<PAGE>
OPPENHEIMER GLOBAL GROWTH & INCOME FUND
Supplement dated January 20, 1994
to the Prospectus dated January 20, 1994
For Use in the State of Missouri
In its operations, the Fund may utilize the following special techniques
when such use appears appropriate: leverage (borrowing to purchase
securities) and investment in "special situations" that the Fund's
investment adviser believes present opportunities for capital growth.
These techniques may be considered to be speculative investment methods
and subject an investment in the Fund to relatively greater risks and
costs that may not be present in a mutual fund that does not utilize such
techniques.
January 20, 1994 PI215
<PAGE>
OPPENHEIMER GLOBAL GROWTH & INCOME FUND
Supplement dated January 20, 1994
to the Prospectus dated January 20, 1994
For Use in the State of South Dakota
In its operations, the Fund may use leverage (borrowing to purchase
securities) and certain hedging instruments, including puts and calls,
when such use appears appropriate. These investment methods may be
considered to be speculative and subject an investment in the Fund to
relatively greater risks and costs that may not be present in a mutual
fund that does not utilize leverage.
January 20, 1994 PD215
<PAGE>
OPPENHEIMER GLOBAL GROWTH & INCOME FUND
Supplement dated January 20, 1994
to the Prospectus dated January 20, 1994
For Use in the State of Wisconsin
In its operations, the Fund may use leverage (borrowing to purchase
securities) and investment of up to 10% of its net assets in restricted
securities (securities unregistered under the Securities Act of 1933).
Leverage may be considered to be a speculative investment method. Both
techniques may subject an investment in the Fund to relatively greater
risks and costs that may not be present in a fund that does not utilize
such techniques.
January 20, 1994 PW215
<PAGE>
OPPENHEIMER GLOBAL GROWTH &
INCOME FUND
Two World Trade Center, New York, NY 10048-0203
Telephone 1-800-525-7048
Oppenheimer Global Growth & Income Fund (referred to in this
Prospectus as the "Fund") is a mutual fund with the investment objective
of seeking capital appreciation consistent with preservation of principal
while providing current income. The Fund emphasizes a combination of
investments in common stocks, convertible securities and fixed income
securities. The Fund will normally invest in at least four countries
(including the United States). The Fund may also write covered calls and
use certain hedging instruments. The Fund is not intended for investors
whose principal objective is assured income and conservation of capital.
The Fund offers two classes of shares which may be purchased at a
price equal to their respective net asset value per share, plus a sales
charge. The investor may elect to purchase shares with a sales charge
imposed (1) at the time of purchase (the "Class A shares"), or (2) on a
contingent deferred basis (the "Class C shares"). Class C shares are also
subject to an asset-based sales charge. The contingent deferred sales
charge (the "CDSC") will be imposed on most redemptions of Class C shares
within 12 months of purchase. These alternatives permit an investor to
choose the method of purchasing shares that is more beneficial to that
investor depending on the amount of the purchase, the length of time the
investor expects to hold the shares and other circumstances. See "How to
Buy Shares -Alternative Sales Arrangements" below for further details.
This Prospectus sets forth concisely information about the Fund that
a prospective investor should know before investing. A Statement of
Additional Information about the Fund (the "Additional Statement"), dated
January 20, 1994 has been filed with the Securities and Exchange
Commission (the "SEC") and is available without charge upon written
request to the Fund's Transfer and Shareholder Servicing Agent,
Oppenheimer Shareholder Services (the "Transfer Agent"), P.O. Box 5270,
Denver, Colorado 80217, or by calling the Transfer Agent at the toll-free
number shown above. The Additional Statement (which is incorporated in
its entirety by reference in this Prospectus) contains more detailed
information about the Fund and its management, including more complete
information as to certain risk factors.
Investors are advised to read and retain this Prospectus for future
reference. These securities may be considered to be speculative. Shares
of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of
principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus is effective January 20, 1994.
<PAGE>
Table Of Contents
Page
Fund Expenses 2
Financial Highlights 4
The Fund and Its Investment Policies 5
Special Investment Methods 7
Investment Restrictions 12
Management of the Fund 12
How to Buy Shares 13
Alternative Sales Arrangements 13
Class A Shares 14
Class A Sales Charge Table 15
Class A Contingent Deferred Sales Charge 15
Reduced Sales Charges for Class A Purchases 16
Class A Service Plan 17
Class C Shares 18
Class C Contingent Deferred Sales Charge 18
Class C Distribution and Service Plan 19
Purchase Programs for Class A and Class C Shares 20
AccountLink 20
PhoneLink 20
Asset Builder Plans 20
How to Redeem Shares 21
Regular Redemption Procedures 21
Telephone Redemptions 21
Distributions from Retirement Plans 22
Automatic Withdrawal and Exchange Plans 22
Repurchase 23
Reinvestment Privilege 23
General Information on Redemptions 23
Exchanges of Shares and Retirement Plans 24
Dividends, Distributions and Taxes 26
Additional Information 27
Fund Expenses
The following table sets forth the fees that an investor in the Fund
might pay and the expenses paid by the Fund during the Fund's fiscal year
ended September 30, 1993. Class C shares were not publicly offered during
that period.
Shareholder Transaction Expenses
Class A Class C
Shares Shares
Maximum Sales Charge on
Purchases (as a percentage of
offering price) 5.75% None
Sales Charge on Reinvested
Dividends None None
Maximum Contingent Deferred
Sales Charge on Redemptions None(1) 1.0%(2)
Redemption Fees None None
Exchange Fee $5.00 $5.00
Annual Fund Operating Expenses
(Estimated as to Class C Shares)
(as a percentage of average net assets)
Class A Class C
Shares Shares
Management Fees .75% .75%
12b-1 (Distribution and/or
Service Plan) Fees .25% 1.00%
Other Expenses .56% .56%
Total Fund Operating Expenses 1.56% 2.31%
_________________
(1) Certain Class A share purchases of $1 million or more are not subject
to front-end sales charges, but a contingent deferred sales charge
(maximum of 1.0%) is imposed on the proceeds of such shares redeemed
within 18 months of the end of the calendar month of their purchase
subject to certain conditions. See "How to Buy Shares--Class A
Contingent Deferred Sales Charge," below.
(2) A 1.0% contingent deferred sales charge is imposed on the proceeds of
Class C shares redeemed within 12 months of their purchase, subject
to certain conditions. See "How to Buy Shares - Class C Contingent
Deferred Sales Charge," below.
The purpose of this table is to assist an investor in understanding
the various costs and expenses that an investor in the Fund will bear
directly (shareholder transaction expenses) or indirectly (annual fund
operating expenses). The sales charge rate shown for Class A shares in
the current maximum rate applicable to purchases of Class A shares of the
Fund. Investors in Class A shares may be entitled to reduced sales
charges based on the amount purchased or the value of shares already owned
and may be subject to a contingent deferred sales charge in limited
circumstances. See "How to Buy Shares - Class A Contingent Deferred Sales
Charge" below. Class C shares were not publicly sold prior to December
1, 1993. The "Annual Fund Operating Expenses" as to Class C shares are
estimates based on amounts that would have been payable that period
assuming that Class C shares were outstanding during such fiscal year.
The actual amount of such fees and expenses in the current and future
years will depend on a number of factors, including the actual average net
assets of Class C shares during such years. "Other Expenses" includes
such expenses as custodial and transfer agent fees, audit and legal and
other business operating expenses, but excludes extraordinary expenses.
For further details, see "Purchase, Redemption and Pricing of Shares -
Dual Class Methodology" and the Fund's financial statements, both included
in the Additional Statement.
The following examples apply the above-stated expenses and the
current maximum sales charges to a hypothetical $1,000 investment in
shares of the Fund over the time periods shown below, assuming a 5% annual
rate of return on the investment. The amounts shown below are the
cumulative costs of such hypothetical $1,000 investment for the periods
shown, and except as indicated in lines 3 and 4, assume that the shares
are redeemed at the end of each stated period.
1 year 3 years 5 years 10 years(1)
1. Class A Shares $72 $104 $138 $232
2. Class C Shares $33 $ 72 $124 $265
3. Class A Shares,
assuming no
redemption $72 $104 $138 $232
4. Class C Shares,
assuming no
redemption $23 $ 72 $124 $265
- --------------------
(1) Long-term shareholders of Class C shares could pay the economic
equivalent, through the asset-based sales charge imposed on Class C
shares, of more than the maximum front-end sales charges permitted
under applicable regulatory requirements.
These examples should not be considered a representation of past or
future expenses or performance. Expenses are subject to change and actual
performance and expenses may be less or greater than those illustrated
above.
<PAGE>
Financial Highlights
Selected data for a Class A share of the Fund outstanding throughout each
period
The information in the table below has been audited by KPMG Peat
Marwick, independent auditors, whose report on the financial statements
of the Fund for the fiscal year ended September 30, 1993 is included in
the Additional Statement. Class C shares were not publicly offered during
that period. Accordingly, no information on Class C shares is reflected
in the table below or in the Fund's other financial statements.
<TABLE>
<CAPTION>
Year Ended September 30,
1993 1992 1991+
<S> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $ 11.91 $ 12.43 $ 11.43
Income (loss) from investment operations:
Net investment income .29 .26 .37
Net realized and unrealized gain (loss) on 2.17 (.47) .95
investments and translation of assets and
liabilities in foreign currencies
Total income (loss) from investment operations 2.46 (.21) 1.32
Dividends and distributions to shareholders:
Dividends from net investment income (.17) (.28) (.32)
Distributions from net realized gain on (.11) (.03) --
investments
Total dividends and distributions to shareholders (.28) (.31) (.32)
Net asset value, end of period $ 14.09 $ 11.91 $ 12.43
Total Return, at Net Asset Value** 21.00% (1.76)% 11.73%
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $86,019 $49,735 $29,239
Average net assets (in thousands) $59,951 $37,116 $19,340
Number of shares outstanding at end of period (in 6,104 4,177 2,352
thousands)
Ratios to average net assets:
Net investment income 2.68% 2.41% 4.05%*
Expenses 1.56% 1.74% 1.94%*
Portfolio turnover rate*** 90.6% 51.3% 23.5%
<FN>
*Annualized.
**Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns.
***The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
Purchases and sales of investment securities (excluding short-term
securities) for the year ended September 30, 1993 were $69,553,908 and
$48,146,611, respectively.
+For the period from October 22, 1990 (commencement of operations) to
September 30, 1991.
</TABLE>
<PAGE>
The Fund And Its Investment Policies
The Fund is an open-end, diversified management investment company
organized in June 1990 as a Massachusetts business trust. The Fund seeks
capital appreciation consistent with preservation of principal while
providing current income. Depending on the assessment of market
conditions by Oppenheimer Management Corporation, the Fund's investment
adviser (the "Manager"), the Fund may emphasize investments in common
stocks and securities convertible into common stocks, or securities
acquired primarily to produce income, or in a combination of both types
of investments. When the investment climate is viewed as favorable,
common stocks may be more heavily emphasized. The Fund will invest in
foreign as well as domestic securities and normally will maintain
investments in at least four countries (including the United States).
While the Fund may invest in securities having appreciation possibilities,
such securities will not be selected which, in the view of the Manager,
would involve undue risk. The Fund's investment policies and practices
are not "fundamental" policies (as defined below) unless a particular
policy is identified as fundamental. The Board may change non-fundamental
investment policies without shareholder approval.
Securities acquired primarily to produce income are bonds, notes,
debentures and income-producing common stocks. All fixed-income
securities are subject to two types of risks: credit risk and interest
rate risk. Credit risk relates to the ability of the issuer to meet
interest or principal payments or both as they become due. Interest rate
risk refers to the fluctuations in value of fixed-income securities
resulting solely from the inverse relationship between price and yield of
fixed-income securities. Investments in bonds and debentures will be
based on the Fund's investment objective and will not be limited to issues
having specific ratings. The Fund may invest in bonds and debentures
rated as low as "C" or "D" by Moody's Investors Service, Inc. ("Moody's")
or Standard & Poor's Corporation ("Standard & Poor's"). Such lower
ratings indicate that the obligations are speculative in a high degree and
may be in default. As a non-fundamental policy, the Fund will invest no
more than 25% of its total assets in non-investment grade securities,
which are those securities rated below "BBB" by Standard & Poor's or below
"Baa" by Moody's, although the Fund currently intends to invest no more
than 15% of its total assets in securities rated below BBB/Baa. The Fund
is not obligated to dispose of securities that have been downgraded below
investment grade. The Appendix of the Additional Statement describes
these rating categories. The Manager does not rely solely on the ratings
of rated securities in making investment decisions but evaluates other
economic and business factors affecting the issuer as well. The primary
advantage of high yield, lower-rated securities is their attractive
investment return. However, high yield, high risk securities, whether
rated or unrated, often have speculative characteristics and may be
subject to greater market fluctuations and risk of loss of income and
principal than lower yielding, higher rated fixed-income securities.
The amount of dividends paid by the Fund may fluctuate. In the event
of uncertain market or economic conditions, the Fund may adopt a temporary
defensive position. See "Temporary Investments." The Fund is not
intended for investors whose principal objective is assured income and
conservation of capital. Since market risks are inherent in all
investments to varying degrees, there can be no assurance that the Fund
will meet its investment objective.
International Securities
The Fund may invest without limit in "foreign securities" (as defined
below) and under normal circumstances, as a matter of fundamental policy,
the Fund will maintain investments in at least three foreign countries.
The Fund may invest in any country, developed or undeveloped, where the
Manager believes there is a potential to achieve the Fund's investment
objective. Investments in securities of issuers in non-industrialized
countries generally involve more risk and may be considered highly
speculative. "Foreign securities" are equity and debt securities issued
by companies organized under the laws of countries other than the U.S. and
debt securities issued by foreign governments, which securities are traded
on foreign securities exchanges or in foreign over-the-counter markets.
Securities of foreign issuers: (i) represented by American Depositary
Receipts, (ii) traded in the U.S. over-the-counter markets or (iii) listed
on a U.S. securities exchange are not considered "foreign securities"
because they are not subject to many of the special considerations and
risks (discussed below) that apply to investments in foreign securities
traded and held abroad.
The Fund may invest in debt obligations issued or guaranteed by
foreign corporations, certain supranational entities (such as the World
Bank) and foreign governments (including political subdivisions having
taxing authority) or their agencies or instrumentalities and debt
obligations issued by U.S. corporations denominated in non-U.S.
currencies. These investments may include (a) U.S. dollar-denominated
debt obligations known as "Brady Bonds", which are issued for the exchange
of existing commercial bank loans to foreign entities for new obligations
that are generally collateralized by zero coupon Treasury securities
having the same maturity, (b) debt obligations such as bonds (including
sinking fund and callable bonds), (c) debentures and notes (including
variable and floating rate instruments), and (d) preferred stocks and zero
coupon securities. Foreign securities that the Fund may purchase may be
denominated in U.S. dollars or in non-U.S. currencies. With respect to
the Fund's portfolio investments held abroad, the countries in which such
investments may be held and the sub-custodians holding them must be, in
most cases, approved by the Fund's Board of Trustees under applicable SEC
rules. The Fund may convert U.S. dollars into foreign currency, but only
to effect securities transactions and not to hold such currency as an
investment.
Investment in foreign securities involves considerations and risks
not associated with investment in securities of U.S. issuers. Foreign
issuers are not required to use accounting methods that correspond to
generally-accepted accounting principles. If foreign securities are not
registered under the Securities Act of 1933, as amended (the "Securities
Act"), the issuer may not have to comply with the disclosure requirements
of the Securities Exchange Act of 1934, as amended. The values of foreign
securities investments will be affected by a variety of factors including,
among others, incomplete or inaccurate information available as to foreign
issuers, changes in currency rates, exchange control regulations or
currency blockage, or expropriation or nationalization of assets, or
changes in governmental administrative or economic or monetary policy in
the U.S. or abroad. Additional costs may be incurred in connection with
investments in foreign securities because of generally higher foreign
commissions and the additional custodial costs associated with monitoring
foreign securities. A risk of Brady Bonds is that in the event of a
default with respect to collateralized Brady Bonds as a result of which
the payment obligations of the issuer are accelerated, the zero coupon
U.S. Treasury securities held as collateral for the payment of principal
will not be distributed to investors, nor will such obligations be sold
and the proceeds distributed. See "Investment Objective and Policies--
Foreign Securities" in the Additional Statement as to additional possible
rewards and risks of investing in foreign securities.
As of September 30, 1992, the Fund had approximately 68.4% of its
total assets invested in foreign securities. When more than 50% of its
total assets are invested in foreign securities at the end of any fiscal
year, the Fund may elect the application of Section 853 of the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code"), to permit
shareholders to take a credit (or a deduction) for foreign income taxes
paid by the Fund. Such foreign tax credit or deduction is subject to
certain limitations under the Internal Revenue Code. See "Total Return,
Dividends and Tax Information--Tax Status of the Fund's Dividends and
Distributions" in the Additional Statement for further discussion.
Domestic Securities
-- Mortgage-Backed Securities and CMO's. The Fund's investments may
include securities that represent participation interests in pools of
residential mortgage loans, including collateralized mortgage-backed
obligations ("CMO's"), which may be issued or guaranteed by: (i) agencies
or instrumentalities of the U.S. Government (e.g., Ginnie Mae's, Freddie
Mac's and Fannie Mae's), or (ii) private issuers. Mortgage-backed
securities provide monthly payments that are, in effect, a "pass through"
of the monthly interest and principal payments (including any prepayments)
made by the individual borrowers on the pooled mortgage loans. The Fund's
reinvestment of scheduled principal payments and unscheduled prepayments
it receives may occur at lower rates than the original investment, thus
reducing the yield of the Fund. The issuer's obligations to make interest
and principal payments is secured by the underlying portfolio of mortgages
or mortgage-backed securities. Mortgage-backed securities created by
private issuers may be supported by various forms of insurance or
guarantees. There can be no assurance that private issuers will be able
to meet their obligations.
The Fund may also enter into "forward roll" transactions under which
it sells the mortgage-backed securities in which it may invest to banks
or other permitted entities and simultaneously agrees to repurchase a
similar security from that party at a later date at an agreed-upon price.
Forward rolls are considered to be a borrowing by the Fund. The principal
risk of the roll is the risk of default by the counterparty. See "Special
Investment Methods--Borrowing."
-- Asset-Backed Securities. The Fund may invest in securities that
represent undivided fractional interests in pools of consumer loans,
similar in structure to the mortgage-backed securities in which the Fund
may invest, described below. Payments of principal and interest are
passed through to holders of asset-backed securities and are typically
supported by some form of credit enhancement, such as a letter of credit,
surety bond, limited guarantee by another entity or by having a priority
to certain of the borrower's other obligations. The degree of credit
enhancement varies and generally applies, until exhausted, to only a
fraction of the asset-backed security's par value. If the credit
enhancement of an asset-backed security held by the Fund has been
exhausted, and if any required payments of principal and interest are not
made with respect to the underlying loans, the Fund may then experience
losses or delays in receiving payment and a decrease in the value of the
asset-backed security. Further details are set forth in the Additional
Statement under "Investment Objective and Policies--Asset-Backed
Securities."
Warrants and Rights
The Fund may invest up to 10% of its total assets in warrants and
rights (other than those that have been acquired in units or attached to
other securities). However, the Fund has undertaken, that its investments
in warrants and rights shall not exceed 5% of its net assets, and that
warrants not listed on the New York and American Stock Exchanges shall not
exceed 2% of its net assets. Warrants are options to purchase equity
securities at specified prices valid for a specific period of time.
Rights are similar to warrants, but normally have a short duration and are
distributed directly by the issuer to its shareholders. For further
details, see "Investment Objective and Policies--Warrants and Rights" in
the Additional Statement.
Temporary Investments
Under normal circumstances, the Fund may hold a portion of its assets
in cash equivalents (commercial paper, Treasury bills and U.S. Government
securities maturing in one year or less) for day-to-day operating
purposes. Under unusual market or economic conditions (including drastic
market fluctuations), for temporary defensive purposes, the Fund may
invest up to 100% of its assets in: (i) obligations issued or guaranteed
by the U.S. Government, its instrumentalities or agencies, (ii)
certificates of deposit, bankers' acceptances, time deposits, and letters
of credit if they are payable in the United States or London, England and
are issued or guaranteed by a domestic or foreign bank having total assets
in excess of $1 billion, (iii) commercial paper rated in the three highest
categories by Standard & Poor's or Moody's and/or (iv) short-term debt
securities (i.e., those maturing in one year or less from the date of
purchase), including rated or unrated bonds, debentures and preferred
stocks.
Special Investment Methods
In pursuing its investment objective, the Fund may use the following
special investment methods.
Borrowing
From time to time, the Fund may increase its ownership of securities
by borrowing up to 10% of the value of its total assets from banks on an
unsecured basis and investing the borrowed funds (on which the Fund will
pay interest), subject to the 300% asset coverage requirement of the
Investment Company Act of 1940, as amended (the "Investment Company Act").
"Forward roll" transactions, discussed above, are considered to be a form
of borrowing by the Fund subject to the asset coverage requirement.
Purchasing securities with borrowed funds is a speculative investment
method known as leverage. There are risks associated with leveraging
purchases of portfolio securities by borrowing, including a possible
reduction of income and increased fluctuation of net asset value per
share. For further discussion, see "Special Investment Methods--
Borrowing" in the Additional Statement.
Loans of Portfolio Securities
To attempt to increase its income and for liquidity purposes, the
Fund may lend its portfolio securities (other than in repurchase
transactions) to qualified borrowers if the loan is collateralized in
accordance with applicable regulatory requirements and if, after any loan,
the value of securities loaned does not exceed 25% of the value of the
Fund's total assets. The Fund presently does not intend that the value
of securities loaned in the coming year will exceed 5% of the value of the
Fund's total assets. See "Special Investment Methods--Loans of Portfolio
Securities" in the Additional Statement for further information.
Repurchase Agreements
The Fund may acquire securities subject to repurchase agreements to
generate income for liquidity purposes to meet anticipated redemptions,
or pending the investment of proceeds from sales of Fund shares or
settlement of purchases of portfolio investments. The Fund's repurchase
agreements will be fully collateralized. However, if the seller of the
securities fails to pay the agreed-upon repurchase price on the delivery
date, the Fund's risks may include the costs of disposing of the
collateral for the agreement and losses that might result from any delays
in foreclosing on the collateral. The Fund will not enter into a
repurchase agreement that will cause more than 10% of the Fund's net
assets to be subject to repurchase agreements maturing in more than seven
days. There is no limit on the amount of the Fund's net assets that may
be subject to repurchase agreements maturing in seven days or less. See
"Special Investment Methods--Repurchase Agreements" in the Additional
Statement for more details.
Restricted and Illiquid Securities
The Fund will not purchase or otherwise acquire any security that may
be "illiquid" by virtue of the absence of a readily-available market or
because its disposition would be subject to legal restrictions
("restricted securities") if, as a result, more than 15% of the Fund's net
assets would be invested in securities that are illiquid (including
repurchase agreements maturing in more than seven days). This policy
applies to the acquisition of over-the-counter options held by the Fund
and a portion of assets used to cover such options, and participation
interests in senior, fully-secured floating rate loans that are made
primarily to U.S. companies. Such participation interests, which may take
the form of interests in, or assignments of, the loan, are acquired from
banks that have made loans or are members of a lending syndicate. This
policy does not limit the acquisition of restricted securities eligible
for resale to qualified institutional buyers pursuant to Rule 144A under
the Securities Act that are determined to be liquid by the Fund's Board
of Trustees or by the Manager under Board-approved guidelines. See
"Special Investment Methods--Restricted and Illiquid Securities" in the
Additional Statement for further details. The Fund currently intends to
invest no more than 10% of its net assets in illiquid or restricted
securities, excluding restricted securities eligible for resale pursuant
to Rule 144A under the Securities Act that are determined to be liquid by
the Board of Trustees or by the Manager under Board-approved guidelines.
When-Issued and Delayed Delivery Transactions
The Fund may invest in securities on a "when-issued" or "delayed
delivery" basis. In those transactions, the Fund obligates itself to
purchase or sell securities with delivery and payment to occur at a later
date to secure what is considered to be an advantageous price and yield
at the time the obligation is entered into. The price, which is generally
expressed in yield terms, is fixed at the time the commitment to purchase
is made, but delivery and payment for when-issued securities take place
at a later date (normally within 45 days of purchase). The Fund is
subject to the risk of adverse market fluctuation between purchase and
settlement. During the period between purchase and settlement, no payment
is made by the Fund to the issuer and no interest accrues to the Fund from
the investment. Although the Fund is subject to the risk of adverse
market fluctuation between purchase and settlement, the Manager does not
believe that the Fund's net asset value or income will be materially
adversely affected by its purchase of securities on a "when-issued" basis.
See "When-Issued and Delayed-Delivery Transactions" in the Additional
Statement for more details.
Writing Covered Calls
The Fund may write (i.e., sell) call options ("calls") on securities
and Futures (discussed below) that are traded on U.S. and foreign
securities exchanges and over-the-counter markets to enhance income
through the receipt of premiums from expired calls and any net profits
from closing purchase transactions. After any such sale, up to 100% of
the Fund's total assets may be subject to calls. All such calls written
by the Fund must be "covered" while the call is outstanding (i.e., the
Fund must own the securities subject to the call or other securities
acceptable for applicable escrow requirements). Calls on Futures must be
covered by deliverable securities or by liquid assets segregated to
satisfy the Futures contract. If a call written by the Fund is exercised,
the Fund foregoes any possible profit from an increase in the market price
of the underlying security over the exercise price less the commissions
paid on the sale. In addition, the Fund could experience capital losses
that might cause previously distributed short-term capital gains to be
recharacterized as non-taxable return of capital to shareholders.
Hedging
As noted above, the Fund may write covered calls to enhance income.
For hedging purposes as a temporary defensive maneuver, the Fund may use
Stock Index Futures, Interest Rate Futures and Bond Index Futures (each
as defined below) (collectively, "Futures"); Forward Contracts (defined
below); and call and put options on securities, Futures, broadly-based
indices and foreign currencies and interest rate swap transactions (all
of the foregoing are referred to as "Hedging Instruments"). Hedging
Instruments may be used to attempt to (i) protect against declines in the
market value of the Fund's portfolio securities or Futures, and thus
protect the Fund's net asset value per share against downward market
trends, (ii) protect the Fund's unrealized gains in the value of its
securities that have appreciated, (iii) facilitate selling portfolio
securities for investment reasons, (iv) establish a position in the
securities markets as a temporary substitute for purchasing particular
securities, or (v) reduce the risk of adverse currency fluctuations. A
call or put may be purchased only if, after such purchase, the value of
all call and put options held by the Fund would not exceed 5% of the
Fund's total assets. All puts and calls on securities, Futures or options
on such Futures purchased or sold by the Fund will be listed on a national
securities or commodities exchange or traded in the over-the-counter
market. The Fund will not use Futures and options on Futures for
speculation. At present, the Fund does not intend to purchase or sell
Futures, Forward Contracts and options on Futures if, after any such
purchase, the sum of initial margin deposits on Futures and premiums paid
for related options exceeds 5% of the value of the Fund's total assets.
The Hedging Instruments the Fund may use are described below.
-- Stock Index Futures. The Fund may buy and sell futures contracts
only if they relate to broadly-based stock indices ("Stock Index
Futures"). A stock index is "broadly-based" if it includes stocks that
are not limited to issuers in any particular industry or group of
industries. Stock Index Futures obligate one party to accept, and the
other party to make, delivery of cash equal to the difference between the
stock index value at the close of trading of the contract and the exercise
price of the futures contract times a specified multiple which determines
the total dollar value for each point of difference. No physical delivery
of the underlying stocks in the index is made. Generally, contracts are
closed out prior to the expiration date of the contract.
-- Interest Rate Futures and Bond Index Futures. The Fund may buy and
sell futures contracts that relate to debt securities ("Interest Rate
Futures") or to bond indices ("Bond Index Futures"). An Interest Rate
Future obligates the seller to deliver and the purchaser to take a
specific type of debt security at a specific future date for a fixed
price. That obligation may be satisfied by actual delivery of the debt
security or by entering into an offsetting contract. A bond index assigns
relative values to the bonds included in that index and is used as a basis
for trading long-term Bond Index Futures contracts. Bond Index Futures
reflect the price movements of bonds included in the index. They differ
from Interest Rate Futures in that settlement is made in cash rather than
by delivery.
-- Purchasing Calls on Securities and Futures. The Fund may purchase
calls on securities or on Futures that are traded on U.S. and foreign
securities exchanges or over-the-counter markets in order to protect
against the possibility that the Fund's portfolio will not fully
participate in an anticipated rise in value of the long-term securities
market. The value of securities underlying calls purchased by the Fund
will not exceed the value of the Fund's portfolio invested in cash or cash
equivalents (i.e., securities with maturities of less than one year).
-- Puts on Securities and Futures. The Fund may purchase put options
("puts") that relate to securities (whether or not it holds such
securities in its portfolio) or Futures. It may also write puts on
securities or Futures in an amount up to 50% of its total assets only if
such puts are covered by segregated liquid assets. In writing puts, there
is the risk that the Fund may be required to buy the underlying security
at a disadvantageous price.
-- Foreign Currency Options. The Fund may purchase and write puts and
calls on foreign currencies that are traded on a securities or commodities
exchange or quoted by major recognized dealers in such options, for the
purpose of protecting against declines in the dollar value of foreign
securities and against increases in the dollar cost of foreign securities
to be acquired. If a rise is anticipated in the dollar value of a foreign
currency in which securities to be acquired are denominated, the increased
cost of such securities may be partially offset by purchasing calls or
writing puts on that foreign currency. If a decline in the dollar value
of a foreign currency is anticipated, the decline in value of portfolio
securities denominated in that currency may be partially offset by writing
calls or purchasing puts on that foreign currency. However, in the event
of currency rate fluctuations adverse to the Fund's position, it would
either lose the premium it paid and incur transactions costs, or purchase
or sell the foreign currency at a disadvantageous price.
-- Forward Contracts. The Fund may enter into foreign currency
exchange contracts ("Forward Contracts"), which obligate the seller to
deliver and the purchaser to take a specific amount of foreign currency
at a specific future date for a fixed price. The Fund may enter into a
Forward Contract in order to "lock in" the U.S. dollar price of a security
denominated in a foreign currency which it has purchased or sold but which
has not yet settled, or to protect against a possible loss resulting from
an adverse change in the relationship between the U.S. dollar and a
foreign currency. There is a risk that use of Forward Contracts may
reduce the gain that would otherwise result from a change in the
relationship between the U.S. dollar and a foreign currency. Forward
Contracts include standardized foreign currency futures contracts that are
traded on exchanges and are subject to procedures and regulations
applicable to other Futures.
The Fund may also enter into a Forward Contract to sell a foreign
currency denominated in a currency other than that in which the underlying
security is denominated. This is done in the expectation that there is
a greater correlation between the foreign currency of the Forward Contract
and the foreign currency of the underlying investment than between the
U.S. dollar and the foreign currency of the underlying investment. This
technique is referred to as "cross hedging." The Fund may also cross-
hedge by entering into a Forward Contract to sell a foreign currency and
receive a second foreign currency, both of which differ from the foreign
currency in which the underlying security is denominated. This is done
in the expectation that there is a greater correlation between the foreign
currencies of the Forward Contract and the foreign currency of the
underlying investment than between the U.S. dollar and the foreign
currency of the underlying investment. The success of cross hedging is
dependent on many factors, including the ability of the Manager to
correctly identify and monitor the correlation between foreign currencies
and the U.S. dollar. To the extent that the correlation is not identical,
the Fund may experience losses or gains on both the underlying security
and the cross currency hedge.
The Fund will not speculate in foreign currency exchange contracts.
There is no limitation as to the percentage of the Fund's assets that may
be committed to foreign currency exchange contracts. The Fund does not
enter into such Forward Contracts or maintain a net exposure in such
contracts to the extent that the Fund would be obligated to deliver an
amount of foreign currency in excess of the value of the Fund's assets
denominated in that currency (unless the excess is covered by liquid, high
grade debt securities denominated in any currency), or enter into a cross
hedge unless it is denominated in a currency or currencies that the
Manager believes will have price movements that tend to correlate closely
with the currency in which the investment being hedged is denominated.
-- Interest Rate Swap Transactions. The Fund may enter into interest
rate swaps. In an interest rate swap, the Fund and another party exchange
their respective commitments to pay or receive interest on a security,
(e.g., an exchange of floating rate payments for fixed rate payments).
The Fund will not use interest rate swaps for leverage. Swap transactions
will be entered into only as to security positions held by the Fund. The
Fund may not enter into swap transactions with respect to more than 50%
of its total assets.
The Fund will segregate liquid assets (e.g., cash, U.S. Government
securities or other appropriate high grade debt obligations) equal to the
net excess, if any, of its obligations over its entitlements under the
swap and will mark to market that amount daily. The interest rate risk
of a swap is that the Fund will incur a net payment obligation as a result
of movements in interest rates. The credit risk of an interest rate swap
depends on the counterparty's ability to perform. The value of the swap
may decline if the counterparty's creditworthiness deteriorates. If the
counterparty defaults, the Fund risks the loss of the net amount of
interest payments that it is contractually entitled to receive. The Fund
may be able to reduce or eliminate its exposure to losses under swap
agreements either by assigning them to another party, or by entering into
an offsetting swap agreement with the same counterparty or another
creditworthy counterparty. See "Covered Calls and Hedging" in the
Additional Statement for further details.
-- Risks of Options and Futures Trading. "Special Investment
Methods-Covered Calls, Puts and Hedging" in the Additional Statement
contains more information about options and Futures, Forward Contracts,
segregation arrangements for Forward Contracts, the payment of premiums
for option trades, the tax effects, risks and possible benefits to the
Fund from options trading and information as to the Fund's other
limitations (which are not fundamental policies) on investment in Futures
and options thereon. There are certain risks in writing calls. If a call
written by the Fund is exercised, the Fund foregoes any profit from any
increase in the market price above the call price of the underlying
investment on which the call was written. In writing puts, there is the
risk that the Fund may be required to buy the underlying security at a
disadvantageous price. The principal risks of Futures trading are: (i)
possible imperfect correlation between the prices of the Futures and the
market value of the debt securities in the Fund's portfolio; (ii) possible
lack of a liquid secondary market for closing out a Futures position;
(iii) the need for additional skills and techniques beyond those required
for normal portfolio management; and (iv) losses on Futures resulting from
interest rate movements not anticipated by the Manager. A discussion of
the tax treatment of foreign currency exchange contracts may be found in
the Additional Statement under "Special Investment Methods--Covered Calls,
Puts and Hedging--Tax Aspects of Hedging and Covered Calls."
Special Situations
The Fund may invest in "special situations" that the Manager believes
present opportunities for capital growth. A "special situation" may
involve a merger, reorganization, or other unusual development that is
expected to occur and which, in the opinion of the Manager, may prompt an
increase in the value of an issuer's securities regardless of general
business conditions or the movement of the market as a whole. There is
a risk that the price of the security may decline if the anticipated
development fails to occur.
Short Sales Against-the-Box
The Fund may not sell securities short except in transactions
referred to as "short sales-against-the-box." No more than 15% of the
Fund's net assets will be held as collateral for such short sales at any
one time. See "Special Investment Methods--Short Sales Against-the-Box"
in the Additional Statement for further details.
Portfolio Turnover
Generally, the Fund will not trade in securities for short-term
profits. However, when circumstances warrant, to take advantage of
differences in securities prices and yield or of fluctuations in interest
rates consistent with its investment objectives, the Fund may sell
securities without regard to the length of time held. The degree of
portfolio activity will affect brokerage costs of the Fund. If the Fund
derives 30% or more of its gross income from the sale of securities held
less than three months, the Fund may fail to qualify under the Internal
Revenue Code as a regulated investment company and thereupon would lose
certain beneficial tax treatment of its income. See "Dividends,
Distributions and Taxes" below.
Investment Restrictions
The Fund has certain investment restrictions that, together with its
investment objective, are fundamental policies changeable only by the vote
of a "majority" (as defined in the Investment Company Act) of the Fund's
outstanding voting securities. Under certain of those restrictions, the
Fund cannot: (i) with respect to 75% of its assets, invest in securities
of any one issuer (other than securities issued by the U.S. Government or
any of its agencies or instrumentalities) if immediately thereafter (a)
more than 5% of the Fund's total assets would be invested in securities
of that issuer, or (b) the Fund would then own more than 10% of that
issuer's voting securities; (ii) concentrate investments to the extent
that more than 25% of the value of its total assets is invested in
securities of issuers in the same industry (other than securities of the
U.S. Government, its agencies or instrumentalities).
The percentage restrictions described above and in the Additional
Statement, other than those described under "Special Investment Methods -
Borrowing," apply only at the time of investment and require no action
by the Fund as a result of subsequent changes in value of the investments
or size of the Fund. A supplementary list of investment restrictions is
contained in the Additional Statement.
Management Of The Fund
The Fund's Board of Trustees has overall responsibility for the
management of the Fund under the laws of Massachusetts governing the
responsibilities of trustees of business trusts. "Trustees and Officers"
in the Additional Statement identifies the Fund's Trustees and officers
and provides certain information about them. Subject to the authority of
the Fund's Board of Trustees, the Manager is responsible for day-to-day
management of the Fund's business, supervises the investment operations
of the Fund and the composition of its portfolio and furnishes the Fund
advice and recommendations with respect to investments, investment
policies and the purchase and sale of securities pursuant to an investment
advisory agreement with the Fund (the "Agreement").
William L. Wilby is a Vice President of the Manager who serves as the
Portfolio Manager and a Vice President of the Fund. Since September,
1991, he has been the person principally responsible for the day-to-day
management of the Fund's portfolio. During the past five years, Mr. Wilby
has also served as an officer and portfolio manager for other
OppenheimerFunds, prior to which he was an international investment
strategist at Brown Brothers, Harriman & Co., prior to which he was a
Managing Director and portfolio manager at AIG Global Investors.
The Agreement contains provisions relating to the selection of
brokers and dealers for the Fund's portfolio transactions. Subject to the
Agreement, the Manager may consider sales of shares of the Fund and other
investment companies managed by the Manager or its affiliates as a factor
in the selection of brokers or dealers for the Fund's portfolio
transactions. Under the Agreement, the Fund pays a monthly management fee
to the Manager at the following annual rates, computed on the net assets
of the Fund at the close of business each day, which rates are higher than
those paid by most other investment companies: 0.75% of the first $200
million of net assets, 0.72% of the next $200 million, 0.69% of the next
$200 million, 0.66% of the next $200 million and 0.60% of average net
assets over $800 million. See "Investment Management Services" in the
Additional Statement for further information about the Agreement,
including a discussion of expense arrangements, exculpation provisions and
brokerage practices.
The Manager has operated as an investment adviser since April 30,
1959. The Manager and its affiliates currently advise U.S. investment
companies with assets aggregating over $24 billion as of September 30,
1993, and having 1.8 million shareholder accounts. The Manager is owned
by Oppenheimer Acquisition Corp., a holding company owned in part by
senior management of the Manager and ultimately controlled by
Massachusetts Mutual Life Insurance Company, a mutual life insurance
company that also advises pension plans and investment companies.
How To Buy Shares
Alternative Sales Arrangements
Two classes of shares of the Fund are offered under the Fund's
"Alternative Sales Arrangements." The investor may elect to purchase
shares with a sales charge imposed (i) at the time of purchase or on a
contingent deferred basis on redemption of shares purchased in amounts
over $1 million (the "Class A shares"), or (ii) on a contingent deferred
basis (the "Class C shares"). The contingent deferred sales charge will
be imposed on most redemptions of Class C shares within 12 months of
purchase. The Alternative Sales Arrangements permit an investor to choose
the method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor
expects to hold shares and other relevant circumstances. The Fund's
distributor, Oppenheimer Funds Distributor, Inc. (the "Distributor"), will
not knowingly accept any order for $1 million or more of Class C shares
or of one or more of the "Eligible Funds" listed in "Right of
Accumulation" below, on behalf of a single investor (not including dealer
"street name" or omnibus accounts) because it generally will be more
advantageous for such investor to purchase Class A shares of such Eligible
Fund(s) instead. Investors should understand that the purpose and
function of the deferred sales charge and asset-based sales charge with
respect to Class C shares are the same as those of the initial sales
charge with respect to Class A shares. Any financial intermediaries or
other person entitled to receive compensation for selling or servicing
Fund shares may receive different compensation with respect to one class
of shares than the other.
The two classes of shares each represent an interest in the same
portfolio of investments of the Fund. However, as described in this
Prospectus, each class has different shareholder privileges and features.
The net income attributable to Class C shares and the dividends payable
on Class C shares will be reduced by incremental expenses borne solely by
that class, including the asset-based sales charge to which Class C shares
are subject. For further information, see "Purchase, Redemption and
Pricing of Shares" in the Additional Statement.
The Fund's shares of either class may be purchased through any dealer
or broker that has a sales agreement with the Distributor, a subsidiary
of the Manager. There are two ways to make an initial investment: either
(1) complete an OppenheimerFunds New Account Application and mail it with
payment to the Distributor at P.O. Box 5270, Denver, Colorado 80217 (if
no dealer or broker is named in the Application, the Distributor will be
listed as the dealer of record), or (2) order the shares through your
dealer or broker. Be certain to specify whether you intend to purchase
Class A shares or Class C shares. If no such instructions are provided,
initial investments will be made in Class A shares and subsequent
investments will be made in the same class as the most recent previous
investment.
The minimum initial investment is $1,000, except as otherwise
described in this Prospectus. Subsequent purchases must be at least $25,
and may be made (1) through authorized dealers or brokers, (2) by
forwarding payment to the Distributor at the above address with the names
of all account owners, the account number and the name of the Fund, (3)
automatically through Asset Builder Plans, or (4) by telephone using
AccountLink described below. Under an Asset Builder Plan, Automatic
Exchange Plan, military allotment plan, or 403(b)(7) custodial plan,
initial and subsequent investments must be at least $25. The minimum
initial and subsequent purchase requirements are waived on purchases made
by reinvesting dividends from any of the "Eligible Funds" listed in "Right
of Accumulation" below, or by reinvesting distributions from unit
investment trusts for which reinvestment arrangements have been made with
the Distributor. No share certificates will be issued for Class A shares
unless specifically requested in writing by an investor or the dealer or
broker.
The net asset value per share of each class is determined as of 4:00
P.M. (all references to time in this Prospectus mean New York time) each
day The New York Stock Exchange is open (a "regular business day") by
dividing the value of the Fund's net assets attributable to that class by
the number of shares of that class outstanding. The Fund's Board of
Trustees has established procedures for valuing the Fund's securities.
In general, those valuations are based on market value, with special
provisions for: (i) securities not having readily-available market
quotations, (ii) short-term debt securities and (iii) covered calls and
Hedging Instruments. Further details are in "Purchase, Redemption and
Pricing of Shares" in the Additional Statement. The net asset values per
share of Class A and Class C shares are expected to be substantially the
same; however, from time to time the net asset values of each class may
differ due to differences in expenses borne by each class, as discussed
under "Dual Class Methodology" in the Additional Statement.
All purchase orders received by the Distributor at its address in
Denver, Colorado prior to 4:00 P.M. on a regular business day are
processed at that day's offering price. However, an order received by the
Distributor from a dealer or broker after the offering price is determined
that day will receive such offering price if the order was received by the
dealer or broker from its customer prior to 4:00 P.M., and was transmitted
to and received by the Distributor prior to its close of business that day
(normally 5:00 P.M.). Purchase orders received on other than a regular
business day will be executed on the next succeeding regular business day.
The Distributor, in its sole discretion, may accept or reject any order
for the purchase of the Fund's shares. The sale of shares will be
suspended during any period in which the determination of net asset value
is suspended and may be suspended by the Fund's Board of Trustees whenever
the Board judges it in the best interest of the Fund to do so.
Class A Shares
Class A Shares are sold at their offering price, which (as that term
is used in this Prospectus and the Additional Statement) is net asset
value plus a front-end sales charge, except that as to certain purchases
described below that are not subject to a front-end sales charge, the
offering price is net asset value. The offering price is determined as
of 4:00 P.M. each regular business day. Class A shares may not be
converted into Class C shares.
The following table shows the regular front-end sales charge rates
for Class A shares for a "single purchaser" (defined below), together with
the dealer discounts paid to authorized dealers and the agency commissions
paid to authorized brokers (collectively, "commissions"):
- -------------------------------------------------------------------------
Front End
Front End Sales Charge
Sales Charge as Commission
as Approximate as
Percentage Percentage Percentage
of Offering of Amount of Offering
Amount of Purchase Price Invested Price
- -------------------------------------------------------------------------
Less than $25,000 5.75% 6.10% 4.75%
$25,000 or more
but less than $50,000 5.50% 5.82% 4.75%
$50,000 or more
but less than $100,000 4.75% 4.99% 4.00%
$100,000 or more
but less than $250,000 3.75% 3.90% 3.00%
$250,000 or more
but less than $500,000 2.50% 2.56% 2.00%
$500,000 or more
but less than $1 million 2.00% 2.04% 1.60%
$1 million or more None* None* None*
- -------------------------------------------------------------------------
* See "Class A Contingent Deferred Sales Charge," below.
Under certain circumstances, commissions up to the amount of the
entire sales charge may be reallowed to dealers or brokers, who might then
be deemed to be "underwriters" under the Securities Act. Commission rates
may vary among the funds for which the Manager and its affiliates act as
investment advisers.
The Distributor may advance up to 13 months' commissions to dealers
that have entered into special arrangements with the Distributor as to
purchases made by their clients under Oppenheimer Asset Builder Plans.
If a registered representative of a securities dealer sells more than $2.5
million of Class A shares of "Eligible Funds" other than "Money Market
Funds" (defined below) in a calendar year, the dealer firm is eligible to
send such representative, with a guest, to a three-day sales conference
(generally held in a resort), if one is sponsored and held by the
Distributor; or in lieu of sending such representative that firm may, at
its option, receive the equivalent cash value of such award as additional
commission. The Distributor may, from time to time, enter into
arrangements with specific dealers whereby the Distributor may make
additional payments to that dealer based, in part, on that dealer meeting
certain sales criteria. Such additional payments may be based on sales
for a specific period of time, shares of certain or all of the Eligible
Funds held by the dealer and/or its customers or some combination thereof.
Dealers whose sales of shares of "Eligible Funds" other than "Money
Market Funds" under OppenheimerFunds-sponsored 403(b)(7) custodial plans
exceed a rate of $5 million per year, calculated per calendar quarter,
will receive monthly one-half of the Distributor's retained commissions
on such sales. Dealers whose sales of such plans exceed a rate of $10
million per year, calculated per calendar quarter, will receive the
Distributor's entire retained commission on such sales.
-- Class A Contingent Deferred Sales Charge. On purchases of Class
A shares of any one or more of the "Eligible Funds" by a "single
purchaser" (defined below in "Right of Accumulation") aggregating $1
million or more, the Distributor will pay authorized dealers an amount
equal to 1.0% of the first $2.5 million of such purchases, plus 0.50% of
the next $2.5 million, plus 0.25% of such purchases in excess of $5
million. A contingent deferred sales charge (the "Class A CDSC") will be
deducted from the redemption proceeds of shares as to whose purchase the
Distributor has made such payments to dealers if the shares are redeemed
within 18 months of the end of the calendar month of their purchase. The
Class A CDSC shall be an amount equal to 1.0% of the lesser of the
aggregate net asset value of the redeemed shares (not including shares
purchased by reinvestment of dividends or capital gains) or the original
cost of such shares. However, the total Class A CDSC paid on such shares
will not exceed the aggregate commissions paid to dealers on all Class A
shares of "Eligible Funds" purchased subject to a Class A CDSC by that
"single purchaser."
The Class A CDSC does not apply to purchases at net asset value
described in "Other Circumstances" and will be waived in the case of
redemptions of shares made for: (i) retirement distributions (or loans)
to participants or beneficiaries from retirement plans qualified under
Section 401(a) of the Internal Revenue Code or from Individual Retirement
Accounts ("IRAs"), 403(b)(7) plans, deferred compensation plans created
under Section 457 of the Internal Revenue Code or other employee benefit
plans (collectively, "Retirement Plans"); (ii) returns of excess
contributions to such Retirement Plans; (iii) Automatic Withdrawal Plan
payments limited to no more than 12% of the original account value
annually; and (iv) involuntary redemptions of shares by operation of law
or under procedures set forth in the Fund's Declaration of Trust or as
adopted by the Fund's Board of Trustees. See "Transfers" in "Purchase,
Redemption and Pricing of Shares" in the Additional Statement for further
details.
Some or all of the proceeds of redeemed shares on which a Class A
CDSC was paid on redemption may be reinvested within six months of
redemption without sales charge at net asset value on the reinvestment
date if the investor notifies the Distributor that the privilege applies.
See "How to Redeem Shares--Reinvestment Privilege" below. Additionally,
no Class A CDSC is charged on exchanges, pursuant to the Fund's Exchange
Privilege (described below), of shares purchased subject to a Class A
CDSC, except that if the Class A shares acquired by exchange are redeemed
within 18 months of the end of the calendar month of the initial purchase
of the exchanged shares, the Class A CDSC will apply. In determining
whether a Class A CDSC is payable, and the amount of any such charge,
shares not subject to a Class A CDSC are redeemed first, including shares
purchased by reinvestment of dividends and capital gains distributions,
and then other shares are redeemed in the order of purchase.
-- Reduced Sales Charges For Class A Purchases. The sales charge
rates in the table above may be reduced as follows:
Right of Accumulation. In calculating the sales charge rate
applicable to current purchases of Class A shares, a single purchaser is
entitled to accumulate current purchases with the greater of (1) amounts
previously paid for, or (2) the current value (at offering price) of Class
A shares of the Fund and certain other Eligible Funds if sold subject to
an initial sales charge and if the investment is still held in one of the
Eligible Funds. The Eligible Funds are those for which the Distributor
or an affiliate acts as the distributor and include the following: (i) the
Fund, Oppenheimer Discovery Fund, Oppenheimer Target Fund, Oppenheimer
Tax-Free Bond Fund, Oppenheimer New York Tax-Exempt Fund, Oppenheimer
California Tax-Exempt Fund, Oppenheimer Pennsylvania Tax-Exempt Fund,
Oppenheimer Florida Tax-Exempt Fund, Oppenheimer High Yield Fund,
Oppenheimer Champion High Yield Fund, Oppenheimer Total Return Fund, Inc.,
Oppenheimer Mortgage Income Fund, Oppenheimer Time Fund, Oppenheimer U.S.
Government Trust, Oppenheimer Government Securities Fund, Oppenheimer
Insured Tax-Exempt Bond Fund, Oppenheimer Intermediate Tax-Exempt Bond
Fund, Oppenheimer Global Environment Fund, Oppenheimer Global Bio-Tech
Fund, Oppenheimer Investment Grade Bond Fund, Oppenheimer Value Stock
Fund, Oppenheimer Fund, Oppenheimer Global Fund, Oppenheimer Asset
Allocation Fund, Oppenheimer Special Fund, Oppenheimer Equity Income Fund,
Oppenheimer Gold & Special Minerals Fund, Oppenheimer Main Street Income
& Growth Fund, Oppenheimer Main Street California Tax-Exempt Fund,
Oppenheimer Strategic Income Fund, Oppenheimer Strategic Investment Grade
Bond Fund, Oppenheimer Strategic Income & Growth Fund and Oppenheimer
Strategic Short-Term Income Fund; and (ii) the following Money Market
Funds: Centennial Tax Exempt Trust, Centennial Money Market Trust,
Centennial America Fund, L.P., Centennial Government Trust, Centennial
California Tax Exempt Trust, Centennial New York Tax Exempt Trust,
Oppenheimer Money Market Fund, Inc., Daily Cash Accumulation Fund, Inc.,
Oppenheimer Cash Reserves and Oppenheimer Tax-Exempt Cash Reserves. There
is an initial sales charge on the purchase of Class A shares of each
Eligible Fund except the Money Market Funds (under certain circumstances
described above, redemption proceeds of Money Market Fund shares may be
subject to a CDSC). The reduced sales charge applies only to current
purchases.
The term "single purchaser" refers to: (i) an individual; (ii) an
individual and spouse purchasing shares of the Fund for their own account
or for trust or custodial accounts for their minor children; or (iii) a
fiduciary purchasing for any one trust, estate or fiduciary account,
including employee benefit plans created under Sections 401 or 457 of the
Internal Revenue Code, including related plans of the same employer. To
be entitled to a reduced sales charge under the Right of Accumulation, at
the time of purchase the purchaser must ask the Distributor for such
entitlement and provide the account number(s) for shares of Eligible Funds
owned by the "single purchaser," and the age of any minor children for
whom the shares are held.
Letter of Intent. By initially investing at least $1,000 and
submitting a Letter of Intent (the "Letter") to the Distributor, a single
purchaser may purchase Class A shares of the Fund and other Eligible Funds
(other than the Money Market Funds) during a 13-month period at the
reduced sales charge rates or at net asset value but subject to the Class
A CDSC (described above), if applicable, applying to the aggregate amount
of the intended purchases stated in the Letter. The Letter may apply to
purchases made up to 90 days before the date of the Letter. The Fund and
the Distributor reserve the right to amend or terminate such program at
any time. For further details, including escrow requirements, see
"Letters of Intent" in the Additional Statement.
-- Other Circumstances. No sales charge is imposed on Class A shares
of the Fund: (i) sold to the Manager or its affiliates, or to present and
former officers, trustees or directors and employees (and their "immediate
families," as defined in "Reduced Sales Charges" in the Additional
Statement) of the Fund, the Manager and its affiliates, and to retirement
plans established by them for employees; (ii) issued in plans of
reorganization, such as mergers, asset acquisitions and exchange offers,
to which the Fund is a party; (iii) sold to registered investment
companies or to separate accounts of insurance companies having an
agreement with the Manager or the Distributor; (iv) sold to dealers or
brokers that have a sales agreement with the Distributor, for their own
account or for retirement plans for their employees, or sold to employees
(and their spouses) of such dealers or brokers or of banks, savings and
loan associations or credit unions that have entered into a sales
arrangement with such dealer or broker or the Distributor (and are
identified to the Distributor by such dealer or broker); the purchaser
must certify to the Distributor at the time of purchase that such purchase
is for its own account (or for the benefit of such employee's minor
children); (v) sold to dealers, brokers or registered investment advisers
that have entered into an agreement with the Distributor providing
specifically for the use of Fund shares in particular investment products
made available to the clients of the dealer, broker or registered
investment adviser; and (vi) purchased by the reinvestment of (a) loan
repayments by a participant in a retirement plan for which the Manager or
its affiliates act as sponsor, or (b) dividends or other distributions
reinvested from the Fund or other Eligible Funds (other than the Cash
Reserves Funds) or unit investment trusts for which reinvestment
arrangements have been made with the Distributor. "Purchase, Redemption
and Pricing of Shares--Reduced Sales Charges" in the Additional Statement
discusses this policy.
-- Class A Service Plan. The Fund has adopted a service plan (the
"Class A Plan") under Rule 12b-1 of the Investment Company Act pursuant
to which the Fund will reimburse the Distributor quarterly for a portion
of its costs incurred in connection with the personal service and
maintenance of accounts that hold Class A shares. The Distributor will
use such fees received from the Fund in its entirety: (i) to compensate
brokers, dealers, banks and other institutions (collectively,
"Recipients") each quarter for providing personal service and maintenance
of accounts that hold Class A shares; and (ii) to reimburse itself (to the
extent authorized by the Board of Trustees) for its other expenditures
under the Plan and its direct costs for personal service and maintenance
of accounts. The services to be provided under the Class A Plan include,
but are not limited to answering routine inquiries from the Recipient's
customers concerning the Fund, providing such customers with information
on their investment in Class A shares, assisting in establishing and
maintaining of accounts or sub-accounts in the Fund, making the Fund's
investment plans and dividend payment options available, and providing
such other information and customer liaison services and the maintenance
of accounts as the Distributor or the Fund may reasonably request.
The Board of Trustees has not presently authorized any reimbursement
to the Distributor under (ii) above. The Distributor will be reimbursed
only for quarterly payments made to each Recipient at a rate not to exceed
0.0625% (0.25% annually) of the aggregate net asset value of Class A
shares owned by the Recipient or its customers. Any unreimbursed expenses
incurred during any quarter by the Distributor may not be recovered in
later periods. The Fund will not be charged for any interest expense,
carrying charges or other financial costs, or allocation of overhead by
the Distributor.
The Class A Plan has the effect of increasing annual expenses of the
Fund by up to 0.25% of its average annual net assets. In addition, the
Manager and the Distributor may, under the Plan, from time to time from
their own resources (which, as to the Manager, may include profits derived
from the advisory fee it receives from the Fund) make similar payments to
Recipients for distribution and administrative services they perform. For
further details, see "Distribution and Service Plans" in the Additional
Statement.
Class C Shares
Class C Shares are sold at net asset value per share without the
imposition of a sales charge at the time of purchase.
-- Class C Contingent Deferred Sales Charge. A contingent deferred
sales charge (the "Class C CDSC") will be deducted from the redemption
proceeds of Class C shares redeemed within 12 months of their purchase
(not including shares purchased by reinvestment of dividends or capital
gains). The Class C CDSC shall be an amount equal to 1.0% of the lesser
of the then net asset value or the original purchase price of the Class
C shares being redeemed. Accordingly, no Class C CDSC will be imposed on
amounts representing increases in net asset value above the initial
purchase price (including increases due to reinvestment of dividends or
capital gains). In determining whether a Class C CDSC is payable and the
amount of any such CDSC, shares not subject to a CDSC are redeemed first,
including shares purchased by reinvestment of dividends and capital gains
distributions, and then other shares are redeemed in the order of
purchase.
Proceeds from the Class C CDSC are paid to the Distributor to
reimburse it for its expenses related to providing distribution-related
services to the Fund in connection with the sale of Class C Shares. The
combination of the Class C CDSC and the distribution fee retained by the
Distributor (as described under "Class C Distribution and Service Plan")
facilitate the sale of Class C Shares without a sales charge being
deducted at the time of purchase.
In determining the amount of the Class C CDSC that applies, all
purchases shall be considered as having been made on the first regular
business day of the month in which the purchase was made. The Class C
CDSC will be waived upon the request of the shareholder for redemptions
for: (1) distributions to participants or beneficiaries from Retirement
Plans, which distributions are made either (a) under an Automatic
Withdrawal Plan (described under "How to Redeem Shares") after the
participant attains age 59-1/2, and which are limited to no more than 10%
of the account value annually (determined in the first year, as of the
date the redemption request is received by the Transfer Agent, and in
subsequent years, as of the most recent anniversary of that date) or (b)
following the participant's or beneficiary's (i) "disability" (as defined
in the Internal Revenue Code) that occurs since the account was
established or (ii) death; (2) redemptions other than from Retirement
Plans following the (i) death or (ii) complete disability (as evidenced
by a certificate from the U.S. Social Security Administration), of all
persons individually owning such shares of record and not as fiduciaries
or agents, that occurs since the account was established, and (3) returns
of excess contributions to such Retirement Plans. In addition, no CDSC
is imposed on Class C shares of the Fund (i) sold to the Manager or its
affiliates; (ii) sold to registered investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor; (iii) issued in plans of reorganization, such as mergers,
asset acquisitions and exchange offers to which the Fund is a party; or
(iv) redeemed in Involuntary Redemptions. See "Transfers of Shares" in
"Purchase, Redemption and Pricing of Shares" in the Additional Statement
for further details.
-- Class C Distribution and Service Plan. The Fund has adopted a plan
of distribution (the "Class C Plan") under Rule 12b-1 of the Investment
Company Act, pursuant to which it will compensate the Distributor for its
services and costs incurred in connection with the distribution and
service of the Fund's Class C shares. Pursuant to the Class C Plan, the
Fund will pay the Distributor an asset-based sales charge of 0.75% per
annum plus a service fee of 0.25% per annum, each of which is computed on
the average net assets of Class C shares of the Fund computed as of the
close of business each day. The Distributor will use the service fee
payment to compensate Recipients for providing personal service and the
maintenance of shareholder accounts that hold Class C shares, examples of
which are described under "Class A Service Plan."
Service fee payments by the Distributor to Recipients will be made
(i) in advance for the first year Class C shares are outstanding,
following the purchase of shares, in an amount equal to 0.25% of the net
assets of the shares purchased by the Recipient or its customers and (ii)
thereafter, on a quarterly basis, computed as of the close of each
business day at an annual rate of 0.25% of the net asset value of Class
C shares held in accounts of the Recipient or its customers. Other terms
and options under the Class C Plan for payment of the service fee by the
Distributor to Recipients, and other terms and conditions of the Class C
Plan are described under "Distribution and Service Plans" in the
Additional Statement. Asset-based sales charges and service fees will be
paid by the Fund to the Distributor monthly and quarterly, respectively.
The Distributor currently expects to pay sales commissions from its
own resources to authorized dealers or brokers at the time of sale equal
to 0.75% of the purchase price of Fund shares sold by such dealer or
broker, and to advance the first year service fee of 0.25%. The service
fee and asset-based sales charge payments by the Fund to the Distributor
during the initial year that Class C shares are outstanding under the
Class C Plan are intended to allow the Distributor to recoup such sales
commissions and service fees advanced. After the first year that Class
C shares are outstanding, the Distributor expects to pay the asset-based
sales charge on such shares to authorized dealers or brokers as an ongoing
sales commission.
Asset-based sales charge payments are designed to permit an investor
to purchase shares of the Fund without the assessment of a front-end sales
load and at the same time permit the Distributor to compensate brokers and
dealers in connection with the sale of shares of the Fund. The
Distributor's actual distribution expenses for any given year may exceed
the aggregate of payments received pursuant to the Class C Plan and
contingent deferred sales charges, and such expenses will be carried
forward and paid in future years. The Fund will be charged only for
interest expenses, carrying charges or other financial costs that are
directly related to the carry-forward of actual distribution expenses.
For example, if the Distributor incurred distribution expenses of $4
million in a given fiscal year, of which $2,000,000 was recovered in the
form of contingent deferred sales charges paid by investors and $1,600,000
were reimbursed in the form of payments made by the Fund to the
Distributor under the Class C Plan, the balance of $400,000 (plus
interest) would be subject to recovery in future fiscal years from such
sources.
The Class C Plan contains a provision which allows the Board to
permit the Fund to continue payments to the Distributor for certain
expenses it incurred for Class C shares sold prior to termination of the
Class C Plan. Pursuant to this provision, payment of the asset-based
sales charge of up to 0.75% per annum could continue after termination.
The Class C Plan has the effect of increasing annual expenses of
Class C shares of the Fund by up to 1.00% of its average annual net assets
from what its expenses would otherwise be. In addition, the Manager and
the Distributor may, under the Class C Plan, from time to time from their
own resources (which, as to the Manager, may include profits derived from
the advisory fee it receives from the Fund) make payments to Recipients
for distribution and administrative services they perform. For further
details, see "Distribution and Service Plans" in the Additional Statement.
Purchase Programs for Class A and Class C Shares
-- Account Link. OppenheimerFunds AccountLink is a means to link a
shareholder's Fund account with an account at a U.S. bank or other
financial institution that is an Automated Clearing House ("ACH") member.
AccountLink can be used to transmit funds by electronic funds transfers
for account transactions, including subsequent share purchases. The
minimum investment by AccountLink is $25. Purchases of up to $250,000 may
be made by telephone using AccountLink (the maximum is $100,000 if the
transaction is done by PhoneLink, described below). To speak to service
operators to initiate such purchases, call the Distributor at 1-800-852-
8457. All such calls will be recorded. To initiate such purchases
automatically using PhoneLink, call 1-800-533-3310. Shares will be
purchased on the regular business day the Distributor is instructed to
initiate the ACH transfer to buy the shares. Dividends will begin to
accrue on such shares on the day the Fund receives Federal Funds for such
purchase through the ACH system before 4:00 P.M., which is normally three
days after the ACH transfer is initiated. If such Federal Funds are
received after that time, dividends will begin to accrue on the next
regular business day after such Federal Funds are received.
AccountLink may also be used as a means of transmitting redemption
proceeds to a designated bank account (see "How to Redeem Shares") or to
transmit distributions paid by the Fund directly to a bank account (see
"Dividends and Distributions"). AccountLink privileges must be requested
on the application used to buy shares or the dealer settlement
instructions establishing the account, or on subsequent signature-
guaranteed instructions to the Transfer Agent, from all shareholders of
record for an account, and such privileges thereupon apply to each
shareholder of record and the dealer representative of record unless and
until the Transfer Agent receives written instructions from a shareholder
of record canceling such privileges. Changes of bank account information
must be made by signature-guaranteed instructions to the Transfer Agent
by all shareholders of record for an account. The Transfer Agent, the
Fund and the Distributor have adopted reasonable procedures to confirm
that telephone instructions under AccountLink (described above) and
"PhoneLink," "Telephone Redemptions" and the "Exchange Privilege"
(described below) are genuine, by requiring callers to provide the tax
identification number(s) and other account data and by recording such
calls and confirming such transactions in writing. If the Transfer Agent
and the Distributor do not use such procedures, they may be liable for
losses due to unauthorized transactions, but otherwise will not be liable
for losses or expenses arising out of telephone instructions reasonably
believed to be genuine. The Fund reserves the right to amend, suspend or
discontinue AccountLink privileges at any time without prior notice.
-- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system which enables shareholders of the Fund to initiate account
transactions automatically by telephone, including exchanges between
existing accounts (see "Exchange Privilege" below), redemptions (see "How
to Redeem Shares - Telephone Redemptions," below) and purchases (see
"AccountLink" above). PhoneLink transactions may be done automatically
using a touchtone telephone provided that the shareholder uses a Personal
Identification Number ("PIN") which may be obtained through PhoneLink by
calling 1-800-533-3310. If an account has multiple owners, the Transfer
Agent or the Distributor may rely on any instructions initiated through
PhoneLink using a PIN. The Fund reserves the right to amend, suspend or
discontinue PhoneLink privileges at any time without prior notice.
-- Asset Builder Plans. Investors may purchase shares of the Fund
(and up to four other Eligible Funds) automatically under Asset Builder
Plans. With AccountLink, Asset Builder Plans may be used to make regular
monthly investments ($25 minimum) from the investor's account at a bank
or other financial institution. See "AccountLink," above for details.
To establish an Asset Builder Plan from a bank account, a check (minimum
$25) for the initial purchase must accompany the application. Shares
purchased by Asset Builder Plan payments from bank accounts are subject
to the redemption restrictions for recent purchases described in "How To
Redeem Shares."
Asset Builder Plans also enable shareholders of Oppenheimer Tax-
Exempt Cash Reserves or Oppenheimer Cash Reserves to use those accounts
for monthly automatic purchases of shares of up to four other Eligible
Funds. There is a sales charge on the purchase of certain Eligible Funds,
and an application should be obtained from the Transfer Agent and
completed and a prospectus of the selected fund(s) (available from the
Distributor) should be obtained before initiating payments. The amount
of the Asset Builder investment may be changed or the automatic
investments terminated at any time by writing to the Transfer Agent. A
reasonable period (approximately 15 days) is required after receipt of
such instructions to implement them. The Fund reserves the right to
amend, suspend, or discontinue offering such plans at any time without
prior notice.
How to Redeem Shares
Regular Redemption Procedures
To redeem some or all shares in an account (whether or not
represented by certificates) under the Fund's regular redemption
procedures, a shareholder must send the following to the Transfer Agent,
Oppenheimer Shareholder Services, P.O. Box 5270, Denver, Colorado 80217
(send courier or Express Mail deliveries to 10200 E. Girard Avenue,
Building D, Denver, Colorado 80231): (1) a written request for redemption
signed by all registered owners exactly as the shares are registered,
including fiduciary titles, if any, and specifying the account number and
the dollar amount or number of shares to be redeemed; (2) a guarantee of
the signatures of all registered owners on the redemption request or on
the endorsement on the share certificate or accompanying stock power, by
a U.S. bank, trust company, credit union, savings association, or a
foreign bank having a U.S. correspondent bank, or by a U.S.-registered
dealer or broker in securities, municipal securities or government
securities, or by a U.S. national securities exchange, registered
securities association or clearing agency; (3) any share certificates
issued for any of the shares to be redeemed; and (4) any additional
documents which may be required by the Transfer Agent for redemption by
corporations, partnerships or other organizations, executors,
administrators, trustees, custodians, guardians, or from an
OppenheimerFunds-sponsored Retirement Plan, or if the redemption is
requested by anyone other than the shareholder(s) of record, or to
demonstrate eligibility for waiver of the Class C CDSC on the grounds of
age or disability. Transfers of shares are subject to similar
requirements.
A signature guarantee is not required for redemptions of $50,000 or
less, requested by and payable to all shareholders of record, to be sent
to the address of record for that account. To avoid delay in redemption
or transfer, shareholders having questions about these requirements should
contact the Transfer Agent in writing or by calling 1-800-525-7048 before
submitting a request. From time to time the Transfer Agent in its
discretion may waive any or certain of the foregoing requirements in
particular cases. Redemption or transfer requests will not be honored
until the Transfer Agent receives all required documents in proper form.
Shareholders owning shares of both classes must specify whether they
intend to redeem Class A or Class C shares.
Telephone Redemptions
To redeem shares by telephone through a service representative, call
the Transfer Agent at 1-800-852-8457. To use PhoneLink to redeem shares
automatically, without a service representative, call 1-800-533-3310.
Under either method of telephone redemptions, proceeds may be paid by
check or through AccountLink as described below. The Transfer Agent may
record any calls. Telephone redemptions may not be available if all lines
are busy, and shareholders would have to use the Fund's regular redemption
procedure described above. Requests received by the Transfer Agent prior
to 4:00 P.M., on a regular business day will be processed at the net asset
value per share determined that day. Telephone redemption privileges are
not available for newly-purchased (within the prior 15 days) shares, for
OppenheimerFunds-sponsored Retirement Plans, or for shares represented by
certificates.
Telephone redemption privileges apply automatically to each
shareholder and the dealer representative of record unless the Transfer
Agent receives cancellation instructions from a shareholder of record.
If an account has multiple owners, the Transfer Agent may rely on the
instructions of any one owner. Telephone redemption privileges may be
amended, suspended or discontinued by the Fund at any time without prior
notice.
-- Telephone Redemptions Paid by Check. For redemption proceeds paid
by check, amounts up to $50,000 may be redeemed by telephone, once in
every seven-day period, and the check must be payable to the
shareholder(s) of record and sent to the address of record for the
account. Telephone redemptions paid by check are not available within 30
days of a change of the address of record.
-- Redemptions Paid Through AccountLink. If AccountLink privileges
have been established for an account, any amount may be redeemed by
telephone, wire or written instructions to the Transfer Agent, and the ACH
transfer of the redemption proceeds to the designated bank account
normally will be initiated by the Transfer Agent on the next bank business
day after the redemption. There are no dollar or frequency limitations
on telephone redemptions sent to a designated bank account through
AccountLink. No dividends are paid on the proceeds of redeemed shares
awaiting transmittal by ACH transfer. See "AccountLink" under "How to Buy
Shares -- Purchase Programs for Class A and Class C Shares" above for
instructions on establishing this privilege.
Distributions From Retirement Plans
Requests for distributions from OppenheimerFunds-sponsored IRAs,
403(b)(7) custodial plans, or pension or profit-sharing plans for which
the Manager or its affiliates act as sponsors should be addressed to
"First Interstate Bank of Denver, N.A., c/o Oppenheimer Shareholder
Services" at the above address, and must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if the
distribution is premature; and (iii) conform to the requirements of the
plan and the Fund's redemption requirements above. Participants (other
than self-employed persons) in OppenheimerFunds-sponsored pension or
profit-sharing plans may not directly request redemption of their
accounts. The employer or plan administrator must sign the request.
Distributions from such plans are subject to additional requirements under
the Internal Revenue Code and certain documents (available from the
Transfer Agent) must be completed before the distribution may be made.
Distributions from retirement plans are subject to withholding
requirements under the Internal Revenue Code, and IRS Form W-4P (available
from the Transfer Agent) must be submitted to the Transfer Agent with the
distribution request, or the distribution may be delayed. Unless the
shareholder has provided the Transfer Agent with a certified tax
identification number, the Internal Revenue Code requires that tax be
withheld from any distribution even if the shareholder elects not to have
tax withheld. The Fund, the Manager, the Distributor, the Trustee and the
Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not
be responsible for any penalties assessed.
Automatic Withdrawal and Exchange Plans
Investors owning shares of the Fund valued at $5,000 or more can
authorize the Transfer Agent to redeem shares (minimum $50) automatically
on a monthly, quarterly, semi-annual or annual basis under an Automatic
Withdrawal Plan. Shares will be redeemed three business days prior to the
date requested by the shareholder for receipt of the payment. Automatic
withdrawals of up to $1,500 per month may be requested by telephone if
payments are by check payable to all shareholders of record and sent to
the address of record for the account (and if the address has not been
changed within the prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on this
basis. Payments are normally made by check, but shareholders having
AccountLink privileges (see "How To Buy Shares") may arrange to have
Automatic Withdrawal Plan payments transferred to the bank account
designated on the OppenheimerFunds New Account Application or signature-
guaranteed instructions. The Fund cannot guarantee receipt of the payment
on the date requested and reserves the right to amend, suspend or
discontinue offering such plans at any time without prior notice. Because
of the sales charge assessed on Class A share purchases, shareholders
should not make regular additional Class A share purchases while
participating in an Automatic Withdrawal Plan. Class C shareholders
normally should not establish withdrawal plans, because of the imposition
of the Class C CDSC on such withdrawals (except where the Class C CDSC is
waived as described in "Class C Contingent Deferred Sales Charge"). For
further details, refer to "Automatic Withdrawal Plan Provisions" in the
Additional Statement.
Shareholders can also authorize the Transfer Agent to exchange a
predetermined amount (minimum purchase is $25 per Fund account) of shares
of the Fund for shares of up to five other "Eligible Funds" automatically
on a monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. Exchanges made pursuant to such plans are subject to the
conditions and terms applicable to exchanges described in "Exchange
Privilege," below.
Repurchase
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price will be the net asset
value next computed after the receipt of an order placed by such dealer
or broker, except that orders received by the Distributor from dealers or
brokers after 4:00 P.M. on a regular business day will be processed at
that day's net asset value if such orders are received by the dealer or
broker from its customers prior to 4:00 P.M., and are transmitted to and
received by the Distributor prior to its close of business that day
(normally 5:00 P.M.). Payment ordinarily will be made within seven days
after the Distributor's receipt of the required documents, with
signature(s) guaranteed as described above.
Reinvestment Privilege
Within six months of a redemption, a shareholder may reinvest all or
part of the redemption proceeds of (i) Class A shares, or (ii) Class C
shares that were subject to the Class C CDSC when redeemed, in Class A
shares of the Fund or any of the Eligible Funds into which shares of the
Fund are exchangeable as described below, at the net asset value next
computed after receipt by the Transfer Agent of the reinvestment order.
The shareholder must ask the Distributor for such entitlement at the time
of reinvestment. A realized gain on the redemption is taxable, and
reinvestment will not alter any capital gains tax payable on that gain.
If there has been a loss on the redemption, some or all of the loss may
not be tax deductible, depending on the timing and amount of the
reinvestment in the Fund. Under the Internal Revenue Code, if the
redemption proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another Eligible Fund within 90 days
of the payment of the sales charge, the shareholder's basis in the Fund
shares redeemed may not include the amount of the sales charge paid,
thereby reducing the loss or increasing the gain recognized from the
redemption. The Fund may amend, suspend or cease offering this
reinvestment privilege at any time as to shares redeemed after the date
of such amendment, suspension or cessation.
General Information on Redemptions
The redemption price will be the Fund's net asset value per share of
the class next determined after the Transfer Agent receives redemption
instructions in proper form. The market value of the securities in the
Fund's portfolio is subject to daily fluctuations and the net asset value
of the Fund's shares will fluctuate accordingly. Therefore, the
redemption value may be more or less than the investor's cost. Under
certain unusual circumstances, shares may be redeemed in kind (i.e., by
payment in portfolio securities). The Fund may involuntarily redeem small
accounts (if the account has fallen below $200 in value for reasons other
than market value fluctuations) and may redeem shares in amounts
sufficient to compensate the Distributor for any loss due to cancellation
of a share purchase order; for details, see "Purchase, Redemption and
Pricing of Shares" in the Additional Statement. Under the Internal
Revenue Code, the Fund may be required to impose "backup" withholding of
Federal income tax at the rate of 31% from dividends, distributions and
redemption proceeds (including exchanges), if the shareholder has not
furnished the Fund a certified tax identification number or has not
complied with the provisions of the Internal Revenue Code relating to
reporting dividends.
Payment for redeemed shares is made ordinarily in cash and forwarded
within seven days of the Transfer Agent's receipt of redemption
instructions in proper form, except under unusual circumstances as
determined by the SEC. The Transfer Agent may delay forwarding a
redemption check for recently purchased shares only until the purchase
payment has cleared, which may take up to 15 or more days from the
purchase date. Such delay may be avoided if the shareholder arranges
telephone or written assurance satisfactory to the Transfer Agent from the
bank upon which the purchase payment was drawn. The Fund makes no charge
for redemption. Dealers or brokers may charge a fee for handling
redemption transactions, but such charge can be avoided by requesting the
redemption directly by the Fund through the Transfer Agent. Under certain
circumstances, the Class A and Class C CDSCs described under "How to Buy
Shares" may apply to the proceeds of redemptions.
Exchanges of Shares and Retirement Plans
Exchange Privilege
Shares of the Fund and of the other Eligible Funds listed in "Right
of Accumulation" may be exchanged at net asset value per share at the time
of exchange, without sales charge, if all of the following conditions are
met: (1) shares of the fund selected for exchange are available for sale
in the shareholder's state of residence; (2) the respective prospectuses
of the funds whose shares are to be exchanged and acquired offer the
Exchange Privilege to the investor; (3) newly-purchased (by initial or
subsequent investment) shares are held in an account for at least seven
days and all other shares at least 1 day prior to the exchange; and (4)
the aggregate net asset value of the shares surrendered for exchange is
at least equal to the minimum investment requirements of the fund whose
shares are to be acquired.
In addition to the conditions stated above, shares of a particular
class of an Eligible Fund having more than one class of shares may be
exchanged only for shares of the same class of another Eligible Fund. All
the Eligible Funds offer Class A shares, but only certain Eligible Funds
(referred to as the "Advisors Portfolio") offer Class C shares. The names
of those Eligible Funds can be obtained by calling the Distributor at 1-
800-525-7048. In addition, Class A shares of Eligible Funds may be
exchanged for shares of any Money Market Fund; shares of any Money Market
Fund purchased without a sales charge may be exchanged for shares of
Eligible Funds offered with a sales charge upon payment of the sales
charge or, if applicable, may be used to purchase shares of Eligible Funds
subject to a CDSC; and shares of the Fund acquired by reinvestment of
dividends or distributions from any other Eligible Fund or from any unit
investment trust for which reinvestment arrangements have been made with
the Distributor may be exchanged at net asset value for shares of any
Eligible Fund. No CDSC is imposed on exchanges of shares purchased
subject to a CDSC. However, when Class A shares acquired by exchange from
Class A shares purchased subject to a Class A CDSC are redeemed within 18
months of the end of the calendar month of the initial purchase of the
exchanged Class A shares, the Class A CDSC will apply (see "Class A
Contingent Deferred Sales Charge," above). Similarly, the Class C CDSC
is imposed on Class C shares redeemed within 12 months of the initial
purchase of the exchanged Class C shares (see "Class C Contingent Deferred
Sales Charge," above).
-- How to Exchange Shares. An exchange may be made by either: (1)
submitting an OppenheimerFunds Exchange Authorization Form to the Transfer
Agent, signed by all registered owners, or (2) telephone exchange
instructions to the Transfer Agent by a shareholder or the dealer
representative of record for an account. The Fund may modify, suspend or
discontinue either of these exchange privileges at any time, and will do
so on 60 days' notice, if such notice is required by regulations adopted
under the Investment Company Act. The Fund reserves the right to reject
telephone or written exchange requests submitted in bulk on behalf of 10
or more accounts. Telephone and written exchange requests must be
received by the Transfer Agent by 4:00 P.M. on a regular business day to
be effected that day. The number of shares exchanged may be less than the
number requested if the number requested would include shares subject to
a restriction cited above or shares covered by a certificate that is not
tendered with such request. Only the shares available for exchange
without restriction will be exchanged.
When Class C shares are redeemed to effect an exchange, the
priorities described in "How to Buy Shares" for the imposition of the
Class C CDSC will be followed in determining the order in which shares are
exchanged. Shareholders should take into account the effect of any
exchange on the applicability and rate of any CDSC that may be imposed in
the subsequent redemption of remaining shares. Shareholders owning shares
of both classes must specify whether they intend to exchange Class A or
Class C shares.
-- Telephone Exchanges. Telephone exchange requests may either be
placed through a service representative by calling the Transfer Agent at
1-800-852-8457 or automatically by PhoneLink, by calling 1-800-533-3310.
If all telephone lines are busy (which might occur, for example, during
periods of substantial market fluctuations), shareholders might not be
able to request telephone exchanges and will have to submit written
exchange requests. Telephone exchange calls may be recorded by the
Transfer Agent. Telephone exchanges are subject to the rules described
above. By exchanging shares by telephone, the shareholder is
acknowledging receipt of a prospectus of the fund to which the exchange
is made and that for full or partial exchanges, any special account
features such as Asset Builder Plans, Automatic Withdrawal or Exchange
Plans and retirement plan contributions will be switched to the new
account unless the Transfer Agent is otherwise instructed. Telephone
exchange privileges automatically apply to each shareholder of record and
the dealer representative of record unless and until the Transfer Agent
receives written instructions from a shareholder of record canceling such
privileges. If an account has multiple owners, the Transfer Agent may
rely on instructions of any one owner. The Transfer Agent reserves the
right to require shareholders to confirm in writing their election of
telephone exchange privileges for an account. Shares acquired by
telephone exchange must be registered exactly as the account from which
the exchange was made. Certificated shares are not eligible for telephone
exchange.
-- General Information on Exchanges. Shares to be exchanged are
redeemed on the regular business day the Transfer Agent receives an
exchange request in proper form (the "Redemption Date"). Normally, shares
of the fund to be acquired are purchased on the Redemption Date, but such
purchases may be delayed by either fund up to five business days if it
determines that it would be disadvantaged by an immediate transfer of the
redemption proceeds. The Fund in its discretion reserves the right to
refuse any exchange request that will disadvantage it, for example, if the
receipt of multiple exchange requests from a dealer might require the
disposition of securities at a time or price disadvantageous to the Fund.
No sales commissions are paid by the Distributor on exchanges of shares
(unless a front-end sales charge is assessed on the exchange).
The Eligible Funds have different investment objectives and policies.
For complete information, including charges and expenses, a prospectus of
the fund into which the exchange is being made should be read prior to an
exchange. A $5 service charge will be deducted from the account to which
the exchange is made to help defray administrative costs. That charge is
waived for telephone exchanges made by PhoneLink between existing
accounts. Dealers or brokers who process exchange orders on behalf of
their customers may charge for their services. Those charges may be
avoided by requesting the Fund directly to exchange shares. For Federal
tax purposes, an exchange is treated as a redemption and purchase of
shares (see "How to Redeem Shares - Reinvestment Privilege" for a
discussion of certain tax effects of exchanges.)
Pursuant to telephone exchange agreements with the Distributor,
certain dealers, brokers and investment advisers may exchange their
clients' Fund shares by telephone, subject to the terms of such agreements
and the Distributor's right to reject or suspend such telephone exchanges
at any time. Because of the restrictions and procedures under such
agreements, such exchanges may be subject to timing limitations and other
restrictions that do not apply to exchanges requested by shareholders
directly, as described above.
Retirement Plans
The Distributor has available forms of: (i) pension and profit-
sharing plans for corporations and self-employed individuals, (ii) IRAs
including Simplified Employee Pension Plans and Rollover IRAs, and (iii)
403(b)(7) custodial plans for employees of qualified employers. The
minimum initial investment for pension and profit-sharing plans is $250,
and for IRAs also unless made under an Asset Builder Plan. When
completing a plan application, include the name(s) of the fund(s) selected
for investment and if selecting more than one fund, the desired
allocation. The Fund reserves the right to discontinue offering its
shares to such plans at any time without prior notice. For further
details, including the administrative fees, the appropriate retirement
plan should be requested from the Distributor.
Dividends, Distributions and Taxes
This discussion relates solely to Federal tax laws and is not
exhaustive; a qualified tax advisor should be consulted. The Fund's
dividends and distributions may also be subject to state and local
taxation. See "Special Investment Methods--Covered Calls, Puts and
Hedging" and "Total Return, Dividend and Tax Information--Tax Status of
the Fund's Dividends and Distributions" in the Additional Statement for
more information on tax aspects of the Fund's investment in Hedging
Instruments and other tax matters.
Dividends and Distributions
The Fund intends to declare dividends separately for Class A and
Class C shares from net investment income quarterly, payable in March,
June, September and December on a date set by the Fund's Board of
Trustees. In addition, distributions may be made annually in December out
of any net short-term or long-term capital gains derived from the sale of
securities, premiums from expired calls written by the Fund, and net
profits from hedging transactions, realized in the twelve months ending
on October 31 of that year. Any difference in the net asset values of
Class A and Class C shares will be reflected in such distribution. The
Fund may make a supplemental distribution of capital gains and ordinary
income following the end of its fiscal year. A shareholder purchasing
Fund shares immediately prior to the declaration of a dividend or capital
gain distribution will receive a distribution subject to income tax, and
the distribution will have the effect of reducing the Fund's net asset
value per share by the amount of the distribution. Any annual long-term
capital gains distribution and any non-taxable return of capital will be
identified separately when paid and when tax information is distributed
by the Fund. There is no fixed dividend rate and there can be no
assurance as to the payment of any dividends or the realization of any
capital gains.
All dividends and capital gains distributions are automatically
reinvested in shares of the same class at net asset value, as of a date
selected by the Fund's Board of Trustees, unless the shareholder asks the
Transfer Agent in writing to pay dividends or capital gains distributions
in cash, or to reinvest them in another Eligible Fund, as described in
"Total Return, Dividend and Tax Information" in the Additional Statement.
That request must be received prior to the record date for a dividend to
be effective as to that dividend. Under AccountLink, dividends and
distributions may be automatically transferred to a designated account at
a financial institution. See "AccountLink" in "How To Buy Shares" and the
OppenheimerFunds New Account Application for more details. For existing
accounts, such privileges may be established only by signature-guaranteed
instructions of all shareholders to the Transfer Agent. Dividends,
distributions and the proceeds of the redemption of Fund shares
represented by checks returned to the Transfer Agent by the Postal Service
as undeliverable will be reinvested in shares of Oppenheimer Money Market
Fund, Inc. as promptly as possible after the return of such checks to the
Transfer Agent, to enable the investor to earn a return on otherwise idle
funds.
The amount of a class's distributions may vary from time to time
depending upon market conditions, the composition of the Fund's portfolio,
expenses borne by the Fund, or borne separately by that class as described
in "Purchase, Redemption and Pricing of Shares - Dual Class Methodology"
in the Additional Statement. Dividends are calculated in the same manner,
at the same time, and on the same day for shares of each class. However,
dividends on Class C shares are expected to be lower than on Class A
shares on a pro rata basis as a result of the asset-based sales charge on
Class C shares, and such dividends also will differ in amount as a
consequence of any difference between the net asset values of Class A and
Class C shares.
At certain times during the Fund's fiscal year ended September 30,
1993, the Fund had, but no longer has, a policy of paying distributions
to shareholders at a targeted level per Class A share, to the extent that
target was consistent with the Fund's net investment income and other
distributable income sources. The amount of distributions might have
varied from time to time, depending on market conditions, the composition
of the Fund's portfolio, and expenses borne by that Class. The Board of
Trustees was free to change that targeted level at any time, and there is
otherwise no fixed dividend rate. There can be no assurance as to the
payment of any dividend or the realization of any capital gains. The Fund
was able to pay dividends at the targeted level from net investment income
and other distributable income, without any material impact on the
Manager's portfolio management practices or on the Fund's net asset value
per share.
Tax Status of the Fund's Dividends and Distributions
Dividends paid by the Fund derived from net investment income or net
short-term capital gains are taxable to shareholders as ordinary income,
whether received in cash or reinvested. Long-term capital gains
distributions, if any, are taxable as long-term capital gains whether
received in cash or reinvested and regardless of how long Fund shares have
been held. An investor purchasing Fund shares immediately prior to the
declaration of a capital gains distribution will receive a distribution
subject to income tax, and the distribution will have the effect of
reducing the Fund's net asset value per share by the amount of the
distribution. For information as to "backup" withholding on dividends,
see "How to Redeem Shares," above.
Tax Status of the Fund
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on
amounts paid by it as dividends and distributions. The Fund so qualified
during its last fiscal year, and intends to qualify in current and future
fiscal years but reserves the right not to do so. The Internal Revenue
Code contains a number of complex tests relating to qualification which
the Fund might not meet in any particular year. For example, if the Fund
derives 30% or more of its gross income from the sale of securities held
less than three months, it may fail to qualify. See "Special Investment
Methods--Covered Calls, Puts and Hedging--Tax Aspects of Hedging
Instruments and Covered Calls" in the Additional Statement. If it did not
so qualify, the Fund would be treated for tax purposes as an ordinary
corporation and receive no tax deduction for dividends and distributions
made to shareholders.
Additional Information
Total Return Information
From time to time, the "average annual total return," "total return"
and "total return at net asset value" of an investment in each class of
shares of the Fund may be advertised. The Fund's "average annual total
return" of each class for a particular period is computed by determining
the average annual compounded rate of return over the period, using the
initial amount invested at the beginning of the period and the redeemable
value of the investment at the end of the period. The Fund's "total
return" of each class for a period is a cumulative rate of return over the
entire period, also using the initial amount invested and the redeemable
value at the end of the period. In both cases, the initial amount
invested assumes the payment of the Fund's current maximum initial sales
charge applicable to Class A shares, or the 1.0% Class C CDSC is taken
into account with respect to the performance of that class. The Fund may
also quote a "total return at net asset value" of each class, which is
total return calculated without considering either sales charges (for
Class A shares) or the Class C CDSC (for Class C shares). In all
instances, the redeemable value of the investment assumes that all
dividends and capital gains distributions have been reinvested at net
asset value without sales charge. The Fund's "average annual total
return," "total return" and "total return at net asset value" indicate the
investment results that an investor holding shares of a class would have
experienced over the stated period from changes in share price and
reinvestment of dividends and distributions. All such performance
information is based on historical per share earnings and is not intended
to indicate future performance. "Total Return, Dividend and Tax
Information" in the Additional Statement contains more detailed
information about calculating the Fund's returns and other performance
information.
Management's Discussion of Fund Performance
During the Fund's fiscal year ended September 30, 1993, the Manager
increased the Fund's investments in emerging markets. In seeking to
reduce the risk of currency fluctuations, the Fund invested in countries
whose currency the Manager regarded as strong. In seeking to increase
yield while reducing the impact of foreign currency swings, the Fund
continued to hold certain high-yield U.S. corporate bonds. The Fund sold
certain longer-term U.S. Treasury securities and took certain profits in
countries where the Manager believed values had peaked, such as Australia.
Comparison of Change
In Value of $10,000
Hypothetical Investment in
Oppenheimer Global Growth
& Income Fund A, Morgan
Stanley Capital International
World Index and Lehman
Aggregate Bond Index
Average Annual Total Return of the Fund at 9/30/93
A Shares 1 year Life*
14.05% 7.94%
Global Morgan Lehman
Growth Stanley Aggregate
Year & Income World $10,000 Bond $10,000
Ending Fund Index Investment Index Investment
10/22/90 $ 9,425
10/31/90 $ 9,425 $10,000 $10,000
09/30/91 $10,454 14.56% $11,456 14.54% $11,454
09/30/92 $10,345 -0.43% $11,407 12.55% $12,891
09/30/93 $12,518 20.89% $13,790 9.98% $14,178
Past performance is not predictive of future performance.
*The Fund began operations on 10/22/90.
The performance graph set forth above depicts the performance of a
hypothetical investment of $10,000 in Class A shares of the Fund on
October 22, 1990 (commencement of operations) at the offering price
including the sales charge then in effect, held through September 30,
1993, with all dividends and distributions reinvested in additional shares
at net asset value on the reinvestment date, without sales charge. The
graph compares the Fund's performance against the performance from October
31, 1990 through September 30, 1993 of the Morgan Stanley World Index, an
unmanaged index of issuers listed on the stock exchanges of 20 foreign
countries and the U.S. that is widely recognized as a measure of global
stock market performance. That index includes a factor for the
reinvestment of dividends but does not reflect expenses or taxes. The
Fund's performance is also compared against the performance from October
31, 1990 through September 30, 1993 of the Lehman Aggregate Bond Index,
an unmanaged index of U.S. Government Treasury and agency issues and
investment grade corporate bond issues and fixed-rate mortgage-backed
securities backed by mortgage pools issued by certain U.S. Government
agencies. That index is widely regarded as a measure of the performance
of the general bond market and includes a factor for the reinvestment of
interest but does not reflect expenses. Comparable graphs are not shown
for the Fund's Class C shares as they were not publicly offered during
this period. The Fund's Class A total return reflects the deduction of
the current maximum sales charge of 5.75% and includes reinvestment of all
dividends and capital gains distributions, but does not consider taxes.
Description of the Fund and Its Shares
The Fund's Board of Trustees is empowered to issue full and
fractional shares of one or more series and classes of series. Shares of
one series having two classes (Class A and Class C) have been authorized,
which constitute the shares of beneficial interest described herein.
Series have separate assets and liabilities. Classes of a series
represent an identical interest in a particular series but, as explained
in this Prospectus, each class has different dividends, distributions and
expenses, and may have different net asset values.
Shares of the Fund represent an interest in the Fund proportionately
equal to the interest of each other share of the same class and entitle
their holders to one vote per share (and a fractional vote for a
fractional share) on matters submitted to their vote. Only shareholders
of a particular class vote on matters affecting only that class. The
Trustees may divide or combine the shares of a class into a greater or
lesser number of shares without thereby changing the proportionate
beneficial interest in the Fund. The Fund's shares are transferable
without restriction and, when issued, are fully-paid and non-assessable
(except as described in "Additional Information" in the Additional
Statement).
The Fund does not anticipate holding annual meetings. Under certain
circumstances, shareholders of the Fund have the right to remove a Trustee
and may be held personally liable as "partners" for the Fund's
obligations; however the risk of a shareholder incurring any financial
loss is limited to the relatively remote circumstances in which the Fund
is unable to meet its obligations. See "Additional Information" in the
Additional Statement for details.
The Custodian and the Transfer Agent
The Custodian of the assets of the Fund is The Bank of New York. The
Manager and its affiliates have banking relationships with the Custodian.
The Fund's cash balances in excess of $100,000 held by the Custodian are
not protected by Federal deposit insurance. Such uninsured balances may
at times be substantial. See "Additional Information" in the Additional
Statement for further information.
The Transfer Agent, a division of the Manager, acts as transfer agent
and shareholder servicing agent on an at-cost basis for the Fund and
certain other open-end funds advised by the Manager and acts as transfer
agent for unit investment trusts for the accumulation of shares of one of
such funds. Shareholders should direct inquiries to the Transfer Agent
at the address or toll-free phone number listed on the back cover of this
Prospectus.
<PAGE>
Investment Adviser
Oppenheimer Management Corporation Advisors
Two World Trade Center Portfolio
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent O P P E N H E I M E R
Oppenheimer Shareholder Services Global
P.O. Box 5270 Growth &
Denver, Colorado 80217 Income
1-800-525-7048 Fund
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
KPMG Peat Marwick
707 Seventeenth Street Prospectus
Denver, Colorado 80202 Effective January 20, 1994
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
No dealer, salesperson or any other person
has been authorized to give any information
or to make any representations other than
those contained in this Prospectus or the
Additional Statement, and if given or made,
such information and representations must -
not be relied upon as having been authorized
by the Fund, Oppenheimer Management
Corporation, Oppenheimer Funds Distributor,
Inc. or any affiliate thereof. This
Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy
any of the securities offered hereby in any
state to any person to whom it is unlawful
to make such an offer in such state.
OppenheimerFunds
PR216.0194.R Printed on recycled paper
<PAGE>
Investment Adviser
Oppenheimer Management Corporation Advisors
Two World Trade Center Portfolio
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent O P P E N H E I M E R
Oppenheimer Shareholder Services Global
P.O. Box 5270 Growth &
Denver, Colorado 80217 Income
1-800-525-7048 Fund
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
KPMG Peat Marwick
707 Seventeenth Street Prospectus and
Denver, Colorado 80202 New Account Application
Effective January 20, 1994
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
No dealer, salesperson or any other person
has been authorized to give any information
or to make any representations other than
those contained in this Prospectus or the
Additional Statement, and if given or made,
such information and representations must -
not be relied upon as having been authorized
by the Fund, Oppenheimer Management
Corporation, Oppenheimer Funds Distributor,
Inc. or any affiliate thereof. This
Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy
any of the securities offered hereby in any
state to any person to whom it is unlawful
to make such an offer in such state.
OppenheimerFunds
PR215.0194 Printed on recycled paper
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
OPPENHEIMER GLOBAL GROWTH & INCOME FUND
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
This Statement of Additional Information (the "Additional Statement")
is not a Prospectus. This Additional Statement should be read together
with the Prospectus (the "Prospectus") dated January 20, 1994 of
Oppenheimer Global Growth & Income Fund (the "Fund"), which may be
obtained upon written request to the Fund's Transfer and Shareholder
Servicing Agent, Oppenheimer Shareholder Services (the "Transfer Agent"),
P.O. Box 5270, Denver, Colorado 80217 or by calling the Transfer Agent at
the toll-free number shown above.
TABLE OF CONTENTS
Page
Investment Objective and Policies. . . . . . . . . . . . . 2
Special Investment Methods . . . . . . . . . . . . . . . . 9
Investment Restrictions. . . . . . . . . . . . . . . . . . 20
Trustees and Officers. . . . . . . . . . . . . . . . . . . 21
Investment Management Services . . . . . . . . . . . . . . 24
Brokerage. . . . . . . . . . . . . . . . . . . . . . . . . 25
Purchase, Redemption and Pricing of Shares . . . . . . . . 27
Distribution and Service Plans . . . . . . . . . . . . . . 30
Total Return, Dividend and Tax Information . . . . . . . . 32
Additional Information . . . . . . . . . . . . . . . . . . 35
Automatic Withdrawal Plan Provisions . . . . . . . . . . . 36
Letters of Intent. . . . . . . . . . . . . . . . . . . . . 38
Independent Auditor's Report . . . . . . . . . . . . . . . 41
Financial Statements . . . . . . . . . . . . . . . . . . . 42
Appendix: Description of Rating Categories . . . . . . . . A-1
This Additional Statement is effective January 20, 1994.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Fund are described in
the Prospectus. Supplemental information about those policies is set
forth below. Certain capitalized terms used in this Additional Statement
and not otherwise defined herein are defined in the Prospectus.
Securities of Growth-Type Companies. The Fund may emphasize securities
of "growth-type" companies. Such issuers typically are those whose goods
or services have relatively favorable long-term prospects for increasing
demand, or ones that develop new products, services or markets and
normally retain a relatively large part of their earnings for research,
development and investment in capital assets. They may include companies
in the natural resources fields or those developing industrial
applications for new scientific knowledge having potential for
technological innovation, such as nuclear energy, oceanography, business
services and new customer products.
Small, Unseasoned Companies. The securities of small, unseasoned
companies may have a limited trading market, which may adversely affect
their disposition and can result in their being priced lower than might
otherwise be the case. If other investment companies and investors that
invest in such securities trade the same securities when the Fund attempts
to dispose of its holdings, the Fund may receive lower prices than might
otherwise be obtained, because of the thinner market for such securities.
Fixed-Income Securities. All fixed-income securities are subject to two
types of risks: credit risk and interest rate risk. Credit risk relates
to the ability of the issuer to meet interest or principal payments or
both as they become due. Generally, higher yielding bonds are subject to
credit risk to a greater extent that lower yielding, higher quality bonds.
Interest rate risk refers to the fluctuations in value of fixed-income
securities resulting solely from the inverse relationship between price
and yield of fixed-income securities. An increase in interest rates will
tend to reduce the market value of fixed-income investments, and a decline
in interest rates will tend to increase their value. In addition, debt
securities with longer maturities, which tend to produce higher yields,
are subject to potentially greater capital appreciation and depreciation
than obligations with shorter maturities.
Foreign Securities. Investing in foreign securities involves
considerations and possible risks not typically associated with investing
in securities of issuers traded in the U.S. The values of foreign
securities will be affected by changes in currency rates or exchange
control regulations or currency blockage, application of foreign tax laws,
including withholding taxes, changes in governmental administration or
economic or monetary policy (in the U.S. or abroad) or changed
circumstances in dealings between nations. Costs will be incurred in
connection with conversions between various currencies. Foreign brokerage
commissions are generally higher than commissions in the U.S., and foreign
securities markets may be less liquid, more volatile and less subject to
governmental regulation than in the U.S. Investments in foreign countries
could be affected by other factors not generally thought to be present
with trading in the U.S., including expropriation or nationalization,
confiscatory taxation and potential difficulties in enforcing contractual
obligations, and could be subject to extended settlement periods.
A number of current significant political and economic developments
may affect investments in foreign securities and in securities of
companies with operations overseas. Such developments include dramatic
political changes in government and economic policies in several Eastern
European countries, Germany and the Commonwealth of Independent States
(the former Soviet Union), as well as unification of the European Economic
Community. The course of any of one or more of these events and the
effect on trade barriers, competition and markets for consumer goods and
services is uncertain.
Because the Fund may purchase securities denominated in foreign
currencies, a change in the value of any such currency against the U.S.
dollar will result in a change in the U.S. dollar value of the Fund's
assets and the Fund's income available for distribution. In buying
foreign securities, the Fund may convert U.S. dollars into foreign
currency, but only to effect securities transactions on foreign securities
exchanges and not to hold such currency as an investment. In addition,
although a portion of the Fund's investment income, if any, may be
received or realized in foreign currencies, the Fund will be required to
compute and distribute its income in U.S. dollars, and absorb the cost of
currency fluctuations. The Fund may engage in foreign currency exchange
transactions for hedging purposes to protect against changes in future
exchange rates. See "Special Investment Methods--Covered Calls, Puts and
Hedging--Forward Contracts" below.
The values of foreign investments and the investment income derived
from them may also be affected unfavorably by changes in currency exchange
control regulations. Although the Fund will invest only in securities
denominated in foreign currencies that at the time of investment do not
have significant government-imposed restrictions on conversion into U.S.
dollars, there can be no assurance against subsequent imposition of
currency controls. In addition, the values of foreign securities will
fluctuate in response to changes in U.S. and foreign interest rates.
Investments in foreign securities offer potential benefits not
available from investing solely in securities of domestic issuers by
offering the opportunity to invest in foreign issuers that appear to offer
growth potential, or in foreign countries with economic policies or
business cycles different from those of the U.S., or to reduce
fluctuations in portfolio value by investing in foreign stock markets that
do not move in a manner parallel to U.S. markets. From time to time, U.S.
government policies have discouraged certain investments abroad by U.S.
investors, through taxation or other restrictions, and it is possible that
such restrictions could be reimposed.
The Fund intends to invest less than 5% of its total assets in
securities of issuers of Eastern European countries. The social,
political and economic reforms in most Eastern European countries are
still in their early stages, and there can be no assurance that these
reforms will continue, or, if they continue, will prove beneficial to the
Fund. Eastern European countries in many cases have no existing capital
market structure for the sale and trading of securities. Participation
in the growth of such countries may be available initially or solely
through investment in joint ventures, state enterprises, private
placements, unlisted securities or other similar illiquid investment
vehicles.
In addition, even though opportunities for investment may exist in
Eastern European countries, any change in the leadership or policies of
the governments of those countries, or changes in the leadership or
policies of any other government that exercises a significant influence
over those countries, may halt the expansion of or reverse the
liberalization of foreign investment policies now occurring and thereby
eliminate any investment opportunities which may currently exist.
Prospective investors should note that upon the accession to power
of authoritarian regimes, the governments of a number of the Eastern
European countries previously expropriated large quantities of real and
personal property, similar to the property which will be represented by
the securities purchased by the Fund. The claims of property owners
against those governments were never finally settled. There can be no
assurance that any property represented by securities purchased by the
Fund will not also be expropriated, nationalized, or otherwise
confiscated. If such confiscation were to occur, the Fund could lose a
substantial portion of its investments in such countries. The Fund's
investments would similarly be adversely affected by exchange control
regulations in any of those countries.
The obligations of foreign governmental entities may or may not be
supported by the full faith and credit of a foreign government.
Obligations of supranational entities include those of international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and of international banking
institutions and related government agencies. Examples include the
International Bank for Reconstruction and Development (the World Bank),
the European Coal and Steel Community, the Asian Development Bank and the
Inter-American Development Bank. The governmental members, or
"stockholders," usually make initial capital contributions to the
supranational entity and in many cases are committed to make additional
capital contributions if the supranational entity is unable to repay its
borrowings. Each supranational entity's lending activities are limited
to a percentage of its total capital (including "callable capital"
contributed by members at the entity's call), reserves and net income.
There is no assurance that foreign governments will be able or willing to
honor their commitments.
The Fund may invest in U.S. dollar-denominated, collateralized "Brady
Bonds", as described in the Prospectus. These debt obligations of foreign
entities may be fixed-rate par bonds or floating-rate discount bonds and
are generally collateralized in full as to principal due at maturity by
U.S Treasury zero coupon obligations that have the same maturity as the
Brady Bonds. Brady Bonds are often viewed as having three or four
valuation components: (i) the collateralized repayment of principal at
final maturity; (ii) the collateralized interest payments; (iii) the
uncollateralized interest payments; and (iv) any uncollateralized
repayment of principal at maturity (these uncollateralized amounts
constitute the "residual risk"). In the event of a default with respect
to collateralized Brady Bonds as a result of which the payment obligations
of the issuer are accelerated, the zero coupon U.S. Treasury securities
held as collateral for the payment of principal will not be distributed
to investors, nor will such obligations be sold and the proceeds
distributed. The collateral will be held by the collateral agent to the
scheduled maturity of the defaulted Brady Bonds, which will continue to
be outstanding, at which time the face amount of the collateral will equal
the principal payments which would have then been due on the Brady Bonds
in the normal course. In addition, in light of the residual risk of Brady
Bonds and, among other factors, the history of defaults with respect to
commercial bank loans by public and private entities of countries issuing
Brady Bonds, investment in Brady Bonds are to be viewed as speculative.
Asset-Backed Securities. The value of asset-backed securities is affected
by changes in the market's perception of the asset backing the security,
the creditworthiness of the servicing agent for the loan pool, the
originator of the loans, or the financial institution providing any credit
enhancement, and is also affected if any credit enhancement is exhausted.
The risks of investing in asset-backed securities are ultimately dependent
upon payment of the underlying consumer loans by the individuals, and the
Fund would generally have no recourse to the entity that originated the
loans in the event of default by a borrower. The underlying loans are
subject to prepayments that shorten the weighted average life of asset-
backed securities and may lower their return in the same manner as
described in the Prospectus and in "Mortgage-Backed Securities" below for
prepayments of a pool of mortgage loans underlying mortgage-backed
securities.
U.S. Government Securities. U.S. Government Securities are debt
obligations issued or guaranteed by the U.S. Government or one of its
agencies or instrumentalities, and include "zero coupon" Treasury
securities, mortgage-backed securities and money market instruments. See
"Temporary Investments" for further discussion.
Mortgage-Backed Securities. These securities represent participation
interests in pools of residential mortgage loans that may or may not be
guaranteed by agencies or instrumentalities of the U.S. Government. Such
securities differ from conventional debt securities which generally
provide for periodic payment of interest in fixed or determinable amounts
(usually semi-annually) with principal payments at maturity or specified
call dates. Some of the mortgage-backed securities in which the Fund may
invest may be backed by the full faith and credit of the U.S. Treasury
(e.g. direct pass-through certificates of the Government National Mortgage
Association (the "GNMA")); some are supported by the right of the issuer
to borrow from the U.S. Government (e.g. obligations of Federal Home Loan
Banks); and some are backed by only the credit of the issuer itself. Any
such guarantees do not extend to the value of or yield of the mortgage-
backed securities themselves or to the net asset value of the Fund's
shares. Any of these government agencies may issue collateralized
mortgage-backed obligations ("CMO's"), discussed below.
Mortgage-backed securities created by private issuers (such as
commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers)
may be supported by various forms of insurance or guarantees, including
individual loan, title, pool and hazard insurance, and letters of credit,
which may be issued by governmental entities, private insurers or the
mortgage poolers. There can be no assurance that private issuers will be
able to meet their obligations.
The yield on mortgage-backed securities is based on the average
expected life of the underlying pool of mortgage loans. The actual life
of any particular pool will be shortened by any unscheduled or early
payments of principal and interest. Principal prepayments generally
result from the sale of the underlying property or the refinancing or
foreclosure of underlying mortgages. The occurrence of prepayments is
affected by a wide range of economic, demographic and social factors and,
accordingly, it is not possible to predict accurately the average life of
a particular pool. Yield on such pools is usually computed by using the
historical record of prepayment history of similar pools. The actual
prepayment experience of a pool of mortgage loans may cause the yield
realized by the Fund to differ from the yield calculated on the basis of
the expected average life of the pool.
Prepayments tend to increase during periods of falling interest
rates, while during periods of rising interest rates prepayments will most
likely decline. When prevailing interest rates rise, the value of a pass-
through security may decrease as do other debt securities, but, when
prevailing interest rates decline, the value of a pass-through security
is not likely to rise on a comparable basis with other debt securities
because of the prepayment feature of pass-through securities. The Fund's
reinvestment of scheduled principal payments and unscheduled prepayments
it receives may occur at higher or lower rates than the original
investment, thus affecting the yield of the Fund. Monthly interest
payments received by the Fund have a compounding effect that may increase
the yield to the Fund more than debt obligations that pay interest semi-
annually. Because of those factors, mortgage-backed securities may be
less effective than Treasury bonds of similar maturity at maintaining
yields during periods of declining interest rates. Accelerated
prepayments adversely affect yields for pass-through securities purchased
at a premium (i.e., at a price in excess of principal amount) and may
involve additional risk of loss of principal because the premium may not
have been fully amortized at the time the obligation is repaid. The
opposite is true for pass-through securities purchased at a discount. The
Fund may purchase mortgage-backed securities at par or at a premium or a
discount.
GNMA Certificates. Certificates of the Government National Mortgage
Association ("GNMA Certificates") are mortgage-backed securities that
evidence an undivided interest in a pool or pools of mortgages. The GNMA
Certificates that the Fund may purchase are of the "modified pass-through"
type, which entitle the holder to receive timely payment of all interest
and principal payments due on the mortgage pool, net of fees paid to the
"issuer" and GNMA, regardless of whether the mortgagor actually makes the
payments.
The National Housing Act authorizes GNMA to guarantee the timely
payment of principal and interest on securities backed by a pool of
mortgages insured by the Federal Housing Administration ("FHA") or
guaranteed by the Veterans Administration ("VA"). The GNMA guarantee is
backed by the full faith and credit of the U.S. Government. GNMA is also
empowered to borrow without limitation from the U.S. Treasury if necessary
to make any payments required under its guarantee.
The average life of a GNMA Certificate is likely to be substantially
shorter than the original maturity of the mortgages underlying the
securities. Prepayments of principal by mortgagors and mortgage
foreclosures will usually result in the return of the greater part of
principal investment long before the maturity of the mortgages in the
pool. Foreclosures impose no risk to principal investment because of the
GNMA guarantee, except to the extent that the Fund has purchased the
certificates at a premium in the secondary market.
FNMA Securities. The Federal National Mortgage Association ("FNMA")
was established to create a secondary market in mortgages insured by the
FHA. FNMA issues guaranteed mortgage pass-through certificates ("FNMA
Certificates"). FNMA Certificates resemble GNMA Certificates in that each
FNMA Certificate represents a pro rata share of all interest and principal
payments made and owed on the underlying pool. FNMA guarantees timely
payment of interest and principal on FNMA Certificates. The FNMA
guarantee is not backed by the full faith and credit of the U.S.
Government.
FHLMC Securities. The Federal Home Loan Mortgage Corporation
("FHLMC") was created to promote development of a nationwide secondary
market for conventional residential mortgages. FHLMC issues mortgage
pass-through certificates ("PCs"). PCs resemble GNMA Certificates in that
each PC represents a pro rata share of all interest and principal payments
made and owed on the underlying pool. FHLMC guarantees timely monthly
payment of interest on PCs and the ultimate payment of principal. The
FHLMC guarantee is not backed by the full faith and credit of the U.S.
Government.
Collateralized Mortgage-Backed Obligations ("CMOs"). CMOs are fully-
collateralized bonds that are the general obligations of the issuer
thereof, either the U.S. Government, a U.S. Government instrumentality,
or a private issuer. Such bonds generally are secured by an assignment
to a trustee (under the indenture pursuant to which the bonds are issued)
of collateral consisting of a pool of mortgages. Payments with respect
to the underlying mortgages generally are made to the trustee under the
indenture. Payments of principal and interest on the underlying mortgages
are not passed through to the holders of the CMOs as such (i.e., the
character of payments of principal and interest is not passed through, and
therefore payments to holders of CMOs attributable to interest paid and
principal repaid on the underlying mortgages do not necessarily constitute
income and return of capital, respectively, to such holders), but such
payments are dedicated to payment of interest on and repayment of
principal of the CMOs. CMOs often are issued in two or more classes with
different characteristics such as varying maturities and stated rates of
interest. Because interest and principal payments on the underlying
mortgages are not passed through to holders of CMOs, CMOs of varying
maturities may be secured by the same pool of mortgages, the payments on
which are used to pay interest on each class and to retire successive
maturities in sequence. Unlike other mortgage-backed securities
(discussed above), CMOs are designed to be retired as the underlying
mortgages are repaid. In the event of prepayment on such mortgages, the
class of CMO first to mature generally will be paid down. Therefore,
although in most cases the issuer of CMOs will not supply additional
collateral in the event of such prepayment, there will be sufficient
collateral to secure CMOs that remain outstanding.
Mortgage-Backed Security Rolls. The Fund may enter into "forward
roll" transactions with respect to mortgage-backed securities issued by
GNMA, FNMA or FHLMC. In a forward roll transaction, which is considered
to be a borrowing by the Fund, the Fund will sell a mortgage-backed
security to a bank or other permitted entity and simultaneously agree to
repurchase a similar security from the institution at a later date at an
agreed upon price. The mortgage-backed securities that are repurchased
will bear the same interest rate as those sold, but generally will be
collateralized by different pools of mortgages with different prepayment
histories than those sold. Risks of mortgage-backed security rolls
include (i) the risk of prepayment prior to maturity, (ii) the possibility
that the Fund may not be entitled to receive interest and principal
payments on the securities sold and that the proceeds of the sale may have
to be invested in money market instruments (typically repurchase
agreements) maturing not later than the expiration of the roll, and (iii)
the risk that the market value of the securities sold by the Fund may
decline below the price at which the Fund is obligated to purchase the
securities. Upon entering into a mortgage-backed security roll, the Fund
will be required to place liquid assets (e.g., cash, U.S. Government
securities (investments issued or guaranteed by the U.S. Government or
its agencies or instrumentalities) or other high-grade debt securities)
in a segregated account with its Custodian in an amount equal to its
obligation under the roll; that amount is subject to the limitation on
borrowing.
Temporary Investments. As stated in the Prospectus, the Fund may hold a
portion of its assets in cash equivalents (commercial paper, Treasury
bills and U.S. Government securities maturing in one year or less) for day
to day operating purposes. Under unusual market or economic conditions
(including drastic market fluctuations), the Fund may invest up to 100%
of its assets in those instruments identified in the Prospectus under
"Temporary Investments."
U.S. Government Securities. U.S. Government securities are debt
obligations issued or guaranteed by the U.S. Government or one of its
agencies or instrumentalities. Certain of these obligations, including
U.S. Treasury notes and bonds, and GNMA debentures ("Ginnie Mae's"), are
supported by the full faith and credit of the U.S. Certain other U.S.
Government securities, issued or guaranteed by Federal agencies or
government sponsored enterprises, are not supported by the full faith and
credit of the U.S. These latter securities may include obligations
supported by the right of the issuer to borrow from the U.S. Treasury,
such as obligations of the Federal Home Loan Mortgage Corporation
("Freddie Macs's") and obligations supported by the credit of the
instrumentality, such as FNMA bonds (Fannie Mae's"). U.S. Government
securities in which the Fund may invest include zero coupon U.S. Treasury
securities, mortgage-backed securities and CMOs (see discussion above) and
money market instruments.
Zero Coupon Securities. The Fund may invest in zero coupon
securities issued by the U.S. Treasury. Zero coupon U.S. Treasury
securities are: (i) U.S. Treasury notes and bonds that have been stripped
of their unmatured interest coupons and receipts; or (ii) certificates
representing interests in such stripped debt obligations or coupons. The
Fund may also invest in zero coupon securities issued by other issuers,
including foreign governments.
Because a zero coupon security pays no interest to its holder during
its life or for a substantial period of time, it usually trades at a deep
discount from its face or par value and will be subject to greater
fluctuations of market value in response to changing interest rates than
debt obligations of comparable maturities that make current distributions
of interest. Because the Fund accrues taxable income from zero coupon
securities issued by either the U.S. Treasury or other issuers without
receiving cash, the Fund may be required to sell portfolio securities in
order to pay a dividend depending, among other things, upon the proportion
of shareholders who elect to receive dividends in cash rather than
reinvesting dividends in additional shares of the Fund. The Fund might
also sell portfolio securities to maintain portfolio liquidity. In either
case, cash distributed or held by the Fund and not reinvested in Fund
shares will hinder the Fund in seeking a high level of current income.
Commercial Paper.
The Fund's commercial paper investments include:
-- Variable Amount Master Demand Notes. Master demand notes are
corporate obligations that permit the investment of fluctuating amounts
by the Fund at varying rates of interest pursuant to direct arrangements
between the Fund, as lender, and the borrower. These notes may or may not
be backed by bank letters of credit. Because these notes are direct
lending arrangements between the lender and borrower, it is not generally
contemplated that they will be traded. There is no secondary market for
these notes, although they are redeemable (and thus immediately repayable
by the borrower) at principal amount, plus accrued interest, at any time.
Accordingly, the Fund's right to redeem is dependent upon the ability of
the borrower to pay principal and interest on demand. The Manager will
consider the earning power, cash flow and other liquidity ratios of the
issuer, and its ability to pay principal and interest on demand, including
a situation in which all holders of such notes made demand simultaneously.
Investments in bank time deposits and master demand notes are subject to
the 10% of total assets limitation on securities that are not readily
marketable.
-- Floating Rate/Variable Rate Notes. Some of the notes the Fund may
purchase may have variable or floating interest rates. Variable rates are
adjustable at stated periodic intervals. Floating rates are automatically
adjusted according to a specified market rate for such investments, such
as the percentage of the prime rate of a bank, or the 91-day U.S. Treasury
Bill rate. Such obligations may be secured by bank letters of credit or
other credit support arrangements.
Warrants and Rights. The Fund may, to the extent described in the
Prospectus, invest in warrants and rights. Warrants are options to
purchase equity securities at specified prices valid for a specific period
of time. Their prices do not necessarily move in a manner parallel to the
prices of the underlying securities. If the warrant is not exercised
prior to expiration, the purchase price will not be able to recouped by
the Fund. Rights are similar to warrants, but normally have a short
duration and are distributed directly by the issuer to its shareholders.
Warrants and rights have no voting
rights, receive no dividends and have no rights with respect to the assets
of the issuer.
SPECIAL INVESTMENT METHODS
Borrowing. From time to time, the Fund may increase its ownership of
securities by borrowing from banks on an unsecured basis and investing the
borrowed funds (on which the Fund will pay interest), subject to the
restrictions stated in the Prospectus. Any such borrowing will be made,
pursuant to the requirements of the Investment Company Act, only to the
extent that the value of the Fund's assets, less its liabilities other
than borrowings, is equal to at least 300% of all borrowings including the
proposed borrowing. If the value of the Fund's assets so computed should
fail to meet the 300% asset coverage requirement, the Fund is required
within three days to reduce its bank debt to the extent necessary to meet
such requirement and may have to sell a portion of its investments at a
time when independent investment judgment would not dictate such sale.
Interest on money borrowed is an expense the Fund would not otherwise
incur, so that it may have little or no net investment income during
periods of substantial borrowings. Borrowing for investment increases both
investment opportunity and risk. Since substantially all of the Fund's
assets fluctuate in value, but borrowing obligations are fixed, when the
Fund has outstanding borrowings, the net asset value per share of the Fund
will tend to increase and decrease more when its portfolio assets
fluctuate in value than would otherwise be the case.
Loans of Portfolio Securities. Subject to the restrictions stated in the
Prospectus, the Fund may lend its portfolio securities to qualified
borrowers if the loan is collateralized in accordance with applicable
regulatory guidelines. Under the present guidelines, the Fund may lend
its portfolio securities if (i) such loans are secured continuously by
collateral consisting of (a) cash or U.S. Government Securities maintained
on a daily basis at an amount or of a market value at least equal at all
times to the market value of the securities loaned, or (b) letters of
credit issued by a bank (other than a bank acting as borrower under such
loan) at the request of the borrower under which the bank is obligated to
pay directly to the Fund amounts demanded by the Fund if the demand meets
the terms of the letter of credit, (ii) the Fund may at any time call such
loans and obtain the loaned securities on five days' notice, (iii) the
Fund will receive an amount at least equal to the interest paid by the
issuer of the loaned securities during the existence of such loan (less
any finders' or administrative fees the Fund pays in arranging the loan),
(iv) the Fund will be entitled to the interest paid upon investment of any
cash collateral in its permitted investments and may share a portion of
the interest earned with the borrower, and (v) the gross income received
by the Fund from all such loans will not exceed the maximum percentage
(currently 10%) that will allow the Fund to qualify as a "regulated
investment company" under the Internal Revenue Code. The Fund may pay
reasonable finders', custodian and administrative fees when lending
securities.
Repurchase Agreements. In a repurchase transaction, the Fund acquires a
security from, and simultaneously resells it to, an approved vendor (a
U.S. commercial bank or the U.S. branch of a foreign bank having total
domestic assets of at least $1 billion or a broker-dealer with a net
capital of at least $50 million and that has been designated a primary
dealer in government securities) for delivery on an agreed-on future date.
The resale price exceeds the purchase price by an amount that reflects an
agreed-upon interest rate effective for the period during which the
repurchase agreement is in effect. The majority of these transactions run
from day to day, and delivery pursuant to the resale typically will occur
within one to five days of the purchase. Repurchase agreements are
considered "loans" under the Investment Company Act, collateralized by the
underlying security. The Fund's repurchase agreements require that at all
times while the repurchase agreement is in effect, the value of the
collateral must equal or exceed the repurchase price to fully
collateralize the repayment obligation. Additionally, the Manager will
impose creditworthiness requirements to confirm that the vendor is
financially sound and will continuously monitor the collateral's value.
Restricted and Illiquid Securities
Restricted Securities. As stated in the Prospectus, restricted
securities, unregistered under the Securities Act of 1933, which are
offered and sold to institutional investors under Rule 144A, may be
readily marketable and thus not illiquid if the Fund's Board of Trustees,
or the Manager under Board-approved guidelines, so determines. Such
guidelines take into account, among other factors, trading activity for
such securities and the availability of reliable pricing information. If
there is a lack of trading interest in particular Rule 144A securities,
the Fund's holdings of those securities may be illiquid. There may be
undesirable delays in selling such securities at a price representing
their fair value. The expenses of registration of restricted securities
that are illiquid may be negotiated by the Fund at the time such
securities are purchased by the Fund. When registration is required
before such securities may be sold, a considerable period may elapse
between a decision to sell the securities and the time when the Fund would
be permitted to sell them. Thus, the Fund would bear the risks of any
downward price fluctuation during that period. The Fund also may acquire,
through private placements, securities having contractual restrictions on
their resale, which might lower the amount realizable upon the sale of
such securities. The Fund will also treat as illiquid any OTC option held
by it, as well as repurchase transactions having a maturity beyond seven
days.
Participation Interests. The Fund may acquire participation
interests in senior, fully-secured floating rate loans that are made
primarily to U.S. companies (the "borrower"). Such participation
interests, which may take the form of interests in, or assignment of, the
loan, are acquired from banks who have made loans or are members of a
lending syndicate. The Fund may purchase only those participation
interests that mature in 60 days or less, or, if maturing in more than 60
days, that have a floating rate that is automatically adjusted at least
once every 60 days according to a specified rate for such investments,
such as the percentage of a bank's prime rate. The Fund will use the
amortized cost method in valuing its investments in participation
interests maturing in 60 days or less when amortized cost represents fair
value as determined in good faith by the Fund's Board of Trustees.
Participation interests are primarily dependent upon the creditworthiness
of the borrower for payment of interest and principal, and such borrowers
may have difficulty making payments. In the event the borrower fails to
pay scheduled interest or principal payments, the Fund could experience
a reduction in its income and might experience a decline in the net asset
value of its shares. The Fund's Board of Trustees has established quality
standards for participation interests (the borrower shall have senior
securities rated at least "BBB" by Standard & Poor's or "Baa" by Moody's
or, if unrated, which offer comparable yields and risks, in the Manager's
opinion, to such rated securities). The Fund currently intends to invest
less than 5% of its net assets in participation interests. The Board will
review procedures to verify that (i) participation interests purchased by
the Fund meet such prescribed quality standards and (ii) provide for
monitoring the creditworthiness of the borrowing institution.
When-Issued and Delayed Delivery Transactions. Although the Fund will
enter into "when-issued" and "delayed delivery" transactions for the
purpose of acquiring securities for its portfolio or for delivery pursuant
to options contracts it has entered into, the Fund may dispose of a
commitment prior to settlement. When such transactions are negotiated the
price (which is generally expressed in yield terms) is fixed at the time
the commitment is made, but delivery and payment for the securities take
place at a later date. During the period between commitment by the Fund
and settlement (generally within two months but not to exceed 120 days),
no payment is made for the securities purchased by the purchaser, and no
interest accrues to the purchaser from the transaction. Such securities
are subject to market fluctuation; the value at delivery may be less than
the purchase price. The Fund will maintain a segregated account with its
Custodian, consisting of cash, U.S. Government securities or other high
grade debt obligations at least equal to the value of purchase commitments
until payment is made.
The Fund will engage in when-issued transactions in order to secure
what is considered to be an advantageous price and yield at the time of
entering into the obligation. When the Fund engages in when-issued or
delayed delivery transactions, it relies on the buyer or seller, as the
case may be, to consummate the transaction. Failure to do so may result
in the Fund losing the opportunity to obtain a price and yield considered
to be advantageous. If the Fund chooses to (i) dispose of the right to
acquire a when-issued security prior to its acquisition or (ii) dispose
of its right to deliver or receive against a forward commitment, it may
incur a gain or loss. At the time the Fund makes a commitment to purchase
or sell a security on a when-issued or forward commitment basis, it
records the transaction and reflects the value of the security purchased,
or if a sale, the proceeds to be received in determining its net asset
value.
To the extent the Fund engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling
securities consistent with its investment objective and policies and not
for the purposes of investment leverage. The Fund enters into such
transactions only with the intention of actually receiving or delivering
the securities, although (as noted above), when-issued securities and
forward commitments may be sold prior to settlement date. In addition,
changes in interest rates in a direction other than that expected by the
Manager before settlement will affect the value of such securities and may
cause loss to the Fund.
When-issued transactions and forward commitments allow the Fund a
technique to use against anticipated changes in interest rates and prices.
For instance, in periods of rising interest rates and falling prices, the
Fund might sell securities in its portfolio on a forward commitment basis
to attempt to limit its exposure to anticipated falling prices. In
periods of falling interest rates and rising prices, the Fund might sell
portfolio securities and purchase the same or similar securities on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher cash yields.
Short Sales Against-the-Box. In such short sales, while the short
position is open, the Fund must own an equal amount of such securities,
or by virtue of ownership of securities have the right, without payment
of further consideration, to obtain an equal amount of the securities sold
short. Short sales against-the-box may be made to defer, for Federal
income tax purposes, recognition of gain or loss on the sale of securities
"in the box" until the short position is closed out.
Covered Calls, Puts and Hedging. As described in the Prospectus, the Fund
may write covered calls or employ one or more types of Hedging
Instruments, including the futures identified in the Prospectus
("Futures"). The Fund's strategy of hedging with Futures and options on
Futures will be incidental to the Fund's activities in the underlying cash
market. When hedging to attempt to protect against declines in the market
value of the Fund's portfolio, to permit the Fund to retain unrealized
gains in the value of portfolio securities which have appreciated, or to
facilitate selling securities for investment reasons, the Fund may (i)
sell Futures, (ii) buy puts on such Futures or securities, or (iii) write
covered calls on securities or on Futures. When hedging to permit the
Fund to establish a position in the equities market as a temporary
substitute for purchasing individual equity securities (which the Fund
will normally purchase, and then terminate that hedging position), or to
attempt to protect against the possibility that portfolio debt securities
are not fully included in a rise in value of the debt securities market,
the Fund may: (i) buy Futures, or (ii) buy calls on such Futures or on
securities. Covered calls and puts may also be written on debt securities
to attempt to increase the Fund's income. When hedging to attempt to
protect against declines in the dollar value of a foreign currency-
denominated security or in a payment on such security, the Fund may: (a)
buy puts on that foreign currency or on foreign currency Futures, (b)
write calls on that currency or on such Futures, or (c) enter into Forward
Contracts at a different rate than the spot ("cash") rate. Additional
information about the Hedging Instruments the Fund may use is provided
below. At present, the Fund does not intend to purchase or sell Futures,
Forward Contracts or options on Futures if, after any such purchase, the
sum of initial margin deposits on Futures and premiums paid for related
options exceeds 5% of the value of the Fund's total assets. Certain
options on foreign currencies are considered related options for this
purpose. The Fund may in the future employ hedging instruments and
strategies that are not presently contemplated to the extent such
investment methods are consistent with the Fund's investment objective,
are legally permissible and are adequately disclosed.
Writing Covered Call Options. When the Fund writes a call on a
security, it receives a premium and agrees to sell the underlying security
to a purchaser of a corresponding call on the same security during the
call period (usually not more than 9 months) at a fixed exercise price
(which may differ from the market price of the underlying security),
regardless of market price changes during the call period. To terminate
its obligation on a call it has written, the Fund may purchase a
corresponding call in a "closing purchase transaction." A profit or loss
will be realized, depending upon whether the net of the amount of the
option transaction costs and the premium received on the call written was
more or less than the price of the call subsequently purchased. A profit
may also be realized if the call expires unexercised, because the Fund
retains the underlying security and the premium received. Any such
profits are considered short-term capital gains for Federal income tax
purposes, and when distributed by the Fund are taxable as ordinary income.
If the Fund could not effect a closing purchase transaction due to lack
of a market, it would have to hold the callable securities until the call
expired or was exercised.
The Fund may write calls on foreign currencies. A call written on
a foreign currency by the Fund is "covered" if the Fund owns the
underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a segregated
account by its custodian) upon conversion or exchange of other foreign
currency held in its portfolio. A call written by the Fund on a foreign
currency is for cross-hedging purposes if it is not covered, but is
designed to provide a hedge against a decline (due to an adverse change
in the exchange rate) in the U.S. dollar value of a security which the
Fund owns or has the right to acquire and which is denominated in the
currency underlying the option. In such circumstances, the Fund
collateralizes the option by maintaining in a segregated account with the
Fund's custodian, cash or Government Securities in an amount not less than
the value of the underlying foreign currency in U.S. dollars marked-to-
market daily.
The Fund may also write calls on Futures without owning a futures
contract, provided that at the time the call is written, the Fund covers
the call by segregating in escrow an equivalent dollar amount of liquid
assets. The Fund will segregate additional liquid assets if the value of
the escrowed assets drops below 100% of the current value of the Future.
In no circumstances would an exercise notice require the Fund to deliver
a futures contract; it would simply put the Fund in a short futures
position, which is permitted by the Fund's hedging policies.
Writing Put Options. A put option on securities gives the purchaser
the right to sell, and the writer the obligation to buy, the underlying
investment at the exercise price during the option period. Writing a put
covered by segregated liquid assets equal to the exercise price of the put
has the same economic effect to the Fund as writing a covered call. The
premium the Fund receives from writing a put option represents a profit,
as long as the price of the underlying investment remains above the
exercise price. However, the Fund has also assumed the obligation during
the option period to buy the underlying investment from the buyer of the
put at the exercise price, even though the value of
the investment may fall below the exercise price. If the put expires
unexercised, the Fund (as the writer of the put) realizes a gain in the
amount of the premium less transaction costs. If the put is exercised,
the Fund must fulfill its obligation to purchase the underlying investment
at the exercise price, which will usually exceed the market value of the
investment at that time. In that case, the Fund may incur a loss, equal
to the sum of the sale price of the underlying investment and the premium
received minus the sum of the exercise price and any transaction costs
incurred.
When writing put options on securities or on foreign currencies, to
secure its obligation to pay for the underlying security, the Fund will
deposit in escrow liquid assets with a value equal to or greater than the
exercise price of the underlying securities. The Fund therefore foregoes
the opportunity of investing the segregated assets or writing calls
against those assets. As long as the obligation of the Fund as the put
writer continues, it may be assigned an exercise notice by the exchange
or broker-dealer through whom such option was sold, requiring the Fund to
exchange currency at the specified rate of exchange or to take delivery
of the underlying security against payment of the exercise price. The
Fund may have no control over when it may be required to purchase the
underlying security, since it may be assigned an exercise notice at any
time prior to the termination of its obligation as the writer of the put.
This obligation terminates upon expiration of the put, or such earlier
time at which the Fund effects a closing purchase transaction by
purchasing a put of the same series as that previously sold. Once the
Fund has been assigned an exercise notice, it is thereafter not allowed
to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent an
underlying security from being put. Furthermore, effecting such a closing
purchase transaction will permit the Fund to write another put option to
the extent that the exercise price thereof is secured by the deposited
assets, or to utilize the proceeds from the sale of such assets for other
investments by the Fund. The Fund will realize a profit or loss from a
closing purchase transaction if the cost of the transaction is less or
more than the premium received from writing the option. As above for
writing covered calls, any and all such profits described herein from
writing puts are considered short-term capital gains for Federal tax
purposes, and when distributed by the Fund, are taxable as ordinary
income.
Purchasing Calls and Puts. When the Fund purchases a call (other
than in a closing purchase transaction), it pays a premium and has the
right to buy the underlying investment from a seller of a corresponding
call on the same investment during the call period at a fixed exercise
price. The Fund benefits only if the call is sold at a profit or if,
during the call period, the market price of the underlying investment is
above the sum of the call price plus the transaction costs and the premium
paid for the call and the call is exercised. If the call is not exercised
or sold (whether or not at a profit), it will become worthless at its
expiration date and the Fund will lose its premium payment and the right
to purchase the underlying investment.
When the Fund purchases a put, it pays a premium and has the right
to sell the underlying investment to a seller of a put on a corresponding
investment during the put period at a fixed exercise price. Buying a put
on securities or Futures the Fund owns enables the Fund to attempt to
protect itself during the put period against a decline in the value of the
underlying investment below the exercise price by selling the underlying
investment at the exercise price to a seller of a corresponding put. If
the market price of the underlying investment is equal to or above the
exercise price and, as a result, the put is not exercised or resold, the
put will become worthless at its expiration date and the Fund will lose
its premium payment and the right to sell the underlying investment; the
put may, however, be sold prior to expiration (whether or not at a
profit).
Purchasing a put on either Futures or on securities it does not own
permits the Fund either to resell the put or, if applicable, to buy the
underlying investment and sell it at the exercise price. The resale price
of the put will vary inversely with the price of the underlying
investment. If the market price of the underlying investment is above the
exercise price, and, as a result, the put is not exercised, the put will
become worthless on its expiration date. In the event of a decline in
price of the underlying investment, the Fund could exercise or sell the
put at a profit to attempt to offset some or all of its loss on its
portfolio securities. When the Fund purchases a put on a Future or
security not held by it, the put protects the Fund to the extent that the
prices of the underlying Future or securities move in a similar pattern
to the prices of the securities in the Fund's portfolio.
Futures. No payment is paid or received by the Fund on the purchase
or sale of a Future. Upon entering into a Futures transaction, the Fund
will be required to deposit an initial margin payment with the futures
commission merchant (the "futures broker"). Initial margin payments will
be deposited with the Fund's Custodian in an account registered in the
futures broker's name; however, the futures broker can gain access to that
account only under specified conditions. As the Future is marked to
market to reflect changes in its market value, subsequent margin payments,
called variation margin, will be paid to or by the futures broker on a
daily basis. At any time prior to expiration of the Future, the Fund may
elect to close out its position by taking an opposite position, at which
time a final determination of variation margin is made and additional cash
is required to be paid by or released to the Fund. Any loss or gain is
realized. All futures transactions are effected through a clearinghouse
associated with the exchange on which the contracts are traded.
Forward Contracts. A Forward Contract involves bilateral obligations
of one party to purchase, and another party to sell, a specific currency
at a future date (which may be any fixed number of days from the date of
the contract agreed upon by the parties), at a price set at the time the
contract is entered into. These contracts are traded in the interbank
market conducted directly between currency traders (usually large
commercial banks) and their customers.
The Fund may use Forward Contracts to protect against uncertainty in
the level of future exchange rates. The use of Forward Contracts does not
eliminate fluctuations in the prices of the underlying securities the Fund
owns or intends to acquire, but it does fix a rate of exchange in advance.
In addition, although Forward Contracts limit the risk of loss due to a
decline in the value of the hedged currencies, at the same time they limit
any potential gain that might result should the value of the currencies
increase. The Fund will not speculate with Forward Contracts or foreign
currency exchange rates.
The Fund may enter into Forward Contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when
the Fund anticipates receipt of dividend payments in a foreign currency,
the Fund may desire to "lock-in" the U.S. dollar price of the security or
the U.S. dollar equivalent of such payment by entering into a Forward
Contract, for a fixed amount of U.S. Dollars per unit of foreign currency,
for the purchase or sale of the amount of foreign currency involved in the
underlying transaction ("transaction hedge"). The Fund will thereby be
able to protect itself against a possible loss resulting from an adverse
change in the relationship between the currency exchange rates during the
period between the date on which the security is purchased or sold, or on
which the payment is declared, and the date on which such payments are
made or received.
The Fund may also use Forward Contracts to lock in the U.S. dollar
value of portfolio positions ("position hedge"). In a position hedge, for
example, when the Fund believes that foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a forward
sale contract to sell an amount of that foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in
such foreign currency, or when the Fund believes that the U.S. dollar may
suffer a substantial decline against a foreign currency, it may enter into
a forward purchase contract to buy that foreign currency for a fixed
dollar amount. In this situation the Fund may, in the alternative, enter
into a forward contract to sell a different foreign currency for a fixed
U.S. dollar amount where the Fund believes that the U.S. dollar value of
the currency to be sold pursuant to the forward contract will fall
whenever there is a decline in the U.S. dollar value of the currency in
which portfolio securities of the Fund are denominated ("cross-hedge").
The Fund will not enter into such Forward Contracts or maintain a net
exposure to such contracts to the extent that the Fund would be obligated
to deliver an amount of foreign currency in excess of the value of the
Fund's assets denominated in that currency. The Fund, however, in order
to avoid excess transactions and transaction costs, may maintain a net
exposure to Forward Contracts in excess of the value of the Fund's
portfolio assets denominated in that currency provided the excess amount
is "covered" by liquid, high-grade debt securities, denominated in any
currency, at least equal at all times to the amount of such excess. As
an alternative, the Fund may purchase a call option permitting the Fund
to purchase the amount of foreign currency being hedged by a forward sale
contract at a price no higher than the forward contract price or the Fund
may purchase a put option permitting the Fund to sell the amount of
foreign currency subject to a forward purchase contract at a price as high
or higher than the forward contract price. Unanticipated changes in
currency prices may result in poorer overall performance for the Fund than
if it had not entered into such contracts.
The precise matching of the Forward Contract amounts and the value
of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of these securities between
the date the Forward Contract is entered into and the date it is sold.
Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot (i.e., cash) market (and bear the expense of
such purchase), if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio
security if its market value exceeds the amount of foreign currency the
Fund is obligated to deliver. The projection of short-term currency
market movements is extremely difficult, and the successful execution of
a short-term hedging strategy is highly uncertain. Forward Contracts
involve the risk that anticipated currency movements will not be
accurately predicted, causing the Fund to sustain losses on these
contracts and incur transactions costs.
At or before the maturity of a Forward Contract requiring the Fund
to sell a currency, the Fund may either sell a portfolio security and use
the sale proceeds to make delivery of the currency or retain the security
and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Fund will obtain, on
the same maturity date, the same amount of the currency that it is
obligated to deliver. Similarly, the Fund may close out a Forward
Contract requiring it to purchase a specified currency by entering into
a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would
realize a gain or loss as a result of entering into such an offsetting
Forward Contract under either circumstance to the extent the exchange rate
or rates between the currencies involved moved between the execution dates
of the first contract and offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because Forward Contracts are
usually entered into on a principal basis, no fees or commissions are
involved. Because such contracts are not traded on an exchange, the Fund
must evaluate the credit and performance risk of each particular
counterparty under a Forward Contract.
Although the Fund values its assets daily in terms of U.S. dollars,
it does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Fund may convert foreign currency from time
to time, and investors should be aware of the costs of currency
conversion. Foreign exchange dealers do not charge a fee for conversion,
but they do seek to realize a profit based on the difference between the
prices at which they buy and sell various currencies. Thus, a dealer may
offer to sell a foreign currency to the Fund at one rate, while offering
a lesser rate of exchange should the Fund desire to resell that currency
to the dealer.
Interest Rate Swap Transactions. Swap agreements entail both
interest rate risk and credit risk. There is a risk that, based on
movements of interest rates in the future, the payments made by the Fund
under a swap agreement will have been greater than those received by it.
Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap defaults, the
Fund's loss will consist of the net amount of contractual interest
payments that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap
transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements. A master netting agreement provides that all swaps done
between the Fund and that counterparty under the master agreement shall
be regarded as parts of an integral agreement. If on any date amounts are
payable in the same currency in respect of one or more swap transactions,
the net amount payable on that date in that currency shall be paid. In
addition, the master netting agreement may provide that if one party
defaults generally or on one swap, the counterparty may terminate the
swaps with that party. Under such agreements, if there is a default
resulting in a loss to one party, the measure of that party's damages is
calculated by reference to the average cost of a replacement swap with
respect to each swap (i.e., the mark-to-market value at the time of the
termination of each swap). The gains and losses on all swaps are then
netted, and the result is the counterparty's gain or loss on termination.
The termination of all swaps and the netting of gains and losses on
termination is generally referred to as "aggregation".
Additional Information About Hedging Instruments and Their Use. The
Fund's Custodian, or a securities depository acting for the Custodian,
will act as the Fund's escrow agent, through the facilities of the Options
Clearing Corporation ("OCC"), as to the investments on which the Fund has
written options traded on exchanges or as to other acceptable escrow
securities, so that no margin will be required for such transactions. OCC
will release the securities on the expiration of the option or upon the
Fund's entering into a closing transaction.
When the Fund writes an over-the-counter("OTC") option, it will enter
into an arrangement with a primary U.S. Government securities dealer,
which would establish a formula price at which the Fund would have the
absolute right to repurchase that OTC option. That formula price would
generally be based on a multiple of the premium received for the option,
plus the amount by which the option is exercisable below for a put, above
for a call, the market price of the underlying security (that is, the
extent to which the option is "in-the-money"). When the Fund writes an
OTC option, it will treat as illiquid (for purposes of the limit on its
assets that may be invested in illiquid securities, stated in the
Prospectus) the mark-to-market value of any OTC option held by it. The
Securities and Exchange Commission is evaluating whether OTC options
should be considered liquid securities, and the procedure described above
could be affected by the outcome of that evaluation.
An option position may be closed out only on a market that provides
secondary trading for options of the same series, and there is no
assurance that a liquid secondary market will exist for any particular
option. The Fund's option activities may affect its turnover rate and
brokerage commissions. The exercise of calls written by the Fund may
cause the Fund to sell related portfolio securities, thus increasing its
turnover rate in a manner beyond the Fund's control. The exercise by the
Fund of puts on securities or Futures may cause the sale of related
investments, also increasing portfolio turnover. Although such exercise
is within the Fund's control, holding a put might cause the Fund to sell
the related investments for reasons which would not exist in the absence
of the put. The Fund will pay a brokerage commission each time it buys
or sells a put, a call, or an underlying investment in connection with the
exercise of a put or call. Such commissions may be higher than those
which would apply to direct purchases or sales of the underlying
investments. Premiums paid for options are small in relation to the
market value of such investments, and consequently, put and call options
offer large amounts of leverage. The leverage offered by trading in
options could result in the Fund's net asset value being more sensitive
to changes in the value of the underlying investments.
Regulatory Aspects of Hedging Instruments. The Fund must operate
within certain restrictions as to its long and short positions in Futures
and options thereon under a rule (the "CFTC Rule") adopted by the
Commodity Futures Trading Commission (the "CFTC") under the Commodity
Exchange Act (the "CEA"), which excludes the Fund from registration with
the CFTC as a "commodity pool operator" (as defined in the CEA) if it
complies with the CFTC Rule. Under these restrictions the Fund will not,
as to any positions, whether short, long or a combination thereof, enter
into Futures and related options for which the aggregate initial margins
and premiums exceed 5% of the fair market value of its total assets, with
certain exclusions as defined in the CFTC Rule. Under the restrictions,
the Fund also must, as to its short positions, use Futures and options
thereon solely for bona-fide hedging purposes within the meaning and
intent of the applicable provisions under the CEA. Certain options on
foreign currencies are considered related options for this purpose.
Transactions in options by the Fund are subject to limitations
established by each of the exchanges governing the maximum number of
options which may be written or held by a single investor or group of
investors acting in concert, regardless of whether the options were
written or purchased on the same or different exchanges or are held in one
or more accounts or through one or more exchanges or brokers. Thus, the
number of options which the Fund may write or hold may be affected by
options written or held by other entities, including other investment
companies having the same or an affiliated investment adviser. Position
limits also apply to Futures. An exchange may order the liquidation of
positions found to be in violation of those limits and may impose certain
other sanctions. Due to requirements under the Investment Company Act,
when the Fund purchases a Future, the Fund will maintain, in a segregated
account or accounts with its custodian bank, cash or readily-marketable,
short-term (maturing in one year or less) debt instruments in an amount
equal to the market value of the securities underlying such Future, less
the margin deposit applicable to it.
Tax Aspects of Hedging Instruments and Covered Calls. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code. One of the tests for such qualification is that less than
30% of its gross income (irrespective of losses) must be derived from
gains realized on the sale of securities held for less than three months.
Due to this limitation, the Fund will limit the extent to which it engages
in the following activities, but will not be precluded from them: (i)
selling investments, including Futures, held for less than three months,
whether or not they were purchased on the exercise of a call held by the
Fund; (ii) purchasing calls or puts that expire in less than three months;
(iii) effecting closing transactions with respect to calls or puts
purchased less than three months previously; (iv) exercising puts or calls
held by the Fund for less than three months; and (v) writing calls on
investments held for less than three months.
Certain foreign currency exchange contracts (Forward Contracts) in
which the Fund may invest are treated as "section 1256 contracts." Gains
or losses relating to section 1256 contracts generally are characterized
under the Internal Revenue Code as 60% long-term and 40% short-term
capital gains or losses. However, foreign currency gains or losses
arising from certain section 1256 contracts (including foreign currency
forward contracts) generally are treated as ordinary income or loss. In
addition, section 1256 contracts held by the Fund at the end of each
taxable year are "marked-to-market" with the result that unrealized gains
or losses are treated as though they were realized. These contracts also
may be marked-to-market for purposes of the excise tax applicable to
investment company distributions and for other purposes under rules
prescribed pursuant to the Internal Revenue Code. An election can be made
by the Fund to exempt these transactions from this marked-to-market
treatment.
Certain foreign currency forward contracts entered into by the Fund
may result in "straddles" for Federal income tax purposes. The straddle
rules may affect the character of gains (or losses) realized by the Fund
on straddle positions. Generally, a loss sustained on the disposition of
a position(s) making up a straddle is allowed only to the extent such loss
exceeds any unrecognized gain in the offsetting positions making up the
straddle. Disallowed loss is generally allowed at the point where there
is no unrecognized gain in the offsetting positions making up the
straddle, or the offsetting position is disposed.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates which occur between the time the Fund
accrues interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the Fund
actually collects such receivables or pays such liabilities generally are
treated as ordinary income or ordinary loss. Similarly, on disposition
of debt securities denominated in a foreign currency and on disposition
of foreign currency forward contracts, gains or losses attributable to
fluctuations in the value of a foreign currency between the date of
acquisition of the security or contract and the date of disposition also
are treated as ordinary gain or loss. Currency gains and losses are
offset against market gains and losses before determining a net "Section
988" gain or loss under the Internal Revenue Code, which may increase or
decrease the amount of the Fund's investment company income available for
distribution to its shareholders.
Possible Risk Factors in Hedging. In addition to the risks with
respect to options discussed in the Prospectus and above, there is a risk
in using short hedging by (i) selling Futures or (ii) purchasing puts on
broadly-based indices or Futures to attempt to protect against declines
in the value of the Fund's securities that the prices of the Futures or
applicable index (thus the prices of the Hedging Instruments) will
correlate imperfectly with the behavior of the cash (i.e., market value
prices) of the Fund's securities. The ordinary spreads between prices in
the cash and futures markets are subject to distortions due to differences
in the natures of those markets. First, all participants in the futures
markets are subject to margin deposit and maintenance requirements.
Rather than meeting additional margin deposit requirements, investors may
close out futures contracts through offsetting transactions which could
distort the normal relationship between the cash and futures markets.
Second, the liquidity of the futures markets depend on participants
entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery,
liquidity in the futures markets could be reduced, thus producing
distortion. Third, from the point of view of speculators, the deposit
requirements in the futures markets are less onerous than margin
requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause temporary
price distortions.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable
index. To compensate for the imperfect correlation of movements in the
price of the portfolio securities being hedged and movements in the price
of the Hedging Instruments, the Fund may use Hedging Instruments in a
greater dollar amount than the dollar amount of portfolio securities being
hedged if the historical volatility of the prices of such portfolio
securities being hedged is more than the historical volatility of the
applicable index. It is also possible that where the Fund has used
Hedging Instruments in a short hedge, the market may advance and the value
of the securities held in the Fund's portfolio may decline. If this
occurred, the Fund would lose money on the Hedging Instruments and also
experience a decline in value in its portfolio securities. However, while
this could occur for a very brief period or to a very small degree, over
time the value of a diversified portfolio of securities will tend to move
in the same direction as the indices upon which the Hedging Instruments
are based.
If the Fund uses Hedging Instruments to establish a position in the
securities markets as a temporary substitute for the purchase of
particular securities (long hedging) by buying Futures and/or calls on
such Futures, on securities, or on broadly-based indices, it is possible
that the market may decline. If the Fund then concludes not to invest in
such securities at that time because of concerns as to possible further
market decline or for other reasons, the Fund will realize a loss on the
Hedging Instruments that is not offset by a reduction in the price of the
securities purchased.
INVESTMENT RESTRICTIONS
The Fund's significant investment restrictions are described in the
Prospectus. The following investment restrictions are also fundamental
policies of the Fund and, together with the Fund's fundamental policies
and investment objective described in the Prospectus, cannot be changed
without the approval of a "majority" of the Fund's outstanding voting
shares. Under the Investment Company Act, a "majority" vote is defined
as the vote, at an annual or special meeting of the shareholders of the
Fund, of the lesser of (i) 67% or more of the shares present or
represented by proxy at such meeting if the holders of more than 50% of
the outstanding shares are present or represented by proxy, or (ii) more
than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot: (1) buy the
securities of any company for the purpose of exercising management
control; (2) invest in commodities or in commodities contracts, other
than the Hedging Instruments permitted by any of its other fundamental
policies, whether or not any such Hedging Instrument is considered to be
a commodity or a commodity contract; (3) buy or sell real estate; however,
the Fund may invest in debt securities secured by real estate or interests
therein or issued by companies, including real estate investment trusts,
which invest in real estate or interests therein; (4) buy securities on
margin, except that the Fund may make margin deposits in connection with
any of the Hedging Instruments which it may use; (5) lend money, but the
Fund may enter into repurchase agreements or invest in all or a portion
of an issue of bonds, debentures, commercial paper, or other similar
corporate obligations of the types that are usually purchased by
institutions, whether or not publicly distributed; (6) mortgage or pledge
any of its assets; however this does not prohibit the Fund from pledging
its assets for collateral arrangements contemplated in connection with the
use of Hedging Instruments; (7) underwrite securities of other companies
except to the extent that, in connection with the disposition of its
portfolio investments, it may be deemed to be an underwriter for purposes
of the Securities Act; (8) buy and retain securities of any issuer if
those officers, directors or trustees of the Fund or the Manager who
beneficially own more than .5% of the securities of such issuer together
own more than 5% of the securities of such issuer; (9) invest more than
5% of total assets through open-market purchases in other investment
companies, except in connection with a merger, consolidation,
reorganization or acquisition of assets; or (10) invest in oil, gas or
other mineral exploration or development programs.
In connection with the qualification of its shares in certain
states, the Fund has undertaken that in addition to the above, it will not
(i) invest more than 5% of its net assets in warrants, and that warrants
not listed on the New York and American Stock Exchanges shall not exceed
2% of its net assets, (ii) invest more than 5% of its total assets in
securities of issuers, including their predecessors, that have been in
continuous operation for less than three continuous years; (iii) invest
in real estate limited partnerships, or (iv) invest in oil, gas or other
mineral leases. In the event that the Fund's shares cease to be qualified
under such laws or if such undertaking otherwise ceases to be operative,
the Fund would not be subject to such restriction. The percentage
restrictions described above and in the Prospectus apply only at the time
of investment and require no action by the Fund as a result of subsequent
changes in relative values.
TRUSTEES AND OFFICERS
The Fund's Trustees and officers and their principal occupations and
business affiliations during the past five years are listed below. The
address of each, except as noted, is Two World Trade Center, New York, New
York 10048-0203. With the exception of William L. Wilby, each serves in
similar capacities with Oppenheimer Fund, Oppenheimer Time Fund,
Oppenheimer Special Fund, Oppenheimer Pennsylvania Tax-Exempt Fund,
Oppenheimer Florida Tax-Exempt Fund, Oppenheimer Tax-Free Bond Fund,
Oppenheimer Money Market Fund, Inc., Oppenheimer Target Fund, Oppenheimer
U.S. Government Trust, Oppenheimer New York Tax-Exempt Fund, Oppenheimer
California Tax-Exempt Fund, Oppenheimer Asset Allocation Fund, Oppenheimer
Gold & Special Minerals Fund, Oppenheimer Discovery Fund, Oppenheimer
Mortgage Income Fund, Oppenheimer Global Fund, Oppenheimer Global Bio-Tech
Fund, Oppenheimer Global Environment Fund, Oppenheimer Multi-Sector Income
Trust and Oppenheimer Multi-Government Trust (collectively, the "New York-
based OppenheimerFunds"). As of December 31, 1993, the Trustees and
officers of the Fund as a group beneficially owned less than 1% of the
Fund's outstanding shares.
LEON LEVY, Chairman of the Board of Trustees
General Partner of Odyssey Partners, L.P. (investment partnership);
Chairman of Avatar Holdings, Inc. (real estate development).
LEO CHERNE, Trustee
386 Park Avenue South, New York, New York 10016
Chairman Emeritus of the International Rescue Committee
(philanthropic organization); formerly Executive Director of The
Research Institute of America.
EDMUND T. DELANEY, Trustee
5 Gorham Road, Chester, Connecticut 06412
Attorney-at-law; formerly a Member of the Connecticut State
Historical Commission and Counsel to Copp, Berall & Hempstead (a law
firm).
ROBERT G. GALLI, Trustee*
Vice Chairman of the Manager and Vice President and Counsel of
Oppenheimer Acquisition Corp. ("OAC") the Manager's parent holding
company; formerly he held the following positions: a director of the
Manager and Oppenheimer Funds Distributor, Inc. (the "Distributor"),
Vice President and a director of HarbourView Asset Management
Corporation ("HarbourView") and Centennial Asset Management
Corporation ("Centennial"), investment adviser subsidiaries of the
Manager, a director of Shareholder Financial Services, Inc. ("SFSI")
and Shareholder Services, Inc. ("SSI"), transfer agent subsidiaries
of the Manager, an officer of other OppenheimerFunds and Executive
Vice President and General Counsel of the Manager and the
Distributor.
BENJAMIN LIPSTEIN, Trustee
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University.
ELIZABETH B. MOYNIHAN, Trustee
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the American Schools
of Oriental Research, the Freer Gallery of Art (Smithsonian
Institution), the Institute of Fine Arts (New York University) and
Preservation League of New York State; a member of the Indo-U.S.
Sub-Commission on Education and Culture.
KENNETH A. RANDALL, Trustee
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Northeast Bancorp, Inc. (bank holding company),
Dominion Resources, Inc. (electric utility holding company), and
Kemper Corporation (insurance and financial services company);
formerly Chairman of the Board of ICL Inc. (information systems).
EDWARD V. REGAN, Trustee
40 Park Avenue, New York, New York 10016
President of Jerome Levy Institute, Bard College; Member of the U.S.
Competitiveness Policy Council; Adjunct Professor of New York
University; formerly New York State Comptroller.
RUSSELL S. REYNOLDS, JR., Trustee
200 Park Avenue, New York, New York 10166
Founder Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directors Publication, Inc. (consulting and
publishing); a trustee of Mystic Seaport Museum, International House
and the Greenwich Historical Society and Greenwich Hospital.
SIDNEY M. ROBBINS, Trustee
50 Overlook Road, Ossining, New York 10562
Chase Manhattan Professor Emeritus of Financial Institutions,
Graduate School of Business, Columbia University; Visiting Professor
of Finance, University of Hawaii; a director of The Korea Fund, Inc.
and The Malaysia Fund, Inc. (closed-end investment companies); a
member of the Board of Advisors, Olympus Private Placement Fund,
L.P.; Professor Emeritus of Finance, Adelphi University.
DONALD W. SPIRO, President and Trustee*
Chairman Emeritus and a director of the Manager; formerly Chairman
of the Manager and Oppenheimer Funds Distributor, Inc. (the
"Distributor").
PAULINE TRIGERE, Trustee
550 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and
sale of women's fashions).
CLAYTON K. YEUTTER, Trustee
1325 Merrie Ridge Road, McLean, Virginia 22101
Of counsel, Hogan & Hartson (a law firm); a director of B.A.T.
Industries, Ltd. (tobacco and financial services), Caterpillar, Inc.
(machinery), ConAgra, Inc. (food and agricultural products), FMC
Corp. (chemicals and machinery), Lindsay Manufacturing Co. and Texas
Instruments Inc. (electronics); formerly (in descending chronological
order) Deputy Chairman, Bush/Quayle Presidential Campaign; Counsellor
to the President (Bush) for Domestic Policy; Chairman of the
Republican National Committee; Secretary of the U.S. Department of
Agriculture; U.S. Trade Representative, Executive Office of the
President.
WILLIAM L. WILBY, Vice President and Portfolio Manager
Vice President of the Manager and HarbourView; an officer of other
OppenheimerFunds; formerly international investment strategist at
Brown Brothers, Harriman & Co., prior to which he was a Managing
Director and Portfolio manager at AIG Global Investors.
GEORGE C. BOWEN, Treasurer
3410 South Galena Street, Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of the Distributor and Harbourview; Senior Vice
President, Treasurer, Assistant Secretary and a director of
Centennial; Vice President, Treasurer and Secretary of SSI and SFSI;
an officer of other OppenheimerFunds; formerly Senior Vice
President/Comptroller and Secretary of Oppenheimer Asset Management
Corporation, a former investment advisory subsidiary of the Manager.
ANDREW J. DONOHUE, Secretary
Executive Vice President and General Counsel of the Manager and
Distributor; an officer of other OppenheimerFunds; formerly Senior
Vice President and Associate General Counsel of the Manager and the
Distributor, Partner in Kraft & McManimon (a law firm), an officer
of First Investors Corporation (a broker-dealer) and First Investors
Management Company, Inc. (broker-dealer and investment adviser), and
a director and an officer of First Investors Family of Funds and
First Investors Life Insurance Company.
ROBERT G. ZACK, Assistant Secretary
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other
OppenheimerFunds.
LYNN M. COLUCCY, Assistant Treasurer
3410 South Galena Street, Denver, Colorado 80231
Vice President and Assistant Treasurer of the Manager; an officer of
other OppenheimerFunds; formerly Vice President/Director of Internal
Audit of the Manager.
[FN]
- -----------------
*Denotes Trustee who is an "interested person" of the Fund as defined in
the Investment Company Act.
Remuneration of Trustees. The officers of the Fund (including Mr. Spiro)
are affiliated with the Manager and receive no salary or fee from the
Fund. During the Fund's fiscal year ended September 30, 1993, the
remuneration (including expense reimbursements) paid by the Fund to all
Trustees of the Fund (excluding Mr. Spiro) in the aggregate for services
as Trustees and as members of one or more committees totaled $13,983. The
Fund has adopted a retirement plan that provides for payment to a retired
Trustee of up to 80% of the average compensation paid during that
Trustee's five years of service in which the highest compensation was
received. A Trustee must serve in that capacity for any of the New York-
based OppenheimerFunds for at least 15 years to be eligible for the
maximum payment. No Trustee has retired since the adoption of the plan
and no payments have been made by the Fund under the plan. During the
fiscal year ended September 30, 1993, the Fund accrued $912 for its
benefit obligations under the plan.
Major Shareholders. As of December 31, 1993, no person owned of record
or was known by the Fund to own of record or beneficially 5% or more of
the Fund's outstanding shares.
INVESTMENT MANAGEMENT SERVICES
The Manager is wholly-owned by OAC, a holding company ultimately
controlled by Massachusetts Mutual Life Insurance Company. OAC is also
owned in part by certain of the Manager's directors and officers, some of
whom serve as officers of the Fund, and one of whom (Mr. Spiro) serves as
a Trustee of the Fund.
The management fee is payable monthly to the Manager under the terms
of an investment advisory agreement between the Manager and the Fund (the
"Agreement"), and is computed on the net assets of the Fund as of the
close of business each day. The Agreement requires the Manager, at its
expense, to provide the Fund with adequate office space, facilities and
equipment, and to provide and supervise the activities of all
administrative and clerical personnel required to provide effective
administration for the Fund, including the compilation and maintenance of
records with respect to its operations, the preparation and filing of
specified reports, and composition of proxy materials and registration
statements for continuous public sale of shares of the Fund. Expenses not
expressly assumed by the Manager under the Agreement or by the Distributor
are paid by the Fund. The Agreement lists examples of expenses paid by
the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to unaffiliated trustees, legal and audit
expenses, custodian and transfer agent expenses, share issuance costs,
certain printing and registration costs, and non-recurring expenses,
including litigation. During the Fund's fiscal period from October 22,
1990 (commencement of operations) through September 30, 1991 and the
Fund's fiscal years ended September 30, 1992 and 1993, the management fees
paid by the Fund to the Manager were $136,317, $278,376 and $449,323,
respectively.
The Agreement contains no expense limitation. However, independently
of the Agreement, the Manager has undertaken that the total expenses of
the Fund in any fiscal year (including the management fee but excluding
taxes, interest, brokerage commissions, distribution assistance payments,
extraordinary expenses such as litigation costs and the component of
custodial expenses which reflects the increased cost of the foreign
subcustodian relationship) will not exceed (and the Manager undertakes to
reduce the Fund's management fee in the amount by which such expenses will
exceed) the most stringent state regulatory limitation on fund expenses
applicable to the Fund. At present, that limitation is imposed by
California, and limits expenses (with specified exclusions) equal to 2.5%
of the Fund's first $30 million of average annual net assets, 2% of the
next $70 million, and 1.5% of the Fund's average annual net assets in
excess of $100 million, subject to certain exclusions. The payment of the
management fee at the end of any month will be reduced or eliminated so
that there will not be any accrued but unpaid liability under the expense
limitation. The Manager reserves the right to terminate or amend the
undertaking at any time. Any assumption of the Fund's expenses under this
undertaking would lower the Fund's overall expense ratio and increase its
total return during any period in which expenses are limited.
The Agreement provides that the Manager is not liable for any loss
sustained by reason of good faith errors or omissions in connection with
matters to which the Agreement relates, except loss resulting by reason
of its willful misfeasance, bad faith, gross negligence or reckless
disregard for its obligations thereunder. The Agreement permits the
Manager to act as investment adviser for any other person, firm or
corporation and to use the name "Oppenheimer" in connection with other
investment companies for which it may act as investment adviser or general
distributor. If the Manager or one of its affiliates no longer acts as
investment adviser to the Fund, the right of the Fund to use the name
"Oppenheimer" as part of its name may be withdrawn.
BROKERAGE
Provisions of the Investment Advisory Agreement. One of the duties of the
Manager under the Agreement is to arrange the portfolio transactions of
the Fund. In doing so, the Manager is authorized by the Agreement to
employ broker-dealers ("brokers") including "affiliated" brokers, as that
term is defined in the Investment Company Act, as may, in its best
judgment based on all relevant factors, implement the policy of the Fund
to obtain, at reasonable expense, the "best execution" (prompt and
reliable execution at the most favorable price obtainable) of such
transactions. The Manager need not seek competitive commission bidding
or base its selection on "posted" rates, but is expected to be aware of
the current rates of eligible brokers and to minimize the commissions paid
to the extent consistent with the provisions of the Agreement and the
interests and policies of the Fund as established by its Board of
Trustees.
Under the Agreement, the Manager is authorized to select brokers that
provide brokerage and/or research services for the Fund and/or the other
accounts over which the Manager or its affiliates have investment
discretion. The commissions paid to such brokers may be higher than
another qualified broker would have charged, if a good faith determination
is made by the Manager that the commission is reasonable in relation to
the services provided. Subject to the foregoing considerations, the
Manager may also consider sales of shares of the Fund and other funds
managed by the Manager and its affiliates as a factor in the selection of
brokers for the Fund's portfolio transactions.
Description of Brokerage Practices. Subject to the provisions of the
Agreement, allocations of the Fund's brokerage are made by portfolio
managers under the supervision of the Manager's executive officers.
Transactions in securities other than those for which an exchange is the
primary market are generally done with principals or market makers. In
connection with transactions on foreign exchanges, the Fund may be
required to pay fixed brokerage commissions and thereby forego the benefit
of negotiated commissions available in U.S. markets. Brokerage
commissions are paid primarily for effecting transactions in listed
securities and otherwise only if it appears likely that a better price or
execution can be obtained. When the Fund engages in an option
transaction, ordinarily the same broker will be used for the purchase or
sale of the option and any transactions in the securities to which the
option relates. When possible, concurrent orders to purchase or sell the
same security by more than one of the accounts managed by the Manager or
it affiliates are combined. Transactions effected pursuant to such
combined orders are averaged as to price and allocated in accordance with
the purchase or sale orders actually placed for each account. Option
commissions may be relatively higher than those which would apply to
direct purchases and sales of portfolio securities.
The research services provided by a particular broker may be useful
only to one or more of the advisory accounts of the Manager and its
affiliates, and investment research received for the commissions of those
other accounts may be useful both to the Fund and one or more of such
other accounts. Such research, which may be supplied by a third party at
the instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid for in
commission dollars. The research services provided by brokers broaden the
scope and supplement the research activities of the Manager, by making
available additional views for consideration and comparisons, and enabling
the Manager to obtain market information for the valuation of securities
held in the Fund's portfolio or being considered for purchase. The Fund's
Board of Trustees, including the independent Trustees of the Fund,
annually reviews information furnished by the Manager as to the
commissions paid to brokers furnishing such services in an effort to
ascertain that the amount of such commissions was reasonably related to
the value or the benefit of such services.
During the fiscal period from October 22, 1990 (commencement of
operations) through September 30, 1991 and the fiscal years ended
September 30, 1992 and 1993, total brokerage commissions paid by the Fund
(not including spreads or concessions on principal transactions on a net
trade basis) were $54,250, $93,625 and $1,462,229, respectively. During
the fiscal year ended September 30, 1993, $14,931 was paid to dealers as
brokerage commissions in return for research services (including special
research, statistical information and execution); the aggregate dollar
amount of those transactions was $7,563,779. The transactions giving rise
to those commissions were allocated in accordance with the internal
allocation procedures described above. The Board of Trustees has
permitted the Manager to use concessions on fixed price offerings to
obtain research, in the same manner as is permitted for agency
transactions.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Determination of Net Asset Value Per Share. The net asset values per
share of Class A and Class C shares of the Fund is determined each day the
New York Stock Exchange (the "NYSE") is open as of 4:00 P.M. (all
references to time mean New York time), that day by dividing the value
of the Fund's net assets attributable to that class by the number of Fund
shares of that class outstanding. The NYSE's most recent annual holiday
schedule (which is subject to change) states that it will close New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day; it may also close on other days.
Trading may occur in debt securities and in foreign securities at times
when the NYSE is closed (including weekends and holidays, or after 4:00
P.M. on a regular business day). Because the net asset values of the Fund
will not be calculated at such times, if securities held in the Fund's
portfolio are traded at such times, the net asset values per share of
Class A and Class C shares of the Fund may be significantly affected at
times when shareholders will not have the ability to purchase or redeem
shares. Trading in securities on European and Asian exchanges and over-
the-counter markets is normally completed before the close of the NYSE.
Events affecting the values of foreign securities traded in such markets
that occur between the time their prices are determined and the close of
the NYSE will not be reflected in the Fund's calculation of net asset
value unless the Fund's Board of Trustees or the Manager, under procedures
established by the Board, determines that the particular event would
materially affect the Fund's net asset value, in which case an adjustment
would be made. Foreign currency will be valued as close to the time fixed
for the valuation date as is reasonably practicable. The value of
securities denominated in foreign currency will be converted to U.S.
dollars at the prevailing rates of exchange at the time of valuation. In
the case of U.S. government securities, corporate bonds and all mortgage-
backed securities, where last sale information is not generally available,
such pricing procedures may include "matrix" comparisons to the prices for
comparable instruments on the basis of quality, yield, maturity and other
special factors involved. The Fund's Board of Trustees has authorized the
Manager to employ a pricing service to price U.S. government securities,
mortgage-backed securities and corporate bonds. The Trustees will monitor
the accuracy of pricing services by comparing prices used for portfolio
evaluation to actual sales prices of selected securities.
The Fund's Board of Trustees has established the following procedures
for the valuation of the Fund's securities, generally as follows: (i)
equity securities traded on a securities exchange or on the NASDAQ for
which last sale information is regularly reported are valued at the last
reported sales prices on their primary exchange or the NASDAQ that day
(or, in the absence of sales that day, at values based on the last sale
prices of the preceding trading day or closing bid and asked prices); (ii)
NASDAQ and other unlisted equity securities for which last sale prices
are not regularly reported but for which over-the-counter market
quotations are readily available are valued at the highest closing bid
price at the time of valuation, or, if no closing bid price is reported,
on the basis of a closing bid price obtained from a dealer who maintains
an active market in that security; (iii) securities (including restricted
securities) not having readily-available market quotations are valued at
fair value under the Board's procedures; (iv) long-term debt securities,
and short-term debt securities having a remaining maturity in excess of
60 days, are valued at the mean between the bid and asked prices
determined by a portfolio pricing service approved by the Fund's Board of
Trustees or obtained from active market makers on the basis of reasonable
inquiry; (v) short-term debt securities having a remaining maturity of 60
days or less are valued at cost, adjusted for amortization of premiums and
accretion of discounts; and (vi) securities traded on foreign exchanges
or in foreign over-the-counter markets are valued as determined by a
portfolio pricing service, approved by the Board, based upon last sales
prices reported on a principal exchange or, if none, at the mean between
closing bid and asked prices and reflect prevailing rates of exchange to
convert their values to U.S. dollars.
In the case of U.S. Government securities, mortgage-backed
securities, foreign securities and corporate bonds, when last sale
information is not generally available, such pricing procedures may
include "matrix" comparison to the prices for comparable instruments on
the basis of quality, yield, maturity, and other special factors involved.
The Fund's Board of Trustees has authorized the Manager to employ a
pricing service to price U.S. Government securities, mortgage-backed
securities, foreign government securities and corporate bonds. The
Trustees will monitor the accuracy of such pricing services by comparing
prices used for portfolio evaluation to actual sales prices of selected
securities.
Calls, puts and Futures are valued at the last sale prices on the
principal exchanges or the NASDAQ on which they are traded, or, if there
are no sales that day, in accordance with (i) above. When the Fund writes
an option, an amount equal to the premium received by the Fund is included
in its Statement of Assets and Liabilities as an asset, and an equivalent
deferred credit is included in the liability section. The deferred credit
is adjusted ("marked-to-market") to reflect the current market value of
the option.
Dual Class Methodology. The methodology for calculating the net asset
value, dividends and distributions of the Fund's Class A and Class C
shares recognizes two types of expenses. General expenses that do not
pertain specifically to either class are allocated pro rata to the shares
of each class, based on the percentage of the net assets of such class to
the Fund's total net assets, and then equally to each outstanding share
within a given class. Such general expenses include (i) management fees,
(ii) legal, bookkeeping and audit fees, (iii) printing and mailing costs
of shareholder reports, Prospectuses, Additional Statements and other
materials for current shareholders, (iv) fees to unaffiliated Trustees,
(v) custodian expenses, (vi) share issuance costs, (vii) organization and
start-up costs, (viii) interest, taxes and brokerage commissions, and (ix)
non-recurring expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each outstanding
share within that class. Such expenses include (i) Distribution Plan
fees, (ii) incremental transfer and shareholder servicing agent fees and
expenses, (iii) registration fees and (iv) shareholder meeting expenses,
to the extent that such expenses pertain to a specific class rather than
to the Fund as a whole.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Rights of
Accumulation and Letters of Intent because of the economies of sales
efforts and reduction in expenses realized by the Distributor and brokers
making such sales. No sales charge is imposed in certain circumstances
described in the Prospectus because the Distributor incurs little or no
selling expenses. The term "immediate family" refers to one's spouse,
children, grandchildren, parents, grandparents, sons- and daughters-in-
law, parents-in-law, siblings, a sibling's spouse and a spouse's siblings.
Redemptions. Information on how to redeem shares of the Fund is stated
in the Prospectus. The Prospectus states that payment for shares tendered
for redemption is ordinarily made in cash. However, if the Fund's Board
of Trustees determines that it would be detrimental to the best interests
of the remaining shareholders of the Fund to make payment wholly or partly
in cash, the Fund may pay the redemption proceeds in whole or in part by
a distribution in kind of securities from the portfolio of the Fund, in
lieu of cash, in conformity with applicable Securities and Exchange
Commission rules. The Fund has elected to be governed by Rule 18f-1 under
the Investment Company Act, pursuant to which the Fund is obligated to
redeem shares solely in cash up to the lesser of $250,000 or 1% of the net
assets of the Fund during any 90-day period for any one shareholder. If
shares are redeemed in kind, the redeeming shareholder might incur
brokerage or other costs in converting the assets to cash. Any shares
issued by the Fund pursuant to an "in-kind" redemption will be readily
marketable. The method of valuing securities used to make redemptions in
kind will be the same as the method of valuing portfolio securities
described above under "Determination of Net Asset Value Per Share," and
such valuation will be made as of the same time the redemption price is
determined.
The Fund's Board of Trustees has the right to cause the involuntary
redemption of the shares held in any account if the aggregate net asset
value of such shares is less than $200 or such lesser amount as the Board
may decide. The Board of Trustees will not cause the involuntary
redemption of shares in an account if the aggregate net asset value of
such shares has fallen below the stated minimum solely as a result of
market fluctuations. Should the Board elect to exercise the right to
redeem small accounts, it may also fix, in accordance with the Investment
Company Act, the requirements for any notice to be given to the
shareholders in question (not less than 30 days), or may set requirements
for permission to allow the shareholder to increase the investment so that
the shares would not be involuntarily redeemed.
Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a check to purchase shares is returned
to the Fund unpaid) causes a loss to be incurred when the net asset value
of the Fund's shares on the cancellation date is less than on the purchase
date, that loss is equal to the difference in the net asset value times
the number of shares in the purchase order. The investor is responsible
for that loss. If the investor fails to compensate the Fund for such
loss, the Distributor will compensate the Fund. The Fund may reimburse
the Distributor for that loss by automatically redeeming shares from any
account registered in that investor's name, or by seeking other redress.
Transfers. Shareholders owning shares of both classes must specify
whether they intend to transfer Class A or Class C shares. Shares are not
subject to the payment of a CDSC of either class at the time of transfer
(by absolute assignment, gift or bequest, not involving, directly or
indirectly, a public sale). The transferred shares will remain subject
to the CDSC, calculated as if the transferee shareholder had acquired the
transferred shares in the same manner and at the same time as the
transferring shareholder. If less than all shares held in an account are
transferred, and some but not all shares in the account would be subject
to a CDSC if redeemed at the time of transfer, then shares will be
transferred in the order described in "How to Buy Shares - Class C
Contingent Deferred Sales Charge" in the Prospectus for the imposition of
the Class C CDSC on redemptions.
Exchanges of Class C Shares. As stated in the Prospectus, shares of a
particular class of Eligible Funds having more than one class of shares
may be exchanged only for shares of the same class or another Eligible
Fund. All of the Eligible Funds offer Class A shares, but only the
following other Eligible Funds (referred to as "Advisors Portfolio" funds)
offer Class C shares:
Oppenheimer Target Fund
Oppenheimer Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Champion High Yield Fund
Oppenheimer U.S. Government Trust
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Cash Reserves
Oppenheimer Strategic Diversified Income Fund
DISTRIBUTION AND SERVICE PLANS
The Fund has adopted a separate Plan for each class of shares of the
Fund under Rule 12b-1 of the Investment Company Act, pursuant to which the
Fund will reimburse the Distributor for a portion of its costs incurred
in connection with the distribution and/or servicing of the shares of that
class, as described in the Prospectus. Each Plan has been approved by a
vote of (i) the Board of Trustees of the Fund, including a majority of the
"Independent Trustees," cast in person at a meeting called for the purpose
of voting on that Plan, and (ii) the holders of a "majority" (as defined
in the Investment Company Act) of the shares of each class such vote
having been cast, as to the Distribution and Service Plan for the Class
C shares (the "Class C Plan"), by the Manager as the sole initial holder
of Class C shares of the Fund.
Each Plan shall, unless terminated as described below, continue in
effect from year to year only so long as such continuance is specifically
approved at least annually by the Fund's Board of Trustees and its
Independent Trustees by a vote cast in person at a meeting called for the
purpose of voting on such continuance. Either Plan may be terminated at
any time by the vote of a majority of the Independent Trustees or by the
vote of the holders of a "majority" (as defined in the Investment Company
Act) of the outstanding shares of that class. Neither Plan may be amended
to increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the class affected by the
amendment. All material amendments must be approved by the Independent
Trustees.
While the Plans are in effect, the Treasurer of the Fund will provide
separate written reports to the Fund's Board of Trustees at least
quarterly on the amount of all payments made pursuant to each Plan, the
identity of each Recipient that received any such payment, and the purpose
of the payments. The report for the Class C Plan shall also include the
distribution costs for that quarter, and such costs for previous fiscal
periods that are carried forward, as explained in the Prospectus and
below. Those reports, including the allocations on which they are based,
will be subject to the review and approval of the Independent Trustees in
the exercise of their fiduciary duty. Each Plan further provides that
while it is in effect, the selection or replacement and nomination of
those Trustees of the Fund who are not "interested persons" of the Fund
is committed to the discretion of the Independent Trustees. This does not
prevent the involvement of others in such selection and nomination if the
final decision as to the selection or nomination is approved by a majority
of such Independent Trustees.
Under the Plans, no payment will be made by the Distributor to any
Recipient in any quarter if the aggregate net asset value of all Fund
shares held by it or its customers at the end of a calendar quarter is
less than the minimum level of qualified holdings, if any, established
under the Plan from time to time by the Trustees who are not "interested
persons" (as defined in the Investment Company Act) of the Fund and who
have no direct or indirect financial interest in the operation of the Plan
or in any agreements related to the Plan ("Independent Trustees").
Currently, no minimum asset requirement has been fixed by the Board of
Trustees. The Plans permit the Distributor and the Manager to make
additional distribution payments to Recipients from their own resources
(including profits from advisory fees) at no cost to the Fund. The
Distributor and the Manager may, in their sole discretion, increase or
decrease the amount of distribution assistance payments they make to
Recipients from their own assets.
For the fiscal year ended September 30, 1993, payments under the
Class A Plan totaled $148,546 all of which was paid by the Distributor to
Recipients, including $4,087 paid to an affiliate of the Distributor. No
payments were made under the Class C Plan during that fiscal period, as
no Class C shares were publicly offered prior to December 1, 1993.
The Class C Plan allows the service fee payment to be paid by the
Distributor to Recipients in advance for the first year Class C shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. The advance payment is based on the net assets of the Class
C shares sold. An exchange of shares does not entitle the Recipient to
an advance service fee payment. In the event Class C shares are redeemed
during the first year such shares are outstanding, the Recipient will be
obligated to repay a pro rata portion of such advance payment to the
Distributor. Although the Class C Plan permits the Distributor to retain
both the asset-based sales charges and the service fee on Class C shares,
or to pay Recipients the service fee on a quarterly basis, without payment
in advance, the Distributor intends to pay the service fee to Recipients
in the manner described above. A minimum holding period may be
established from time to time under the Class C Plan by the Board.
Initially, the Board has set no minimum holding period. All payments
under the Class C Plan become subject to the limitations imposed by the
National Association of Securities Dealers, Inc. Rules of Fair Practice.
The Class C Plan allows for the carry-forward of distribution expenses,
to be recovered from asset-based sales charges in subsequent fiscal
periods, as described in the Prospectus. As of the date of this
Additional Statement, no payments were made under the Class C Plan, as no
Class C shares were publicly issued prior to December 1, 1993.
The asset-based sales charge paid to the Distributor by the Fund
under the Class C Plan is intended to allow the Distributor to recoup the
cost of sales commissions paid to authorized brokers and dealers at the
time of sale, plus financing costs, as described in the Prospectus. Such
payments may also be used to pay for the following expenses in connection
with the distribution of Class C shares: (i) financing the advance of the
service fee payment to Recipients under the Class C Plan, (ii)
compensation and expenses of personnel employed by the Distributor to
support distribution of Class C shares, and (iii) costs of sales
literature, advertising and prospectuses (other than those furnished to
current shareholders) and state "blue sky" registration fees.
The Glass-Steagall Act and other applicable laws and regulations,
among other things, generally prohibit Federally-chartered or supervised
banks from engaging in the business of underwriting, selling or
distributing securities as principals. Accordingly, the Distributor may
pay banks only for sales made on an agency basis or for the performance
of administrative and shareholder servicing functions. In addition,
certain banks and financial institutions may be required to register as
dealers under state law. While the matter is not free from doubt, the
Manager understands that such laws do not preclude a bank from performing
the services required of a Recipient. However, judicial or administrative
decisions or interpretations of such laws, as well as changes in either
Federal or state statutes or regulations relating to the permissible
activities of banks or their subsidiaries or affiliates, could prevent
certain banks from continuing to perform all or a part of these services.
The Fund's Board of Trustees will consider appropriate modifications to
the Fund's operations, including discontinuance of payments under the Plan
to such institutions, in the event of any future change in such laws or
regulations which may adversely affect the ability of such institutions
to provide these services. If a bank were so prohibited, shareholders of
the Fund who were clients of such bank would be permitted to remain as
shareholders, and if a bank could no longer provide those service
functions, alternate means for continuing the servicing of such
shareholders would be sought. In such event, shareholders serviced by
such bank might no longer be able to avail themselves of any automatic
investment or other services then being provided by such bank. It is not
expected that shareholders would suffer any adverse financial consequences
as a result of any of those occurrences.
TOTAL RETURN, DIVIDEND AND TAX INFORMATION
Total Return Information. As described in the Prospectus, from time to
time the "average annual total return", "total return" and "total return
at net asset value" of an investment in each class of the Fund may be
advertised. An explanation of how average annual total return and total
return are calculated for each class and the components of those
calculations is set forth below. No yield or total return calculations
are presented below for Class C shares because no shares of that class
were publicly issued prior to December 1, 1993.
The "average annual total return" of each class is an average annual
compounded rate of return. It is the rate of return based on factors
which include a hypothetical initial investment of $1,000 ("P" in the
formula below) held for a number of years ("n") with an Ending Redeemable
Value ("ERV") of that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
The "total return" calculation for each class uses some of the same
factors as "average annual total return" but does not average the rate of
return on an annual basis. Total return measures the cumulative (rather
than average) change in value of a hypothetical investment over a stated
period. Total Return is determined as follows:
ERV - P
------- = Total Return
P
Both formulas assume (i) for Class A shares, the payment of the
current maximum sales charge of 5.75% (as a percentage of the offering
price) on the initial investment ("P"), and (ii) for Class C shares, the
payment of the 1.0% contingent deferred sales charge for the first 12
months, applied as described in the Prospectus. The formulas also assume
that all dividends and capital gains distributions during the period are
reinvested at net asset value per share, and that the investment is
redeemed at the end of the period. The "average annual total returns" on
an investment in Class A shares of the Fund (using the method described
above) for the fiscal year ended September 30, 1993 and for the period
October 22, 1990 (commencement of operations) to September 30, 1993 were
14.05% and 7.94%, respectively; and the "total return" on Class A shares
for the period from October 22, 1990 (commencement of operations) to
September 30, 1993 was 25.18%.
From time to time the Fund may also quote a "return at net asset
value" for Class A or Class C shares. It is based on the difference in
net asset value per share at the beginning and the end of the period
(without considering sales charge) and takes into consideration the
reinvestment of dividends and capital gains (as with total return,
described above). The return at net asset value of the Fund's Class A
shares for the fiscal year ended September 30, 1993 and for the period
from October 22, 1990 (commencement of operations) to September 30, 1993,
was 21.00% and 32.81%, respectively.
Total return information may be useful to investors in reviewing the
performance of the Fund's Class A or Class C shares. However, certain
factors should be considered before using this information as a basis for
comparison with alternative investments. No adjustment is made for taxes
payable on distributions. An investment in the Fund is not insured; its
total return is not guaranteed and will fluctuate over time. The total
return for any given past period is not an indication or representation
by the Fund of future rates of return on its shares. The total return of
the Class A and Class C shares of the Fund is affected by portfolio
quality, portfolio maturity, type of investments held and operating
expenses. When comparing total return of an investment in Class A or
Class C shares of the Fund with that of other investment instruments,
investors should understand that certain other investment alternatives
such as money market instruments, certificates of deposit, U.S. Government
securities or bank accounts provide a return which remains relatively
constant over time and also that bank accounts may be insured. Investors
should also understand, when comparing the Fund's total return with that
of other investment alternatives, that since the Fund seeks capital
appreciation as well as current income, its shares may be subject to
greater market risks than shares of funds having other investment
objectives. The current price per share is listed daily in newspaper
financial sections.
From time to time the return on an investment in Class A or Class C
shares of the Fund may be compared to the returns on other investments at
specified fixed rates of return over a 10-year period. The chart below
illustrates the returns on hypothetical investments having the fixed rates
of return illustrated, assuming (i) there is no sales charge on the
investment, (ii) earnings are reinvested at the end of each year and (iii)
each investment is made on the first day of each year in the periods
shown:
Value on September 30, 1993
Investment Assumed Average Annual Return
5% 10% 15% 20%
Single $1,000 $ 1,629 $ 2,594 $ 4,046 $ 6,192
Annual $1,000 $13,208 $17,533 $23,350 $31,151
From time to time the Fund may publish the ranking of the performance
of its Class A or Class C shares by Lipper Analytical Services, Inc.
("Lipper"), a widely-recognized independent service that monitors the
performance of regulated investment companies, including the Fund, and
ranks their performance for various periods based on categories relating
to investment objectives. The performance of the Fund is ranked against:
(i) all other funds, (ii) all other balanced funds, and (iii) all other
balanced funds in a specific size category. The Lipper performance
analysis includes the reinvestment of capital gain distributions and
income dividends but does not take sale charges into consideration.
From time to time the Fund may publish the ranking of the performance
of its Class A or Class C shares by Morningstar, Inc. ("Morningstar"), an
independent mutual fund monitoring service that ranks various mutual
funds, including the Fund, based upon the fund's three, five and ten-year
average annual total returns (when available) and a risk factor that
reflects fund performance relative to three-month U.S. Treasury bill
monthly returns. Such returns are adjusted for fees and sales loads.
There are five ranking categories with a corresponding number of stars:
highest (5), above average (4), neutral (3), below average (2) and lowest
(1). Morningstar ranks the Fund in relation to other rated growth and
income funds.
The total return on an investment in the Fund's Class A or Class C
shares may be compared with performance for the same period of either the
Dow Jones Industrial Average ("Dow") or the Standard & Poor's 500 Index
("S&P 500"), both of which are widely-recognized indices of stock market
performance. Both indices consist of unmanaged groups of common stocks;
the Dow consists of thirty such issues. The performance of both indices
includes a factor for the reinvestment of income dividends. Neither index
reflects investment of capital gains or takes sales charges or taxes into
consideration as these items are not applicable to indices.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect
to reinvest all dividends and/or distributions in shares of the same class
of any of the other funds listed in the Prospectus as "Eligible Funds,"
at net asset value without sales charge. Class C shareholders should be
aware that as of the date of this Additional Statement, not all Eligible
Funds offer Class C shares. The names of these funds are listed above
under "Purchase, Redemption and Pricing of Shares - Exchanges of Class C
Shares." To elect this option, a shareholder must notify the Transfer
Agent in writing and have either an existing account in the fund selected
for reinvestment or must obtain a prospectus for that fund and an
application from the Transfer Agent to establish an account. The
investment will be made at the net asset value per share in effect at the
close of business on the payable date of the dividend or distribution.
Dividends and distributions from other Eligible Funds may be invested in
shares of the Fund on the same basis.
Tax Status of the Fund's Dividends and Distributions. The Federal tax
treatment of the Fund's dividends and distributions is explained in the
Prospectus under the caption "Dividends, Distributions and Taxes."
Special provisions of the Internal Revenue Code apply to the dividends-
received deduction for corporate shareholders. Long-term capital gains
distributions are not eligible for the deduction. In addition, the amount
of dividends paid by the Fund that may qualify for the deduction is
limited to the aggregate amount of qualifying dividends (generally
dividends from domestic corporations) that the Fund derives from its
portfolio investments held for a minimum period, usually 46 days. A
corporate shareholder will not be eligible for the deduction on dividends
paid on shares held by the shareholder for 45 days or less. To the extent
the Fund's dividends are derived from gross income from dividends from
foreign corporations, options premiums, interest income or short-term
gains from the sale of securities, its dividends will not qualify for the
deduction.
Under the Internal Revenue Code, by December 31 of each year, the
Fund must distribute 98% of its taxable investment income earned from
January 1 through December 31 of that year and 98% of its capital gains
realized in the period from November 1 of the prior year through October
31 of that year, or else the Fund must pay an excise tax on the amounts
not distributed. While it is presently anticipated that the Fund will
meet those requirements, the Fund's Board and the Manager may determine
in a particular year that it would be in the best interests of the Fund
not to make such distributions at the required levels and to pay the
excise tax, which would reduce the amount available for distributions to
shareholders.
If the Fund has more than 50% of its assets invested in securities
of foreign issuers at the end of its fiscal year, it may elect the
application of Section 853 of the Internal Revenue Code to permit
shareholders to take a credit (or a deduction) for foreign taxes paid by
the Fund. Under Section 853, shareholders would include in gross income
both cash dividends received from the Fund and the income taxes paid by
the Fund with respect to, or withheld from, interest and dividends paid
to the Fund from its foreign investments. Shareholders would generally
be entitled to treat the foreign taxes withheld as a credit on their
Federal income taxes. In effect, a portion of the shareholder's Federal
income taxes would be paid to other governments. As an alternative,
shareholders could, if to their advantage, treat the foreign tax withheld
as a deduction from gross income in computing taxable income rather than
as a tax credit. In substance, the Fund's election would enable
shareholders to benefit from the same foreign tax credit or deduction that
would be received if they had been the record owners of the Fund's foreign
securities and had paid foreign income taxes on the income received.
ADDITIONAL INFORMATION
Description of the Fund. The Fund's Declaration of Trust contains an
express disclaimer of shareholder or Trustee liability for the Fund's
obligations, and provides for indemnification and reimbursement of
expenses out of its property for any shareholder held personally liable
for its obligations. The Declaration of Trust also provides that the Fund
shall, upon request, assume a defense of any claim made against any
shareholder for any act or obligation of the Fund and satisfy any judgment
thereon. Thus, while Massachusetts law permits a shareholder of a trust
(such as the Fund) to be held personally liable as a "partner" under
certain circumstances, the risk of a Fund shareholder incurring financial
loss on account of shareholder liability is limited to the relatively
remote circumstances in which the Fund would be unable to meet the
obligations described above. Any person doing business with the Fund, and
any shareholder of the Fund, agrees under the Fund's Declaration of Trust
that he shall look solely to the assets of the Fund for satisfaction of
any claim or demand which may arise out of any dealings with the Fund, and
the Trustees shall have no personal liability to any such person to the
extent permitted by law.
It is not contemplated that regular annual meetings of shareholders
will be held. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder
meeting is called by the Trustees or upon proper request of the
shareholders. Shareholders have the right, upon the declaration in
writing or vote of two-thirds of the outstanding shares of the Fund, to
remove a Trustee. The Trustees will call a meeting of shareholders to
vote on the removal of a Trustee upon the written request of the
recordholders of 10% of its outstanding shares. In addition, if the
Trustees receive a request from at least 10 shareholders (who have been
shareholders at least six months) holding shares of the Fund valued at
$25,000 or more or holding 1% or more of the Fund's outstanding shares,
whichever is less, that they wish to communicate with other shareholders
to request a meeting to remove a Trustee, the Trustees will then either
make the Fund's shareholder list available to the applicants or mail their
communication to all other shareholders at the applicants' expense, or the
Trustees may take such other action as set forth in by Section 16(c) of
the Investment Company Act.
The Custodian and the Transfer Agent. The Custodian's responsibilities
include safeguarding and controlling the Fund's portfolio securities and
cash, collecting income on the portfolio securities and handling the
delivery of portfolio securities to and from the Fund. The Manager has
represented to the Fund that its banking relationships with the Custodian
have been and will continue to be unrelated to and unaffected by the
relationship between the Fund and the Custodian. It will be the practice
of the Fund to deal with the Custodian in a manner uninfluenced by any
banking relationship the Custodian may have with the Manager and its
affiliates.
The Transfer Agent is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for
shareholder servicing and administrative functions.
General Distributor's Agreement. Under the Distribution Agreement between
the Fund and the Distributor, the Distributor acts as the Fund's principal
underwriter in the continuous public offering of the Fund's Class A and
Class C shares, but is not obligated to sell a specific number of shares.
Expenses normally attributable to sales other than those paid under the
Plan of Distribution, including advertising and the cost of printing and
mailing prospectuses (other than those furnished to existing
shareholders), are borne by the Distributor. During the fiscal years
ended September 30, 1993 and 1992 and the fiscal period from October 22,
1990 (commencement of operations) through September 30, 1991, the
aggregate amount of sales charges on the Fund's shares was $429,513,
$444,168 and $931,592, respectively, of which the Distributor and an
affiliated broker-dealer retained in the aggregate $120,083, $105,976 and
130,709 in those respective periods.
Independent Auditors. The independent auditors of the Fund examine the
Fund's financial statements and perform other related audit services.
They also act as auditors for certain other funds advised by the Manager.
AUTOMATIC WITHDRAWAL PLAN PROVISIONS
As discussed in the Prospectus, a shareholder who owns shares of the
Fund valued at $5,000 or more at the current offering price may establish
an Automatic Withdrawal Plan to receive a monthly or quarterly check in
a requested amount of not less than $50. Shares will be redeemed three
business days prior to the date requested for receipt of the check (which
is an approximate date).
Fund shares will be redeemed as necessary to meet withdrawal
payments. Shares acquired without a sales charge will be redeemed first
and thereafter shares acquired with reinvested dividends and distributions
followed by sales acquired with a sales charge, will be redeemed to the
extent necessary to meet withdrawal payments. Depending upon the amount
withdrawn, the investor's principal may be depleted. Payments made to
shareholders under such plans should not be considered as a yield or
income on an investment. Purchases of additional shares concurrently with
withdrawals are undesirable because of sales charges on purchases.
Accordingly, a shareholder may not maintain an Automatic Withdrawal Plan
while simultaneously making regular purchases. For further details, refer
to the Automatic Withdrawal Plan provisions included in this Additional
Statement. The Fund reserves the right to amend, suspend or cease the
offering of such plans at any time without prior notice.
By requesting an Automatic Withdrawal Plan, the applicant agrees to
the terms and conditions applicable to such plans, as stated below and
elsewhere in the Application for such Plans, the Prospectus and this
Additional Statement as they may be amended from time to time by the Fund
and/or the Distributor. When adopted, such amendments will automatically
apply to existing Plans.
1. The Transfer Agent of the Fund will administer the Automatic
Withdrawal Plan (the "Withdrawal Plan") as agent for the person (the
"Planholder") who executed the Withdrawal Plan authorization and
application submitted to the Transfer Agent.
2. Certificates will not be issued for shares of the Fund purchased
for and held under the Withdrawal Plan, but the Transfer Agent will credit
all such shares to the account of the Planholder on the records of the
Fund. Any share certificates now held by the Planholder may be
surrendered unendorsed to the Transfer Agent with the Withdrawal Plan
application so that the shares represented by the certificate may be held
under the Withdrawal Plan. Those shares will be carried on the
Planholder's Withdrawal Plan Statement.
3. Distributions of capital gains must be reinvested in shares of
the Fund, which will be done at net asset value without a sales charge.
Dividends may be paid in cash or reinvested.
4. Redemptions of shares in connection with disbursement payments
will be made at the net asset value per share determined on the redemption
date.
5. Checks or ACH payments will be transmitted three business days
prior to the date selected for receipt of the monthly or quarterly payment
(the date of receipt is approximate), according to the choice specified
in writing by the Planholder.
6. The amount and the interval of disbursement payments and the
address to which checks are to be mailed may be changed at any time by the
Planholder on written notification to the Transfer Agent. The Planholder
should allow at least two weeks' time in mailing such notification before
the requested change can be put in effect.
7. The Planholder may, at any time, instruct the Transfer Agent by
written notice (in proper form in accordance with the requirements of the
then-current Prospectus of the Fund) to redeem all, or any part of, the
shares held under the Withdrawal Plan. In such case, the Transfer Agent
will redeem the number of shares requested at the net asset value per
share in effect in accordance with the Fund's usual redemption procedures
and will mail a check for the proceeds of such redemption to the
Planholder.
8. The Withdrawal Plan may, at any time, be terminated by the
Planholder on written notice to the Transfer Agent, or by the Transfer
Agent upon receiving directions to that effect from the Fund. the
Transfer Agent will also terminate the Withdrawal Plan upon receipt of
evidence satisfactory to it of the death or legal incapacity of the
Planholder. Upon termination of the Withdrawal Plan by the Transfer Agent
or the Fund, shares remaining unredeemed will be held in an uncertificated
account in the name of the Planholder, and the account will continue as
a dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder, his or her executor or
guardian, or as otherwise appropriate.
9. For purposes of using shares held under the Withdrawal Plan as
collateral, the Planholder may request the issuance of a portion of his
or her shares in certificated form. Upon written request from the
Planholder, the Transfer Agent will determine the number of shares as to
which a certificate may be issued, so as not to cause the withdrawal
checks to stop because of exhaustion of uncertificated shares needed to
continue payments. Should such uncertificated shares become exhausted,
Withdrawal Plan withdrawals will terminate.
10. The Transfer Agent shall incur no liability to the Planholder
for any action taken or omitted by the Transfer Agent in good faith.
11. In the event that the Transfer Agent shall cease to act as
transfer agent for the Fund, the Planholder will be deemed to have
appointed any successor transfer agent to act as his agent in
administering the Withdrawal Plan.
LETTERS OF INTENT
In submitting a Letter of Intent to purchase Class A shares of the
Fund and other OppenheimerFunds at a reduced sales charge, the investor
agrees to the terms of the Prospectus, the Application used to buy such
shares, and the language in this Additional Statement as to Letters of
Intent, as they may be amended from time to time by the Fund. Such
amendments will apply automatically to existing Letters of Intent.
A Letter of Intent ("Letter") is the investor's statement of
intention to purchase Class A shares of the Fund (and other eligible
OppenheimerFunds sold with a sales charge) during the 13-month period from
the investor's first purchase pursuant to the Letter (the "Letter of
Intent period"), which may, at the investor's request, include purchases
made up to 90 days prior to the date of the Letter. The investor states
the intention to make the aggregate amount of purchases (excluding any
reinvestments of dividends or distributions or purchases made at net asset
value without sales charge), which together with the investor's holdings
of such funds (calculated at their respective public offering prices
calculated on the date of the Letter) will equal or exceed the amount
specified in the Letter to obtain the reduced sales charge rate (as set
forth in "How To Buy Shares" in the Prospectus) applicable to purchases
of shares in that amount (the "intended amount"). Each purchase under the
Letter will be made at the public offering price applicable to a single
lump-sum purchase of shares in the intended amount, as described in the
applicable prospectus.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of such fund shares on the last day of that period,
do not equal or exceed the intended amount, the investor agrees to pay the
additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow" below, as those terms may be amended from time
to time. The investor agrees that shares equal in value to 5% of the
intended amount will be held in escrow by the Fund's transfer agent
subject to the Terms of Escrow.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended amount, the commissions
previously paid to the dealer of record for the account and the amount of
sales charge retained by the Distributor will be adjusted to the rates
applicable to actual total purchases. If total eligible purchases during
the Letter of Intent period exceed the intended amount and exceed the
amount needed to qualify for the next sales charge rate reduction set
forth in the applicable prospectus, the sales charges paid will be
adjusted to the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid to the
dealer over the amount of commissions that apply to the actual amount of
purchases. The excess commissions returned to the Distributor will be
used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly
after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to refer to the Letter in placing any
purchase orders for the investor during the Letter of Intent period. All
of such purchases must be made through the Distributor.
Terms of Escrow
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in value
to 5% of the intended amount specified in the Letter shall be held in
escrow by the Fund's transfer agent. For example, if the intended amount
specified under the Letter is $50,000, the escrow shall be shares valued
in the amount of $2,500 (computed at the public offering price adjusted
for a $50,000 purchase). Any dividends and capital gains distributions
on the escrowed shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is
completed within the 13 month Letter of Intent period, the escrowed shares
will be promptly released to the investor.
3. If, at the end of the 13 month Letter of Intent period the total
purchases pursuant to the Letter are less than the intended amount
specified in the Letter, the investor must remit to the Distributor an
amount equal to the difference between the dollar amount of sales charges
actually paid and the amount of sales charges which would have been paid
if the total amount purchased had been made at a single time. Such sales
charge adjustment will apply to any shares redeemed prior to the
completion of the Letter. If such difference in sales charges is not paid
within 20 days after a request from the Distributor or the dealer, the
Distributor will, within 60 days of the expiration of the Letter, redeem
the number of escrowed shares necessary to realize such difference in
sales charges. Full and fractional shares remaining after such redemption
will be released from escrow. If a request is received to redeem escrowed
shares prior to the payment of such additional sales charge, the sales
charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the transfer agent of the Fund as attorney-in-fact to surrender
for redemption any or all escrowed shares.
5. The funds whose shares are eligible for purchase under the
Letter (or the holding of which may be counted toward completion of the
Letter) do not include any fund whose shares are sold without a front-end
sales charge or without being subject to a Class A CDSC unless (for the
purpose of determining completion of the obligation to purchase shares
under the Letter) the shares were acquired in exchange for shares of a
fund (described as an "Eligible Fund" in the Prospectus) whose shares were
acquired by payment of a sales charge.
6. Shares held in escrow hereunder will automatically be exchanged
for shares of another fund to which an exchange is requested, as described
in the section of the Prospectus entitled "Exchange Privilege," and the
escrow will be transferred to that other fund.
<PAGE>
Independent Auditors' Report
The Board of Trustees and Shareholders of Oppenheimer Global Growth &
Income Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer Global Growth & Income Fund as of September 30,
1993, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year
period then ended and the financial highlights for each of the years in
the two-year period then ended and the period from October 22, 1990
(commencement of operations) to September 30, 1991. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our
procedures included confirmation of securities owned as of September 30,
1993, by correspondence with the custodian and brokers; and where
confirmations were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Oppenheimer Global Growth & Income Fund as of September 30, 1993, the
results of its operations for the year then ended, the changes in its net
assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the two-year period then
ended and the period from October 22, 1990 (commencement of operations)
to September 30, 1991, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick
- ---------------------
KPMG Peat Marwick
Denver, Colorado
October 21, 1993
<PAGE>
Statement of Investments September 30, 1993
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
<S> <C> <C>
Repurchase Agreements--12.4%
Repurchase agreement with First Boston Corp. (The), 3.25%, $ 10,700,000 $10,700,000
dated 9/30/93 and maturing 10/1/93, collateralized by U.S.
Treasury Nts., 5%, 6/30/94, with a value of $10,923,168
(Cost $10,700,000)
Short-Term Foreign Government Obligations--2.6%
United Mexican States Treasury Bills, 0%, 3/10/94 (Cost 7,407,810+ 2,219,479
$2,208,153)
Long-Term Foreign Government Obligations--10.1%
Argentina (Republic of):
Bonds, Bonos de Consolidacion de Deudas, Series 1, 3.1875%, 2,005,313 1,662,805
4/1/01
Par Bonds, 4%, 3/31/23(2) 4,000,000 2,435,000
Brazil (Federal Republic of):
Bonds, Banco Do Nordeste Brasil, 10.375%, 11/6/95(2) 1,000,000 1,023,125
Interest Due and Unpaid Bonds, 8.75%, 1/1/01 1,000,000 776,875
German Bund (Federal Republic of) Nts., 6.125%, 7/21/97 2,300,000+ 1,429,069
Italy (Republic of) Treasury Bonds, 11.50%, 5/1/98 2,000,000,000+ 1,365,424
Total Long-Term Foreign Government Obligations (Cost $7,017,333) 8,692,298
Short-Term Foreign Corporate Bonds and Notes--2.3%
Banco Provincial CD:
58%, 11/3/93 48,975,000+ 496,216
58%, 11/29/93 48,650,000+ 492,923
Citibank CD, 20.50%, 11/5/93 408,100,000+ 993,334
Total Short-Term Foreign Corporate Bonds and Notes (Cost $1,993,110) 1,982,473
Long-Term Foreign Corporate Bonds and Notes--.5%
Banco Nacional de Mexico SA, 7% Exch. Sub. Debs., 300,000 336,750
12/15/99(2)
Charoen Pokphand Indonesia, 12.875% Cv. Bonds, 3/23/98 238,100,000+ 113,089
Total Long-Term Foreign Corporate Bonds and Notes (Cost $1,412,864) 449,839
Long Term--U.S. Government Obligations--3.7%
Government National Mortgage Assn., 7.50%, 9/15/22 1,944,792 2,039,367
U.S. Treasury Nts., 8.50%, 7/15/97 1,000,000 1,137,180
Total Long-Term U.S. Government Obligations (Cost $2,999,867) 3,176,547
Long-Term U.S. Corporate Bonds and Notes--7.2%
Amstar Corp., 11.375% Sr. Sub. Nts., 2/15/97 400,000 406,000
Auburn Hills Trust, 14.875% Gtd. Exch. Ctfs., 5/1/20(4) 300,000 450,750
Carlton Communications PLC, 7.50% Cv. Bonds, 8/14/07 170,000 321,822
Charter Medical Corp., 11.05% Sr. Sec. Disc. Nts., 292,000 294,190
12/31/97(3)
Computervision Corp., 10.875% Sr. Nts., 8/15/97 300,000 268,500
Dr. Pepper/Seven-Up Cos., Inc., 0%/11.50% Sr. Sub. Disc. 556,000 410,050
Nts., 11/1/02(1)
Epic Holdings, Inc., 0%/12% Sr. Def. Cpn. Nts., 3/15/02(1) 600,000 403,500
Grand Union Co., 11.25% Sr. Nts., 7/15/00 300,000 310,875
Infinity Broadcasting Corp., 10.375% Sr. Sub. Nts. 3/15/02 300,000 313,875
International Container Terminal Services, Inc., 6% Cv. Sr. 300,000 415,500
Nts., 2/19/00(2)
Southland Corp., 4.50% 2nd Priority Sr. Sub. Debs., Series 700,000 466,375
A, 6/15/04
Swift Energy Co., 6.50% Cv. Sub. Debs., 6/30/03 300,000 325,500
Synthetic Industries, Inc., 12.75% Sr. Sub. Debs.,12/1/02 300,000 313,500
Thermo Electron Corp., 4.625% Cv. Sr. Debs., 8/1/97(2) 750,000 1,072,500
Unisys Corp., 10.625% Nts., 10/1/99 400,000 431,000
Total Long-Term U.S. Corporate Bonds and Notes (Cost $5,522,613) 6,203,937
<PAGE>
Units Subject Market Value
Date/Price to Put See Note 1
Put Options Purchased--.0%
Hang Seng Index (Cost $16,400) 10/93/HKD 6,084 91,752 $ 24
Shares
Common Stocks--62.8%
Basic Materials--2.7%
Chemicals-Specialty--.5%
PT Kurnia Kapuas Utama Glue Industries 200,000 398,968
Gold--.3% Minerals Technologies, Inc. 10,000 287,500
Paper and
Forest Products--.8%
Indah Kiat 300,000 313,475
Kimberly Clark de Mexico, Series A 30,000 384,946
698,421
Steel--1.1% Dofasco, Inc.* 21,100 246,824
Maruichi Malaysia Steel Tube Berhad 130,000 324,242
Pohang Iron & Steel Co., Ltd.* 10,000 395,027
966,093
Consumer Cyclicals--10.9%
Airlines--.3% Vienna International Airport 6,500 266,589
Automobiles--.5% CONSORCIO G GRUPO DINA SA, Sponsored ADR 20,000 405,000
Broadcast Media--2.8% Comcast Corp., Cl. A Special 15,000 433,125
Grupo Televisa SA ADS* 10,000 473,750
Scandinavian Broadcasting System SA 25,000 471,875
Tele-Communications, Inc.* 10,000 250,000
Television Francaise I 4,000 346,705
United International Holdings, Inc.* 15,000 451,875
2,427,330
Household Furnishings
and Appliances--2.2%
Berjaya Singar bhd 200,000 428,132
Electrolux AB, Series B Free 10,000 298,331
Philips Gloeilamp NV 20,000 405,417
Singer Co. NV (The)* 12,000 450,000
Sony Corp. 7,000 297,584
1,879,464
Publishing--1.2%
Dun & Bradstreet Corp. (The) 5,000 312,500
Oriental Press Group 700,000 341,662
Time Warner, Inc. 10,000 407,500
1,061,662
Retail Stores--
General Merchandise
Chains--1.0%
SPAR Handels AG, Non-Vtg. 1,500 394,605
Sears Roebuck de Mexico SA, ADR*(2) 20,000 452,497
847,102
Retail-Specialty--1.4%
Aoyama Trading Co. 5,500 450,005
Castorama Dubois Investissements LP 3,034 393,932
PT Modern Photo Film Co. 47,000 375,030
1,218,967
Retail--
Specialty Apparel--.2%
Giordano Holdings Ltd. 281,000 158,952
Textiles--Apparel
Manufacturers--.7%
Pang-Rim Cotton Spinning Co.* 11,500 342,131
Tokyo Style Co. 15,000 265,818
607,949
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Shares Market Value
See Note 1
<S> <C> <C>
Common Stocks (continued)
Consumer Cyclicals
(continued)
Toys--.6% Nintendo Co. 6,000 $ 532,768
Consumer Non-Cyclicals--8.1%
Beverages--
Alcoholic--1.3%
Compania Cervecerias Unidas SA, Sponsored ADR 20,000 420,000
Jinro Ltd. 16,500 384,967
Remy Cointreau 8,000 276,101
1,081,068
Beverages--
Soft Drinks--.8%
Buenos Aires Embotelladora SA, Sponsored ADR, Cl. B* 10,000 322,500
COCA-COLA FEMSA SA, Sponsored ADR* 15,000 356,250
678,750
Drugs--1.6% Astra AB Free, Series A 30,000 617,619
Sankyo Co. Ltd. 15,000 424,178
Takeda Chemical Industries Ltd. 25,000 322,847
1,364,644
Food Processing--.8%
Molinos Rio de La Plata, Series B 37,100 365,802
PT Sinar Mass Agro Resources & Technology 130,000 348,859
714,661
Food Wholesalers--.5% United Foods Co. Ltd. 150,000 386,718
Healthcare--
Diversified--.4%
Schering AG 625 377,589
Healthcare--
Miscellaneous--1.9%
Fuji Rebio, Inc. 25,000 311,064
Gehe AG 585 147,812
Genzyme Corp.* 10,843 363,240
Plant Genetics Systems International NV(2) 50,072 812,639
1,634,755
Hospital Management--.5% Community Psychiatric Centers 35,000 463,750
Retail Stores--
Food Chains--.3% PT Fast Food 70,000 $ 252,680
Energy--5.9%
Natural Gas--
Processing--1.4%
Renaissance Energy Ltd.* 12,000 297,593
Voest-Alpine Eisenbahnsysteme AG 8,000 938,950
1,236,543
Oil--Integrated
Domestic--.4%
Valero Energy Corp. 14,000 344,750
Oil--Integrated
International--1.9%
British Petroleum Co. PLC 8,000 475,000
Poco Petroleum Ltd.* 30,000 218,984
YPF Sociedad Anonima, Sponsored ADR* 22,000 558,250
YuKong Ltd. 12,104 352,629
1,604,863
Oil and Gas Drilling--.9% Petroleum Geo-Services AS* 17,000 373,038
Transocean Drilling AS 50,000 359,900
732,938
Oil Well Services and
Equipment--1.3%
JGC Corp. 18,000 346,129
McDermott International, Inc. 10,000 282,500
TH Loy Industries 115,000 474,284
1,102,913
<PAGE>
Shares Market Value
See Note 1
Common stocks (continued)
Financial--8.3%
Financial Services--
Miscellaneous--2.6%
American Express Co. 12,000 $ 427,500
Coryo Securities Corp. 12,000 256,274
Industrial Finance Corp. 230,000 469,813
Morgan Stanley Group, Inc. 1,700 147,900
Peregrine Investment Holdings Ltd. 230,000 339,012
Sangyoug Investment & Securities 10,000 253,065
SecomCo. Ltd. 5,000 344,998
2,238,562
Major Banks--Other--4.7%
Banco de Galicia, Series B 41,000 324,225
Banco LatinoAmericano de Exportaciones SA, Cl. E 10,000 398,750
Banco Totta & Acores* 15,000 305,320
Commerzbank Aktiengesellschaft 1,600 303,937
C.S. Holdings 200 412,799
Deutsche Bank AG 1,000 471,079
Korea First Bank 20,000 261,706
PT Lippo Bank 100,000 251,730
PT Panin Bank 350,000 440,527
Shin Han Bank Ltd. 16,000 254,793
Standard Chartered Bank PLC 30,000 423,809
Swiss Bank Corp. 1,200 185,550
4,034,225
Money Center Banks--1.0%
Bankers Trust New York Corp. 4,000 320,000
Chemical Banking Corp. 8,000 360,000
Citicorp 5,000 190,000
870,000
Industrial--14.9%
Building Materials
Group--.4%
Sungei Way Holdings 90,000 351,736
Conglomerates--2.0%
Commercial del Plata 32,800 180,581
Compagnie Generale des Eaux 508 229,784
Hopewell Holdings Ltd. 500,000 391,118
Hutchison Whampoa Ltd. 100,000 306,429
Kinnevik Investments AB, Series B Free 15,000 286,620
Sophus Berendsen AS, Series B 4,604 332,019
1,726,551
Containers-Paper--.2%
PT Surabaya Agung Industries* 145,500 214,231
Electrical Equipment--2.9% BBC Brown Boveri AG 900 559,167
Felten & Guilleaume Energietechnik AG 1,500 363,862
Horiba 18,000 305,408
Kabelmetal Indonesia PT 147,000 404,952
LEM Holdings SA 2,100 426,092
Sasib SPA 100,000 449,277
2,508,758
Common Stocks (continued)
Engineering and
Construction--4.0%
BAU Holdings AF Preference 2,000 172,781
Boskalis Westminster Koniniije 22,000 479,525
Danieli & Co., Non-Vtg. 110,000 379,812
Deutsche Babcock AG 5,650 656,066
Dong-AH Construction Industrial Co. 16,711 441,462
Fluor Corp. 10,000 410,000
Nittoc Construction 20,000 269,589
<PAGE>
Shares Market Value
See Note 1
Common Stocks (continued)
Industrial (continued)
Engineering and
Construction
(continued)
Societe Generale d'Enterprise 10,178 $ 491,099
Voegele (Josef) AG 643 141,617
3,441,951
Machinery--
Diversified--1.1%
Bobst Bearers AG 310 289,554
Klein, Schanjlin & Becker AG Preference 2,000 393,993
Schaerf AG Preference 341 67,802
Tampella OY AB 33,000 151,947
903,296
Manufacturing--
Diversified
Industrials--1.5%
CBI Industries, Inc. 11,000 277,750
Mitsubishi Heavy Industries Ltd. 45,000 273,171
Nylex Malaysia Berhad 95,000 207,094
Siemens AG 700 285,645
Tipco Asphalt Co. Ltd. 40,000 249,086
1,292,746
Pollution Control--.9%
Elco Looser Holdings Inhaber 135 241,802
GEA AG Preference 1,100 298,798
Ionics, Inc.* 4,500 210,375
750,975
Transportation--
Miscellaneous--1.9%
Kvaerner Industrier AS 15,000 563,960
Sembawang Shipyard Ltd. 40,000 313,430
Singmarine Industries Ltd. 140,000 332,640
Unitor Ships Service AS 32,000 389,112
1,599,142
Technology--9.5%
Computer Software and
Services--1.6%
Microsoft Corp.* 5,700 470,250
Novell, Inc. 15,000 283,125
Sap AG Preference 350 267,658
SHL Systemhouse, Inc.* 35,000 336,875
1,357,908
Computer Systems--.4% Cisco Systems, Inc. 6,000 300,000
Electronics--
Instrumentation--.3%
Solectron Corp.* 5,000 273,750
Electronics--
Semiconducters--.7%
Austia Mikro Systems AG* 7,200 257,600
Intel Corp. 5,000 353,750
611,350
Telecommunications--6.5%
Advanced Information Services Ltd. 20,000 371,249
Atlantic Tele-Network, Inc. 25,000 300,000
Champion Technology Holdings 450,000 308,369
Millicom, Inc.* 500 12,625
Shinawatra Computer Communications Co. Ltd.* 13,000 246,468
Societa Finanziora Telefonica SPA 285,000 783,306
Societa Italiana per L'Eserrcizio delle Telecomunicazioni 432,500 1,011,782
SPA
Technology Resources Industries* 240,000 838,983
Telecommunication de Argentina, Cl. B 114,800 471,152
Telefonica de Argentina SA, Cl. B 91,000 428,129
Telefonos de Mexico SA, Sponsored ADR 9,000 454,500
Vodafone Group 51,700 389,166
5,615,729
<PAGE>
Shares Market Value
See Note 1
Common Stocks (continued)
Utilities--2.5%
Electric Companies--1.6%
AES Corp. (The) 12,000 $ 385,500
California Energy Co., Inc.* 15,000 275,625
Sithe Energies, Inc.* 25,000 331,250
Verbund Oest Electriz 6,500 356,208
1,348,583
Common Stocks (continued)
Natural Gas--.3%
Hong Kong & China Natural Gas 144,000 $ 275,554
Telephone (New)--.6%
Compania de Telefonos de Chile SA 6,700 551,913
Total Common Stocks (Cost $46,391,087) 54,000,347
Total Investments, at Value (Cost $78,261,427) 101.6% 87,424,944
Liabilities in Excess of Other Assets (1.6) (1,405,953)
Net Assets 100.0% 86,018,991
<FN>
+Face amount is reported in foreign currency.
*Non-income producing security.
(1)Represents a zero coupon bond that converts to a fixed rate of interest at a designated future date.
(2)Restricted security--See Note 5 of notes to financial statements.
(3)Represents the current interest rate for an increasing rate security.
(4)Represents the current interest rate for a variable rate security.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Statement of Assets and Liabilities September 30, 1993
<TABLE>
<S> <C> <C>
Assets Investments, at value (cost $78,261,427)--see accompanying statement $87,424,944
Cash 109,371
Receivables:
Dividends and interest 458,592
Shares of beneficial interest sold 323,878
Investments sold 246,514
Deferred organization costs 6,425
Other 8,868
Total assets 88,578,592
Liabilities Payables and other liabilities:
Investments purchased 2,300,620
Shares of beneficial interest redeemed 113,606
Distribution assistance--Note 4 47,839
Dividends 6,345
Other 91,191
Total liabilities 2,559,601
Net Assets $86,018,991
Composition of
Net Assets Paid-in capital $74,873,645
Undistributed net investment income 854,919
Accumulated net realized gain from investment transactions 1,123,458
Net unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies--Note 3 9,166,969
Net Assets--Applicable to 6,103,837 shares of beneficial interest outstanding $86,018,991
Net Asset Value and Redemption Price Per Share $ 14.09
Maximum Offering Price Per Share (net asset value plus sales charge of 5.75% of offering price) $ 14.95
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Statement of Operations For the Year Ended September 30, 1993
<TABLE>
<S> <C> <C>
Investment Income Interest $1,916,818
Dividends (including $513,021 from foreign securities less $62,003 of foreign 620,421
tax withheld at source)
Total income 2,537,239
Expenses Management fees--Note 4 449,323
Distribution assistance--Note 4 148,546
Transfer and shareholder servicing agent fees--Note 4 130,843
Shareholder reports 80,988
Custodian fees and expenses 64,064
Legal and auditing fees 23,217
Trustees' fees and expenses 14,895
Other 17,952
Total expenses 929,828
Net Investment Income 1,607,411
Realized and
Unrealized Gain
on Investments and
Translation of
Assets and Liabilities
in Foreign Currencies Net realized gain on investments 2,657,100
Net change in unrealized appreciation on investments and translation of assets
and liabilities in foreign currencies:
Beginning of year 1,098,660
End of year--Note 3 9,166,969
Net change 8,068,309
Net Realized and Unrealized Gain on Investments and Translation of
Assets and Liabilities in Foreign Currencies 10,725,409
Net Increase in Net Assets Resulting From Operations $12,332,820
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended September 30,
1993 1992
<S> <C> <C> <C>
Operations Net investment income $ 1,607,411 $ 894,985
Net realized gain (loss) on investments 2,657,100 (1,035,668)
Net change in unrealized appreciation or depreciation on 8,068,309 (689,453)
investments and translation of assets and liabilities in
foreign currencies
Net increase (decrease) in net assets resulting from 12,332,820 (830,136)
operations
Dividends and
Distributions to
Shareholders Dividends from net investment income ($.173 and $.28 per (867,342) (892,585)
share, respectively)
Distributions from net realized gain on investments ($.105 (450,227) (60,416)
and $.025 per share, respectively)
Beneficial Interest
Transactions Net increase in net assets resulting from beneficial 25,269,073 22,279,191
interest transactions--Note 2
Net Assets Total increase 36,284,324 20,496,054
Beginning of year 49,734,667 29,238,613
End of year (including undistributed net investment income $86,018,991 $49,734,667
of $854,919 and $114,850, respectively)
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Year Ended September 30,
1993 1992 1991+
<S> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $ 11.91 $ 12.43 $ 11.43
Income (loss) from investment operations:
Net investment income .29 .26 .37
Net realized and unrealized gain (loss) on 2.17 (.47) .95
investments and translation of assets and
liabilities in foreign currencies
Total income (loss) from investment operations 2.46 (.21) 1.32
Dividends and distributions to shareholders:
Dividends from net investment income (.17) (.28) (.32)
Distributions from net realized gain on (.11) (.03) --
investments
Total dividends and distributions to shareholders (.28) (.31) (.32)
Net asset value, end of period $ 14.09 $ 11.91 $ 12.43
Total Return, at Net Asset Value** 21.00% (1.76)% 11.73%
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $86,019 $49,735 $29,239
Average net assets (in thousands) $59,951 $37,116 $19,340
Number of shares outstanding at end of period (in 6,104 4,177 2,352
thousands)
Ratios to average net assets:
Net investment income 2.68% 2.41% 4.05%*
Expenses 1.56% 1.74% 1.94%*
Portfolio turnover rate*** 90.6% 51.3% 23.5%
<FN>
*Annualized.
**Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns.
***The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
Purchases and sales of investment securities (excluding short-term
securities) for the year ended September 30, 1993 were $69,553,908 and
$48,146,611, respectively.
+For the period from October 22, 1990 (commencement of operations) to
September 30, 1991.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies
Oppenheimer Global Growth & Income Fund (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment adviser is
Oppenheimer Management Corporation (the Manager). The following is a
summary of significant accounting policies consistently followed by the
Fund.
Investment Valuation--Portfolio securities are valued at 4:00 p.m. (New
York time) on each trading day. Listed and unlisted securities for which
such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid
or asked price or the last sale price on the prior trading day. Long-term
debt securities are valued by a portfolio pricing service approved by the
Board of Trustees. Long-term debt securities which cannot be valued by the
approved portfolio pricing service are valued by averaging the mean
between the bid and asked prices obtained from two active market makers
in such securities. Short-term debt securities having a remaining maturity
of 60 days or less are valued at cost (or last determined market value)
adjusted for amortization to maturity of any premium or discount.
Securities for which market quotes are not readily available are valued
under procedures established by the Board of Trustees to determine fair
value in good faith.
Foreign Currency Translation--The accounting records of the Fund are
maintained in U.S. dollars. Prices of securities denominated in non-U.S.
currencies are translated into U.S. dollars at the closing rates of
exchange. Amounts related to the purchase and sale of securities and
investment income are translated at the rates of exchange prevailing on
the respective dates of such transactions.
The Fund generally enters into forward foreign currency exchange contracts
as a hedge, upon the purchase or sale of a security denominated in a
foreign currency. Risks may arise from the potential inability of the
counterparty to meet the terms of the contract and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
The effect of changes in foreign currency exchange rates is not separately
identified in the Fund's results of operations. Gains and losses on
foreign currency transactions are accounted for with the transactions that
gave rise to the exchange gain or loss.
Repurchase Agreements--The Fund requires the custodian to take possession,
to have legally segregated in the Federal Reserve Book Entry System or to
have segregated within the custodian's vault, all securities held as
collateral for repurchase agreements. If the seller of the agreement
defaults and the value of the collateral declines, or if the seller enters
an insolvency proceeding, realization of the value of the collateral by
the Fund may be delayed or limited.
Federal Income Taxes--The Fund intends to continue to comply with
provisions of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income, including any net
realized gain on investments not offset by loss carryovers, to
shareholders. Therefore, no federal income tax provision is required.
Trustees' Fees and Expenses--The Fund has adopted a nonfunded retirement
plan for the Fund's independent trustees. Benefits are based on years of
service and fees paid to each trustee during the years of service. During
the year ended September 30, 1993, a provision of $912 was made for the
Fund's projected benefit obligations, resulting in an accumulated
liability of $28,730 at September 30, 1993. No payments have been made
under the plan.
<PAGE>
Organization Costs--The Manager advanced $15,751 for organization and
start-up costs of the Fund. Such expenses are being amortized over a
five-year period from the date operations commenced. In the event that all
or part of the Manager's initial investment in shares of the Fund is
withdrawn during the amortization period, the redemption proceeds will be
reduced to reimburse the Fund for any unamortized expenses, in the same
ratio as the number of shares redeemed bears to the number of initial
shares outstanding at the time of such redemption.
Distributions to Shareholders--Dividends and distributions to shareholders
are recorded on the ex-dividend date.
Other--Investment transactions are accounted for on the date the
investments are purchased or sold (trade date) and dividend income is
recorded on the ex-dividend date. Discount on securities purchased is
amortized over the life of the respective securities, in accordance with
federal income tax requirements. Realized gains and losses on investments
and unrealized
appreciation and depreciation are determined on an identified cost basis,
which is the same basis used for federal income tax purposes.
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of
beneficial interest.
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Year Ended September 30, 1993+ Year Ended September 30, 1992
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Sold 3,291,571 $ 42,379,689 2,550,901 $31,319,200
Dividends and distributions reinvested 102,240 1,265,994 75,003 910,667
Redeemed (1,466,579) (18,376,610) (801,291) (9,950,676)
Net increase 1,927,232 $ 25,269,073 1,824,613 $22,279,191
</TABLE>
3. Unrealized Gains and Losses on Investments
At September 30, 1993, net unrealized appreciation of investments of
$9,163,517 was composed of gross appreciation of $9,372,425, and gross
depreciation of $208,908.
4. Management Fees and Other Transactions with Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for an annual fee of .75%
on the first $200 million of net assets with a reduction of .03% on each
$200 million thereafter to $800 million and .60% on net assets in excess
of $800 million. The Manager has agreed to reimburse the Fund if aggregate
expenses (with specified exceptions) exceed the most stringent applicable
regulatory limit on Fund expenses.
For the year ended September 30, 1993, commissions (sales charges paid by
investors) on sales of Fund shares totaled $429,513, of which $120,083 was
retained by Oppenheimer Funds Distributor, Inc. (OFDI), a subsidiary of
the
Manager, as general distributor, and by an affiliated broker-dealer.
Oppenheimer Shareholder Services (OSS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund, and for other
registered investment companies. OSS's total costs of providing such
services are allocated ratably to these companies.
Under an approved plan of distribution, the Fund may expend up to .25% of
its net assets annually to reimburse OFDI for costs incurred in
distributing shares of the Fund, including amounts paid to brokers,
dealers, banks and other institutions. During the year ended September 30,
1993, OFDI paid $4,087 to an affiliated broker-dealer as reimbursement for
distribution-- related expenses.
<PAGE>
5. Restricted Securities
The Fund owns securities purchased in private placement transactions,
without registration under the Securities Act of 1933 (the Act). The
securities are valued under methods approved by the Board of Trustees as
reflecting fair value. The Fund intends to invest no more than 10% of its
net assets (determined at the time of purchase) in restricted and illiquid
securities, excluding securities eligible for resale pursuant to Rule 144A
of the Act that are determined to be liquid by the Board of Trustees or
by the Manager under Board-approved guidelines. Restricted and illiquid
securities amount to $812,639, or .9% of the Fund's net assets, at
September 30, 1993.
<TABLE>
<CAPTION>
Valuation Per
Acquisition Cost Unit as of
Security Date Per Unit September 30, 1993
<S> <C> <C> <C>
Argentina (Republic of) Par Bonds, 4%, 3/31/23+ 4/27/93 $ 48.25 $ 60.88
Banco Nacional de Mexico SA, 7% Exch. Sub. Debs., 12/15/99+ 12/1/92 $100.00 $112.25
Brazil (Federal Republic of) Bonds,
Banco Do Nordeste Brasil, 10.375%, 11/6/95+ 4/27/93 $ 99.80 $102.31
International Container Terminal Services, Inc.,
6% Cv. Sr. Nts., 2/19/00+ 2/19/93 $100.00 $138.50
Plant Genetics Systems International NV 5/27/92 $ 11.18 $ 16.23
Sears Roebuck de Mexico SA, ADR+ 3/16/92 $ 15.50 $ 22.62
Thermo Electron Corp., 4.625% Cv. Sr. Debs., 8/1/97+ 7/15/92 $100.00 $143.00
</TABLE>
+Transferable under Rule 144A of the Act.
<PAGE>
Appendix: Description of Ratings
Description of Moody's Investors Service, Inc. Bond Ratings
Aaa: Bonds which are rated "Aaa" are judged to be the best quality
and to carry the smallest degree of investment risk. Interest payments
are protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are likely to
change, the changes that can be expected are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated "Aa" are judged to be of high quality by
all standards. Together with the "Aaa" group, they comprise what are
generally known as "high-grade" bonds. They are rated lower than the best
bonds because margins of protection may not be as large as with "Aaa"
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-term
risks appear somewhat larger than those of "Aaa" securities.
A: Bonds which are rated "A" possess many favorable investment
attributes and are to be considered as upper-medium grade obligations.
Factors giving security to principal and interest are considered adequate
but elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa: Bonds which are rated "Baa" are considered medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and have speculative
characteristics as well.
Ba: Bonds which are rated "Ba" are judged to have speculative
elements; their future cannot be considered well-assured. Often the
protection of interest and principal payments may be very moderate and not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B: Bonds which are rated "B" generally lack characteristics of
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa: Bonds which are rated "Caa" are of poor standing and may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds which are rated "Ca" represent obligations which are
speculative in a high degree and are often in default or have other marked
shortcomings.
C: Bonds which are rated "C" 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: The bond investments in which the Fund will principally invest
will be in the lower-rated categories, described below. 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>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
KPMG Peat Marwick
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
