in the future.
For units which represent debt securities, face amount disclosed
represents total underlying principal.
12. Denotes a step bond: a zero coupon bond that converts to a fixed
rate of interest at a designated future date.
13. Non-income producing--issuer is in default of interest payment.
14. Interest or dividend is paid in kind.
15. Non-income producing security.
See accompanying Notes to Financial Statements.
18 Oppenheimer Champion Income Fund
<PAGE> 19
STATEMENT OF ASSETS AND LIABILITIES September 30, 1996
<TABLE>
<S>
<C>
=====================================================================
===================================
=====================
ASSETS
Investments, at value (cost $525,578,792)--see accompanying statement
$542,324,004
- --------------------------------------------------------------------------------------------------------
- --------------
Cash
1,472,594
- --------------------------------------------------------------------------------------------------------
- --------------
Unrealized appreciation on forward foreign currency exchange contracts--Note 5
34,717
- --------------------------------------------------------------------------------------------------------
- --------------
Receivables:
Interest, dividends and principal paydowns
11,967,057
Investments sold
8,113,530
Shares of beneficial interest sold
3,845,276
Closed forward foreign currency exchange contracts
149,931
- --------------------------------------------------------------------------------------------------------
- --------------
Other
17,449
------------
Total assets
567,924,558
=====================================================================
===================================
=====================
LIABILITIES
Unrealized depreciation on forward foreign currency exchange contracts--Note 5
910
- --------------------------------------------------------------------------------------------------------
- --------------
Options written, at value (premiums received $74,680)--
see accompanying statement--Note 6
204,400
- --------------------------------------------------------------------------------------------------------
- --------------
Payables and other liabilities:
Investments purchased (including $5,692,885 purchased on a when-issued basis)--Note 1
10,724,741
Dividends
1,170,110
Shares of beneficial interest redeemed
974,384
Distribution and service plan fees
316,803
Closed forward foreign currency exchange contracts
83,461
Transfer and shareholder servicing agent fees
13,720
Other
230,626
------------
Total liabilities
13,719,155
=====================================================================
===================================
=====================
NET ASSETS
$554,205,403
============
=====================================================================
===================================
=====================
COMPOSITION OF
NET ASSETS
Paid-in capital
$538,658,915
- --------------------------------------------------------------------------------------------------------
- --------------
Undistributed net investment income
27,701
- --------------------------------------------------------------------------------------------------------
- --------------
Accumulated net realized loss on investments and foreign
currency transactions
(1,122,029)
- --------------------------------------------------------------------------------------------------------
- --------------
Net unrealized appreciation on investments and translation
of assets and liabilities denominated in foreign currencies
16,640,816
------------
Net assets
$554,205,403
============
=====================================================================
===================================
=====================
NET ASSET VALUE
PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $359,208,323 and 27,808,390 shares of beneficial interest outstanding)
$12.92
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price)
$13.56
- --------------------------------------------------------------------------------------------------------
- --------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $82,052,059 and 6,357,778 shares of beneficial interest outstanding)
$12.91
- --------------------------------------------------------------------------------------------------------
- --------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $112,945,021 and 8,751,748 shares of beneficial interest outstanding)
$12.91
</TABLE>
See accompanying Notes to Financial Statements.
19 Oppenheimer Champion Income Fund
<PAGE> 20
STATEMENT OF OPERATIONS For the Year Ended September 30, 1996
<TABLE>
<S>
<C>
=====================================================================
===================================
=====================
INVESTMENT INCOME
Interest (net of foreign withholding taxes of $21,619)
$42,991,935
- --------------------------------------------------------------------------------------------------------
- --------------
Dividends
346,267
-----------
Total income
43,338,202
=====================================================================
===================================
=====================
EXPENSES
Management fees--Note 4
2,902,865
- --------------------------------------------------------------------------------------------------------
- --------------
Distribution and service plan fees--Note 4:
Class A
748,429
Class B
328,699
Class C
893,787
- --------------------------------------------------------------------------------------------------------
- --------------
Transfer and shareholder servicing agent fees--Note 4
625,256
- --------------------------------------------------------------------------------------------------------
- --------------
Shareholder reports
258,126
- --------------------------------------------------------------------------------------------------------
- --------------
Custodian fees and expenses
82,041
- --------------------------------------------------------------------------------------------------------
- --------------
Registration and filing fees:
Class A
33,588
Class B
27,624
Class C
15,770
- --------------------------------------------------------------------------------------------------------
- --------------
Legal and auditing fees
20,760
- --------------------------------------------------------------------------------------------------------
- --------------
Trustees' fees and expenses
4,069
- --------------------------------------------------------------------------------------------------------
- --------------
Other
33,940
------------
Total expenses
5,974,954
=====================================================================
===================================
=====================
NET INVESTMENT INCOME
37,363,248
=====================================================================
===================================
=====================
REALIZED AND UNREALIZED
GAIN (LOSS)
Net realized gain (loss) on:
Investments and options written (including premiums on options exercised)
5,010,482
Closing of futures contracts (1,620,086)
Closing and expiration of options written
(103,292)
Foreign currency transactions
(459,552)
------------
Net realized gain
2,827,552
- --------------------------------------------------------------------------------------------------------
- ---------------------
Net change in unrealized appreciation or depreciation on:
Investments
12,313,659
Translation of assets and liabilities denominated in foreign currencies
(2,916)
------------
Net change
12,310,743
------------
Net realized and unrealized gain
15,138,295
=====================================================================
===================================
=====================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$52,501,543
============
</TABLE>
See accompanying Notes to Financial Statements.
20 Oppenheimer Champion Income Fund
<PAGE> 21
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
ENDED SEPTEMBER 30,
1996
1995
=====================================================================
===================================
=====================
<S> <C>
<C>
OPERATIONS
Net investment income
$37,363,248 $20,637,843
- --------------------------------------------------------------------------------------------------------
- --------------
Net realized gain (loss)
2,827,552 (2,898,856)
- --------------------------------------------------------------------------------------------------------
- --------------
Net change in unrealized appreciation or depreciation
12,310,743 7,212,069
- ----------- -----------
Net increase in net assets resulting from operations
52,501,543 24,951,056
=====================================================================
===================================
=====================
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS
Dividends from net investment income:
Class A
(27,408,362) (17,271,188)
Class B
(2,625,608) --
Class C
(7,329,215) (3,335,380)
- --------------------------------------------------------------------------------------------------------
- --------------
Distributions from net realized gain:
Class A
- -- (26,483)
Class C
- -- (4,572)
=====================================================================
===================================
=====================
BENEFICIAL INTEREST
TRANSACTIONS
Net increase in net assets resulting from beneficial
interest transactions--Note 2:
Class A
93,320,881 91,132,115
Class B
80,797,723 --
Class C
44,878,194 36,376,191
=====================================================================
===================================
=====================
NET ASSETS
Total increase
234,135,156 131,821,739
- --------------------------------------------------------------------------------------------------------
- --------------
Beginning of period
320,070,247 188,248,508
- ------------ ------------
End of period (including undistributed net investment income of
$27,701 and $83,753,respectively)
$554,205,403 $320,070,247
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
21 Oppenheimer Champion Income Fund
<PAGE> 22
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
CLASS B
- --------------------------------------------------------------- ---------
PERIOD ENDED
YEAR ENDED SEPTEMBER 30,
SEPT. 30,
1996 1995 1994 1993
1992 1996(2)
=====================================================================
===================================
============================
<S> <C> <C> <C> <C>
<C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $12.47 $12.32 $12.90 $12.26
$11.49 $12.47
- --------------------------------------------------------------------------------------------------------
- ----------------------------
Income (loss) from investment
operations:
Net investment income 1.15 1.05 1.10 1.22
1.41 1.03
Net realized and unrealized
gain (loss) .44 .14 (.38) .64
.77 .44
------ ------ ------ ------
------ ------
Total income from investment
operations 1.59 1.19 .72 1.86
2.18 1.47
- --------------------------------------------------------------------------------------------------------
- ----------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income (1.14) (1.04) (1.10) (1.22)
(1.41) (1.03)
Dividends in excess of net
investment income -- -- (.01) --
-- --
Distributions in excess of net
realized gain -- -- (.19) --
-- --
------ ------ ------ ------
------ ------
Total dividends and distributions
to shareholders (1.14) (1.04) (1.30) (1.22)
(1.41) (1.03)
- --------------------------------------------------------------------------------------------------------
- ----------------------------
Net asset value, end of period $12.92 $12.47 $12.32 $12.90
$12.26 $12.91
====== ====== ====== ======
====== ======
=====================================================================
===================================
============================
TOTAL RETURN, AT NET ASSET VALUE(4) 13.28% 10.09% 5.61%
15.92%
19.94% 12.20%
=====================================================================
===================================
============================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $359,208 $255,139 $160,505 $104,465
$47,125 $82,052
- --------------------------------------------------------------------------------------------------------
- ----------------------------
Average net assets (in thousands) $305,638 $204,917 $135,431 $ 73,334
$28,270 $33,189
- --------------------------------------------------------------------------------------------------------
- ----------------------------
Ratios to average net assets:
Net investment income 8.97% 8.45% 8.49% 9.52%
11.60% 7.90%(5)
Expenses 1.17% 1.18% 1.22% 1.24%
1.35% 1.97%(5)
- --------------------------------------------------------------------------------------------------------
- ----------------------------
Portfolio turnover rate(6) 95.0% 72.5% 108.0% 116.2%
121.5% 95.0%
</TABLE>
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1996 1995 1994(1)
=====================================================================
==================================
<S> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $12.46 $12.32 $13.13
- -------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income 1.06 .95 .75
Net realized and unrealized
gain (loss) .44 .13 (.60)
------ ------ ------
Total income from investment
operations 1.50 1.08 .15
- -------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income (1.05) (.94) (.77)
Dividends in excess of net
investment income -- -- --
(3)
Distributions in excess of net
realized gain -- -- (.19)
Total dividends and distributions
to shareholders (1.05) (.94) (.96)
- -------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.91 $12.46 $12.32
====== ====== ======
=====================================================================
==================================
TOTAL RETURN, AT NET ASSET VALUE(4) 12.44% 9.16%
1.11%
=====================================================================
==================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $112,945 $64,932 $27,743
- -------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 89,416 $43,584 $13,693
Ratios to average net assets:
Net investment income 8.19% 7.63%
7.24%(5)
Expenses 1.93% 1.95%
1.94%(5)
- -------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 95.0% 72.5% 108.0%
</TABLE>
1. For the period from December 1, 1993 (inception of offering)
to September 30, 1994.
2. For the period from October 2, 1995 to September 30, 1996.
3. Less than $.005 per share.
4. Assumes a hypothetical initial investment on the business day
before the first day of the fiscal period (or inception of
offering), with all dividends and distributions reinvested in
additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one
full year.
5. Annualized.
6. The lesser of purchases or sales of portfolio securities for a
period, divided by the monthly average of the market value of
portfolio securities owned during the period. Securities with a
maturity or expiration date at the time of acquisition of one
year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities)
for the period ended September 30, 1996 were $590,516,268 and
$380,018,484, respectively.
See accompanying Notes to Financial Statements.
22 Oppenheimer Champion Income Fund
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS
=====================================================================
===========
1. SIGNIFICANT
ACCOUNTING POLICIES
Oppenheimer Champion Income Fund (the Fund) is registered under
the Investment Company Act of 1940, as amended, as a diversified,
open-end management investment company. The Fund's investment
objective is to seek a high level of current income primarily
through investing in a diversified portfolio of high yield fixed
income securities. The Fund's investment adviser is
OppenheimerFunds, Inc. (the Manager). The Fund offers Class A,
Class B and Class C shares. Class A shares are sold with a
front-end sales charge. Class B and Class C shares may be subject
to a contingent deferred sales charge. All three classes of
shares have identical rights to earnings, assets and voting
privileges, except that each class has its own distribution
and/or service plan, expenses directly attributable to a
particular class and exclusive voting rights with respect to
matters affecting a single class. Class B shares will
automatically convert to Class A shares six years after the date
of purchase. The following is a summary of significant accounting
policies consistently followed by the Fund.
------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at the
close of the New York Stock Exchange on each trading day. Listed
and unlisted securities for which such information is regularly
reported are valued at the last sale price of the day or, in the
absence of sales, at values based on the closing bid or the last
sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio
pricing service approved by the Board of Trustees. Such
securities which cannot be valued by the approved portfolio
pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the
quotes is reliable and that the quotes reflect current market
value, or are valued under consistently applied procedures
established by the Board of Trustees to determine fair value in
good faith. Short-term "money market type" debt securities having
a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to
maturity of any premium or discount. Forward foreign currency
exchange contracts are valued based on the closing prices of the
forward currency contract rates in the London foreign exchange
markets on a daily basis as provided by a reliable bank or
dealer. Options are valued based upon the last sale price on the
principal exchange on which the option is traded or, in the
absence of any transactions that day, the value is based upon the
last sale price on the prior trading date if it is within the
spread between the closing bid and asked prices. If the last sale
price is outside the spread, the closing bid is used.
------------------------------------------------------------------
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS. Delivery and payment
for securities that have been purchased by the Fund on a forward
commitment or when-issued basis can take place a month or more
after the transaction date. During this period, such securities
do not earn interest, are subject to market fluctuation and may
increase or decrease in value prior to their delivery. The Fund
maintains, in a segregated account with its custodian, assets
with a market value equal to the amount of its purchase
commitments. The purchase of securities on a when-issued or
forward commitment basis may increase the volatility of the
Fund's net asset value to the extent the Fund makes such
purchases while remaining substantially fully invested. As of
September 30, 1996, the Fund had entered into outstanding
when-issued or forward commitments of $5,692,885.
In connection with its ability to purchase
securities on a when-issued or forward commitment basis, the Fund
may enter into mortgage "dollar-rolls" in which the Fund sells
securities for delivery in the current month and simultaneously
contracts with the same counterparty to repurchase similar (same
type coupon and maturity) but not identical securities on a
specified future date. The Fund records each dollar-roll as a
sale and a new purchase transaction.
------------------------------------------------------------------
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,
1996, securities with an aggregate market value of $1,380,500,
representing 0.25% of the Fund's net assets, were in default.
23 Oppenheimer Champion Income Fund
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (Continued)
=====================================================================
===========
1. SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund
are maintained in U.S. dollars. Prices of securities denominated
in foreign currencies are translated into U.S. dollars at the
closing rates of exchange. Amounts related to the purchase and
sale of securities and investment income are translated at the
rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange
rates on investments is separately identified from the
fluctuations arising from changes in market values of securities
held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund requires the custodian to take
possession, to have legally segregated in the Federal Reserve
Book Entry System or to have segregated within the custodian's
vault, all securities held as collateral for repurchase
agreements. The market value of the underlying securities is
required to be at least 102% of the resale price at the time of
purchase. If the seller of the agreement defaults and the value
of the collateral declines, or if the seller enters an insolvency
proceeding, realization of the value of the collateral by the
Fund may be delayed or limited.
------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income,
expenses (other than those attributable to a specific class) and
gains and losses are allocated daily to each class of shares
based upon the relative proportion of net assets represented by
such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to continue to comply with
provisions of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income,
including any net realized gain on investments not offset by loss
carryovers, to shareholders. Therefore, no federal income or
excise tax provision is required. At September 30, 1996, the Fund
had available for federal income tax purposes an unused capital
loss carryover of approximately $511,000, which expires in 2003.
------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare
dividends separately for Class A, Class B and Class C shares 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.
------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERs. Net investment
income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of the
distributions made during the year from net investment income or
net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to
timing of dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that the income
or realized gain (loss) was recorded by the Fund.
During the year ended September 30, 1996, the Fund
adjusted the classification of distributions to shareholders to
reflect the differences between financial statement amounts and
distributions determined in accordance with income tax
regulations. During the year ended September 30, 1996, amounts
have been reclassified to reflect a decrease in undistributed net
investment income of $56,115. Accumulated net realized loss on
investments was decreased by the same amount.
------------------------------------------------------------------
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
periodically.
The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during
the reporting period. Actual results could differ from those
estimates.
24 Oppenheimer Champion Income Fund
<PAGE> 25
=====================================================================
===========
2. SHARES OF
BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value
shares of beneficial interest of each class. Transactions in
shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1996(1) YEAR
ENDED SEPTEMBER 30, 1995
--------------------------------
- --------------------------------
SHARES AMOUNT
SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------
- ---------------------------
<S> <C> <C> <C>
<C>
Class A:
Sold 13,390,615 $170,144,406
13,552,963 $166,240,526
Dividends and distributions reinvested 1,445,851 18,398,126
941,789 11,588,722
Redeemed (7,492,035) (95,221,651)
(7,056,6892) (86,697,133)
---------- ------------
- ----------- ------------
Net increase 7,344,431 $ 93,320,881
7,438,063 $ 91,132,115
========== ============
=========== ============
- --------------------------------------------------------------------------------------------------------
- --------------
Class B:
Sold 6,824,247 $ 86,737,093
-- $ --
Dividends and distributions reinvested 132,964 1,694,762
-- --
Redeemed (599,433) (7,634,132)
-- --
---------- ------------
- ----------- ------------
Net increase 6,357,778 $ 80,797,723
-- $ --
========== ============
=========== ============
- --------------------------------------------------------------------------------------------------------
- --------------
Class C:
Sold 4,628,427 $ 58,715,116
3,640,178 $ 44,736,101
Dividends and distributions reinvested 401,746 5,108,872
176,650 2,175,061
Redeemed (1,490,391) (18,945,794)
(856,281) (10,534,971)
---------- ------------
- ----------- ------------
Net increase 3,539,782 $ 44,878,194
2,960,547 $ 36,376,191
========== ============
=========== ============
</TABLE>
1. For the year ended September 30, 1996 for Class A and Class C
shares and for the period from October 2, 1995 (inception of
offering) to September 30, 1996 for Class B shares.
=====================================================================
===========
3. UNREALIZED GAINS AND
LOSSES ON INVESTMENTS
At September 30, 1996, net unrealized appreciation on investments
and options written of $16,615,492 was composed of gross
appreciation of $20,896,547, and gross depreciation of
$4,281,055.
=====================================================================
===========
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 a
fee of 0.70% on the first $250 million of average annual net
assets, 0.65% on the next $250 million, 0.60% on the next $500
million and 0.55% 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, 1996, commissions
(sales charges paid by investors) on sales of Class A shares
totaled $2,709,849, of which $693,681 was retained by
OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by an affiliated
broker/dealer. Sales charges advanced to broker/dealers by OFDI
on sales of the Fund's Class B and Class C shares totaled
$2,801,916 and $680,794, of which $38,875 and $7,587,
respectively, was paid to an affiliated broker/dealer. During the
year ended September 30, 1996, OFDI received contingent deferred
sales charges of $59,676 and $40,138, respectively, upon
redemption of Class B and Class C shares, as reimbursement for
sales commissions advanced by OFDI at the time of sale of such
shares.
OppenheimerFunds Services (OFS), a division of the
Manager, is the transfer and shareholder servicing agent for the
Fund, and for other registered investment companies. OFS's total
costs of providing such services are allocated ratably to these
companies.
The Fund has adopted a Service Plan for Class A
shares to reimburse OFDI for a portion of its costs incurred in
connection with the personal service and maintenance of accounts
that hold Class A shares. Reimbursement is made quarterly at an
annual rate that may not exceed 0.25% of the average annual net
assets of Class A shares of the Fund. OFDI uses the service fee
to reimburse brokers, dealers, banks and other financial
institutions quarterly for providing personal service and
maintenance of accounts of their customers that hold Class A
shares. During the year ended September 30, 1996, OFDI paid
$28,869 to an affiliated broker/dealer as reimbursement for Class
A personal service and maintenance expenses.
25 Oppenheimer Champion Income Fund
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS (Continued)
=====================================================================
===========
4. MANAGEMENT FEES
AND OTHER TRANSACTIONS
WITH AFFILIATES
(CONTINUED)
The Fund has adopted a compensation type Distribution and Service
Plan for Class B shares to compensate OFDI for its services and
costs in distributing Class B shares and servicing accounts.
Under the Plan, the Fund pays OFDI an annual asset-based sales
charge of 0.75% per year on Class B shares. OFDI also receives a
service fee of 0.25% per year to compensate dealers for providing
personal services for accounts that hold Class B shares. Both
fees are computed on the average annual net assets of Class B
shares, determined as of the close of each regular business day.
If the Plan is terminated by the Fund, the Board of Trustees may
allow the Fund to continue payments of the asset-based sales
charge to OFDI for certain expenses it incurred before the Plan
was terminated. During the year ended September 30, 1996, OFDI
retained $323,036 as compensation for Class B sales commissions
and service fee advances, as well as financing costs. As of
September 30, 1996, OFDI had incurred unreimbursed expenses of
$3,224,469 for Class B.
The Fund has adopted a reimbursement type
Distribution and Service Plan for Class C shares to reimburse
OFDI for its services and costs in distributing Class C shares
and servicing accounts. Under the Plan, the Fund pays OFDI an
annual asset-based sales charge of 0.75% per year on Class C
shares. OFDI also receives a service fee of 0.25% per year to
reimburse dealers for providing personal services for accounts
that hold Class C shares. Both fees are computed on the average
annual net assets of Class C shares, determined as of the close
of each regular business day. If the Plan is terminated by the
Fund, the Board of Trustees may allow the Fund to continue
payments of the asset-based sales charge to OFDI for certain
expenses it incurred before the Plan was terminated. During the
year ended September 30, 1996, OFDI paid $7,548 to an affiliated
broker/dealer as reimbursement for Class C personal service and
maintenance expenses and retained $507,536 as reimbursement for
Class C sales commissions and service fee advances, as well as
financing costs. As of September 30, 1996, OFDI had incurred
unreimbursed expenses of $1,300,506 for Class C.
=====================================================================
===========
5. FORWARD CONTRACTS
A forward foreign currency exchange contract (forward contract)
is a commitment to purchase or sell a foreign currency at a
future date, at a negotiated rate.
The Fund uses forward contracts to seek to manage
foreign currency risks. They may also be used to tactically shift
portfolio currency risk. The Fund generally enters into forward
contracts as a hedge upon the purchase or sale of a security
denominated in a foreign currency. In addition, the Fund may
enter into such contracts as a hedge against changes in foreign
currency exchange rates on portfolio positions.
Forward contracts are valued based on the closing
prices of the forward currency contract rates in the London
foreign exchange markets on a daily basis as provided by a
reliable bank or dealer. The Fund will realize a gain or loss
upon the closing or settlement of the forward transaction.
Securities held in segregated accounts to cover net
exposure on outstanding forward contracts are noted in the
Statement of Investments where applicable. Unrealized
appreciation or depreciation on forward contracts is reported in
the Statement of Assets and Liabilities. Realized gains and
losses are reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
Risks include the potential inability of the
counterparty to meet the terms of the contract and unanticipated
movements in the value of a foreign currency relative to the U.S.
dollar.
At September 30, 1996, the Fund had outstanding forward contracts
to purchase and sell foreign currencies as follows:
<TABLE>
<CAPTION>
CONTRACT VALUATION AS OF
UNREALIZED UNREALIZED
CONTRACTS TO PURCHASE EXPIRATION DATE AMOUNT (000S)
SEPTEMBER 30, 1996
APPRECIATION DEPRECIATION
- --------------------------------------------------------------------------------------------------------
- ------------
<S> <C> <C>
<C>
Danish Krone (DKK) 10/2/96 4,139 DKK $ 706,760 $
- -- $ 910
==========
- ------- -------
CONTRACTS TO SELL
- --------------------------------------------------------------------------------------------------------
- ------------
Finnish Markka (FIM) 10/2/96--12/2/96 9,352 FIM $2,050,213 $
7,822 $ --
Japanese Yen (JPY) 10/28/96 72,000 JPY 648,176
21,430 --
Swedish Krona (SEK) 11/1/96 10,070 SEK 1,519,465
5,045 --
SwissFranc (CHF) 1/3/97 1,250 CHF 1,006,987
420 --
----------
- ------- -------
$5,224,841
34,717 --
==========
- ------- -------
Total Unrealized Appreciation and Depreciation
$34,717 $ 910
======= =======
</TABLE>
26 Oppenheimer Champion Income Fund
<PAGE> 27
=====================================================================
===========
6. FUTURES CONTRACTS
The Fund may buy and sell interest rate futures contracts in
order to gain exposure to or protect against changes in interest
rates. The Fund may also buy or write put or call options on
these futures contracts.
The Fund generally sells futures contracts to hedge
against increase in interest rates and the resulting negative
effect on the value of fixed rate portfolio securities. The Fund
may also purchase futures contracts to gain exposure to changes
in interest rates as it may be more efficient or cost effective
than actually buying fixed-income securities.
Upon entering into a futures contract, the Fund is
required to deposit either cash or securities in an amount
(initial margin) equal to a certain percentage of the contract
value. Subsequent payments (variation margin) are made or
received by the Fund each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded
as unrealized gains and losses. The Fund recognizes a realized
gain or loss when the contract is closed or expired.
Risks of entering into futures contracts (and
related options) include the possibility that there may be an
illiquid market and that a change in the value of the contract or
option may not correlate with changes in the value of the
underlying securities.
=====================================================================
===========
7. OPTION ACTIVITY
The Fund may buy and sell put and call options, or write put and
covered call options on portfolio securities in order to produce
incremental earnings or protect against changes in the value of
portfolio securities.
The Fund generally purchases put options or writes
covered call options to hedge against adverse movements in the
value of portfolio holdings. When an option is written, the Fund
receives a premium and becomes obligated to sell or purchase the
underlying security at a fixed price, upon exercise of the
option.
Options are valued daily based upon the last sale
price on the principal exchange on which the option is traded and
unrealized appreciation or depreciation is recorded. The Fund
will realize a gain or loss upon the expiration or closing of the
option transaction. When an option is exercised, the proceeds on
sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or
call option is adjusted by the amount of premium received or
paid.
Securities designated to cover outstanding call
options are noted in the Statement of Investments where
applicable. Shares subject to call, expiration date, exercise
price, premium received and market value are detailed in a
footnote to the Statement of Investments. Options written are
reported as a liability in the Statement of Assets and
Liabilities. Gains and losses are reported in the Statement of
Operations.
The risk in writing a call option is that the Fund
gives up the opportunity for profit if the market price of the
security increases and the option is exercised. The risk in
writing a put option is that the Fund may incur a loss if the
market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a
premium whether or not the option is exercised. The Fund also has
the additional risk of not being able to enter into a closing
transaction if a liquid secondary market does not exist.
Written call option activity for the year ended September 30,
1996 was as follows:
<TABLE>
<CAPTION>
CALL OPTIONS PUT OPTIONS
------------------------------
- ------------------------
NUMBER OF AMOUNT OF NUMBER OF
AMOUNT OF
OPTIONS PREMIUMS OPTIONS
PREMIUMS
- --------------------------------------------------------------------------------------------------------
- -----------
<S> <C> <C> <C>
<C>
Options outstanding at
September 30, 1995 -- $ -- --
$ --
Options written 13,277,948 268,958 1,734
60,012
Options closed or expired (12,307,448) (186,398) (1,734)
(60,012)
Options exercised (959,500) (7,880) --
--
----------- --------- ------
--------
Options outstanding at
September 30, 1996 11,000 $ 74,680 --
$ --
=========== ========= ======
========
</TABLE>
27 Oppenheimer Champion Income Fund
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS (Continued)
=====================================================================
===========
8. ILLIQUID AND RESTRICTED
SECURITIES
At September 30, 1996, investments in securities included issues
that are illiquid or restricted. Restricted securities are often
purchased in private placement transactions, are not registered
under the Securities Act of 1933, may have contractual
restrictions on resale, and are valued under methods approved by
the Board of Trustees as reflecting fair value. A security may be
considered illiquid if it lacks a readily available market or if
its valuation has not changed for a certain period of time. The
Fund intends to invest no more than 10% of its net assets
(determined at the time of purchase and reviewed from time to
time) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional
investors, are not subject to that limit. The aggregate value of
illiquid or restricted securities subject to this limitation at
September 30, 1996 was $16,671,756 which represents 3.01% of the
Fund's net assets. Information concerning restricted securities
is as follows:
<TABLE>
<CAPTION>
VALUATION
PER UNIT AS OF
SECURITY ACQUISITION DATE COST PER UNIT
SEPT. 30, 1996
- --------------------------------------------------------------------------------------------------------
- ----
<S> <C> <C>
<C>
Arizona Charlie's Inc., 12% First Mtg. Nts.,
Series A, 11/15/00 11/18/93 $ 100.00
$ 69.00
- --------------------------------------------------------------------------------------------------------
- ----
Becker Gaming, Inc. Wts., Exp. 11/00 11/18/93 2.00
0.25
- --------------------------------------------------------------------------------------------------------
- ----
Capitol Queen & Casino, Inc., 12% First Mtg. Nts.,
Series A, 11/15/00 11/18/93 87.50
70.00
- --------------------------------------------------------------------------------------------------------
- ----
ECM Fund, L.P.I.:
14% Sub. Nts., 6/10/02 7/28/92 100.50
110.50
Common Stock 4/14/92 1,000.00
1,005.00
- --------------------------------------------------------------------------------------------------------
- ----
Triangle Wire & Cable, Inc. Common Stock 5/2/94 9.50
1.00
</TABLE>
Pursuant to guidelines adopted by the Board of Trustees, certain
unregistered securities are determined to be liquid and are not
included within the 10% limitation specified above.
28 Oppenheimer Champion Income Fund
<PAGE> 29
<PAGE>
Appendix
Industry Classifications
Corporate Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
<PAGE>
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies &
Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications -
Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking<PAGE>
<PAGE>
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
<PAGE>
OPPENHEIMER CHAMPION INCOME FUND
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Financial Highlights - See Parts A and B: Filed
herewith.
(2) Independent Auditors' Report - See Part B: Filed
herewith.
(3) Statement of Investments - 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.
(b) Exhibits
(1) Amended and Restated Declaration of Trust made as of
8/22/95 - Filed with Post-Effective Amendment No. 15 to Registrant's
Registration Statement, 9/28/95, 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 refiled with Registrant's Post-Effective Amendment No. 13,
1/24/95, pursuant to Item 102 of Regulation S-T.
(3) Not applicable.
(4) (i) Specimen Class A Share Certificate: Filed herewith.
(ii) Specimen Class B Share Certificate: Filed herewith.
(iii) 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 refiled with Registrant's Post-Effective
Amendment No. 13, 1/24/95, pursuant to Item 102 of Regulation S-T 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 refiled with Registrant's Post-Effective
Amendment No. 13, 1/24/95, pursuant to Item 102 of Regulation S-T and
incorporated herein by reference.
(ii) Form of OppenheimerFunds Distributor, Inc. Dealer
Agreement: Filed with Post-Effective Amendment No. 14 of Oppenheimer
Main Street Funds, Inc. (Reg. No. 33-17850), 9/30/94, pursuant to Item
102 of Regulation S-T, and incorporated herein by reference.
(iii) Form of OppenheimerFunds Distributor, Inc. Broker
Agreement: Filed with Post-Effective Amendment No. 14 of Oppenheimer
Main Street Funds, Inc. (Reg. No. 33-17850), 9/30/94, pursuant to Item
102 of Regulation S-T, and incorporated herein by reference.
(iv) Form of OppenheimerFunds Distributor, Inc. Agency
Agreement: Filed with Post-Effective Amendment No. 14 of Oppenheimer
Main Street Funds, Inc. (Reg. No. 33-17850), 9/30/94, pursuant to Item
102 of Regulation S-T, and incorporated herein by reference.
(v) Broker Agreement between OppenheimerFunds
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, refiled with Post-
Effective Amendment No. 45 of Oppenheimer Special Fund (reg. No. 2-
45272), 8/22/94, pursuant to Item 102 of Regulation S-T 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 refiled with
Registrant's Post-Effective Amendment No. 13, 1/27/95, pursuant to Item
102 of Regulation S-T 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 refiled
with Registrant's Post-Effective Amendment No. 13, 1/24/95, pursuant to
Item 102 of Regulation S-T and incorporated herein by reference.
(11) Independent Auditors Consent: Filed herewith.
(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 Prototype Standardized and Non-
Standardized Profit Sharing Plan and Money Purchase Pension Plan For
Self-Employed Persons in corporations: Filed with Post-Effective
Amendment No. 15 to the Registration Statement of Oppenheimer Mortgage
Income Fund (Reg. No. 33-6614), 1/19/95, 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. 47 of Oppenheimer
Growth Fund (File No. 2-45272), 10/21/94 and incorporated herein by
reference.
(iv) Form of Prototype 401(k) Plan: Filed with Post-
Effective Amendment No. 7 to the Registration Statement of Oppenheimer
Strategic Income & Growth Fund (Reg. No. 33-47378), 9/28/95, and
incorporated herein by reference.
(v) Form of SAR SEP Simplified Employee Pension IRA:
Filed with Post-Effective Amendment No. 15 to the Registration Statement
of Oppenheimer Mortgage Income Fund (Reg. No. 33-6614), 1/19/95, 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 B shares dated 10/1/95 under Rule 12b-1 of the Investment Company
Act of 1940: Filed with Post-Effective Amendment No. 14 to Registrant's
Registration Statement, 7/27/95 and incorporated herein by reference.
(iii) Distribution and Service Plan and Agreement for
Class C Shares dated 12/1/93 under Rule 12b-1 of the Investment Company
Act of 1940: Filed with Post-Effective Amendment No. 13 to Registrant's
Registration Statement, 1/27/95, and incorporated herein by reference.
(16) Performance Data Computation Schedule: Filed
herewith.
(17) (i) Financial Data Schedule for Class A Shares: Filed
herewith.
(ii) Financial Data Schedule For Class B Shares: Filed
herewith.
(iii) Financial Data Schedule for Class C Shares: Filed
herewith.
(18) Oppenheimer Funds Multiple Class Plan pursuant to Rule 18f-
3 under the Investment Company Act of 1940: Filed with Post-Effective
Amendment No. 12 to the Registration Statement of Oppenheimer California
Tax-Exempt Fund (Reg. No. 33-23566), 11/1/95, and incorporated herein
by reference.
-- Powers of Attorney: For Sam Freedman, Trustee: Filed
herewith; for Bridget A. Macaskill, Trustee: Filed with Amendment No.16
to Registrant's Registration Statement, 1/24/96, and incorporated herein
by reference; for all other Trustees: 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 January 3, 1997
-------------- ----------------------
Class A Shares of Beneficial Interest
Class B Shares of Beneficial Interest
Class C Shares of Beneficial Interest
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) OppenheimerFunds, Inc. is the investment adviser of the
Registrant; it and certain subsidiaries and affiliates act in the same
capacity to other registered investment companies as described in Parts
A and B hereof and listed in Item 28(b) below.
(b) There is set forth below information as to any other business,
profession, vocation or employment of a substantial nature in which each
officer and director of OppenheimerFunds, Inc. is, or at any time during
the past two fiscal years has been, engaged for his/her own account or
in the capacity of director, officer, employee, partner or trustee.
Name & Current Position Other Business and Connections with
OppenheimerFunds, Inc. During the Past Two Years
- --------------------------- ------------------------------
Mark J.P. Anson,
Vice President Vice President of Oppenheimer
Real Asset Management, Inc.
("ORAMI"); formerly Vice
President of Equity Derivatives
at Salomon Brothers, Inc.
Peter M. Antos,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; a Chartered Financial
Analyst; Senior Vice President of
HarbourView; prior to March, 1996
he was the senior equity
portfolio manager for the
Panorama Series Fund, Inc. (the
"Company") and other mutual funds
and pension funds managed by G.R.
Phelps & Co. Inc. ("G.R.
Phelps"), the Company's former
investment adviser, which was a
subsidiary of Connecticut Mutual
Life Insurance Company; was also
responsible for managing the
common stock department and
common stock investments of
Connecticut Mutual Life Insurance
Co.
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; formerly a Vice President
and Senior Portfolio Manager at
First of America Investment Corp.
Ellen Batt,
Assistant Vice President None
Kathleen Beichert,
Assistant Vice President Formerly employed by Smith
Barney, Inc.
David Bernard,
Vice President Previously a Regional Sales
Director for Retirement Plan
Services at Charles Schwab & Co.,
Inc.
Robert J. Bishop,
Vice President Assistant Treasurer of the
Oppenheimer Funds (listed below);
previously a Fund Controller for
OppenheimerFunds, Inc. (the
"Manager").
George Bowen,
Senior Vice President & Treasurer Treasurer of the New York-based
Oppenheimer Funds; Vice
President, Assistant Secretary
and Treasurer of the Denver-based
Oppenheimer Funds. Vice President
and Treasurer of OppenheimerFunds
Distributor, Inc. (the
"Distributor") and HarbourView
Asset Management Corporation
("HarbourView"), an investment
adviser subsidiary of the
Manager; Senior Vice President,
Treasurer, Assistant Secretary
and a director of Centennial
Asset Management Corporation
("Centennial"), an investment
adviser subsidiary of the
Manager; Vice President,
Treasurer and Secretary of
Shareholder Services, Inc.
("SSI") and Shareholder Financial
Services, Inc. ("SFSI"), transfer
agent subsidiaries of the
Manager; Director, Treasurer and
Chief Executive Officer of
MultiSource Services, Inc.; Vice
President and Treasurer of
Oppenheimer Real Asset
Management, Inc.; President,
Treasurer and Director of
Centennial Capital Corporation;
Vice President and Treasurer of
Main Street Advisers.
Scott Brooks,
Assistant Vice President None.
Susan Burton,
Assistant Vice President Previously a Director of
Educational Services for H.D.
Vest Investment Securities, Inc.
Michael A. Carbuto,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; Vice President of
Centennial.
Ruxandra Chivu,
Assistant Vice President None.
O. Leonard Darling,
Executive Vice President Formerly Co-Director of Fixed
Income for State Street Research
& Management Co.
Robert A. Densen,
Senior Vice President None.
Robert Doll, Jr.,
Executive Vice President and
Director An officer and/or portfolio
manager of certain Oppenheimer
funds.
John Doney,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Secretary of the New York-based
Oppenheimer Funds; Vice President
and Secretary of the Denver-based
Oppenheimer Funds; Secretary of
the Oppenheimer Quest and
Oppenheimer Rochester Funds;
Executive Vice President,
Director and General Counsel of
the Distributor; President and a
Director of Centennial; Chief
Legal Officer and a Director of
MultiSource Services, Inc.;
President and a Director of
Oppenheimer Real Asset
Management, Inc.; Executive Vice
President,
General Counsel and Director
of SFSI and SSI; formerly
Senior Vice President and
Associate General Counsel of
the Manager and the
Distributor.
George Evans,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
Scott Farrar,
Vice President Assistant Treasurer of the New
York-based and Denver-based
Oppenheimer funds.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of
OppenheimerFunds Distributor,
Inc.; Secretary of HarbourView
Asset Management Corporation,
MultiSource Services, Inc. and
Centennial Asset Management
Corporation; Secretary, Vice
President and Director of
Centennial Capital Corporation;
Vice President and Secretary of
ORAMI.
Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division An officer, Director and/or
portfolio manager of certain
Oppenheimer funds. Formerly
Chairman of the Board and
Director of Rochester Fund
Distributors, Inc. ("RFD"),
President and Director of
Fielding Management Company, Inc.
("FMC"), President and Director
of Rochester Capital Advisors,
Inc. ("RCAI"), Managing Partner
of Rochester Capital Advisors,
L.P., President and Director of
Rochester Fund Services, Inc.
("RFS"), President and Director
of Rochester Tax Managed Fund,
Inc.
John Fortuna,
Vice President None.
Patricia Foster,
Vice President Formerly she held the following
positions: An officer of certain
Oppenheimer funds; Secretary and
General Counsel of Rochester
Capital Advisors, L.P. and
Secretary of Rochester Tax
Managed Fund, Inc.
Robert G. Galli,
Vice Chairman Trustee of the New York-based
Oppenheimer Funds; Vice President
and Counsel of OAC; formerly he
held the following positions:
Vice President and a director of
HarbourView and Centennial, a
director of SFSI and SSI, an
officer of other Oppenheimer
Funds.
Linda Gardner,
Assistant Vice President None.
Janelle Gellermann,
Assistant Vice President None.
Jill Glazerman, None.
Assistant Vice President
Ginger Gonzalez,
Vice President, Director of
Marketing Communications Formerly 1st Vice President /
Director of Graphic and Print
Communications for Shearson
Lehman Brothers.
Mildred Gottlieb,
Assistant Vice President Formerly served as a Strategy
Consultant for the Private Client
Division of Merrill Lynch.
Caryn Halbrecht,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; formerly Vice President of
Fixed Income Portfolio Management
at Bankers Trust.
Barbara Hennigar,
Executive Vice President and
President and Chief Executive
Officer of OppenheimerFunds
Services, a division of the Manager President and Director of SFSI;
President and Chief Executive
Officer of SSI.
Dorothy Hirshman,
Assistant Vice President None.
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Assistant Vice President None.
Jane Ingalls,
Assistant Vice President Formerly a Senior Associate with
Robinson, Lake/Sawyer Miller.
Ronald Jamison,
Vice President Formerly Vice President and
Associate General Counsel at
Prudential Securities, Inc.
Frank Jennings,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds. Formerly a Managing
Director of Global Equities at
Paine Webber's Mitchell Hutchins
division.
Heidi Kagan,
Assistant Vice President None.
Thomas W. Keffer,
Vice President Formerly Senior Managing Director
of Van Eck Global.
Avram Kornberg,
Vice President Formerly a Vice President with
Bankers Trust.
Paul LaRocco,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds. Formerly a Securities
Analyst for Columbus Circle
Investors.
Michael Levine,
Assistant Vice President None.
Stephen F. Libera,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; a Chartered Financial
Analyst; a Vice President of
HarbourView; prior to March, 1996
he was the senior bond portfolio
manager for Panorama Series Fund,
Inc., other mutual funds and
pension accounts managed by G.R.
Phelps; was also responsible for
managing the public fixed-income
securities department at
Connecticut Mutual Life Insurance
Co.
Mitchell J. Lindauer,
Vice President None.
Loretta McCarthy,
Executive Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director President, Director and Trustee
of the New York-based and the
Denver-based Oppenheimer funds;
President and a Director of OAC,
HarbourView and Oppenheimer
Partnership Holdings, Inc.;
Director of ORAMI; Chairman and
Director of SSI; a Director of
Oppenheimer Real Asset
Management, Inc.
Timothy Martin,
Assistant Vice President Formerly Vice President, Mortgage
Trading, at S.N. Phelps& Co.,
Salomon Brothers, and Kidder
Peabody.
Sally Marzouk,
Vice President None.
Lisa Migan,
Assistant Vice President, None.
Robert J. Milnamow,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds. Formerly a Portfolio
Manager with Phoenix Securities
Group.
Denis R. Molleur,
Vice President None.
Kenneth Nadler,
Vice President None.
David Negri,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Robert E. Patterson,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
John Pirie,
Assistant Vice President Formerly a Vice President with
Cohane Rafferty Securities, Inc.
Tilghman G. Pitts III,
Executive Vice President Chairman and Director of the
Distributor.
Jane Putnam,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds. Formerly Senior Investment
Officer and Portfolio Manager
with Chemical Bank.
Russell Read,
Vice President Consultant for Prudential
Insurance on behalf of the
General Motors Pension Plan.
Thomas Reedy,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds. Formerly a Securities
Analyst for the Manager.
David Robertson,
Vice President None.
Adam Rochlin,
Vice President Formerly a Product Manager for
Metropolitan Life Insurance
Company.
Michael S. Rosen
Vice President; President:
Rochester Division An officer and/or portfolio
manager of certain Oppenheimer
funds. Formerly Vice President of
RFS, President and Director of
RFD, Vice President and Director
of FMC, Vice President and
director of RCAI, General Partner
of RCA, an officer and/or
portfolio manager of certain
Oppenheimer funds.
David Rosenberg,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; formerly Vice President
and Portfolio Manager/Security
Analyst for Oppenheimer Capital
Corp., an investment adviser.
Lawrence Rudnick,
Assistant Vice President Formerly Vice President of Dollar
Dry Dock Bank.
James Ruff,
Executive Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Stephanie Seminara,
Vice President Formerly Vice President of
Citicorp Investment Services.
Diane Sobin,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; formerly a Vice President
and Senior Portfolio Manager for
Dean Witter InterCapital, Inc.
Richard A. Soper, None.
Assistant Vice President
Nancy Sperte,
Executive Vice President
None.
Donald W. Spiro,
Chairman Emeritus Vice Chairman and Trustee of the
New York-based Oppenheimer Funds;
formerly Chairman of the Manager
and the Distributor.
Arthur Steinmetz,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
Ralph Stellmacher,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
John Stoma,
Senior Vice President,
Director Retirement Plans Formerly Vice President of U.S.
Group Pension Strategy and
Marketing for Manulife Financial.
Michael C. Strathearn,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; a Chartered Financial
Analyst; a Vice President of
HarbourView; prior to March, 1996
he was an equity portfolio
manager for Panorama Series Fund,
Inc. and other mutual funds and
pension accounts managed by G.R.
Phelps.
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee,
Director or Managing Partner of
the Denver-based Oppenheimer
Funds; President and a Director
of Centennial; formerly President
and Director of OAMC, and
Chairman of the Board of SSI.
James Tobin,
Vice President None.
Jay Tracey,
Vice President Vice President of the Manager;
Vice President and Portfolio
Manager of Oppenheimer Discovery
Fund, Oppenheimer Global Emerging
Growth Fund and Oppenheimer
Enterprise Fund. Formerly
Managing Director of Buckingham
Capital Management.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant Treasurer Assistant Treasurer of the
Distributor and SFSI.
Ashwin Vasan,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
Valerie Victorson,
Vice President None.
Dorothy Warmack,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
Jerry A. Webman,
Senior Vice President Director of New York-based tax-
exempt fixed income Oppenheimer
Funds; Formerly Managing Director
and Chief Fixed Income Strategist
at Prudential Mutual Funds.
Christine Wells,
Vice President None.
Kenneth B. White,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; a Chartered Financial
Analyst; Vice President of
HarbourView; prior to March, 1996
he was an equity portfolio
manager for Panorama Series Fund,
Inc. and other mutual funds and
pension funds managed by G.R.
Phelps.
William L. Wilby,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; Vice President of
HarbourView.
Carol Wolf,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; Vice President of
Centennial; Vice President,
Finance and Accounting and member
of the Board of Directors of the
Junior League of Denver, Inc.
Robert G. Zack,
Senior Vice President and
Assistant Secretary Associate General Counsel of the
Manager; Assistant Secretary of
the Oppenheimer Funds; Assistant
Secretary of SSI, SFSI; an
officer of other Oppenheimer
Funds.
Arthur J. Zimmer,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; Vice President of
Centennial.
The Oppenheimer Funds include the New York-based Oppenheimer Funds,
the Denver-based Oppenheimer Funds, and the Rochester-based Oppenheimer
Funds, set forth below:
New York-based Oppenheimer Funds
- --------------------------------
Oppenheimer Asset Allocation Fund
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer International Growth Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust
Oppenheimer New York Municipal Fund
Oppenheimer Fund
Oppenheimer Series Fund, Inc.
Oppenheimer Municipal Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
Denver-based Oppenheimer Funds
- ------------------------------
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Daily Cash Accumulation Fund, Inc.
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Municipal Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
Quest/Rochester Funds
- ---------------------------------
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest for Value Funds
Bond Fund Series - Oppenheimer Bond Fund For Growth
Rochester Fund Municipals
Rochester Portfolio Series - Limited Term
New York Municipal Fund
The address of OppenheimerFunds, Inc., the New York-based
Oppenheimer Funds, Quest funds, OppenheimerFunds Distributor, Inc.,
HarbourView Asset Management Corp., Oppenheimer Partnership Holdings,
Inc., and Oppenheimer Acquisition Corp. is Two World Trade Center, New
York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder
Financial Services, Inc., Shareholder Services, Inc., OppenheimerFunds
Services, Centennial Asset Management Corporation, Centennial Capital
Corp., Oppenheimer Real Asset Management, Inc. and Oppenheimer Real
Asset Management, Inc. is 6803 South Tucson Way, Englewood, Colorado
80012
The address of MultiSource Services, Inc. is 1700 Lincoln
Street, Denver, Colorado 80203.
The address of Bond Fund Series - Oppenheimer Bond Fund For
Growth, Rochester Fund Municipals and Rochester Portfolio Series -
Limited Term New York Municipal Fund is 350 Linden Oaks, Rochester, New
York 14625-2807.
Item 29. Principal Underwriter
- -------- ---------------------
(a) OppenheimerFunds Distributor, Inc. is the Distributor of
Registrant's shares. It is also the Distributor of each of the other
registered open-end investment companies for which OppenheimerFunds,
Inc. is the investment adviser, as described in Part A and B of this
Registration Statement and listed in Item 28(b) above.
(b) The directors and officers of the Registrant's principal
underwriter are:
<TABLE>
<CAPTION> Positions and
Name & Principal Positions & Offices Offices with
Business Address with Underwriter Registrant
- ---------------- ------------------- -------------
<S> <C> <C>
George Clarence Bowen+ Vice President & Treasurer Vice President and
Treasurer of the NY-
based
Oppenheimer funds /
Vice President,
Secretary and
Treasurer of the
Denver-based Oppen-
heimer funds
Julie Bowers Vice President None
21 Dreamwold Road
Scituate, MA 02066
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Maryann Bruce* Senior Vice President - None
Director - Financial
Institution Div.
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce DeLeon Ave.
Decatur, GA 30030
Bill Coughlin Vice President None
3425-1/2 Irving Avenue So.
Minneapolis, MN 55408
Mary Crooks+ Senior Vice President None
E. Drew Devereaux ++ Assistant Vice President None
Andrew John Donohue* Executive Vice Secretary of
President, General the New York-based
Counsel and Director Oppenheimer funds /Vice
President of the Denver-
based Oppenheimer funds
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
41 Craig Place
Cranford, NJ 07016
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
Katherine P. Feld* Vice President & Secretary None
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding++ Vice President; Chairman:
Rochester Division None
Reed F. Finley Vice President - None
320 E. Maple, Ste. 254 Financial Institution Div.
Birmingham, MI 48009
Wendy Fishler* Vice President - None
Financial Institution Div.
Ronald R. Foster Senior Vice President None
139 Avant Lane
Cincinatti, OH 45249
Patricia Gadecki Vice President None
3906 Americana Drive
Tampa, FL 3334
Luiggino Galletto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Mark Giles Vice President - None
5506 Bryn Mawr Financial Institution Div.
Dallas, TX 75209
Ralph Grant* Vice President/National None
Sales Manager - Financial
Institution Div.
Sharon Hamilton Vice President None
720 N. Juanita Ave. - #1
Redondo Beach, CA 90277
Mark D. Johnson Vice President None
7512 Cromwell Dr. Apt 1
Clayton, MO 63105
Michael Keogh* Vice President None
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Ilene Kutno* Vice President - None
Director - Regional Sales
Wayne A. LeBlang Senior Vice President - None
23 Fox Trail Director Eastern Div.
Lincolnshire, IL 60069
Dawn Lind Vice President - None
7 Maize Court Financial Institution Div.
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
John McDonough Vice President None
P.O. Box 760
50 Riverview Road
New Castle, NH 03854
Laura Mulhall* Senior Vice President - None
Director of Key Accounts
Timothy G. Mulligan ++ Vice President None
Charles Murray Vice President None
50 Deerwood Drive
Littleton, CO 80127
Wendy Murray Vice President None
114-B Larchmont Acres West
Larchmont, NY 10538
Joseph Norton Vice President None
2518 Fillmore Street
Apt. 1
San Francisco, CA 94115
Patrick Palmer Vice President None
958 Blue Mountain Cr.
West Lake Village, CA 91362
Randall Payne Vice President - None
1307 Wandering Way Dr. Financial Institution Div.
Charlotte, NC 28226
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
22 Fall Meadow Dr.
Pittsford, NY 14534
Bill Presutti Vice President None
1777 Larimer St. #807
Denver, CO 80202
Tilghman G. Pitts, III* Chairman & Director None
Elaine Puleo* Vice President - None
Financial Institution Div.,
Director -
Key Accounts
Minnie Ra Vice President - None
0895 Thirty-First Ave. Financial Institution Div.
Apt. 4
San Francisco, CA 94121
Michael Raso Vice President None
30 Hommocks Road
Apt. 30
Larchmont, NY 10538
John C. Reinhardt ++ Vice President None
Ian Robertson Vice President None
4204 Summit Way
Marietta, GA 30066
Michael S. Rosen++ Vice President, President:
Rochester Division None
Kenneth Rosenson Vice President None
3802 Knickerbocker Place
Apt. 3D
Indianapolis, IN 46240
James Ruff* President None
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Wasington, DC 20007
Michael Sciortino Vice President None
3114 Hickory Run
Sugarland, TX 77479
Robert Shore Vice President - None
26 Baroness Lane Financial Institution Div.
Laguna Niguel, CA 92677
Peggy Spilker ++ Vice President None
Michael Stenger Vice President None
8572 Saint Ives Place
Cincinnati, OH 45255
George Sweeney Vice President None
1855 O'Hara Lane
Middletown, PA 17057
Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214
David G. Thomas Vice President - None
111 South Joliet Circle Financial Institution Div.
#304
Aurora, CO 80112
Philip Trimble Vice President None
2213 West Homer
Chicago, IL 60647
Gary Paul Tyc+ Assistant Treasurer None
Mark Stephen Vandehey+ Vice President None
</TABLE>
* Two World Trade Center, New York, NY 10048-0203
+ 6803 South Tucson Way, Englewood, Colorado 80012
++ 350 Linden Oaks, Rochester, NY 14625-2807 (the "Rochester Division")
(c) Not applicable.
Item 30. Location of Accounts and Records
The accounts, books and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the Investment
Company Act of 1940 and rules promulgated thereunder are in the
possession of OppenheimerFunds, Inc. at its offices at 6803 South Tucson
Way, Englewood, Colorado 80012
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 the 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 17th day of January, 1997.
OPPENHEIMER
CHAMPION INCOME 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 of Trustees,
James C. Swain Principal Executive January 17, 1997
Officer
/s/ George C. Bowen* Chief Financial
- --------------------- and Accounting January 17, 1997
George C. Bowen Officer, Treasurer,
Vice President
/s/ Robert G. Avis* Trustee January 17, 1997
- ---------------------
Robert G. Avis
/s/ William A. Baker* Trustee January 17, 1997
- ----------------------
William A. Baker
/s/ Charles Conrad, Jr.* Trustee January 17, 1997
- ------------------------
Charles Conrad, Jr.
/s/ Jon S. Fossel* Trustee January 17, 1997 ---
- ---------------------
Jon S. Fossel
/s/Sam Freedman* Trustee January 17, 1997
- ------------------------
Sam Freedman
/s/Raymond J. Kalinowski* Trustee January 17, 1997
- -------------------------
Raymond J. Kalinowski
/s/C. Howard Kast* Trustee January 17, 1997
- -------------------------
C. Howard Kast
/s/Robert M.Kirchner* Trustee January 17, 1997
- -------------------------
Robert M. Kirchner
/s/Bridget A. Macaskill* President and
- ------------------------- Trustee January 17, 1997
Bridget A. Macaskill
/s/Ned M. Steel* Trustee January 17, 1997
- -------------------------
Ned M. Steel
*By: /s/ Robert G. Zack
- --------------------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
FORM N-1A
OPPENHEIMER CHAMPION INCOME FUND
EXHIBIT INDEX
Item No. Description
- -------- -----------
24(b)(4)(i) Specimen Stock Certificate for Class A
shares
24(b)(4)(ii) Specimen Stock Certificate for Class B
shares
24(b)(4)(iii) Specimen Stock Certificate for Class C
shares
24(b)(11) Independent Auditor's Consent
24(b)(16) Performance Data Computation Schedule
24(b)(17)(i) Financial Data Schedule for Class A Shares
24(b)(17)(ii) Financial Data Schedule for Class B Shares
24(b)(17)(iii) Financial Data Schedule for Class C Shares
------ Power of Attorney for Sam Freedman, Trustee
Exhibit 24(b)(4)(i)
OPPENHEIMER CHAMPION INCOME 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 Income 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 Income 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:
_______________________ ___________________
TREASURER PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
Oppenheimer Champion Income Fund
SEAL
1987
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMER SHAREHOLDER SERVICES
(A DIVISION OF OPPENHEIMERFUNDS, INC.)
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.
_________________________________________________________________
(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 box to
the left of financial 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 INCOME FUND
Class B 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 B SHARES;
certificate number above
(centered
below boxes) Oppenheimer Champion Income Fund
A MASSACHUSETTS BUSINESS TRUST
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
box with number
CUSIP 683944300
(at left) is the owner of
(centered) FULLY PAID Class B SHARES OF
BENEFICIAL INTEREST OF
Oppenheimer Champion Income 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:
_______________________ ___________________
TREASURER PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
Oppenheimer Champion Income Fund
SEAL
1987
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMER SHAREHOLDER SERVICES
(A DIVISION OF OPPENHEIMERFUNDS, INC.)
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.
_________________________________________________________________
(Please print or type name and address of assignee)
______________________________________________________
________________________________________________ Class B 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)(iii)
OPPENHEIMER CHAMPION INCOME 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 Income Fund
A MASSACHUSETTS BUSINESS TRUST
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
box with number
CUSIP 683944201
(at left) is the owner of
(centered) FULLY PAID Class C SHARES OF
BENEFICIAL INTEREST OF
Oppenheimer Champion Income 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:
_______________________ ___________________
TREASURER PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
Oppenheimer Champion Income Fund
SEAL
1987
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMER SHAREHOLDER SERVICES
(A DIVISION OF OPPENHEIMERFUNDS,
INC.)
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.
_________________________________________________________________
(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
Exhibit 24(b)(11)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 17 to
Registration Statement No. 33-16494 of Oppenheimer Champion Income
Fund of our report dated October 21, 1996 appearing in the
Statement of Additional Information, which is a part of such
Registration Statement, and to the reference to us under the
heading "Financial Highlights" appearing in the Prospectus, which
is also part of such Registration Statement.
/s/ Deloitte & Touche LLP
- -------------------------
DELOITTE & TOUCHE LLP
Denver, Colorado
January 17, 1997
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, for the past 10 years which are as follows:
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares
12/08/87 0.0749359 0.0000000 11.390
12/31/87 0.0906312 0.0000000 11.580
01/11/88 0.0435017 0.0000000 11.600
02/08/88 0.1101632 0.0000000 12.000
03/08/88 0.1140977 0.0000000 12.060
04/11/88 0.1337696 0.0000000 12.080
05/09/88 0.1101632 0.0000000 12.050
06/08/88 0.1189806 0.0000000 12.070
07/11/88 0.1287500 0.0000000 12.190
08/08/88 0.1053904 0.0000000 12.210
09/09/88 0.1224939 0.0000000 12.120
10/10/88 0.1216102 0.0000000 12.110
11/08/88 0.1122531 0.0000000 12.080
12/08/88 0.1169233 0.0000000 12.030
12/30/88 0.0856000 0.1400000 11.840
01/10/89 0.0427944 0.0000000 11.860
02/08/89 0.1184395 0.0000000 11.830
03/08/89 0.1050970 0.0000000 11.840
04/10/89 0.1321986 0.0000000 11.750
05/08/89 0.1116532 0.0000000 11.700
06/08/89 0.1197603 0.0000000 11.850
07/11/89 0.1291361 0.0000000 11.810
08/08/89 0.1034668 0.0000000 11.830
09/11/89 0.1244246 0.0000000 11.800
10/09/89 0.1056065 0.0000000 11.520
11/08/89 0.1085000 0.0000000 11.270
12/08/89 0.1079041 0.0000000 11.310
12/29/89 0.1268311 0.0000000 11.230
01/09/90 0.0394790 0.0000000 11.230
02/08/90 0.1076700 0.0000000 11.080
03/08/90 0.1068117 0.0000000 10.920
04/09/90 0.1240533 0.0000000 10.970
05/08/90 0.1166603 0.0000000 10.870
06/08/90 0.1213904 0.0000000 10.970
07/05/90 0.1050840 0.0000000 11.000
08/08/90 0.1329772 0.0000000 10.980
09/10/90 0.1205070 0.0000000 10.760
10/10/90 0.1065238 0.0000000 10.350
11/14/90 0.1253361 0.0000000 10.040
12/12/90 0.0989020 0.0000000 10.090
12/31/90 0.0677602 0.0000000 10.090
01/09/91 0.0334956 0.0000000 10.100
02/13/91 0.1426406 0.0000000 10.330
03/13/91 0.1190719 0.0000000 10.750
04/10/91 0.1157644 0.0000000 11.010
Oppenheimer Champion High Yield Fund
Page 2
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares (Continued)
05/08/91 0.1182808 0.0000000 11.170
06/12/91 0.1267984 0.0000000 11.160
07/10/91 0.1130507 0.0000000 11.320
08/14/91 0.1556661 0.0000000 11.410
09/11/91 0.1171589 0.0000000 11.530
10/09/91 0.1209660 0.0000000 11.550
11/13/91 0.1412882 0.0000000 11.730
12/11/91 0.1050652 0.0000000 11.540
12/31/91 0.0713153 0.0000000 11.580
01/08/92 0.0331137 0.0000000 11.720
02/12/92 0.1394176 0.0000000 12.040
03/11/92 0.1142743 0.0000000 12.180
04/08/92 0.1114858 0.0000000 12.100
05/13/92 0.1208152 0.0000000 12.170
06/10/92 0.1149839 0.0000000 12.180
07/08/92 0.1118269 0.0000000 12.160
08/12/92 0.1225576 0.0000000 12.300
09/09/92 0.1068058 0.0000000 12.250
10/14/92 0.1269119 0.0000000 12.070
11/11/92 0.0925110 0.0000000 11.990
12/09/92 0.0963249 0.0000000 12.030
12/31/92 0.0972944 0.0000000 12.010
01/13/93 0.0444903 0.0000000 12.100
02/10/93 0.0964170 0.0000000 12.330
03/10/93 0.0917997 0.0000000 12.560
04/14/93 0.1209879 0.0000000 12.670
05/12/93 0.0847282 0.0000000 12.720
06/09/93 0.0836887 0.0000000 12.900
06/30/93 0.0735387 0.0000000 12.990
07/30/93 0.0896500 0.0000000 13.050
08/31/93 0.0839568 0.0000000 12.990
09/30/93 0.1179897 0.0000000 12.900
10/29/93 0.1086641 0.0000000 13.160
11/30/93 0.1102826 0.0000000 13.110
12/31/94 0.1070635 0.1887628 13.080
01/31/94 0.0879305 0.0000000 13.320
02/28/94 0.0798046 0.0000000 13.170
03/31/94 0.0959372 0.0000000 12.680
04/29/94 0.0778299 0.0000000 12.520
05/31/94 0.0833046 0.0000000 12.610
06/30/94 0.0846318 0.0000000 12.500
07/29/94 0.0879858 0.0000000 12.430
08/31/94 0.0889744 0.0000000 12.340
09/30/94 0.0957540 0.0000000 12.320
10/31/94 0.0797348 0.0000000 12.250
11/30/94 0.0851661 0.0000000 12.110
12/30/94 0.0881057 0.0000000 12.030
01/31/95 0.0857392 0.0000000 12.020
02/28/95 0.0756186 0.0000000 12.200
03/31/95 0.0896056 0.0000000 12.170
Oppenheimer Champion High Yield Fund
Page 3
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares (Continued)
04/28/95 0.0763613 0.0000000 12.320
05/31/95 0.0963545 0.0000000 12.470
06/30/95 0.0917710 0.0000000 12.430
07/31/95 0.0860493 0.0000000 12.500
08/31/95 0.0912816 0.0000000 12.420
09/29/95 0.0900533 0.0000000 12.470
10/31/95 0.0911439 0.0000000 12.520
11/30/95 0.0977377 0.0000000 12.560
12/29/95 0.0989533 0.0000000 12.660
01/31/96 0.0984584 0.0000000 12.830
02/29/96 0.0909476 0.0000000 12.870
03/29/96 0.0944212 0.0000000 12.750
04/30/96 0.0946410 0.0000000 12.740
05/31/96 0.1029634 0.0000000 12.760
06/28/96 0.0867355 0.0000000 12.690
07/31/96 0.0969633 0.0000000 12.660
08/30/96 0.1011361 0.0000000 12.720
09/30/96 0.0856944 0.0000000 12.920
Class B Shares
10/31/95 0.0791876 0.0000000 12.510
11/30/95 0.0883900 0.0000000 12.550
12/29/95 0.0888803 0.0000000 12.650
01/31/96 0.0882856 0.0000000 12.820
02/29/96 0.0804580 0.0000000 12.860
03/29/96 0.0848319 0.0000000 12.740
04/30/96 0.0858242 0.0000000 12.730
05/31/96 0.0932635 0.0000000 12.750
06/28/96 0.0788017 0.0000000 12.680
07/31/96 0.0882546 0.0000000 12.650
08/30/96 0.0917870 0.0000000 12.710
09/30/96 0.0780263 0.0000000 12.910
Class C Shares
12/31/93 0.0730000 0.1888000 13.070
01/31/94 0.0747539 0.0000000 13.320
02/28/94 0.0670124 0.0000000 13.170
03/31/94 0.0856328 0.0000000 12.680
04/29/94 0.0703100 0.0000000 12.530
05/31/94 0.0752066 0.0000000 12.610
06/30/94 0.0757186 0.0000000 12.500
07/29/94 0.0793942 0.0000000 12.430
08/31/94 0.0799592 0.0000000 12.340
09/30/94 0.0876407 0.0000000 12.320
10/31/94 0.0721016 0.0000000 12.250
11/30/94 0.0774601 0.0000000 12.100
12/30/94 0.0801314 0.0000000 12.020
01/31/95 0.0778444 0.0000000 12.020
02/28/95 0.0684292 0.0000000 12.190
03/31/95 0.0807818 0.0000000 12.160
04/28/95 0.0689783 0.0000000 12.310
Oppenheimer Champion High Yield Fund
Page 4
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class C Shares (Continued)
05/31/95 0.0879897 0.0000000 12.460
06/30/95 0.0831454 0.0000000 12.420
07/31/95 0.0784206 0.0000000 12.490
08/31/95 0.0830717 0.0000000 12.410
09/29/95 0.0819904 0.0000000 12.460
10/31/95 0.0832129 0.0000000 12.510
11/30/95 0.0896980 0.0000000 12.550
12/29/95 0.0908058 0.0000000 12.650
01/31/96 0.0902079 0.0000000 12.810
02/29/96 0.0831510 0.0000000 12.850
03/29/96 0.0860668 0.0000000 12.730
04/30/96 0.0867167 0.0000000 12.730
05/31/96 0.0942409 0.0000000 12.750
06/28/96 0.0793614 0.0000000 12.680
07/31/96 0.0889543 0.0000000 12.650
08/30/96 0.0924103 0.0000000 12.710
09/30/96 0.0782520 0.0000000 12.910
1. Average Annual Total Returns for the Periods Ended 09/30/96:
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
Class A Shares
Examples, assuming a maximum sales charge of 4.75%:
One Year Five Year
$1,079.00 1 $1,744.48 .2
(---------) - 1 = 7.90% (---------) - 1 = 11.77%
$1,000 $1,000
Inception
$2,876.48 .1127
(---------) - 1 = 12.65%
$1,000
Oppenheimer Champion High Yield Fund
Page 5
1. Average Annual Total Returns for the Periods Ended 09/30/96 (Continued):
Class C Shares
Examples, assuming a maximum contingent deferred sales charge
of 1.00% for the first year and 0.00% for the inception year:
One Year Inception
$1,114.43 1 $1,241.06 .3533
(---------) - 1 = 11.44% (---------) - 1 = 7.93%
$1,000 $1,000
Examples at NAV:
Class A Shares
One Year Five Year
$1,132.84 1 $1,831.42 .2
(---------) - 1 = 13.28% (---------) - 1 = 12.86%
$1,000 $1,000
Inception
$3,019.97 .1127
(---------) - 1 = 13.27%
$1,000
Class C Shares
One Year Inception
$1,124.44 1 $1,241.06 .3533
(---------) - 1 = 12.44% (---------) - 1 = 7.93%
$1,000 $1,000
Oppenheimer Champion High Yield Fund
Page 6
2. Cumulative Total Returns for the Periods Ended 9/30/96:
The formula for calculating cumulative total return is as follows:
(ERV - P) / P = Cumulative Total Return
Class A Shares
Examples, assuming a maximum sales charge of 4.75%:
One Year Five Year
$1,079.00 - $1,000 $1,744.48 - $1,000
------------------ = 7.90% ------------------ = 74.45%
$1,000 $1,000
Inception
$2,876.48 - $1,000
------------------ = 187.65%
$1,000
Class B Shares
Examples, assuming a maximum contingent deferred sales
charge of 5.00% for the inception year:
Inception
$1,072.01 - $1,000
------------------ = 7.20%
$1,000
Class C Shares
Examples, assuming a maximum contingent deferred sales charge
of 1.00% for the first year, and 0.00% for the inception year:
One Year Inception
$1,114.43 - $1,000 $1,241.06 - $1,000
------------------ = 11.44% ------------------ = 24.11%
$1,000 $1,000
Oppenheimer Champion High Yield Fund
Page 7
2. Cumulative Total Returns for the Periods Ended 9/30/96 (Continued):
Examples at NAV:
Class A Shares
One Year Five Year
$1,132.84 - $1,000 $1,831.42 - $1,000
------------------ = 13.28% ------------------ = 83.14%
$1,000 $1,000
Inception
$3,019.97 - $1,000
------------------ = 202.00%
$1,000
Class B Shares
Inception
$1,122.01 - $1,000
------------------ = 12.20%
$1,000
Class C Shares
One Year Inception
$1,124.44 - $1,000 $1,241.06 - $1,000
------------------ = 12.44% ------------------ = 24.11%
$1,000 $1,000
Oppenheimer Champion High Yield Fund
Page 8
3. Standardized Yield for the 30-Day Period Ended 09/30/96:
The Fund's standardized yields are calculated using
the following formula set forth in the SEC rules:
a - b 6
Yield = 2 { (-------- + 1 ) - 1 }
cd or ce
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.
e = The Fund's net asset value (excluding contingent deferred
sales charge) per share on the last day of the period.
Class A Shares
Example, assuming a maximum sales charge of 4.75%:
$2,741,521.56 - $339,454.21 6
2{(--------------------------- + 1) - 1} = 7.90%
27,364,297 x $13.56
Class B Shares
Example at NAV:
$ 592,068.45 - $122,015.12 6
2{(--------------------------- + 1) - 1} = 7.50%
5,913,973 x $12.91
Class C Shares
Example at NAV:
$ 854,578.71 - $173,952.57 6
2{(--------------------------- + 1) - 1} = 7.53%
8,536,788 x $12.91
Oppenheimer Champion High Yield Fund
Page 9
4. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 09/30/96:
The Fund's dividend yields are calculated using the following formula:
Dividend Yield = { (a / 30) x 365 } / b or c
The symbols above represent the following factors:
a = The accrual dividend earned during the thirty day 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:
Class A Shares
Dividend Yield
at Maximum Offering $.0918613/30 x 365
------------------ = 8.24%
$13.56
Dividend Yield
at Net Asset Value $.0918613/30 x 365
------------------ = 8.65%
$12.92
Class B Shares
Dividend Yield
at Net Asset Value $.0836464/30 x 365
------------------ = 7.88%
$12.91
Class C Shares
Dividend Yield
at Net Asset Value $.0838932/30 x 365
------------------ = 7.91%
$12.91
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<ARTICLE> 6
<CIK> 820120
<NAME> Oppenheimer Champion Income Fund Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 525,578,792
<INVESTMENTS-AT-VALUE> 542,324,004
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<ASSETS-OTHER> 17,449
<OTHER-ITEMS-ASSETS> 1,507,311
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<OTHER-ITEMS-LIABILITIES> 2,994,414
<TOTAL-LIABILITIES> 13,719,155
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<NET-ASSETS> 359,208,323
<DIVIDEND-INCOME> 346,267
<INTEREST-INCOME> 42,991,935
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<EXPENSES-NET> 5,974,954
<NET-INVESTMENT-INCOME> 37,363,248
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<NET-CHANGE-FROM-OPS> 52,501,543
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<DISTRIBUTIONS-OF-INCOME> 27,408,362
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13,390,615
<NUMBER-OF-SHARES-REDEEMED> 7,492,035
<SHARES-REINVESTED> 1,445,851
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<GROSS-ADVISORY-FEES> 2,902,865
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,974,954
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<PER-SHARE-NII> 1.15
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<PER-SHARE-NAV-END> 12.92
<EXPENSE-RATIO> 1.17
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 820120
<NAME> Oppenheimer Champion Income Fund Class B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-02-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 525,578,792
<INVESTMENTS-AT-VALUE> 542,324,004
<RECEIVABLES> 24,075,794
<ASSETS-OTHER> 17,449
<OTHER-ITEMS-ASSETS> 1,507,311
<TOTAL-ASSETS> 567,924,558
<PAYABLE-FOR-SECURITIES> 10,724,741
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,994,414
<TOTAL-LIABILITIES> 13,719,155
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 538,658,915
<SHARES-COMMON-STOCK> 6,357,778
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 27,701
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,122,029)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16,640,816
<NET-ASSETS> 82,052,059
<DIVIDEND-INCOME> 346,267
<INTEREST-INCOME> 42,991,935
<OTHER-INCOME> 0
<EXPENSES-NET> 5,974,954
<NET-INVESTMENT-INCOME> 37,363,248
<REALIZED-GAINS-CURRENT> 2,827,552
<APPREC-INCREASE-CURRENT> 12,310,743
<NET-CHANGE-FROM-OPS> 52,501,543
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,625,608
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,824,247
<NUMBER-OF-SHARES-REDEEMED> 599,433
<SHARES-REINVESTED> 132,964
<NET-CHANGE-IN-ASSETS> 234,135,156
<ACCUMULATED-NII-PRIOR> 83,753
<ACCUMULATED-GAINS-PRIOR> (4,005,696)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,902,865
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,974,954
<AVERAGE-NET-ASSETS> 33,188,625
<PER-SHARE-NAV-BEGIN> 12.47
<PER-SHARE-NII> 1.03
<PER-SHARE-GAIN-APPREC> 0.44
<PER-SHARE-DIVIDEND> 1.03
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.91
<EXPENSE-RATIO> 1.97
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 820120
<NAME> Oppenheimer Champion Income Fund Class C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 525,578,792
<INVESTMENTS-AT-VALUE> 542,324,004
<RECEIVABLES> 24,075,794
<ASSETS-OTHER> 17,449
<OTHER-ITEMS-ASSETS> 1,507,311
<TOTAL-ASSETS> 567,924,558
<PAYABLE-FOR-SECURITIES> 10,724,741
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,994,414
<TOTAL-LIABILITIES> 13,719,155
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 538,658,915
<SHARES-COMMON-STOCK> 8,751,748
<SHARES-COMMON-PRIOR> 5,211,966
<ACCUMULATED-NII-CURRENT> 27,701
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,122,029)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16,640,816
<NET-ASSETS> 112,945,021
<DIVIDEND-INCOME> 346,267
<INTEREST-INCOME> 42,991,935
<OTHER-INCOME> 0
<EXPENSES-NET> 5,974,954
<NET-INVESTMENT-INCOME> 37,363,248
<REALIZED-GAINS-CURRENT> 2,827,552
<APPREC-INCREASE-CURRENT> 12,310,743
<NET-CHANGE-FROM-OPS> 52,501,543
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,329,215
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,628,427
<NUMBER-OF-SHARES-REDEEMED> 1,490,391
<SHARES-REINVESTED> 401,746
<NET-CHANGE-IN-ASSETS> 234,135,156
<ACCUMULATED-NII-PRIOR> 83,753
<ACCUMULATED-GAINS-PRIOR> (4,005,696)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,902,865
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,974,954
<AVERAGE-NET-ASSETS> 89,415,911
<PER-SHARE-NAV-BEGIN> 12.46
<PER-SHARE-NII> 1.06
<PER-SHARE-GAIN-APPREC> 0.44
<PER-SHARE-DIVIDEND> 1.05
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.91
<EXPENSE-RATIO> 1.93
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes
and appoints Andrew J. Donohue or Robert G. Zack, and each of them,
his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his capacity as
a trustee of OPPENHEIMER CHAMPION INCOME FUND, a Massachusetts
business trust (the Fund ), to sign on his behalf any and all
Registration Statements (including any post-effective amendments to
Registration Statements) under the Securities Act of 1933, the
Investment Company Act of 1940 and any amendments and supplements
thereto, and any other documents in connection thereunder, and to
file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises,
as fully as to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-
fact and agents, and each of them, may lawfully do or cause to be
done by virtue hereof.
Dated this 27th day of June, 1996.
/s/ Sam Freedman
- ------------------
Sam Freedman
