OPPENHEIMER
Strategic Income Fund
Prospectus dated January 16, 1997, revised September 15, 1997
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 16, 1997 Statement of
Additional Information. For a free copy, call OppenheimerFunds
Services, the Fund's Transfer Agent, at 1-800-525-7048, or write to
the Transfer Agent at the address on the back cover. The Statement
of Additional Information has been filed with the Securities and
Exchange Commission ("SEC") 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.<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
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
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
<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, 1996.
Shareholder Transaction Expenses are charges you pay when
you buy or sell shares of the Fund. Please refer to "About Your
Account," starting on page __ for an explanation of how and when
these charges apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Maximum Sales Charge 4.75% None None
on Purchases (as a %
of offering price)
Maximum Deferred Sales None(1) 5% in the first 1.0% if
Charge(as a % of the lower of year, declining shares are
the original offering to 1% in the redeemed
price or redemption sixth year and within 12
proceeds) eliminated months of
thereafter(2) purchase(2)
Maximum Sales Charge on None None None
Reinvested Dividends
Exchange Fee None None None
Redemption Fee None(3) None(3) None(3)
</TABLE>
(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 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.
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
Shares Shares Shares
- -------------------------------------------------------
Management Fees 0.53% 0.53% 0.53%
- -------------------------------------------------------
12b-1 Distribution
Plan Fees 0.25% 1.00% 1.00%
- -------------------------------------------------------
Other Expenses 0.19% 0.19% 0.21%
- -------------------------------------------------------
Total Fund
Operating Expenses 0.97% 1.72% 1.74%
The numbers in the chart above are based upon the Fund's
expenses in its last fiscal year ended September 30, 1996. These
amounts are shown as a percentage of the average net assets of each
class of the Fund's shares for that year. The "12b-1 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.
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*
- -----------------------------------------------------------
Class A Shares $57 $77 $ 99 $161
- -----------------------------------------------------------
Class B Shares $67 $84 $113 $165
- -----------------------------------------------------------
Class C Shares $28 $55 $ 94 $205
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10 years*
- -----------------------------------------------------------
Class A Shares $57 $77 $99 $161
- -----------------------------------------------------------
Class B Shares $17 $54 $93 $165
- -----------------------------------------------------------
Class C Shares $18 $55 $94 $205
* 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.
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.
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
_____.
Who Manages the Fund? The Fund's investment advisor (the
"Manager") is OppenheimerFunds, Inc. The Manager (including
subsidiaries) advises investment company portfolios having over $70
billion in assets at June 30, 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.
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. However, such securities are
considered speculative and may be subject to greater market
fluctuations and risks of loss of income and principal and have
less liquidity than investments in higher-rated securities. Fixed-
income securities are also subject to interest rate risks and
credit risks which can negatively impact the value of the security
and the Fund's net asset value per share.
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.
How Can I Buy Shares? You can buy shares through your
dealer or financial institution, or you can purchase shares
directly through the Distributor by completing an Application or by
using an Automatic Investment Plan under AccountLink. Please refer
to "How To Buy Shares" on page __ for more details.
Will I Pay a Sales Charge to Buy Shares? The Fund offers an
investor three classes of shares. All classes have the same
investment portfolio, but different expenses. Class A shares are
offered with a front-end sales charge, starting at 4.75%, and
reduced for larger purchases. Class B 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.
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) 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
__.
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, 1996, is
included in the Statement of Additional Information.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CLASS A
- --------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1996 1995 1994 1993 1992 1991
1990(3)
- ----------------------------------------------------------------------------------------------------------------
- ----------------
<S> <C> <C> <C> <C> <C> <C>
<C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 4.68 $ 4.75 $ 5.21 $ 5.07 $ 5.01 $ 4.87
$ 5.00
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Income (loss) from investment operations:
Net investment income 0.44 .41 .45 .48 .46 .56
.59
Net realized and unrealized gain (loss) 0.15 (.03) (.35) .17 .14 .21
(.10)
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Total income from investment operations 0.59 .38 .10 .65 .60 .77
.49
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Dividends and distributions to shareholders:
Dividends from net investment income (.41) (.41) (.43) (.50) (.46) (.57)
(.57)
Distributions from net realized gain -- (.01) -- (.01) (.08) (.06)
(.05)
Distributions in excess of net realized gain -- -- (.12) -- -- --
--
Tax return of capital (.02) (.03) (.01) -- -- --
--
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Total dividends and distributions
to shareholders (.43) (.45) (.56) (.51) (.54) (.63)
(.62)
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Net asset value, end of period $ 4.84 $ 4.68 $ 4.75 $ 5.21 $ 5.07 $ 5.01
$ 4.87
======================================================================================
- ----------------------------------------------------------------------------------------------------------------
- ----------------
TOTAL RETURN, AT NET ASSET VALUE(4) 13.06% 8.62% 1.85% 13.30% 12.56% 16.97%
10.20%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) $3,526 $3,219 $3,143 $2,754 $1,736 $ 560
$ 177
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Average net assets (in millions) $3,340 $3,085 $3,082 $2,107 $1,084 $ 311
$ 93
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Ratios to average net assets:
Net investment income 9.09% 9.63% 8.72% 9.78% 9.39% 11.82%
12.79%(5)
Expenses 0.97% 0.99% 0.95% 1.09% 1.16%
1.27%(6) 1.36%(5)
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Portfolio turnover rate(7) 104.8% 141.5% 119.0% 148.6% 208.2% 194.7%
424.6%
<CAPTION>
CLASS B CLASS C
--------------------------------------------
- -----------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER
30,
1996 1995 1994 1993(2) 1996
1995(1)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 4.69 $ 4.76 $ 5.22 $ 4.89 $ 4.68 $ 4.68
- --------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .40 .37 .42 .36 .38
.13
Net realized and unrealized gain (loss) .15 (.03) (.36) .34 .16
.01
- --------------------------------------------------------------------------------------------------------------------
Total income from investment operations .55 .34 .06 .70 .54
.14
- --------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.37) (.37) (.39) (.36) (.37)
(.12)
Distributions from net realized gain -- (.01) -- (.01) --
(.01)
Distributions in excess of net realized gain -- -- (.12) -- -- --
Tax return of capital (.02) (.03) (.01) -- (.02)
(.01)
- --------------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.39) (.41) (.52) (.37) (.39)
(.14)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 4.85 $ 4.69 $ 4.76 $ 5.22 $ 4.83 $ 4.68
- --------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(4) 12.19% 7.79% 1.07% 13.58% 11.96%
3.09%
- --------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) $2,590 $1,947 $1,586 $ 695 $ 175 $
67
- --------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $2,250 $1,711 $1,236 $ 276 $ 110 $
24
- --------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 8.30% 8.83% 7.90% 8.13%(5) 8.18%
8.28%(5)
Expenses 1.72% 1.75% 1.71% 1.80%(5) 1.74%
2.02%(5)
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 104.8% 141.5% 119.0% 148.6% 104.8%
141.5%
</TABLE>
1. For the period from May 26, 1995 (inception of offering) to
September 30, 1995.
2. For the period from November 30, 1992 (inception of offering)
to September 30, 1993.
3. For the period from October 16, 1989 (commencement of
operations) to September 30, 1990.
4. Assumes a hypothetical initial investment on the business day
before the first day of the fiscal period (or inception of
offering), with all dividends and distributions reinvested in
additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
5. Annualized.
6. Includes $0.0002 and $0.0020 per share of federal excise tax
expense for 1992 and 1991, respectively. The expense ratio,
exclusive of federal excise tax expense, was 1.16% and 1.23%,
respectively.
7. The lesser of purchases or sales of portfolio securities for a
period, divided by the monthly average of the market value of
portfolio securities owned during the period. Securities with a
maturity or expiration date at the time of acquisition of one year
or less are excluded from the calculation. Purchases and sales of
investment securities (excluding short-term securities) for the
period ended September 30, 1996 were $6,365,987,904 and
$5,950,010,495, respectively.
For the years ended September 30, 1995 and 1994, purchases and
sales of investment securities included mortgage "dollar-rolls."
<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.
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).
How the Fund's Portfolio Securities Are Rated. As of
September 30, 1996, the Fund's portfolio included corporate bonds
in the following Standard & Poor's Corporation ("S&P") rating
categories or if unrated, determined by the Manager to be
comparable to the category indicated (the amounts shown are dollar-
weighted average values of the bonds in each category measured as
a percentage of the Fund's total assets):
AAA: 0.08%
A: .28%
BBB: 1.04%
BB: 4.94%
B: 15.39%
CCC: 2.98%
C: 0.14%
D: 0.01%
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, 1996, the Fund invested 35.6% 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.
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."
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.
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.
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.
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.
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.
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".
Portfolio Turnover. The length of time the Fund has held a
security is not generally a consideration in investment decisions.
A change in the securities held by the Fund is known as "portfolio
turnover." As a result of the Fund's investment policies and
market factors, the Fund will trade its portfolio actively to try
to benefit from short-term yield differences among debt securities
and as a result the Fund's portfolio turnover may be higher than
other mutual funds. This strategy may involve greater transaction
costs from brokerage commissions and dealer mark-ups.
Additionally, high portfolio turnover may result in increased
short-term capital gains and affect the ability of the Fund to
qualify for tax deductions for payments made to shareholders as a
"regulated investment company" under the Internal Revenue Code. The
Fund qualified in its last fiscal year and intends to do so in the
coming year, although it reserves the right not to qualify.
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.
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.
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.
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.
Risks of Foreign Securities. Investing in foreign
securities, especially those issued in underdeveloped countries,
generally involves special risks. For example, foreign issuers are
not subject to the same accounting and disclosure requirements that
U.S. companies are subject to. The value of foreign investments
may be affected by changes in foreign currency rates, exchange
control regulations, expropriation or nationalization of a
company's assets, foreign taxes, delays in settlement of
transactions, changes in governmental economic or monetary policy
in the U.S. or abroad, or other political and economic factors. If
the Fund distributes more income during a period than it earns
because of unfavorable currency exchange rates, those dividends may
later have to be considered a return of capital. Some of the
foreign debt securities the Fund may invest in, such as emerging
market debt, have speculative characteristics. More information
about the risks and potential rewards of foreign securities is
contained in the Statement of Additional Information.
Special Risks of Emerging Market Countries. Investments in
emerging market countries may involve further risks in addition to
those identified above for investments in foreign securities.
Securities issued by emerging market countries and by companies
located in those countries may be subject to extended settlement
periods, whereby the Fund might not receive principal and/or income
on a timely basis and its net asset value could be affected. There
may be a lack of liquidity for emerging market securities; interest
rates and foreign currency exchange rates may be more volatile;
sovereign limitations on foreign investments may be more likely to
be imposed; there may be significant balance of payment deficits;
and their economies and markets may respond in a more volatile
manner to economic changes than those of developed countries.
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.
Hedging Instruments Can Be Volatile Investments and May
Involve Special Risks. The use of hedging instruments requires
special skills and knowledge of investment techniques that are
different than what is required for normal portfolio management.
If the Manager uses a hedging instrument at the wrong time or
judges market conditions incorrectly, hedging strategies may reduce
the Fund's return. The Fund could also experience losses if the
prices of its futures and options positions were not correlated
with its other investments or if it could not close out a position
because of an illiquid market for the future or option.
Options trading involves the payment of premiums and has
special tax effects on the Fund. There are also special risks in
particular hedging strategies. 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.
Derivatives May Entail Special Risks. 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.
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.
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.
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 and at times the Fund may be required 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.
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.
"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.
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) and (3)
foreign currencies. 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 certain
kinds of put options (puts) and call options (calls).
The Fund may purchase calls on (1) debt securities, (2)
Futures, (3) broadly-based securities indices and (4) foreign
currencies, (5) foreign currency or interest rate spreads, or to
terminate its obligation on a call the Fund previously wrote. The
Fund may write (that is, sell) covered call options on debt
securities to raise cash for income to distribute to shareholders
or for defensive reasons. When the Fund writes a call, it receives
cash (called a premium). The call gives the buyer the ability to
buy the investment on which the call was written from the Fund at
the call price during the period in which the call may be
exercised. If the value of the investment does not rise above the
call price, it is likely that the call will lapse without being
exercised, while the Fund keeps the cash premium (and the
investment).
The Fund may purchase put options. Buying a put on an
investment gives the Fund the right to sell the investment at a set
price to a seller of a put on that investment. The Fund can
purchase those puts that relate to (1) debt securities, (2)
Interest Rate Futures, (3) broad-based securities indices, (4)
Stock or Bond Index Futures, (5) foreign currencies, or (6) foreign
currency or interest rate spreads. The Fund may purchase puts on
investments it does not own. Writing puts requires the segregation
of liquid assets to cover the put. The Fund will not write a put
if it will require more than 50% of the Fund's net assets to be
segregated to cover the put obligation.
The Fund may buy or sell foreign currency puts and calls if
they are traded on a securities or commodities exchange or on the
over-the-counter market, or are quoted by recognized dealers in
those options. 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 increases in the dollar cost of buying
foreign securities.
The Fund may buy and sell calls if certain conditions are met:
(1) the calls must be listed on a domestic or foreign securities or
commodities exchange or quoted on the Automated Quotation System of
the National Association of Securities Dealers, Inc. or traded in
the over-the-counter market; and (2) each written call must be
"covered" while it is outstanding; that means the Fund must own the
securities on which the call is written. There is no limit on the
amount of the Fund's total assets that may be subject to covered
calls. The Fund can also write calls on foreign currencies
(discussed below). The Fund may also write covered calls on
Futures Contracts it owns, but these calls must be covered by
securities or other liquid assets the Fund owns and segregates to
enable it to satisfy its obligations if the call is exercised. A
call or put option may not be purchased if the net value of all of
the Fund's put and call options would exceed 5% of the Fund's total
assets.
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.
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:
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);
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;
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
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 three
classes of shares, Class A, Class B and Class C. All classes
invest in the same investment portfolio. Each class has its own
dividends and distributions and pays certain expenses which may be
different for the different classes. Each class may have a
different net asset value. Each share has one vote at shareholder
meetings, with fractional shares voting proportionally. 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 $70
billion as of June 30, 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.
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.
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.
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.
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.
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.
Yield. Each class of shares calculates its yield by
dividing the annualized net investment income per share on the
portfolio during a 30-day period by the maximum offering price on
the last day of the period. The yield of each class will differ
because of the different expenses of each class of shares. The
yield data represents a hypothetical investment return on the
portfolio, and does not measure an investment return based on
dividends actually paid to shareholders. To show that return, a
dividend yield may be calculated. Dividend yield is calculated by
dividing the dividends of a class derived from net investment
income during a stated period by the maximum offering price on the
last day of the period. Yields and dividend yields for Class A
shares reflect the deduction of the maximum initial sales charge,
but may also be shown based on the Fund's net asset value per
share. Yields for Class B and Class C shares do not reflect the
deduction of the contingent deferred sales charge.
How Has the Fund Performed? Below is a discussion by the Manager
of the Fund's performance during its last fiscal year ended
September 30, 1996, followed by a graphical comparison of the
Fund's performance to appropriate broad-based market indices.
Management's Discussion of Performance. During the Fund's
fiscal year ended September 30, 1996, the Fund's performance was
positively affected by its holdings of high yield debt securities
and debt securities of foreign governments and companies. As U.S.
interest rates declined, the Fund increased its investment in high
yield debt securities. In the foreign bond sector the Fund shifted
its focus to the emerging markets area which the Manager expected
to provide more income with reduced credit risk as many emerging
economies improved. Lastly, declining U.S. interest rates also
positively affected the Fund's holdings of U.S. Government
securities. The Fund's portfolio holdings, allocations and
strategies are subject to change.
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, 1996,
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.
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.
Oppenheimer Strategic Income Fund
Comparison of Change in Value
of $10,000 Hypothetical Investment to
Lehman Brothers Aggregate Bond Index and
Salomon Brothers World Government Bond Index
[Graph]
Past Performance is not predictive of future performance.
Oppenheimer Strategic Income Fund
Average Annual Total Returns at 9/30/96
1 Year 5 Years Life of Class*
Class A: 7.69% 8.82% 10.19%
1 Year Life of Class*
Class B: 7.19% 8.66%
1 Year Life of Class*
Class C 10.96% 11.25%
________________
*Class A shares were first publicly offered on 10/16/89.
Class B shares were first publicly offered on 11/30/92.
Class C shares were first publicly offered on 5/26/95.
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors three different
classes of shares. The different classes of shares represent
investments in the same portfolio of securities but may be subject
to different expenses and will likely have different share prices.
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.
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.
Class C Shares. If you buy Class C shares, you pay no sales
charge at the time of purchase, but if you sell your shares within
12 months of buying them, you will normally pay a contingent
deferred sales charge of 1% as described in "Buying Class C Shares"
below.
Which Class of Shares Should You Choose? Once you decide that the
Fund is an appropriate investment for you, the decision as to which
class of shares is better suited to your needs depends on a number
of factors which you should discuss with your financial advisor.
The Fund's operating costs that apply to a class of shares and the
effect of the different types of sales charges on your investment
will vary your investment results over time. The most important
factors 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 used the sales charge rates that apply to each class, and
considered the effect of the annual asset-based sales charge on
Class B and Class C expenses (which, like all expenses, will affect
your investment return). For the sake of comparison, we have
assumed that there is a 10% rate of appreciation in the investment
each year. Of course, the actual performance of your investment
cannot be predicted and will vary, based on the Fund's actual
investment returns and the operating expenses borne by each class
of shares, and which class of shares you invest in. The factors
discussed below are not intended to be investment advice or
recommendations, because each investor's financial considerations
are different. The discussion below of the factors to consider in
purchasing a particular class of shares assumes that you will
purchase only one class of shares and not a combination of shares
of different classes.
How Long Do You Expect to Hold Your Investment? While
future financial needs cannot be predicted with certainty, knowing
how long you expect to hold your investment will assist you in
selecting the appropriate class of shares. Because of the effect
of class-based expenses, your choice will also depend on how much
you plan to invest. For example, the reduced sales charges
available for larger purchases of Class A shares may, over time,
offset the effect of paying an initial sales charge on your
investment (which reduces the amount of your investment dollars
used to buy shares for your account), compared to the effect over
time of higher class-based expenses on Class B or Class C shares
for which no initial sales charge is paid.
Investing for the Short Term. If you have a short-term
investment horizon (that is, you plan to hold your shares for not
more than six years), you should probably consider purchasing Class
A or Class C shares rather than Class B shares, because of the
effect of the Class B contingent deferred sales charge if you
redeem in less than 7 years, as well as the effect of the Class B
asset-based sales charge on the investment return for that class in
the short term. Class C shares might be the appropriate choice
(especially for investments of less than $100,000), because there
is no initial sales charge on Class C shares, and the contingent
deferred sales charge does not apply to amounts you sell after
holding them one year.
However, if you plan to invest more than $100,000 for the
shorter term, then the more you invest and the more your investment
horizon increases toward six years, Class C shares might not be as
advantageous as Class A shares. That is because the annual asset-
based sales charge on Class C shares will have a greater impact on
your account over the longer term than the reduced front-end sales
charge available for larger purchases of Class A shares. For
example, Class A 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.
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 C shares, as discussed above, because of the effect of
the expected lower expenses for Class A shares and the reduced
initial sales charges available for larger investments in Class A
shares under the Fund's Right of Accumulation. Of course, these
examples are based on approximations of the effect of current sales
charges and expenses on a hypothetical investment over time, using
the assumed annual performance return stated above, and therefore
you should analyze your options carefully.
Are There Differences in Account Features That Matter to
You? Because some account features (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.
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:
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.
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.
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.
How Are Shares Purchased? You can buy shares several ways --
through any dealer, broker or financial institution that has a
sales agreement with the Distributor, or directly through the
Distributor, or automatically from your bank account through an
Asset Builder Plan under the OppenheimerFunds AccountLink service.
The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase (and redemption) orders.
When you buy shares, be sure to specify Class A, Class B or Class
C shares. If you do not choose, your investment will be made in
Class A shares.
Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.
Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "OppenheimerFunds Distributor, Inc." Mail it to P.O. Box
5270, Denver, Colorado 80217. If you don't list a dealer on the
application, the Distributor will act as your agent in buying the
shares. However, we recommend that you discuss your investment
first with a financial advisor, to be sure it is appropriate for
you.
Buying Shares Through OppenheimerFunds AccountLink. You
can use AccountLink to link your Fund account with an account at a
U.S. bank or other financial institution that is an Automated
Clearing House (ACH) member. You can then transmit funds
electronically to purchase shares, 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.
Asset Builder Plans. You may purchase shares of the Fund
(and up to four other Oppenheimer funds) automatically each month
from your account at a bank or other financial institution under an
Asset Builder Plan with AccountLink. Details are in the Statement
of Additional Information.
At What Prices Are Shares Sold? Shares are sold at the
public offering price based on the net asset value (and any initial
sales charge that applies) that is next determined after the
Distributor receives the purchase order in Denver, Colorado. In
most cases, to enable you to receive that day's offering price, the
Distributor or its designated agent must receive your order by the
time of day The New York Stock Exchange closes, which is normally
4:00 P.M., New York time, but may be earlier on some days (all
references to time in this Prospectus mean "New York time"). The
net asset value of each class of shares is determined as of that
time on each day The New York Stock Exchange is open (which is a
"regular business day").
If you buy shares through a dealer, the dealer must receive
your order by the close of The New York Stock Exchange, on a
regular business day and transmit it to the Distributor so that it
is received before the Distributor's close of business that day,
which is normally 5:00 P.M. The Distributor, in its sole
discretion, may reject any purchase order for the Fund's shares.
Special Sales Charge Arrangements for Certain Persons.
Appendix B to this Prospectus sets forth conditions for the waiver
of, or exemption from, sales charges or the special sales charge
rates that apply to purchases of shares of the Fund (including
purchases by exchange) by a person who was a shareholder of one of
the Former Quest for Value Funds (as defined in that Appendix).
Buying Class A Shares. Class A shares are sold at their offering
price, which is normally net asset value plus an initial sales
charge. However, in some cases, described below, purchases are not
subject to an initial sales charge, and the offering price will be
the net asset value. In some cases, reduced sales charges may be
available, as described below. Out of the amount you invest, the
Fund receives the net asset value to invest for your account. The
sales charge varies depending on the amount of your purchase. A
portion of the sales charge may be retained by the Distributor and
allocated to your dealer as commission. The current sales charge
rates and commissions paid to dealers and brokers are as follows:
<TABLE>
<CAPTION>
Front-End Front-End
Sales Charge As Sales Charge As Commission as
a Percentage of a Percentage of Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
<S> <C> <C> <C>
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%
</TABLE>
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.
Class A Contingent Deferred Sales Charge. There is no
initial sales charge on purchases of Class A shares of any one or
more of the Oppenheimer funds in the following cases:
Purchases by a retirement plan qualified under Section
401(a) if the retirement plan has total plan assets of $500,000 or
more.
Purchases aggregating $1 million or more.
Purchases by a retirement plan qualified under sections
401(a) or 401(k) of the Internal Revenue Code, by a non-qualified
deferred compensation plan (not including Section 457 plans),
Employee Benefit Plan, Group Retirement Plan (see "How to Buy
Shares - Retirement Plans" in the Statement of Additional
Information for further 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.
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 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 18 months of the end of the calendar month of the purchase
of the exchanged shares, the sales charge will apply.
Special Arrangements With Dealers. The Distributor may
advance up to 13 months' commissions to dealers that have
established special arrangements with the Distributor for Asset
Builder Plans for their clients.
Reduced Sales Charges for Class A Share Purchases. You may be
eligible to buy Class A shares at reduced sales charge rates in one
or more of the following ways:
Right of Accumulation. To qualify for the lower sales
charge rates that apply to larger purchases of Class A shares, you
and your spouse can add together Class A and Class B shares you
purchase for your individual accounts, or jointly, or for trust or
custodial accounts on behalf of your children who are minors. A
fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit
plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class
A and Class B shares of the Fund and other Oppenheimer funds with
Class A shares of 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.
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.
Waivers of Class A Sales Charges. The Class A sales charges
are not imposed in the circumstances described below. There is an
explanation of this policy in "Reduced Sales Charges" in the
Statement of Additional Information.
Waivers of Initial and Contingent Deferred Sales Charges for
Certain Purchasers. Class A shares purchased by the following
investors are not subject to any Class A sales charges:
the Manager or its affiliates;
present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced
Sales Charges" in the Statement of Additional Information) of the
Fund, the Manager and its affiliates, and retirement plans
established by them for their employees;
registered management investment companies, or separate
accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose;
dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees;
employees and registered representatives (and their spouses)
of dealers or brokers described above or financial institutions
that have entered into sales arrangements with such dealers or
brokers (and are identified to the Distributor) or with the
Distributor; the purchaser must certify to the Distributor at the
time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor
children);
dealers, brokers, 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);
(1) investment advisors and financial planners who charge an
advisory, consulting or other fee for their services and buy shares
for their own accounts or the accounts of their clients, (2)
Retirement Plans and deferred compensation plans and trusts used to
fund those Plans (including, for example, plans qualified or
created under sections 401(a), 403(b) or 457 of the Internal
Revenue Code), and "rabbi trusts" that buy shares for their own
accounts, in each case if those purchases are made through a broker
or agent or other financial intermediary that has made special
arrangements with the Distributor for those purchases; and (3)
clients of such investment advisors or financial planners who buy
shares for their own accounts may also purchase shares without
sales charge but only if their accounts are linked to a master
account of their investment advisor or financial planner on the
books and records of the broker, agent or financial intermediary
with which the Distributor has made such special arrangements (each
of these investors may be charged a fee by the broker, agent or
financial intermediary for purchasing shares);
directors, trustees, officers or full-time employees of
OpCap Advisors or its affiliates, their relatives or any trust,
pension, profit sharing or other benefit plan which beneficially
owns shares for those persons;
accounts for which Oppenheimer Capital is the investment
advisor (the Distributor must be advised of this arrangement) and
persons who are directors or trustees of the company or trust which
is the beneficial owner of such accounts;
any unit investment trust that has entered into an
appropriate agreement with the Distributor;
a TRAC-2000 401(k) plan (sponsored by the former Quest for
Value Advisors) whose Class B or Class C shares of a Former Quest
for Value Fund were exchanged for Class A shares of that Fund due
to the termination of the Class B and Class C TRAC-2000 program on
November 24, 1995; or
qualified retirement plans that had agreed with the former
Quest for Value Advisors to purchase shares of any of the Former
Quest for Value Funds at net asset value, with such shares to be
held through DCXchange, a sub-transfer agency mutual fund
clearinghouse, provided that such arrangements are consummated and
share purchases 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:
shares issued in plans of reorganization, such as mergers,
asset acquisitions and exchange offers, to which the Fund is a
party;
shares purchased by the reinvestment of loan repayments by
a participant in a retirement plan for which the Manager or its
affiliates acts as sponsor;
shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds
(other than Oppenheimer Cash Reserves) or unit investment trusts
for which reinvestment arrangements have been made with the
Distributor;
shares purchased and paid for with the proceeds of shares
redeemed in the past 12 months from a mutual fund (other than a
fund managed by the Manager or any of its subsidiaries) on which an
initial sales charge or contingent deferred sales charge was paid
(this waiver also applies to shares purchased by exchange of shares
of Oppenheimer Money Market Fund, Inc. that were purchased and paid
for in this manner); this waiver must be requested when the
purchase order is placed for your shares of the Fund, and the
Distributor may require evidence of your qualification for this
waiver; or
shares purchased with the proceeds of maturing principal of
units of any Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for
Certain Redemptions. The Class A contingent deferred sales charge
is also waived if shares that would otherwise be subject to the
contingent deferred sales charge are redeemed in the following
cases:
to make Automatic Withdrawal Plan payments that are limited
annually to no more than 12% of the original account value;
involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (see "Shareholder Account
Rules and Policies," below);
if, at the time 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);
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);
for distributions from a TRAC-2000 401(k) plan sponsored by
the Distributor due to the termination of the TRAC-2000 program;
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;
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
for distributions from 401(k) plans sponsored by broker-
dealers that have entered into a special agreement with the
Distributor allowing this waiver.
Service Plan for Class A Shares. The Fund has adopted a
Service Plan for Class A shares to reimburse the Distributor for a
portion of its costs incurred in connection with the personal
service and maintenance of accounts that hold Class A shares.
Reimbursement is made quarterly at an annual rate that may not
exceed 0.25% of the average annual net assets of Class A shares of
the Fund. The Distributor uses all of those fees to compensate
dealers, brokers, banks and other financial institutions quarterly
for providing personal service and maintenance of accounts of their
customers that hold Class A shares and to reimburse itself (if the
Fund's Board of Trustees authorizes such reimbursements, which it
has not yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering
customer inquiries about the Fund, assisting in establishing and
maintaining 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 on Redemptions in that Year
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.
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.
Distribution and Service Plan for Class B shares. The Fund
has adopted a Distribution and Service Plan for Class B shares to
compensate the Distributor for distributing Class B shares and
servicing accounts. This Plan is described below under "Buying
Class C Shares - Distribution and Service Plans for Class B and
Class C shares."
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 Distribution and Service Plans for Class B and
Class C shares to compensate the Distributor for 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.
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. If a dealer has a special agreement with the Distributor,
the Distributor will 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. If a dealer has a special
agreement with the Distributor, the Distributor shall 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, 1996, the end of the Class B Plan year, the
Distributor had incurred unreimbursed expenses in connection with
sales of Class B shares of $87,974,774 (equal to 3.40% of the
Fund's net assets represented by Class B shares on that date) which
have been carried over into the present plan year. At September
30, 1996, the end of the Class C Plan year, the Distributor had
incurred unreimbursed expenses in connection with sales of Class C
shares of $2,429,770 (equal to 1.39% 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.
Waivers of Class B and Class C Sales Charges. The Class B
and Class C contingent deferred sales charges will not be applied
to shares purchased in certain types of transactions nor will it
apply to Class B and Class C shares redeemed in certain
circumstances as described below. The reasons for this policy are
in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers for Redemptions 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, if the Transfer Agent
is notified that these conditions apply at redemption:
distributions to participants or beneficiaries from
Retirement Plans, if the distributions are made (a) under an
Automatic Withdrawal Plan after the participant reaches age 59-1/2,
as long as the payments are no more than 10% of the account value
annually (measured from the date the Transfer Agent receives the
request), or (b) following the death or disability (as defined in
the Internal Revenue Code) of the participant or beneficiary (the
death or disability must have occurred after the account was
established);
redemptions from accounts other than Retirement Plans
following the death or disability of the last surviving
shareholder, including a trustee of a "grantor" trust or revocable
living trust for which the trustee is also the sole beneficiary
(the death or disability must have occurred after the account was
established, and for disability you must provide evidence of a
determination of disability by the Social Security Administration);
returns of excess contributions to Retirement Plans;
distributions from retirement plans to make "substantially
equal periodic payments" as permitted in Section 72(t) of the
Internal Revenue Code that do not exceed 10% of the account value
annually, measured from the date the Transfer Agent receives the
request;
shares redeemed involuntarily, as described in "Shareholder
Account Rules and Policies," below; or
distributions from OppenheimerFunds prototype 401(k) plans
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:
shares sold to the Manager or its affiliates;
shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with
the Manager or the Distributor for that purpose;
shares issued in plans of reorganization to which the Fund
is a party; and
distributions from 401(k) plans sponsored by broker-dealers
that have entered into a special agreement with the Distributor
allowing this waiver.
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.
Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase
shares in amounts up to $250,000 through a telephone
representative, call the Distributor at 1-800-852-8457. The
purchase payment will be debited from your bank account.
PhoneLink. PhoneLink is the OppenheimerFunds automated
telephone system that enables shareholders to perform a number of
account transactions automatically using a touch-tone phone.
PhoneLink may be used on already-established Fund accounts after
you obtain a Personal Identification Number (PIN), by calling the
special PhoneLink number: 1-800-533-3310.
Shareholder Transactions by Fax. Requests for certain account
transactions may be sent to the Transfer Agent by tax (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.
Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have
established AccountLink privileges to link your bank account with
the Fund, to pay for these purchases.
Exchanging Shares. With the OppenheimerFunds Exchange
Privilege, described below, you can exchange shares automatically
by phone from your Fund account to another Oppenheimer funds
account you have already established by calling the special
PhoneLink number. Please refer to "How to Exchange Shares," below,
for details.
Selling Shares. You can redeem shares by telephone
automatically by calling the PhoneLink number and the Fund will
send the proceeds directly to your AccountLink bank account.
Please refer to "How to Sell Shares," below, for details.
Automatic Withdrawal and Exchange Plans. The Fund has several
plans that enable you to sell shares automatically or exchange them
to another Oppenheimer funds account on a regular basis:
Automatic Withdrawal Plans. If your Fund account is worth
$5,000 or more, you can establish an Automatic Withdrawal Plan to
receive payments of at least $50 on a monthly, quarterly, semi-
annual or annual basis. The checks may be sent to you or sent
automatically to your bank account on AccountLink. You may even set
up certain types of withdrawals of up to $1,500 per month by
telephone. You should consult the Statement of Additional
Information for more details.
Automatic Exchange Plans. You can authorize the Transfer
Agent to 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:
Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
403(b)(7) Custodial Plans for employees of eligible tax-
exempt organizations, such as schools, hospitals and charitable
organizations
SEP-IRAs (Simplified Employee Pension Plans) for small
business owners or people with income from self-employment,
including SAR/SEP-IRAs
Pension and Profit-Sharing Plans for self-employed persons
and other employers
401(k) prototype retirement plans for businesses
Please call the Distributor for the OppenheimerFunds plan
documents, which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account by selling
(redeeming) some or all of your shares on any regular business day.
Your shares will be sold at the next net asset value calculated
after your order is received and accepted by the Transfer Agent.
The Fund offers you a number of ways to sell your shares: in
writing, by using the Fund's Checkwriting privilege or by
telephone. You can also set up Automatic Withdrawal Plans to
redeem shares on a regular basis, as described above. If you have
questions about any of these procedures, and especially if you are
redeeming shares in a special situation, such as due to the death
of the owner, or from a retirement plan, please call the Transfer
Agent first, at 1-800-525-7048, for assistance.
Retirement Accounts. To sell shares in an OppenheimerFunds
retirement account in your name, call the Transfer Agent for a
distribution request form. There are special income tax withholding
requirements for distributions from retirement plans and you must
submit a withholding form with your request to avoid delay. If
your retirement plan account is held for you by your employer, you
must arrange for the distribution request to be sent by the plan
administrator or trustee. There are additional details in the
Statement of Additional Information.
Certain Requests Require a Signature Guarantee. To protect
you and the Fund from fraud, certain redemption requests must be in
writing and must include a signature guarantee in the following
situations (there may be other situations also requiring a
signature guarantee):
You wish to redeem more than $50,000 worth of shares and
receive a check
A redemption check is not payable to all shareholders listed
on the account statement
A redemption check is not sent to the address of record on
your account statement
Shares are being transferred to a Fund account with a
different owner or name
Shares are redeemed by someone other than the owners (such
as an Executor)
Where Can I Have My Signature Guaranteed? The Transfer
Agent will accept a guarantee of your signature by a number of
financial institutions, including: a U.S. bank, trust company,
credit union or savings association, or by a foreign bank that has
a U.S. correspondent bank, or by a U.S. registered dealer or broker
in securities, municipal securities or government securities, or by
a U.S. national securities exchange, a registered securities
association or a clearing agency. If you are signing on behalf of
a corporation, partnership or other business, or as a fiduciary,
you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that
includes:
Your name
The Fund's name
Your Fund account number (from your account statement)
The dollar amount or number of shares to be redeemed
Any special payment instructions
Any share certificates for the shares you are selling
The signatures of all registered owners exactly as the
account is registered, and
Any special requirements or documents requested by the
Transfer Agent to assure proper authorization of the person asking
to sell shares.
Use the following address for Send courier or Express Mail
requests by mail to: request to:
OppenheimerFunds Services 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.
To redeem shares through a service representative, call 1-
800-852-8457
To redeem shares automatically on PhoneLink, call 1-800-533-
3310
Whichever method you use, you may have a check sent to the
address on the account statement, or, if you have linked your Fund
account to your bank account on AccountLink, you may have the
proceeds wired to that bank account.
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.
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.
Checks can be written to the order of whomever you wish, but
may not be cashed at the Fund's bank or custodian.
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.
Checks must be written for at least $100.
Checks cannot be paid if they are written for more than your
account value. Remember: your shares fluctuate in value and you
should not write a check close to the total account value.
You may not write a check that would require the Fund to
redeem shares that were purchased by check or Asset Builder Plan
payments within the prior 10 days.
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:
Shares of the fund selected for exchange must be available
for sale in your state of residence
The prospectuses of this Fund and the fund whose shares you
want to buy must offer the exchange privilege
You must hold the shares you buy when you establish your
account for at least 7 days before you can exchange them; after the
account is open 7 days, you can exchange shares every regular
business day
You must meet the minimum purchase requirements for the fund
you purchase by exchange
Before exchanging into a fund, you should obtain and read
its prospectus
Shares of a particular class of the Fund may be exchanged only
for shares of the same class in the other Oppenheimer funds. For
example, you can exchange Class A shares of this Fund only for
Class A shares of another fund. At present, Oppenheimer Money
Market Fund, Inc. offers only one class of shares, which are
considered to be Class A shares for this purpose. In some cases,
sales charges may be imposed on exchange transactions. Please
refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
Exchanges may be requested in writing or by telephone:
Written Exchange Requests. Submit an OppenheimerFunds
Exchange Request form, signed by all owners of the account. Send
it to the Transfer Agent at the addresses listed in "How to Sell
Shares."
Telephone Exchange Requests. Telephone exchange requests may
be made either by calling a service representative at 1-800-852-
8457 or by using PhoneLink for automated exchanges, by calling 1-
800-533-3310. Telephone exchanges may be made only between accounts
that are registered with the same name(s) and address. Shares held
under certificates may not be exchanged by telephone.
You can find a list of Oppenheimer funds currently available
for exchanges in the Statement of Additional Information or obtain
one by calling a service representative at 1-800-525-7048. That
list can change from time to time.
There are certain exchange policies you should be aware of:
Shares are normally redeemed from one fund and purchased
from the other fund in the exchange transaction on the same regular
business day on which the Transfer Agent receives an exchange
request that is in proper form by the close of The New York Stock
Exchange that day, which is normally 4:00 P.M., but may be earlier
on some days. However, either fund may delay the purchase of
shares of the fund you are exchanging into up to 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.
Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange
request that will disadvantage it, or to refuse multiple exchange
requests submitted by a shareholder or dealer.
The Fund may amend, suspend or terminate the exchange
privilege at any time. Although the Fund will attempt to provide
you notice whenever it is reasonably able to do so, it may impose
these changes at any time.
For tax purposes, exchanges of shares involve a redemption
of the shares of the Fund you own and a purchase of the shares of
the other fund, which may result in a capital gain or loss. For
more information about taxes affecting exchanges, please refer to
"How to Exchange Shares" in the Statement of Additional
Information.
If the Transfer Agent cannot exchange all the shares you
request because of a restriction cited above, only the shares
eligible for exchange will be exchanged.
Shareholder Account Rules and Policies
Net Asset Value Per Share is determined for each class of
shares as of the close of The New York Stock Exchange, which is
normally 4:00 P.M., but may be earlier on some days, on each day
the Exchange is open, by dividing the value of the Fund's net
assets attributable to a 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.
The offering of shares may be suspended during any period in
which the determination of net asset value is suspended, and the
offering may be suspended by the Board of Trustees at any time the
Board believes it is in the Fund's best interest to do so.
Telephone Transaction Privileges for purchases, redemptions
or exchanges may be modified, suspended or terminated by the Fund
at any time. If an account has more than one owner, the Fund and
the Transfer Agent may rely on the instructions of any one owner.
Telephone privileges apply to each owner of the account and the
dealer representative of record for the account unless and until
the Transfer Agent receives cancellation instructions from an owner
of the account.
The Transfer Agent will record any telephone calls to verify
data concerning transactions and has adopted other procedures to
confirm that telephone instructions are genuine, by requiring
callers to provide tax identification numbers and other account
data or by using PINs, and by confirming such transactions in
writing. If the Transfer Agent does not use reasonable procedures
it may be liable for losses due to unauthorized transactions, but
otherwise neither the Transfer Agent nor the Fund will be liable
for losses or expenses arising out of telephone instructions
reasonably believed to be genuine. If you are unable to reach the
Transfer Agent during periods of unusual market activity, you may
not be able to complete a telephone transaction and should consider
placing your order by mail.
Redemption or transfer requests will not be honored until
the Transfer Agent receives all required documents in proper form.
From time to time, the Transfer Agent in its discretion may waive
certain of the requirements for redemptions stated in this
Prospectus.
Dealers that can perform account transactions for their
clients by participating in NETWORKING through the National
Securities Clearing Corporation are responsible for obtaining their
clients' permission to perform those transactions and are
responsible to their clients who are shareholders of the Fund if
the dealer performs any transaction erroneously or improperly.
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 and
Class C shares. Therefore, the redemption value of your shares may
be more or less than their original cost.
Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the
shareholder under the redemption procedures described above) within
7 days after the Transfer Agent receives redemption instructions in
proper form, except under unusual circumstances determined by the
Securities and Exchange Commission delaying or suspending such
payments. For accounts registered in the name of a broker-dealer,
payment will be forwarded within 3 business days. The Transfer
Agent may delay forwarding a check or processing a payment via
AccountLink for recently purchased shares, but only until the
purchase payment has cleared. That delay may be as much as 10 days
from the date the shares were purchased. That delay may be avoided
if you purchase shares by certified check or arrange with your bank
to provide telephone or written assurance to the Transfer Agent
that your purchase payment has cleared.
Involuntary redemptions of small accounts may be made by the
Fund if the account value has fallen below $200 for reasons other
than the fact that the market value of shares has dropped, and in
some cases involuntary redemptions may be made to repay the
Distributor for losses from the cancellation of share purchase
orders.
Under unusual circumstances, shares of the Fund may be
redeemed "in kind," which means that the redemption proceeds will
be paid with securities from the Fund's portfolio. Please refer to
"How to Sell Shares" in the Statement of Additional Information for
more details.
"Backup Withholding" of Federal income tax may be applied at
the rate of 31% from 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.
The Fund does not charge a redemption fee, but if your
dealer or broker handles your redemption, they may charge a fee.
That fee can be avoided by redeeming your Fund shares directly
through the Transfer Agent. Under the circumstances described in
"How To Buy Shares," you may be subject to a contingent deferred
sales charge when redeeming certain Class A, Class B and Class C
shares.
To avoid sending duplicate copies of materials to
households, the Fund will mail only one copy of each annual and
semi-annual report to shareholders having the same last name and
address on the Fund's records. However, each shareholder may call
the Transfer Agent at 1-800-525-7048 to ask that copies of those
materials be sent personally to that shareholder.
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 and Class C shares from net investment income on each
regular business day and pays those dividends to shareholders
monthly. Normally, dividends are paid on 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 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, 1996, 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 or Class C 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 year. Short-term capital gains are treated as
dividends for tax purposes. There can be no assurance that the
Fund will pay any capital gains distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are
reinvested. For other accounts, you have four options:
Reinvest All Distributions in the Fund. You can elect to
reinvest all dividends and long-term capital gains distributions in
additional shares of the Fund.
Reinvest Long-Term Capital Gains Only. You can elect to
reinvest long-term capital gains in the Fund while receiving
dividends by check or have them sent to your bank account on
AccountLink.
Receive All Distributions in Cash. You can elect to receive
a check for all dividends and long-term capital gains distributions
or have them sent to your bank on AccountLink.
Reinvest Your Distributions in Another Oppenheimer Fund
Account. You can reinvest all distributions in another Oppenheimer
fund account you have established.
Taxes. If your account is not a tax-deferred retirement account,
you should be aware of the following tax implications of investing
in the Fund. Long-term capital gains are taxable as long-term
capital gains when distributed to shareholders. It does not matter
how long you 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.
"Buying a Dividend": If you buy shares on or just before
the ex-dividend date, or just before the Fund declares a capital
gains distribution, you will pay the full price for the shares and
then receive a portion of the price back as a taxable dividend or
capital gain.
Taxes on Transactions: Share redemptions, including
redemptions for exchanges, are subject to capital gains tax.
Generally speaking, a capital gain or loss is the difference
between the price you paid for the shares and the price you
received when you sold them.
Returns of Capital: In certain cases distributions made by
the Fund may be considered a non-taxable return of capital to
shareholders. If that occurs, it will be identified in notices to
shareholders. A non-taxable return of capital may reduce your tax
basis in your Fund shares.
This information is only a summary of certain federal tax
information about your investment. More information is contained
in the Statement of Additional Information, and in addition you
should consult with your tax advisor about the effect of an
investment in the Fund on your particular tax situation.
<PAGE>
Appendix A
Description of Ratings-Categories of Rating Services
Description of Moody's Investors Service, Inc. Bond Ratings
Aaa: Bonds 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.<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
Reduced Class A Initial Sales Charge Rates for Certain
Former Quest Shareholders
Purchases by Groups, Associations and Certain Qualified
Retirement Plans. The following table sets forth the initial sales
charge rates for Class A shares purchased by a "Qualified
Retirement Plan" through a single broker, dealer or financial
institution, or by members of "Associations" formed for any purpose
other than the purchase of securities if that Qualified Retirement
Plan or that Association purchased shares of any of the Former
Quest for Value Funds or received a proposal to purchase such
shares from OCC Distributors prior to November 24, 1995. For this
purpose only, a "Qualified Retirement Plan" includes any 401(k)
plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a
single employer.
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.
Special Class A Contingent Deferred Sales Charge Rates
Class A shares of the Fund purchased by exchange of shares of
other Oppenheimer funds that were acquired as a result of the
merger of Former Quest for Value Funds into those Oppenheimer
funds, and which shares were subject to a Class A contingent
deferred sales charge prior to November 24, 1995 will be subject to
a contingent deferred sales charge at the following rates: if they
are redeemed within 18 months of the end of the calendar month in
which they were purchased, at a rate equal to 1.0% if the
redemption occurs within 12 months of their initial purchase and at
a rate of 0.50 of 1.0% if the redemption occurs in the subsequent
six months. Class A shares of any of the Former Quest for Value
Funds purchased without an initial sales charge on or before
November 22, 1995 will continue to be subject to the applicable
contingent deferred sales charge in effect as of that date as set
forth in the then-current prospectus for such fund.
Waiver of Class A Sales Charges for Certain Shareholders
Class A shares of the Fund purchased by the following
investors are not subject to any Class A initial or contingent
deferred sales charges:
Shareholders of the Fund who were shareholders of the AMA
Family of Funds on February 28, 1991 and who acquired shares of any
of the Former Quest for Value Funds by merger of a portfolio of the
AMA Family of Funds.
Shareholders of the Fund who acquired shares of any Former
Quest for Value Fund by merger of any of the portfolios of the
Unified Funds.
Waiver of Class A Contingent Deferred Sales Charge in
Certain Transactions
The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares of the Fund purchased by the
following investors who were shareholders of any Former Quest for
Value Fund:
Investors who purchased Class A shares from a dealer that is
or was not permitted to receive a sales load or redemption fee
imposed on a shareholder with whom that dealer has a fiduciary
relationship under the Employee Retirement Income Security Act of
1974 and regulations adopted under that law.
Participants in Qualified Retirement Plans that purchased
shares of any of the Former Quest For Value Funds pursuant to a
special "strategic alliance" with the distributor of those funds.
The Fund's Distributor will pay a commission to the dealer for
purchases of Fund shares as described above in "Class A Contingent
Deferred Sales Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge
Waivers
Waivers for Redemptions of Shares Purchased Prior to March
6, 1995
In the following cases, the contingent deferred sales charge
will be waived for redemptions of Class A, 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.
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.
Special Dealer Arrangements
Dealers who sold Class B shares of a Former Quest for Value
Fund to Quest for Value prototype 401(k) plans that were maintained
on the TRAC-2000 recordkeeping system and that were transferred to
an OppenheimerFunds prototype 401(k) plan shall be eligible for an
additional one-time payment by the Distributor of 1% of the value
of the plan assets transferred, but that payment may not exceed
$5,000 as to any one plan.
Dealers who sold Class C shares of a Former Quest for Value
Fund to Quest for Value prototype 401(k) plans that were maintained
on the TRAC-2000 recordkeeping system and (i) the shares held by
those plans were exchanged for Class A shares, or (ii) the plan
assets were transferred to an OppenheimerFunds prototype 401(k)
plan, shall be eligible for an additional one-time payment by the
Distributor of 1% of the value of the plan assets transferred, but
that payment may not exceed $5,000.
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER 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) comparing such values with the same investments over the same
time periods with The Lehman Aggregate Bond Index and The Salomon
World Government Bond Index. Set forth below are the relevant data
points that will appear on the linear graph. Additional
information with respect to the foregoing, including a description
of The 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(1) $ 9,525 $10,000 $10,000
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
Salomon
Brothers
Oppenheimer Lehman Bros. World
Fiscal Year Strategic Aggregate Government
(Period) Ended Income Fund B Bond Index Bond Index
- -------------- ------------- ------------ ----------
11/30/92(2) $10,000 $10,000 $10,000
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
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 $10,000
09/30/95 $10,309 $10,271 $ 9,953
09/30/96 $11,542 $10,774 $10,372
- -------------
(1) The Fund commenced operations on October 16, 1989.
(2) Class B shares of the Fund were first publicly offered on
November 30, 1992.
(3) Class C shares of the Fund were first publicly offered on May
26, 1995<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, Suite 3600
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.
PR0230.001.0897* Printed on recycled paper
