Registration No. 33-28598
File No. 811-5724
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. 15
/X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 /X/
Amendment No. 16
/X/
OPPENHEIMER STRATEGIC INCOME FUND
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(Exact Name of Registrant as Specified in Charter)
6803 South Tucson Way, Englewood, Colorado 80112
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(Address of Principal Executive Offices)
1-303- 768-3200
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(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc.
Two World Trade Center, Suite 3400
New York, New York 10048-0203
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
/ / Immediately upon filing pursuant to paragraph (b)
/ / On ______________ pursuant to
paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/X/ On January 23, 1998 pursuant to
paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / On _____________ pursuant to paragraph (a)(2) of
Rule 485
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 STRATEGIC INCOME FUND
Cross Reference Sheet
Part A of
Form N-1A
Item No. Prospectus Heading
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1 Front Cover Page
2 Expenses; 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
5 How the Fund is Managed; Expenses; Back Cover
5A Performance of the Fund
6 How the Fund is Managed-Organization and History;
The Transfer Agent; Dividends, Capital Gains and
Taxes;
Investment Objective and Policies-Portfolio
Turnover
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 for Class B and
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
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10 Cover Page
11 Cover Page
12 *
13 Investment Objectives and Policies; Other
Investment Techniques and Strategies; Additional
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
17 Brokerage Policies of the Fund
18 Additional Information About the Fund
19 Your Investment 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 *
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* Not applicable or negative answer.
<PAGE>
OPPENHEIMER
Strategic Income Fund
Prospectus dated January 23, 1998
Oppenheimer Strategic Income Fund is a mutual fund that seeks a high level of
current income by investing mainly in debt securities and by writing covered
call options on them. The Fund invests principally in (1) debt securities of
foreign governments and companies, (2) U.S. Government securities, and (3)
lower-rated, high yield debt securities of U.S. companies, commonly known as
"junk bonds." The Fund may invest some or all of its assets in any of these
three market sectors at any time. When it invests in more than one sector, the
Fund may reduce some of the risks of investing in only one market sector, which
may help to reduce the fluctuations in its net asset value per share.
The Fund may invest up to 100% of its assets in "junk bonds," or foreign
debt securities rated below investment grade, which are securities that are
speculative and involve greater risks, including risk of default, than higher
rated securities. The Fund is a diversified portfolio designed for investors
willing to assume additional risk in return for seeking high current income. You
should carefully review the risks associated with an investment in the Fund.
Please refer to "Investment Objective and Policies" for more information about
the types of securities in which the Fund invests and please refer to
"Investment Risks" for a discussion of the risks of investing in the Fund.
This Prospectus explains concisely what you should know before investing
in the Fund. Please read this Prospectus carefully and keep it for future
reference. You can find more detailed information about the Fund in the January
23, 1998 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).
(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 NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-1-
<PAGE>
Contents
ABOUT THE FUND
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objective and Policies
Investment Risks
Investment Techniques and Strategies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Class Y Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
By Checkwriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Appendix A: Description of Ratings Categories
Appendix B: Special Sales Charge Arrangements
-2-
<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 its last fiscal year ended September 30,
1997.
o 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
__ for an explanation of how and when these charges apply.
Class A Class B Class C Class Y
Shares Shares Shares Shares
- -------------------------------------------------------------------
Maximum Sales Charge 4.75% None None None
on Purchases (as a %of
offering price)
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Maximum Deferred Sales None(1) 5% in the first 1% if shares None
Charge (as a % of the year, declining are redeemed
lower of the original to 1% in the within 12 months
offering price or sixth year and of purchse (2)
redemption proceeds) eliminated
thereafter(2)
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Maximum Sales Charge None None None None
on Reinvested Dividends
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Exchange Fee None None None None
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Redemption Fee None(3) None(3) None(3) None(3)
(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 ___)
in Class A shares, you may have
to pay a sales charge of up to 1% if you sell your shares within 18 12 calendar
months (18 months for shares purchased prior to May 1, 1997) 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, for more
information on the contingent deferred sales charges. (3) There is a $10
transaction fee for redemptions paid by Federal Funds wire, but not for
redemptions paid by check or by ACH transfer through AccountLink, or for which
Checkwriting privileges are used. See "How to Sell Shares", below.
o 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. (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 Class Y
Shares Shares Shares Shares
- -----------------------------------------------------------------
Management Fees ___% ____% ____% ____%
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- -------------------------------------------------------
12b-1 Distribution
Plan Fees _________% _____%
- -----%
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Other Expenses ____% _____% _____% _____%
- --------------------------------------------------
- -------------------------------------------------------
Total Fund
Operating Expenses _________% ____%
- -----%
The numbers in the chart above are based upon the Fund's expenses in its
last fiscal year ended September 30, 1997. 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 Distribution Plan Fees" for Class A Shares are Service Plan
Fees (the maximum fee is 0.25% of average annual net assets of that class), and
for Class B and Class C shares, are the 12b-1 Distribution and Service Plan Fees
(the maximum service fee is 0.25% of average annual net assets of the class and
the asset-based sales charge for Class B and Class C shares is 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 table, depending on a number of factors,
including the actual value of the Fund's assets represented by each class of
shares. Class Y shares were not available during the fiscal year ended September
30, 1997. Therefore, the Annual Fund Operating Expenses shown for Class Y shares
are based on the amount that would have been payable in that period assuming
that Class Y shares were outstanding during such fiscal year.
o 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*
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Class A Shares $_$___ $___ $___
- -----------------------------------------------------------
Class B Shares $_$___ $___ $___
- -----------------------------------------------------------
Class C Shares $_$___ $___ $___
- -----------------------------------------------------------
Class Y Shares $___ $___ $___ $___
If you did not redeem your investment, it would incur the following expenses:
1 year 3 years 5 years 10 years*
- -----------------------------------------------------------
Class A Shares $__$___ $___ $___
- -----------------------------------------------------------
Class B Shares $__$___ $___ $___
- -----------------------------------------------------------
Class C Shares $__$___ $___ $___
- -----------------------------------------------------------
Class Y Shares $___ $___ $___ $___
* 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 the 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 imposed on Class B and Class C shares,
long-term holders of Class B and Class C shares could pay the economic
equivalent of more 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.
o What Is The Fund's Investment Objective? The Fund's investment objective
is to seek a high level of current income by investing mainly in debt securities
and by writing covered call options on them.
o What Does the Fund Invest In? The Fund invests primarily in debt
securities of foreign governments and companies, U.S. Government securities, and
lower-rated high yield debt securities of U.S. companies. The Fund may also
write covered calls and use derivative investments to enhance income, and may
use hedging instruments, including some derivative investments, to try to manage
investment risks. These investments are more fully explained in "Investment
Objective and Policies," starting on page _____.
o Who Manages the Fund? The Fund's investment advisor (the "Manager") is
OppenheimerFunds, Inc. The Manager (including subsidiaries) manages investment
company portfolios having over $___ billion in assets at December 31, 1997. The
Manager is paid an advisory fee by the Fund based on its assets. The Fund has
two portfolio managers, David Negri and Arthur Steinmetz, who are employed by
the Manager and are primarily responsible for the selection of the Fund's
securities. The Board of Trustees, elected by shareholders, oversees the
investment advisor and the portfolio managers. Please refer to "How the Fund is
Managed," starting on page __ for more information about the Manager and its
fees.
o 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 potential investment return. All fixed-income securities are
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. However, the
securities in which the Fund invests 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.
The Fund's investments in foreign securities, especially those issued by
underdeveloped countries, generally involve special risks. The value of foreign
securities 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 transactions, changes in governmental,
economic or monetary policy in the U.S. or abroad, or other political or
economic factors. In addition, the Fund's investments in U.S. Government
securities and bonds are subject to changes in their value from a number of
factors such as changes in general bond and stock market movements, the change
in value of particular stocks or bonds because of an event affecting the issuer,
or changes in interest rates that can affect bond prices. 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 has more investment risk than money market or
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 Risks" starting on page __ for a more complete
discussion of the Fund's investment risks.
o How Can I Buy Shares? You can buy shares through your broker, 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 __ for more
details.
o Will I Pay a Sales Charge to Buy Shares? The Fund offers an investor
four 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 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, respectively, of
purchase. There is also an annual asset-based sales charge on Class B and Class
C shares. Please review "How To Buy Shares" starting on page __ for more
details, including a discussion about factors you and your financial advisor
should consider in determining which class may be appropriate for you. The Fund
also offers Class Y shares to certain institutional investors; such shares are
not available for sales to individual investors.
o How Can I Sell My Shares? Shares can be redeemed by mail, by telephone
call to the Transfer Agent on any business day, through your dealer, by writing
a check against your Fund account (available for Class A shares only that are
not subject to a contingent deferred sales charge) or by wire to a previously
designated bank account. Please refer to "How To Sell Shares" on page __. The
Fund also offers exchange privileges to other Oppenheimer funds, described in
"How to Exchange Shares" on page __.
o How Has the Fund Performed? The Fund measures its performance by quoting
its dividend yield, distribution return, average annual total return and
cumulative total return, which measure historical performance. The Fund's yield
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, which we have done on pages __ and __. 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, 1997, is included
in the Statement of Additional Information. Class Y shares were not publicly
offered during any of the period shown; therefore information on this class of
shares is not included in the table below or in the Fund's other financial
statements.
-3-
<PAGE>
Investment Objective and Policies
Objective. The Fund seeks a high level of current income by
investing mainly in debt securities and by writing covered call
options on them. The Fund does not invest with the objective of
seeking
capital appreciation.
Investment Policies and Strategies. The Fund seeks its investment objective by
investing principally in three market sectors: (1) debt securities of foreign
governments and companies, (2) U.S. Government securities, and (3) lower-rated,
high yield debt securities of U.S. companies. Under normal market conditions the
Fund will invest in each of these three sectors, but from time to time the
Manager will adjust the amounts the Fund invests in each sector.
By investing in all three sectors, the Fund seeks to reduce the volatility
of fluctuations in its net asset value per share, because the overall securities
price and interest rate movements in each of the different sectors are not
necessarily correlated with each other. Changes in one sector may be offset by
changes in another sector that moves in a different direction. Therefore, this
strategy may help reduce some of the risks from negative market movements and
interest rate changes in any one sector. However, the Fund may invest up to 100%
of its assets in any one sector if the Manager believes that in doing so the
Fund can achieve its objective without undue risk to the Fund's assets.
When investing the Fund's assets, the Manager considers many factors,
including general economic conditions in the U.S. and abroad, prevailing
interest rates, and the relative yields of U.S. and foreign securities. While
the Fund may seek to earn income by writing covered call options, market price
movements may make it disadvantageous to do so. The Fund may also try to hedge
against losses by using hedging strategies described below. When market
conditions are unstable, the Fund may invest substantial amounts of its assets
in money market instruments for defensive purposes. These strategies are
described in greater detail below and also in the Statement of Additional
Information under the same headings.
The amount of income the Fund may earn to distribute to shareholders will
fluctuate, depending on the securities the Fund owns and the sectors in which it
invests. The Fund is not a complete investment program and is designed for
investors willing to assume a higher degree of risk. There is no assurance that
the Fund will be able to achieve its investment objective. Because of the high
yield, lower-rated securities in which the Fund invests, the Fund is considered
a speculative investment, and the value of your shares may decline in adverse
market conditions.
o Can the Fund's Investment Objective and Policies Change? The Fund has an
investment objective, which is described above, as well as investment policies
that it follows to try to achieve its objective. Additionally, it uses certain
investment techniques and strategies in carrying out those investment policies.
The Fund's investment policies and techniques are not "fundamental" unless a
particular policy is identified in this Prospectus or in the Statement of
Additional Information as "fundamental." The Fund's investment objective is a
fundamental policy.
The Fund's Board of Trustees may change non-fundamental policies,
strategies and techniques without shareholder approval, although significant
changes will be described in amendments to this Prospectus. Fundamental policies
are those that cannot be changed without the approval of a "majority" of the
Fund's outstanding voting shares. The term "majority" is defined in the
Investment Company Act to be a particular percentage of outstanding voting
shares (and this term is explained in the Statement of Additional Information).
o How the Fund's Portfolio Securities Are Rated. As of September 30, 1997,
the Fund's portfolio included fixed income securities that were rated by a
rating service in each of the Standard & Poor's Corporation ("S&P") rating
categories (the amounts shown are dollar-weighted average values of the bonds in
each category measured as a percentage of the Fund's total assets):
AAA: %
AA: %
A: %
BBB: %
BB: %
B: %
CCC: %
CC: %
C: %
D: %
Appendix A to this Prospectus describes the rating categories. The
allocation of the Fund's assets in securities in the different rating categories
will vary over time. Additionally, as of September 30, 1997, the Fund invested
____% of its assets in U.S. Government securities (as defined in "U.S.
Government Securities" below). U.S. Government securities are not rated by any
agency. As of September 30, 1997, ____% of the Fund's total assets were
represented by fixed-income securities (other than U.S. Government securities).
Debt Securities of Foreign Governments and Companies. The Fund may invest in
debt securities issued or guaranteed by foreign companies, "supranational"
entities such as the World Bank, and foreign governments or their agencies.
These foreign securities may include debt obligations such as government bonds,
debentures issued by companies and notes. Some of these debt securities may have
variable interest rates or "floating" interest rates that change in different
market conditions. Those changes will affect the income the Fund receives. The
Fund can also invest in preferred stocks and "zero coupon" securities, which
have similar features to the ones described below in "Debt Securities of U.S.
Companies." Preferred stocks and zero coupon securities are described in more
detail in the Statement of Additional Information.
The Fund will not invest more than 25% of its total assets in government
securities of any one foreign country. Otherwise, the Fund is not restricted in
the amount of its assets it may invest in foreign countries or in which
countries, and the Fund has no limitations on the maturity of a security or the
capitalization of the issuer of the foreign debt securities in which it invests,
although it is expected that most issuers will have total assets or
capitalization in excess of $100 million.
The Fund may buy or sell foreign currencies and foreign currency forward
contracts (agreements to exchange one currency for another at a future date) to
hedge currency risks and to facilitate transactions in foreign investments.
Although currency forward contracts can be used to protect the Fund from adverse
exchange rate changes, there is a risk of loss if the Manager fails to predict
currency exchange movements correctly.
U.S. Government Securities. The Fund may invest in debt
securities issued or guaranteed by the U.S. Government or its
agencies and instrumentalities ("U.S. Government securities").
Certain U.S.
Government securities, including U.S. Treasury bills, notes and bonds, and
mortgage participation certificates guaranteed by the Government National
Mortgage Association ("Ginnie Mae") are supported by the full faith and credit
of the U.S. Government. Ginnie Mae certificates are one type of mortgage-related
U.S. Government security in which the Fund invests . Other mortgage-related U.S.
Government securities the Fund invests in that are issued or guaranteed by
federal agencies or government-sponsored entities are not supported by the full
faith and credit of the U.S. Government. Those securities include obligations
supported by the right of the issuer to borrow from the U.S. Treasury, such as
obligations of Federal Home Loan Mortgage Corporation ("Freddie Mac") and
obligations supported only by the credit of the instrumentality, such as Federal
National Mortgage Association ("Fannie Mae"). Other U.S. Government securities
the Fund invests in may be zero coupon Treasury securities and collateralized
mortgage obligations ("CMOs").
Although U.S. Government securities involve little credit risk, their
values will fluctuate depending on prevailing interest rates. Because the yields
on U.S. Government securities are generally lower than on corporate debt
securities, when the Fund holds U.S. Government securities it may attempt to
increase the income it can earn from them by writing covered call options
against them when market conditions are appropriate. Writing covered calls is
explained below, under "Put and Call Options."
o Zero Coupon Treasury Securities. Zero coupon Treasury securities
generally are U.S. Treasury notes or bonds that have been "stripped" of their
interest coupons, U.S. Treasury bills issued without interest coupons, or
certificates representing an interest in the stripped securities. A zero coupon
Treasury security pays no current interest and trades at a deep discount from
its face value and will be subject to greater market fluctuations from changes
in interest rates than interest- paying securities. The Fund accrues interest on
its holdings without receiving the actual cash. As a result, the Fund may be
forced to sell portfolio securities to pay cash dividends or meet redemptions.
The Fund may invest up to 50% of its total assets in zero coupon securities
issued by either the U.S. Government or U.S. companies.
o Mortgage-Backed U.S. Government Securities and CMOs. Certain
mortgage-backed U.S. Government securities "pass-through" to investors the
interest and principal payments generated by a pool of mortgages assembled for
sale by government agencies. Pass-through mortgage-backed securities entail the
risk that principal may be repaid at any time because of prepayments on the
underlying mortgages. That may result in greater price and yield volatility than
traditional fixed-income securities that have a fixed maturity and interest
rate.
The Fund may also invest in CMOs, which generally are obligations fully
collateralized by a portfolio of mortgages or mortgage-related securities.
Payment of the interest and principal generated by the pool of mortgages is
passed through to the holders as the payments are received. CMOs are issued with
a variety of classes or series which have different maturities. Certain CMOs may
be more volatile and less liquid than other types of mortgage-related
securities, because of the possibility of the prepayment of principal due to
prepayments on the underlying mortgage loans.
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 would be required to identify liquid
assets of any type, including equity and debt securities of any grade to its
custodian bank in an amount equal to its purchase payment obligation under the
roll.
o Collateralized Mortgage Obligations. The Fund may invest in
collateralized mortgage obligations that are issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, or that are collateralized by a
portfolio of mortgages or mortgage-related securities guaranteed by such an
agency or instrumentality. Payment of the interest and principal generated by
the pool of mortgages is passed through to the holders as the payments are
received by the issuer of the CMO.
CMOs may be issued in a variety of classes or series ("tranches") that
have different maturities. The principal value of certain CMO tranches may be
more volatile than other types of mortgage-related securities because of the
possibility that the principal value of the CMO may be prepaid earlier than the
maturity of the CMO as a result of prepayments of the underlying mortgage loans
by the borrowers.
The Fund may invest in "stripped" mortgage-backed securities, CMOs or
other securities issued by agencies or instrumentalities of the U.S. Government.
Stripped mortgage-backed securities usually have two classes. The classes
receive different proportions of the interest and principal distributions on the
pool of mortgage assets that act as collateral for the security. In certain
cases, one class will receive all of the interest payments (and is known as an
"I/O"), while the other class will receive all of the principal value on
maturity (and is known as a "P/O").
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. They have the additional risk that if the underlying
mortgages are prepaid, the Fund will lose the anticipated cash flow from the
interest on the prepaid mortgages. That risk is increased when general interest
rates fall, and in times of rapidly falling interest rates, the Fund might
receive back less than its investment.
The value of "principal-only" securities generally increases as interest
rates decline and prepayment rates rise. The price of these securities is
typically more volatile than that of coupon- bearing bonds of the same maturity.
Stripped securities are generally purchased and sold by institutional
investors through investment banking firms. At present, established trading
markets have not yet developed for these securities. Therefore, some stripped
securities may be deemed "illiquid."
The value of mortgage-backed securities may be affected by changes in the
market's perception of the creditworthiness of the entity issuing or
guaranteeing them or by changes in government regulations and tax policies, as
well as by interest rate risks, described below. Because the yields on U.S.
Government securities are generally lower than on corporate debt securities, the
Fund may attempt to increase the income it can earn from U.S. Government
securities by writing covered call options against them, when market conditions
are appropriate. Writing covered call options is explained below, under
"Investment Techniques and Strategies."
Debt Securities of U.S. Companies. The Fund may invest in debt securities,
including bonds, debentures, notes, preferred stocks, zero coupon securities,
participation interests, asset-backed securities and sinking fund and callable
bonds. The Fund may purchase these securities in public offerings or through
private placements. The Fund has no limitations on the maturity, capitalization
of the issuer or credit rating of the domestic debt securities in which it
invests, although it is expected that most issuers will have total assets in
excess of $100 million.
o Zero Coupon Corporate Securities. Zero coupon corporate securities are
similar to U.S. Government zero coupon Treasury securities but are issued by
companies. They have an additional risk that the issuing company may fail to pay
interest or repay the principal on the obligation.
o Corporate Asset-Backed Securities. Asset-backed securities are fractional
interests in pools of consumer loans and other trade receivables, similar to
mortgage-backed securities. They are issued by trusts and special purpose
corporations. They are backed by a pool of assets, such as credit card or auto
loan receivables, which are the obligations of a number of different parties.
The income from the underlying pool is passed through to holders, such as the
Fund. These securities are frequently supported by a credit enhancement, such as
a letter of credit, a guarantee or a preference right. However, the extent of
the credit enhancement may be different for different securities and generally
applies to only a fraction of the security's value. These securities present
special risks. For example, in the case of credit card receivables, the issuer
of the security may have no security interest in the related collateral. Thus,
the risks of corporate asset-backed securities are ultimately dependent upon
payment of consumer loans by the individual borrowers.
o 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".
o 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 . The Financial Highlights
table shows the Fund's portfolio turnover rates during prior fiscal years.
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 the 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 case 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.
o Special Risks of Lower-Grade Securities. In seeking high current income,
the Fund may invest in higher yielding, lower grade debt securities, commonly
known as "junk bonds." There is no restriction on the amount of the Fund's
assets that could be invested in these types of securities. Lower grade debt
securities are those rated below investment grade, which means they have a
rating lower than "Baa" by Moody's Investors Service, Inc.("Moody's"), or lower
than "BBB" by S&P or similar ratings by other nationally recognized statistical
rating organizations ("NRSROs"). 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 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 securities. 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 due on the bonds. The issuer's low
creditworthiness may increase the potential for its insolvency ("credit risk").
All corporate debt securities (whether foreign or domestic) are subject to some
degree of credit risk. Additionally, during an economic downturn, high yield
bonds might decline in value more than lower yielding, investment grade bonds.
Also, an increase in interest rates could have a significant negative impact on
the value of high yield bonds.
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.
o 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 mean 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.
o 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 the Fund may hold in significant amounts) 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
because 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 NRSROs, such as S&P's 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.
o 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.
o 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.
o Borrowing for Leverage. The Fund may borrow up to 50% of the value of
its net assets from banks to buy securities. The Fund will borrow only if it can
do so without putting up assets as security for a loan. This is a speculative
investment method known as "leverage." This investing technique may subject the
Fund to greater risks and costs than funds that do not borrow. These risks may
include the possibility that the Fund's net asset value per share will fluctuate
more than the net asset value of funds that don't borrow, since the Fund pays
interest on borrowings and interest expense affects the Fund's share price and
yield. Borrowing for leverage is subject to limits under the Investment Company
Act, described in more detail in "Borrowing for Leverage" in the Statement of
Additional Information. The Fund can borrow only if it maintains a 300% ratio of
net assets to borrowings at all times in the manner set forth under the
Investment Company Act.
o Special Risks of Hedging Instruments . 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. If
a covered call written by the Fund is
exercised on a security that has increased in value, the Fund will be required
to sell the security at the call price and will not be able to realize any
profit if the security has increased in value above the call price. The use of
forward contracts may reduce the gain that would otherwise result from a change
in the relationship between the U.S. dollar and a foreign currency. To limit its
exposure in foreign currency exchange contracts, the Fund limits its exposure to
the amount of its assets denominated in the foreign currency. Interest rate
swaps are subject to credit risks (if the other party fails to meet its
obligations) and also to interest rate risks. The 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.
o Special Risks of Derivatives. The
company issuing the instrument may fail to pay the amount due on
the maturity of the instrument. Also, the underlying investment
or security on which
the derivative is based, and the derivative itself, may not
perform the way the Manager expected it
to perform. Markets, underlying securities and indices 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."
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 the practices, including limitations on their
use that may help to reduce some of the risks.
o Temporary Defensive Investments. In times of unstable economic or market
conditions, the Manager may determine that it is appropriate for the Fund to
assume a temporary defensive position by investing some of its assets (there is
no limit on the amount) in short-term money market instruments. These include
U.S. Government securities, bank obligations, commercial paper, corporate
obligations and other instruments approved by the Fund's Board of Trustees.
o 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
experience costs in disposing of the collateral and losses if there is any delay
in doing so.
o 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 currently intends to invest no more than 10% of
its net assets in illiquid and 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 to determine whether to sell some holdings to
maintain adequate liquidity. Illiquid securities include repurchase agreements
maturing in move than seven days, or certain participation interests other than
those with puts exercisable within seven days.
o 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. The Fund
may invest up to 5% of its total assets in warrants or rights. That 5% does not
apply to warrants and rights the Fund acquired as part of units with other
securities or that were attached to other securities. No more than 2% of the
Fund's assets may be invested in warrants that are not listed on the New York or
American Stock Exchanges. For further details about these investments, please
refer to "Warrants and Rights" in the Statement of Additional Information.
o "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.
o 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 and broadly-based securities indices, 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. The hedging instruments the Fund may use are
described below and in greater detail in "Other Investment Techniques and
Strategies" in the Statement of Additional Information.
The Fund may 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 also 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 defensive
reasons or to raise cash to distribute to shareholders.
|_| Futures. The Fund may buy and sell futures contracts that relate to
(1) broadly-based securities indices (these are referred to as Stock Index
Futures and Bond Index Futures), (2) interest rates (these are referred to as
Interest Rate Futures) , (3) foreign currencies and (4) commodities (these are
referred to as commodity futures). All of these futures are described in
"Hedging With Options and Futures Contracts" in the Statement of Additional
Information. The Fund does not use futures and options on futures for
speculative purposes.
|_| Put and Call Options. The Fund may buy and sell exchange-traded and
over-the-counter put and call options, including index options, securities
options, currency options, commodities options, and options on the other types
of futures described in "Futures," above. A call or put may be purchased only
if, after the purchase, the value of all call and put options held by the Fund
will not exceed 5% of the Fund's total assets.
If the Fund sells (that is, writes) a call option, it must be "covered." That
means the Fund must own the security subject to the call while the call is
outstanding, or, for other types of written calls, the Fund must segregate
liquid assets to enable it to satisfy its obligations if the call is exercised.
There is no limit on the amount of the Fund's total assets that may be subject
to covered calls.
The Fund may buy puts whether or not it holds the underlying investment in
the portfolio. If the Fund writes a put, the put must be covered by segregated
liquid assets. The Fund will not write puts if more than 50% of the Fund's net
assets would have to be segregated to cover put options.
|_| 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 "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 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 (such as cash or U.S.
Government securities) to cover any amounts it could owe under swaps that exceed
the amounts it is entitled to receive, and it will adjust that amount daily, as
needed.
o Derivative Investments. In general, a "derivative investment" is a
specially designed investment. Its performance is linked to the performance of
another investment or security, such as an option, future, index, currency or
commodity. The Fund may not purchase or sell physical commodities or commodity
contracts; however this does not prevent the Fund from buying or selling options
and futures contracts or from investing in securities or other instruments
backed by physical commodities. The Fund may purchase and sell foreign currency
in hedging transactions.
Derivative investments used by the Fund are used in some cases for hedging
purposes and in other cases for "non-hedging" investment purposes to seek income
or total return. In the broadest sense, exchange-traded options and futures
contracts (discussed in "Hedging," above) may be considered "derivative
investment."
The Fund may invest in different types of derivatives, generally known as
"Structured Investments." "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 to pay a fixed sum on the maturity of
the note. Principal and/or interest payments on an index-linked note depend on
the performance of one or more market indices, such as the S&P 500 Index or a
weighted index of commodity futures, such as crude oil, gasoline and natural
gas. 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
recovery of the amount of the principal anticipated and increased price
volatility.
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:
o As to 75% of its total assets, the Fund may not buy securities issued or
guaranteed by a single issuer if, as a result, the Fund would have invested more
than 5% of its assets in the securities of that issuer or would own more than
10% of the voting securities of that issuer (purchases of U.S. Government
securities are not restricted by this policy);
o The Fund may not borrow money in excess of 50% of the value of its total
assets [as a non-fundamental policy, that limit is applied to the Fund's net
assets], and it may borrow only subject to the restrictions described under
"Borrowing for Leverage," in the Statement of Additional
Information;
o The Fund may not invest more than 25% of its total assets in any one
industry (this limit does not apply to U.S. Government securities but each
foreign government is treated as an "industry," and utilities are divided
according to the services they provide); and
o The Fund may not invest more than 5% of its total assets in securities
of issuers (including their predecessors) that have been in operation less than
three years.
Unless the prospectus states that a percentage restriction applies on an
ongoing basis, it applies only at the time the Fund makes an 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 "Investment Restrictions" in the Statement of
Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized in 1989 as a Massachusetts
business trust with one series, but in December 1993, that business trust was
reorganized to become a multi-series business trust called Oppenheimer Strategic
Funds Trust (the "Trust"), and the Fund became a series of it. In January 1996,
the Trust was renamed Oppenheimer Strategic Income Fund. The Trust is an
open-end, diversified management investment company, with an unlimited number of
authorized shares of beneficial interest of one series.
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
provides more information about them and the officers of the Fund. Although the
Fund will not normally hold annual meetings, it may hold shareholder meetings
from time to time on important matters, and shareholders have the right to call
a meeting to remove a Trustee or to take other action described in the Fund's
Declaration of Trust.
The 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 four classes of shares, Class A, Class B , Class
C and Class Y. 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. Only shares of a particular class vote as a class on
matters that affect that class alone. Shares are freely transferrable.
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
(including subsidiaries) currently manages investment companies, including other
Oppenheimer funds, in excess of $__ billion as of December 31, 1997, held in
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.
o Portfolio Managers. The Portfolio Managers of the Fund
are Arthur P. Steinmetz and David P. Negri. They have been the
individuals principally responsible for the day-to-day
management of the Fund's portfolio since November 1989. Mr.
Steinmetz, a Senior Vice President
of the Manager, and Mr. Negri, a Vice President of the Manager,
are Vice Presidents of the Trust.
They each serve as officers and portfolio managers of other Oppenheimer funds.
o Fees and Expenses. Under the Investment Advisory Agreement, the Fund
pays the Manager the following annual fees, which decline on additional assets
as the Fund grows: 0.75% of the first $200 million of the Fund's average annual
net assets, 0.72% of the next $200 million, 0.69% of the next $200 million,
0.66% of the next $200 million, 0.60% of the next $200 million, and 0.50% of
average annual net assets in excess of $1 billion. The Fund's management fee for
its last fiscal year was 0.53% of average annual net assets for Class A, Class B
shares and Class C shares, which may be higher than the rate paid by some other
mutual funds.
The Fund pays expenses related to its daily operations, such as custodian
fees, Trustees' fees, transfer agency fees, legal and auditing costs. Those
expenses are paid out of the Fund's assets and are not paid directly by
shareholders. However, those expenses reduce the net asset value of shares, and
therefore are indirectly borne by shareholders through their investment. More
information about the Investment Advisory Agreement and the other expenses paid
by the Fund is contained in the Statement of Additional Information.
There is also information about the Fund's brokerage policies and
portfolio transactions in "Brokerage Policies of the Fund" in the Statement of
Additional Information. Because the Fund purchases most of its portfolio
securities directly from the sellers and not through brokers, it therefore
incurs relatively little expense for brokerage. From time to time it may use
brokers when buying portfolio securities. When deciding which brokers to use in
those cases, the Investment Advisory Agreement allows the Manager to consider
whether brokers have sold shares of the Fund or any other funds for which the
Manager also serves as investment advisor.
o 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 Distributor. The
Distributor also distributes shares of the other Oppenheimer funds and is
sub-distributor for funds managed by a subsidiary of the Manager.
o 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 accounts to the Transfer Agent at the address and
toll-free numbers shown below 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 will
usually be different, as a result of
the different kinds of expenses each class bears. This performance information
may be useful to help you see how well your investment has done and to compare
it to other funds or market indices, as we have done below.
It is important to understand that the Fund's 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 total returns and yields are calculated is
contained in the Statement of Additional Information, which also contains
information about indices and 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.
o 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. When total returns are shown for
Class B or Class C shares, 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.
o Yield. Different types of yields may be quoted to show performance. 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 paid for a stated period by the maximum
offering price on the last day of the and annualizing the result. Yields for
Class A shares normally reflect the deduction of the maximum initial sales
charge, but may also be shown without deducting the sales charge. 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 its last fiscal year ended September 30, 1997, followed by a
graphical comparison of the Fund's performance to appropriate broad-based market
indices.
o Management's Discussion of Performance. During the Fund's fiscal year
ending September 30, 1997, its investment returns were affected positively by
non-inflationary growth in the U.S. bond markets in response to strong corporate
earnings and low interest rates. The Fund's investments in the high yield bond
sector focused on telecommunications technology issuers, and investments in
consumer cyclical issuers were reduced. The Fund's investment portfolio
benefitted from the relatively low volatility experienced by mortgage-backed
securities during this period. However, the Fund's international investments in
developed markets, which for the most part were denominated in currencies other
than the U.S. dollar, were adversely affected by a strong U.S. dollar.
Conversely, most of the emerging markets securities held in the Fund's portfolio
were U.S. dollar denominated, so they were not adversely affected by either the
strength of the U.S. dollar or by a currency crisis that occurred in several
Southeast Asian markets during the fiscal year. Much of the positive returns
from the Fund's investments in emerging markets securities came from Latin
America. The Fund's portfolio and its portfolio managers' strategies are subject
to change.
o Comparing the Fund's Performance to the Market. The chart below shows
the performance of a hypothetical $10,000 investment in Class A and Class B and
Class C shares of the Fund from the inception of each respective Class held
through September 30, 1997, with all dividends and capital gains distributions
reinvested in additional shares. The graph reflects the deduction of the 4.75%
maximum initial sales charge on Class A shares, the maximum 5% contingent
deferred sales charge for Class B shares (for one year) and the 1% contingent
deferred sales charge for Class C shares. Since Class Y shares were not issued
prior to September 30, 1997, there are no comparisons shown for that class.
Because the Fund invests in a variety of debt securities in domestic and
foreign markets, the Fund's performance is compared to the performance of the
Lehman Brothers Aggregate Bond Index and the Salomon Brothers World Government
Bond Index. The Lehman Brothers Aggregate Bond Index is a broad-based, unmanaged
index of U.S. corporate bond issues, U.S. Government securities and
mortgage-backed securities widely regarded as a measure of the performance of
the domestic debt securities market. The Salomon Brothers World Government Bond
Index is an unmanaged index of fixed-rate bonds having a maturity of one year or
more, widely regarded as a benchmark of fixed-income performance on a world-wide
basis. Index performance reflects the reinvestment of income, but not capital
gains or transaction costs, and none of the data below shows the effect of
taxes. Also, the Fund's performance data 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 Investment
In:
Oppenheimer Strategic Income Fund (Class A), Lehman Brothers
Aggregate Bond Index and
Salomon Brothers World Government Bond Index
[Graph]
Average Annual Total Returns of Class A Shares of the Fund at 9/30/971 1 Year 5
Years Life of Class
% % %
Class B Shares
Comparison of Change in Value of $10,000 Hypothetical Investment
In:
Oppenheimer Strategic Income Fund (Class B), Lehman Brothers
Aggregate Bond Index and
Salomon Brothers World Government Bond Index
[Graph]
Average Annual Total Returns of Class B Shares of the Fund at
9/30/972
1 Year Life of Class
% %
Class C Shares
Comparison of Change in Value of $10,000 Hypothetical Investment
In:
Oppenheimer Strategic Income Fund (Class C), Lehman Brothers
Aggregate Bond Index and
Salomon Brothers World Government Bond Index
[Graph]
Average Annual Total Returns of Class C Shares of the Fund at
9/30/973
1 Year Life of Class
% %
Total returns and ending account values in the graphs show change in share value
and include reinvestment of all dividends and capital gains distributions. The
performance information for the Lehman Brothers Aggregate Bond Index and the
Salomon Brothers World Government Bond Index begins on 11/1/89 for Class A
shares, 12/1/92 for Class B shares and 6/1/95 for Class C shares. 1The inception
date of the Fund (Class A shares) was 10/16/89. Class A returns are shown net of
the applicable 4.75% maximum initial sales charge. 2Class B shares of the Fund
were first publicly offered on 11/30/92. Returns are shown net of the applicable
5% and 2% contingent deferred sales charges, respectively, for the one year
period and the life-of-class. The ending account value for Class B shares in the
graph is net of the applicable 2% contingent deferred sales charge. 3Class C
shares of the Fund were first publicly offered on 5/26/95. The 1-year return is
shown net of the applicable 1% contingent deferred sales charge. Past
performance is not predictive of future performance. Graphs are not drawn to
same scale.
-4-
<PAGE>
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors four different classes of shares.
The different classes of shares represent investments in the same portfolio of
securities but may be subject to different expenses and will likely have
different share prices.
o Class A Shares. If you buy Class A shares, you may pay an initial sales
charge on investments up to $1 million (up to $500,000 for purchases by
"Retirement Plans," as defined in "Class A Contingent Deferred Sales Charge" on
page __). 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 12 months of buying them (18 months if the shares were purchased
prior to May 1, 1997), 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.
o 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 varies
depending on how long you own your shares as described in "Buying Class B
Shares" below.
o 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.
o Class Y Shares. Class Y shares are offered only to certain institutional
investors that have special agreements with the Distributor.
-5-
<PAGE>
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 to consider 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 assumed you are an
individual investor and therefore ineligible to purchase Class Y shares. 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.
o 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 Class B or Class C shares for
which no initial sales charge is paid.
o 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 shares might be more advantageous than Class C (as well as Class B)
shares 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) shares. If investing $500,000 or more, Class A shares may be more
advantageous as your investment horizon approaches 3 years or more.
And for most 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.
o 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.
o Are There Differences in Account Features That Matter to You? Because
some account features (such as Checkwriting) may not be available to Class B or
Class C shareholders, or other features (such as Automatic Withdrawal Plans)
might not be advisable (because of the effect of the contingent deferred sales
charge) in non-retirement accounts for Class B or Class C shareholders, you
should carefully review how you plan to use your investment account before
deciding which class of shares to buy. For example, share certificates are not
available for Class B or Class C shares and if you are considering using you
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, dividends payable to Class B and Class C shareholders will be
reduced by the additional expenses borne by those classes that are not borne by
Class A, such as the Class B and Class C asset-based sales charges described
below and in the Statement of Additional Information.
o 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 of shares
than for selling another class. It is important that investors understand that
the purpose of the contingent deferred sales charge and asset-based sales charge
for Class B and Class C shares is the same as the purpose of the front-end sales
charge on sales of Class A shares: that is, to compensate the Distributor for
commissions it pays to dealers and financial institutions for selling shares.
The Distributor may pay additional periodic compensation from its own resources
to securities dealers or financial institutions based upon the value of shares
of the Fund owned by the dealer or financial institution for its own account or
for its customers.
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:
o With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7) custodial
plans and military allotment plans, you can make initial and subsequent
investments of as little as $25. Subsequent purchases of at least $25 can be
made by telephone through AccountLink.
o Under pension, profit-sharing and 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.
o There is no minimum investment requirement if you are buying shares by
reinvesting dividends or distributions 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.
Payment by Federal Funds Wire: Shares may be purchased by Federal Funds wire.
The Minimum investment is $2,500. You must first call the Distributor's Wire
Department at 1-800-525-7041 to notify the Distributor of the wire, and receive
further instructions.
o 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.
o Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.
o 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.
o 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, to have the Transfer
Agent send redemption proceeds, and to transmit dividends and distributions to
your 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.
o 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.
o 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, or the order is received and transmitted to the Distributor by
an entity authorized by the Fund to accept purchase or redemption orders. The
Fund has authorized the Distributor, certain broker-dealers and agents or
intermediaries designated by the Distributor or those broker-dealers to accept
orders. 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, normally your order must be
transmitted to 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.
o 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 commission. The
current sales charge rates and commissions paid to dealers and brokers are as
follows:
Front-End Sales Front-End
Sales
Charge aCharge as a Commissions
as
Percentage of Percentage of Percentage of
Amount of Purchase Offering Price Amount Invested Offering
Price
- -------------------------------------------------------------------
Less than $50,000 4.75% 4.98% 4.00%
- -------------------------------------------------------------------
$50,000 or more but
less than $100,000 4.50% 4.71% 3.75%
- -------------------------------------------------------------------
$100,000 or more but
less than $250,000 3.50% 3.63% 2.75%
- -------------------------------------------------------------------
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
- -------------------------------------------------------------------
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
- -------------------------------------------------------------------
The Distributor reserves the right to reallow the entire commission to dealers.
If that occurs, the dealer may be considered an "underwriter" under Federal
securities laws.
o 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:
o Purchases by a retirement plan qualified under Section 401(a) if the
retirement plan has total plan assets of $500,000 or more.
o Purchases aggregating $1 million or more.
o 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,
Employee Benefit Plan, Group Retirement Plan (see "How to Buy Shares -
Retirement Plans" in the Statement of Additional Information for further
details), an employee's 403(b)(7) custodial plan account, 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.
o 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.
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, calculated on a calendar
year basis. 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 purchased prior to May 1, 1997, within
18 calendar months of the end of the calendar month of their purchase, a
contingent deferred sales charge (called the "Class A contingent deferred sales
charge") may be deducted from the redemption proceeds. A Class A contingent
deferred sales charge may be deducted from the redemption proceeds of any of
those shares purchased on or after May 1, 1997 that are redeemed within 12
months of the end of the calendar month of their purchase. That sales charge may
be equal to 1.0% of the lesser of (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). 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 12 calendar months (18 months
for shares purchased prior to May 1, 1997) of the end of the calendar month of
the purchase of the exchanged shares, the contingent deferred sales charge will
apply.
o 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:
o 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 Distributor will add the value,
at current offering price, of the shares you previously purchased and currently
own to the value of current purchases to determine the sales charge rate that
applies. 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.
o 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 purchase 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.
o 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. In
order to receive a waiver of the Class A contingent deferred sales charge, you
must notify the Transfer Agent which conditions apply.
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:
o the Manager or its affiliates;
o 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;
o registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose;
o 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;
o employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered into
sales arrangements with such dealers or brokers (and are identified to the
Distributor) or with the Distributor; the purchaser must certify to the
Distributor at the time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor children);
o dealers, brokers, banks 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 made available to
their clients (those clients may be charged a transaction fee by their dealer,
broker or advisor for the purchase or sale of Fund shares);
o (1) investment advisors and financial planners who have entered into an
agreement for this purpose with the Distributor and 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 (that have entered into an agreement for this purpose with the
Distributor)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 financial intermediary for purchasing shares);
o 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;
o 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;
o any unit investment trust that has entered into an
appropriate agreement with the Distributor;
o 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 Class C TRAC-2000 program on November 24, 1995; or
o 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 commence 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:
o shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
o 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;
o 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;
o shares purchased and paid for with the proceeds of shares redeemed in
the prior 30 days 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
o 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:
o to make Automatic Withdrawal Plan payments that are limited annually to
no more than 12% of the original account value;
o involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (see "Shareholder Account Rules and Policies,"
below);
o if, at the time of purchase of shares (prior to May 1, 1997) the dealer
agreed in writing to accept the dealer's portion of the sales commission 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);
o if, at the time of purchase of shares (on or after May 1, 1997) the
dealer agrees in writing to accept the dealer's portion of the sales commission
in installments of 1/12th of the commission per month (and no further commission
will be payable if the shares are redeemed within 12 months of purchase);
o for distributions from a TRAC-2000 401(k) plan sponsored
by the Distributor due to the termination of the TRAC-2000 program;
o 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
subsidiaries) 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;
o for distributions from Retirement Plans having 500 or more eligible
participants, except distributions due to termination of all of the Oppenheimer
funds as an investment option under the Plan; and
o for distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing this waiver.
o 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 shareholder 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 shareholder
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 and (2) shares held
the longest during the 6-year period. The contingent deferred sales charge is
not imposed in the circumstances described in "Waivers of the Class B and Class
C Sales Charges" below. Class B shares held for a period greater than 6 years
automatically convert to Class A shares.
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 Charge
Beginning of Month In Which Redemptions in that Year
Which Purchase Order was Accepted (As % of Amount 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.
o 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 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.
o Waivers of Class B Sales Charges. The Class B contingent deferred sales
charge will not apply to shares purchases in certain types of transactions, nor
will it apply to shares redeemed in certain circumstances, as described below
under "Waivers of Class B and Class C Sales Charges."
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 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 a Distribution and Service Plan for Class B shares to reimburse, and has
adopted a Distribution and Service Plan for Class C shares to compensate 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.
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 fees to compensate dealers for providing
personal 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 fees 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 or Class C
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 and
Class C shares. As to Class B shares, those asset-based sales payments reimburse
the Distributor for its services rendered in distributing Class B shares. As to
Class C 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 and Class C shares.
The Distributor currently 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 sales of Class B shares is 4.00% of the
purchase price. The Distributor retains the Class B asset-based sales charge.
The Distributor may pay the Class B service fee and the asset-based sales charge
to the dealer quarterly in lieu of paying the sales commission and service fee
advance at the time of purchase.
The Distributor currently pays sales commissions of 0.75% of the purchase
price to dealers from its own resources at the time of sale of Class C shares.
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 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 may pay the Class C service fee and
asset-based sales charge to the dealer quarterly in lieu of paying the sales
commission and service fee advance at the time of purchase.
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.
At September 30, 1997, the end of the Class B Plan year, the Distributor
had incurred unreimbursed expenses in connection with sales of Class B shares of
$__________ (equal to ____% 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, 1997, the end of the Class C Plan year,
the Distributor had incurred unreimbursed expenses in connection with sales of
Class C shares of $_________ (equal to _____% of the Fund's net assets
represented by Class C shares on that date). If the Fund terminates either Plan,
the Board of Trustees may allow the Fund to continue payments of the asset-based
sales charge to the Distributor for distributing shares before the Plan was
terminated.
o 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. In order to receive a waiver of the Class B or Class C contingent
deferred sales charge, you must notify the Transfer Agent which conditions
apply.
Waivers for Redemptions of shares in Certain Cases. The Class B and Class
C contingent deferred sales charges will be waived for redemptions of shares in
the following cases :
o 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);
o 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);
o returns of excess contributions to Retirement Plans;
o 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;
o shares redeemed involuntarily, as described in
"Shareholder Account Rules and Policies," below; or
o distributions from OppenheimerFunds prototype 401(k) plans and from
certain Massachusetts Mutual Life Insurance Company
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; or (6) for loans
to participants.
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:
o shares sold to the Manager or its affiliates;
o 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;
o shares issued in plans of reorganization to which the Fund
is a party; and
o distributions from 401(k) plans sponsored by broker-dealers that have
entered into a special agreement with the Distributor allowing this waiver.
Buying Class Y Shares. Class Y shares are sold at net asset value per share
without sales charge directly to certain institutional investors, such as
insurance companies, registered investment companies and employee benefit plans,
that have special agreements with the Distributor for this purpose. These
include Massachusetts Mutual Life Insurance Company, an affiliate of the
Manager, which may purchase Class Y shares of the Fund and other Oppenheimer
funds for asset allocation programs, investment companies or separate investment
accounts it sponsors and offers to its customers. Individual investors are not
able to invest in Class Y shares directly.
While Class Y shares are not subject to initial or contingent deferred
sales charges or asset-based sales charges, an institutional investor buying the
shares for its customers' accounts may impose charges on those accounts. The
procedures for purchasing, redeeming, exchanging, or transferring the Fund's
other classes of shares, and the special account features that apply to those
shares described elsewhere in this Prospectus (other than provisions as to the
timing of the Fund's receipt of purchase, redemption and exchange orders) in
general do not apply to Class Y shares.
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 purchases of shares by telephone (either through a
service representative or by PhoneLink, described below), automatic investments
under Asset Builder Plans, and sending dividends and distributions or Automatic
Withdrawal Plan payments directly to your bank account. Please call the Transfer
Agent for more information.
AccountLink privileges should be requested 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.
o 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.
o 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.
o 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.
o 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.
o 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.
Shareholder Transactions by Fax. Requests for certain
account transactions may be sent to the Transfer Agent by fax
(telecopier). Please call 1-800-525-7048 for information about
which
transactions are included. Transaction requests submitted by fax
are subject to the same rules and
restrictions as written and telephone requests described in this
Prospectus.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that enable
you to sell shares automatically or exchange them to another Oppenheimer funds
account on a regular basis:
o 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.
o Automatic Exchange Plans. You can authorize the Transfer Agent to
automatically exchange an amount you establish in advance for shares 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 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. It 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:
o Individual Retirement Accounts including rollover IRAs, for individuals
and their spouses and SIMPLE IRAs offered by employers
o 403(b)(7) Custodial Plans for employees of eligible
tax-exempt organizations, such as schools, hospitals and
charitable organizations
o SEP-IRAs (Simplified Employee Pension Plans) for small business owners
or people with income from self-employment, including SAR/SEP-IRAs
o Pension and Profit-Sharing Plans for self-employed persons
and other employers
o 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, 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.
o 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.
o 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):
o You wish to redeem more than $50,000 worth of shares and
receive a check
o A redemption check is not payable to all shareholders
listed on the account statement
o A redemption check is not sent to the address of record on
your account statement
o Shares are being transferred to a Fund account with a
different owner or name
o Shares are redeemed by someone other than the owners (such
as an Executor)
o 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:
o Your name
o The Fund's name
o Your Fund account number (from your account statement) o The dollar
amount or number of shares to be redeemed o Any special payment
instructions o Any share certificates for the shares you are selling o The
signatures of all registered owners exactly as the
account is registered, and
o 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 Send courier or Express Mail
requests by mail to: request to:
OppenheimerFunds Serv OppenheimerFunds Services
P.O. Box 5270, 10200 E. Girard Ave., Building D
Denver, Colorado 80217 Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record may
also sell your shares by telephone. To receive the redemption price on a regular
business day, your call must be received by the Transfer Agent by the close of
The New York Stock Exchange that day, which is normally 4:00 P.M., but may be
earlier on some days. You may not redeem shares held in an OppenheimerFunds
retirement plan or under a share certificate by telephone.
o To redeem shares through a service representative, call
1-800-852-8457
o 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 wired to that bank account.
o Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed by
telephone 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.
o Telephone Redemptions Through AccountLink or by Wire. 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.
Shareholders may also have the Transfer Agent send redemption proceeds of
$2,500 or more by Federal Funds wire to a designated commercial bank account.
The bank must be a member of
the Federal Reserve wire system. There is a $10 fee for each Federal Funds wire.
To place a wire redemption request, call the Transfer Agent at 1-800-852-8457.
The wire will normally be transmitted on the next bank business day after the
shares are redeemed. There is a possibility that the wire may be delayed up to
seven days to enable the Fund to sell securities to pay the redemption proceeds.
No dividends are accrued or paid on the proceeds of shares that have been
redeemed and are awaiting transmittal by wire. To establish wire redemption
privileges on an account that is already established, please contact the
Transfer Agent for instructions.
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. Please 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.
Checkwriting. 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 Checkwriting for an
account in this Fund that has the same registration as that other fund account.
o Checks can be written to the order of whomever you wish, but may not be
cashed at the Fund's bank or custodian.
o Checkwriting 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.
o Checks must be written for at least $100.
o 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.
o 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 10
days.
o Don't use your checks if you changed your Fund account
number.
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:
o Shares of the fund selected for exchange must be available
for sale in your state of residence
o The prospectuses of this Fund and the fund whose shares
you want to buy must offer the exchange privilege
o 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
o You must meet the minimum purchase requirements for the
fund you purchase by exchange
o 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:
o 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."
o 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:
o 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 seven 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 sale of portfolio securities at a time or price
disadvantageous to the Fund.
o 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.
o 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.
o 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.
o 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.
Shareholder Account Rules and Policies
o 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 class by 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.
o 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.
o 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.
o 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.
o 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.
o 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 or improperly.
o 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, Class B , Class C and Class Y shares. Therefore, the redemption value
of your shares may be more or less than their original cost.
o 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 federal funds wire, certified check or arrange with your bank
to provide telephone or written assurance to the Transfer Agent that your
purchase payment has cleared.
o 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.
o 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.
o "Backup Withholding" of Federal income tax may be applied at the rate of
31% to taxable 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.
o 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.
o 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.
o Transfer Agent and Shareholder Servicing Agent. The transfer agent and
shareholder servicing agent is OppenheimerFunds Services. Unified Management
Corporation (1-800-346-4601) is the shareholder servicing agent for former
shareholders of the AMA Family of Funds and clients of AMA Investment Advisors,
L.P. who owned shares of the Former Quest For Value Fund when it merged into the
Fund on November 24, 1995.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B , Class C
and Class Y shares from net investment income on each regular business day and
pays those dividends to shareholders monthly. Normally, dividends are paid on
the 25th day of each month (or the prior regular business day if the 25th is not
a regular business day), 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. It is expected that distributions paid with
respect to Class A and Class Y shares will generally be higher than for Class B
or Class C shares because expenses allocable to Class B and Class C shares will
generally be higher.
During the Fund's fiscal year ended September 30, 1997,
the Fund attempted to pay
dividends on its Class A shares at a constant level. That was done keeping in
mind the amount of net investment income and other distributable income
available from the Fund's portfolio investments. However, the amount of each
dividend can change from time to time (or there might not be a dividend at all
on either class) depending on market conditions, the Fund's expenses, and the
composition of the Fund's portfolio. Attempting to pay dividends at a constant
level required the Manager to monitor the Fund's income stream from its
investments and at times to select higher yielding securities (appropriate to
the Fund's objectives and investment restrictions) to maintain income at the
required level. This practice did not affect the net asset values of either
class of shares. The Board of Trustees may change or end the Fund's targeted
dividend level for Class A shares at any time. There is no targeted dividend
level for Class B , Class C or Class Y shares.
Capital Gains. The Fund may make distributions annually in December out of any
net short-term or long-term capital gains, and the Fund may make supplemental
distributions of dividends and capital gains following the end of its fiscal
year. Long-term capital gains will be separately identified in the tax
information the Fund sends you after the end of the 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:
o 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.
o Reinvest Long-Term Capital Gains Only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or have
them sent to your bank account on AccountLink.
o 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.
o Reinvest Your Distributions in Another Oppenheimer Fund
Account. You can reinvest all distributions in the same class of
shares of 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 have 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 so that the Fund will not
have to pay taxes on the amounts it distributes to shareholders as dividends and
capital gains. The Fund intends to manage its investments to that it will
qualify as a "regulated investment company" under the Internal Revenue Code,
although it reserves the right not to qualify in a particular year.
o "Buying a Dividend": When the Fund goes ex-dividend, its share price is
reduced by the amount of the distribution. If you buy shares on or just before
the ex-dividend date, or just before the Fund declares a capital gains
distribution, you will pay the full price for the shares and then receive a
portion of the price back as a taxable dividend or capital gain.
o Taxes on Transactions: Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. Generally speaking, a capital gain
or loss is the difference between the price you paid for the shares and the
price you receive when you sell them.
o Returns of Capital: In certain cases distributions made by the Fund may
be considered a non-taxable return of capital to shareholders. If that occurs,
it will be identified in notices to shareholders. 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.
-6-
<PAGE>
Appendix A
Description of Ratings-Categories of Rating Services
Description of Moody's Investors Service, Inc. Bond Ratings
Aaa: Bonds 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 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 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.
Baa: Bonds rated "Baa" are considered medium grade obligations, that is,
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 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 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 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 rated "Ca" represent obligations which are
speculative in a high degree and are often in default or have
other marked shortcomings.
C: Bonds rated "C" can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Description of Standard & Poor's Bond Ratings
AAA: "AAA" is the highest rating assigned to a debt
obligation and indicates an extremely strong capacity to pay
principal and interest.
AA: Bonds rated "AA" also qualify as high quality debt
obligations. Capacity to pay principal and interest is very
strong, and in the majority of instances they differ from "AAA"
issues
only in small degree.
A: Bonds rated "A" have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to adverse effects of change in
circumstances and economic conditions.
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, D: Bonds on which no interest is being paid are rated "C." Bonds rated
"D" are in default and payment of interest and/or repayment of principal is in
arrears.
A-1
<PAGE>
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)
Oppenheimer Quest Value Fund, Inc., Oppenheimer Quest Growth & Income Value
Fund, Oppenheimer Quest Opportunity Value Fund, Oppenheimer Quest Small Cap
Value Fund and Oppenheimer Quest Global Value 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 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
o Reduced Class A Initial Sales Charge Rates for Certain
Former Quest Shareholders
o 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.
Front-End Front-End
Sales Sales Commission
Charge Charge as
Number of as a as a Percentage
Eligible Percentage Percentage of
Employees of Offering of Amount Offering
or Members Price Invested Price
- -------------------------------------------------------------
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 pages __ through __ 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.
o 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:
o 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.
o 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.
o 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:
o 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.
o 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
o 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, Class B or Class 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 Class 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.
o 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, Class B or Class 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 Class 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, Class B or Class 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.
APPENDIX TO PROSPECTUS OF
OPPENHEIMER STRATEGIC INCOME FUND
Graphic material included in Prospectus of Oppenheimer Strategic Income
Fund: "Comparison of Total Return of Oppenheimer Strategic Income Fund with The
Lehman Aggregate Bond Index and The Salomon Brothers World Government Bond Index
Change in Value of a $10,000 Hypothetical Investment". A linear graph will be
included in the Prospectus of Oppenheimer Strategic Income Fund (the "Fund")
depicting the initial account value and subsequent account value of a
hypothetical $10,000 investment in the Fund during each of the Fund's fiscal
years since the commencement of the Fund's operations as to Class A shares
(October 16, 1989) and Class B shares (November 30, 1992) and Class C shares
(May 26, 1995) The graph will compare such values with hypothetical $10,000
investments in the Lehman Aggregate Bond Index and the Salomon World Government
Bond Index over the periods indicated below. Set forth below are the relevant
data points that will appear on the linear graph. Additional information with
respect to the foregoing, including a description of The Lehman Brothers
Aggregate Bond Index and The Salomon Brothers World Government Bond Index, is
set forth in the Prospectus under "Fund Performance Information - Management's
Discussion of Performance."
Salomon
Brothers
Oppenheimer Lehman Bros. World
Fiscal Year Strategic Aggregate Government
(Period) Ended Income Fund A Bond Index Bond Index
- -------------- ------------- ------------ ----------
10/16/89 $ 9,525 $10,000 (1)$10,000(1)
09/30/90 $10,489 $10,498 $10,664
09/30/91 $12,258 $12,177 $12,268
09/30/92 $13,794 $13,705 $14,513
09/30/93 $15,667 $15,072 $15,839
09/30/94 $15,981 $14,586 $16,124
09/30/95 $17,349 $16,637 $18,733
09/30/96 $19,644 $17,452 $19,525
09/30/97 $ $ $
Salomon
Brothers
Oppenheimer Lehman Bros. World
Fiscal Year Strategic Aggregate Government
(Period) Ended Income Fund B Bond Index Bond Index
- -------------- ------------- ------------ ----------
11/30/92 $10,000 $10,000 (2)$10,000(2)
09/30/93 $11,489 $11,143 $11,400
09/30/94 $11,617 $10,784 $11,605
09/30/95 $12,522 $12,300 $13,483
09/30/96 $13,751 $12,903 $14,052
09/30/97 $ $ $
Salomon
Brothers
Oppenheimer Lehman Bros. World
Fiscal Year Strategic Aggregate Government
(Period) Ended Income Fund C Bond Index Bond Index
- -------------- ------------- ------------ ----------
05/26/95(3) $10,000 $10,000 (3)$10,000(3)
09/30/95 $10,309 $10,271 $ 9,953
09/30/96 $11,542 $10,774 $10,372
09/30/$7 $ $
- ------------- formation begins on 11/1/89. (2) Performance information begins on
12/1/92.
(3) Performance information begins on 6/1/95.
<PAGE>
Oppenheimer Strategic Income Fund
6803 South Tucson Way
Englewood, Colorado 80112
Telephone: 1-800-525-7048
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
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.
PR0230.001.0198* Printed on recycled paper
<PAGE>
Oppenheimer Strategic Income Fund
6803 South Tucson Way, Englewood, Colorado 80112
1-800-525-7048
Statement of Additional Information dated January 23, 1998
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated January 23, 1998. 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 Objective and Policies............................
Investment Policies and Strategies......................
Other Investment Techniques and Strategies..............
Other Investment Restrictions...........................
How the Fund is Managed .....................................
Organization and History................................
Trustees and Officers of the Fund.......................
The Manager and Its Affiliates..........................
Brokerage Policies of the Fund...............................
Performance of the Fund......................................
Distribution and Service Plans...............................
About Your Account
How To Buy Shares............................................
How To Sell Shares...........................................
How To Exchange Shares.......................................
Dividends, Capital Gains and Taxes...........................
Additional Information About the Fund........................
Financial Information About the Fund
Independent Auditors' Report.................................
Financial Statements.........................................
Appendix: Corporate Industry Classifications.................
-1-
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and policies of the
Fund are discussed 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 strategies the Fund may use to try to achieve its objective.
Capitalized terms used in this Statement of Additional Information have the same
meaning as those terms have in the Prospectus.
In selecting securities for the Fund's portfolio, the Fund's investment
manager, OppenheimerFunds, Inc. (the "Manager"), evaluates the investment merits
of debt securities primarily through the exercise of its own investment
analysis. This may include, among other things, consideration of the financial
strength of an issuer, including its historic and current financial condition,
the trading activity in its securities, present and anticipated cash flow,
estimated current value of its assets in relation to their 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 an
issuer and the issuer's continuing ability to meet its future obligations. The
Manager also may consider anticipated changes in business conditions, levels of
interest rates of bonds as contrasted with levels of cash dividends, industry
and regional prospects, the availability of new investment opportunities and the
general economic, legislative and monetary outlook for specific industries, the
nation and the world.
o Investment Risks. With the exception of U.S. Government securities, the
debt securities the Fund invests in will have one or more types of investment
risk: credit risk, interest rate risk or foreign exchange rate risk. Credit risk
relates to the ability of the issuer to meet interest or principal payments or
both as they become due. Generally, higher yielding bonds are subject to credit
risk to a greater extent than higher quality bonds. Interest rate risk refers to
the fluctuations in value of debt securities resulting solely from the inverse
relationship between price and yield of outstanding debt securities. An increase
in prevailing interest rates will generally reduce the market value of debt
securities, and a decline in interest rates will tend to increase their value.
In addition, debt securities with longer maturities, which tend to produce
higher yields, are subject to potentially greater capital appreciation and
depreciation than obligations with shorter maturities. Fluctuations in the
market value of debt securities subsequent to their acquisition will not affect
the interest payable on those securities, and thus the cash income from such
securities, but will be reflected in the valuations of these securities used to
compute the Fund's net asset values. Foreign exchange rate risk refers to the
change in value of the currency in which a foreign security the Fund holds is
denominated against the U.S. dollar.
o Special Risks - High Yield Securities. As stated in the Prospectus, the
corporate debt securities in which the Fund will principally invest may be in
the lower rating categories. The Fund may invest in securities rated as low as
"C" by Moody's or "D" by Standard & Poor's. The Manager will not rely solely on
the ratings assigned by rating services and may invest, without limitation, in
unrated securities which offer, in the opinion of the Manager, comparable yields
and risks as those rated securities in which the Fund may invest.
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Risks of high yield securities may include: (i) limited liquidity and
secondary market support, (ii) substantial market price volatility resulting
from changes in prevailing interest rates, (iii) subordination to the prior
claims of banks and other senior lenders, (iv) the operation of mandatory
sinking fund or call/redemption provisions during periods of declining interest
rates that could cause the Fund to be able to reinvest premature redemption
proceeds only in lower yielding portfolio securities, (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. As a result of the limited
liquidity of high yield securities, their prices have at times experienced
significant and rapid decline when a substantial number of holders decided to
sell. 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 bonds and adversely affect the value of
outstanding bonds and the ability of the issuers to repay principal and
interest.
o Portfolio Turnover. The Manager will monitor the Fund's tax status under
the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code")
during periods in which the Fund's annual turnover rate exceeds 100%. To the
extent that increased portfolio turnover results in sales of securities held
less than three months, the Fund's ability to qualify as "regulated investment
company" under the Internal Revenue Code may be affected (see "Dividends and
Distributions," below). No limitations are placed on the weighted average
maturity of the portfolio, which will generally be of longer duration. Preferred
stocks, other than those of a finite maturity, will be assumed to have a 40 year
maturity for the purpose of calculating a weighted average maturity. The Fund
anticipates it will shift its investment focus to securities of longer maturity
as interest rates decline, and to securities of shorter maturity as interest
rates rise. Although changes in the value of the Fund's portfolio securities
subsequent to their acquisition are reflected in the net asset value of the
Fund's shares, such changes will not affect the income received by the Fund from
such securities. The dividends paid by the Fund will increase or decrease in
relation to the income received by the Fund from its investments, which will in
any case be reduced by the Fund's expenses before being distributed to the
Fund's shareholders.
o Debt Securities of Foreign Governments and Companies. As
noted in the Prospectus,
the Fund may invest in debt obligations and other 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 debt obligations and other
securities issued by U.S. corporations denominated in non-U.S. currencies. All
of these are considered to be "foreign securities." The types of foreign debt
obligations and other securities in which the Fund may invest are the same types
of debt obligations identified under "Debt Securities of U.S. Companies," below.
The percentage of the Fund's assets that will be allocated to foreign
securities will vary depending on the relative yields of foreign and U.S.
securities, the economies of foreign countries, the condition of such countries'
financial markets, the interest rate climate of such countries and the
relationship of such countries' currency to the U.S. dollar. These factors are
judged on the basis of fundamental economic criteria (e.g., relative inflation
levels and trends, growth rate forecasts, balance of payments status, and
economic policies) as well as technical and political data.
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Investments in foreign securities offer potential benefits not available
from investments solely in securities of domestic issuers, by offering 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 bond or other markets that do not move in a manner parallel
to U.S. markets. From time to time, 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 reimposed.
Securities of foreign issuers that are represented by American depository
receipts, or that are listed on a U.S. securities exchange, or are traded in the
U.S. over-the-counter market are not considered "foreign securities" when the
Fund moves its investment focus among different sectors, because they are not
subject to many of the special considerations and risks (discussed below) that
apply to foreign securities traded and held abroad. 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 SEC rules.
o Risks of Foreign Securities. Investment in foreign securities involves
considerations and risks not associated with investment in securities of U.S.
issuers. For example, foreign issuers are not required to use generally-accepted
accounting principles ("G.A.A.P."). If foreign securities are not registered
under the Securities Act of 1933, the issuer does not have to comply with the
disclosure requirements of the Securities Exchange Act of 1934. In addition, it
is generally more difficult to obtain court judgments outside the United States.
The values of foreign securities will be affected by incomplete or inaccurate
information available as to foreign issuers, changes in currency rates or
exchange control regulations or currency blockage, application of foreign tax
laws, including withholding taxes, changes in governmental administration or
economic or monetary policy (in the U.S. or abroad) or changed circumstances in
dealings between nations. Costs will be incurred in connection with conversions
between various currencies. Foreign brokerage commissions are generally higher
than commissions in the U.S., and foreign securities markets may be less liquid,
more volatile and less subject to governmental regulation than in the U.S.
Investments in foreign countries could be affected by other factors not
generally thought to be present in the U.S., including expropriation or
nationalization, confiscatory taxation and potential difficulties in enforcing
contractual obligations, and could be subject to extended settlement periods.
Because the Fund may purchase securities denominated in foreign
currencies, a change in the value of any such currency against the U.S. dollar
will result in a change in the U.S. dollar value of the Fund's assets and its
income available for distribution. In addition, although a portion of the Fund's
investment income may be received or realized in foreign currencies, the Fund
will be required to compute and distribute its income in U.S. dollars, and
absorb the cost of currency fluctuations. The Fund may engage in foreign
currency exchange transactions for hedging purposes to protect against changes
in future exchange rates. See "Hedging With Options and Futures Contracts,"
below.
The values of foreign investments and the investment income derived from
them may also be affected unfavorably by changes in currency exchange control
regulations. Although the Fund will invest primarily in securities denominated
in foreign
currencies that at the time of investment
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do not have significant government-imposed restrictions on
conversion into U.S. dollars, there can
be no assurance against subsequent imposition of currency
controls. In addition, the values of
foreign securities will fluctuate in response to a variety of
factors, including changes in U.S. and
foreign interest rates.
The Fund may invest in U.S. dollar-denominated foreign securities referred
to as "Brady Bonds." These are debt obligations of foreign entities that 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 that have the same maturity as the Brady Bonds. However, the
Fund may also invest in uncollateralized Brady Bonds. Brady Bonds are generally
viewed as having three or four valuation components: (i) any 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 what is referred to as the "residual risk" of such bonds). 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
U.S. Treasury securities held as collateral for the payment of principal will
not be distributed to investors, nor will such obligations be sold and the
proceeds distributed. The collateral will be held by the collateral agent to the
scheduled maturity of the defaulted Brady Bonds, which will continue to be
outstanding, at which time the face amount of the collateral will equal the
principal payments which would have then been due on the Brady Bonds in the
normal course. In addition, in light of the residual risk of Brady Bonds and,
among other factors, the history of defaults with respect to commercial bank
loans by public and private entities of countries issuing Brady Bonds,
investments in Brady Bonds are to be viewed as speculative.
The obligations of foreign governmental entities may or may not be
supported by the full faith and credit of a foreign government. Obligations of
"supranational entities" include those of international organizations designated
or supported by governmental entities to promote economic reconstruction or
development and of international banking institutions and related government
agencies. Examples include the International Bank for Reconstruction and
Development (the "World Bank"), the European Coal and Steel Community, the Asian
Development Bank and the Inter-American Development Bank. The governmental
members, or "stockholders," usually make initial capital contributions to the
supranational entity and in many cases are committed to make additional capital
contributions if the supranational entity is unable to repay its borrowings.
Each supranational entity's lending activities are limited to a percentage of
its total capital (including "callable capital" contributed by members at the
entity's call), reserves and net income. There is no assurance that foreign
governments will be able or willing to honor their commitments.
o 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 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 in developed countries.
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o U.S. Government Securities. U.S. Government
securities are debt obligations
issued or guaranteed by the U.S. Government or one of its agencies
or instrumentalities. The U.S.
Government securities the Fund can invest in are described in the Prospectus and
include U.S. Treasury securities such as "zero coupon" Treasury securities,
mortgage-backed securities and CMOs.
o Zero Coupon Treasury Securities. The Fund may invest in zero coupon
Treasury securities, which are U.S. Treasury bills issued without interest
coupons, U.S. Treasury notes and bonds which have been stripped of their
unmatured interest coupons, and receipts or certificates representing interests
in such stripped obligations and 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. The
interest rate is effectively "locked in" and there is no risk of having to
reinvest periodic interest payments prior to maturity of the zero coupon
security in securities having lower rates.
o Mortgage-Backed U.S. Government Securities and CMOs.
These securities represent
participation interests in pools of residential mortgage loans
made by lenders such as banks and
savings and loan associations. The pools are assembled for sale to investors
(such as the Fund) by government agencies, which issue or guarantee the
securities relating to the pool. Such securities differ from conventional debt
securities which generally provide for periodic payment of interest in fixed or
determinable amounts (usually semi-annually) with principal payments at maturity
or specified call dates. Some mortgage-backed U.S. Government 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 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 Mortgage Corporation);
and some are backed by only the credit of the issuer itself (e.g., Federal
National Mortgage Association). Those guarantees do not extend to the value or
yield of the mortgage-backed securities themselves or to the net asset value of
the Fund's shares. Those government agencies may also issue derivative mortgage
backed securities such as collateralized mortgage obligations ("CMOs"),
discussed below.
The yield on mortgage-backed securities 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 affected 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 to differ from the yield calculated on the basis of the expected
average life of the pool.
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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 to the extent that the values of other debt securities rise,
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 times when available investments offer higher or lower
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 the Fund 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 their 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.
o Ginnie Mae Certificates. Certificates of Government National Mortgage
Association ("Ginnie Mae") are mortgage-backed securities of Ginnie Mae that
evidence an undivided interest in a pool or pools of mortgages ("Ginnie Mae
Certificates"). 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 when due.
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.
o FNMA Securities. The Federal National Mortgage Association ("FNMA") was
established to create a secondary market in mortgages insured by the FHA. FNMA
issues guaranteed mortgage pass-through certificates ("FNMA Certificates"). FNMA
Certificates resemble Ginnie Mae Certificates in that each FNMA Certificate
represents a pro rata share of all interest and principal payments made and owed
on the underlying pool. FNMA guarantees timely payment of interest and principal
on FNMA Certificates. The FNMA guarantee is not backed by the full faith
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and credit of the U.S. Government.
o FHLMC Securities. The Federal Home Loan Mortgage
Corporation ("FHLMC") was
created to promote development of a nationwide secondary market
for conventional residential
mortgages. FHLMC issues two types of mortgage pass-through
securities ("FHLMC Certificates"):
mortgage participation certificates ("PCs") and guaranteed mortgage certificates
("GMCs"). PCs resemble Ginnie Mae Certificates in that each PC 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. The FHLMC guarantee is not backed by the full
faith and credit of the U.S. Government.
o Collateralized Mortgage-Backed Obligations ("CMOs"). CMOs
are fully-
collateralized bonds that are the general obligations of the
issuer thereof, either the U.S.
Government, a U.S. Government instrumentality, or a private issuer. Such bonds
generally are secured by an assignment to a trustee (under the indenture
pursuant to which the bonds are issued) of collateral consisting of a pool of
mortgages. Payments with respect to the underlying mortgages generally are made
to the trustee under the indenture. Payments of principal and interest on the
underlying mortgages are not passed through to the holders of the CMOs as such
(i.e., the character of payments of principal and interest is not passed
through, and therefore payments to holders of CMOs attributable to interest paid
and principal repaid on the underlying mortgages do not necessarily constitute
income and return of capital, respectively, to such holders), but such payments
are dedicated to payment of interest on and repayment of principal of the CMOs.
CMOs often are issued in two or more classes with different characteristics such
as varying maturities and stated rates of interest. Because interest and
principal payments on the underlying mortgages are not passed through to holders
of CMOs, CMOs of varying maturities may be secured by the same pool of
mortgages, the payments on which are used to pay interest on each class and to
retire successive maturities in sequence. Unlike other mortgage-backed
securities (discussed above), CMOs are designed to be retired as the underlying
mortgages are repaid. In the event of prepayment on such mortgages, the class of
CMO first to mature generally will be paid down. Therefore, although in most
cases the issuer of CMOs will not supply additional collateral in the event of
such prepayment, there will be sufficient collateral to secure CMOs that remain
outstanding.
o Stripped Mortgage-Backed Securities. These are derivative multi-class
mortgage back securities, that are usually structured with two classes that
receive different proportions of the interest and principal distributions on a
pool of Ginnie Mae, FNMA or FHLMC certificates. Commonly, one class receives
some of the interest and most of the principal, while the other class will
receive most of the interest and the rest of the principal. In some cases, one
class will receive all of the interest ("interest-only" securities) and the
other will receive all of the principal. The yield on interest-only securities
is extremely sensitive to the rate of principal payments (including prepayments)
on the underlying pool, and a rapid rate of principal prepayments may have a
material adverse effect on the yield of the interest-only class. If the
underlying pool experiences greater than anticipated principal prepayments, the
Fund may fail to fully recoup its initial investment.
o Mortgage-Backed Security Rolls. The Fund may enter into
"forward roll" transactions
with respect to mortgage-backed securities issued by Ginnie Mae,
FNMA or FHLMC. In a forward
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roll transaction, which is considered to be a borrowing by the Fund, the Fund
will sell a mortgage security to selected banks or other entities and
simultaneously agree to repurchase a similar security (same type, coupon and
maturity) from the institution at a specified later date at an agreed upon
price. The mortgage securities that are repurchased will bear the same interest
rate as those sold, but generally will be collateralized by different pools of
mortgages with different prepayment histories than those sold. Risks of
mortgage-backed security rolls include: (i) the risk of prepayment prior to
maturity, (ii) the possibility that the Fund may not be entitled to receive
interest and principal payments on the securities sold and that the proceeds of
the sale may have to be invested in money market instruments (typically
repurchase agreements) maturing not later than the expiration of the roll, and
(iii) the possibility that the market value of the securities sold by the Fund
may decline below the price at which the Fund is obligated to purchase the
securities. Upon entering into a mortgage-backed security roll, the Fund will be
required to identify to its Custodian cash, U.S. Government securities or other
high-grade debt securities in an amount equal to its obligation under the roll.
o Debt Securities of U.S. Companies. The Fund's investments in
fixed-income securities issued by domestic companies and other issuers may
include debt obligations (bonds, debentures, notes, mortgage-backed and
asset-backed securities and CMOs) together with preferred stocks.
The risks attendant to investing in high-yielding, lower-rated bonds are
described above. If a sinking fund or callable bond held by the Fund is selling
at a premium (or discount) and the issuer exercises the call or makes a
mandatory sinking fund payment, the Fund would realize a loss (or gain) in
market value; the income from the reinvestment of the proceeds would be
determined by current market conditions, and reinvestment of that income may
occur at times when rates are generally lower than those on the called bond.
o Preferred Stocks. Preferred stock, unlike common stock, offers a stated
dividend rate payable from the corporation's earnings. Such preferred stock
dividends may be cumulative or non-cumulative, participating, or auction rate.
If interest rates rise, the fixed dividend on preferred stocks may be less
attractive, causing the price of preferred stocks to decline. Preferred stock
may have mandatory sinking fund provisions, as well as call/redemption
provisions prior to maturity, a negative feature when interest rates decline.
Dividends on some preferred stock may be "cumulative," requiring all or a
portion of prior unpaid dividends to be paid. Preferred stock also generally has
a preference over common stock on the distribution of a corporation's assets in
the event of liquidation of the corporation, and may be "participating," which
means that it may be entitled to a dividend exceeding the stated dividend in
certain cases. The rights of preferred stocks on distribution of a corporation's
assets in the event of a liquidation are generally subordinate to the rights
associated with a corporation's debt securities.
o Participation Interests. The Fund may invest in participation interests,
subject to the limitation, described in "Illiquid and Restricted Securities" in
the Prospectus, on investments by the Fund in illiquid investments.
Participation interests represent an undivided interest in or assignment of a
loan made by the issuing financial institution. No more than 5% of the Fund's
net assets can be invested in participation interests of the same issuing
borrower. Participation interests are primarily dependent upon the financial
strength of the borrowing corporation, which is obligated to make
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payments of principal and interest on the loan, and there is a risk that such
borrowers may have difficulty making payments. Such borrowers may have senior
securities rated as low as "C" by Moody's or "D" by Standard & Poor's. In the
event the borrower fails to pay scheduled interest or principal payments, the
Fund could experience a reduction in its income and might experience a decline
in the net asset value of its shares. In the event of a failure by the financial
institution to perform its obligation 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. The Manager has set certain
creditworthiness standards for issuers of loan participation and monitors their
creditworthiness. These same standards apply to participation interests in loans
to foreign companies.
o Warrants and Rights. The Fund may, to the limited extent described in
the Prospectus, invest in warrants and rights. Warrants basically are options to
purchase equity securities at specific prices valid for a specific period of
time. Their prices do not necessarily move parallel to the prices of the
underlying securities. Rights are similar to warrants but normally have a short
duration and are distributed directly by the issuer to its shareholders.
Warrants and rights have no voting rights,
receive no dividends and have no rights with respect to the assets
of the issuer.
o Asset-Backed Securities. These securities, issued by trusts and special
purpose entities, 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.
o Zero Coupon Corporate Securities. The Fund may invest in zero coupon
securities issued by corporations. Corporate zero coupon securities are: (i)
notes or debentures which do not pay current interest and are issued at
substantial discounts from par value, or (ii) notes or debentures that pay no
current interest until a stated date one or more years into the future, after
which the issuer is
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obligated to pay interest until maturity, usually at a higher rate than if
interest were payable from the date of issuance. Such corporate zero coupon
securities, in addition to the risks identified above under "U.S. Government
Securities - Zero Coupon Treasury Securities," are subject to the risk of the
issuer's failure to pay interest and repay principal in accordance with the
terms of the obligation.
o Mortgage-Backed Securities. Mortgage-backed securities may also be
issued by private issuers such as commercial banks, savings and loan
associations, mortgage insurance companies and other secondary market issuers
that create pass-through pools of conventional residential mortgage loans and on
commercial mortgage loans. They may be the originators of the underlying loans
as well as the guarantors of the mortgage-backed securities. There are no direct
or indirect government guarantees of payments on these pools. However, timely
payment of interest and principal of these pools is generally supported by
various forms of insurance or guarantees. The insurance and guarantees are
issued by government entities, private insurers and the mortgage poolers. The
insurance available, the guarantees, and the creditworthiness of the issuers
will be evaluated by the Manager to determine whether a particular
mortgage-backed security of this type meets the Fund's investment standards.
There can be no assurance that the private insurers can meet their obligations
under the policies. Securities issued by certain private poolers may not be
readily marketable, and would be treated as illiquid securities subject to the
Fund's limitations on investments in such securities.
o Temporary Defensive Investments. In times of unstable or
uncertain economic or
market conditions, when the Manager determines it appropriate to
do so, the Fund may assume a
temporary defensive position and invest an unlimited amount of its assets in
U.S. dollar-denominated debt obligations, issued by the U.S. or foreign
governments, domestic or foreign corporations or banks, maturing in one year or
less ("money market securities"). The Fund will purchase money market securities
to maintain liquidity deemed necessary by the Manager for investment purposes,
and to minimize the impact of fluctuating interest rates on the net asset value
of the Fund. To the extent the Fund is so invested, it is not invested to
achieve its investment objective of seeking a high level of current income.
Other Investment Techniques and Strategies
o Repurchase Agreements. The Fund may acquire securities
that are subject to repurchase
agreements, in order to generate income while providing liquidity.
In a repurchase transaction, the
Fund acquires a security from, and simultaneously resells it to, an approved
vendor (a U.S. commercial bank, U.S. branch of a foreign bank or a broker-dealer
which has been designated a primary dealer in government securities, which must
meet the credit requirements set by the Fund's Board of Trustees from time to
time), for delivery on an agreed upon future date. The sale 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 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 will
require that at all times while the repurchase agreement is in effect, the
collateral's value must equal or exceed the repurchase price to collateralize
the repayment obligation fully. Additionally, the Manager will
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impose creditworthiness requirements to confirm that the vendor is financially
sound and will continuously monitor the collateral's value. If the vendor of a
repurchase agreement fails to pay the agreed-upon resale price on the delivery
date, the Fund's risks in such event may include any costs of disposing of the
collateral, and any loss from any delay in foreclosing on the collateral.
o Illiquid and Restricted Securities. The Fund will not purchase or
otherwise acquire any security if, as a result, more than 10% of its net assets
(taken at current value) would be invested in securities that are illiquid by
virtue of the absence of a readily available market or because of legal or
contractual restrictions on resale ("restricted securities"). As noted in the
Prospectus, the Board may increase that limit to 15%. This policy applies to
participation interests, bank time deposits, master demand notes, repurchase
transactions having a maturity beyond seven days, over-the-counter options held
by the Fund and that portion of assets used to cover such options and certain
derivative instruments. This policy is not a fundamental policy and does not
limit purchases of restricted securities eligible for resale to qualified
institutional purchasers pursuant to Rule 144A under the Securities Act of 1933
that are determined to be liquid by the Board of Trustees or by the Manager
under Board-approved guidelines. Such guidelines take into account trading
activity for such securities and the availability of reliable pricing
information, among other factors. If there is a lack of trading interest in
particular Rule 144A securities, the Fund's holdings of those securities may be
illiquid. There may be undesirable delays in selling illiquid securities at
prices representing their fair value. The expenses of registration of restricted
securities that are subject to legal restrictions on resale (excluding
securities that may be resold by the Fund pursuant to Rule 144A, as explained in
the Prospectus) may be negotiated at the time such securities are purchased by
the Fund. When registration is required, a considerable period may elapse
between a decision to sell the securities and the time the Fund would be
permitted to sell them. Thus, the Fund might not be able to obtain as favorable
a price as that prevailing at the time of the decision to sell. The Fund also
may acquire, through private placements, securities having contractual resale
restrictions, which might lower the amount realizable upon the sale of such
securities. Illiquid securities include repurchase agreements maturing in more
than seven days, or certain participation interests other than those with puts
exercisable within seven days.
o Loans of Portfolio Securities. The Fund may lend its portfolio
securities (other than in repurchase transactions) to brokers, dealers and other
financial institutions meeting certain credit standards if the loan is
collateralized in accordance with applicable regulatory requirements, and if,
after any loan, the value of securities loaned does not exceed 25% of the value
of the Fund's total assets. Under applicable regulatory requirements (which are
subject to change), the loan collateral must, on each business day, at least
equal the market value of the loaned securities and must consist of cash, bank
letters of credit, U.S. Government securities, or other cash equivalents in
which the Fund is permitted to invest. To be acceptable as collateral, letters
of credit must obligate a bank to pay amounts demanded by the Fund if the demand
meets the terms of the letter. Such terms and the issuing bank must be
satisfactory to the Fund. In a portfolio securities lending transaction, the
Fund receives from the borrower an amount equal to the interest paid or the
dividends declared on the loaned securities during the term of the loan as well
as the interest on the collateral securities, less any finders' or
administrative or other fees the Fund pays in connection with the loan. The Fund
may share the interest it receives on the collateral securities with the
borrower as long as it realizes at least a minimum amount of interest required
by the lending guidelines
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established by its Board of Trustees. In connection with securities lending, the
Fund might experience risks of delay in receiving additional collateral, or
risks of delay in recovery of the securities, or loss of rights in the
collateral should the borrower fail financially. The Fund will not lend its
portfolio securities to any officer, trustee, employee or affiliate of the Fund
or its Manager. The terms of the Fund's loans must meet certain tests under the
Internal Revenue Code and permit the Fund to reacquire loaned securities on five
business days' notice or in time to vote on any important matter.
o Borrowing for Leverage. From time to time, the Fund may increase its
ownership of securities by borrowing from banks on a unsecured basis and
investing the borrowed funds, subject to the restrictions stated in the
Prospectus. Any such borrowing will be made only from banks, and pursuant to the
current requirements of the Investment Company Act, will be made only to the
extent that the value of the Fund's assets, less its liabilities other than
borrowings, is equal to at least 300% of all borrowings including the proposed
borrowing and amounts covering the Fund's obligations under "forward roll"
transactions. If the value of the Fund's assets so computed should fail to meet
the 300% asset coverage requirement, the Fund is required within three days to
reduce its bank debt to the extent necessary to meet such requirement and may
have to sell a portion of its investments at a time when independent investment
judgment would not dictate such sale. Borrowing for investment increases both
investment opportunity and risk. Since substantially all of the Fund's assets
fluctuate in value, but borrowing obligations are fixed, when the Fund has
outstanding borrowings, the net asset value per share of the Fund
correspondingly will tend to increase and decrease more when portfolio assets
fluctuate in value than otherwise would be the case.
o "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 or are to be
delivered at a later date. 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 (usually within two months
but generally not to exceed 120 days), 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 securities or other high grade debt obligations 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
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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 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.
Although the Fund may enter into such
transactions with the intention of actually receiving or delivering the
securities, 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.
o Floating Rate/Variable Rate Obligations. Some of the notes the Fund may
purchase may have variable or floating interest rates. Variable rates are
adjustable at stated periodic intervals; floating rates are automatically
adjusted according to a specified market rate for such investments, such as the
percentage of the prime rate of a bank, or the 91-day U.S. Treasury Bill rate.
Such obligations may be secured by bank letters of credit or other credit
support arrangements.
o Hedging with Options and Futures Contracts. As described in the
Prospectus, the Fund may employ one or more types of Hedging Instruments for
temporary defensive purposes. The Fund's strategy of hedging with Futures and
options on Futures will be incidental to the Fund's activities in the underlying
cash market. Puts may also be written on debt securities to attempt to increase
the Fund's income. For hedging purposes, the Fund may use Interest Rate Futures;
Financial Futures (together with Interest Rate Futures, "Futures"); Forward
Contracts (defined below); and call and put options on debt securities, Futures,
bond indices and foreign currencies (all of the foregoing are referred to as
"Hedging Instruments"). Hedging Instruments may be used to attempt to: (i)
protect against possible declines in the market value of the Fund's portfolio
resulting from downward trends in the debt securities markets (generally due to
a rise in interest rates), (ii) protect unrealized gains in the value of the
Fund's debt securities which have appreciated, (iii) facilitate selling debt
securities for investment reasons, (iv) establish a position in the debt
securities markets as a temporary substitute for purchasing particular debt
securities, or (v) reduce the risk of adverse currency fluctuations. A call or
put may be purchased only if, after such purchase, the net
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value of all call and put options owned by the Fund would not
exceed 5% of the Fund's total assets.
The Fund will not use Futures and options on Futures for
speculation. The Hedging Instruments the
Fund may use are described below.
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 Futures, (ii) purchase
puts on such Futures or securities, (iii) write calls on securities held by it
or on Futures or (iv) purchase call options on interest rate, currency or asset
spreads. When hedging to attempt to protect against the possibility that
portfolio securities are not fully included in a rise in value of the debt
securities market, the Fund may: (i) purchase Futures, or (ii) purchase calls on
such Futures or on securities. Covered calls and puts may also be written on
debt securities to attempt to increase the Fund's income. When hedging to
protect against declines in the dollar value of a foreign currency-denominated
security, the Fund may: (a) purchase puts on that foreign currency and on
foreign currency Futures, (b) write calls on that currency or on such Futures,
or (c) enter into Forward Contracts at a lower rate than the spot ("cash") rate.
The Fund may also purchase calls and puts on spread options.
Spread options pay the
difference between two interest rates, two exchange rates or two referenced
assets. Spread options are used to hedge the decline in the value of an interest
rate, currency or asset compared to a referenced or base interest rate, currency
or asset. The risks associated with spread options are similar to those for
individual interest rate options, foreign exchange options and debt or equity
options.
The Fund's strategy of hedging with Futures and options on Futures will be
incidental to the Fund's activities in the underlying cash market. Additional
Information about the Hedging Instruments the Fund may use is provided below.
The Fund may employ Hedging Instruments and strategies that are not presently
contemplated but which may be developed, to the extent such investment methods
are consistent with the Fund's investment objective, legally permissible and
adequately disclosed.
o Writing Call Options. The Fund may write (that is, sell) call options
("calls") on debt securities that are traded on U.S. and foreign securities
exchanges and over-the-counter markets, to enhance income through the receipt of
premiums from expired calls and any net profits from closing purchase
transactions. After any such sale up to 100% of the Fund's total assets may be
subject to calls. All such calls written by the Fund must be "covered" while the
call is outstanding. Calls on Futures (discussed below) must be covered by
deliverable securities or by liquid assets segregated to satisfy the Futures
contract. When the Fund writes a call on a security it receives a premium and
agrees to sell the callable investment to a purchaser of a corresponding call on
the same security during the call period at a fixed exercise price (which may
differ from the market price of the underlying security), regardless of market
price changes during the call period. The Fund has retained the risk of loss
should the price of the underlying security decline during the call period,
which may be offset to some extent by the premium.
To terminate its obligation on a call it has written, the
Fund may purchase a corresponding
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<PAGE>
call in a "closing purchase transaction." A profit or loss will be realized,
depending upon whether the net of the amount of the option transaction costs and
the premium received on the call written was more or less than the price of the
call subsequently purchased. A profit may also be realized if the call lapses
unexercised, because the Fund retains the underlying investment and the premium
received. Any such profits are considered short-term capital gains for Federal
income tax purposes, and when distributed by the Fund are taxable as ordinary
income. If the Fund could not effect a closing purchase transaction due to lack
of a market, it would have to hold the callable investments until the call
lapsed or was exercised.
The Fund may also write calls on Futures without owning a futures contract
or a deliverable bond, provided that at the time the call is written, the Fund
covers the call by segregating in escrow an equivalent dollar amount of liquid
assets. The Fund will segregate additional liquid assets if the value of the
escrowed assets drops below 100% of the current value of the Future. In no
circumstances would an exercise notice require the Fund to deliver a futures
contract; it would simply put the Fund in a short futures position, which is
permitted by the Fund's hedging policies.
o Writing Put Options. The Fund may write put options on
debt securities or Futures but
only if such puts are covered by segregated liquid assets. The
Fund will not write puts if, as a result,
more than 50% of the Fund's net assets would be required to be segregated to
cover such put obligations. In writing puts, there is the risk that the Fund may
be required to buy the underlying security at a disadvantageous price. A put
option on securities gives the purchaser the right to sell, and the writer the
obligation to buy, the underlying investment at the exercise price during the
option period. Writing a put covered by segregated liquid assets equal to the
exercise price of the put has the same economic effect to the Fund as writing a
covered call. The premium the Fund receives from writing a put option represents
a profit, as long as the price of the underlying investment remains above the
exercise price. However, the Fund has also assumed the obligation during the
option period to buy the underlying investment from the buyer of the put at the
exercise price, even though the value of the investment may fall below the
exercise price. If the put lapses unexercised, the Fund (as the writer of the
put) realizes a gain in the amount of the premium. If the put is exercised, the
Fund must fulfill its obligation to purchase the underlying investment at the
exercise price, which will usually exceed the market value of the investment at
that time. In that case, the Fund may incur a loss, equal to the sum of the
current market value of the underlying investment and the premium received minus
the sum of the exercise price and any transaction costs incurred.
When writing put options on securities, to secure its obligation to pay
for the underlying security, the Fund will deposit in escrow liquid assets with
a value equal to or greater than the exercise price of the put option. The Fund
therefore 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 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
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not allowed to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a profit on
an outstanding put option it has written or to prevent an underlying security
from being put. Furthermore, effecting such a closing purchase transaction will
permit the Fund to write another put option to the extent that the exercise
price thereof is secured by the deposited assets, or to utilize the proceeds
from the sale of such assets for other investments by the Fund. The Fund will
realize a profit or loss from a closing purchase transaction if the cost of the
transaction is less or more than the premium received from writing the option.
As above for writing covered calls, any and all such profits described herein
from writing puts are considered short-term gains for Federal tax purposes, and
when distributed by the Fund, are taxable as ordinary income.
o Purchasing Calls and Puts. The Fund may purchase calls on debt
securities, spreads, or on Futures that are traded on U.S. and foreign
securities exchanges and the U.S. over-the-counter markets, in order to protect
against the possibility that the Fund's portfolio will not fully participate in
an anticipated rise in value of the long-term debt securities market. The value
of debt securities underlying calls purchased by the Fund will not exceed the
value of the portion of the Fund's portfolio invested in cash or cash
equivalents (i.e. securities with maturities of less than one year). When the
Fund purchases a call (other than in a closing purchase transaction), it pays a
premium and, except as to calls on indices, spreads or Futures, has the right to
buy the underlying investment from a seller of a corresponding call on the same
investment during the call period at a fixed exercise price. When the Fund
purchases a call on an index, spread or Future, it pays a premium, but
settlement is in cash rather than by delivery of the underlying investment to
the Fund. In purchasing a call, the Fund benefits only if the call is sold at a
profit or if, during the call period, the market price of the underlying
investment is above the sum of the call price plus the transaction costs and the
premium paid and the call is exercised. If the call is not exercised or sold
(whether or not at a profit), it will become worthless at its expiration date
and the Fund will lose its premium payment and the right to purchase the
underlying investment.
The Fund may purchase put options ("puts") which relate to debt securities
(whether or not it holds such securities in its portfolio), spreads or Futures.
When the Fund purchases a put, it pays
a premium and, except as to puts on indices or spreads, has the right to sell
the underlying investment to a seller of a corresponding put on the same
investment during the put period at a fixed exercise price. Buying a put on an
investment the Fund owns enables the Fund to protect itself during the put
period against a decline in the value of the underlying investment below the
exercise price by selling such underlying investment at the exercise price to a
seller of a corresponding put. If the market price of the underlying investment
is equal to or above the exercise price and as a result the put is not exercised
or resold, the put will become worthless at its expiration date, and the Fund
will lose its premium payment and the right to sell the underlying investment.
The put may, however, be sold prior to expiration (whether or not at a profit.)
Buying a put on an investment it does not own, either a put on an index or
a put on a Future not held by the Fund, permits the Fund either to resell the
put or buy the underlying investment and sell it at the exercise price. The
resale price of the put will vary inversely with the price of the underlying
investment. If the market price of the underlying investment is above the
exercise price
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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 the stock market, 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 an index, or
on a Future not held by it, the put protects the Fund to the extent that the
index moves in a similar pattern to the securities held. In the case of a put on
an index or Future, settlement is in cash rather than by delivery by the Fund of
the underlying investment.
Puts and calls on broadly-based indices or Futures are similar to puts and
calls on securities except that all settlements are in cash and gain or loss
depends on changes in the index in question (and thus on price movements in the
stock market generally) rather than on price movements in individual securities
or futures contracts. When the Fund buys a call on an index or 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 index and
the exercise price of the call times a specified multiple (the "multiplier")
which determines the total dollar value for each point of difference. When the
Fund buys a put on an index or Future, it pays a premium and has the right
during the put period to require a seller of a corresponding put, upon the
Fund's exercise of its put, to deliver to the Fund an amount of cash to settle
the put if the closing level of the index or Future upon which the put is based
is less than the exercise price of the put. That cash payment is determined by
the multiplier, in the same manner as described above as to calls.
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 by the Fund of puts on securities will cause the sale of related
investments, increasing portfolio turnover. Although such exercise is within the
Fund's control, holding a put might cause the Fund to sell the related
investments for reasons which would not exist in the absence of the put. The
Fund will pay a brokerage commission each time it buys a put or call, sells a
call, or buys or sells an underlying investment in connection with the exercise
of a put or call. Such commissions may be higher than those which would apply to
direct purchases or sales of such underlying investments. Premiums paid for
options are small in relation to the market value of the related investments,
and consequently, put and call options offer large amounts of leverage. The
leverage offered by trading in options could result in the Fund's net asset
value being more sensitive to changes in the value of the underlying
investments.
o Options on Foreign Currencies. The Fund intends to write and purchase
calls on foreign currencies. The Fund may purchase and write puts and calls on
foreign currencies that are traded on a securities or commodities exchange or
quoted by major recognized dealers in such options, for the purpose of
protecting against declines in the dollar value of foreign securities and
against increases in the dollar cost of foreign securities to be acquired.
If a rise is anticipated in the dollar
value of a foreign currency in which securities to be acquired are denominated,
the increased cost of such securities may be partially offset by purchasing
calls or writing puts on that foreign currency. If a decline in the dollar value
of a foreign currency is anticipated, the decline in value of portfolio
securities denominated in that currency may be partially offset by writing calls
or purchasing puts
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<PAGE>
on that foreign currency. However, in the event of currency rate fluctuations
adverse to the Fund's position, it would lose the premium it paid and
transactions costs. 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 may be written by the Fund on a foreign currency
to provide a hedge against a decline due to an expected adverse change in the
exchange rate in the U.S. dollar value of a security which the Fund owns or has
the right to acquire and which is denominated in a currency other than that of
underlying the option. This is a cross-hedging strategy. In such circumstances,
the Fund collateralizes the option by maintaining in a segregated account with
the Fund's custodian, liquid assets in an amount not less than the value of the
underlying foreign currency in U.S. dollars marked-to-market daily.
o Futures. The Fund may buy and sell Futures. No price is
paid or received upon the
purchase or sale of an Interest Rate Future or a foreign currency
exchange contract ("Forward
Contract"), discussed below. An Interest Rate Future obligates
the seller to deliver and the purchaser
to take a specific type of debt security at a specific future date for a fixed
price. That obligation may be satisfied by actual delivery of the debt security
or by entering into an offsetting contract. A securities index assigns relative
values to the securities included in that index and is used as a basis for
trading long-term Financial Futures contracts. Financial Futures reflect the
price movements of securities included in the index. They differ from Interest
Rate Futures in that settlement is made in cash rather than by delivery of the
underlying investment.
Upon entering into a Futures transaction, the Fund will be required to
deposit an initial margin payment in cash or U.S. Treasury bills with the
futures commission merchant (the "futures broker"). The initial margin will be
deposited with the Fund's Custodian in an account registered in the futures
broker's name; however the futures broker can gain access to that account only
under specified conditions. As the Future is marked to market to reflect changes
in its market value, subsequent margin payments, called variation margin, will
be made 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
for tax purposes. 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 above with regard to Interest Rate Futures.
o 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
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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.
The Fund may also enter into a forward contract to sell a foreign currency
denominated in a currency other than that in which the underlying security is
denominated. This is done in the expectation that there is a greater correlation
between the foreign currency of the forward contract and the foreign currency of
the underlying investment than between the U.S. dollar and the foreign currency
of the underlying investment, or as a tactical allocation to take advantage of
differences in foreign interest rates. This technique is referred to as "cross
hedging." Cross hedges 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.
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 and between foreign currencies and other
base currencies closely correlated with the U.S. dollar. To the extent that
these correlations are 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 will 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
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<PAGE>
a foreign currency, or when the Fund anticipates receipt of dividend payments in
a foreign currency, the Fund may desire to "lock-in" the U.S. dollar price of
the security or the U.S. dollar equivalent of such payment by entering into a
Forward Contract, for a fixed amount of U.S. dollars per unit of foreign
currency, for the purchase or sale of the amount of foreign currency involved in
the underlying transaction ("transaction hedge"). The Fund will thereby be able
to protect itself against a possible loss resulting from an adverse change in
the relationship between the currency exchange rates during the period between
the date on which the security is purchased or sold, or on which the payment is
declared, and the date on which such payments are made or received.
The Fund may also use Forward Contracts to lock in the U.S. dollar value
of portfolio positions ("position hedge"). In a position hedge, for example,
when the Fund believes that foreign currency may suffer a substantial decline
against the U.S. dollar, it may enter into a forward sale contract to sell an
amount of that foreign currency approximating the value of some or all of the
Fund's portfolio securities denominated in such foreign currency, or when the
Fund believes that the U.S. dollar may suffer a substantial decline against a
foreign currency, it may enter into a forward purchase contract to buy that
foreign currency for a fixed dollar amount. In this situation the Fund may, in
the alternative, enter into a forward contract to sell a different foreign
currency for a fixed U.S. dollar amount where the Fund believes that the U.S.
dollar value of the currency to be sold pursuant to the forward contract will
fall whenever there is a decline in the U.S. dollar value of the currency in
which portfolio securities of the Fund are denominated ("cross hedge").
The Fund's Custodian will place liquid assets in a separate account of the
Fund with the Custodian having a value equal to the aggregate amount of the
Fund's commitments under forward contracts entered into with respect to position
hedges and cross hedges. If the value of the assets 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 obligations 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
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<PAGE>
hedging strategy is highly uncertain. Forward Contracts involve the risk that
anticipated currency movements will not be accurately predicted, causing the
Fund to sustain losses on these contracts and transactions costs.
At or before the maturity of a Forward Contract requiring the Fund to sell
a currency, the Fund may either sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund may
close out a Forward Contract requiring it to purchase a specified currency by
entering into a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would realize a
gain or loss as a result of entering into such an offsetting Forward Contract
under either circumstance to the extent the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies with factors
such as the currencies involved, the length of the contract period and the
market conditions then prevailing. Because Forward Contracts are usually entered
into on a principal basis, no fees or commissions are involved. Because such
contracts are not traded on an exchange, the Fund must evaluate the credit and
performance risk of each particular counterparty under a Forward Contract.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund may convert foreign currency from time to time, and
investors should be aware of the costs of currency conversion. Foreign exchange
dealers do not charge a fee for conversion, but they do seek to realize a profit
based on the difference between the prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.
o Interest Rate Swap Transactions. Swap agreements entail both interest
rate risk and credit risk. There is a risk that, based on movements of interest
rates in the future, the payments made by the Fund under a swap agreement will
have been greater than those received by it. Credit risk arises from the
possibility that the counterparty will default. If the counterparty to an
interest rate swap defaults, the Fund's loss will consist of the net amount of
contractual interest payments that the Fund has not yet received. The Manager
will monitor the creditworthiness of counterparties to the Fund's interest rate
swap transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements. A master netting agreement provides that all swaps done between the
Fund and that counterparty under that 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
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<PAGE>
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".
o 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 investments 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.
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. That formula price would generally be based on a
multiple of the premium received for the option, plus the amount by which the
option is exercisable below the market price of the underlying security (that
is, the extent to which the option is "in-the-money"). When the Fund writes an
OTC option, it will treat as illiquid (for purposes of the limit on its assets
that may be invested in illiquid securities, stated in the Prospectus) the
mark-to-market value of any OTC option held by it unless the option is subject
to a buy-back agreement by the executing broker. The Securities and Exchange
Commission ("SEC") is evaluating whether OTC options should be considered liquid
securities, and the procedure described above could be affected by the outcome
of that evaluation.
o 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 on Futures established by the Commodity Futures Trading
Commission ("CFTC"). In particular, the Fund is exempted from registration with
the CFTC as a "commodity pool operator" if the Fund complies with the
requirements of the Rule 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
options premiums for a bona fide hedging position. However, under the Rule the
Fund must limit its aggregate initial Futures margin and related options
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.
Under the Rule the Fund also must
use short futures and options on futures solely for bona fide hedging purposes
within the meaning and intent of the applicable provisions of the Commodity
Exchange Act.
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
exchanges or brokers. Thus, the number of options which the Fund may write or
hold may be affected by options written or held by other entities, including
other investment companies having the same or 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
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<PAGE>
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 bank, 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.
o Tax Aspects of Covered Calls and Hedging Instruments.
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
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<PAGE>
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.
o Possible Risk Factors in Hedging. In addition to the risks with respect
to options discussed in the Prospectus and above, there is a risk in using short
hedging by selling Futures to attempt to protect against decline in value of the
Fund's portfolio securities (due to an increase in interest rates) that the
prices of such Futures will correlate imperfectly with the behavior of the cash
(i.e., market value) prices of the Fund's securities. The ordinary spreads
between prices in the cash and futures markets are subject to distortions due to
differences in the natures of those markets. First, all participants in the
futures 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 depend on participants entering into offsetting
transactions rather than making or taking delivery. To the extent participants
decide to make or take delivery, liquidity in the futures markets could be
reduced, thus producing distortion. Third, from the point of view of
speculators, the deposit requirements in the futures markets are less onerous
than margin requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause temporary price
distortions.
If the Fund uses Hedging Instruments to establish a position in the debt
securities markets as a temporary substitute for the purchase of individual debt
securities (long hedging) by buying Futures and/or calls on such Futures or on
debt securities, it is possible that the market may decline; if the Fund then
concludes not to invest in such securities at that time because of concerns as
to possible further market decline or for other reasons, the Fund will realize a
loss on the Hedging Instruments that is not offset by a reduction in the price
of the debt securities purchased.
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 fundamental policies of the Fund. Fundamental policies and the
Fund's investment objective cannot be changed without the vote of a "majority"
of the Fund's outstanding voting securities.
Under the Investment Company Act,
such a "majority" vote is defined as the vote of the holders of the lesser of
(i) 67% or more of the shares present or represented by proxy at a shareholders'
meeting, if the holders of more than 50% of the outstanding shares are present
or represented by a proxy, or (ii) more than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot do any of the
following:
o The Fund cannot buy or sell real estate, or commodities or commodity
contracts; however, 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, and the
Fund may buy and sell Hedging Instruments;
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<PAGE>
o The Fund cannot buy securities on margin, except that the Fund may make
margin deposits in connection with any of the Hedging Instruments which it may
use;
o The Fund cannot underwrite securities issued by other persons except to
the extent that, in connection with the disposition of its portfolio
investments, it may be deemed to be an underwriter for purposes of the
Securities Act of 1933;
o The Fund cannot buy and retain securities of any issuer if those
officers, Trustees or Directors of the Fund or the Manager who beneficially own
more than 0.5% of the securities of such issuer together own more than 5% of the
securities of such issuer;
o The Fund cannot invest in oil, gas, or other mineral
exploration or development programs;
o The Fund cannot buy the securities of any company for the
purpose of exercising
management control;
o The Fund cannot make loans, except by purchasing debt obligations in
accordance with its investment objectives and policies, or by entering into
repurchase agreements, or as described in "Loans of Portfolio Securities";
o The Fund cannot buy securities of an issuer which, together with any
predecessor, has been in operation for less than three years, if as a result,
the aggregate of such investments would exceed 5% of the value of the Fund's
total assets; or
o The Fund cannot make short sales of securities or maintain a short
position .
For purposes of the Fund's policy not to concentrate as described in the
Prospectus, the Fund has adopted the corporate industry classifications set
forth in Appendix A to this Statement of Additional Information. This is not a
fundamental policy.
How the Fund Is Managed
Organization and History. As a series of a Massachusetts business trust, the
Fund is not required to hold, and does not plan to hold, regular annual meetings
of shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder meeting is
called by the Trustees or upon proper request of the shareholders. Shareholders
have the right, upon the declaration in writing or vote of two-thirds of the
outstanding shares of the Fund, to remove a Trustee. The Trustees will call a
meeting of shareholders to vote on the removal of a Trustee upon the written
request of the record holders of 10% of its outstanding shares. In addition, if
the Trustees receive a request from at least 10 shareholders (who have been
shareholders for at least six months) holding shares of the Fund valued at
$25,000 or more or holding
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<PAGE>
at least 1% of the Fund's outstanding shares, whichever is less, stating that
they wish to communicate with other shareholders to request a meeting to remove
a Trustee, the Trustees will then either make the Fund's shareholder list
available to the applicants or mail their communication to all other
shareholders at the applicants' expense, or the Trustees may take such other
action as set forth under Section 16(c) of the Investment Company Act.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides for
indemnification and reimbursement of expenses out of its property for any
shareholder held personally liable for its obligations. The Declaration of Trust
also provides that the Fund shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Fund and satisfy
any judgment thereon. Thus, while Massachusetts law permits a shareholder of a
business trust (such as the Fund) to be held personally liable as a "partner"
under certain circumstances, the risk of a Fund shareholder incurring financial
loss on account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any shareholder
of the Trust, agrees under the Trust's Declaration of Trust to look solely to
the assets of the Trust for satisfaction of any claim or demand which may arise
out of any dealings with the Trust, and the Trustees shall have no personal
liability to any such person, to the extent permitted by law.
Trustees and Officers of the Fund. The Fund's Trustees and officers and their
principal occupations and business affiliations and occupations during the past
five years are listed below. All of the Trustees and (Ms. Macaskill) are also
trustees, directors or managing general partners of Oppenheimer Total Return
Fund, Inc., Oppenheimer Real Asset Fund, Oppenheimer Equity Income Fund,
Oppenheimer High Yield Fund, Oppenheimer Cash Reserves, Oppenheimer Municipal
Fund, Oppenheimer Limited-Term Government Fund, The New York Tax-Exempt Income
Fund, Inc., Centennial America Fund, L.P., Oppenheimer Champion Income Fund,
Oppenheimer Main Street Funds, Inc., Oppenheimer International Bond Fund,
Oppenheimer Variable Account Funds, and Oppenheimer Integrity Funds; as well as
the following "Centennial Funds": Daily Cash Accumulation Fund, Inc., Centennial
Money Market Trust, Centennial Government Trust, Centennial New York Tax Exempt
Trust, Centennial Tax Exempt Trust, Centennial California Tax Exempt Trust and
Panorama Series Fund, Inc., (all of the foregoing funds are collectively
referred to as the "Denver-based Oppenheimer funds") except for Ms. Macaskill,
who is a Trustee, Director or Managing General Partner of all the Denver-based
Oppenheimer funds except Oppenheimer Integrity Funds, Oppenheimer Strategic
Income Fund, Panorama Series Fund, Inc. and Oppenheimer Variable Account Funds
and except for Mr. Fossel who is not a trustee of Centennial New York Tax-Exempt
Trust or a Managing General Partner of Centennial America Fund, L.P. All of the
Fund's officers except Messrs. Steinmetz and Negri are officers of the
Denver-based Oppenheimer funds. Ms. Macaskill is President and Mr. Swain is
Chairman and Chief Executive Officer of the Denver-based Oppenheimer funds. As
of December 31, 1997, the Trustees and officers of the Fund as a group owned
less than 1% of each class of shares of the Fund. 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 officers of the Fund, Bridget A.
Macaskill and Andrew J. Donohue, are trustees), other than the shares
beneficially owned under that plan by officers of the
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<PAGE>
Fund listed above.
Robert G. Avis, Trustee;* Age 66
One North Jefferson Ave., 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 82
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Trustee; Age 67
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
the National Aeronautics and Space Administration.
- ------------------------
* A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Jon S. Fossel, Trustee; Age 55
P.O. 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 the Manager,
President and a director of Oppenheimer Acquisition Corp. ("OAC"), the Manager's
parent holding company, and Shareholder Services, Inc. ("SSI") and Shareholder
Financial Services, Inc. ("SFSI"), transfer agent subsidiaries of the Manager.
Sam Freedman, Trustee; Age 57
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly Chairman and Chief Executive Officer of OppenheimerFunds Services,
Chairman, Chief Executive Officer and a director of SSI, Chairman, Chief
Executive and Officer director of SFSI, Vice President and director of OAC and a
director of OppenheimerFunds, Inc.
Raymond J. Kalinowski, Trustee; Age 68
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 76
2552 East Alameda, Denver, Colorado 80209
Formerly the Managing Partner of Deloitte, Haskins & Sells (an accounting firm).
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<PAGE>
Robert M. Kirchner, Trustee; Age 76
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Ned M. Steel, Trustee; Age 82
3416 S. Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; Director of Visiting
Nurse Corporation of Colorado
.
James C. Swain, Chairman, Chief Executive Officer and Trustee;* Age 64 6803
South Tucson Way, Englewood, Colorado 80012 Vice Chairman of the Manager;
formerly President and a Director of Centennial Asset Management Corporation, an
investment advisor subsidiary of the Manager ("Centennial"); a director of the
Manager and Chairman of the Board of SSI.
Bridget A. Macaskill, President; Age 49
President, Chief Executive Officer and a Director of the Manager
;
President and director of HarbourView Asset Management("HarbourView"); Chairman
and a director of SSI, and SFSI; President and a director of OAC; President and
a director of Oppenheimer Partnership Holdings, Inc., a holding company
subsidiary of the Manager; a director of Oppenheimer Real Asset Management,
Inc.; a director of the NASDAQ Stock Market, Inc. and of Hillsdown Holdings plc,
(a U.K. food company); formerly an Executive Vice President of the Manager.
Andrew J. Donohue, Vice President and Secretary; Age 48
Executive Vice President
,
General Counsel and a Director of the Manager; Executive Vice
President, and a director of the
Distributor; Executive Vice President, General Counsel and a director of
HarbourView, SSI, SFSI and Oppenheimer Partnership Holdings, Inc.; President and
a director of Centennial; President and a director of Oppenheimer Real Asset
Management, Inc.; General Counsel and Secretary of OAC; an officer of other
Oppenheimer funds
-29-
<PAGE>
.
George C. Bowen, Treasurer; Vice President,
Assistant Secretary and
Treasurer; Age 61
6803 Tucson Way, Englewood, Colorado 80112 Senior Vice President and Treasurer
of the Manager; Vice President and Treasurer of the Distributor ; Vice President
and Treasurer of HarbourView; Senior Vice President, Treasurer and a director of
Centennial; President, Treasurer and a director of Centennial Capital
Corporation; Vice President and Treasurer and Secretary of SSI; Vice President,
Treasurer and Secretary of SFSI; Treasurer of OAC; Treasurer of Oppenheimer
Partnership Holdings, Inc.; Vice President and Treasurer of Oppenheimer Real
Asset Management, Inc. ; an officer of other Oppenheimer funds.
Arthur P. Steinmetz, Vice President and Portfolio Manager; Age 39 Two World
Trade Center, New York, New York 10048-0203 Senior Vice President of the
Manager; an officer of other Oppenheimer funds.
David P. Negri, Vice President and Portfolio Manager; Age 43
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager; an officer of other Oppenheimer
funds.
Robert G. Zack, Assistant Secretary; Age 49 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 39
6803 South Tucson Way, Englewood, Colorado 80012
Vice President of the Manager/Mutual Fund Accounting; an officer of other
Oppenheimer funds; formerly an Assistant Vice President of the Manager/Mutual
Fund Accounting and a Fund Controller of the Manager .
Scott Farrar, Assistant Treasurer; Age 32
6803 South Tucson Way, Englewood, Colorado 80012
Vice President of the Manager/Mutual Fund Accounting, an officer of other
Oppenheimer funds; formerly an Assistant Vice President of the Manager/Mutual
Fund Accounting and a Fund Controller for the Manager.
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<PAGE>
o Remuneration of Trustees. The officers of the Trust and
certain Trustees of the Fund
are affiliated with the Manager (Mr. Swain, who is both an officer
and a Trustee) receive no salary
or fee from the Fund. Mr. Fossel did not receive any salary or
fees from the Fund prior to July 1,
1997. The remaining Trustees of the Fund received the compensation shown below.
The compensation from the Fund was paid during its fiscal year ended September
30, 1997. Compensation from all of the Denver-based Oppenheimer funds includes
the Fund and compensation is received as a Trustee, Director, Managing General
Partner or member of a committee of the Board of those funds during the calendar
year 1996 1997. Compensation is paid for services in the positions listed
beneath their names:
Total Compensation
Aggregate From All
Compensation Denver-based
Name and Position from Fund Oppenheimer funds1
Robert G. Avis
Trustee
William A. Baker
Audit and Review
Committee Chairman,
Ex Offico Member2
and Trustee
Charles Conrad, Jr.
Trustee3
Jon S. Fossel
Trustee
Sam Freedman
Audit and Review
Committee Chairman2
and Trustee
Raymond J. Kalinowski
Audit and Review Committee
Member2 and Trustee
Total Compensation
Aggregate From All
Compensation Denver-based
Name and Position from Fund Oppenheimer funds1
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<PAGE>
C. Howard Kast
Audit and Review Committee
Member2 and Trustee3
Robert M. Kirchner
Trustee3
Ned M. Steel
Trustee
- ----------------------
1 For the 1997 calendar year. 2 Committee positions effective July 1, 1997.
3 Prior to July 1, 1997, Messrs. Conrad and Kirchner were also
members of the Audit and Review
Committee.
Deferred Compensation Plan. The Board of Trustees has adopted a
Deferred Compensation plan
for disinterested trustees that enables them to elect to defer
receipt of all or a portion of the annual
fees they are entitled to receive from the Fund. Under the plan, the
compensation deferred by a Trustee is periodically adjusted as though an
equivalent amount had been invested in shares of one or more Oppenheimer funds
selected by the Trustee. The amount paid to the Trustee under the plan will be
determined based upon the performance of the selected funds. Deferral of
Trustees' fees under the plan will not materially affect the Fund's assets,
liabilities and net income per share. The plan will not obligate the Fund to
retain the services of any Trustee or to pay any particular level of
compensation to any Trustee. Pursuant to an Order issued by the Securities and
Exchange Commission, the Fund may invest in the funds selected by the Trustee
under the plan for the limited purpose of determining the value of the Trustee's
deferred fee account.
Major Shareholders. As of December 31, 1997, no person owned of record or was
known by the Fund to own beneficially 5% or more of the Fund's outstanding Class
A, Class B or Class C shares except: ______________________ . As of the date of
this Statement of
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<PAGE>
Additional Information, the Manager was the sole record and beneficial holder of
Class Y shares.
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition
Corp. ("OAC"), a holding company controlled by Massachusetts
Mutual Life Insurance Company.
OAC is also owned in part by certain of the Manager's directors and officers,
some of whom also serve as officers of the Fund, and one of whom (Mr. Swain)
serves as Trustee 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.
o Portfolio Management. The Portfolio Managers of the
Fund are David Negri and
Arthur Steinmetz, who are principally responsible for the
day-to-day management of the Fund's
portfolio. Mr. Negri's and Mr. Steinmetz's backgrounds are
described in the Prospectus under
"Portfolio Managers."
o The Investment Advisory Agreement. A management fee is
payable monthly to the
Manager under the terms of the investment advisory agreement
between the Manager and the Fund,
and is computed on the aggregate net assets of the Fund as of the close of
business each day. The investment advisory agreement requires the Manager, at
its expense, to provide the Fund with adequate office space, facilities and
equipment, and to provide and supervise the activities of all administrative and
clerical personnel required to provide effective administration for the Fund,
including the compilation and maintenance of records with respect to its
operations, the preparation and filing of specified reports, and composition of
proxy materials and registration statements for continuous public sale of shares
of the Fund.
Expenses not expressly assumed by the Manager under the advisory agreement
or by the Distributor are paid by the Fund. The advisory agreement lists
examples of expenses paid by the Fund, the major categories of which relate to
interest, taxes, brokerage commissions, fees to unaffiliated trustees, legal,
bookkeeping and audit expenses, custodian and transfer agent expenses, share
issuance costs, certain printing and registration costs and non-recurring
expenses, including litigation. During the Fund's fiscal years ended September
30, 1995 , 1996 and 1997, the management fees paid by the Fund to the Manager
were $25,850,869 , $30,343,674 and $___________, respectively.
The Investment Advisory Agreement contains no expense limitation. However,
because of state regulations limiting 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.
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<PAGE>
The advisory agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties, or
reckless disregard of its obligations and duties under the advisory agreement,
the Manager is not liable for any loss sustained by reason of good faith errors
or omissions in connection with any matters to which the Agreement relates. The
advisory 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 or general distributor. If the Manager or one of its affiliates 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.
o 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 , Class C shares and Class Y
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), 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, 1995 , 1996
and 1997, the aggregate amount of sales charges on sales of the Fund's Class A
shares was $16,024,553 , $17,340,997 and $_________, respectively, of which the
Distributor and an affiliated broker-dealer retained in the aggregate $4,566,642
, $5,066,780 and $_________ in those respective years. During the Fund's fiscal
years ended September 30, 1995 , 1996 and 1997, the contingent deferred sales
charges collected on the Fund's Class B shares totalled $5,144,993 , $5,337,650
and $__________, respectively, all of which the Distributor retained. During the
Fund's fiscal period May 26, 1995 through September 30, 1995 and the fiscal
years ended September 30, 1996 and 1997, the contingent deferred sales charges
collected on the Fund's Class C shares totalled $5,409 , $81,871 and $_______,
all of which the Distributor retained. For additional information about
distribution of the Fund's shares and the expenses connected with such
activities, please refer to "Distribution and Service Plans," below.
o The Transfer Agent. OppenheimerFunds Services, as
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 of 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 or base its selection on "posted" rates, but is
expected to be aware
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<PAGE>
of the current rates of eligible brokers and to minimize the commissions paid to
the extent consistent with the provisions of the advisory agreement and the
interests and policies of the Fund as established by its Board of Trustees.
Under the Investment Advisory Agreement, the Manager is authorized to
select brokers which provide brokerage and/or research services for the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher than
another qualified broker would have charged, if a good faith determination is
made by the Manager that the commission is fair and reasonable in relation to
the services provided. Subject to the foregoing considerations, the Manager may
also consider sales of the 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. Most purchases made by the Fund are
principal transactions at net prices, and the Fund incurs little or no brokerage
costs.
Description of Brokerage Practices Followed by the Manager. Subject to the
provisions of the advisory agreement, the procedures and rules described above,
allocations of brokerage are made by portfolio managers of the Manager under the
supervision of the Manager's executive officers. Transactions in securities
other than those for which an exchange is the primary market are generally done
with principals or market makers. Brokerage commissions are paid primarily for
effecting transactions in listed securities or for certain fixed-income agency
transactions in the secondary market, and otherwise only if it appears likely
that a better price or execution can be obtained. When the Fund engages in an
option transaction, ordinarily the same broker will be used for the purchase or
sale of the option and any transactions in the securities to which the option
relates. Where 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. Option commissions may be relatively
higher than those which would apply to direct purchases and sales of portfolio
securities.
Most purchases of money market instruments and debt obligations are
principal transactions at net prices. For those transactions, instead of using a
broker the Fund normally deals directly with the selling or purchasing principal
or market maker unless it is determined that a better price or execution can be
obtained by using a broker. Purchases of these securities from underwriters
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers include a spread between the bid and asked price. The
Fund seeks to obtain prompt execution of such orders at the most favorable net
price.
The research services provided by a particular broker may be useful only
to one or more of the advisory accounts of the Manager and its affiliates, and
investment research for the commissions of these other accounts may be useful
both to the Fund and one or more of such other accounts. Such research, which
may be supplied by a third party at the instance of a broker, includes
information and analyses on particular companies and industries as well as
market or economic trends and portfolio strategy, receipt of market quotations
for portfolio evaluations, information systems, computer hardware and similar
products and services. If a research service also assists the Manager in a
non-research capacity (such as bookkeeping or other administrative functions),
then
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<PAGE>
only the percentage or component that provides assistance to the Manager in the
investment decision-making process may be paid for in commission dollars. The
Board has also permitted the Manager to use concessions on fixed-price offerings
to obtain research, in the same manner permitted for agency transactions. The
Board has also permitted the Manager to use stated commissions on secondary
fixed-income agency trades to obtain research where the broker has represented
to Manager that: (i) the trade is not from or for the broker's own inventory,
(ii) the trade was executed by the broker of 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 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 as to the
commissions paid to brokers furnishing such services together with the Manager's
representations that the amount of such commissions was reasonably related to
the value or benefit of such services.
During the Fund's fiscal years ended September 30, 1995 , 1996 and 1997,
total brokerage commissions paid by the Fund (not including spreads or
concessions on principal transactions on a net trade basis) were $1,029,940,
$594,459 and $______, respectively. Of those amounts, $____, $_________and
$________, respectively, were paid during those same periods to brokers as
commissions in return for research services .
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 each class of Fund shares
may be advertised. An explanation of how yields and total returns are calculated
for each class and the components of those calculations is set forth below. No
performance information is presented below for Class Y shares because no Class Y
shares were publicly offered during the fiscal year ended September 30, 1997.
The Fund's advertisement of its performance must, under applicable SEC
rules, include the average annual total returns for each advertised class of
shares of the Fund for the 1, 5 and 10-year period (or the life of the class, if
less) as of the most recently ended calendar quarter. 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 yield and total return 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. Yield and total return for
any given past period are not a prediction or representation by the Fund of
future yields or rates of return
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<PAGE>
on its shares. The yield and total returns of the Class A, Class B , Class C and
Class Y shares of the Fund are affected by portfolio quality, portfolio
maturity, the type of investments the Fund holds and expenses allocated to the
particular class.
o Yields.
o Standardized Yield. The Fund's standardized "yield"
(referred to as "yield") is
shown
for a class of shares for a stated 30-day period. It 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 for that period. It may therefore differ from the
"dividend yield" for the same class for the same class of shares, described
below. It 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 designed to assure uniformity in the way that all funds calculate their
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 the class on the last
day of the period, adjusted for undistributed net investment
income.
The standardized yield for a 30-day period may differ from the yield for
other periods. The SEC formula assumes that the standardized yield for a 3-day
period occurs at a constant rate for a six-month period and is annualized at the
end of the six-month period. 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 any 30-day period. For the 31-day
period ended September 30, 1997, the standardized yields for the Fund's classes
were as follows:
Without Deducting Sales Charge
With Sales Charge Deducted
Class A: % %
Class B: % N/A
Class C: % N/A
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<PAGE>
o Dividend Yield. The Fund may quote a "dividend yield" for each class of
its shares. Dividend yield is based on the dividends paid on shares of a class
during the actual dividend period. To calculate dividend yield, the dividends of
a class declared during a stated period are added together and the sum is
multiplied by 12 (to annualize the yield) and divided by the maximum offering
price on the last day of the dividend period. The formula is shown below:
Dividend yield = dividends paid x 12/maximum offering price
(payment date)
The maximum offering price for Class A shares includes the current maximum
initial sales charge. The maximum offering price for Class B and Class C shares
is the net asset value per share, without considering the effect of contingent
deferred sales charges. The Class A dividend yield may also be quoted without
deducting the maximum initial sales charge .
The dividend yields for the 31-day dividend period ended September 30,
1997 were as follows:
Without Deducting Sales Charge With Sales Charge Deducted
Class A: % %
Class B: % N/A
Class C: % N/A
o Total Return Information
o 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"),
according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
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<PAGE>
( P )
o 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. For the Class C shares, the payment of the 1.0% contingent deferred sales
charge is applied to the investment result for the one-year period (or less).
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
discussed below). For Class B shares, the payment of the applicable contingent
deferred sales charge (5.0% for the first year, 4.0% for the second year, 3.0%
for the third and fourth years, 2.0% in the fifth year, 1.0% in the sixth year
and none thereafter) is applied to the investment result for the time period
shown (unless the total return is shown at net asset value, as described below).
For Class C shares, the payment of the 1.0% contingent deferred sales charge is
applied to the investment result for the one-year period (or less). Class Y
shares are not subject to a sales charge. 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, 1997 and for the period from October 16, 1989 (commencement of
operations) to September 30, 1997, were ___%, ___% and ____%, respectively. The
cumulative "total return" on Class A shares for the period from October 16, 1989
to September 30, 1996 1997 was ____%. For the fiscal year ended September 30,
1997 and the period from November 30, 1992 through September 30, 1997, the
average annual total return on an investment in Class B shares of the Fund were
____% and ___%, respectively. The cumulative total return on an investment in
Class B shares of the Fund for the period from November 30, 1992 to September
30, 1997 was ____%. The average annual total return on an investment in Class C
shares of the Fund for the fiscal year ended September 30, 1997, and for the
period from May 26, 1995 through September 30, 1997 were _____% and 11.26%____%,
respectively. For the period from May 26, 1995 through September 30, 1997, the
cumulative total return on an investment in Class C shares of the Fund was
____%.
o 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 , Class C and Class Y 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 returns at net asset value" on the Fund's
Class A shares for the fiscal year ended September 30, 1997, and for the period
from October 16, 1989 to September 30, 1997 were 13.06%____% and ____%,
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<PAGE>
respectively. The cumulative total return at net asset value on the Fund's Class
B shares for the fiscal year ended September 30, 1997 and for the period from
November 30, 1992 through September 30, 1997 was _____% and _____%,
respectively. The cumulative total returns at net asset value on the Fund's
Class C shares for the fiscal year ended September 30, 1997 and for the period
from May 26, 1995 through September 30, 1997 were _____% and _____%.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of the performance of its Class A, Class B , Class C or Class Y shares
by Lipper Analytical Services, Inc. ("Lipper"), a widely-recognized independent
mutual fund monitoring 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 is ranked against (i) all other funds,
excluding money market funds, and (ii) all other general bond funds. The Lipper
performance rankings are based on total return that includes the reinvestment of
capital gains distributions and income dividends but does not take sales charges
or taxes into consideration. The Fund's performance may also be compared to the
performance of the Lipper General Bond Fund Index, which is a net asset value
weighted index of general bond funds compiled by Lipper. It is calculated with
adjustments for income dividends and capital gains distributions as of the
ex-dividend date.
From time to time the Fund may publish the star ranking of the performance
of its Class A, Class B , Class C or Class Y 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 and municipal bond funds, based on risk-adjusted total
investment returns. Investment return measure 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 measure a fund's class
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 the 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 rankings 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 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 comparison by Morningstar are based on the same risk
and return measurements as its star rankings but do not consider the effect of
sales charges.
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<PAGE>
The total return on an investment made in Class A, Class B , Class C or
Class Y shares of the Fund may be compared with the performance for the same
period of one or more of the following indices: the Consumer Price Index, the
Salomon Brothers World Government Bond Index, the Standard & Poor's 500 Index,
the Salomon Brothers High Grade Corporate Bond Index, the Shearson Lehman
Government/Corporate Bond Index, the Lehman Brothers Aggregate Bond Index, and
the J.P. Morgan Government Bond Index. Other indices may be used from time to
time. The Consumer Price Index is generally considered to be a measure of
inflation. The Salomon Brothers World Government Bond Index generally represents
the performance of government debt securities of various markets throughout the
world, including the United States. The Salomon Brothers High Grade Corporate
Bond Index generally represents the performance of high grade long-term
corporate bonds, and the Lehman Government/Corporate Bond Index generally
represents the performance of intermediate and long-term government and
investment grade corporate debt securities. The Lehman Brothers Aggregate Bond
Index measures the performance of U.S. corporate bond issues, U.S. government
securities and mortgage-backed securities. The J.P. Morgan Government Bond Index
generally represents the performance of government bonds issued by various
countries including the United States. The S&P 500 Index is a composite index of
500 common stocks generally regarded as an index of U.S. stock market
performance. The foregoing bond indices are unmanaged indices of securities that
do not reflect reinvestment of capital gains or take investment costs into
consideration, as these items are not applicable to indices. The performance of
the Fund's Class A, Class B , Class C or Class Y 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.
From time to time the Fund may also include in its advertisements and
sales literature performance information about the Fund or rankings of the
Fund's performance cited in newspapers or periodicals, such as The New York
Times, Money, The Wall Street Journal, Fortune, or other publications. These
articles may include quotations of performance from other sources, such as
Lipper or Morningstar.
When comparing yield, total return and investment risk of an investment in
Class A, Class B , Class C or Class Y shares of the Fund with other investments,
investors should understand that certain other investments have different risk
characteristics than
an investment in shares of the Fund.
For example, certificates of deposit may have fixed rates of return and may be
insured as to principal and interest by the FDIC, while the Fund's returns will
fluctuate and its share values and returns are not guaranteed. Money market
accounts offered by banks also may be insured by the FDIC and may offer
stability of principal. U.S. Treasury securities are guaranteed as to principal
and interest by the full faith and credit of the U.S. government. Money market
mutual funds may seek to offer a fixed price per share.
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 of the Fund under Rule 12b-1 of
the
Investment Company Act,
pursuant to which the Fund makes payments to the Distributor in
connection with the distribution
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<PAGE>
and/or servicing of the shares of that class, as described in the
Prospectus. No such Plan has been
adopted for Class Y shares. Each Plan has been approved 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 Plans for the Class B and Class C
shares, the votes were cast by the Manager as the then-sole initial holder of
such shares.
In addition, the Manager and the Distributor may, under the Plans, from
time to time from their own resources (which, as to the Manager, may include
profits derived from the advisory fee it receives from the Fund) make payments
to Recipients for distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion, increase or decrease
the amount of distribution assistance payments they make to Recipients from
their own assets.
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 and its Independent Trustees by a
vote cast in person at a meeting called for the purpose of voting on such
continuance. Any 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 shareholders of 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 payments under the plan. Such approval must be by a "majority" of the
Class A and Class B shares (as defined in the Investment Company Act), voting
separately by class. All material amendments must be approved by the Board the
Independent Trustees.
While the plans are in effect, the Treasurer of the Fund must provide
separate written reports to the Fund's Board of Trustees at least quarterly
describing the amount of payments made pursuant to each Plan and the purposes
for which the payments were made. The Class B report also must include the
Distributor's distribution costs for the quarter, and such costs for previous
quarters that have been carried forward. The Class A and Class B reports also
must include the identity of each Recipient that received any payment. These
reports are subject to the review and approval of the Independent Trustees.
Under the Plans, no payment will be made to any broker, dealer or other
financial institution under the Plan (each is referred to as a "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
allowed under the Plans and set no minimum amount.
For the fiscal year ended September 30, 1997, payments under the Class A
Plan totalled $__________, all of which was paid by the Distributor to
Recipients, including
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<PAGE>
$_______ paid to an affiliate of the Distributor. 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 Plan and Class C Plan allow the service fee payments 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 asset value of shares sold.
An exchange of shares does not entitle the Recipient to an advance payment of
the service fee. 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 the advance of the service fee payment to the Distributor.
Although the Class B Plan and the Class C Plan permit the Distributor to
retain both the asset-based sales charges and the service fee, or to pay
Recipients the service fee on a quarterly basis, without payment in advance, the
Distributor presently intends to pay the service fee to Recipients in the manner
described above. A minimum holding period may be established from time to time
under the Class B Plan and the Class C Plan by the Board.
Initially, the Board has set no minimum
holding period. All payments under the Class B Plan and the Class C Plan 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 Distributor anticipates that it will take a number of
years for it to recoup (from the Fund's payments to the Distributor under the
Class B Plan and from the contingent deferred sales charges collected on
redeemed Class B shares) the sales commissions paid to authorized brokers or
dealers. For the fiscal year ended September 30, 1997, payments under the Class
B Plan totaled $_________, including $_________ paid to an affiliate of the
Distributor and $_________ retained by the Distributor. For the fiscal year
ended September 30, 1997, payments under Class C Plan totaled $__________,
including $_________ paid to an affiliate of the Distributor and $__________
retained by the Distributor
Asset-based sales charge payments are designed to permit an investor to
purchase shares of the Fund without the assessment of a front-end sales load and
at the same time permit the Distributor to compensate brokers and dealers in
connection with the sale of Class B and Class C shares of the Fund. The
Distributor's actual distribution expenses for any given year may exceed the
aggregate of payments received pursuant to the Class B or Class C Plan and from
contingent deferred sales charges. Under the Class B Plan, such expenses will be
carried forward and paid in future years. The Fund will be charged only for
interest expenses, carrying charges or other financial costs that are directly
related to the carry-forward of actual distribution expenses for such shares.
For example, if the Distributor incurred distribution expenses of $4 million in
a given fiscal year, of which $2,000,000 was recovered in the form of contingent
deferred sales charges paid by investors and $1,600,000 was reimbursed in the
form of payments made by the Fund to the Distributor under the Class B Plan, the
balance of $400,000 (plus interest) would be subject to recovery in future
fiscal years from such sources.
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The Class B Plan allows for the carry-forward of distribution expenses, to
be recovered from asset-based sales charges in subsequent fiscal periods, as
described above and in the Prospectus. The asset-based sales charge paid to the
Distributor by the Fund under the Class B Plan is intended to allow the
Distributor to recoup the cost of sales commissions paid to authorized brokers
and dealers at the time of sale, plus financing costs, as described in the
Prospectus. Such payments may also be used to pay for the following expenses in
connection with the distribution of Class B shares: (i) financing the advance of
the service fee payment to Recipients under the Class B Plan, (ii) compensation
and expenses of personnel employed by the Distributor to support distribution of
Class B shares, and (iii) costs of sales literature, advertising and
prospectuses (other than those furnished to current shareholders) and state
"blue sky" registration fees.
The Class C Plan provides for the Distributor to be compensated at a flat
rate, whether the Distributor's distribution expenses are more or less than the
amounts paid by the Fund. Such payments are made in recognition that the
Distributor (i) pays sales commissions to authorized brokers and dealers at the
time of sale, as described in the Prospectus, (ii) may finance such commissions
and/or the advance of the service fee payment to Recipients under that Plan,
(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.
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 the individual 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 the other. The
Distributor will not accept any order of $500,000 or more of Class B shares or
$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. A fourth class of shares, Class Y shares, may be purchased only by
certain institutional investors at net asset value per share.
The four 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 solely by that class, 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
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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 , Class C and Class Y 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 Independent Trustees, (v) custodian expenses, (vi)
share issuance costs, (vii) organization and start-up costs, (viii) interest,
taxes and brokerage commissions, and (ix) non-recurring expenses, such as
litigation costs. Other expenses that are directly attributable to a class are
allocated equally to each outstanding share within that class. Such expenses
include (a) Distribution Plan fees, (b) incremental transfer and shareholder
servicing agent fees and expenses, (c) registration fees and (d) shareholder
meeting expenses, to the extent that such expenses pertain to a specific class
rather than to the Fund as a whole.
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 other than
public school 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 or association has made special arrangements with the
Distributor and all members of the group or association participating in or who
are eligible to participate in the plan(s) purchase Class A shares of the Fund
through a single investment dealer, broker, or other financial institution
designated by the group. "Group retirement plan" also includes qualified
retirement plans and non-qualified deferred compensation plans and IRAs that
purchase Class A shares of the Fund through a single investment dealer, broker,
or other financial institution, if that broker-dealer has made special
arrangements with the Distributor enabling those plans to purchase Class A
shares of the Fund at net asset value but subject to a contingent deferred sales
charge.
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In addition to the discussion in the Prospectus relating to the ability of
Retirement Plans to purchase Class A shares at net asset value in certain
circumstances, there is no initial sales charge on purchases of Class A shares
of any one or more of the Oppenheimer funds by a Retirement Plan in the
following cases:
(i) the recordkeeping for the Retirement Plan is performed
on a daily valuation basis by
Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch") and,
on the date the plan sponsor signs
the Merrill Lynch recordkeeping service agreement, the Retirement Plan has $3
million or more in assets invested in mutual funds other than those advised or
managed by Merrill Lynch Asset Management, L.P. ("MLAM") that are made available
pursuant to a Service Agreement between Merrill Lynch and the mutual fund's
principal underwriter or distributor and in funds advised or managed by MLAM
(collectively, the "Applicable Investments"); or
(ii) the recordkeeping for the Retirement Plan is performed on a daily
valuation basis by an independent record keeper whose services are provided
under a contract or arrangement between the Retirement Plan and Merrill Lynch.
On the date the plan sponsor signs the Merrill Lynch record keeping service
agreement, the Plan must have $3 million or more in assets, excluding assets
held in money market funds, invested in Applicable Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by the
Merrill Lynch plan conversion manager on the date the plan sponsor signs the
Merrill Lynch record keeping service agreement.
If a Retirement Plan's records are maintained on a daily valuation basis
by Merrill Lynch or an independent record keeper under a contract or alliance
arrangement with Merrill Lynch, and if on the date the plan sponsor signs the
Merrill Lynch record keeping service agreement the Retirement Plan has less than
$3 million in assets, excluding money market funds, invested in Applicable
Investments, then the Retirement Plan may purchase only Class B shares of one or
more of the Oppenheimer funds. Otherwise, the Retirement Plan will be permitted
to purchase Class A shares of one or more of the Oppenheimer funds. Any of those
Retirement Plans that currently invest in Class B shares of the Fund will have
their Class B shares be converted to Class A shares of the Fund once the Plan's
Applicable Investments have reached $5 million.
Any redemptions of shares of the Fund held by Retirement Plans whose
records are maintained on a daily valuation basis by Merrill Lynch or an
independent record keeper under a contract with Merrill Lynch that are currently
invested in Class B shares of the Fund shall not be subject to the Class B CDSC.
Determination of Net Asset Values Per Share. The net asset values per share of
Class A, Class B , Class C and Class Y shares of the Fund are determined as of
the close of business of The New York Stock Exchange (the "Exchange") on each
day that the Exchange is open by dividing the value of the Fund's net assets
attributable to a 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 Exchange most
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recent annual holiday schedule (which is subject to change) states that it will
close New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. It may also close on other
days. Trading may occur in debt securities and in foreign securities at times
when the Exchange is closed, including weekends and holidays or after the close
of the Exchange on a regular business day. Because the net asset values of the
Fund will not be calculated at such times, if securities held in the Fund's
portfolio are traded at such times, the net asset values per share of Class A,
Class B and Class C shares of the Fund may be significantly affected at times
when shareholders do not have the ability to purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the valuation
of the Fund's securities 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" price 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 "asked" prices
obtained from 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 "asked" 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 "asked" 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-type debt
securities held by a non-money market fund that had a maturity of less than 397
days when issued that have a remaining maturity of 60 days or less , and debt
instruments held by a money market fund that have a remaining maturity of 397
days or less, shall be 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).
In the case of U.S. Government securities, foreign fixed income, corporate
bonds and mortgage-backed securities, where last sale information is not
generally available, such pricing procedures may include "matrix" comparisons to
the prices for comparable instruments on the basis of quality, yield, maturity
and other special factors involved. The Manager may use pricing services
approved by the Board of Trustees to price U.S. Government securities or
mortgage-backed securities for which last sale information is not generally
available. The Manager will monitor the accuracy of such pricing services, which
may include comparing prices used for portfolio evaluation to actual sales
prices of selected securities.
Trading in securities on European and Asian exchanges and over-the-counter
markets is normally completed before the close of the 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 Exchange will not be
reflected in the Fund's calculation of its net asset value unless the Board of
Trustees, or the Manager under procedures established by the Board, determines
that the particular event would materially affect the Fund's net asset value, in
which case an adjustment would be made. 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
value 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.
Calls, puts and Futures are valued at the last sale prices on the
principal exchanges or on the NASDAQ market on which they are traded, 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 asked 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 asked
prices obtained by the Manager from two active market makers (which in certain
cases may be the bid price if no asked price is available).
When the Fund writes an option, an amount equal to the premium received by
the Fund is included in its Statement of Assets and Liabilities as an asset, and
an equivalent deferred credit is included in the liability section. The deferred
credit is adjusted ("marked-to-market") to reflect the current market value of
the option. In determining the Fund's gain on investments, if a call written by
the Fund is exercised, the proceeds are increased by the premium received. If a
put written by the Fund is exercised, the required payment by the Fund is
reduced by the premium received. If a call or put written by the Fund expires,
the Fund has a gain in the amount of the premium; if the Fund enters into a
closing purchase transaction, it will have a gain or loss depending on whether
the premium received was more or less than the cost of the closing transaction.
If the Fund exercises a put it holds, the amount the Fund receives on its sale
of the underlying investment is reduced by the amount of premium paid by the
Fund.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25.00. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House transfer to
buy the shares.
Dividends will begin to accrue on 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 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 reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in the Prospectus
because the Distributor, dealer or broker incurs little or no selling expenses.
The term "immediate family" refers to one's spouse, children, grandchildren,
grandparents, parents, aunts, uncles, nieces, nephews, parents-in-law, brothers
and sisters, sons- and daughters-in-law, a sibling's spouse and a spouse's
siblings. Relations by virtue of a remarriage (step-children, step-parents,
etc.) are included.
o 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:
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer California Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Main Street California
Municipal Fund
Oppenheimer Florida Municipal Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Discovery Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth
Fund
Oppenheimer MidCap Fund
Oppenheimer High Yield Fund
Oppenheimer Disciplined Value Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer LifeSpan Growth Fund
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Oppenheimer Champion Income Fund Oppenheimer Developing Markets Fund Oppenheimer
Bond Fund Oppenheimer U.S. Government Trust Oppenheimer Limited-Term Government
Fund Oppenheimer Global Fund Oppenheimer Global Growth & Income Fund Oppenheimer
Gold & Special Minerals Fund Oppenheimer Strategic Income Fund Oppenheimer
International Bond Fund Oppenheimer International Small Company Fund Oppenheimer
International Growth Fund Oppenheimer Enterprise Fund Oppenheimer Quest Capital
Value Fund, Inc. Oppenheimer Quest Global Value Fund, Inc. Oppenheimer Quest
Value Fund, Inc. Oppenheimer Quest Opportunity Value Fund Oppenheimer Quest
Small Cap Value Fund Oppenheimer Quest Growth & Income Value Fund Oppenheimer
Quest Officers Value Fund Oppenheimer Bond Fund For Growth Oppenheimer Real
Asset Fund Rochester Fund Municipals Limited-Term New York Municipal Fund
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc. Oppenheimer Cash Reserves Centennial Money
Market Trust Centennial Tax Exempt Trust Centennial Government Trust Centennial
New York Tax Exempt Trust Centennial California Tax Exempt Trust Centennial
America Fund, L.P.
Daily Cash Accumulation Fund, Inc .
There is an initial sales charge on the purchase of Class A shares of each
of the Oppenheimer funds except Money Market Funds (under certain circumstances
described herein, redemption proceeds of Money Market Fund shares may be subject
to a CDSC).
o 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 or Class A and Class B shares of the Fund (and other Oppenheimer
funds) during a 13-month period (the "Letter of Intent period"), which may, at
the investor's request, include purchases made up to 90 days prior to the date
of the Letter. The Letter states the investor's intention to make the aggregate
amount of purchases 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 under the Letter will be made at the
public offering price (including the sales charge) applicable to a single
lump-sum purchase of shares in the intended purchase amount, as described in the
Prospectus.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of Intent
period, when added to the value (at offering price) of the investor's holdings
of shares on the last day of that period, do not equal or exceed the intended
purchase amount, the investor agrees to pay the additional amount of sales
charge applicable to such purchases, as set forth in "Terms of Escrow," below
(as those terms may be amended from time to time). The investor agrees that
shares equal in value to 5% of the intended purchase amount will be held in
escrow by the Transfer Agent subject to the Terms of Escrow. Also, the investor
agrees to be bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and if such
terms are amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
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
total 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.
o 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 or Class B shares acquired
in exchange for either (i) Class A shares sold with a front-end sales charge or
Class B 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 "Shareholder
Account Rules and Policies," 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. If you make
payments from your bank account to purchase shares of the Fund, your bank
account will be automatically debited normally four to five business days prior
to the investment dates selected in the Account Application. Neither the
Distributor, the Transfer Agent nor the Fund shall be responsible for any delays
in purchasing shares resulting from delays in ACH transmissions.
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 Transfer
Agent, completed and returned, and a prospectus of the selected fund(s)
(available from the Distributor) should be obtained before initiating Asset
Builder payments. The amount of the Asset Builder investment may be changed or
the automatic investments may be terminated at any time by writing to the
Transfer Agent. A reasonable period (approximately 15 days) is required after
the Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans at any
time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the Fund's
shares (for example, when a purchase check is returned to the Fund unpaid)
causes a loss to be incurred when the net asset value of the Fund's shares on
the cancellation date is less than on the purchase date. That loss is equal to
the amount of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is responsible for that
loss. If the investor fails to compensate the Fund for the loss, the Distributor
will do so. The Fund may reimburse the Distributor for that amount by redeeming
shares from any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
How to Sell Shares
Information on how to sell shares of the Fund is stated in
the Prospectus. The information
below supplements the terms and conditions for redemptions set
forth in the Prospectus.
o Checkwriting. 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 Checkwriting
privileges at any time without prior notice.
By choosing the Check Writing privilege, whether you do so by signing the
Account Application or by completing a Check Writing card, the individuals
signing (1) represent that they are either the registered owner(s) of the shares
of the Fund, or are an officer, general partner, trustee or other fiduciary or
agent, as applicable, duly authorized to act on behalf of such registered
owner(s); (2) authorize the Fund, its Transfer Agent and any bank through which
the Fund's drafts ("checks") are payable (the "Bank"), to pay all checks drawn
on the Fund account of such person(s) and to effect a redemption of sufficient
shares in that account to cover payment of such checks; (3) specifically
acknowledge(s) that if you choose to permit a single signature on checks drawn
against joint accounts, or accounts for corporations, partnerships, trusts or
other entities, the signature of any one signatory on a check will be sufficient
to authorize payment of that check and redemption from an account even if that
account is registered in the names of more than one person or even if more than
one authorized signature appears on the Check Writing card or the Application,
as applicable; and (4) understand(s) that the Check Writing privilege may be
terminated or amended at any time by the Fund and/or the Bank and neither shall
incur any liability for such amendment or termination or for effecting
redemptions to pay checks reasonably believed to be genuine, or for returning or
not paying checks which have not been accepted for any reason.
o 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.
o 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 the
"Determination of Net Asset Values Per Share" and that valuation will be made as
of the time the redemption price is determined.
Reinvestment Privilege. Within _________ of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of (i) Class A shares that you
purchase subject to an initial sales charge or Class A contingent deferred sales
charge or (ii) Class B shares that were subject to the Class B contingent
deferred sales charge when redeemed . 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 in "How to Exchange
Shares" below, at the net asset value next computed after the Transfer Agent
receives the reinvestment order. This reinvestment privilege does not apply to
Class C or Class Y shares. The shareholder must ask the Distributor for such
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.
Transfer of Shares. Shares are not subject to the payment of a contingent
deferred sales charge of any class 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 and 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 or profit-sharing or 401(k) plans
may not directly redeem or exchange shares held for their accounts 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 their type of redemption. The repurchase price per
share will be the net asset value next computed after the Distributor receives
the order placed by such 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. Shares are
normally redeemed pursuant to an Automatic Withdrawal Plan three business days
before the date you select in the Account Application. If a contingent deferred
sales charge applies to the redemption, the amount of the check or payment will
be reduced accordingly. The Fund cannot guarantee receipt of the payment on the
date requested and reserves the right to amend, suspend or discontinue offering
such plans at any time without prior notice. Because of the sales charge
assessed on Class A share purchases, shareholders should not make regular
additional Class A 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 Class B or the Class C contingent
deferred sales charge is waived as described in the Prospectus in "Waivers of
Class B and Class C 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 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.
o 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.
o 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 thereafter 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 such plans should not be considered as a yield or income on
your investment. It may not be desirable to purchases additional Class A shares
while making automatic withdrawals because of the sales charges that apply to
purchases when made. Accordingly, a shareholder normally may not maintain an
Automatic Withdrawal Plan while simultaneously making regular purchases of Class
A shares.
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. Neither the
Fund nor the Transfer Agent shall incur any 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 ACH
transfer 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 Class A 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. Share certificates are not issued for Class B or Class C
shares. 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, B and 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.
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 CDSC); and shares of
this Fund acquired by reinvestment of dividends or distributions from any other
of the Oppenheimer funds (except Oppenheimer Cash Reserves) or from any unit
investment trust for which reinvestment arrangements have been made with the
Distributor may be exchanged at net asset value for shares of any of the
Oppenheimer funds. However, shares of Oppenheimer Money Market Fund, Inc.
purchased with the redemption procedures 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. The Class B contingent deferred sales charge is imposed on Class B
shares redeemed within six 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.
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 or the number requested would include
shares subject to a restriction cited in the Prospectus or this Statement of
Additional Information or would include shares covered by a share certificate
that is not tendered with the request. In those cases, only the shares available
for exchange without restriction will be exchanged.
When 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 and 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.
When exchanging shares by telephone, the shareholder must either have an
existing account in, or acknowledge receipt of a prospectus of, the fund to
which the exchange is to be made. For full or partial exchanges of an account
made by telephone, any special account features such as Asset Builder Plans,
Automatic Withdrawal Plans and retirement plan contributions will be switched to
the new account unless the Transfer Agent is instructed otherwise.
If all telephone lines are busy
(which might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by telephone
and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the "Redemption
Date").
Normally, shares of the fund to be
acquired are purchased on the Redemption Date, but such purchases may be delayed
by either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The Fund
reserves the right, in its discretion, to refuse any exchange request that may
disadvantage it (for example, if the receipt of multiple exchange requests from
a dealer might require the disposition of portfolio securities at a time or at a
price that might be disadvantageous to the Fund).
The different 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 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, or as otherwise
described in "How to Buy Shares." 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. 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). If all shares in an account are redeemed, all
dividends accrued on shares of the same class in the account will be paid
together with the redemption proceeds.
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,
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 capital gains distributions is explained in the
Prospectus under the caption "Dividends, Capital Gains and Taxes." Special
provisions of the Internal Revenue Code govern the eligibility of the Fund's
dividends for the dividends-received deduction for corporate shareholders.
Long-term capital gains distributions are not eligible for the deduction. In
addition, the amount of dividends paid by the Fund which may qualify for the
deduction is limited to the aggregate amount of qualifying dividends (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 that
shareholder for 45 days or less. To the extent the Fund's dividends are derived
from its gross income from option premiums, interest income or short-term
capital gains from the sale of securities, or dividends from foreign
corporations, its dividends will not qualify for the deduction. It is expected
that for the most part the Fund's dividends will not qualify, because of the
nature of the investments held by the Fund in its portfolio.
The amount of a class's distributions may vary from time to time depending
on market conditions, the composition of the Fund's portfolio, and expenses
borne by the Fund or borne separately by a class, as described in "Alternative
Sales Arrangements -- Class A, Class B and Class C Shares," above. Dividends are
calculated in the same manner, at the same time and on the same day for shares
of each class. However, dividends on Class B and Class C shares are expected to
be lower as a result of the asset-based sales charge on Class B and Class C
shares, and Class B and Class C dividends will also differ in amount as a
consequence of any difference in net asset value between the classes.
If prior distributions must be re-characterized at the end of the fiscal
year as a result of the effect of the Fund's investment policies, shareholders
may have a non-taxable return of capital, which will be identified in notices to
shareholders. There is no fixed dividend rate (although the Fund may have a
targeted dividend rate for Class A shares which can be changed at ant time) and
there can be no assurance as to the payment of any dividends or the realization
of any capital gains.
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on amounts
paid by it as dividends and distributions. The Fund qualified as a regulated
investment company in its last fiscal year and intends to qualify in future
years, but reserves the right not to qualify. The Internal Revenue Code contains
a number of complex tests to determine whether the Fund will qualify, and the
Fund might not meet those tests in a particular year.
Under the Internal Revenue Code, by December 31 each year the Fund must
distribute 98% of its taxable investment income earned from January 1 through
December 31 of that year and 98% of its capital gains realized in the period
from November 1 of the prior year through October 31 of the current year, or
else the Fund must pay an excise tax on the amounts not distributed. While it is
presently anticipated that the Fund will meet those requirements, the Board of
Trustees and the Manager might determine in a particular year that it would be
in the best interest of shareholders for the Fund not to make such distributions
at the required levels and to pay the excise tax on the undistributed amounts.
That would reduce the amount of income or capital gains available for
distribution to shareholders.
The Internal Revenue Code requires that a holder (such as the Fund) of a
zero coupon security accrue as income each year a portion of the discount at
which the security was purchased even though the Fund receives no interest
payment in cash on the security during the year. As an investment company, the
Fund must pay out substantially all of its net investment income each year or be
subject to excise taxes, as described above. Accordingly, when the Fund holds
zero coupon securities, it 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 during that year. Such distributions will be made from
the cash assets of the Fund or by liquidation of portfolio securities, if
necessary. 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 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 Distributor to establish an
account. The investment will be made at the net asset value per share in effect
at the close of business on the payable date of the dividend or distribution.
Additional Information About The Fund
The Custodian. The Bank of New York is the custodian of the
Fund's assets. The Custodian's responsibilities include
safeguarding and controlling the Fund's portfolio securities,
collecting
income on the portfolio securities and handling the delivery of
such securities to and from the Fund.
The Manager has represented to the Fund that the banking relationships between
the Manager and the Custodian have been and will continue to be unrelated to and
unaffected by the relationship between the Fund and the Custodian. It will be
the practice of the Fund to deal with the Custodian in a manner uninfluenced by
any banking relationship the Custodian may have with the Manager and its
affiliates. The Fund's cash balances with the Custodian in excess of $100,000
are not protected by Federal deposit insurance. Such uninsured balances may at
times be substantial.
Independent Auditors. The independent auditors of the Fund audit the Fund's
financial statements and perform other related audit services. They also act as
auditors for the Manager and certain other funds advised by the Manager and its
affiliates.
-48-
<PAGE>
Appendix
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
Food
Gas Utilities
Gold
Health Care/Drugs Health Care/Supplies & Services Homebuilders/Real Estate
Hotel/Gaming Industrial Services Information Technology 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 Wireless Services
A-1
<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 80202-3942
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
<PAGE>
OPPENHEIMER STRATEGIC 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
(2) Independent Auditors' Report (See Part
*
(3) Statement of Investments (See Part
*
(4) Statement of Assets and Liabilities
(See Part B)*
(5) Statement of Operations (See Part B)
*
(6) Statements of Changes in Net Assets (See Part
*
(7) Notes to Financial Statements (See Part B)
*
(b) Exhibits
--------
(1) Registrant's Amended and Restated
Declaration of Trust dated
6/24/97: Filed herewith.
(2) By-Laws as amended through 6/26/90: Filed with Post- Effective
Amendment No. 4, 1/27/92, and refiled with Registrant's Post-Effective Amendment
No. 9, 1/31/95, pursuant to Item 102 of Regulation S-T, and incorporated herein
by reference.
(3) Not applicable.
(4) (i)Specimen Class A Share Certificate: Filed
with Registrant's Post-Effective Amendment No. 14,
1/15/97, and
incorporated herein by reference.
(ii)Specimen Class B Share Certificate: Filed
with
Registrant's Post-Effective Amendment No. 14, 1/15/97, and
incorporated herein by reference.
- ------------
*To be filed by amendment.
(iii)Specimen Class C Share Certificate: Filed
with
Registrant's Post-Effective Amendment No. 14, 1/15/97, and
incorporated herein by reference.
(5) Investment Advisory Agreement dated 10/22/90: Filed with
Registrant's Post-Effective Amendment No. 3, 11/26/90 and refiled with
Registrant's Post-Effective Amendment No. 9, 1/31/95, pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.
(6) (i) (a) General Distributor's Agreement dated
10/13/92: Filed with Registrant's Post-Effective Amendment No.
5,
12/3/92 and refiled with Registrant's Post-Effective Amendment No. 9, 1/31/95,
pursuant to Item 102 of Regulation S-T, and incorporated herein by reference.
(ii) Form of Oppenheimer Funds Distributor,
Inc. Dealer Agreement - Filed with Post-Effective Amendment No. 14
to
the Registration Statement of Oppenheimer Main Street Funds,
Inc.
(Reg. No. 33-17850), 9/30/94, and incorporated herein by
reference.
(iii) Form of Oppenheimer Funds Distributor,
Inc. Broker Agreement - Filed with Post-Effective Amendment No. 14
to
the Registration Statement of Oppenheimer Main Street Funds,
Inc.
(Reg. No. 33-17850), 9/30/94, and incorporated herein by
reference.
(iv) Form of Oppenheimer Funds Distributor,
Inc. Agency Agreement - Filed with Post-Effective Amendment No. 14
to
the Registration Statement of Oppenheimer Main Street Funds,
Inc.
(Reg. No. 33-17850), 9/30/94, and incorporated herein by
reference.
(v) Broker Agreement between Oppenheimer Fund
Management, Inc. and Newbridge Securities, Inc. dated 10/1/86:
Previously 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: Filed with Registrant's
Post-Effective Amendment No. 5, 12/3/92 and refiled with Registrant's
Post-Effective Amendment No. 9, 1/31/95, pursuant to Item 102 of Regulation S-T,
and incorporated herein by reference.
(9) Not applicable.
(10) Opinion and Consent of Counsel dated 8/30/89: Filed with
Registrant's Pre-Effective Amendment No. 2, 8/31/89 and refiled with
Registrant's Post-Effective Amendment No. 9, 1/31/95, pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.
(11) Independent Auditors' Consent: To
be filed by amendment.
(12) Not applicable.
(13) Investment Letter from Oppenheimer Management
Corporation to Registrant dated 8/24/89: Filed with
Post-Effective
Amendment No. 6, 1/29/93, and incorporated herein by reference.
(14) (i) Form of prototype Standardized and Non-
Standardized Profit-Sharing Plans and Money Purchase Pension
Plans
for self-employed persons and corporations: Filed with Post-
Effective Amendment No. 15 to the Registration Statement of
Oppenheimer Mortgage Income Fund (Reg. No. 33-6614), 1/20/95,
and
incorporated herein by reference.
(ii) Form of Individual Retirement Account
Trust Agreement: Filed with Post-Effective Amendment No. 21, of
Oppenheimer U.S. Government Trust (Reg. No. 2-76645), 8/25/93,
and
incorporated herein by reference.
(iii) Form of Tax Sheltered Retirement Plan and
Custody Agreement for employees of public schools and tax-exempt
organizations: Previously 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 Simplified Employee Pension IRA:
Previously filed with Post-Effective Amendment No. 36 to the
Registration Statement of Oppenheimer Equity Income Fund (Reg.
No.
2-33043), 10/23/91, refiled with Post-Effective Amendment No.
42 to
the Registration Statement of Oppenheimer Equity Income Fund
(Reg.
No. 2-33043), 10/28/94, pursuant to Item 102 of Regulation S-T,
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 (File No.
33-6614),
1/20/95, and incorporated herein by reference.
(15) (i) Service Plan and Agreement for Class A
shares dated 6/22/93: Filed with Registrant's Post-Effective
Amendment
No. 8, 2/1/94, and incorporated herein by reference.
(ii) Distribution and Service Plan and
Agreement for Class B shares dated
10/21/97:[To be filed by
amendment].
(iii) Distribution and Service Plan and
Agreement for Class C shares dated
10/21/97: [To be filed by
amendment].
(16) (i)Performance Data Computation Schedule:
To be filed by amendment.
(17) (i) Financial Data Schedule for Class A shares: To be filed by
amendment.
(ii) Financial Data Schedule for Class B shares: To be filed by
amendment.
(iii) Financial Data Schedule for Class C shares: To be filed by
amendment.
(iv) Financial Data Schedule for Class Y shares: Not applicable.
(18) Oppenheimer Funds Multiple Class Plan under Rule 18f-3 dated
3/18/96: Filed with Post-Effective Amendment No. 38 to the Registration
Statement of Oppenheimer High Yield Fund (2- 62076), 8/13/97, and incorporated
herein by reference.
-- Powers of Attorney (including Certified Resolutions of
the
Board): Filed with Registrant's
Post-Effective Amendment No. 14,
1/15/97, and incorporated herein by reference (Sam Freedman)and previously filed
(all other Trustees) with Post-Effective Amendment No. 7, 12/3/93, to the
Registrant's Registration Statement 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
October 31, 1997
-------------- ------------------------
Class A Shares of 179,293
Beneficial Interest
Class B Shares of 149,579
Beneficial Interest
Class C Shares of
16,870
Beneficial Interest
Class Y Shares of 0
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 and Current Position Other Business and Connections
During
with OppenheimerFunds, Inc. 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.
Rajeev Bhaman,
Assistant Vice President Formerly Vice President
(January 1992 - February,
1996) of Asian Equities
for Barclays de Zoete Wedd
, Inc.
Robert J. Bishop,
Vice President Assistant
treasurer of the
Oppenheimer funds.
George C. Bowen,
Senior Vice President & Treasurer Treasurer of the
Oppenheimer
funds, OppenheimerFunds
Distributor, Inc.
(the "Distributor") and
HarbourView
Asset Management Corporation
("HarbourView"), an investment
adviser subsidiary of
OppenheimerFunds,
Inc. (the
"Manager"); Vice President and
Assistant Secretary of the
Denver-
based Oppenheimer funds; Vice
President of the Distributor
and
HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a
Director of Centennial Asset Management
Corporation ("Centennial"), 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. (July, 1996
-present); Vice President and
Treasurer of
ORAMI
(July, 1996 -present);
President Treasurer and
Director of Centennial Capital
Corporation; Vice President and
Treasurer of Main Street
Advisers.
Scott Brooks,
Vice President None.
Susan Burton,
Assistant Vice President None.
Adele Campbell,
Assistant Vice President
& Assistant
Treasurer: Rochester DiviFormerly Assistant Vice
President of Rochester Fund
Services, Inc.
Michael Carbuto,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of Centennial.
Ruxandra Chivu,
Assistant Vice President None.
H.D. Digby Clements,
Assistant Vice President:
Rochester Division None.
O. Leonard Darling,
Executive Vice President Trustee (1993 - present) of
Awhtolia College - Greece.
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Assistant Vice President None.
Robert Doll, Jr.,
Executive Vice President &
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
York-based Oppenheimer Funds;
Vice President
of the Denver-based
Oppenheimer 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 ;
President and a Director
of
ORAMI;
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.
Edward Everett,
Assistant Vice President None.
Scott Farrar,
Vice President Assistant Treasurer of the
Oppenheimer funds.
Leslie A. Falconio,
Assistant Vice President None.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary
of the
Distributor ; Secretary of
HarbourView
, MultiSource
and
Centennial
; Secretary, Vice
President
and Director of Centennial
Capital
Corporation; Vice President and
Secretary of Oppenheimer
Real Asset
Management, Inc.
Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division An officer, Director and/or
portfolio manager of certain
Oppenheimer funds ;
Presently he holds the
following
other positions: Director
(since
1995) of ICI Mutual Insurance
Company; Governor (since 1994)
of St.
John's College; Director
(since 1994
- present) of International
Museum of
Photography at George Eastman
House;
Director (since 1986) of GeVa
Theatre. Formerly he held the
following positions: 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.;
Director
(1993 - 1997) of VehiCare
Corp.;
Director (1993 - 1996) of
VoiceMode.
John Fortuna,
Vice President None.
Patricia Foster,
Vice President Formerly she held the
following positions: An
officer of certain
Oppenheimer funds (May, 1993
-January, 1996); Secretary
of
Rochester Capital Advisors,
Inc. and General Counsel
(June, 1993 - January
1996) of Rochester Capital
Advisors,
L.P.
Jennifer Foxson,
Assistant Vice President None.
Paula C. Gabriele,
Executive Vice President Formerly, Managing Director
(1990-
1996) for Bankers Trust Co.
Robert G. Galli,
Vice Chairman Trustee of the New York-based
Oppenheimer Funds
. Formerly
Vice
President and General Counsel
of
Oppenheimer Acquisition Corp.
Linda Gardner,
Vice President None.
Jill Glazerman,
Assistant Vice President None.
Robert Grill,
Vice President Formerly
Marketing Vice
President for Bankers Trust
Company (1993-1996);
Steering Committee Member,
Subcommittee Chairman for
American
Savings Education Council
(1995-
1996).
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.
Elaine T. Hamann,
Vice President Formerly Vice President
(September, 1989 - January,
1997) of Bankers
Trust Company.
Glenna Hale,
Director of Investor Marketing Formerly, Vice President
(1994-1997) of Retirement
Plans Services for
OppenheimerFunds Services.
Thomas B. Hayes,
Assistant Vice President None.
Barbara Hennigar,
Executive Vice 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, None.
Assistant Vice President
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,
Vice President None.
Byron Ingram,
Assistant Vice President
None.
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.
Thomas W. Keffer,
Senior Vice President Formerly Senior Managing
Director (1994 - 1996) of Van
Eck Global.
Avram Kornberg,
Vice President None.
Joseph Krist,
Assistant Vice President None.
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.
Shanquan Li,
Assistant Vice President Director of Board (since
2/96), Chinese Finance Society; formerly,
Chairman
(11/94- 2/96), Chinese Finance
Society; and Director (6/94-6/95),Greater China
Business Networks,
Stephen F. Libera,
Vice President An officer and/or portfolio
manager for certain
Oppenheimer funds; a
Chartered Financial Analyst; a
Vice
President of HarbourView;
prior to
March 1996 , the senior
bond portfolio
manager for Panorama Series
Fund
Inc., other mutual funds and
pension
accounts managed by G.R.
Phelps; also
responsible for managing the
public
fixed-income securities
department at
Connecticut Mutual Life
Insurance Co.
Mitchell J. Lindauer,
Vice President None.
David Mabry,
Assistant Vice President None.
Steve Macchia,
Assistant Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director President, Director and
Trustee of the
Oppenheimer funds; President
and
a Director of OAC, HarbourView
and
Oppenheimer Partnership
Holdings,
Inc.; Director of Oppenheimer Real Asset
Management, Inc.; Chairman and Director of
SSI; Director (since 1993) of Hillsdown
Holdings plc, U.K.; Director (since 1996) of
NASDAQ Stock Market, Inc.
Wesley Mayer,
Vice President Formerly Vice President
(January, 1995 - June, 1996) of Manufacturers
Life Insurance Company.
Loretta McCarthy,
Executive Vice President None.
Kevin McNeil,
Vice President Treasurer (September, 1994 -
present) for the Martin Luther
King Multi-
Purpose Center (non-profit
community
organization); Formerly Vice
President (January, 1995 -
April,
1996) for Lockheed Martin IMS.
Tanya Mrva,
Assistant 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 (August,
1989 - August, 1995) with
Phoenix
Securities Group.
Denis R. Molleur,
Vice President None.
Linda Moore,
Vice President Formerly, Marketing Manager
(July 1995-November 1996) for
Chase
Investment Services Corp.
Tanya Mrva,
Assistant 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.
Richard M. O'Shaugnessy,
Assistant Vice President:
Rochester Division None.
Gina M. Palmieri,
Assistant 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
and Director Chairman and Director of the
Distributor.
Jane Putnam,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
Russell Read,
Senior Vice PresFormerly a 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
None.
Michael S. Rosen
Vice President; President,
Rochester Division An officer and/or portfolio
manager of certain Oppenheimer
funds ;
Formerly, Vice President
(June, 1983
- January, 1996) of RFS,
President
and Director of RFD ; Vice
President
and Director of FMC ; Vice
President
and director of RCAI ; General
Partner
of RCA; Vice President and
Director
of Rochester Tax Managed Fund
Inc.
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
None.
James Ruff,
Executive Vice President None.
Valerie Sanders,
Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Stephanie Seminara,
Vice President Formerly, Vice President of
Citicorp
Investment Services
Richard Soper,
Assistant Vice President None.
Nancy Sperte,
Executive Vice President None.
Donald W. Spiro,
Chairman Emeritus and Director Vice Chairman and Trustee of
the New York-based Oppenheimer
Funds;
formerly Chairman of the
Manager and
the Distributor.
Richard A. Stein,
Vice President: Rochester Division Assistant Vice President
(since 1995) of Rochester
Capitol Advisors, L.P.
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 , 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
An officer
and/or portfolio manager of
certain Oppenheimer funds;
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.
Dorothy Warmack,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
Jerry 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.
Joseph Welsh,
Assistant 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 , 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.;
Point of Contact: Finance
Supporters
of Children; Member of the
Oncology
Advisory Board of the Childrens
Hospital; Member of the Board
of
Directors of the Colorado
Museum of
Contemporary Art.
Caleb Wong,
Assistant Vice President None.
Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel Assistant
Secretary of the Oppenheimer
funds; Assistant
Secretary of SSI
and SFSI.
Jill Zachman,
Assistant Vice President:
Rochester Division None.
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
Oppenheimer/Quest Rochester Funds, as
set forth below:
New York-based Oppenheimer Funds
- --------------------------------
Oppenheimer Multiple Strategies Fund Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund Oppenheimer Discovery Fund Oppenheimer
Enterprise Fund Oppenheimer Global Fund Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund Oppenheimer Growth Fund Oppenheimer
International Growth Fund Oppenheimer International Small Company 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 Oppenheimer
Developing Markets Fund
Quest/Rochester Funds
- ---------------------
Oppenheiemr MidCap Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Bond Fund For Growth
Rochester Fund Municipals
Limited Term New York Municipal Fund
Denver-based Oppenheimer Funds
- ------------------------------
Oppenheimer Cash Reserves
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.
The New York Tax-Exempt Income Fund, Inc.
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 Municipal Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
Oppenheimer Real Asset Fund
The address of OppenheimerFunds, Inc., the New York-based Oppenheimer
Funds, the 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., 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 the Rochester-based funds is 350 Linden Oaks,
Rochester, New York 14625- 2807.
Item 29. Principal Underwriter
- -------- ---------------------
(a) OppenheimerFunds Distributor, Inc. is the Distributor of the
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:
Name & Principal Positions & Offices Positions &
Offices
Business Address with Underwriter with Registrant
- ---------------- -------------------
- -------------------
George C. Bowen(1) Vice President and Vice President
and
Treasurer Treasurer of
the
Oppenheimer
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(2) Senior Vice President; None
Director: Financial
Institution Division
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce de Leon Ave.
Decatur, GA 30030
William Coughlin Vice President None
542 West Surf - #2N
Chicago, IL 60657
Mary Crooks(1)
E. Drew Devereaux(3) Assistant Vice
President None
Rhonda Dixon-Gunner(1) Assistant Vice President None
Andrew John Donohue(2) Executive Vice Secretary of
President
& Director the Oppen-heimer funds
.
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
41 Craig Place
Cranford, NJ 07016
Todd Ermenio Vice President None
11011 South Darlington
Tulsa, OK 74137
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
George Fahey Vice President None
201 E. Rund Grove Rd.
#26-22
Lewisville, TX 75067
Katherine P. Feld(2) Vice President None
& Secretary
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding(3) Vice President
None
Reed F. Finley Vice President None
1657 Graefield
Birmingham, MI 48009
Wendy Fishler(2) Vice President None
Ronald R. Foster Senior Vice President None
11339 Avant Lane
Cincinnati, OH 45249
Patricia Gadecki Vice President None
950 First St., S.
Suite 204
Winter Haven, FL 33880
Luiggino Galleto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Mark Giles Vice President None
5506 Bryn Mawr
Dallas, TX 75209
Ralph Grant(2) Vice President/National None
Sales Manager
Sharon Hamilton Vice President None
720 N. Juanita Ave.,#1
Redondo Beach, CA 90277
Byron Ingram(2) Assistant Vice President None
Mark D. Johnson Vice President None
129 Girard Place
Kirkwood, MO 63105
Michael Keogh(2) Vice President None
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Daniel Krause Vice President
None
13416 Larchmere Square
Shaker Heights, OH 44120
Ilene Kutno(2) Assistant Vice President None
Todd Lawson Vice President None
3333 E. Bayaud Avenue
Unit 714
Denver, CO 80209
Wayne A. LeBlang Senior Vice President None
23 Fox Trail
Lincolnshire, IL 60069
Dawn Lind Vice President None
7 Maize Court
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
Todd Marion Vice President None
21 N. Passaic Avenue
Chatham,N.J. 07928
Marie Masters Vice President None
520 E. 76th Street
New York, NY 10021
John McDonough Vice President None
P.O. Box 760
50 Riverview Road
New Castle, NH 03854
Tanya Mrva(2) Assistant Vice
President None
Laura Mulhall(2) Senior Vice
President None
Charles Murray Vice President None
18 Spring Lake Drive
Far Hills, NJ 07931
Wendy Murray Vice President None
32 Carolin Road
Upper Montclair, NJ 07043
Chad V. Noel Vice President None
3238 W. Taro Lane
Phoenix, AZ 85027
Joseph Norton Vice President None
2518 Fillmore Street
San Francisco, CA 94115
Patrick Palmer Vice President None
958 Blue Mountain Cr.
West Lake Village, CA 91362
Kevin Parchinski Vice President None
1105 Harney St., #310
Omaha, NE 68102
Randall Payne Vice President None
3530 Providence
Plantation Way
Charlotte, NC 28270
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(2) Chairman & Director None
Elaine Puleo(2) Vice President None
Minnie Ra Vice President None
895 Thirty-First Ave.
San Francisco, CA 94121
Michael Raso Vice President None
16 N. Chatsworth Ave.
Apt. 301
Larchmont, NY 10538
John C. Reinhardt(3) Vice President None
Douglas Rentschler Vice President None
867 Pemberton
Grosse Pointe Park, MI
48230
Ian Robertson Vice President None
4204 Summit Wa
Marietta, GA 30066
Michael S. Rosen(3) Vice President
None
Kenneth Rosenson Vice President None
3802 Knickerbocker Place
Apt. #3D
Indianapolis, IN 46240
James Ruff(2) President None
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Washington, DC 77479
Michael Sciortino Vice President None
785 Beau Chene Drive
Mandeville, LA 70471
Robert Shore Vice President None
26 Baroness Lane
Laguna Niguel, CA 92677
George Sweeney Vice President None
1855 O'Hara Lane
Middletown, PA 17057
Andrew Sweeny Vice President None
5967 Bayberry Drive
Cincinnati, OH 45242
Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214
David G. Thomas Vice President
None
8116 Arlingon Blvd.
#123
Falls Church, VA 22042
Philip St. John Trimble Vice President None
2213 West Homer
Chicago, IL 60647
Sarah Turpin Vice President None
2735 Dover Road
Atlanta,GA 30327
Gary Paul Tyc(1) Assistant
Treasurer None
Mark Stephen Vandehey(1) Vice President
None
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
(1) 6803 South Tucson Way, Englewood, Colorado 80112 (2) Two World Trade Center,
New York, NY 10048-0203 (3) 350 Linden Oaks, Rochester, NY 14625-2807
(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, CO 80112.
Item 31. Management Services
- -------
- --------------------
Not applicable.
Item 32. Undertakings
- ------- --------------
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to call a meeting of shareholders for the
purpose of voting upon the question of the removal of a Trustee or Trustees when
requested in writing to do so by the holders of at least 10% of the Registrant's
outstanding shares and in connection with such meeting to comply with the
provisions of section 16(c) of the Investment Company Act of 1940 relating to
shareholder communications.
C-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the County of Arapahoe and State of
Colorado on the 17th day of November,
1997.
OPPENHEIMER STRATEGIC INCOME FUND
by: /s/ James C. Swain*
---------------------------------
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, Trustee
November 17, 1997
- ------------------- and Principal
James C. Swain Executive Officer
/s/ George C. Bowen* Treasurer and
November 17, 1997
- ----------------- Principal Financial
George C. Bowen and Accounting Officer
/s/ Robert G. Avis* Trustee
November 17, 1997
- -------------------
Robert G. Avis
/s/ William A. Baker* Trustee
November 17, 1997
- ---------------------
William A. Baker
/s/ Charles Conrad, Jr.* Trustee
November 17, 1997
- -----------------------
Charles Conrad, Jr.
/s/ Jon S. Fossel* Trustee November 17, 1997
- ---------------------
Jon S. Fossel
/s/ Sam Freedman* Trustee
November 17, 1997
- ----------------
Sam Freedman
/s/ Raymond J. Kalinowski* Trustee
November 17, 1997
- -------------------------
Raymond J. Kalinowski
/s/ C. Howard Kast* Trustee
November 17, 1997
- -------------------
C. Howard Kast
/s/ Robert M. Kirchner* Trustee
November 17, 1997
- ----------------------
Robert M. Kirchner
/s/ Ned M. Steel* Trustee
November 17, 1997
- ----------------
Ned M. Steel
*By: /s/ Robert G. Zack
--------------------------------
Robert G. Zack, Attorney-in-Fact
C-2
<PAGE>
OPPENHEIMER STRATEGIC INCOME FUND
REGISTRATION NO. 33-28598
EXHIBIT INDEX
24(b)(1)
Amended and Restated Declaration of Trust dated
6/24/97
24(b)(4)(iv)
Specimen Class Y Share Certificate
C-3
<PAGE>
EIGHTH AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
OF
OPPENHEIMER STRATEGIC INCOME FUND
This EIGHTH AMENDED AND RESTATED DECLARATION OF TRUST, is made as of June
24, 1997, by and among the individuals executing this Amended and Restated
Declaration of
Trust, as the Trustees.
WHEREAS, the Trustees established Oppenheimer Strategic Funds Trust,
initially named "Oppenheimer Total Income Fund" and thereafter named
"Oppenheimer Strategic Diversified Income Fund" (the "Trust"), a trust fund
under the laws of the Commonwealth of Massachusetts, for the investment and
reinvestment of funds contributed thereto, under a Declaration of Trust dated
May 1, 1989, as amended pursuant to an Amended Declaration of Trust dated August
9, 1989, and further amended May 19, 1992, November 30, 1992, November 26, 1993,
December 14, 1993, March 16, 1995 and January 10, 1996;
WHEREAS, pursuant to Section 2 of Article Fourth the Trustees of the Trust
have authorized the issuance of a fourth class of shares, pursuant to Section 2
of Article Fourth of the Series, Oppenheimer Strategic Income Fund, which shall
be designated Class Y; and
WHEREAS, the Trustees desire to make permitted changes to
said Declaration of Trust
pursuant to Section 3 of Article Fourth;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust fund hereunder shall henceforth be held and managed
under this Amended and Restated Declaration of Trust IN TRUST as herein set
forth below.
FIRST: This Trust shall be known as OPPENHEIMER STRATEGIC INCOME FUND. As
of the date of this Amended and Restated Declaration of Trust, the principal
address of Oppenheimer Strategic Income Fund is 6803 S. Tucson Way, Englewood,
Colorado 80112, and its resident agent in the Commonwealth of Massachusetts is
Massachusetts Mutual Life Insurance Company, Attention: Legal Department, 1295
State Street, Springfield, Massachusetts 01111.
SECOND: Whenever used herein, unless otherwise required by
the context or specifically
provided:
1. All terms used in this Declaration of Trust that are defined in the
1940 Act (defined below) shall have the meanings given to them in the 1940 Act.
2. "Board" or "Board of Trustees" or the "Trustees" means
the Board of Trustees of the
Trust.
3. "By-Laws" means the By-Laws of the Trust as amended
from time to time.
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<PAGE>
4. "Class" means a class of a series of shares established and designated
under or in accordance with the provisions of Article FOURTH.
5. "Commission" means the Securities and Exchange
Commission.
6. "Declaration of Trust" shall mean this Amended and Restated Declaration
of Trust as it may be amended or restated from time to time.
7. The "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations of the Commission thereunder, all as amended from time to
time.
8. "Series" refers to series of shares established and designated under or
in accordance with the provisions of Article FOURTH.
9. "Shareholder" means a record owner of Shares of the
Trust.
10. "Shares" refers to the transferable units of interest into which the
beneficial interest in the Trust or any Series or Class of the Trust (as the
context may require) shall be divided from time to time and includes fractions
of Shares as well as whole Shares.
11. The "Trust" refers to the Massachusetts business trust created by this
Declaration of Trust, as amended or restated from time to time.
12. "Trustees" refers to the individual trustees in their capacity as
trustees hereunder of the Trust and their successor or successors for the time
being in office as such trustees.
THIRD: The purpose or purposes for which the Trust is
formed and the business or objects
to be transacted, carried on and promoted by it are as follows:
1. To hold, invest or reinvest its funds, and in connection therewith to
hold part or all of its funds in cash, and to purchase or otherwise acquire,
hold for investment or otherwise, sell, sell short, assign, negotiate, transfer,
exchange or otherwise dispose of or turn to account or realize upon, securities
(which term "securities" shall for the purposes of this Declaration of Trust,
without limitation of the generality thereof, be deemed to include any stocks,
shares, bonds, financial futures contracts, indexes, debentures, notes,
mortgages or other obligations, and any certificates, receipts, warrants or
other instruments representing rights to receive, purchase or subscribe for the
same, or evidencing or representing any other rights or interests therein, or in
any property or assets) created or issued by any issuer (which term "issuer"
shall for the purposes of this Declaration of Trust, without limitation of the
generality thereof be deemed to include any persons, firms, associations,
corporations, syndicates, business trusts, partnerships, investment companies,
combinations, organizations, governments, or subdivisions thereof) and in
financial instruments (whether they are considered as securities or
commodities); and to exercise, as owner or holder of any securities or financial
instruments, all rights, powers and privileges in respect thereof; and to do any
and all acts and things for the preservation, protection, improvement and
enhancement in value of any or all such securities or financial instruments.
-2-
<PAGE>
2. To borrow money and pledge assets in connection with any of the objects
or purposes of the Trust, and to issue notes or other obligations evidencing
such borrowings, to the extent permitted by the 1940 Act and by the Trust's
fundamental investment policies under the 1940 Act.
3. To issue and sell its Shares in such Series and Classes and amounts and
on such terms and conditions, for such purposes and for such amount or kind of
consideration (including without limitation thereto, securities) now or
hereafter permitted by the laws of the Commonwealth of Massachusetts and by this
Declaration of Trust, as the Trustees may determine.
4. To purchase or otherwise acquire, hold, dispose of, resell, transfer,
reissue or cancel its Shares, or to classify or reclassify any unissued Shares
or any Shares previously issued and reacquired of any Series or Class into one
or more Series or Classes that may have been established and designated from
time to time, all without the vote or consent of the Shareholders of the Trust,
in any manner and to the extent now or hereafter permitted by this Declaration
of Trust.
5. To conduct its business in all its branches at one or more offices in
New York, Colorado and elsewhere in any part of the world, without restriction
or limit as to extent.
6. To carry out all or any of the foregoing objects and purposes as
principal or agent, and alone or with associates or to the extent now or
hereafter permitted by the laws of Massachusetts, as a member of, or as the
owner or holder of any stock of, or share or interest in, any issuer, and in
connection therewith or make or enter into such deeds or contracts with any
issuers and to do such acts and things and to exercise such powers, as a natural
person could lawfully make, enter into, do or exercise.
7. To do any and all such further acts and things and to exercise any and
all such further powers as may be necessary, incidental, relative, conducive,
appropriate or desirable for the accomplishment, carrying out or attainment of
all or any of the foregoing purposes or objects.
The foregoing objects and purposes shall, except as otherwise
expressly provided, be in no way limited or restricted by reference to, or
inference from, the terms of any other clause of this or any other Article of
this Declaration of Trust, and shall each be regarded as independent and
construed as powers as well as objects and purposes, and the enumeration of
specific purposes, objects and powers shall not be construed to limit or
restrict in any manner the meaning of general terms or the general powers of the
Trust now or hereafter conferred by the laws of the Commonwealth of
Massachusetts nor shall the expression of one thing be deemed to exclude
another, though it be of a similar or dissimilar nature, not expressed;
provided, however, that the Trust shall not carry on any business, or exercise
any powers, in any state, territory, district or country except to the extent
that the same may lawfully be carried on or exercised under the laws thereof.
FOURTH:
1. The beneficial interests in the Trust shall be divided into Shares, all
without par value, but the Trustees shall have the authority from time to time,
without obtaining shareholder approval,
-3-
<PAGE>
to create one or more Series of Shares in addition to the Series specifically
established and designated in part 3 of this Article FOURTH, and to divide the
shares of any Series into two or more Classes pursuant to Part 2 of this Article
FOURTH, all as they deem necessary or desirable, to establish and designate such
Series and Classes, and to fix and determine the relative rights and preferences
as between the different Series of Shares or Classes as to right of redemption
and the price, terms and manner of redemption, liabilities and expenses to be
borne by any Series or Class, special and relative rights as to dividends and
other distributions and on liquidation, sinking or purchase fund provisions,
conversion on liquidation, conversion rights, and conditions under which the
several Series or Classes shall have individual voting rights or no voting
rights. Except as aforesaid, all Shares of the different Series shall be
identical.
(a) The number of authorized Shares and the number of Shares of each
Series and each Class of a Series that may be issued is unlimited, and the
Trustees may issue Shares of any Series or Class of any Series for such
consideration and on such
terms as they may determine (or for
no consideration if pursuant to a Share dividend or split-up), all without
action or approval of the Shareholders. All Shares when so issued on the terms
determined by the Trustees shall be fully paid and non-assessable. The Trustees
may classify or reclassify any unissued Shares or any Shares previously issued
and reacquired of any Series into one or more Series or Classes of Series that
may be established and designated from time to time. The Trustees may hold as
treasury Shares (of the same or some other Series), reissue for such
consideration and on such terms as they may determine, or cancel, at their
discretion from time to time, any Shares of any Series reacquired by the Trust.
(b) The establishment and designation of any Series or any Class of
any Series in addition to that established and designated in part 3 of this
Article FOURTH shall be effective upon the execution by a majority of the
Trustees of an instrument setting forth such establishment and designation and
the relative rights and preferences of such Series or such Class of such Series
or as otherwise provided in such instrument. At any time that there are no
Shares outstanding of any particular Series previously established and
designated, the Trustees may by an instrument executed by a majority of their
number abolish that Series and the establishment and designation thereof. Each
instrument referred to in this paragraph shall be an amendment to this
Declaration of Trust, and the Trustees may make any such amendment without
shareholder approval.
(c) Any Trustee, officer or other agent of the Trust, and any
organization in which any such person is interested may acquire, own, hold and
dispose of Shares of any Series or Class of any Series of the Trust to the same
extent as if such person were not a Trustee, officer or other agent of the
Trust; and the Trust may issue and sell or cause to be issued and sold and may
purchase Shares of any Series or Class of any Series from any such person or any
such organization subject only to the general limitations, restrictions or other
provisions applicable to the sale or purchase of Shares of such Series or Class
generally.
2. The Trustees shall have the authority from time to time, without
obtaining shareholder approval, to divide the Shares of any Series into two or
more Classes as they deem necessary or desirable, and to establish and designate
such Classes. In such event, each Class of a Series shall represent interests in
the designated Series of the Trust and have such voting, dividend, liquidation
and other rights as may be established and designated by the Trustees. Expenses
related
-4-
<PAGE>
directly or indirectly to the Shares of a Class of a Series may be borne solely
by such Class (as shall be determined by the Trustees) and, as provided in
Article FIFTH, a Class of a Series may have exclusive voting rights with respect
to matters relating solely to such Class. The bearing of expenses solely by a
Class of Shares of a Series shall be appropriately reflected (in the manner
determined by the Trustees) in the net asset value, dividend and liquidation
rights of the Shares of such Class of a Series. The division of the Shares of a
Series into Classes and the terms and conditions pursuant to which the Shares of
the Classes of a Series will be issued must be made in compliance with the 1940
Act. No division of Shares of a Series into Classes shall result in the creation
of a Class of Shares having a preference as to dividends or distributions or a
preference in the event of any liquidation, termination or winding up of the
Trust, to the extent such a preference is prohibited by Section 18 of the 1940
Act as to the Trust.
(a) The relative rights and preferences of Shares of different
Classes of Shares of the same Series shall be the same in all respects except
that,
and unless and until the Board of
Trustees shall determine otherwise: (i) when a vote of Shareholders is required
under this Declaration of Trust or when a meeting of Shareholders is called by
the Board of Trustees, the Shares of a Class shall vote exclusively on matters
that affect that Class only; (ii) the liability and expenses related to a Class
shall be borne solely by such Class (as determined and allocated to such Class
by the Trustees from time to time in a manner consistent with parts 2 and 3 of
Article FOURTH); and (iii) pursuant to paragraph 10 of Article NINTH, the Shares
of each Class shall have such other rights and preferences as are set forth from
time to time in the then effective prospectus and/or statement of additional
information relating to the Shares.
Dividends and distributions on
Shares of different Classes of the same Series may differ and the net asset
values of Shares of different Classes of the same Series may differ.
3. Without limiting the authority of the Trustees set forth in part 1 of
this Article FOURTH to establish and designate any further Series, the Trustees
having previously established one Series of Shares having the same name as the
Trust, hereby divide said Shares into four Classes, which shall be designated
Class A , Class B, Class C and Class Y, as follows: (i) the Shares of the Class
outstanding since the inception of the Trust have previously been designated
Class A shares; (ii) the Shares of the Trust initially issued upon the division
of the Shares into two Classes have previously been designated Class B shares;
(iii) the Shares of the Class initially issued upon the division of the Shares
into three Classes have previously been designated Class C Shares; and (iii) the
Shares of the Class initially issued upon the division of the Shares of that
Series into four Classes pursuant to this Amended and Restated Declaration of
Trust are hereby designated Class Y Shares. The Shares of these Series and any
Shares of any further Series or Classes that may from time to time be
established and designated by the Trustees shall (unless the Trustees otherwise
determine with respect to some further Series or Classes at the time of
establishing and designating the same) have the following relative rights and
preferences:
(a) Assets Belonging to Series. All consideration received by the
Trust for the issue or sale of Shares of a particular Series, together with all
assets in which such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong
-5-
<PAGE>
to that Series for all purposes, subject only to the rights of creditors, and
shall be so recorded upon the books of account of the Trust. Such consideration,
assets, income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds, in whatever form the
same may be, together with any General Items allocated to that Series as
provided in the following sentence, are herein referred to as "assets belonging
to" that Series. In the event that there are any assets, income, earnings,
profits, and proceeds thereof, funds, or payments which are not readily
identifiable as belonging to any particular Series (collectively "General
Items"), the Trustees shall allocate such General Items to and among any one or
more of the Series established and designated from time to time in such manner
and on such basis as they, in their sole discretion, deem fair and equitable;
and any General Items so allocated to a particular Series shall belong to that
Series. Each such allocation by the Trustees shall be conclusive and binding
upon the shareholders of all Series for all purposes.
(b) (1) Liabilities Belonging to Series. The liabilities, expenses,
costs, charges and reserves attributable to each Series shall be charged and
allocated to the assets belonging to each particular Series. Any general
liabilities, expenses, costs, charges and reserves of the Trust which are not
identifiable as belong to any particular Series shall be allocated and charged
by the Trustees to and among any one or more of the Series established and
designated from time to time in such manner and on such basis as the Trustees in
their sole discretion deem fair and equitable. The liabilities, expenses, costs,
charges and reserves allocated and so charged to each Series are herein referred
to as "liabilities belonging to" that Series. Each allocation of liabilities,
expenses, costs, charges and reserves by the Trustees shall be conclusive and
binding upon the shareholders of all Series for all purposes.
(2) Liabilities Belonging to a Class. If a Series is divided
into more than one Class, the liabilities, expenses, costs, charges and reserves
attributable to a Class shall be charged and allocated to the Class to which
such liabilities, expenses, costs, charges or reserves are attributable. Any
general liabilities, expenses, costs, charges or reserves belonging to the
Series which are not identifiable as belonging to any particular Class shall be
allocated and charged by the Trustees to and among any one or more of the
Classes established and designated from time to time in such manner and on such
basis as the Trustees in their sole discretion deem fair and equitable. The
allocations in the two preceding sentences shall be subject to the 1940 Act or
any release, rule, regulation, interpretation or order thereunder, relating to
such allocations. The liabilities, expenses, costs, charges and reserves
allocated and so charged to each Class are herein referred to as "liabilities
belonging to" that Class. Each allocation of liabilities, expenses, costs,
charges and reserves by the Trustees shall be conclusive and binding upon the
holders of all Classes for all purposes.
(c) Dividends. Dividends and distributions on Shares of a particular
Series or Class may be paid to the holders of Shares of that Series or Class,
with such frequency as the Trustees may determine, which may be daily or
otherwise pursuant to a standing resolution or resolutions adopted only once or
with such frequency as the Trustees may determine, from such of the income,
capital gains accrued or realized, and capital and surplus, from the assets
belonging to that Series, as the Trustees may determine, after providing for
actual and accrued liabilities belonging to such Series or Class. All dividends
and distributions on Shares of a particular Series
-6-
<PAGE>
or Class shall be distributed pro rata to the holders of such Series or Class in
proportion to the number of Shares of such Series or Class held by such holders
at the date and time of record established for the payment of such dividends or
distributions, except that in connection with any dividend or distribution
program or procedure the Trustees may determine that no dividend or distribution
shall be payable on Shares as to which the Shareholder's purchase order and/or
payment have not been received by the time or times established by the Trustees
under such program or procedure. Such dividends and distributions may be made in
cash or Shares or a combination thereof as determined by the Trustees or
pursuant to any program that the Trustees may have in effect at the time for the
election by each Shareholder of the mode of the making of such dividend or
distribution to that Shareholder. Any such dividend or distribution paid in
Shares will be paid at the net asset value thereof as determined in accordance
with paragraph 13 of Article SEVENTH.
(d) Liquidation. In the event of the liquidation or dissolution of
the Trust, the Shareholders of each Series and all Classes of each Series that
has been established and designated shall be entitled to receive, as a Series or
Class, when and as declared by the Trustees, the excess of the assets belonging
to that Series over the liabilities belonging to that Series or Class. The
assets so distributable to the Shareholders of any particular Class and Series
shall be distributed among such Shareholders in proportion to the number of
Shares of such Class of that Series held by them and recorded on the books of
the Trust.
(e) Transfer. All Shares of each particular Series or Class shall be
transferable, but transfers of Shares of a particular Class and Series will be
recorded on the Share transfer records of the Trust applicable to such Series or
Class of that Series only at such times as Shareholders shall have the right to
require the Trust to redeem Shares of such Series or Class of that Series and at
such other times as may be permitted by the Trustees.
(f) Equality. All Shares of each Series shall represent an equal
proportionate interest in the assets belonging to that Series (subject to the
liabilities belonging to such Series or any Class of that Series), and each
Share of any particular Series shall be equal to each other Share of that
Series; but the provisions of this sentence shall not restrict any distinctions
permissible under this Article FOURTH that may exist with respect to Shares of
the different Classes of a Series. The Trustees may from time to time divide or
combine the Shares of any particular Class or Series into a greater or lesser
number of Shares of that Class or Series without thereby changing the
proportionate beneficial interest in the assets belonging to that Class or
Series or in any way affecting the rights of Shares of any other Class or Series
and Shares of each Class of a Series shall be equal to each other Share of such
Class.
(g) Fractions. Any fractional Share of any Class and Series, if any
such fractional Share is outstanding, shall carry proportionately all the rights
and obligations of a whole Share of that Class and Series, including those
rights and obligations with respect to voting, receipt of dividends and
distributions, redemption of Shares, and liquidation of the Trust.
(h) Conversion Rights. Subject to compliance with the requirements of
the 1940 Act, the Trustees shall have the authority to provide (i) whether
holders of Shares of any Series shall have the right to exchange said Shares
into Shares of one or more other Series of Shares, (ii) whether
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holders of shares of any Class shall have the right to exchange said Shares into
Shares of one or more other Classes of the same or a different Series, and/or
(iii) that the Trust shall have the right to carry out the aforesaid exchanges,
in each case in accordance with such requirements and procedures as may be
established by the Trustees.
(i) Ownership of Shares. The ownership of Shares shall be recorded on
the books of the Trust or of a transfer or similar agent for the Trust, which
books shall be maintained separately for the Shares of each Class and Series
that has been established and designated. No certification certifying the
ownership of Shares need be issued except as the Trustees may otherwise
determine from time to time. The Trustees may make such rules as they consider
appropriate for the issuance of Share certificates, the use of facsimile
signatures, the transfer of Shares and similar matters. The record books of the
Trust as kept by the Trust or any transfer or similar agent, as the case may be,
shall be conclusive as to who are the Shareholders and as to the number of
Shares of each Class and Series held from time to time by each such Shareholder.
(j) Investments in the Trust. The Trustees may accept investments in
the Trust from such persons and on such terms and for such consideration, not
inconsistent with the provisions of the 1940 Act, as they from time to time
authorize. The Trustees may authorize any distributor, principal underwriter,
custodian, transfer agent or other person to accept orders for the purchase or
sale of Shares that conform to such authorized terms and to reject any purchase
or sale orders for Shares whether or not conforming to such authorized terms.
FIFTH: The following provisions are hereby adopted with
respect to voting Shares of the
Trust and certain other rights:
1. The Shareholders shall have the power to vote (a) for the election of
Trustees when that issue is submitted to them, (b) with respect to the amendment
of this Declaration of Trust except where the Trustees are given authority to
amend the Declaration of Trust without shareholder approval, (c) to the same
extent as the shareholders of a Massachusetts business corporation, as to
whether or not a court action, proceeding or claim should be brought or
maintained derivatively or as a Class action on behalf of the Trust or the
Shareholders, and (d) with respect to those matters relating to the Trust as may
be required by the 1940 Act or required by law, by this Declaration of Trust, or
the By-Laws of the Trust or any registration statement of the Trust filed with
the Commission or any State, or as the Trustees may consider desirable.
2. The Trust will not hold shareholder meetings unless required by the
1940 Act, the provisions of this Declaration of Trust, or any other applicable
law, or unless the Trustees determine to call a meeting of shareholders.
3. At all meetings of Shareholders, each Shareholder shall be entitled to
one vote on each matter submitted to a vote of the Shareholders of the affected
Series for each Share standing in his name on the books of the Trust on the
date, fixed in accordance with the By-Laws, for determination of Shareholders of
the affected Series entitled to vote at such meeting (except, if the Board so
determines, for Shares redeemed prior to the meeting), and each such Series
shall vote separately ("Individual Series Voting"); a Series shall be deemed to
be affected when a vote of the
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holders of that Series on a matter is required by the 1940 Act; provided,
however, that as to any matter with respect to which a vote of Shareholders is
required by the 1940 Act or by any applicable law that must be complied with,
such requirements as to a vote by Shareholders shall apply in lieu of Individual
Series Voting as described above. If the shares of a Series shall be divided
into Classes as provided in Article FOURTH, the shares of each Class shall have
identical voting rights except that the Trustees, in their discretion, may
provide a Class of a Series with exclusive voting rights with respect to matters
which relate solely to such Classes. If the Shares of any Series shall be
divided into Classes with a Class having exclusive voting rights with respect to
certain matters, the quorum and voting requirements described below with respect
to action to be taken by the Shareholders of the Class of such Series on such
matters shall be applicable only to the Shares of such Class. Any fractional
Share shall carry proportionately all the rights of a whole Share, including the
right to vote and the right to receive dividends. The presence in person or by
proxy of the holders of one-third of the Shares, or of the Shares of any Series
or Class of any Series, outstanding and entitled to vote thereat shall
constitute a quorum at any meeting of the Shareholders or of that Series or
Class, respectively; provided however, that if any action to be taken by the
Shareholders or by a Series or Class at a meeting requires an affirmative vote
of a majority, or more than a majority, of the shares outstanding and entitled
to vote, then in such event the presence in person or by proxy of the holders of
a majority of the shares outstanding and entitled to vote at such a meeting
shall constitute a quorum for all purposes. At a meeting at which is a quorum is
present, a vote of a majority of the quorum shall be sufficient to transact all
business at the meeting. If at any meeting of the Shareholders there shall be
less than a quorum present, the Shareholders or the Trustees present at such
meeting may, without further notice, adjourn the same from time to time until a
quorum shall attend, but no business shall be transacted at any such adjourned
meeting except such as might have been lawfully transacted had the meeting not
been adjourned.
4. Each Shareholder, upon request to the Trust in proper form determined
by the Trust, shall be entitled to require the Trust to redeem from the net
assets of that Series all or part of the Shares of such Series and Class
standing in the name of such Shareholder. The method of computing such net asset
value, the time at which such net asset value shall be computed and the time
within which the Trust shall make payment therefor, shall be determined as
hereinafter provided in Article SEVENTH of this Declaration of Trust.
Notwithstanding the foregoing, the Trustees, when permitted or required to do so
by the 1940 Act, may suspend the right of the Shareholders to require the Trust
to redeem Shares.
5. No Shareholder shall, as such holder, have any right to purchase or
subscribe for any Shares of the Trust which it may issue or sell, other than
such right, if any, as the Trustees, in their discretion, may determine.
6. All persons who shall acquire Shares shall acquire the same subject to
the provisions of the Declaration of Trust.
7. Cumulative voting for the election of Trustees shall not be allowed.
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SIXTH:
1. The persons who shall act as initial Trustees until the first meeting
or until their successors are duly chosen and qualify are the initial trustees
executing the original Declaration of Trust dated May 1, 1989 or any counterpart
thereof. However, the By-Laws of the Trust may fix the number of Trustees at a
number greater or lesser than the number of initial Trustees and may authorize
the Trustees to increase or decrease the number of Trustees, to fill any
vacancies on the Board which may occur for any reason including any vacancies
created by any such increase in the number of Trustees, to set and alter the
terms of office of the Trustees and to lengthen or lessen their own terms of
office or make their terms of office of indefinite duration, all subject to the
1940 Act. Unless otherwise provided by the By-Laws of the Trust, the Trustees
need not be Shareholders.
2. A Trustee at any time may be removed either with or without cause by
resolution duly adopted by the affirmative vote of the holders of two-thirds of
the outstanding Shares, present in person or by proxy at any meeting of
Shareholders called for such purpose; such a meeting shall be called by the
Trustees when requested in writing to do so by the record holders of not less
than ten per centum of the outstanding Shares. A Trustee may also be removed by
the Board of Trustees as provided in the By-Laws of the Trust.
3. The Trustees shall make available a list of names and addresses of all
Shareholders as recorded on the books of the Trust, upon receipt of the request
in writing signed by not less than ten Shareholders (who have been shareholders
for at least six months) holding in the aggregate shares of the Trust valued at
not less than $25,000 at current offering price (as defined in the then
effective prospectus and\or statement of additional information relating to the
Shares under the Securities Act of 1933, as amended from time to time) or
holding not less than 1% in amount of the entire amount of Shares issued and
outstanding; such request must state that such Shareholders wish to communicate
with other Shareholders with a view to obtaining signatures to a request for a
meeting to take action pursuant to part 2 of this Article SIXTH and be
accompanied by a form of communication to the Shareholders. The Trustees may, in
their discretion, satisfy their obligation under this part 3 by either making
available the Shareholder list to such Shareholders at the principal offices of
the Trust, or at the offices of the Trust's transfer agent, during regular
business hours, or by mailing a copy of such communication and form of request,
at the expense of such requesting Shareholders, to all other Shareholders, and
the Trustees may also take such other action as may be permitted under Section
16(c) of the 1940 Act.
4. The Trust may at any time or from time to time apply to the Commission
for one or more exemptions from all or part of said Section 16(c) of the 1940
Act and, if an exemptive order or orders are issued by the Commission, such
order or orders shall be deemed part of said Section 16(c) for the purposes of
parts 2 and 3 of this Article SIXTH.
SEVENTH: The following provisions are hereby adopted for
the purpose of defining,
limiting and regulating the powers of the Trust, the Trustees and
the Shareholders.
1. As soon as any Trustee is duly elected by the Shareholders or the
Trustees and shall have accepted this Trust, the Trust estate shall vest in the
new Trustee or Trustees, together with the
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continuing Trustees, without any further act or conveyance, and he
shall be deemed a Trustee
hereunder.
2. The death, declination, resignation, retirement, removal, or incapacity
of the Trustees, or any one of them shall not operate to annul or terminate the
Trust but the Trust shall continue in full force and effect pursuant to the
terms of this Declaration of Trust.
3. The assets of the Trust shall be held separate and apart from any
assets now or hereafter held in any capacity other than as Trustee hereunder by
the Trustees or any successor Trustees. All of the assets of the Trust shall at
all times be considered as vested in the Trustees. No Shareholder shall have, as
a holder of beneficial interest in the Trust, any authority, power or right
whatsoever to transact business for or on behalf of the Trust, or on behalf of
the Trustees, in connection with the property or assets of the Trust, or in any
part thereof.
4. The Trustees in all instances shall act as principals, and are and
shall be free from the control of the Shareholders. The Trustees shall have full
power and authority to do any and all acts and to make and execute, and to
authorize the officers and agents of the Trust to make and execute, any and all
contracts and instruments that they may consider necessary or appropriate in
connection with the management of the Trust. The Trustees shall not in any way
be bound or limited by present or future laws or customs in regard to Trust
investments, but shall have full authority and power to make any and all
investments which they, in their uncontrolled discretion, shall deem proper to
accomplish the purpose of this Trust. Subject to any applicable limitation in
this Declaration of Trust or by the By-Laws of the Trust, the Trustees shall
have power and authority:
(a) to adopt By-Laws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust and to amend and
repeal them to the extent that they do
not reserve that right to the Shareholders;
(b) to elect and remove such officers and appoint and terminate such
officers as they consider appropriate with or without cause, and to appoint and
designate from among the Trustees such committees as the Trustees may determine,
and to terminate any such committee and remove any member of such committee;
(c) to employ as custodian of any assets of the Trust a bank or trust
company or any other entity qualified and eligible to act as a custodian,
subject to any conditions set forth in this Declaration of Trust or in the
By-Laws;
(d) to retain a transfer agent and shareholder
servicing agent, or both;
(e) to provide for the distribution of Shares either through a
principal underwriter or the Trust itself or both;
(f) to set record dates in the manner provided for in
the By-Laws of the Trust;
(g) to delegate such authority as they consider
desirable to any officers of the
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Trust and to any agent, custodian or underwriter;
(h) to vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property held in Trust hereunder; and to
execute and deliver powers of attorney to such person or persons as the Trustees
shall deem proper, granting to such person or persons such power and discretion
with relation to securities or property as the Trustees shall deem proper;
(i) to exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities held in trust hereunder;
(j) to hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, either in its
own name or in the name of a custodian or a nominee or nominees, subject in
either case to proper safeguards according to the usual practice of
Massachusetts business trusts or investment companies;
(k) to consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of which is
held in the Trust; to consent to any contract, lease, mortgage, purchase, or
sale of property by such corporation or concern, and to pay calls or
subscriptions with respect to any security held in the Trust;
(l) to compromise, arbitrate, or otherwise adjust claims in favor of
or against the Trust or any matter in controversy including, but not limited to,
claims for taxes;
(m) to make, in the manner provided in the By-Laws,
distributions of income and
of capital gains to Shareholders;
(n) to borrow money to the extent and in the manner permitted by the
1940 Act and the Trust's fundamental policy thereunder as to borrowing;
(o) to enter into investment advisory or management contracts,
subject to the 1940 Act, with any one or more corporations, partnerships,
trusts, associations or other persons;
(p) to change the name of the Trust or any Class or Series of the
Trust as they consider appropriate without prior shareholder approval; and
(q) to establish officers' and Trustees' fees or compensation and
fees or compensation for committees of the Trustees to be paid by the Trust or
each Series thereof in such manner and amount as the Trustees may determine.
5. No one dealing with the Trustees shall be under any obligation to make
any inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees or upon
their order.
6. (a) The Trustees shall have no power to bind any
Shareholder personally or to
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call upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time personally agree
to pay by way of subscription to any Shares or otherwise. This paragraph shall
not limit the right of the Trustees to assert claims against any shareholder
based upon the acts or omissions of such shareholder or for any other reason.
There is hereby expressly disclaimed shareholder and Trustee liability for the
acts and obligations of the Trust. Every note, bond, contract or other
undertaking issued by or on behalf of the Trust or the Trustees relating to the
Trust shall include a notice and provision limiting the obligation represented
thereby to the Trust and its assets (but the omission of such notice and
provision shall not operate to impose any liability or obligation on any
Shareholder or Trustee).
(b) Whenever this Declaration of Trust calls for or permits any
action to be taken by the Trustees hereunder, such action shall mean that taken
by the Board of Trustees by vote of the majority of a quorum of Trustees as set
forth from time to time in the By-Laws of the Trust or as required by the 1940
Act.
(c) The Trustees shall possess and exercise any and all such
additional powers as are reasonably implied from the powers herein contained
such as may be necessary or convenient in the conduct of any business or
enterprise of the Trust, to do and perform anything necessary, suitable, or
proper for the accomplishment of any of the purposes, or the attainment of any
one or more of the objects, herein enumerated, or which shall at any time appear
conducive to or expedient for the protection or benefit of the Trust, and to do
and perform all other acts and things necessary or incidental to the purposes
herein before set forth, or that may be deemed necessary by the Trustees.
(d) The Trustees shall have the power, to the extent not inconsistent
with the 1940 Act, to determine conclusively whether any moneys, securities, or
other properties of the Trust are, for the purposes of this Trust, to be
considered as capital or income and in what manner any expenses or disbursements
are to be borne as between capital and income whether or not in the absence of
this provision such moneys, securities, or other properties would be regarded as
capital or income and whether or not in the absence of this provision such
expenses or disbursements would ordinarily be charged to capital or to income.
7. The By-Laws of the Trust may divide the Trustees into Classes and
prescribe the tenure of office of the several Classes, but no Class of Trustee
shall be elected for a period shorter than that from the time of the election
following the division into Classes until the next meeting and thereafter for a
period shorter than the interval between meetings or for a period longer than
five years, and the term of office of at least one Class shall expire each year.
8. The Shareholders shall have the right to inspect the records,
documents, accounts and books of the Trust, subject to reasonable regulations of
the Trustees, not contrary to Massachusetts law, as to whether and to what
extent, and at what times and places, and under what conditions and regulations,
such right shall be exercised.
9. Any officer elected or appointed by the Trustees or by the Shareholders
or otherwise, may be removed at any time, with or without cause, in such lawful
manner as may be provided in
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the By-Laws of the Trust.
10. The Trustees shall have power to hold their meetings, to have an
office or offices and, subject to the provisions of the laws of Massachusetts,
to keep the books of the Trust outside of said Commonwealth at such places as
may from time to time be designated by them. Action may be taken by the Trustees
without a meeting by unanimous written consent or by telephone or similar method
of communication.
11. Securities held by the Trust shall be voted in person or by proxy by
the President or a Vice-President, or such officer or officers of the Trust as
the Trustees shall designate for the purpose, or by a proxy or proxies thereunto
duly authorized by the Trustees, except as otherwise ordered by vote of the
holders of a majority of the Shares outstanding and entitled to vote in respect
thereto.
12. (a) Subject to the provisions of the 1940 Act, any Trustee, officer or
employee, individually, or any partnership of which any Trustee, officer or
employee may be a member, or any corporation or association of which any
Trustee, officer or employee may be an officer, partner, director, trustee,
employee or stockholder, or otherwise may have an interest, may be a party to,
or may be pecuniarily or otherwise interested in, any contract or transaction of
the Trust, and in the absence of fraud no contract or other transaction shall be
thereby affected or invalidated; provided that in such case a Trustee, officer
or employee or a partnership, corporation or association of which a Trustee,
officer or employee is a member, officer, director, trustee, employee or
stockholder is so interested, such fact shall be disclosed or shall have been
known to the Trustees including those Trustees who are not so interested and who
are neither "interested" nor "affiliated" persons as those terms are defined in
the 1940 Act, or a majority thereof; and any Trustee who is so interested, or
who is also a director, officer, partner, trustee, employee or stockholder of
such other corporation or a member of such partnership or association which is
so interested, may be counted in determining the existence of a quorum at any
meeting of the Trustees which shall authorize any such contract or transaction,
and may vote thereat to authorize any such contract or transaction, with like
force and effect as if he were not so interested.
(b) Specifically, but without limitation of the foregoing, the Trust
may enter into a management or investment advisory contract or underwriting
contract and other contracts with, and may otherwise do business with any
manager or investment adviser for the Trust and/or principal underwriter of the
Shares of the Trust or any subsidiary or affiliate of any such manager or
investment adviser and/or principal underwriter and may permit any such firm or
corporation to enter into any contracts or other arrangements with any other
firm or corporation relating to the Trust notwithstanding that the Trustees of
the Trust may be composed in part of partners, directors, officers or employees
of any such firm or corporation, and officers of the Trust may have been or may
be or become partners, directors, officers or employees of any such firm or
corporation, and in the absence of fraud the Trust and any such firm or
corporation may deal freely with each other, and no such contract or transaction
between the Trust and any such firm or corporation shall be invalidated or in
any way affected thereby, nor shall any Trustee or officer of the Trust be
liable to the Trust or to any Shareholder or creditor thereof or to any other
person for any loss incurred by it or him solely because of the existence of any
such contract or transaction; provided that nothing
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herein shall protect any director or officer of the Trust against any liability
to the trust or to its security holders to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
(c) As used in this paragraph the following terms shall have the
meanings set forth below:
(i) the term "indemnitee" shall mean any present or former
Trustee, officer or employee of the Trust, any present or former Trustee,
partner, Director or officer of another trust, partnership, corporation or
association whose securities are or were owned by the Trust or of which the
Trust is or was a creditor and who served or serves in such capacity at the
request of the Trust, and the heirs, executors, administrators, successors and
assigns of any of the foregoing; however, whenever conduct by an indemnitee is
referred to, the conduct shall be that of the original indemnitee rather than
that of the heir, executor, administrator, successor or assignee;
(ii) the term "covered proceeding" shall mean any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which an indemnitee is or was a party or is
threatened to be made a party by reason of the fact or facts under which he or
it is an indemnitee as defined above;
(iii) the term "disabling conduct" shall mean willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office in question;
(iv) the term "covered expenses" shall mean expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by an indemnitee in connection with a covered proceeding;
and
(v) the term "adjudication of liability" shall mean, as to any
covered proceeding and as to any indemnitee, an adverse determination as to the
indemnitee whether by judgment, order, settlement, conviction or upon a plea of
nolo contendere or its equivalent.
(d) The Trust shall not indemnify any indemnitee for any covered
expenses in any covered proceeding if there has been an adjudication of
liability against such indemnitee expressly based on a finding of disabling
conduct.
(e) Except as set forth in paragraph (d) above, the Trust shall
indemnify any indemnitee for covered expenses in any covered proceeding, whether
or not there is an adjudication of liability as to such indemnitee, such
indemnification by the Trust to be to the fullest extent now or hereafter
permitted by any applicable law unless the By-laws limit or restrict the
indemnification to which any indemnitee may be entitled. The Board of Trustees
may adopt bylaw provisions to implement sub-paragraphs (c), (d) and (e) hereof.
(f) Nothing herein shall be deemed to affect the right of the Trust
and/or any indemnitee to acquire and pay for any insurance covering any or all
indemnities to the extent
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permitted by applicable law or to affect any other indemnification
rights to which any indemnitee
may be entitled to the extent permitted by applicable law. Such
rights to indemnification shall not,
except as otherwise provided by law, be deemed exclusive of any other rights to
which such indemnitee may be entitled under any statute now or hereafter
enacted, By-Law, contract or
otherwise.
13. The Trustees are empowered, in their absolute discretion, to establish
bases or times, or both, for determining the net asset value per Share of any
Class and Series in accordance with the 1940 Act and to authorize the voluntary
purchase by any Class and Series, either directly or through an agent, of Shares
of any Class and Series upon such terms and conditions and for such
consideration as the Trustees shall deem advisable in accordance with the 1940
Act.
14. Payment of the net asset value per Share of any Class and Series
properly surrendered to it for redemption shall be made by the Trust within
seven days, or as specified in any applicable law or regulation, after tender of
such stock or request for redemption to the Trust for such purpose together with
any additional documentation that may be reasonably required by the Trust or its
transfer agent to evidence the authority of the tenderor to make such request,
plus any period of time during which the right of the holders of the shares of
such Class of that Series to require the Trust to redeem such shares has been
suspended. Any such payment may be made in portfolio securities of that Series
and/or in cash, as the Trustees shall deem advisable, and no Shareholder shall
have a right, other than as determined by the Trustees, to have Shares redeemed
in kind.
15. The Trust shall have the right, at any time and without prior notice
to the Shareholder, to redeem Shares of the Class and Series held by such
Shareholder held in any account registered in the name of such Shareholder for
its current net asset value, if and to the extent that such redemption is
necessary to reimburse either that Series or Class of the Trust or the
distributor (i.e., principal underwriter) of the Shares for any loss either has
sustained by reason of the failure of such Shareholder to make timely and good
payment for Shares purchased or subscribed for by such Shareholder, regardless
of whether such Shareholder was a Shareholder at the time of such purchase or
subscription; subject to and upon such terms and conditions as the Trustees may
from time to time prescribe.
EIGHTH: The name "Oppenheimer" included in the name of the
Trust and of any Series
shall be used pursuant to a royalty-free, non-exclusive license
from OppenheimerFunds, Inc.
("OFI"), incidental to and as part of any one or more advisory, management or
supervisory contracts which may be entered into by the Trust with OFI. Such
license shall allow OMC to inspect and subject to the control of the Board of
Trustees to control the nature and quality of services offered by the Trust
under such name. The license may be terminated by OFI upon termination of such
advisory, management or supervisory contracts or without cause upon 60 days'
written notice, in which case neither the Trust nor any Series or Class shall
have any further right to use the name "Oppenheimer" in its name or otherwise
and the Trust, the Shareholders and its officers and Trustees shall promptly
take whatever action may be necessary to change its name and the names of any
Series or Classes accordingly.
NINTH:
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1. In case any Shareholder or former Shareholder shall be held to be
personally liable solely by reason of his being or having been a Shareholder and
not because of his acts or omissions or for some other reason, the Shareholder
or former Shareholder (or the Shareholders, heirs, executors, administrators or
other legal representatives or in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled out of the Trust estate
to be held harmless from and indemnified against all loss and expense arising
from such liability. The Trust shall, upon request by the Shareholder, assume
the defense of any such claim made against any Shareholder for any act or
obligation of the Trust and satisfy any judgment thereon.
2. It is hereby expressly declared that a trust and not a partnership is
created hereby. No individual Trustee hereunder shall have any power to bind the
Trust, the Trust's officers or any Shareholder. All persons extending credit to,
doing business with, contracting with or having or asserting any claim against
the Trust or the Trustees shall look only to the assets of the Trust for payment
under any such credit, transaction, contract or claim; and neither the
Shareholders nor the Trustees, nor any of their agents, whether past, present or
future, shall be personally liable therefor; notice of such disclaimer shall be
given in each agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. Nothing in this Declaration of Trust shall protect a
Trustee against any liability to which such Trustee would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee
hereunder.
3. The exercise by the Trustees of their powers and discretion hereunder
in good faith and with reasonable care under the circumstances then prevailing,
shall be binding upon everyone interested. Subject to the provisions of
paragraph 2 of this Article NINTH, the Trustees shall not be liable for errors
of judgment or mistakes of fact or law. The Trustees may take advice of counsel
or other experts with respect to the meaning and operations of this Declaration
of Trust, applicable laws, contracts, obligations, transactions or any other
business the Trust may enter into, and subject to the provisions of paragraph 2
of this Article NINTH, shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice. The Trustees
shall not be required to give any bond as such, nor any surety if a bond is
required.
4. This Trust shall continue without limitation of time but subject to the
provisions of sub-sections (a), (b), (c) and (d) of this paragraph 4.
(a) The Trustees, with the favorable vote of the holders of a
majority of the outstanding voting securities, as defined in the 1940 Act, of
any one or more Series entitled to vote, may sell and convey the assets of that
Series (which sale may be subject to the retention of assets for the payment of
liabilities and expenses) to another issuer for a consideration which may be or
include securities of such issuer. Upon making provision for the payment of
liabilities, by assumption by such issuer or otherwise, the Trustees shall
distribute the remaining proceeds ratably among the holders of the outstanding
Shares of the Series the assets of which have been so transferred.
(b) The Trustees, with the favorable vote of the holders of a
majority of the outstanding voting securities, as defined in the 1940 Act, of
any one or more Series entitled to vote,
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may at any time sell and convert into money all the assets of that Series. Upon
making provisions for the payment of all outstanding obligations, taxes and
other liabilities, accrued or contingent, of that Series, the Trustees shall
distribute the remaining assets of that Series ratably among the holders of the
outstanding Shares of that Series.
(c) The Trustees, with the favorable vote of the holders of a
majority of the outstanding voting securities, as defined in the 1940 Act, of
any one or more Series entitled to vote, may otherwise alter, convert or
transfer the assets of that Series or those Series.
(d) Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in sub-sections (a) and (b), and in subsection
(c) where applicable, the Series the assets of which have been so transferred
shall terminate, and if all the assets of the Trust have been so transferred,
the Trust shall terminate and the Trustees shall be discharged of any and all
further liabilities and duties hereunder and the right, title and interest of
all parties shall be canceled and discharged.
5. The original or a copy of this instrument and of each restated
declaration of trust or instrument supplemental hereto shall be kept at the
office of the Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each supplemental or restated declaration of trust shall be
filed with the Secretary of the Commonwealth of Massachusetts, as well as any
other governmental office where such filing may from time to time be required.
Anyone dealing with the Trust may rely on a certificate by an officer of the
Trust as to whether or not any such supplemental or restated declarations of
trust have been made and as to any matters in connection with the Trust
hereunder, and, with the same effect as if it were the original, may rely on a
copy certified by an officer of the Trust to be a copy of this instrument or of
any such supplemental or restated declaration of trust. In this instrument or in
any such supplemental or restated declaration of trust, references to this
instrument, and all expressions like "herein", "hereof" and "hereunder" shall be
deemed to refer to this instrument as amended or affected by any such
supplemental or restated declaration of trust. This instrument may be executed
in any number of counterparts, each of which shall be deemed as an original.
6. The Trust set forth in this instrument is created under and is to be
governed by and construed and administered according to the laws of the
Commonwealth of Massachusetts. The Trust shall be of the type commonly called a
Massachusetts business trust, and without limiting the provisions hereof, the
Trust may exercise all powers which are ordinarily exercised by such a trust.
7. The Board of Trustees is empowered to cause the redemption of the
Shares held in any account if the aggregate net asset value of such Shares has
been reduced to $200 or less upon such notice to the shareholder in question,
with such permission to increase the investment in question and upon such other
terms and conditions as may be fixed by the Board of Trustees in accordance with
the 1940 Act.
8. In the event that any person advances the organizational expenses of
the Trust, such advances shall become an obligation of the Trust subject to such
terms and conditions as may be fixed by, and on a date fixed by, or determined
with criteria fixed by the Board of Trustees, to be
-18-
<PAGE>
amortized over a period or periods to be fixed by the Board.
9. Whenever any action is taken under this Declaration of Trust including
action which is required or permitted by the 1940 Act or any other applicable
law, such action shall be deemed to have been properly taken if such action is
in accordance with the construction of the 1940 Act or such other applicable law
then in effect as expressed in "no action" letters of the staff of the
Commission or any release, rule, regulation or order under the 1940 Act or any
decision of a court of competent jurisdiction, notwithstanding that any of the
foregoing shall later be found to be invalid or otherwise reversed or modified
by any of the foregoing.
10. Any action which may be taken by the Board of Trustees under this
Declaration of Trust or its By-Laws may be taken by the description thereof in
the then effective prospectus and/or statement of additional information
relating to the Shares under the Securities Act of 1933 or in any proxy
statement of the Trust rather than by formal resolution of the Board.
11. Whenever under this Declaration of Trust, the Board of Trustees is
permitted or required to place a value on assets of the Trust, such action may
be delegated by the Board, and/or determined in accordance with a formula
determined by the Board, to the extent permitted by the 1940 Act.
12. If authorized by vote of the Trustees and the favorable vote of the
holders of a majority of the outstanding voting securities, as defined in the
1940 Act, entitled to vote, or by any larger vote which may be required by
applicable law in any particular case, the Trustees may amend or otherwise
supplement this instrument, by making a Restated Declaration of Trust or a
Declaration of Trust supplemental hereto, which thereafter shall form a part
hereof; any such Supplemental or Restated Declaration of Trust may be executed
by and on behalf of the Trust and the Trustees by an officer or officers of the
Trust.
ORGZN\230#8
-19-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
the 24th day of June, 1997.
/s/ William A. Baker /s/ Charles Conrad, Jr.
- -------------------- -----------------------
William A. Baker, Trustee Charles Conrad, Jr., Trustee
197 Desert Lakes Drive 6301 Princeville Circle
Palm Springs, CA 92264 Huntington Beach, CA 92648
/s/ Ned M. Steel /s/ Robert M. Kirchner
- -------------------- -----------------------
Ned M. Steel, Trustee Robert M. Kirchner, Trustee
3416 S. Race Street 2800 S. University Boulevard
Englewood, Colorado 80110 Denver, Colorado 80210
/s/ Raymond J. Kalinowski /s/ C. Howard Kast
- ------------------------- -----------------------
Raymond J. Kalinowski, Trustee C. Howard Kast, Trustee
44 Portland Drive 2552 East Alameda
St. Louis, Missouri Denver, Colorado 80209
/s/ James C. Swain /s/ Jon S. Fossel
- ------------------------- ------------------------
James C. Swain, Trustee Jon S. Fossel, Trustee
355 Adams Street Box 44 - Mead Street
Denver, Colorado 80206 Waccabuc, New York 10597
/s/ Robert G. Avis /s/ Sam Freedman
- ------------------------ ------------------------
Robert G. Avis, Trustee Sam Freedman, Trustee
1706 Warson Estates Drive 4975 Lakeshore Drive
St. Louis, Missouri 63124 Littleton, Colorado 80123
ORGZN\230#8
-20-
<PAGE>
Exhibit 24(b)(4)(iv)
OPPENHEIMER STRATEGIC INCOME FUND
Class Y Share Certificate (8-1/2" x 11")
I. FRONT OF CERTIFICATE (All text and other matter lies within
decorative border 5/16" in width)
(upper lefbox with heading: NUMBER [of shares]
(upper rigbox with heading: CLASS Y SHARES
(centered
below boxeOppenheimer Strategic Income Fund
A MASSACHUSETTS BUSINESS TRUST
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE
FOR
CERTAIN DEFINITIONS
box: CUSIP
(at left) is the owner of
(centered)FULLY PAID CLASS Y SHARES OF
BENEFICIAL INTEREST OF
OPPENHEIMER STRATEGIC 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 Fund's
Declaration of Trust 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 Trust and the
signatures of its duly
authorized officers.
Dated:
(at left (at right
of seal) of seal)
(signature) (signature)
<PAGE>
/s/ George C. Bowen /s/ Bridget A. Macaskill
------------------- ------------------------
TREASURER PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER STRATEGIC INCOME FUND
SEAL
1989
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
(A DIVISION OF
OPPENHEIMERFUNDS,
INC.)
Englewood (Co) 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 joint tenants with rights of survivorship and not as
tenants in common
UNIF GIFT/TRANSFER MIN ACT - _____________ Custodian ____________
(Cust) (Minor)
UNDER UGMA/UTMA ___________________
(State)
Additional abbreviations may also be used though not on above list.
<PAGE>
For Value Received ................ hereby sell(s), assign(s) and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
_________________________________________________________(Please
print or
type name and address of assignee)
- ------------------------------------------------------
________________________________________________Class Y 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 Trust with full power
of substitution in the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint owners)
Signature(s) __________________________
guaranteedName of Guarantor
by: _____________________________
Signature of Officer/Title
(text printed
vertically to right NOTICE: The signature(s) to this assignment
must correspond with
of above paragraph) with the name(s) as written upon the face of
the certificate in every
particular without alteration or enlargement
or any change whatever.
(text printed in Signatures must be guaranteed by Y
box to left of financial institution of the type
signature(s)) described in the current prospectus of the
Trust.
PLEASE NOTE: This document contains (OppenheimerFunds
watermark when viewed at an ang logo)
invalid without this watermark:
<PAGE>
- -----------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
EDGAR\230CERT.Y
<PAGE>
