OPPENHEIMER GLOBAL GROWTH & INCOME FUND
Supplement dated January 24, 1997 to the
Prospectus dated January 24, 1997
The Prospectus is changed as follows:
In addition to paying dealers the regular commission for (1)
sales of Class A shares stated in the sales charge table in "Buying
Class A Shares" on page 30, (2) sales of Class B shares described
in the fourth paragraph in "Distribution and Service Plans for
Class B and Class C Shares" on page 37, and (3) sales of Class C
shares described in the fifth paragraph in "Distribution and
Service Plans for Class B and Class C Shares" on page 37, the
Distributor will pay additional commission to each broker, dealer
and financial institution that has a sales agreement with the
Distributor and agrees to accept that additional commission (these
are referred to as "participating firms") for Class A, Class B and
Class C shares of the Fund sold in "qualifying transactions" (the
"promotion"). The additional commission will be 1.00% of the
offering price of shares of the Fund sold by a registered
representative or sales representative of a participating firm
during the promotion. If the additional commission is paid on the
sale of Class A shares of $500,000 or more or the sale of Class A
shares to a SEP IRA with 100 or more eligible participants and
those shares are redeemed within 13 months from the end of the
month in which they were purchased, the participating firm will be
required to return the additional commission.
"Qualifying transactions" are aggregate sales of $150,000 or
more of Class A, Class B and/or Class C shares of any one or more
of the Oppenheimer funds (except money market funds and municipal
bond funds) for rollovers or trustee-to-trustee transfers from
another retirement plan trustee, of IRA assets or other employee
benefit plan assets from an account or investment other than an
account or investment in the Oppenheimer funds to (1) IRAs,
rollover IRAs, SEP IRAs and SAR-SEP IRAs, using the
OppenheimerFunds, Inc. prototype IRA agreement, if the rollover
contribution is received during the period from January 1, 1997
through April 15, 1997 (the "promotion period"), or the acceptance
of a direct rollover or trustee-to-trustee transfer is acknowledged
by the trustee of the OppenheimerFunds prototype IRA during the
promotion period, and (2) IRAs, rollover IRAs, SEP IRAs and SAR-
SEP IRAs using the A.G. Edwards & Sons, Inc. prototype IRA
agreement, if the rollover contribution or trustee-to-trustee
payment is received during the promotion period. "Qualifying
transactions" do not include (1) purchases of Class A shares
intended but not yet made under a Letter of Intent, and (2)
purchases of Class A, Class B and/or Class C shares with the
redemption proceeds from an existing Oppenheimer funds account.
January 24, 1997 PS0215.011
<PAGE>
OPPENHEIMER GLOBAL GROWTH & INCOME FUND
Prospectus dated January 24, 1997
Oppenheimer Global Growth & Income Fund is a mutual fund with
the investment objective of seeking capital appreciation consistent
with preservation of principal while providing current income. The
Fund may invest in common stocks, convertible securities and fixed
income securities. It may emphasize one or more of those types of
securities at any one time, or invest in a combination of them,
depending on market conditions. The Fund will normally invest in
at least four countries (including the United States) and expects
to invest a substantial amount of its assets in foreign securities.
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.
Some investment techniques the Fund uses may be considered to
be speculative investment methods that may increase the risks of
investing in the Fund and may also increase the Fund's operating
costs. You should carefully review the risks associated with an
investment in the Fund. Please refer to "Investment Objective and
Policies" for more information about the types of securities the
Fund invests in, its investment methods and the risks of investing
in the Fund.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and
keep it for future reference. You can find more detailed
information about the Fund in the January 24, 1997 Statement of
Additional Information. For a free copy, call OppenheimerFunds
Services, the Fund's Transfer Agent, at 1-800-525-7048, or write to
the Transfer Agent at the address on the back cover. The Statement
of Additional Information has been filed with the Securities and
Exchange Commission and is incorporated into this Prospectus by
reference (which means that it is legally part of this Prospectus).
(OppenheimerFunds logo)
Shares of the Fund are not deposits or obligations of any bank, are
not guaranteed by any bank, and are not insured by the F.D.I.C. or
any other agency, and involve investment risks, including the
possible loss of the principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
Contents
ABOUT THE FUND
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objective and Policies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Appendix A: Special Sales Charge Arrangements<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other
services, and those expenses are subtracted from the Fund's assets
to calculate the Fund's net asset value per share. All
shareholders therefore pay those expenses indirectly. Shareholders
pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you
understand your direct expenses of investing in the Fund and your
share of the Fund's business operating expenses that you will bear
indirectly. The numbers below are based on the Fund's expenses
during its last fiscal year ended September 30, 1996.
Shareholder Transaction Expenses are charges you pay when you
buy or sell shares of the Fund. Please refer to "About Your
Account," starting on page __, for an explanation of how and when
these charges apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
-------- --------- ---------
<S> <C> <C> <C>
Maximum Sales Charge on
Purchases 5.75% None None
(as a % of offering price)
Maximum Deferred Sales
Charge None(1) 5% in the first 1.0% if shares
(as a % of the lower year, declining are redeemed
of the original to 1% in the within 12 months
offering price or sixth year and of purchase (2)
redemption proceeds) eliminated
threafter (2)
Maximum Sales Charge on
Reinvested Dividends None None None
Exchange Fee None None None
Redemption Fee None None None
</TABLE>
_______________________
(1) If you invest $1 million or more ($500,000 or more for
purchases by "Retirement Plans," as defined in "Class A
Contingent Deferred Sales Charge" on page ____), in Class A
shares, you may have to pay a sales charge of up to 1% if you
sell your shares within 18 calendar months from the end of
the calendar month during which you purchased those shares.
See "How to Buy Shares - Buying Class A Shares," below.
(2) See "How to Buy Shares - Buying Class B Shares" and "How to
Buy Shares - Buying Class C Shares," for more information on
the contingent deferred sales charges.
Annual Fund Operating Expenses are paid out of the Fund's
assets and represent the Fund's expenses in operating its business.
For example, the Fund pays management fees to its investment
advisor, OppenheimerFunds, Inc. (which is referred to in this
Prospectus as the "Manager"). The rates of the Manager's fees are
set forth in "How the Fund is Managed," below. The Fund has other
regular expenses for services, such as transfer agent fees,
custodial fees paid to the bank that holds its portfolio
securities, audit fees and legal expenses. Those expenses are
detailed in the Fund's Financial Statements in the Statement of
Additional Information.
Annual Operating Expenses (as a Percentage of Average Net Assets)
Class A Class B Class C
Shares Shares Shares
------- -------- --------
Management Fees 0.80% 0.80% 0.80%
12b-1 Distribution
Plan Fees 0.25% 1.00% 1.00%
Other Expenses 0.47% 0.48% 0.48%
Total Fund Operating
Expenses 1.52% 2.28% 2.28%
The numbers for Class A and Class C shares in the table above
are based on the Fund's expenses in its fiscal year ended September
30, 1996. These amounts are shown as a percentage of the average
net assets of each of those classes of the Fund's shares for that
year. Class B shares were not publicly offered before October 10,
1995. Therefore, the Annual Fund Operating Expenses shown for
Class B shares are based on expenses for the period from October
10, 1995 until September 30, 1996. The actual expenses for each
class of shares in future years may be more or less than the
numbers in the table, depending on a number of factors, including
changes in the actual value of the Fund's assets represented by
each class of shares.
Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of shares
of the Fund, that the Fund's annual return is 5%, and that its operating
expenses for each class are the ones shown in the Annual Fund Operating
Expenses table above. If you were to redeem your shares at the end of
each period shown below, your investment would incur the following
expenses by the end of 1, 3, 5 and 10 years:
<PAGE>
1 year 3 years 5 years 10 years*
------ -------- -------- ----------
Class A Shares $72 $103 $136 $228
Class B Shares $73 $101 $142 $225
Class C Shares $33 $ 71 $122 $262
If you did not redeem your investment, it would incur the following
expenses:
Class A Shares $72 $103 $136 $228
Class B Shares $23 $ 71 $122 $225
Class C Shares $23 $ 71 $122 $262
*In the first example, expenses include the Class A initial sales charge
and the applicable Class B or Class C contingent deferred sales charge.
In the second example, Class A expenses include the initial sales charge,
but Class B and Class C expenses do not include contingent deferred sales
charges. The Class B expenses in years 7 through 10 are based on the
Class A expenses shown above, because the Fund automatically converts your
Class B shares into Class A shares after 6 years. Because of the effect
of the asset-based sales charge and contingent deferred sales charge
imposed on Class B and Class C shares, long-term holders of Class B and
Class C shares could pay the economic equivalent of more than the maximum
front-end sales charge allowed under applicable regulations. For Class
B shareholders, the automatic conversion of Class B shares to Class A
shares is designed to minimize the likelihood that this will occur.
Please refer to "How to Buy Shares - Buying Class B Shares" for more
information.
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment
returns of the Fund, all of which may be more or less than those shown.
<PAGE>
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with
references to the section of this Prospectus where more complete
information can be found. You should carefully read the entire Prospectus
before making a decision about investing in the Fund. Keep the Prospectus
for reference after you invest, particularly for information about your
account, such as how to sell or exchange shares.
What Is The Fund's Investment Objective? The Fund's investment
objective is to seek capital appreciation consistent with preservation of
principal while providing current income.
What Does the Fund Invest In? The Fund may invest in common stocks,
convertible securities and debt securities, such as debentures or bonds.
To seek growth, the Fund will emphasize common stocks and convertible
securities. For income, the Fund will invest in debt securities and
dividend-paying stocks. The Fund may emphasize one or more different
types of securities or a combination of securities from time to time,
depending on market conditions. The Fund will normally invest in at least
four countries (including the United States). The Fund may also write
covered calls and use derivative investments to enhance income, and may
use hedging instruments, including some derivative investments, to try to
manage investment risks. These investments and investment methods are
more fully explained in "Investment Objective and Policies," starting on
page __.
Who Manages the Fund? The Fund's investment advisor (the "Manager")
is OppenheimerFunds, Inc.. The Manager (including a subsidiary) manages
investment company portfolios having over $62 billion in assets at
December 31, 1996. The Manager is paid an advisory fee by the Fund, based
on its net assets. The Fund's portfolio manager, Mr. Frank Jennings, is
employed by the Manager. He is primarily responsible for the selection
of the Fund's securities. The Fund's Board of Trustees, elected by
shareholders, oversees the investment advisor and the portfolio manager.
Please refer to "How the Fund is Managed" starting on page __ for more
information about the Manager and its fees.
How Risky is the Fund? All investments carry risks to some degree.
The Fund's investments in stocks and bonds are subject to changes in their
value from a number of factors such as changes in general bond and stock
market movements, or the change in value of particular stocks or bonds
because of an event affecting the issuer. Changes in interest rates can
affect bond prices. These changes affect the value of the Fund's
investments and its price per share. The Fund's investment in foreign
securities involves additional risks not associated with investment in
domestic securities, including risks associated with changes in currency
rates.
Certain of the Fund's investment techniques and strategies, such as
purchasing securities with borrowed funds, may subject an investment in
the Fund to relatively greater risks and costs than a mutual fund that
does not utilize these practices. While the Manager tries to reduce risks
by diversifying investments, by carefully researching securities before
they are purchased for the portfolio, and in some cases by using hedging
techniques, there is no guarantee of success in achieving the Fund's
objective and your shares may be worth more or less than their original
cost when you redeem them. Please refer to "Investment Objective and
Policies" starting on page __ for a more complete discussion of the Fund's
investment risks.
How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic
Investment Plan under AccountLink. Please refer to "How to Buy Shares"
on page __ for more details.
Will I Pay a Sales Charge to Buy Shares? The Fund offers the
individual investor three classes of shares. Each class has the same
investment portfolio but different expenses. Class A shares are offered
with a front-end sales charge, starting at 5.75%, and reduced for larger
purchases. Class B and Class C shares are offered without a front-end
sales charge, but may be subject to a contingent deferred sales charge if
redeemed within 6 years or 12 months, respectively, of purchase. There
is also an annual asset-based sales charge on Class B and Class C shares.
Please review "How to Buy Shares" starting on page ___ for more details,
including a discussion about which class may be appropriate for you.
How Can I Sell My Shares? Shares can be redeemed by mail or by
telephone call to the Transfer Agent on any business day, or through your
dealer. Please refer to "How to Sell Shares" on page __. The Fund also
offers exchange privileges to other Oppenheimer funds, described in "How
To Exchange Shares" on page __.
How Has the Fund Performed? The Fund measures its performance by
quoting its average annual total returns and cumulative total returns,
which measure historical performance. Those returns can be compared to
the returns (over similar periods) of other funds. Of course, other funds
may have different objectives, investments, and levels of risk. The
Fund's performance can also be compared to a broad-based market index and
a narrower market index, which we have done on page __. Please remember
that past performance does not guarantee future results.
Financial Highlights
The table on the following pages presents selected financial
information about the Fund, including per share data, expense ratios and
other data based on the Fund's average net assets. This information has
been audited by KPMG Peat Marwick LLP, the Fund's independent auditors,
whose report on the Fund's financial statements for the fiscal year ended
September 30, 1996 is included in the Statement of Additional Information.
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1996 1995 1994 1993 1992 1991(3)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 14.98 $ 15.21 $ 14.09 $ 11.91 $ 12.43 $ 11.43
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .47 .45 .33 .29 .26 .37
Net realized and unrealized gain (loss) 1.40 .54 1.62 2.17 (.47) .95
- ---------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations 1.87 .99 1.95 2.46 (.21) 1.32
- ---------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.40) (.40) (.35) (.17) (.28) (.32)
Distributions from net realized gain (.83) (.82) (.48) (.11) (.03) --
- ---------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (1.23) (1.22) (.83) (.28) (.31) (.32)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 15.62 $ 14.98 $ 15.21 $ 14.09 $ 11.91 $ 12.43
====================================================================
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(4) 13.28% 7.43% 13.96% 21.00% (1.76)% 11.73%
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $120,214 $113,341 $124,017 $86,019 $49,735 $29,239
- ---------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands ) $115,186 $120,267 $117,164 $59,951 $37,116 $19,340
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 2.65% 3.09% 2.44% 2.68% 2.41% 4.05%(5)
Expenses 1.52% 1.63% 1.49% 1.56% 1.74% 1.94%(5)
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 207.8% 135.2% 87.4% 90.6% 51.3% 23.5%
Average brokerage commission rate(7) $ 0.0004 -- -- -- -- --
<CAPTION>
CLASS B CLASS C
-------------- ------------------------------------------------
PERIOD ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
1996(2) 1996 1995 1994(1)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 14.72 $ 14.92 $ 15.17 $ 14.85
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .36 .35 .35 .22
Net realized and unrealized gain (loss) 1.63 1.40 .53 .87
- ------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations 1.99 1.75 .88 1.09
- ------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.31) (.29) (.31) (.29)
Distributions from net realized gain (.83) (.83) (.82) (.48)
- ------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (1.14) (1.12) (1.13) (.77)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 15.57 $ 15.55 $ 14.92 $ 15.17
===================================================================
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(4) 14.33% 12.45% 6.61% 7.41%
- ------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 8,131 $35,706 $28,295 $17,008
- ------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 3,815 $31,371 $22,211 $ 7,896
- ------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.64%(5) 1.87% 2.36% 1.85%(5)
Expenses 2.28%(5) 2.28% 2.39% 2.44%(5)
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 207.8% 207.8% 135.2% 87.4%
Average brokerage commission rate(7) $0.0004 $0.0004 -- --
</TABLE>
1. For the period from December 1, 1993 (inception of offering) to September 30,
1994.
2. For the period from October 10, 1995 (inception of offering) to September 30,
1996.
3. For the period from October 22, 1990 (commencement of operations) to
September 30, 1991.
4. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
5. Annualized.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended September 30, 1996 were $306,553,668 and $296,763,170, respectively.
7. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period divided by the total number of related
shares purchased and sold.
<PAGE>
<PAGE>
Investment Objective and Policies
Objective. As its investment objective, the Fund seeks capital
appreciation consistent with preservation of principal while
providing current income.
Investment Policies and Strategies. In seeking its investment
objective, the Fund may invest in common stocks and securities
convertible into common stocks to seek growth, or debt securities
such as bonds, notes and debentures, and income producing stocks,
to seek current income. The Fund does not have any policy
requiring that a specific percentage of its assets be invested to
seek growth or to seek income, and the Fund may at times invest
primarily for growth, or primarily for income, or a combination of
the two, depending on the Manager's assessment of market
conditions.
The Fund will invest in foreign as well as U.S. securities and
normally will invest in at least four countries (including the
United States). The Manager expects that the Fund will normally
invest a substantial portion of its assets in foreign securities
(discussed in "Foreign Securities," below). While the Fund may
invest in securities having appreciation possibilities, the Manager
will select securities which, in the view of the Manager, would not
involve undue risk to principal. However, the prices of stocks
will fluctuate and the value of the Fund's shares will also
fluctuate as a result.
The Fund's portfolio manager currently uses an investment
strategy in selecting foreign and domestic securities that examines
the effects of worldwide trends on the growth of various business
sectors. These trends, or "global themes," currently include
telecommunications expansion, emerging consumer markets,
infrastructure development, natural resource use and development,
corporate restructuring, capital market development in foreign
countries, healthcare expansion and global integration. These
trends, which may affect the growth of companies having businesses
in these sectors or which are affected by their development, may
suggest opportunities for investing the Fund's assets. The Manager
does not invest a fixed amount of the Fund's assets in any one
sector, and these themes and this approach may change over time.
When investing the Fund's assets, the Manager considers many
factors, including general economic conditions abroad relative to
those in the U.S. and the trends in foreign and domestic stock
markets. The Fund may try to hedge against losses in the value of
its portfolio of securities by using hedging strategies or
derivative investments, described below.
When market or economic conditions are unstable, the Fund may
invest all or a portion of its assets in U.S. Government
securities, money market instruments, commercial paper and short-
term debt securities. See "Temporary Defensive Investments,"
below. It is expected that short-term debt securities (which
mature in one year or less from the date of purchase) will be
emphasized for defensive purposes.
The Fund's portfolio manager may employ special investment
techniques in selecting securities for the Fund. These are also
described below. Additional information may be found about them
under the same headings in the Statement of Additional Information.
The Fund is not intended for investors whose principal objective is
assured income. Since market risks are inherent in all investments
to varying degrees, there can be no assurance that the Fund will
meet its investment objective.
Can the Fund's Investment Objective and Policies Change? The
Fund has an investment objective, described above, as well as
investment policies it follows to try to achieve its objective.
Additionally, the Fund uses certain investment techniques and
strategies in carrying out those investment policies. The Fund's
investment policies and techniques are not "fundamental" unless
this Prospectus or the Statement of Additional Information says
that a particular policy is "fundamental." The Fund's investment
objective is a fundamental policy.
Fundamental policies are those that cannot be changed without
the approval of a "majority" of the Fund's outstanding voting
shares. The term "majority" is defined in the Investment Company
Act to be a particular percentage of outstanding voting shares (and
this term is explained in the Statement of Additional Information).
The Fund's Board of Trustees may change non-fundamental policies
without shareholder approval, although significant changes will be
described in amendments to this Prospectus.
Stock Investment Risks. Because the Fund may invest a
substantial portion of its assets in stocks, the value of the
Fund's portfolio will be affected by changes in the stock markets.
At times, the stock markets can be volatile and stock prices can
change substantially. This market risk will affect the Fund's net
asset values per share, which will fluctuate as the values of the
Fund's portfolio securities change. Not all stock prices change
uniformly or at the same time, not all stock markets move in the
same direction at the same time, and other factors can affect a
particular stock's prices (for example, poor earnings reports by an
issuer, loss of major customers, major litigation against an
issuer, and changes in government regulations affecting an
industry). Not all of these factors can be predicted.
The Fund attempts to limit market risks by diversifying its
investments, that is, by not holding a substantial amount of the
stock of any one company and by not investing too great a
percentage of the Fund's assets in any one company. Also, the Fund
does not concentrate its investments in any one industry or group
of industries. Because changes in stock and bond market prices can
occur at any time, and because yields on debt securities available
at different times will vary, there is no assurance that the Fund
will achieve its investment objective, and when you redeem your
shares, they may be worth more or less than what you paid for them.
Interest Rate Risks. Fixed income or debt securities are
subject to credit risks, described below, and are also subject to
changes in their value due to changes in prevailing interest rates.
When prevailing interest rates fall, the values of already-issued
fixed-income securities generally rise. When interest rates rise,
the values of already-issued fixed-income securities generally
decline. The magnitude of these fluctuations will often be greater
for longer-term fixed-income securities than shorter-term fixed-
income securities. Changes in the value of securities held by the
Fund mean that the Fund's share prices can go up or down when
interest rates change because of the effect of interest rate
fluctuations on the value of the Fund's portfolio of debt
securities.
Special Risks of Lower-Rated Securities. The Fund does not
limit its investments in bonds and debentures to issues having
specific credit ratings. 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 Fund may invest in bonds and debentures rated below
"investment grade" (investment grade securities are generally those
in the four highest rating categories of Moody's Investors Service,
Inc. ("Moody's") or Standard & Poor's Corporation ("S&P")). The
Fund can invest in securities rated "C" or "D," which indicate that
the obligations are speculative in a high degree and may be in
default.
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, or
unrated securities that are judged by the Manager to have
comparable ratings. They are commonly called "junk bonds." The
Fund currently intends to invest no more than 15% of its total
assets in securities rated below BBB or Baa. The Fund is not
obligated to dispose of securities that are downgraded below
investment grade after the Fund buys them. The Appendix to the
Statement of Additional Information describes these rating
categories.
High yield, lower-grade securities, whether rated or unrated,
often have speculative characteristics. They may be subject to
greater price fluctuations and risk of loss of income and principal
than lower yielding, investment grade securities. There may be
less of a market for them and therefore they may be harder to sell
at an acceptable price. There is a relatively greater possibility
that the issuer's earnings may be insufficient to make the payments
of interest due on the bonds. The issuer's low creditworthiness
may increase the potential for its insolvency.
How the Fund's Portfolio Securities Are Rated. As of
September 30, 1996, the Fund's portfolio included corporate bonds
in the following S&P rating categories (if the securities were
unrated they were determined by the Manager to be comparable to the
category indicated). The amounts shown are dollar-weighted average
values of the bonds in each category measured as a percentage of
the Fund's total assets: AAA, 0.39%; AA, 0.68%; A, 2.49%; BB,
1.45%; B, 2.40%; CCC, 1.90%;. The Appendix to the Statement of
Additional Information describes the rating categories. The
allocation of the Fund's assets among securities in the different
rating categories will vary over time.
Foreign Securities. Under normal circumstances, as a matter
of fundamental policy, the Fund will invest in the United States
and at least three foreign countries. Otherwise, the Fund may
invest its assets without limit in equity and debt securities
issued or guaranteed by foreign companies or foreign governments,
including foreign government agencies. The Fund will normally
invest a substantial amount of its assets in foreign securities.
The Fund may invest in any country, whether it is developed or
underdeveloped. Investments in securities of issuers in non-
industrialized countries generally involve more risk and may be
considered to be highly speculative. The Fund's selection of
foreign securities must be consistent with preservation of capital,
however, under its investment objective.
The Fund may invest in foreign securities that are U.S. dollar-
denominated debt obligations known as "Brady Bonds." They are
issued to exchange existing commercial bank loans to foreign
entities for new obligations that are generally collateralized by
zero coupon U.S. Treasury securities having the same maturity. The
Fund may also buy foreign debt obligations such as bonds (including
sinking fund and callable bonds), debentures and notes (including
variable and floating rate instruments), and preferred stocks and
zero coupon securities. The Fund may purchase foreign securities
denominated in U.S. dollars or in foreign currencies. The Fund
will hold foreign currency only in connection with the purchase or
sale of foreign securities.
Foreign securities have special risks. There are special
risks in investing in foreign securities. Because the Fund may buy
securities denominated in foreign currencies or traded primarily in
foreign markets, a change in the value of a foreign currency
against the U.S. dollar will result in a change in the U.S. dollar
value of securities denominated in that foreign currency.
Currency rate changes will also affect the income available to
distribute to shareholders of the Fund. Although the Fund's
investment income from foreign securities will be received in
foreign currencies, the Fund will be required to distribute its
income to shareholders in U.S. dollars. Therefore, the Fund will
absorb the cost of currency fluctuations. While the Fund may use
hedging techniques to try to reduce the risk of currency
fluctuations, if the Fund suffers losses on foreign currencies
after it has distributed its income during the year, it may find
that it has distributed more income than was available from net
investment income. That could result in previously distributed
income being re-classified as a return of capital to shareholders.
Foreign issuers are not subject to the same accounting and
disclosure requirements that U.S. companies are subject to. The
value of foreign investments may be affected by other factors,
including exchange control regulations, expropriation or
nationalization of a company's assets, foreign taxes, delays in
settlement of transactions, changes in governmental economic or
monetary policy in the U.S. or abroad, or other political and
economic factors. Issuers of foreign securities that are not
registered for sale in the U.S. do not have to comply with
disclosure requirements that U.S. companies are subject to.
In addition, it is generally more difficult to obtain court
judgments outside the U.S. if the Fund were to sue a foreign issuer
or broker. Additional costs may be incurred because foreign
brokerage commissions are generally higher than U.S. rates, and
there are additional custodial costs associated with holding
securities abroad. More information about the risks and potential
rewards of investing in foreign securities is contained in the
Statement of Additional Information.
Domestic Debt Securities. In addition to the bonds and
debentures described above, that the Fund can invest in, it may
also invest in other types of debt securities.
Mortgage-Backed Securities and CMOs. The Fund may invest in
securities that represent participation interests in pools of
residential mortgage loans, including collateralized mortgage
obligations (CMOs). Some CMOs may be issued or guaranteed by
agencies or instrumentalities of the U.S. Government (for example,
Ginnie Maes, Freddie Macs and Fannie Maes). Other CMOs are issued
by private issuers, such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage
bankers and other secondary market issuers.
Certain mortgage-backed securities "pass-through" to investors
the interest and principal payments generated by a pool of
mortgages assembled for sale by government agencies or private
issuers. Pass-through mortgage-backed securities are subject to
the risk that the principal value may be repaid at any time because
of prepayments on the underlying mortgages. As a result, their
price and yield may be more volatile than fixed-income securities
that have a fixed maturity and interest rate.
Mortgage-backed securities created by private issuers may be
supported by various forms of insurance or guarantees, although
there can be no assurance that private issuers will be able to meet
their obligations. As new types of mortgage-related securities are
developed and offered to investors, the Manager will, subject to
the direction of the Fund's Board of Trustees and consistent with
the Fund's investment objective and policies, consider making
investment in new types of mortgage-related securities.
The Fund may also enter into "forward roll" transactions with
banks or other buyers that provide for future delivery of the
mortgage-backed securities in which the Fund may invest. The Fund
would be required to identify cash, U.S. Government securities or
other high-grade debt securities to its custodian bank in an amount
equal to its purchase payment obligation under the roll.
Other Asset-Backed Securities. Asset-backed securities are
fractional interests in pools of consumer loans or other trade
receivables. They are similar to mortgage-backed securities,
described above. They are issued by trusts and special purpose
corporations. They are backed by a pool of assets, such as credit
card or auto loan receivables, which are the obligations of a
number of different parties. The income from the underlying pool
is passed through to holders of the participation interests in the
pool. To try to reduce some of the risks that the underlying
debtors won't pay their loan installments, the pools may offer a
credit enhancement, such as a letter of credit by a bank to secure
the pool's obligation to repay its investors, or a guarantee or a
preference right. However, the credit enhancement may apply only
to a fraction of the security's value. These securities present
special risks. For example, in the case of credit card
receivables, the issuer of the security may have no security
interest in the underlying debt that serves as the stream of income
and collateral security for the pool.
Warrants and Rights. Warrants basically are options to
purchase stock at set prices that are valid for a limited period of
time. Rights are options to purchase securities, normally granted
to current stockholders by the issuer. The Fund may invest up to
10% of its total assets in warrants or rights. That 10% does not
apply to warrants and rights the Fund acquired as part of units
that include other securities or that were attached to other
securities. However, the Fund does not presently expect that its
investments in warrants and rights shall exceed 5% of its net
assets. For further details about these investments, please refer
to "Warrants and Rights" in the Statement of Additional
Information.
Board Approved Instruments. The Fund may invest in other
investments (including new investments that may be developed in the
future) that the Fund's Board of Trustees (or the Manager under
guidelines established by the Board) determines are consistent with
the Fund's investment objective and investment policies.
Portfolio Turnover. A change in the securities held by the
Fund is known as "portfolio turnover." The Fund ordinarily does not
engage in short-term trading to try to achieve its objective. The
"Financial Highlights," above, show the Fund's portfolio turnover
rate during past fiscal years.
Portfolio turnover affects brokerage costs, dealer mark-ups and
other transaction costs and results in the Fund's realization of
capital gains or losses for tax purposes. It may also affect the
Fund's ability to qualify as a "regulated investment company" under
the Internal Revenue Code for tax deductions for dividends and
capital gains distributions the Fund pays to shareholders. The
Fund qualified in its last fiscal year and intends to do so in the
coming year, although it reserves the right not to qualify.
Other Investment Techniques and Strategies. The Fund may also use
the investment techniques and strategies described below. These
techniques involve certain risks. The Statement of Additional
Information contains more information about these practices,
including limitations on their use that may help reduce some of the
risks.
Temporary Defensive 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.
When stock market prices are falling or in other unusual economic
or business circumstances, the Fund may invest all or a portion of
its assets in defensive securities. Securities selected for
defensive purposes usually may include (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 S&P or Moody's and (iv) short-term debt securities
(which are securities maturing in one year or less from the date of
purchase), including rated or unrated bonds, debentures and
preferred stocks.
Borrowing for Leverage. The Fund may borrow up to 10% of the
value of its net assets from banks on an unsecured basis to buy
securities. This is a speculative investment method known as
"leverage." This technique may subject the Fund to greater risks
and costs than funds that do not borrow. These risks may include
the possibility that the Fund's net asset values per share will
fluctuate more than funds that do not borrow. Borrowing is subject
to limits under the Investment Company Act, described in more
detail in the Statement of Additional Information.
Loans of Portfolio Securities. To attempt to increase its
income and for liquidity purposes, the Fund may lend its portfolio
securities to brokers, dealers and other financial institutions.
The value of the securities loaned may not exceed 25% of the value
of the Fund's net assets. Loans are subject to other conditions
described in the Statement of Additional Information. The Fund
presently does not intend to lend its portfolio securities, but if
it does, the value of securities loaned is not expected to exceed
5% of the value of its total assets in the current year.
Repurchase Agreements. The Fund may enter into repurchase
agreements. They are primarily used for liquidity purposes. In a
repurchase transaction, the Fund buys a security and simultaneously
sells it to the vendor for delivery at a future date. Repurchase
agreements must be fully collateralized. However, if the vendor
fails to pay the resale price on the delivery date, the Fund may
incur costs in disposing of the collateral and may experience
losses if there is any delay in its ability to do so. The Fund will
not enter into a repurchase agreement that causes more than 10% of
its net assets to be subject to repurchase agreements having a
maturity beyond seven days. There is no limit on the amount of the
Fund's net assets that may be subject to repurchase agreements of
seven days or less.
Illiquid and Restricted Securities. Under the policies and
procedures established by the Fund's Board of Trustees, the Manager
determines the liquidity of certain of the Fund's investments.
Investments may be illiquid because of the absence of an active
trading market, making it difficult to value them or dispose of
them promptly at an acceptable price. A restricted security is one
that has a contractual restriction on its resale or which cannot be
sold publicly until it is registered under the Securities Act of
1933. The Fund will not invest more than 10% of its net assets in
illiquid or restricted securities (the Board may increase that
limit to 15%). The Fund's percentage limitation on these
investments does not apply to certain restricted securities that
are eligible for resale to qualified institutional purchasers. The
Manager monitors holdings of illiquid securities on an ongoing
basis and at times the Fund may be required to sell some holdings
to maintain adequate liquidity.
"When-Issued" and "Delayed Delivery" Transactions. The Fund
may purchase securities on a "when-issued" basis and may purchase
or sell securities on a "delayed delivery" basis. These terms
refer to securities that have been created and for which a market
exists, but which are not available for immediate delivery. There
may be a risk of loss to the Fund if the value of the security
declines prior to the settlement date.
Loan Participation Interests. The Fund may acquire
participation interests from banks and brokers in loans that are
made primarily to U.S. or foreign companies. The value of loan
participation interests depends primarily upon the creditworthiness
of the borrower and its ability to pay interest and repay the
principal. If a borrower fails to make 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 Fund may invest in. The
Fund currently intends to invest less than 5% of its net assets in
participation interests.
Hedging. As described below, the Fund may purchase and sell
certain kinds of futures contracts, put and call options, forward
contracts, and options on futures and securities, or enter into
interest rate swap agreements. These are all referred to as
"hedging instruments." The Fund does not use hedging instruments
for speculative purposes, and has limits on the use of them,
described below. The hedging instruments the Fund may use are
described below and in greater detail in "Other Investment
Techniques and Strategies" in the Statement of Additional
Information.
The Fund may buy and sell options, futures and forward contracts
for a number of purposes. It may do so to try to manage its
exposure to the possibility that the prices of its portfolio
securities may decline, or to establish a position in the
securities market as a temporary substitute for purchasing
individual securities. It may also use certain kinds of hedging
instruments to try to manage its exposure to changing interest
rates.
Some of these strategies, such as selling futures, buying puts
and writing covered calls, hedge the Fund's portfolio against price
fluctuations. Other hedging strategies, such as buying futures and
call options, tend to increase the Fund's exposure to the
securities market. Forward contracts are used to try to manage
foreign currency risks on the Fund's foreign investments. Foreign
currency options are used to try to protect against declines in the
dollar value of foreign securities the Fund owns, or to protect
against an increase in the dollar cost of buying foreign
securities. Writing covered call options may also provide income
to the Fund for liquidity purposes or to raise cash to distribute
to shareholders.
Futures. The Fund may buy and sell futures contracts that
relate to (1) broadly-based stock indices (these are referred to as
Stock Index Futures), (2) interest rates (these are referred to as
Interest Rate Futures), (3) bond indices (these are referred to as
Bond Index Futures) or (4) foreign currencies (these are called
Forward Contracts and are discussed below).
Put and Call Options. The Fund may buy and sell certain
kinds of put options (puts) and call options (calls). Calls the
Fund buys or sells must be listed on a securities or commodities
exchange, or traded in the over-the-counter market. In the case of
puts and calls on foreign currency, they must be traded on a
securities or commodities exchange, or quoted by recognized dealers
in those options. A call or put option may not be purchased if the
value of all of the Fund's put and call options would exceed 5% of
the Fund's total assets.
The Fund may buy calls only on securities, foreign currencies,
broadly-based stock or bond indices, Stock Index Futures, Interest
Rate Futures and Bond Index Futures.
The Fund may write (that is, sell) call options. Each call the
Fund writes must be "covered" while it is outstanding. That means
the Fund must own the investment on which the call is written or
the Fund owns and segregates liquid assets to satisfy its
obligation if the class is exercised. The Fund may write calls on
Futures contracts it owns, but these calls must be covered by
securities or other liquid assets the Fund owns and segregated to
enable it to satisfy its obligations if the call is exercised.
When the Fund writes a call, it receives cash (called a premium).
The call gives the buyer the ability to buy the investment on which
the call was written from the Fund at the call price during the
period in which the call may be exercised. If the value of the
investment does not rise above the call price, it is likely that
the call will lapse without being exercised, while the Fund keeps
the cash premium (and the investment).
The Fund may purchase and sell put options. Buying a put on an
investment gives the Fund the right to sell the investment at a set
price to a seller of a put on that investment. The Fund can buy
only those puts that relate to securities (whether or not it holds
such securities in its portfolio), foreign currencies, Stock Index
Futures, Interest Rate Futures and Bond Index Futures. The Fund
may write puts on securities, broadly-based stock or bond indices,
foreign currencies or Stock Index Futures. Puts the Fund buys and
sells must be listed on a securities or commodities exchange or
traded in the over-the-counter market. Any put sold must be
covered by segregated liquid assets with not more than 50% of the
Fund's assets subject to puts.
Forward Contracts. Forward contracts are foreign currency
exchange contracts. They are used to buy or sell foreign currency
for future delivery at a fixed price. The Fund uses them to try to
"lock in" the U.S. dollar price of a security denominated in a
foreign currency that the Fund has purchased or sold, or to protect
against possible losses from changes in the relative values of the
U.S. dollar and a foreign currency. The Fund limits its exposure
in foreign currency exchange contracts in a particular foreign
currency to the amount of its assets denominated in that currency
or in a closely-correlated currency. The Fund may also use "cross-
hedging," where the Fund hedges against changes in currencies other
than the currency in which a security it holds is denominated.
Interest Rate Swaps. In an interest rate swap, the Fund and
another party exchange their right to receive, or their obligation
to pay, interest on a security. For example, they may swap a right
to receive floating rate payments for the right to receive fixed
rate payments. The Fund enters into swaps only on securities it
owns. The Fund may not enter into swaps with respect to more than
25% of its total assets. Also, the Fund will segregate liquid
assets (such as cash or U.S. Government securities) to cover any
amounts it could owe under swaps that exceed the amounts it is
entitled to receive, and it will adjust that amount daily, as
needed.
Hedging instruments can be volatile instruments and may
involve special risks. The use of hedging instruments requires
special skills and knowledge of investment techniques that are
different than what is required for normal portfolio management.
If the Manager uses a hedging instrument at the wrong time or
judges market conditions incorrectly, hedging strategies may reduce
the Fund's return. The Fund could also experience losses if the
prices of its futures and options positions were not correlated
with its other investments or if it could not close out a position
because of an illiquid market for the future or option.
Options trading involves the payment of premiums and has special
tax effects on the Fund. There are also special risks in
particular hedging strategies. For example, if a covered call
written by the Fund is exercised on an investment that has
increased in value, the Fund will be required to sell the
investment at the call price and will not be able to realize any
profit if the investment has increased in value above the call
price. In writing a put, there is a risk that the Fund may be
required to buy the underlying security at a disadvantageous price.
The use of forward contracts may reduce the gain that would
otherwise result from a change in the relationship between the U.S.
dollar and a foreign currency. Interest rate swaps are subject to
credit risks (the other party may fail to meet its obligation) and
also to interest rate risks: the Fund could be obligated to pay
more under its swap agreements that it receives under them, as a
result of interest rate changes. These risks and the hedging
strategies the Fund may use are described in greater detail in the
Statement of Additional Information.
Derivative Investments. In general, a "derivative
investment" is a specially-designed investment. Its performance is
linked to the performance of another investment or security, such
as an option, future, index or currency. The Fund can invest in a
number of different kinds of "derivative investments." They are
used in some cases for hedging purposes, and in others because they
offer the potential for increased income and principal value. In
the broadest sense, exchange-traded options and futures contracts
(please refer to "Hedging" above) may be considered "derivative
investments."
One type of derivative the Fund may invest in is an "index-
linked note." On the maturity of this type of debt security,
payment is made based on the performance of an underlying index,
unlike a typical note, where repayment of principal is based on a
set face amount. Another derivative investment the Fund may invest
in is a currency-indexed security. These are typically short-term
or intermediate-term debt securities. Their value at maturity or
the rates at which they pay income are determined by the change in
value of the U.S. dollar against one or more foreign currencies or
an index. In some cases, these securities may pay an amount at
maturity based on a multiple of the amount of the relative currency
movements. This variety of index security offers the potential for
greater income but at a greater risk of loss.
Other derivative investments the Fund may invest in include debt
exchangeable for common stock of an issuer or "equity-linked debt
securities" of an issuer. At maturity, the debt security is
exchanged for common stock of the issuer or is payable in an amount
based on the price of the issuer's common stock at the time of
maturity. In either case there is a risk that the amount payable
at maturity will be less than the principal amount of the debt
(because the price of the issuer's common stock may not be as high
as was expected).
Derivatives may entail special risks. The company issuing
the instrument might not pay the amount due on the maturity of the
instrument. Also, the underlying investment or security on which
the derivative is based, and the derivative itself, might not
perform the way the Manager expected it to perform. The
performance of derivative investments may also be influenced by
interest rate changes in the U.S. and abroad. All of these risks
mean that the Fund might realize less income than expected from its
investments, or that it can lose part of the value of its
investments, which will affect the Fund's share price. Certain
derivative investments held by the Fund may trade in the over-the-
counter markets and may be illiquid. If that is the case, the
Fund's investment in them will be limited, as discussed in
"Illiquid and Restricted Securities," above.
Special Situations. The Fund may invest in securities of
companies that are in "special situations" that the Manager
believes present opportunities for capital growth. A "special
situation" may be an event such as a proposed merger,
reorganization, or other unusual development that is expected to
occur and which may result in an increase in the value of a
company's securities regardless of general business conditions or
the movement of prices in the securities 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". In a short sale, the seller
does not own the security that is sold, but normally borrows the
security to fulfill its delivery obligation. The seller later buys
the securities to repay the loan, in the expectation that the price
of the security will be lower when the purchase is made, resulting
in a gain. The Fund may not sell securities short except in
collateralized transactions referred to as short sales against-the-
box," where the Fund owns an equivalent amount of the securities
sold short. This technique is primarily used for tax purposes. No
more than 15% of the Fund's net assets will be held as collateral
for such short sales at any one time.
Investing in Small, Unseasoned Companies. The Fund may
invest in securities of small, unseasoned companies. These are
companies that have been in operation for less than three years,
counting the operations of any predecessors. Securities of these
companies may have limited liquidity (which means that the Fund may
have difficulty selling them at an acceptable price when it wants
to) and the prices of these securities may be volatile. The Fund
may not invest more than 5% of its net assets in securities of
small, unseasoned issuers.
Other Investment Restrictions. The Fund has certain investment
restrictions that are fundamental policies. Under these
fundamental policies, the Fund cannot do any of the following:
With respect to 75% of its assets, the Fund cannot 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.
The Fund cannot 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 or any of its agencies or
instrumentalities).
Unless the prospectus states that a percentage restriction
applies on an ongoing basis, it applies only at the time the Fund
makes an investment and the Fund need not sell securities to meet
the percentage limits if the value of the investment increases in
proportion to the size of the Fund. Other investment restrictions
are listed in "Investment Restrictions" in the Statement of
Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized in 1990 as a
Massachusetts business trust. The Fund is an open-end, diversified
management investment company, with an unlimited number of
authorized shares of beneficial interest.
The Fund is governed by a Board of Trustees, which is
responsible for protecting the interests of shareholders under
Massachusetts law. The Trustees meet periodically throughout the
year to oversee the Fund's activities, review its performance, and
review the actions of the Manager. "Trustees and Officers of the
Fund" in the Statement of Additional Information names the Trustees
and officers of the Fund and provides more information about them.
Although the Fund will not normally hold annual meetings of its
shareholders, it may hold shareholder meetings from time to time on
important matters, and shareholders have the right to call a
meeting to remove a Trustee or to take other action described in
the Fund's Declaration of Trust.
The Board of Trustees has the power, without shareholder
approval, to divide unissued shares of the Fund into two or more
classes. The Board has done so, and the Fund currently has three
classes of shares, Class A, Class B and Class C. All classes
invest in the same investment portfolio. Each class has its own
dividends and distributions and pays certain expenses, which may be
different for the different classes. Each class may have a
different net asset value. Each share has one vote at shareholder
meetings, with fractional shares voting proportionally. Only
shares of a particular class vote as a class on matters that affect
that class alone. Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager,
OppenheimerFunds, Inc., which is responsible for selecting the
Fund's investments and handles its day-to-day business. The
Manager carries out its duties, subject to the policies established
by the Board of Trustees, under an Investment Advisory Agreement
which states the Manager's responsibilities. The Investment
Advisory Agreement sets forth the fees paid by the Fund to the
Manager and describes the expenses that the Fund is responsible to
pay to conduct its business.
The Manager has operated as an investment advisor since 1959.
The Manager (including a subsidiary) currently manages investment
companies, including other Oppenheimer funds, with assets of more
than $62 billion as of December 31, 1996, and with more than 3
million shareholder accounts. The Manager is owned by Oppenheimer
Acquisition Corp., a holding company that is owned in part by
senior officers of the Manager and controlled by Massachusetts
Mutual Life Insurance Company.
Portfolio Manager. The Portfolio Manager of the Fund is
Frank Jennings. He is a Vice President of the Manager and he has
been the person principally responsible for the day-to-day
management of the Fund's portfolio since October 2, 1995. Prior to
joining the Manager, Mr. Jennings was a Managing Director of Global
Equities at Mitchell Hutchins Asset Management, Inc., a subsidiary
of Paine Webber, Inc. Prior to that, Mr. Jennings was a global
funds manager for AIG Global Investors.
Fees and Expenses. Under the Investment Advisory Agreement
the Fund pays the Manager the following annual fees, which decline
on additional assets as the Fund grows: 0.80% of the first $250
million of average annual net assets; 0.77% of the next $250
million; 0.75% of the next $500 million; 0.69% of the next $1
billion; and 0.67% of average annual net assets in excess of $2
billion. The Fund's management fee for its fiscal year ended
September 30, 1996 was 0.80% of average annual net assets for its
Class A and Class C shares, and for Class B shares (on an
annualized basis).
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal fees
and auditing costs. Those expenses are paid out of the Fund's
assets and are not paid directly by shareholders. However, those
expenses reduce the net asset value of shares, and therefore are
indirectly borne by shareholders through their investment. More
information about the Investment Advisory Agreement and the other
expenses paid by the Fund is contained in the Statement of
Additional Information.
There is also information about the Fund's brokerage policies
and practices in "Brokerage Policies of the Fund" in the Statement
of Additional Information. That section discusses how brokers and
dealers are selected for the Fund's portfolio transactions. When
deciding which brokers to use, the Manager is permitted by the
Investment Advisory Agreement to consider whether brokers have sold
shares of the Fund or any other funds for which the Manager serves
as investment advisor.
The Distributor. The Fund's shares are sold through dealers,
brokers and other financial institutions that have a sales
agreement with OppenheimerFunds Distributor, Inc., a subsidiary of
the Manager that acts as the Fund's Distributor. The Distributor
also distributes the shares of the other Oppenheimer funds and is
sub-distributor for funds managed by a subsidiary of the Manager.
The Transfer Agent. The Fund's transfer agent is
OppenheimerFunds Services, a division of the Manager, which acts as
the shareholder servicing agent for the Fund and the other
Oppenheimer funds on an "at-cost" basis. It also acts as the
shareholder servicing agent for the other Oppenheimer funds.
Shareholders should direct inquiries about their accounts to the
Transfer Agent at the address and toll-free number shown below in
this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms
"total return" and "average annual total return" to illustrate its
performance. The performance of each class of shares is shown
separately, because the performance of each class will usually be
different as a result of the different kinds of expenses each class
bears. These returns measure the performance of a hypothetical
account in the Fund over various periods, and do not show the
performance of each shareholder's account (which will vary if
dividends are received in cash or shares are sold or purchased).
The Fund's performance information may help you see how well your
Fund has done over time and to compare it to other funds or market
indices, as we have done below.
It is important to understand that the Fund's total returns
represent past performance and should not be considered to be
predictions of future returns or performance. More detailed
information about how total returns are calculated is contained in
the Statement of Additional Information, which also contains
information about other ways to measure and compare the Fund's
performance. The Fund's investment performance will vary over time,
depending on market conditions, the composition of the portfolio,
expenses and which class of shares you purchase.
Total Returns. There are different types of total returns
used to measure the Fund's performance. Total return is the change
in value of a hypothetical investment in the Fund over a given
period, assuming that all dividends and capital gains distributions
are reinvested in additional shares. The cumulative total return
measures the change in value over the entire period (for example,
ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the
cumulative total return over the entire period. However, average
annual total returns do not show the Fund's actual year-by-year
performance.
When total returns are quoted for Class A shares, normally the
current maximum initial sales charge has been deducted. When total
returns are shown for Class B shares, normally the contingent
deferred sales charge that applies to the period for which total
return is shown has been deducted. When total returns are shown
for a one-year period (or less) for Class C shares, they reflect
the effect of the contingent deferred sales charge. However, total
returns may also be quoted "at net asset value," without
considering the effect of either the front-end or the appropriate
contingent deferred sales charge, as applicable, and those returns
would be less if sales charges were deducted.
How Has the Fund Performed? Below is a discussion by the Manager
of the Fund's performance during its last fiscal year ended
September 30, 1996, followed by a graphical comparison of the
Fund's performance to an appropriate broad-based market index and
narrower market index.
Management's Discussion of Performance. The Fund's
performance during its fiscal year ended September 30, 1996, was
affected by the outperformance of the major foreign markets by the
U.S. stock market, and by the outperformance of NASDAQ-listed
issues in the U.S. stock market by exchange-listed issues. The
Manager utilized the following global theme areas in selecting
stocks for the equity portion of the Fund's portfolio: technology,
telecommunications, heathcare, natural resources, infrastructure
and restructuring. The Fund's equity investments in
telecommunications stock were decreased in response to lower
profits as a result of growing competition, and its investments
were increased in the medical technology area, including
pharmaceutical and biotechnology companies. The Fund's equity
investments also focused on consumer non-cyclical stocks,
particularly companies with products aimed at middle-class
consumers. The Fund's investment in bonds were adversely impacted
when interest rates climbed in the first half of 1996.
Comparing the Fund's Performance to the Market. The graphs
below show the performance of a hypothetical $10,000 investment in
Class A, Class B and Class C shares of the Fund held until
September 30, 1996. In the case of Class A shares, performance is
measured from the inception of the Class on October 22, 1990. In
the case of Class B shares, performance is measured since inception
of the class on October 10, 1995. In the case of Class C shares,
performance is measure from the inception of the Class on December
1, 1993.
The Fund's performance is compared to two indices, because the
Fund invests its assets in both stocks and debt securities, and in
the Manager's view, no one index adequately combines both types of
investments globally. Performance is compared to the performance
of the Morgan Stanley Capital International World Index, an
unmanaged index of issuers listed on the stock exchanges of 20
foreign countries and the U.S. It is widely recognized as a
measure of global stock market performance. Because the Fund also
invests in income-producing securities, the Fund's performance is
also compared to the performance of the Lehman Brothers Aggregate
Bond Index, an unmanaged index of U.S. Government Treasury and
agency issues, investment grade corporate bond issues and fixed-
rate mortgage-backed securities. That index is widely regarded as
a measure of the performance of the overall bond market.
Index performance reflects the reinvestment of dividends but does
not consider the effect of capital gains or transaction costs, and
none of the data below show the effect of taxes. The Fund's
performance reflects the effect of Fund business and operating
expenses. While index comparisons may be useful to provide a
benchmark for the Fund's performance, it must be noted that the
Fund's investments are not limited to the securities in the indices
shown. Moreover, the index performance data does not reflect any
assessment of the risk of the investments included in the index.
Comparison of Change in Value
of $10,000 Hypothetical Investments in Oppenheimer Global Growth &
Income Fund and the
Morgan Stanley Capital International World Index and the Lehman
Aggregate Bond Index
(Graphs)
<TABLE>
<CAPTION>
(Graphs)
Oppenheimer Global Growth & Income Fund
Average Annual Total Returns Cumulative Total Return Average Annual Total Returns
of Class A Shares of the Fund of Class B Shares of the Fund of Class C Shares of the Fund
at 9/30/96 at 9/30/96 at 9/30/96
<S> <C> <C> <C> <C> <C>
1 Year 5 Year Life of Class1 Life(2) 1 Year Life of Class(3)
6.76% 9.21% 9.73% 9.33% 11.45% 9.34%
</TABLE>
_____________________
Total returns at the ending account values in the graph show change
in share value and include reinvestment of all dividends and
capital gains distributions.
1Class A returns are shown net of the applicable 5.75% maximum initial
sales charge. The inception date of the Fund (Class A shares) was 10/22/90.
Performance information for the two indices in the graph begins on 10/1/95.
2Class B shares of the Fund were first publicly offered on 10/10/95.
The Life of Class return is shown net of the applicable 5% contingent
deferred sales charge. The performance information for the two indices
in the graph begins on 10/1/95.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
3Class C shares of the Fund were first publicly offered on 12/1/93. Returns
are shown net of the applicable 1% contingent deferred sales charge
for the 1-year period.
Past performance is not predicative of future performance.
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors three different
classes of shares. The different classes of shares represent
investments in the same portfolio of securities but are subject to
different expenses and will likely have different share prices.
Class A Shares. If you buy Class A shares, you pay an
initial sales charge on investments up to $1 million (up to
$500,000 for purchases by "Retirement Plans," as defined in "Class
A Contingent Deferred Sales Charge" on page _____). If you
purchase Class A shares as part of an investment of at least $1
million ($500,000 for Retirement Plans) in shares of one or more
Oppenheimer funds, you will not pay an initial sales charge, but if
you sell any of those shares within 18 months of buying them, you
may pay a contingent deferred sales charge. The amount of that
sales charge will vary depending on the amount you invested. Sales
charge rates are described in "Buying Class A Shares" below.
Class B Shares. If you buy Class B shares, you pay no sales
charge at the time of purchase, but if you sell your shares within
six years of buying them, you will normally pay a contingent
deferred sales charge that varies depending on how long you own
your shares, as described in "Buying Class B Shares" below.
Class C Shares. If you buy Class C shares, you pay no sales
charge at the time of purchase, but if you sell your shares within
12 months of buying them, you will normally pay a contingent
deferred sales charge of 1%, as described in "Buying Class C
Shares" below.
Which Class of Shares Should You Choose? Once you decide that the
Fund is an appropriate investment for you, the decision as to which
class of shares is better suited to your needs depends on a number
of factors which you should discuss with your financial advisor.
The Fund's operating costs that apply to a class of shares and the
effect of the different types of sales charges on your investment
will vary your investment results over time. The most important
factors to consider are how much you plan to invest and how long
you plan to hold your investment. If your goals and objectives
change over time and you plan to purchase additional shares, you
should re-evaluate those factors to see if you should consider
another class of shares.
In the following discussion, to help provide you and your
financial advisor with a framework in which to choose a class, we
have made some assumptions using a hypothetical investment in the
Fund. We used the sales charge rates that apply to each class,
considering the effect of the annual asset-based sales charge on
Class B and Class C expenses (which, like all expenses, will affect
your investment return). For the sake of comparison, we have
assumed that there is a 10% rate of appreciation in the investment
each year. Of course, the actual performance of your investment
cannot be predicted and will vary, based on the Fund's actual
investment returns and the operating expenses borne by each class
of shares, and which class of shares you invest in. The factors
discussed below are not intended to be investment advice or
recommendations, because each investor's financial considerations
are different. The discussion below of the factors to consider in
purchasing a particular class of shares assumes that you will
purchase only one class of shares and not a combination of shares
of different classes.
How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, knowing how
long you expect to hold your investment will assist you in
selecting the appropriate class of shares. Because of the effect
of class-based expenses, your choice will also depend on how much
you plan to invest. For example, the reduced sales charges
available for larger purchases of Class A shares may, over time,
offset the effect of paying an initial sales charge on your
investment (which reduces the amount of your investment dollars
used to buy shares for your account), compared to the effect over
time of higher class-based expenses on Class B or Class C shares,
for which no initial sales charge is paid.
Investing for the Short Term. If you have a short-term
investment horizon (that is, you plan to hold your shares for not
more than six years), you should probably consider purchasing Class
A or Class C shares rather than Class B shares, because of the
effect of the Class B contingent deferred sales charge if you
redeem in less than 7 years, as well as the effect of the Class B
asset-based sales charge on the investment return for that class in
the short-term. Class C shares might be the appropriate choice
(especially for investments of less than $100,000), because there
is no initial sales charge on Class C shares, and the contingent
deferred sales charge does not apply to amounts you sell after
holding them one year.
However, if you plan to invest more than $100,000 for the
shorter term, then the more you invest and the more your investment
horizon increases toward six years, Class C shares might not be as
advantageous as Class A shares. That is because the annual asset-
based sales charge on Class C shares will have a greater impact on
your account over the longer term than the reduced front-end sales
charge available for larger purchases of Class A shares. For
example, Class A might be more advantageous than Class C (as well
as Class B) for investments of more than $100,000 expected to be
held for 5 or 6 years (or more). For investments over $250,000
expected to be held 4 to 6 years (or more), Class A shares may
become more advantageous than Class C (and B). If investing
$500,000 or more, Class A may be more advantageous as your
investment horizon approaches 3 years or more.
And for investors who invest $1 million or more, in most cases
Class A shares will be the most advantageous choice, no matter how
long you intend to hold your shares. For that reason, the
Distributor normally will not accept purchase orders of $500,000 or
more of Class B shares or $1 million or more of Class C shares from
a single investor.
Investing for the Longer Term. If you are investing for the
longer term, for example, for retirement, and do not expect to need
access to your money for seven years or more, Class B shares may be
an appropriate consideration, if you plan to invest less than
$100,000. If you plan to invest more than $100,000 over the long
term, Class A shares will likely be more advantageous than Class B
shares or C shares, as discussed above, because of the effect of
the expected lower expenses for Class A shares and the reduced
initial sales charges available for larger investments in Class A
shares under the Fund's Right of Accumulation.
Of course, these examples are based on approximations of the
effect of current sales charges and expenses on a hypothetical
investment over time, using the assumed annual performance return
stated above, and therefore, you should analyze your options
carefully.
Are There Differences in Account Features That Matter to You?
Because some account features may not be available to Class B or
Class C shareholders, or other features (such as Automatic
Withdrawal Plans) might not be advisable (because of the effect of
the contingent deferred sales charge) in non-retirement accounts
for Class B or Class C shareholders, you should carefully review
how you plan to use your investment account before deciding which
class of shares to buy. Share certificates are not available for
Class B and Class C shares, and if you are considering using your
shares as collateral for a loan, that may be a factor to consider.
How Does It Affect Payments to My Broker? A salesperson,
such as a broker, or any other person who is entitled to receive
compensation for selling Fund shares may receive different
compensation for selling one class of shares than for selling
another class. It is important that investors understand that the
purpose of the Class B and Class C contingent deferred sales
charges and asset-based sales charge is the same as the purpose of
the front-end sales charge on sales of Class A shares: that is, to
compensate the Distributor for commissions it pays to dealers and
financial institutions for selling shares.
How Much Must You Invest? You can open a Fund account with a
minimum initial investment of $1,000 and make additional
investments at any time with as little as $25. There are reduced
minimum investments under special investment plans.
With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7)
custodial plans and military allotment plans, you can make initial
and subsequent investments of as little as $25; and subsequent
purchases of at least $25 can be made by telephone through
AccountLink.
Under pension, profit-sharing and 401(k) plans and Individual
Retirement Accounts (IRAs), you can make an initial investment of
as little as $250 (if your IRA is established under an Asset
Builder Plan, the $25 minimum applies), and subsequent investments
may be as little as $25.
There is no minimum investment requirement if you are buying
shares by reinvesting dividends from the Fund or other Oppenheimer
funds (a list of them appears in the Statement of Additional
Information, or you can ask your dealer or call the Transfer
Agent), or by reinvesting distributions from unit investment trusts
that have made arrangements with the Distributor.
How Are Shares Purchased? You can buy shares several ways --
through any dealer, broker or financial institution that has a
sales agreement with the Distributor, directly through the
Distributor, or automatically from your bank account through an
Asset Builder Plan under the OppenheimerFunds AccountLink service.
The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase (and redemption) orders.
When you buy shares, be sure to specify Class A, Class B or Class
C shares. If you do not choose, your investment will be made in
Class A shares.
Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.
Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "OppenheimerFunds Distributor, Inc." Mail it to P.O. Box
5270, Denver, Colorado 80217. If you don't list a dealer on the
application, the Distributor will act as your agent in buying the
shares. However, it is recommended that you discuss your
investment first with a financial advisor, to be sure that it is
appropriate for you.
Buying Shares Through OppenheimerFunds AccountLink. You can
use AccountLink to link your Fund account with an account at a U.S.
bank or other financial institution that is an Automated Clearing
House (ACH) member. You can then transmit funds electronically to
purchase shares, to have the Transfer Agent send redemption
proceeds, or to transmit dividends and distributions to your bank
account.
Shares are purchased for your account on AccountLink on the
regular business day the Distributor is instructed by you to
initiate the ACH transfer to buy shares. You can provide those
instructions automatically, under an Asset Builder Plan, described
below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. You should request AccountLink
privileges on the application or dealer settlement instructions
used to establish your account. Please refer to "AccountLink" below
for more details.
Asset Builder Plans. You may purchase shares of the Fund (and
up to four other Oppenheimer funds) automatically each month from
your account at a bank or other financial institution under an
Asset Builder Plan with AccountLink. Details are on the
Application and in the Statement of Additional Information.
At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value (and any initial sales
charge that applies) that is next determined after the Distributor
receives the purchase order in Denver, Colorado. In most cases, to
enable you to receive that day's offering price, the Distributor or
its designated agent must receive your order by the time of day The
New York Stock Exchange closes, which is normally 4:00 P.M., New
York time, but may be earlier on some days (all references to time
in this Prospectus mean "New York time"). The net asset value of
each class of shares is determined as of that time on each day The
New York Stock Exchange is open (which is a "regular business
day").
If you buy shares through a dealer, the dealer must receive your
order by the close of The New York Stock Exchange on a regular
business day and transmit it to the Distributor so that it is
received before the Distributor's close of business that day, which
is normally 5:00 P.M. The Distributor may reject any purchase
order for the Fund's shares, in its sole discretion.
Special Sales Charge Arrangements for Certain Persons. Appendix A
to this Prospectus sets forth conditions for the waiver of, or
exemption from, sales charges or the special sales charge rates
that apply to purchases of shares of the Fund (including purchases
by exchange) by a person who was a shareholder of one of the Former
Quest for Value Funds (as defined in that Appendix).
Buying Class A Shares. Class A shares are sold at their offering
price, which is normally net asset value plus an initial sales
charge. However, in some cases, described below, purchases are not
subject to an initial sales charge, and the offering price will be
the net asset value. In some cases, reduced sales charges may be
available, as described below. Out of the amount you invest, the
Fund receives the net asset value to invest for your account. The
sales charge varies depending on the amount of your purchase. A
portion of the sales charge may be retained by the Distributor and
allocated to your dealer as commission. The current sales charge
rates and commissions paid to dealers and brokers are as follows:
<TABLE>
<CAPTION>
Front-End Front-End
Sales Charge Sales Charge
As a As a Commission as
Percentage of Percentage of Percentage of
Amount of Purchase Offering Price: Amount Invested: Offering Price:
<S> <C> <C> <C>
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%
</TABLE>
The Distributor reserves the right to reallow the entire
commission to dealers. If that occurs, the dealer may be
considered an "underwriter" under Federal securities laws.
Class A Contingent Deferred Sales Charge. There is no
initial sales charge on purchases of Class A shares of any one or
more of the Oppenheimer funds in the following cases:
Purchases aggregating $1 million or more;
Purchases by a retirement plan qualified under section 401(a)
if the retirement plan has total plan assets of $500,000 or more;
Purchases by a retirement plan qualified under sections 401(a)
or 401(k) of the Internal Revenue Code, by a non-qualified deferred
compensation plan (not including Section 457 plans), employee
benefit plan, group retirement plan (see "How to Buy Shares -
Retirement Plans" in the Statement of Additional Information for
further details), an employee's 403(b)(7) custodial plan account,
SEP IRA, SARSEP, or SIMPLE plan (all of these plans are
collectively referred to as "Retirement Plans"); that: (1) buys
shares costing $500,000 or more or (2) has, at the time of
purchase, 100 or more eligible participants, or (3) certifies that
it projects to have annual plan purchases of $200,000 or more; or
Purchases by an OppenheimerFunds Rollover IRA if the purchases
are made (1) through a broker,dealer, bank or registered investment
advisor that has made special arrangements with the Distributor for
these purchases, or (2) by a direct rollover of a distribution from
a qualified retirement plan if the administrator of that plan has
made special arrangements with the Distributor for those purchases.
The Distributor pays dealers of record commissions on those
purchases in an amount equal to (i) 1.0% for non-Retirement Plan
accounts, and (ii) for Retirement Plan accounts, 1.0% of the first
$2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of
purchases over $5 million. That commission will be paid only on
those purchases that were not previously subject to a front-end
sales charge and dealer commission. No sales commission will be
paid to the dealer, broker or financial institution on sales of
Class A shares purchased with the redemption proceeds of shares of
a mutual fund offered as an investment option in a Retirement Plan
in which Oppenheimer funds are also offered as investment options
under a special arrangement with the Distributor if the purchase
occurs more than 30 days after the addition of the Oppenheimer
funds as an investment option to the Retirement Plan.
If you redeem any of those shares within 18 months of the end of
the calendar month of their purchase, a contingent deferred sales
charge (called the "Class A contingent deferred sales charge") may
be deducted from the redemption proceeds. That sales charge may be
equal to 1.0% of the lesser of (1) the aggregate net asset value of
the redeemed shares (not including shares purchased by reinvestment
of dividends or capital gains distributions) or (2) the original
offering price (which is the original net asset value) of the
redeemed shares. However, the Class A contingent deferred sales
charge will not exceed the aggregate amount of the commissions the
Distributor paid to your dealer on all Class A shares of all
Oppenheimer funds you purchased subject to the Class A contingent
deferred sales charge.
In determining whether a contingent deferred sales charge is
payable, the Fund will first redeem shares that are not subject to
the sales charge, including shares purchased by reinvestment of
dividends and capital gains, and then will redeem other shares in
the order that you purchased them. The Class A contingent deferred
sales charge is waived in certain cases described in "Waivers of
Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on
exchanges of shares under the Fund's exchange privilege (described
below). However, if the shares acquired by exchange are redeemed
within 18 months of the end of the calendar month of the purchase
of the exchanged shares, the sales charge will apply.
Special Arrangements With Dealers. The Distributor may
advance up to 13 months' commissions to dealers that have
established special arrangements with the Distributor for Asset
Builder Plans for their clients.
Reduced Sales Charges for Class A Share Purchases. You may be
eligible to buy Class A shares at reduced sales charge rates in one
or more of the following ways:
Right of Accumulation. To qualify for the lower sales charge
rates that apply to larger purchases of Class A shares, you and
your spouse can add together Class A and Class B shares you
purchase for your individual accounts, or jointly, or for trust or
custodial accounts on behalf of your children who are minors. A
fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit
plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A
and Class B shares of the Fund and other Oppenheimer funds to
reduce the sales charge rate that applies to current purchases of
Class A shares. You can also include Class A and Class B shares of
Oppenheimer funds you previously purchased subject to an initial or
contingent deferred sales charge to reduce the sales charge rate
for current purchases of Class A shares, provided that you still
hold your investment in one of the Oppenheimer funds. The value of
those shares will be based on the greater of the amount you paid
for the shares or their current value (at offering price). The
Oppenheimer funds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from
the Distributor. The reduced sales charge will apply only to
current purchases and must be requested when you buy your shares.
Letter of Intent. Under a Letter of Intent, if you purchase
Class A shares or Class A and Class B shares of the Fund and other
Oppenheimer funds during a 13-month period, you can reduce the
sales charge rate that applies to your purchases of Class A shares.
The total amount of your intended purchases of both Class A and
Class B shares will determine the reduced sales charge rate for the
Class A shares purchased during that period. This can include
purchases made up to 90 days before the date of the Letter. More
information is contained in the Application and in "Reduced Sales
Charges" in the Statement of Additional Information.
Waivers of Class A Sales Charges. The Class A sales charges
are not imposed in the circumstances described below. There is an
explanation of this policy in "Reduced Sales Charges" in the
Statement of Additional Information.
Waivers of Initial and Contingent Deferred Sales Charges for
Certain Purchasers. Class A shares purchased by the following
investors are not subject to any Class A sales charges:
the Manager or its affiliates;
present or former officers, directors, trustees and employees
(and their "immediate families" as defined in "Reduced Sales
Charges" in the Statement of Additional Information) of the Fund,
the Manager and its affiliates, and retirement plans established by
them for their employees;
registered management investment companies, or separate
accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose;
dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees;
employees and registered representatives (and their spouses)
of dealers or brokers described above or financial institutions
that have entered into sales arrangements with such dealers or
brokers (and are identified to the Distributor) or with the
Distributor; the purchaser must certify to the Distributor at the
time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor
children);
dealers, brokers, banks or registered investment advisors
that have entered into an agreement with the Distributor providing
specifically for the use of shares of the Fund in particular
investment products made available to their clients (those clients
may be charged a transaction fee by their dealer, broker or advisor
for the purchase or sale of Fund shares);
(1) investment advisors and financial planners who charge an
advisory, consulting or other fee for their services and buy shares
for their own accounts or the accounts of their clients, (2)
Retirement Plans and deferred compensation plans and trusts used to
fund those Plans (including, for example, plans qualified or
created under sections 401(a), 403(b) or 457 of the Internal
Revenue Code), and "rabbi trusts" that buy shares for their own
accounts, in each case if those purchases are made through a broker
or agent or other financial intermediary that has made special
arrangements with the Distributor for those purchases; and (3)
clients of such investment advisors or financial planners who buy
shares for their own accounts may also purchase shares without
sales charge but only if their accounts are linked to a master
account of their investment advisor or financial planner on the
books and records of the broker, agent or financial intermediary
with which the Distributor has made such special arrangements (each
of these investors may be charged a fee by the broker, agent or
financial intermediary for purchasing shares);
directors, trustees, officers or full-time employees of OpCap
Advisors or its affiliates, their relatives or any trust, pension,
profit sharing or other benefit plan which beneficially owns shares
for those persons;
accounts for which Oppenheimer Capital is the investment
advisor (the Distributor must be advised of this arrangement) and
persons who are directors or trustees of the company or trust which
is the beneficial owner of such accounts;
any unit investment trust that has entered into an appropriate
agreement with the Distributor;
a TRAC-2000 401(k) plan (sponsored by the former Quest for
Value Advisors) whose Class B or Class C shares of a Former Quest
for Value Fund were exchanged for Class A shares of that Fund due
to the termination of the Class B and C TRAC-2000 program on
November 24, 1995; or
qualified retirement plans that had agreed with the former
Quest for Value Advisors to purchase shares of any of the Former
Quest for Value Funds at net asset value, with such shares to be
held through DCXchange, a sub-transfer agency mutual fund
clearinghouse, provided that such arrangements are consummated and
share purchases commenced by December 31, 1996.
Waivers of Initial and Contingent Deferred Sales Charges in
Certain Transactions. Class A shares issued or purchased in the
following transactions are not subject to Class A sales charges:
shares issued in plans of reorganization, such as mergers,
asset acquisitions and exchange offers, to which the Fund is a
party;
shares purchased by the reinvestment of loan repayments by a
participant in a retirement plan for which the Manager or its
affiliates acts as sponsor;
shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds
(other than Oppenheimer Cash Reserves) or unit investment trusts
for which reinvestment arrangements have been made with the
Distributor;
shares purchased and paid for with the proceeds of shares
redeemed in the past 12 months from a mutual fund (other than a
fund managed by the Manager or any of its subsidiaries) on which an
initial sales charge or contingent sales charge was paid (this
waiver also applies to shares purchased by exchange of shares of
Oppenheimer Money Market Fund, Inc. that were purchased and paid
for in this manner); this waiver must be requested when the
purchase order is placed for your shares of the Fund, and the
Distributor may require evidence of your qualification for this
waiver; or
purchased with the proceeds of maturing principal of units of
any Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for
Certain Redemptions. The Class A contingent deferred sales charge
is also waived if shares that would otherwise be subject to the
contingent deferred sales charge are redeemed in the following
cases:
to make Automatic Withdrawal Plan payments that are
limited annually to no more than 12%
of the original account value;
involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (see
"Shareholder Account Rules and Policies," below);
if, at the time a purchase order is placed for Class A
shares that would otherwise be subject to the Class A
contingent deferred sales charge, the dealer agrees in
writing to accept the dealer's portion of the commission
payable on the sale in installments of 1/18th of the
commission per month ( and no further commission will be
payable if the shares are redeemed within 18 months of
purchase);
for distributions from a TRAC-2000 401(k) plan sponsored
by the Distributor due to the termination of the TRAC-2000
program.
for distributions from Retirement Plans, deferred
compensation plans or other employee benefit plans for any
of the following purposes: (1) following the death or
disability (as defined in the Internal Revenue Code) of
the participant or beneficiary (the death or disability
must occur after the participant's account was
established); (2) to return excess contributions; (3) to
return contributions made due to a mistake of fact; (4)
hardship withdrawals, as defined in the plan; (5) under a
Qualified Domestic Relations Order, as defined in the
Internal Revenue Code; (6) to meet the minimum
distribution requirements of the Internal Revenue Code;
(7) to establish "substantially equal periodic payments"
as described in Section 72(t) of the Internal Revenue
Code; (8) for retirement distributions or loans to
participants or beneficiaries; (9) separation from
service; (10) participant-directed redemptions to purchase
shares of a mutual fund (other than a fund managed by the
Manager or its subsidiary) offered as an investment option
in a Retirement Plan in which Oppenheimer funds are also
offered as investment options under a special arrangement
with the Distributor; or (11) plan termination or "in-
service distributions", if the redemption proceeds are
rolled over directly to an OppenheimerFunds IRA.
Service Plan for Class A Shares. The Fund has adopted a
Service Plan for Class A shares to reimburse the Distributor for a
portion of its costs incurred in connection with the personal
service and maintenance of shareholder accounts that hold Class A
shares. Reimbursement is made quarterly at an annual rate that may
not exceed 0.25% of the average annual net assets of Class A shares
of the Fund. The Distributor uses all of those fees to compensate
dealers, brokers, banks and other financial institutions quarterly
for providing personal service and maintenance of accounts of their
customers that hold Class A shares and to reimburse itself (if the
Fund's Board of Trustees authorizes such reimbursements, which it
has not yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering
customer inquiries about the Fund, assisting in establishing and
maintaining accounts in the Fund, making the Fund's investment
plans available and providing other services at the request of the
Fund or the Distributor. Payments are made by the Distributor
quarterly at an annual rate not to exceed 0.25% of the average
annual net assets of Class A shares held in accounts of the service
providers or their customers. The payments under the Plan increase
the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of
Additional Information.
Buying Class B Shares. Class B shares are sold at net asset value
per share without an initial sales charge. However, if Class B
shares are redeemed within 6 years of their purchase, a contingent
deferred sales charge will be deducted from the redemption
proceeds. That sales charge will not apply to shares purchased by
the reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge will be based on the lesser of the
net asset value of the shares at the time of redemption or the
original offering price (which is the original net asset value).
The contingent deferred sales charge is not imposed on the amount
of your account value represented by the increase in net asset
value over the initial purchase price. The Class B contingent
deferred sales charge is paid to the Distributor to reimburse its
expenses of providing distribution-related services to the Fund in
connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge
applies to a redemption, the Fund redeems shares in the following
order: (1) shares acquired by reinvestment of dividends and capital
gains distributions, (2) shares held for over 6 years, and (3)
shares held the longest during the 6-year period. The contingent
deferred sales charge is not imposed in the circumstances described
in "Waivers of Class B and Class C Sales Charges" below.
The amount of the contingent deferred sales charge will depend
on the number of years since you invested and the dollar amount
being redeemed, according to the following schedule:
Contingent Deferred Sales Charge
Years Since Beginning On Redemptions in that Year
of Month In Which As % of Amount Subject
Purchase Order was Accepted to Charge)
- --------------------------- -------------------------------
0 - 1 5.0%
1 - 2 4.0%
2 - 3 3.0%
3 - 4 3.0%
4 - 5 2.0%
5 - 6 1.0%
6 and following None
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of
the month in which the purchase was made.
Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to
Class A shares. This conversion feature relieves Class B
shareholders of the asset-based sales charge that applies to Class
B shares under the Class B Distribution and Service Plan, described
below. The conversion is based on the relative net asset value of
the two classes, and no sales load or other charge is imposed. When
Class B shares convert, any other Class B shares that were acquired
by the reinvestment of dividends and distributions on the converted
shares will also convert to Class A shares. The conversion feature
is subject to the continued availability of a tax ruling described
in "Alternative Sales Arrangements - Class A, Class B and Class C
Shares" in the Statement of Additional Information.
Buying Class C Shares. Class C shares are sold at net asset value
per share without an initial sales charge. However, if Class C
shares are redeemed within 12 months of their purchase, a
contingent deferred sales charge of 1.0% will be deducted from the
redemption proceeds. That sales charge will not apply to shares
purchased by the reinvestment of dividends or capital gains
distributions. The charge will be assessed on the lesser of the net
asset value of the shares at the time of redemption or the original
purchase price. The contingent deferred sales charge is not imposed
on the amount of your account value represented by the increase in
net asset value over the initial purchase price (including
increases due to the reinvestment of dividends and capital gains
distributions). The Class C contingent deferred sales charge is
paid to the Distributor to reimburse its expenses of providing
distribution-related services to the Fund in connection with the
sale of Class C shares.
To determine whether the contingent deferred sales charge
applies to a redemption, the Fund redeems shares in the following
order: (1) shares acquired by reinvestment of dividends and capital
gains distributions, (2) shares held for over 12 months, and (3)
shares held the longest during the 12-month period.
Distribution and Service Plans for Class B and Class C Shares. The
Fund has adopted Distribution and Service Plans for Class B and
Class C shares to compensate the Distributor for distributing Class
B shares and to reimburse the Distributor for distributing Class C
shares and servicing accounts. Under the Plans, the Fund pays the
Distributor an annual "asset-based sales charge" of 0.75% per year
on Class B shares that are outstanding for 6 years or less and on
Class C shares. The Distributor also receives a service fee of
0.25% per year under each Plan. If either Plan is terminated by the
Fund, the Board of Trustees may allow the Fund to continue payments
of the asset-based sales charge to the Distributor for certain
expenses it incurred before the plan was terminated.
Under each Plan, both fees are computed on the average of the
net asset value of shares in the respective class, determined as of
the close of each regular business day during the period. The
asset-based sales charge allows investors to buy Class B or Class
C shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell those shares. The
asset-based sales charge and service fees increase Class B and
Class C expenses by up to 1.00% of the net assets per year of the
respective class.
The Distributor uses the service fees to compensate dealers for
providing personal services for accounts that hold Class B or Class
C shares. Those services are similar to those provided under the
Class A Service Plan, described above. The Distributor pays the
0.25% service fees to dealers in advance for the first year after
Class B or Class C shares have been sold by the dealer and retains
the service fee paid by the Fund in that year. After the shares
have been held for a year, the Distributor pays the service fees to
dealers on a quarterly basis.
The Distributor currently pays sales commissions of 3.75% of the
purchase price of Class B shares to dealers from its own resources
at the time of sale. The total amount paid by the Distributor to
the dealer at the time of sale of Class B shares is therefore 4.00%
of the purchase price. The Fund pays the asset-based sales charge
to the Distributor for its services rendered in connection with the
distribution of Class B shares. Those payments, retained by the
Distributor, are at a fixed rate which is not related to the
Distributor's expenses. The services rendered by the Distributor
include paying and financing the payment of sales commissions,
service fees, and other costs of distributing and selling Class B
shares.
The Distributor currently pays sales commissions of 0.75% of the
purchase price of Class C shares to dealers from its own resources
at the time of sale. The total up-front commission paid by the
Distributor to the dealer at the time of sale of Class C shares is
therefore 1.00% of the purchase price. The Distributor retains the
asset-based sales charge during the first year Class C shares are
outstanding to recoup the sales commissions it has paid, the
advances of the service fee payments it has made and its financing
costs and other expenses. The Distributor plans to pay the asset-
based sales charge as an ongoing commission to the dealer on Class
C shares that have been outstanding for a year or more.
The Distributor's actual expenses in selling Class B and Class
C shares may be more than the payments it receives from contingent
deferred sales charges collected on redeemed shares and from the
Fund under the Distribution and Service Plan for Class B and Class
C shares. Therefore, those expenses may be carried over and paid
in future years. At September 30, 1996, the end of the Plan year,
the Distributor had incurred unreimbursed expenses under the Class
B Plan of $255,659 (equal to 3.15% of the Fund's net assets
represented by Class B shares on that date), and under the Class C
Plan, the Distributor had incurred unreimbursed expenses of
$339,000 (equal to 0.95% of the Fund's net assets represented by
Class C shares on that date), which have been carried over into the
present Plan year.
Waivers of Class B and Class C Sales Charges. The Class B and
Class C contingent deferred sales charges will not be applied to
shares purchased in certain types of transactions nor will it apply
to Class B and Class C shares redeemed in certain circumstances as
described below. The reasons for this policy are in "Reduced Sales
Charges" in the Statement of Additional Information.
Waivers for Redemptions in Certain Cases. The Class B and Class
C contingent deferred sales charges will be waived for redemptions
of shares in the following cases if the Transfer Agent is notified
that these conditions apply to the redemption:
distributions to participants or beneficiaries from Retirement
Plans, if the distributions are made (a) under an Automatic
Withdrawal Plan after the participant reaches age 59-1/2, as long
as the payments are no more than 10% of the account value annually
(measured from the date the Transfer Agent receives the request),
or (b) following the death or disability (as defined in the
Internal Revenue Code) of the participant or beneficiary (the death
or disability must have occurred after the account was
established);
redemptions from accounts other than Retirement Plans
following the death or disability of the last surviving shareholder
(the death or disability must have occurred after the account was
established, and for disability you must provide evidence of a
determination of disability by the Social Security Administration);
returns of excess contributions to Retirement Plans;
distributions from retirement plans to make "substantially
equal periodic payments" as permitted in Section 72(t) of the
Internal Revenue Code that do not exceed 10% of the account value
annually, measured from the date the Transfer Agent receives the
request; or
distributions from OppenheimerFunds prototype 401(k) plans (1)
for hardship withdrawals; (2) under a Qualified Domestic Relations
Order, as defined in the Internal Revenue Code; (3) to meet minimum
distribution requirements as defined in the Internal Revenue Code;
(4) to make "substantially equal periodic payments" as described in
Section 72(t) of the Internal Revenue Code; or (5) for separation
from service.
Waivers for Shares Sold or Issued in Certain Transactions. The
contingent deferred sales charge is also waived on Class B and
Class C shares sold or issued in the following cases:
shares sold to the Manager or its affiliates;
shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with
the Manager or the Distributor for that purpose;
shares issued in plans of reorganization to which the Fund is
a party; or
shares redeemed involuntarily, as described in "Shareholder
Account Rules and Policies," below.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account
to your account at your bank or other financial institution to
enable you to send money electronically between those accounts to
perform a number of types of account transactions. These include
purchases of shares by telephone (either through a service
representative or by PhoneLink, described below), automatic
investments under Asset Builder Plans, and sending dividends and
distributions or Automatic Withdrawal Plan payments directly to
your bank account. Please refer to the Application for details or
call the Transfer Agent for more information.
AccountLink privileges should be requested on the Application
you use to buy shares, or on your dealer's settlement instructions
if you buy your shares through your dealer. After your account is
established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent.
AccountLink privileges will apply to each shareholder listed in the
registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent
receives written instructions terminating or changing those
privileges. After you establish AccountLink for your account, any
change of bank account information must be made by signature-
guaranteed instructions to the Transfer Agent signed by all
shareholders who own the account.
Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase
shares in amounts up to $250,000 through a telephone
representative, call the Distributor at 1-800-852-8457. The
purchase payment will be debited from your bank account.
PhoneLink. PhoneLink is the OppenheimerFunds automated
telephone system that enables shareholders to perform a number of
account transactions automatically using a touch-tone phone.
PhoneLink may be used on already-established Fund accounts after
you obtain a Personal Identification Number (PIN), by calling the
special PhoneLink number: 1-800-533-3310.
Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have
established AccountLink privileges to link your bank account with
the Fund, to pay for these purchases.
Exchanging Shares. With the OppenheimerFunds Exchange
Privilege, described below, you can exchange shares automatically
by phone from your Fund account to another Oppenheimer funds
account you have already established by calling the special
PhoneLink number. Please refer to "How to Exchange Shares," below,
for details.
Selling Shares. You can redeem shares by telephone
automatically by calling the PhoneLink number and the Fund will
send the proceeds directly to your AccountLink bank account.
Please refer to "How to Sell Shares," below, for details.
Automatic Withdrawal and Exchange Plans. The Fund has several
plans that enable you to sell shares automatically or exchange them
to another Oppenheimer funds account on a regular basis:
Automatic Withdrawal Plans. If your Fund account is worth
$5,000 or more, you can establish an Automatic Withdrawal Plan to
receive payments of at least $50 on a monthly, quarterly, semi-
annual or annual basis. The checks may be sent to you or sent
automatically to your bank account on AccountLink. You may even
set up certain types of withdrawals of up to $1,500 per month by
telephone. You should consult the Application and Statement of
Additional Information for more details.
Automatic Exchange Plans. You can authorize the Transfer
Agent to automatically exchange an amount you establish in advance
for shares of up to five other Oppenheimer funds on a monthly,
quarterly, semi-annual or annual basis under an Automatic Exchange
Plan. The minimum purchase for each Oppenheimer funds account is
$25. These exchanges are subject to the terms of the Exchange
Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A
shares or Class B shares of the Fund, you have up to 6 months to
reinvest all or part of the redemption proceeds in Class A shares
of the Fund or other Oppenheimer funds without paying a sales
charge. This privilege applies to Class A shares that you
purchased subject to an initial sales charge and to Class A or
Class B shares on which you paid a contingent deferred sales charge
when you redeemed them. This privilege does not apply to Class C
shares. You must be sure to ask the Distributor for this privilege
when you send your payment. Please consult the Statement of
Additional Information for more details.
Retirement Plans. Fund shares are available as an investment for
your retirement plans. If you participate in a plan sponsored by
your employer, the plan trustee or administrator must make the
purchase of shares for your retirement plan account. The
Distributor offers a number of different retirement plans that can
be used by individuals and employers:
Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable
organizations
SEP-IRAs (Simplified Employee Pension Plans) for small
business owners or people with income from self-employment,
including SARSEP-IRAs
Pension and Profit-Sharing Plans for self-employed persons and
other employers
401(k) Prototype Retirement Plans for businesses
Please call the Distributor for the OppenheimerFunds plan
documents, which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account by selling
(redeeming) some or all of your shares on any regular business day.
Your shares will be sold at the next net asset value calculated
after your order is received and accepted by the Transfer Agent.
The Fund offers you a number of ways to sell your shares: in
writing or by telephone. You can also set up Automatic Withdrawal
Plans to redeem shares on a regular basis, as described above. If
you have questions about any of these procedures, and especially if
you are redeeming shares in a special situation, such as due to the
death of the owner, or from a retirement plan, please call the
Transfer Agent first at 1-800-525-7048, for assistance.
Retirement Accounts. To sell shares in an OppenheimerFunds
retirement account in your name, call the Transfer Agent for a
distribution request form. There are special income tax withholding
requirements for distributions from retirement plans and you must
submit a withholding form with your request to avoid delay. If your
retirement plan account is held for you by your employer, you must
arrange for the distribution request to be sent by the plan
administrator or trustee. There are additional details in the
Statement of Additional Information.
Certain Requests Require a Signature Guarantee. To protect
you and the Fund from fraud, certain redemption requests must be in
writing and must include a signature guarantee in the following
situations (there may be other situations also requiring a
signature guarantee):
You wish to redeem more than $50,000 worth of shares and
receive a check
The redemption check is not payable to all shareholders listed
on the account statement
The redemption check is not sent to the address of record on
your account statement
Shares are being transferred to a Fund account with a
different owner or name
Shares are redeemed by someone other than the owners (such as
an Executor)
Where Can I Have My Signature Guaranteed? The Transfer Agent
will accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union
or savings association, or by a foreign bank that has a U.S.
correspondent bank, or by a U.S. registered dealer or broker in
securities, municipal securities or government securities, or by a
U.S. national securities exchange, a registered securities
association or a clearing agency. If you are signing on behalf of
a corporation, partnership or other business, or as a fiduciary,
you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that
includes:
Your name
The Fund's name
Your Fund account number (from your account statement)
The dollar amount or number of shares to be redeemed
Any special payment instructions
Any share certificates for the shares you are selling
The signatures of all registered owners exactly as the account
is registered, and
Any special requirements or documents requested by the
Transfer Agent to assure proper authorization of the person asking
to sell shares.
Use the following address for requests by mail:
OppenheimerFunds Services
P.O. Box 5270, Denver, Colorado 80217
Send courier or Express Mail requests to:
OppenheimerFunds Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of
record may also sell your shares by telephone. To receive the
redemption price on a regular business day, your call must be
received by the Transfer Agent by the close of The New York Stock
Exchange that day, which is normally 4:00 P.M., but may be earlier
on some days. You may not redeem shares held in an
OppenheimerFunds retirement plan or under a share certificate by
telephone.
To redeem shares through a service representative, call 1-
800-852-8457
To redeem shares automatically on PhoneLink, call 1-800-533-
3310
Whichever method you use, you may have a check sent to the
address on the account statement, or, if you have linked your Fund
account to your bank account on AccountLink, you may have the
proceeds sent to that bank account.
Telephone Redemptions Paid by Check. Up to $50,000 may be
redeemed by telephone, once in any 7-day period. The check must be
payable to all owners of record of the shares and must be sent to
the address on the account statement. This service is not
available within 30 days of changing the address on an account.
Telephone Redemptions Through AccountLink. There are no
dollar limits on telephone redemption proceeds sent to a bank
account designated when you establish AccountLink. Normally the
ACH transfer to your bank is initiated on the business day after
the redemption. You do not receive dividends on the proceeds of
the shares you redeemed while they are waiting to be transferred.
Selling Shares Through Your Dealer. The Distributor has made
arrangements to repurchase Fund shares from dealers and brokers on
behalf of their customers. Brokers or dealers may charge for that
service. Please call your dealer for more information about this
procedure. Please refer to "Special Arrangements for Repurchase of
Shares from Dealers and Brokers" in the Statement of Additional
Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
Oppenheimer funds at net asset value per share at the time of
exchange, without sales charge. To exchange shares, you must meet
several conditions:
Shares of the fund selected for exchange must be available
for sale in your state of residence.
The prospectuses of this Fund and the fund whose shares you
want to buy must offer the exchange privilege.
You must hold the shares you buy when you establish your
account for at least 7 days before you can exchange them; after the
account is open 7 days, you can exchange shares every regular
business day.
You must meet the minimum purchase requirements for the fund
you purchase by exchange.
Before exchanging into a fund, you should obtain and read its
prospectus.
Shares of a particular class of the Fund may be exchanged only
for shares of the same class in the other Oppenheimer funds. For
example, you can exchange Class A shares of this Fund only for
Class A shares of another fund. At present, Oppenheimer Money
Market Fund, Inc. offers only one class of shares, which are
considered to be Class A shares for this purpose. In some cases,
sales charges may be imposed on exchange transactions. Please
refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
Exchanges may be requested in writing or by telephone:
Written Exchange Requests. Submit an OppenheimerFunds
Exchange Request form, signed by all owners of the account. Send
it to the Transfer Agent at the addresses listed in "How to Sell
Shares."
Telephone Exchange Requests. Telephone exchange requests may
be made either by calling a service representative at 1-800-852-
8457 or by using PhoneLink for automated exchanges, by calling 1-
800-533-3310. Telephone exchanges may be made only between accounts
that are registered with the same name(s) and address. Shares held
under certificates may not be exchanged by telephone.
You can find a list of Oppenheimer funds currently available for
exchanges in the Statement of Additional Information or obtain one
by calling a service representative at 1-800-525-7048. That list
can change from time to time.
There are certain exchange policies you should be aware of:
Shares are normally redeemed from one fund and purchased from
the other fund in the exchange transaction on the same regular
business day on which the Transfer Agent receives an exchange
request that is in proper form by the close of The New York Stock
Exchange that day, which is normally 4:00 P.M., but may be earlier
on some days. However, either fund may delay the purchase of
shares of the fund you are exchanging into up to 7 days if it
determines it would be disadvantaged by a same-day transfer of the
proceeds to buy shares. For example, the receipt of multiple
exchange requests from a dealer in a "market-timing" strategy might
require the sale of portfolio securities at a time or price
disadvantageous to the Fund.
Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange
request that will disadvantage it, or to refuse multiple exchange
requests submitted by a shareholder or dealer.
The Fund may amend, suspend or terminate the exchange
privilege at any time. Although the Fund will attempt to provide
you notice whenever it is reasonably able to do so, it may impose
these changes at any time.
For tax purposes, exchanges of shares involve a redemption of
the shares of the Fund you own and a purchase of the shares of the
other fund, which may result in a capital gain or loss. For more
information about taxes affecting exchanges, please refer to "How
to Exchange Shares" in the Statement of Additional Information.
If the Transfer Agent cannot exchange all the shares you
request because of a restriction cited above, only the shares
eligible for exchange will be exchanged.
Shareholder Account Rules and Policies
Net Asset Value Per Share is determined for each class of
shares as of the close of The New York Stock Exchange on each day
the Exchange is open by dividing the value of the Fund's net assets
attributable to a class by the number of shares of that class that
are outstanding. The Fund's Board of Trustees has established
procedures to value the Fund's securities to determine net asset
value. In general, securities values are based on market value.
There are special procedures for valuing illiquid and restricted
securities and obligations for which market values cannot be
readily obtained. These procedures are described more completely
in the Statement of Additional Information.
The offering of shares may be suspended during any period in
which the determination of net asset value is suspended, and the
offering may be suspended by the Board of Trustees at any time the
Board believes it is in the Fund's best interest to do so.
Telephone Transaction Privileges for purchases, redemptions
or exchanges may be modified, suspended or terminated by the Fund
at any time. If an account has more than one owner, the Fund and
the Transfer Agent may rely on the instructions of any one owner.
Telephone privileges apply to each owner of the account and the
dealer representative of record for the account unless and until
the Transfer Agent receives cancellation instructions from an owner
of the account.
The Transfer Agent will record any telephone calls to verify
data concerning transactions and has adopted other procedures to
confirm that telephone instructions are genuine, by requiring
callers to provide tax identification numbers and other account
data or by using PINs, and by confirming such transactions in
writing. If the Transfer Agent does not use reasonable procedures
it may be liable for losses due to unauthorized transactions, but
otherwise neither the Transfer Agent nor the Fund will be liable
for losses or expenses arising out of telephone instructions
reasonably believed to be genuine. If you are unable to reach the
Transfer Agent during periods of unusual market activity, you may
not be able to complete a telephone transaction and should consider
placing your order by mail.
Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From
time to time, the Transfer Agent in its discretion may waive
certain of the requirements for redemptions stated in this
Prospectus.
Dealers that can perform account transactions for their
clients by participating in NETWORKING through the National
Securities Clearing Corporation are responsible for obtaining their
clients' permission to perform those transactions and are
responsible to their clients who are shareholders of the Fund if
the dealer performs any transaction erroneously or improperly.
The redemption price for shares will vary from day to day
because the values of the securities in the Fund's portfolio
fluctuate, and the redemption price, which is the net asset value
per share, will normally be different for Class A, Class B and
Class C shares. Therefore, the redemption value of your shares may
be more or less than their original cost.
Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the
shareholder under the redemption procedures described above) within
7 days after the Transfer Agent receives redemption instructions in
proper form, except under unusual circumstances determined by the
Securities and Exchange Commission delaying or suspending such
payments. For accounts registered in the name of a broker/dealer,
payment will be forwarded within 3 business days. The Transfer
Agent may delay forwarding a check or processing a payment via
AccountLink for recently purchased shares, but only until the
purchase payment has cleared. That delay may be as much as 10 days
from the date the shares were purchased. That delay may be avoided
if you purchase shares by certified check or arrange with your bank
to provide telephone or written assurance to the Transfer Agent
that your purchase payment has cleared.
Involuntary redemptions of small accounts may be made by the
Fund if the account value has fallen below $200 for reasons other
than the fact that the market value of shares has dropped, and in
some cases involuntary redemptions may be made to repay the
Distributor for losses from the cancellation of share purchase
orders.
Under unusual circumstances, shares of the Fund may be
redeemed "in kind," which means that the redemption proceeds will
be paid with securities from the Fund's portfolio. Please refer to
"How to Sell Shares" in the Statement of Additional Information for
more details.
"Backup Withholding" of Federal income tax may be applied at
the rate of 31% from taxable dividends, distributions and
redemption proceeds (including exchanges) if you fail to furnish
the Fund a certified Social Security or Employer Identification
Number when you sign your application, or if you violate Internal
Revenue Service regulations on tax reporting of income.
The Fund does not charge a redemption fee, but if your dealer
or broker handles your redemption, they may charge a fee. That fee
can be avoided by redeeming your Fund shares directly through the
Transfer Agent. Under the circumstances described in "How to Buy
Shares," you may be subject to a contingent deferred sales charge
when redeeming certain Class A, Class B and Class C shares.
To avoid sending duplicate copies of materials to households,
the Fund will mail only one copy of each annual and semi-annual
report to shareholders having the same last name and address on the
Fund's records. However, each shareholder may call the Transfer
Agent at 1-800-525-7048 to ask that copies of those materials be
sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A,
Class B and Class C shares from net investment income and pays such
dividends to shareholders quarterly in March, June, September and
December, but the Board of Trustees can change that schedule.
Dividends paid with respect to Class A shares will generally be
higher than for Class B and C shares because expenses allocable to
Class B and C shares will generally be higher than for Class A
shares. There is no fixed dividend rate and there can be no
assurance as to the payment of any dividends or the realization of
any capital gains.
Capital Gains. The Fund may make distributions annually in December
out of any net short-term or long-term capital gains, and the Fund
may make supplemental distributions of dividends and capital gains
following the end of its fiscal year (which ends September 30).
Short-term capital gains are treated as dividends for tax purposes.
Long-term capital gains will be separately identified in the tax
information the Fund sends you after the end of the calendar year.
There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are
reinvested. For other accounts, you have four options:
Reinvest All Distributions in the Fund. You can elect to
reinvest all dividends and long-term capital gains distributions in
additional shares of the Fund.
Reinvest Long-Term Capital Gains Only. You can elect to
reinvest long-term capital gains in the Fund while receiving
dividends by check or sent to your bank account on AccountLink.
Receive All Distributions in Cash. You can elect to receive
a check for all dividends and long-term capital gains distributions
or have them sent to your bank on AccountLink.
Reinvest Your Distributions in Another Oppenheimer fund
Account. You can reinvest all distributions in another Oppenheimer
fund account you have established.
Taxes. If your account is not a tax-deferred retirement account,
you should be aware of the following tax implications of investing
in the Fund. Long-term capital gains are taxable as long-term
capital gains when distributed to shareholders. It does not matter
how long you have held your shares. Dividends paid from short-term
capital gains and net investment income are taxable as ordinary
income. Distributions are subject to federal income tax and may be
subject to state or local taxes. Your distributions are taxable
when paid, whether you reinvest them in additional shares or take
them in cash. Every year the Fund will send you and the IRS a
statement showing the amount of each taxable distribution you
received in the previous year.
When more than 50% of its assets are invested in foreign
securities at the end of any fiscal year, the Fund may elect that
Section 853 of the Internal Revenue Code will apply to it to permit
shareholders to take a credit (or a deduction) on their own federal
income tax returns for foreign income taxes paid by the Fund.
"Dividends, Capital Gains and Taxes" in the Statement of Additional
Information contains further information about this tax provision.
"Buying a Dividend": When a fund goes ex-dividend, its share
price is reduced by the amount of the distribution. If you buy
shares on or just before the ex-dividend date, or just before the
Fund declares a capital gains distribution, you will pay the full
price for the shares and then receive a portion of the price back
as a taxable dividend or capital gain.
Taxes on Transactions: Share redemptions, including
redemptions for exchanges, are subject to capital gains tax.
Generally speaking, a capital gain or loss is the difference
between the price you paid for the shares and the price you receive
when you sell them.
Returns of Capital: In certain cases distributions made by
the Fund may be considered a non-taxable return of capital to
shareholders. If that occurs, it will be identified in notices to
shareholders. A non-taxable return of capital may reduce your tax
basis in your Fund shares.
This information is only a summary of certain federal tax
information about your investment. More information is contained
in the Statement of Additional Information, and in addition you
should consult with your tax advisor about the effect of an
investment in the Fund on your particular tax situation.
215PSP#6<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER GLOBAL GROWTH & INCOME FUND
Graphic material included in Prospectus of Oppenheimer Global
Growth & Income Fund: "Comparison of Total Return of Oppenheimer
Global Growth & Income Fund to the Morgan Stanley Capital
International World Index and the Lehman Brothers Aggregate Bond
Index - Change in Value of $10,000 Hypothetical Investments."
Linear graphs will be included in the Prospectus of Oppenheimer
Global Growth & Income Fund (the "Fund") depicting the initial
account value and subsequent account value of a hypothetical
$10,000 investment in each class of shares of the Fund. In the
case of the Fund's Class A shares, that graph will cover the life
of the Fund from 10/22/90 through 9/30/96. In the case of Class B
shares, that graph will cover the period from 10/10/95 (inception
of the class) through 9/30/96, and in the case of the Fund's Class
C shares, that graph will cover the period from the inception of
the class on 12/1/93 through 9/30/96. The graphs will compare such
values with hypothetical $10,000 investments over the same time
periods to the Morgan Stanley Capital International World Index and
the Lehman Aggregate Bond Index. Set forth below are the relevant
data points that will appear on the linear graph. Additional
information with respect to the foregoing, including a description
of the Morgan Stanley Capital International World Index and the
Lehman Brothers Aggregate Bond Index, is set forth in the
Prospectus Under "Performance of the Fund - Comparing the Fund's
Performance to the Market."
<TABLE>
<CAPTION>
Fiscal Year Oppenheimer Global Morgan Stanley Lehman Brothers
(Period) Ended Growth & Income Capital International Aggregate Bond
Fund A World Index Index
<S> <C> <C> <C>
10/22/90(1) $ 9,425 $10,000 $10,000
09/30/91 $10,531 $11,456 $11,454
09/30/92 $10,345 $11,407 $12,891
09/30/93 $12,517 $13,790 $14,177
09/30/94 $14,265 $14,903 $13,720
09/30/95 $15,325 $17,134 $15,649
09/30/96 $17,359 $19,567 $16,416
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Oppenheimer Global Morgan Stanley Lehman Brothers
(Period) Ended Growth & Income Capital International Aggregate Bond
Fund B World Index Index
<S> <C> <C> <C>
10/10/95(2) $10,000 $10,000 $10,000
09/30/96 $10,932 $11,420 $10,490
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Global Morgan Stanley Lehman Brothers
Fiscal Year Growth & Income Capital International Aggregate Bond
(Period) Ended Fund C World Index Index
<S> <C> <C> <C>
12/01/93(2) $10,000 $10,000 $10,000
09/30/94 $10,741 $11,144 $9,724
09/30/95 $11,451 $12,813 $11,092
09/30/96 $12,876 $14,632 $11,635
</TABLE>
- ----------------------
(1) The Fund commenced operations (Class A shares publicly
issued) on October 22, 1990.
(2) Class B shares of the Fund were first publicly offered on
October 10, 1995.
(2) Class C shares of the Fund were first publicly offered on
December 1, 1993.
<PAGE>
APPENDIX A
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent deferred sales charge rates and
waivers for Class A, Class B and Class C shares of the Fund
described elsewhere in this Prospectus are modified as described
below for those shareholders of (i) Quest for Value Fund, Inc.,
Quest for Value Growth and Income Fund, Quest for Value Opportunity
Fund, Quest for Value Small Capitalization Fund and Quest for Value
Global Equity Fund, Inc. on November 24, 1995, when
OppenheimerFunds, Inc. became the investment advisor to those
funds, and (ii) Quest for Value U.S. Government Income Fund, Quest
for Value Investment Quality Income Fund, Quest for Value Global
Income Fund, Quest for Value New York Tax-Exempt Fund, Quest for
Value National Tax-Exempt Fund and Quest for Value California Tax-
Exempt Fund when those funds merged into various Oppenheimer funds
on November 24, 1995. The funds listed above are referred to in
this Prospectus as the "Former Quest for Value Funds." The waivers
of initial and contingent deferred sales charges described in this
Appendix apply to shares of the Fund (i) acquired by such
shareholder pursuant to an exchange of shares of one of the
Oppenheimer funds that was one of the Former Quest for Value Funds
or (ii) received by such shareholder pursuant to the merger of any
of the Former Quest for Value Funds into an Oppenheimer fund on
November 24, 1995.
Class A Sales Charges
Reduced Class A Initial Sales Charge Rates for Certain Former
Quest Shareholders
Purchases by Groups, Associations and Certain Qualified
Retirement Plans. The following table sets forth the initial sales
charge rates for Class A shares purchased by a "Qualified
Retirement Plan" through a single broker, dealer or financial
institution, or by members of "Associations" formed for any purpose
other than the purchase of securities if that Qualified Retirement
Plan or that Association purchased shares of any of the Former
Quest for Value Funds or received a proposal to purchase such
shares from OCC Distributors prior to November 24, 1995. For this
purpose only, a "Qualified Retirement Plan" includes any 401(k)
plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a
single employer.
<PAGE>
<TABLE>
<CAPTION>
Front-End Front-End
Sales Sales Commission
Charge Charge as
as a as a Percentage
Number of Percentage Percentage of
Eligible Employees of Offering of Amount Offering
or Members Price Invested Price
<S> <C> <C> <C>
9 or fewer 2.50% 2.56% 2.00%
At least 10 but not
more than 49 2.00% 2.04% 1.60%
</TABLE>
For purchases by Qualified Retirement plans and Associations
having 50 or more eligible employees or members, there is no
initial sales charge on purchases of Class A shares, but those
shares are subject to the Class A contingent deferred sales charge
described on pages 28 to 30 of this Prospectus.
Purchases made under this arrangement qualify for the lower of
the sales charge rate in the table based on the number of eligible
employees in a Qualified Retirement Plan or members of an
Association or the sales charge rate that applies under the Rights
of Accumulation described above in the Prospectus. In addition,
purchases by 401(k) plans that are Qualified Retirement Plans
qualify for the waiver of the Class A initial sales charge if they
qualified to purchase shares of any of the Former Quest For Value
Funds by virtue of projected contributions or investments of $1
million or more each year. Individuals who qualify under this
arrangement for reduced sales charge rates as members of
Associations, or as eligible employees in Qualified Retirement
Plans also may purchase shares for their individual or custodial
accounts at these reduced sales charge rates, upon request to the
Fund's Distributor.
Special Class A Contingent Deferred Sales Charge Rates.
Class A shares of the Fund issued in the reorganization on November
24, 1995 for shares of Quest for Value Global Income Fund that were
subject to a contingent deferred sales charge, will be subject to
a contingent deferred sales charge at the following rates: if they
are redeemed within 18 months of the end of the calendar month in
which they were purchased, at a rate equal to 1.0% if the
redemption occurs within 12 months of their initial purchase and at
a rate of 0.50 of 1.0% if the redemption occurs in the subsequent
six months. This contingent deferred sales charge rate also
applies to shares of the Fund purchased by exchange of shares of
other Oppenheimer funds that were acquired as a result of the
merger of Former Quest for Value Funds into those Oppenheimer
funds, and which shares were subject to a Class A contingent
deferred sales charge prior to November 24, 1995. Class A shares
of any of the Former Quest for Value Funds purchased without an
initial sales charge on or before November 22, 1995 will continue
to be subject to the applicable contingent deferred sales charge in
effect as of that date as set forth in the then-current prospectus
for such fund.
Waiver of Class A Sales Charges for Certain Shareholders.
Class A shares of the Fund purchased by the following investors are
not subject to any Class A initial or contingent deferred sales
charges:
Shareholders of the Fund who were shareholders of the AMA
Family of Funds on February 28, 1991 and who acquired shares of any
of the Former Quest for Value Funds by merger of a portfolio of the
AMA Family of Funds.
Shareholders of the Fund who acquired shares of any Former
Quest for Value Fund by merger of any of the portfolios of the
Unified Funds.
Waiver of Class A Contingent Deferred Sales Charge in
Certain Transactions. The
Class A contingent deferred sales charge will not apply to
redemptions of Class A shares of the Fund purchased by the
following investors who were shareholders of any Former Quest for
Value Fund:
Investors who purchased Class A shares from a dealer that is
or was not permitted to receive a sales load or redemption fee
imposed on a shareholder with whom that dealer has a fiduciary
relationship under the Employee Retirement Income Security Act of
1974 and regulations adopted under that law.
Participants in Qualified Retirement Plans that purchased
shares of any of the Former Quest For Value Funds pursuant to a
special "strategic alliance" with the distributor of those funds.
The Fund's Distributor will pay a commission to the dealer for
purchases of Fund shares as described above in "Class A Contingent
Deferred Sales Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge
Waivers
Waivers for Redemptions of Shares Purchased Prior to March
6, 1995. In the following cases, the contingent deferred sales
charge will be waived for redemptions of Class A, B or C shares of
the Fund acquired by merger of a Former Quest for Value Fund into
the Fund or by exchange from an Oppenheimer fund that was a Former
Quest for Value Fund or into which such fund merged, if those
shares were purchased prior to March 6, 1995: in connection with
(i) distributions to participants or beneficiaries of plans
qualified under Section 401(a) of the Internal Revenue Code or from
custodial accounts under Section 403(b)(7) of the Code, Individual
Retirement Accounts, deferred compensation plans under Section 457
of the Code, and other employee benefit plans, and returns of
excess contributions made to each type of plan, (ii) withdrawals
under an automatic withdrawal plan holding only either Class B or
C shares if the annual withdrawal does not exceed 10% of the
initial value of the account, and (iii) liquidation of a
shareholder's account if the aggregate net asset value of shares
held in the account is less than the required minimum value of such
accounts.
Waivers for Redemptions of Shares Purchased on or After
March 6, 1995 but Prior to November 24, 1995. In the following
cases, the contingent deferred sales charge will be waived for
redemptions of Class A, B or C shares of the Fund acquired by
merger of a Former Quest for Value Fund into the Fund or by
exchange from an Oppenheimer fund that was a Former Quest For Value
Fund or into which such fund merged, if those shares were purchased
on or after March 6, 1995, but prior to November 24, 1995:
(1) distributions to participants or beneficiaries from Individual
Retirement Accounts under Section 408(a) of the Internal Revenue
Code or retirement plans under Section 401(a), 401(k), 403(b) and
457 of the Code, if those distributions are made either (a) to an
individual participant as a result of separation from service or
(b) following the death or disability (as defined in the Code) of
the participant or beneficiary; (2) returns of excess contributions
to such retirement plans; (3) redemptions other than from
retirement plans following the death or disability of the
shareholder(s) (as evidenced by a determination of total disability
by the U.S. Social Security Administration); (4) withdrawals under
an automatic withdrawal plan (but only for Class B or C shares)
where the annual withdrawals do not exceed 10% of the initial value
of the account; and (5) liquidation of a shareholder's account if
the aggregate net asset value of shares held in the account is less
than the required minimum account value. A shareholder's account
will be credited with the amount of any contingent deferred sales
charge paid on the redemption of any Class A, B or C shares of the
Fund described in this section if within 90 days after that
redemption, the proceeds are invested in the same Class of shares
in this Fund or another Oppenheimer fund.
Special Dealer Arrangements
Dealers who sold Class B shares of a Former Quest for Value Fund to
Quest for Value prototype 401(k) plans that were maintained on the
TRAC-2000 recordkeeping system and that were transferred to an
OppenheimerFunds prototype 401(k) plan shall be eligible for an
additional one-time payment by the Distributor of 1% of the value
of the plan assets transferred, but that payment may not exceed
$5,000 as to any one plan.
Dealers who sold Class C shares of a Former Quest for Value Fund to
Quest for Value prototype 401(k) plans that were maintained on the
TRAC-2000 recordkeeping system and (i) the shares held by those
plans were exchanged for Class A shares, or (ii) the plan assets
were transferred to an OppenheimerFunds prototype 401(k) plan,
shall be eligible for an additional one-time payment by the
Distributor of 1% of the value of the plan assets transferred, but
that payment may not exceed $5,000.
<PAGE>
Oppenheimer Global Growth & Income Fund
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
No dealer, broker, salesperson or any other person has been
authorized to give any information or to make any representations
other than those contained in this Prospectus or the Statement of
Additional Information, and if given or made, such information and
representations must not be relied upon as having been authorized
by the Fund, OppenheimerFunds, Inc., OppenheimerFunds Distributor,
Inc. or any affiliate thereof. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any state to any person to whom it is
unlawful to make such an offer in such state.
PR0215.001.0197 Printed on recycled paper
<PAGE>
Oppenheimer Global Growth & Income Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated January 24, 1997
This Statement of Additional Information is not a Prospectus.
This document contains additional information about the Fund and
supplements information in the Prospectus dated January 24, 1997.
It should be read together with the Prospectus, which may be
obtained by writing to the Fund's Transfer Agent, OppenheimerFunds
Services, at P.O. Box 5270, Denver, Colorado 80217 or by calling
the Transfer Agent at the toll-free number shown above.
CONTENTS
Page
About the Fund
Investment Objective and Policies 2
Investment Policies and Strategies 2
Other Investment Techniques and Strategies 10
Other Investment Restrictions 22
How the Fund is Managed 23
Organization and History 23
Trustees and Officers of the Fund 24
The Manager and Its Affiliates 29
Brokerage Policies of the Fund
Performance of the Fund 32
Distribution and Service Plans 35
About Your Account
How To Buy Shares 37
How To Sell Shares 43
How To Exchange Shares 47
Dividends, Capital Gains and Taxes 49
Additional Information About the Fund 50
Financial Information About the Fund
Independent Auditors' Report 50
Financial Statements 51
Appendix A: Ratings of Investments A-1
Appendix B: Industry Classifications B-1
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and
policies of the Fund are described in the Prospectus. Set forth
below is supplemental information about those policies and the
types of securities in which the Fund invests, as well as
strategies the Fund may use to try to achieve its objective.
Capitalized terms used in this Statement of Additional Information
have the same meaning as those terms have in the Prospectus.
In selecting securities for the Fund's portfolio, the Fund's
investment advisor, OppenheimerFunds, Inc. (the "Manager"),
evaluates the merits of particular equity and fixed-income
securities primarily through the exercise of its own investment
analysis. This may include, among other things, evaluation of the
history of the issuer's operations, prospects for the industry of
which the issuer is part, the issuer's financial condition, the
issuer's pending product developments and developments by
competitors, the effect of general market and economic conditions
on the issuer's business, and legislative proposals or new laws
that might affect the issuer. Depending on the assessment of
market conditions by 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. 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.
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.
Investing in Small, Unseasoned Companies. The securities
of small, unseasoned companies may have a limited trading market,
which may adversely affect the Fund's ability to dispose of them
and can reduce the price the Fund might be able to obtain for them.
If other investment companies and investors 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. Fluctuations in the market value of fixed-income
securities after the Fund buys them will not affect the interest
payable on those securities, nor the cash income from such
securities. However, those price fluctuations will be reflected in
the valuations of these securities and therefore the Fund's net
asset values.
As stated in the Prospectus, the Fund may not invest more than
25% of its assets in bonds and debentures in the lower rating
categories of Moody's and Standard & Poor's, the principal rating
services. High yield securities, whether rated or unrated, may be
subject to greater market fluctuations and risks of loss of income
and principal than lower-yielding, higher-rated, fixed-income
securities. Risks of high yield securities may include (i) limited
liquidity and secondary market support, (ii) substantial market
price volatility resulting from changes in prevailing interest
rates, (iii) subordination of the obligations to the prior claims
of banks and other senior lenders, (iv) the operation of mandatory
sinking fund or call/redemption provisions during periods of
declining interest rates that could cause the Fund to be able to
reinvest premature redemption proceeds only in lower-yielding
portfolio securities, (v) the possibility that earnings of the
issuer may be insufficient to meet its debt service, and (vi) the
issuer's low creditworthiness and potential for insolvency during
periods of rising interest rates and economic downturn. As a
result of the limited liquidity of high yield securities, at times
their prices have experienced significant and rapid declines when
a substantial number of holders decided to sell simultaneously. A
decline is also likely in the high yield bond market during a
general economic downturn. An economic downturn or an increase in
interest rates could severely disrupt the market for high yield
bonds and adversely affect the value of outstanding bonds and the
ability of the issuers to repay principal and interest. In
addition, there have been several Congressional attempts to limit
the use of tax and other advantages of high yield bonds which, if
enacted, could adversely affect the value of these securities and
the Fund's net asset value. For example, federally-insured savings
and loan associations have been required to divest their
investments in high yield bonds.
Convertible Securities. While convertible securities are
a form of debt security in many cases, their conversion feature
(allowing conversion into equity securities) causes them to be
regarded more as "equity equivalents." As a result, the rating
assigned to the security has less impact on the Manager's
investment decision with respect to convertible securities than in
the case of non-convertible fixed-income securities. To determine
whether convertible securities should be regarded as "equity
equivalents," the Manager examines the following factors: (1)
whether, at the option of the investor, the convertible security
can be exchanged for a fixed number of shares of common stock of
the issuer, (2) whether the issuer of the convertible securities
has restated its earnings per share of common stock on a fully
diluted basis (considering the effect of converting the convertible
securities), and (3) the extent to which the convertible security
may be a defensive "equity substitute," providing the ability to
participate in any appreciation in the price of the issuer's common
stock.
Foreign Securities. As noted in the Prospectus, the Fund
may invest in securities (which may be denominated in U.S. or non-
U.S. currencies) issued or guarantied by foreign corporations,
certain supranational entities (described below) and foreign
governments or their agencies or instrumentalities, and in
securities issued by U.S. corporations denominated in non-U.S.
currencies. "Foreign securities" 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.
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 "Other Investment Techniques
and Strategies-Hedging" 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.
Investing in foreign securities offers 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 taking
advantage of 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 foreign debt
obligations 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.
Special Risks of Emerging Market Countries. Investments in
emerging market countries may involve further risks in addition to
those identified above for investments in foreign securities.
Securities issued by emerging market countries and companies
located in those countries may be subject to extended settlement
periods, whereby the Fund might not receive principal and/or income
on a timely basis and its net asset value could be affected. There
may be a lack of liquidity for emerging market securities; interest
rates and foreign currency exchange rates may be more volatile;
sovereign limitations on foreign investments may be more likely to
be imposed; there may be significant balance of payment deficits;
and their economies and markets may respond in a more volatile
manner to economic changes than those in developed countries.
Asset-Backed Securities. These securities, issued by trusts
and special purpose corporations, are backed by pools of assets,
primarily automobile and credit-card receivables and home equity
loans, which pass through the payments on the underlying
obligations to the security holders (less servicing fees paid to
the originator or fees for any credit enhancement). The value of
an asset-backed security is affected by changes in the market's
perception of the asset backing the security, the creditworthiness
of the servicing agent for the loan pool, the originator of the
loans, or the financial institution providing any credit
enhancement, and is also affected if any credit enhancement has
been exhausted. Payments of principal and interest passed through
to holders of asset-backed securities are typically supported by
some form of credit enhancement, such as a letter of credit, surety
bond, limited guarantee by another entity or having a priority to
certain of the borrower's other securities. The degree of credit
enhancement varies, and generally applies to only a fraction of the
asset-backed security's par value until exhausted. If the credit
enhancement of an asset-backed security held by the Fund has been
exhausted, and if any required payments of principal and interest
are not made with respect to the underlying loans, the Fund may
experience losses or delays in receiving payment. The risks of
investing in asset-backed securities are ultimately dependent upon
payment of the consumer loans by the individual borrowers. As a
purchaser of an asset-backed security, the Fund would generally
have no recourse to the entity that originated the loans in the
event of default by a borrower. The underlying loans are subject
to prepayments 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, collateralized
mortgage-backed obligations 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.
The yield on mortgage-backed securities is based on the
average expected life of the underlying pool of mortgage loans.
The actual life of any particular pool will be shortened by any
unscheduled or early payments of principal and interest. Principal
prepayments generally result from the sale of the underlying
property or the refinancing or foreclosure of underlying mortgages.
The occurrence of prepayments is affected by a wide range of
economic, demographic and social factors and, accordingly, it is
not possible to predict accurately the average life of a particular
pool. Yield on such pools is usually computed by using the
historical record of prepayments for that pool or, in the case of
newly-issued mortgages, the prepayment history of similar pools.
The actual prepayment experience of a pool of mortgage loans may
cause the yield realized by the Fund to differ from the yield
calculated on the basis of the expected average life of the pool.
Prepayments tend to increase during periods of falling
interest rates, while during periods of rising interest rates
prepayments will most likely decline. When prevailing interest
rates rise, the value of a pass-through security may decrease as do
the values other debt securities, but, when prevailing interest
rates decline, the value of a pass-through security is not likely
to rise to the extent that the value of other debt securities
because of the prepayment feature of pass-through securities. The
Fund's reinvestment of scheduled principal payments and unscheduled
prepayments it receives may occur at times when available
investments 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. Due to 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
their principal amount) and may involve additional risk of loss of
principal because the premium may not have been fully amortized at
the time the obligation is repaid. The opposite is true for pass-
through securities purchased at a discount. The Fund may purchase
mortgage-backed securities at par, at a premium or at a discount.
GNMA Certificates. Certificates of the Government National
Mortgage Association ("GNMA Certificates") are mortgage-backed
securities of GNMA that evidence an undivided interest in a pool or
pools of mortgages ("GNMA Certificates"). 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 the GNMA, regardless of whether the mortgagor
actually makes the payments.
The National Housing Act authorizes the GNMA to guarantee the
timely payment of principal and interest on securities backed by a
pool of mortgages insured by the Federal Housing Administration
(the "FHA") or guaranteed by the Veterans Administration (the
"VA"). The GNMA guarantee is backed by the full faith and credit
of the U.S. Government. The 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 (the "FHLMC") was created to promote development of a
nationwide secondary market for conventional residential mortgages.
The 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. The 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 (known as "tranches") 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. The value of certain classes or
"tranches" may be more volatile than the value of the pool as a
whole, and losses may be more severe than on other classes.
Mortgage-backed securities may be less effective than debt
obligations of similar maturity at maintaining yields during
periods of declining interest rates. As new types of mortgage-
related securities are developed and offered to investors, the
Manager will, subject to the direction of the Board of Trustees and
consistent with the Fund's investment objectives and policies,
consider making investments in such new types of mortgage-related
securities.
Mortgage-Backed Security Rolls. The Fund may enter into
"forward roll" transactions with respect to mortgage-backed
securities issued by the 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 cash, U.S. Government securities
or other high-grade debt securities in a segregated account with
its Custodian in an amount equal to its obligation under the roll.
Temporary Defensive 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 Defensive 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 U.S. Treasury notes and bonds that have been
stripped of their unmatured interest coupons and receipts or bills
issued without interest coupons, U.S. Treasury certificates
representing interest in such stripped debt obligations or coupons.
The Fund may also invest in zero coupon securities issued by other
issuers, including foreign governments.
These securities usually trade at a deep discount from their
face or par value and will be subject to greater fluctuations in
market value in response to changing interest rates than debt
obligations of comparable maturities that make current payments of
interest. However, the interest rate is "locked in" and there is
no risk of having to reinvest periodic interest payments in
securities having lower rates. Because the Fund accrues taxable
income from zero coupon securities 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 the following:
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. They
permit daily changes in the amounts borrowed. The Fund has the
right to increase the amount under the note at any time up to the
full amount provided by the note agreement or to decrease the
amount, and the borrower may prepay up to the full amount of the
note without penalty. 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 Fund has no limitation on
the type of issuer from whom these notes will be purchased;
however, in connection with such purchases and on an ongoing basis,
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 limitation on
investments by the Fund in illiquid securities, described in the
Prospectus.
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. Warrants basically are options to
purchase equity securities at set prices valid for a specified
period of time. The prices of warrants do not necessarily move in
a manner parallel to the prices of the underlying securities. The
price the Fund pays for a warrant will be lost unless the warrant
is exercised prior to its expiration. 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.
Other Investment Techniques and Strategies
Borrowing for Leverage. 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 subject to the
restrictions stated in the Prospectus. Any such borrowing will be
made only from banks, and, pursuant to the requirements of the
Investment Company Act of 1940 (the "Investment Company Act"), will
only be made 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, when computed in that manner, 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. To do so, the Fund 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
during period of substantial borrowing, its expenses may increase
more than funds that do not borrow.
Loans of Portfolio Securities. The Fund may lend its
portfolio securities subject to the restrictions stated in the
Prospectus. Under applicable regulatory requirements (which are
subject to change), the loan collateral on each business day must
at least equal the value of the loaned securities and must consist
of cash, bank letters of credit or securities of the U.S.
Government (or its agencies or instrumentalities). To be
acceptable as collateral, letters of credit must obligate a bank to
pay amounts demanded by the Fund if the demand meets the terms of
the letter. Such terms and the issuing bank must be satisfactory
to the Fund. When it lends securities, the Fund receives amounts
equal to the dividends or interest on loaned securities and also
receives one or more of (a) negotiated loan fees, (b) interest on
securities used as collateral, and (c) interest on short-term debt
securities purchased with such loan collateral. Either type of
interest may be shared with the borrower. The Fund may also pay
reasonable finder's, custodian and administrative fees. The terms
of the Fund's loans must meet applicable tests under the Internal
Revenue Code and must permit the Fund to reacquire loaned
securities on five days' notice or in time to vote on any important
matter.
Repurchase Agreements. The Fund may acquire securities
subject to repurchase agreements for liquidity purposes to meet
anticipated redemptions, or pending the investment of the proceeds
from sales of Fund shares, or pending the settlement of purchases
of portfolio securities. In a repurchase transaction, the Fund
acquires a security from, and simultaneously resells it to, an
approved vendor. An "approved vendor" is a U.S. commercial bank or
the U.S. branch of a foreign bank or a broker-dealer that has been
designated a primary dealer in government securities, that must
meet credit requirements set by the Fund's Board of Trustees from
time to time. 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. 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 invest in
participation interests, subject to the limitation, described in
"Illiquid and Restricted Securities" in the Prospectus on
investments by the Fund in illiquid investments. Participation
interests provide the Fund an undivided interest in a loan made by
the issuing financial institution in the proportion that the Fund's
participation interest bears to the total principal amount of the
loan. No more than 5% of the Fund's net assets can be invested in
participation interests of the same borrower. The issuing
financial institution may have no obligation to the Fund other than
to pay the Fund the proportionate amount of the principal and
interest payments it receives. Participation interests are
primarily dependent upon the creditworthiness of the borrowing
corporation, which is obligated to make payments of principal and
interest on the loan, and there is a risk that 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 value of that participation interest and in the net asset
value of its shares. In the event of a failure by the financial
institution to perform its obligation in connection with the
participation agreement, the Fund might incur certain costs and
delays in realizing payment or may suffer a loss of principal
and/or interest.
"When-Issued" and Delayed Delivery Transactions. The Fund
may purchase securities on a "when-issued" basis, and may purchase
or sell such securities on a "delayed delivery" basis. Although
the Fund will enter into such transactions for the purpose of
acquiring securities for its portfolio or for delivery pursuant to
options contracts it has entered into, the Fund may dispose of a
commitment prior to settlement. "When-issued" or "delayed
delivery" refers to securities whose terms and indenture are
available and for which a market exists, but which are not
available for immediate delivery or to securities to be delivered
at a later date. When such transactions are negotiated, the price
(which is generally expressed in yield terms) is fixed at the time
the commitment is made, but delivery and payment for the securities
take place at a later date. The Fund does not intend to make such
purchases for speculative purposes. The commitment to purchase a
security for which payment will be made on a future date may be
deemed a separate security and involve a risk of loss if the value
of the security declines prior to the settlement date. During the
period between commitment by the Fund and settlement (generally
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's Custodian will identify and
segregate liquid assets of the Fund having a value at least equal
to the value of purchase commitments until payment is made.
The Fund will engage in when-issued transactions in order to
secure what is considered to be an advantageous price and yield at
the time of entering into the obligation. When the Fund engages in
when-issued or delayed delivery transactions, it relies on the
buyer or seller, as the case may be, to consummate the transaction.
Failure of the buyer or seller to do so may result in the Fund
losing the opportunity to obtain a price and yield considered to be
advantageous. At the time the Fund makes a commitment to purchase
or sell a security on a when-issued or forward commitment basis, it
records the transaction and reflects the value of the security
purchased, or if a sale, the proceeds to be received, in
determining its net asset value. If the Fund chooses to (i)
dispose of the right to acquire a when-issued security prior to its
acquisition or (ii) dispose of its right to deliver or receive
against a forward commitment, it may incur a gain or loss.
To the extent the Fund engages in when-issued and delayed
delivery transactions, it 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 before
settlement in a direction other than that expected by the Manager
will affect the value of such securities and may cause a loss to
the Fund.
When-issued transactions and forward commitments allow the
Fund a technique to use against anticipated changes in interest
rates and prices. For instance, in periods of rising interest
rates and falling prices, the Fund might sell securities in its
portfolio on a forward commitment basis to attempt to limit its
exposure to anticipated falling prices. In periods of falling
interest rates and rising prices, the Fund might sell portfolio
securities and purchase the same or similar securities on a when-
issued or forward commitment basis, thereby obtaining the benefit
of currently higher cash yields
Short Sales Against-the-Box. In this type of short sale,
while the short position is open, the Fund must own an equal amount
of such securities sold short, 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. They may also be used to protect a gain on the security "in
the box" when the Fund does not want to sell it and recognize a
capital gain.
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.
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 that are traded
on exchanges, or as to other acceptable escrow securities, so that
no margin will be required from the Fund for such option
transactions. OCC will release the securities covering a call on
the expiration of the call or when the Fund enters into a closing
purchase transaction. Call writing affects the Fund's turnover
rate and the brokerage commissions it pays. Commissions, normally
higher than on general securities transactions, are payable on
writing or purchasing a call.
Writing Covered Call Options. When the Fund writes a call
on a security, it receives a premium and agrees to sell the
callable investment to a purchaser of a corresponding call on the
same security during the call period (usually not more than 9
months) at a fixed exercise price (which may differ from the market
price of the underlying security), regardless of market price
changes during the call period. The Fund has retained the risk of
loss should the price or the underlying decline during the call
period, which may be offset to some extent by the premium. To
terminate its obligation on a call it has written, the Fund may
purchase a corresponding 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
investment and the premium received. Any such profits are
considered short-term capital gains for Federal income tax
purposes, and when distributed by the Fund are taxable as ordinary
income. 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
a particular option. If the Fund could not effect a closing
purchase transaction due to lack of a market, it would have to hold
the callable investment 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 or a deliverable security, 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 current market value
of the underlying investment and the premium received minus the sum
of the exercise price and any transaction costs incurred.
When writing put options on securities 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 forgoes the opportunity of
investing the segregated assets or writing calls against those
assets. As long as the obligation of the Fund as the put writer
continues, it may be assigned an exercise notice by the exchange or
broker-dealer through whom such option was sold, requiring the Fund
to 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. The Fund may enter into foreign
currency exchange contracts ("Forward Contracts"), which obligate
the seller to deliver and the purchaser to take a specific amount
of foreign currency at a specific future date for a fixed price.
A Forward Contract involves bilateral obligations of one party to
purchase, and another party to sell, a specific currency at a
future date (which may be any fixed number of days from the date of
the contract agreed upon by the parties), at a price set at the
time the contract is entered into. These contracts are traded in
the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. The Fund may
enter into a Forward Contract in order to "lock in" the U.S. dollar
price of a security denominated in a foreign currency which it has
purchased or sold but which has not yet settled, or to protect
against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and a foreign currency.
There is a risk that use of Forward Contracts may reduce the
gain that would otherwise result from a change in the relationship
between the U.S. dollar and a foreign currency. To attempt to
limit its exposure to loss under Forward Contracts in a particular
foreign currency, the Fund limits its use of these contracts to the
amount of its assets denominated in that currency or denominated in
a closely-correlated foreign currency. Forward Contracts include
standardized foreign currency futures contracts which are traded on
exchanges and are subject to procedures and regulations applicable
to other Futures. The Fund may also enter into a Forward Contract
to sell a foreign currency 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 success of cross hedging is
dependent on many factors, including the ability of the Manager to
correctly identify and monitor the correlation between foreign
currencies and the U.S. dollar. To the extent that the correlation
is not identical, the Fund may experience losses or gains on both
the underlying security and the cross currency hedge.
The Fund may use Forward Contracts to protect against
uncertainty in the level of future exchange rates. The use of
Forward Contracts does not eliminate fluctuations in the prices of
the underlying securities the Fund owns or intends to acquire, but
it does fix a rate of exchange in advance. In addition, although
Forward Contracts limit the risk of loss due to a decline in the
value of the hedged currencies, at the same time they limit any
potential gain that might result should the value of the currencies
increase.
There is no limitation as to the percentage of the Fund's
assets that may be committed to foreign currency exchange
contracts. The Fund does not enter into such forward contracts or
maintain a net exposure in such contracts to the extent that the
Fund would be obligated to deliver an amount of foreign currency in
excess of the value of the Fund's assets denominated in that
currency, or enter into a "cross hedge," unless it is denominated
in a currency or currencies that the Manager believes will have
price movements that tend to correlate closely with the currency in
which the investment being hedged is denominated. See "Tax Aspects
of Covered Calls and Hedging Instruments" below for a discussion of
the tax treatment of foreign currency exchange contracts.
The Fund may enter into Forward Contracts with respect to
specific transactions. For example, when the Fund enters into a
contract for the purchase or sale of a security denominated in a
foreign currency, or when the Fund anticipates receipt of dividend
payments in a foreign currency, the Fund may desire to "lock-in"
the U.S. dollar price of the security or the U.S. dollar equivalent
of such payment by entering into a Forward Contract, for a fixed
amount of U.S. dollars per unit of foreign currency, for the
purchase or sale of the amount of foreign currency involved in the
underlying transaction ("transaction hedge"). The Fund will
thereby be able to protect itself against a possible loss resulting
from an adverse change in the relationship between the currency
exchange rates during the period between the date on which the
security is purchased or sold, or on which the payment is declared,
and the date on which such payments are made or received.
The Fund may also use Forward Contracts to lock in the U.S.
dollar value of portfolio positions ("position hedge"). In a
position hedge, for example, when the Fund believes that foreign
currency may suffer a substantial decline against the U.S. dollar,
it may enter into a forward sale contract to sell an amount of that
foreign currency approximating the value of some or all of the
Fund's portfolio securities denominated in such foreign currency,
or when the Fund believes that the U.S. dollar may suffer a
substantial decline against a foreign currency, it may enter into
a forward purchase contract to buy that foreign currency for a
fixed dollar amount. In this situation the Fund may, in the
alternative, enter into a forward contract to sell a different
foreign currency for a fixed U.S. dollar amount where the Fund
believes that the U.S. dollar value of the currency to be sold
pursuant to the forward contract will fall whenever there is a
decline in the U.S. dollar value of the currency in which portfolio
securities of the Fund are denominated ("cross hedge").
The Fund's Custodian will place cash or U.S. Government
securities or other liquid high-quality debt securities in a
separate account of the Fund having a value equal to the aggregate
amount of the Fund's commitments under forward contracts to cover
its short positions. If the value of the securities placed in the
separate account declines, additional cash or securities will be
placed in the account on a daily basis so that the value of the
account will equal the amount of the Fund's commitments with
respect to such contracts. As an alternative to maintaining all or
part of the separate account, the Fund may purchase a call option
permitting the Fund to purchase the amount of foreign currency
being hedged by a forward sale contract at a price no higher than
the forward contract price, or the Fund may purchase a put option
permitting the Fund to sell the amount of foreign currency subject
to a forward purchase contract at a price as high or higher than
the forward contract price. Unanticipated changes in currency
prices may result in poorer overall performance for the Fund than
if it had not entered into such contracts.
The precise matching of the Forward Contract amounts and the
value of the securities involved will not generally be possible
because the future value of such securities in foreign currencies
will change as a consequence of market movements in the value of
these securities between the date the Forward Contract is entered
into and the date it is sold. Accordingly, it may be necessary for
the Fund to purchase additional foreign currency on the spot (i.e.,
cash) market (and bear the expense of such purchase), if the market
value of the security is less than the amount of foreign currency
the Fund is obligated to deliver and if a decision is made to sell
the security and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of
the foreign currency received upon the sale of the portfolio
security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver. The projection of short-term
currency market movements is extremely difficult, and the
successful execution of a short-term hedging strategy is highly
uncertain. Forward Contracts involve the risk that anticipated
currency movements will not be accurately predicted, causing the
Fund to sustain losses on these contracts and transactions costs.
At or before the maturity of a Forward Contract requiring the
Fund to sell a currency, the Fund may either sell a portfolio
security and use the sale proceeds to make delivery of the currency
or retain the security and offset its contractual obligation to
deliver the currency by purchasing a second contract pursuant to
which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly,
the Fund may close out a Forward Contract requiring it to purchase
a specified currency by entering into a second contract entitling
it to sell the same amount of the same currency on the maturity
date of the first contract. The Fund would realize a gain or loss
as a result of entering into such an offsetting Forward Contract
under either circumstance to the extent the exchange rate or rates
between the currencies involved moved between the execution dates
of the first contract and offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies
with factors such as the currencies involved, the length of the
contract period and the market conditions then prevailing. Because
Forward Contracts are usually entered into on a principal basis, no
fees or commissions are involved. 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. In an interest rate swap,
the Fund and another party exchange their right to receive, or
their obligation to pay, interest on a security. For example, they
may swap a right to receive floating rate interest payments for
fixed rate payments. The Fund enters into swaps only on securities
it owns. The Fund may not enter into swaps with respect to more
than 25% of its total assets. The Fund will segregate liquid
assets (such as cash or U.S. Government securities) to cover any
amounts it could owe under swaps that exceed the amounts it is
entitled to receive, and it will adjust that amount daily, as
needed. 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." The Fund will not invest more than 25% of its
assets in interest rate swap transactions.
Regulatory Aspects of Hedging Instruments. The Fund is
required to operate within certain guidelines and restrictions with
respect to its use of futures and options thereon as established by
the Commodities Futures Trading Commission ("CFTC"). In
particular, the Fund is excluded from registration as a "commodity
pool operator" if it complies with the requirements of Rule 4.5
adopted by the CFTC. The Rule does not limit the percentage of the
Fund's assets that may be used for Futures margin and related
option premiums for a bona fide hedging position. However, under
the Rule the Fund must limit its aggregate initial futures margin
and related option premiums to no more than 5% of the Fund's net
assets for hedging strategies that are not considered bona fide
hedging strategies under the Rule.
Transactions in options by the Fund are subject to limitations
established by option exchanges governing the maximum number of
options that may be written or held by a single investor or group
of investors acting in concert, regardless of whether the options
were written or purchased on the same or different exchanges or are
held in one or more accounts or through one or more different
exchanges or through one or more brokers. Thus the number of
options which the Fund may write or hold may be affected by options
written or held by other entities, including other investment
companies having the same advisor as the Fund (or an advisor that
is an affiliate of the Fund's advisor). The exchanges also impose
position limits on Futures transactions which apply to Futures. An
exchange may order the liquidation of positions found to be in
violation of those limits and may impose certain other sanctions.
Due to requirements under the Investment Company Act, when the
Fund purchases a Future, the Fund will maintain, in a segregated
account or accounts with its Custodian, cash or readily-marketable,
short-term (maturing in one year or less) debt instruments in an
amount equal to the net exposure between the market value and the
contract price of the Future, less the margin deposit applicable to
it.
Tax Aspects of Covered Calls and Hedging Instruments. The
Fund intends to qualify as a "regulated investment company" under
the Internal Revenue Code (although it reserves the right not to
qualify). That qualification enables the Fund to "pass through"
its income and realized capital gains to shareholders without
having to pay tax on them. This avoids a "double tax" on that
income and capital gains, since shareholders normally will be taxed
on the dividends and capital gains they receive from the Fund
(unless the Fund's shares are held in a retirement account or the
shareholder is otherwise exempt from tax). One of the tests for
the Fund's qualification as a regulated investment company is that
less than 30% of its gross income must be derived from gains
realized on the sale of securities held for less than three months.
To comply with this 30% cap, the Fund will limit the extent to
which it engages in the following activities, but will not be
precluded from them: (i) selling investments, including Futures,
held for less than three months, whether or not they were purchased
on the exercise of a call held by the Fund; (ii) purchasing options
which expire in less than three months; (iii) effecting closing
transactions with respect to calls or puts written or purchased
less than three months previously; (iv) exercising puts or calls
held by the Fund for less than three months; or (v) writing calls
on investments held less than three months.
Certain foreign currency exchange contracts (Forward
Contracts) in which the Fund may invest are treated as "section
1256 contracts." Gains or losses relating to section 1256
contracts generally are characterized under the Internal Revenue
Code as 60% long-term and 40% short-term capital gains or losses.
However, foreign currency gains or losses arising from certain
section 1256 contracts (including Forward Contracts) generally are
treated as ordinary income or loss. In addition, section 1256
contracts held by the Fund at the end of each taxable year are
"marked-to-market" with the result that unrealized gains or losses
are treated as though they were realized. These contracts also may
be marked-to-market for purposes of the excise tax applicable to
investment company distributions and for other purposes under rules
prescribed pursuant to the Internal Revenue Code. An election can
be made by the Fund to exempt these transactions from this marked-
to-market treatment.
Certain Forward Contracts entered into by the Fund may result
in "straddles" for Federal income tax purposes. The straddle rules
may affect the timing and character of gains (or losses) recognized
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 of.
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 an ordinary gain or loss. Currency gains and losses are offset
against market gains and losses on each before determining a net
"section 988" gain or loss under the Internal Revenue Code for that
trade, which may increase or decrease the amount of the Fund's
investment company income available for distribution to its
shareholders.
Risks of Hedging With Options and Futures. An option
position may be closed out only on a market that provides secondary
trading for options of the same series, and there is no assurance
that a liquid secondary market will exist for any particular
option. In addition to the risks associated with hedging that are
discussed in the Prospectus and above, there is a risk in using
short hedging by (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 equity securities. The risk is
that the prices of Futures will correlate imperfectly with the
behavior of the cash (i.e., market value) prices of the Fund's
equity securities. The ordinary spreads between prices in the cash
and futures markets are subject to distortions, due to differences
in the natures of those markets. First, all participants in the
futures markets are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit
requirements, investors may close out futures contracts through
offsetting transactions which could distort the normal relationship
between the cash and futures markets. Second, the liquidity of the
futures markets depends on participants entering into offsetting
transactions rather than making or taking delivery. To the extent
participants decide to make or take delivery, liquidity in the
futures markets could be reduced, thus producing distortion.
Third, from the point of view of speculators, the deposit
requirements in the futures markets are less onerous than margin
requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause
temporary price distortions.
The risk of imperfect correlation increases as the composition
of the Fund's portfolio diverges from the securities included in
the applicable index. To compensate for the imperfect correlation
of movements in the price of the 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 if 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 that
occurred, the Fund would lose money on the hedging instruments and
also experience a decline in value in its portfolio securities.
However, while this could occur for a very brief period or to a
very small degree, over time the value of a diversified portfolio
of securities will tend to move in the same direction as the
indices upon which the hedging instruments are based.
If the Fund uses hedging instruments to establish a position
in the securities markets as a temporary substitute for the
purchase of 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 a possible further market decline or for
other reasons, the Fund will realize a loss on the hedging
instruments that is not offset by a reduction in the price of the
securities purchased.
Other Investment Restrictions
The Fund's most significant investment restrictions are set
forth in the Prospectus. There are additional investment
restrictions that the Fund must follow that are also fundamental
policies. Fundamental policies and the Fund's investment objective
cannot be changed without the vote of a "majority" of the Fund's
outstanding voting securities. Under the Investment Company Act,
such a "majority" vote is defined as the vote of the holders of the
lesser of (1) 67% or more of the shares present or represented by
proxy at a shareholder meeting, if the holders of more than 50% of
the outstanding shares are present or represented by proxy, or (2)
more than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot:
buy the securities issued by any company for the purpose of
exercising management control;
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;
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;
buy securities on margin, except that the Fund may make
margin deposits in connection with any of the Hedging Instruments
which it may use;
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;
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;
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;
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;
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
invest in oil, gas or other mineral exploration or
development programs.
For purposes of the Fund's policy not to concentrate its
assets described under the second investment restriction in the
Prospectus, the Fund has adopted the industry classifications set
forth in Appendix B to this Statement of Additional Information.
This is not a fundamental policy.
How the Fund Is Managed
Organization and History. As a Massachusetts business trust, the
Fund is not required to hold, and does not plan to hold, regular
annual meetings of shareholders. The Fund will hold meetings when
required to do so by the Investment Company Act or other applicable
law, or when a shareholder meeting is called by the Trustees or
upon proper request of the shareholders. Shareholders have the
right, upon the declaration in writing or vote of two-thirds of the
outstanding shares of the Fund, to remove a Trustee. The Trustees
will call a meeting of shareholders to vote on the removal of a
Trustee upon the written request of the record holders of 10% of
its outstanding shares. In addition, if the Trustees receive a
request from at least 10 shareholders (who have been shareholders
for at least six months) holding shares of the Fund valued at
$25,000 or more or holding at least 1% of the Fund's outstanding
shares, whichever is less, stating that they wish to communicate
with other shareholders to request a meeting to remove a Trustee,
the Trustees will then either make the Fund's shareholder list
available to the applicants or mail their communication to all
other shareholders at the applicants' expense, or the Trustees may
take such other action as set forth under Section 16(c) of the
Investment Company Act.
The Fund's Declaration of Trust contains an express disclaimer
of shareholder or Trustee liability for the Fund's obligations, and
provides for indemnification and reimbursement of expenses out of
its property for any shareholder held personally liable for its
obligations. The Declaration of Trust also provides that the Fund
shall, upon request, assume the defense of any claim made against
any shareholder for any act or obligation of the Fund and satisfy
any judgment thereon. Thus, while Massachusetts law permits a
shareholder of a business trust (such as the Fund) to be held
personally liable as a "partner" under certain circumstances, the
risk of a Fund shareholder incurring financial loss on account of
shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its
obligations described above. Any person doing business with the
Trust, and any shareholder of the Trust, agrees under the Trust's
Declaration of Trust to look solely to the assets of the Trust for
satisfaction of any claim or demand which may arise out of any
dealings with the Trust, and the Trustees shall have no personal
liability to any such person, to the extent permitted by law.
Trustees And Officers of the Fund. The Fund's Trustees and
officers and their principal occupations and business affiliations
and occupations during the past five years are set forth below.
The address of each Trustee and officer is Two World Trade Center,
New York, New York 10048-0203, unless another address is listed
below. All of the Trustees are also trustees or directors of
Oppenheimer Fund, Oppenheimer Global Fund, Oppenheimer Enterprise
Fund, Oppenheimer International Growth Fund, Oppenheimer Developing
Markets Fund, Oppenheimer Series Fund, Inc., Oppenheimer Money
Market Fund, Inc., Oppenheimer Growth Fund, Oppenheimer Capital
Appreciation Fund, Oppenheimer Discovery Fund, Oppenheimer Global
Emerging Growth Fund, Oppenheimer Municipal Bond Fund, Oppenheimer
New York Municipal Fund, Oppenheimer California Municipal Fund,
Oppenheimer Multi-State Municipal Trust, Oppenheimer Multiple
Strategies Fund, Oppenheimer U.S. Government Trust, Oppenheimer
Multi-Sector Income Trust and Oppenheimer World Bond Fund (the "New
York-based Oppenheimer funds"), except that Ms. Macaskill is not a
director of Oppenheimer Money Market Fund, Inc. Ms. Macaskill and
Messrs. Bishop, Bowen, Donohue, Farrar and Zack respectively hold
the same offices with the other New York-based Oppenheimer funds as
with the Fund. As of December 31, 1996, the officers and Trustees
of the Fund as a group owned of record or beneficially less than 1%
of each class of shares of the Fund. That statement does not
include shares held of record by an employee benefit plan for
employees of the Manager (one of the Trustees of the Fund, Ms.
Macaskill, and one of the officers, Mr. Donohue, are trustees of
that plan), other than the shares beneficially owned under that
plan by the officers of the Fund listed below.
Leon Levy, Chairman of the Board of Trustees; Age 71
General Partner of Odyssey Partners, L.P. (investment partnership)
and Chairman of Avatar Holdings, Inc. (real estate development).
Robert G. Galli, Trustee*; Age 63
Vice Chairman of OppenheimerFunds, Inc. (the "Manager"); formerly
he held the following positions: Vice President and Counsel of
Oppenheimer Acquisition Corp. ("OAC"), the Manager's parent holding
company; Executive Vice President & General Counsel and a director
of the Manager and OppenheimerFunds Distributor, Inc. (the
"Distributor"), Vice President and a director of HarbourView Asset
Management Corporation ("HarbourView") and Centennial Asset
Management Corporation ("Centennial"), investment advisor
subsidiaries of the Manager, a director of Shareholder Financial
Services, Inc. ("SFSI") and Shareholder Services, Inc. ("SSI"),
transfer agent subsidiaries of the Manager and an officer of other
Oppenheimer funds.
Benjamin Lipstein, Trustee; Age 73
591 Breezy Hill Road, Hillsdale, N.Y. 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University; a director of Sussex
Publishers, Inc (Publishers of Psychology Today and Mother Earth
News) and of Spy Magazine, L.P.
Bridget A. Macaskill, President and Trustee*; Age 48
President, Chief Executive Officer and a Director of the Manager;
Chairman and a director of SSI, and SFSI; President and a director
of OAC, HarbourView and Oppenheimer Partnership Holdings, Inc., a
holding company subsidiary of the Manager; a director of
Oppenheimer Real Asset Management, Inc.; formerly an Executive
Vice President of the Manager.
Elizabeth B. Moynihan, Trustee; Age 67
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the Freer Gallery
of Art (Smithsonian Institution), the Institute of Fine Arts (New
York University), National Building Museum; a member of the
Trustees Council, Preservation League of New York State, and of the
Indo-U.S. Sub-Commission on Education and Culture.
Kenneth A. Randall, Trustee; Age 69
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding
company), Dominion Energy, Inc. (electric power and oil & gas
producer), Enron-Dominion Cogen Corp. (cogeneration company),
Kemper Corporation (insurance and financial services company),
Fidelity Life Association (mutual life insurance company); formerly
President and Chief Executive Officer of The Conference Board, Inc.
(international economic and business research) and a director of
Lumbermens Mutual Casualty Company, American Motorists Insurance
Company and American Manufacturers Mutual Insurance Company.
_________________
*A Trustee who is an "interested person" of the Fund.
<PAGE>
Edward V. Regan, Trustee; Age 66
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New
York; Senior Fellow of Jerome Levy Economics Institute, Bard
College; a member of the U.S. Competitiveness Policy Council; a
director of GranCare, Inc. (health care provider); formerly New
York State Comptroller and trustee, New York State and Local
Retirement Fund.
Russell S. Reynolds Jr., Trustee; Age 65
200 Park Avenue, New York, New York 10166
Founder Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directorship Inc. (corporate governance
consulting); a director of Professional Staff Limited (U.K.); a
trustee of Mystic Seaport Museum, International House and Greenwich
Historical Society.
Donald W. Spiro, Vice Chairman and Trustee*; Age 71
Chairman Emeritus and a director of the Manager; formerly Chairman
of the Manager and the Distributor.
Pauline Trigere, Trustee; Age 84
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and
sale of women's fashions).
Clayton Yeutter, Trustee; Age 66
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),
Farmers Insurance Company (insurance), FMC Corp. (chemicals and
machinery), IMC Global Inc. (chemicals and animal feed) and Texas
Instruments, Inc. (electronics); formerly (in descending
chronological order) Counsellor to the President (Bush) for
Domestic Policy, Chairman of the Republican National Committee,
Secretary of the U.S. Department of Agriculture, and U.S. Trade
Representative.
Andrew J. Donohue, Secretary; Age 46
Executive Vice President and General Counsel of the Manager and
the Distributor; President and a director of Centennial;
Executive Vice President, General Counsel and a director of
HarbourView, SSI, SFSI, and Oppenheimer Partnership Holdings, Inc.;
President and director of Oppenheimer Real Asset Management, Inc.;
General Counsel of OAC; Executive Vice President, Chief Legal
Officer and a director of MultiSource Services, Inc. (a broker-
dealer); an officer of other Oppenheimer funds; formerly Senior
Vice President and Associate General Counsel of the Manager and the
Distributor; Partner in, Kraft & McManimon (a law firm); an officer
of First Investors Corporation (a broker-dealer) and First
Investors Management Company, Inc. (broker-dealer and investment
advisor); director and an officer of First Investors Family of
Funds and First Investors Life Insurance Company.
__________________
*A Trustee who is an "interested person" of the Fund.
George C. Bowen, Treasurer; Age 60
6803 South Tucson Way, Englewood, Colorado 80112
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; Senior Vice President, Treasurer and Secretary of SSI;
Vice President, Treasurer and Secretary of SFSI; Treasurer of OAC;
Vice President and Treasurer of Oppenheimer Real Asset Management,
Inc.; Chief Executive Officer, Treasurer and a director of
MultiSource Services, Inc. (a broker-dealer); an officer of other
Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer; Age 38
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting; an officer of
other Oppenheimer funds; formerly a Fund Controller for the
Manager, prior to which he was an Accountant for Yale & Seffinger,
P.C., an accounting firm, and previously an Accountant and
Commissions Supervisor for Stuart James Company Inc., a broker-
dealer.
Scott T. Farrar, Assistant Treasurer; Age 31
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting; an officer of
other Oppenheimer funds; formerly a Fund Controller for the
Manager.
Robert G. Zack, Assistant Secretary; Age 48
Senior Vice President and Associate General Counsel of the Manager,
Assistant Secretary of SSI, SFSI; an officer of other Oppenheimer
funds.
Frank Jennings, Vice President and Portfolio Manager; Age 49
Vice President of the Manager; formerly a Managing Director at
Paine Webber's Mitchell Hutchins division.
Remuneration of Trustees. The officers of the Fund and
certain Trustees (Ms. Macaskill and Messrs. Galli and Spiro; Ms.
Macaskill is also an officer) who are affiliated with the Manager
receive no salary or fees from the Fund. The remaining Trustees of
the Fund received the compensation shown below from the Fund. The
compensation from the Fund was paid during its fiscal year ended
September 30, 1996. The compensation from all the New York-based
Oppenheimer funds includes the Fund and its compensation received
as a director, trustee or member of a committee of the Board of
those funds during the calendar year 1996.
<PAGE>
<TABLE>
<CAPTION>
Retirement Total Compensation
Aggregate Benefits Accrued From All
Compensation as Part of New York-based
Name and Position From Fund Fund Expenses Oppenheimer Funds1
<S> <C> <C> <C>
Leon Levy, Chairman $4,696 $2,89 $152,750
and Trustee
Benjamin Lipstein, $2,871 $1,770 $ 91,350
Study Committee
Chairman, Audit
Committee Member
and Trustee2
Elizabeth B. Moynihan, $2,871 $1,770 $91,350
Study Committee
Member and Trustee
Kenneth A. Randall, $2,611 $1,610 $83,450
Audit Committee Chairman
and Trustee
Edward V. Regan, $2,291 $1,463 $78,150
Proxy Committee Chairman,
Audit Committee
Member and Trustee
Russell S. Reynolds, Jr., $1,735 $1,070 $58,800
Proxy Committee
Member and Trustee
Pauline Trigere, Trustee $1,735 $1,070 $55,300
Clayton K. Yeutter, Proxy $1,735 $1,070 $58,800
Committee Member and
Trustee
</TABLE>
______________________
1 For the 1996 calendar year.
2 Committee position held during a portion of the period shown.
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 Oppenheimer funds for at least 15
years to be eligible for the maximum payment. Because each
Trustee's retirement benefits will depend on the amount of the
Trustee's future compensation and length of service, the amount of
these benefits cannot be determined as of this time nor can we
estimate the number of years of credited service that will be used
to determine those benefits.
Major Shareholders. As of December 31, 1996, no person owned
of record or was known by the Fund to own beneficially 5% or more
of the shares of the Fund except Merrill Lynch Pierce Fenner &
Smith, Inc., which was the record owner of 37,738 Class B shares
(representing 5.65% of the Class B shares then outstanding and
185,581 Class C shares (representing 7.28% of the Class C shares
then outstanding). The Fund has been advised that Merrill Lynch
Pierce Fenner & Smith, Inc. holds such shares for the benefit of
its customers.
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled
by Massachusetts Mutual Life Insurance Company. OAC is also owned
in part by certain of the Manager's directors and officers, some of
whom also serve as officers of the Fund, and three of whom (Ms.
Macaskill, Mr. Galli and Mr. Spiro) serve as Trustees of the Fund.
The Manager and the Fund have a Code of Ethics. It is designed
to detect and prevent improper personal trading by certain
employees, including portfolio managers, that would compete with or
take advantage of the Fund's portfolio transactions. Compliance
with the Code of Ethics is carefully monitored and strictly
enforced by the Manager.
The Investment Advisory Agreement. The investment advisory
agreement between the Manager and the Fund requires the Manager, at
its expense, to provide the Fund with adequate office space,
facilities and equipment, and to provide and supervise the
activities of all administrative and clerical personnel required to
provide effective corporate administration for the Fund, including
the compilation and maintenance of records with respect to its
operations, the preparation and filing of specified reports, and
composition of proxy materials and registration statements for
continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the General Distributor's
Agreement are paid by the Fund. The advisory agreement lists
examples of expenses paid by the Fund, the major categories of
which relate to interest, taxes, brokerage commissions, fees to
certain Trustees, legal and audit expenses, custodian and transfer
agent expenses, share issuance costs, certain printing and
registration costs and non-recurring expenses, including litigation
costs. For the Fund's fiscal years ended September 30, 1994, 1995
and 1996, the management fees paid by the Fund to the Manager were
$945,062, $1,140,233 and $1,202,416, respectively.
The Investment Advisory Agreement contains no expense
limitation. However, because of state regulations limiting fund
expenses that previously applied, the Manager had voluntarily
undertaken that the Fund's total expenses in any fiscal year
(including the investment advisory fee but exclusive of taxes,
interest, brokerage commissions, distribution plan payments and any
extraordinary non-recurring expenses, including litigation) would
not exceed the most stringent state regulatory limitation
applicable to the Fund. Due to changes in federal securities laws,
such state regulations no longer apply and the Manager's
undertaking is therefore inapplicable and has been withdrawn.
During the Fund's last fiscal year, the Fund's expenses did not
exceed the most stringent state regulatory limit and the voluntary
undertaking was not invoked.
The advisory agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence in the performance of
its duties, or reckless disregard of its obligations and duties
under the advisory agreement, the Manager is not liable for any
loss resulting from a good faith error or omission on its part with
respect to any of its duties thereunder. The advisory agreement
permits the Manager to act as investment advisor for any other
person, firm or corporation and to use the name "Oppenheimer" in
connection with other investment companies for which it may act as
investment advisor or general distributor. If the Manager shall no
longer act as investment advisor to the Fund, the right of the Fund
to use the name "Oppenheimer" as part of its name may be withdrawn.
The Distributor. Under its General Distributor's Agreement
with the Fund, the Distributor acts as the Fund's principal
underwriter in the continuous public offering of the Fund's Class
A, Class B and Class C shares but is not obligated to sell a
specific number of shares. Expenses normally attributable to sales
(excluding payments under the Distribution and Service Plans but
including advertising and the cost of printing and mailing
prospectuses, other than those furnished to existing shareholders),
are borne by the Distributor. During the Fund's fiscal years ended
September 30, 1994, 1995 and 1996, the aggregate sales charges on
sales of the Fund's Class A shares were $1,020,885, $684,243 and
$507,729, respectively, of which the Distributor and an affiliated
broker-dealer retained in the aggregate $286,660, $205,662 and
$171,752 in those respective years. During the Fund's fiscal year
ended September 30, 1996, contingent deferred sales charges
collected on the Fund's Class B shares totalled $6,391, all of
which the Distributor retained. During the Fund's fiscal year
ended September 30, 1996, contingent deferred sales charges
collected on the Fund's Class C shares totalled $3,710, all of
which the Distributor retained. For additional information about
distribution of the Fund's shares and the expenses connected with
such activities, please refer to "Distribution and Service Plans,"
below.
The Transfer Agent. OppenheimerFunds Services, the Fund's
Transfer Agent, is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for
shareholder servicing and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of
the duties of the Manager under the advisory agreement is to
arrange the portfolio transactions for the Fund. The advisory
agreement contains provisions relating to the employment of broker-
dealers ("brokers") to effect the Fund's portfolio transactions.
In doing so, the Manager is authorized by the advisory agreement to
employ broker-dealers, including "affiliated" brokers, as that term
is defined in the Investment Company Act, as may, in its best
judgment based on all relevant factors, implement the policy of the
Fund to obtain, at reasonable expense, the "best execution" (prompt
and reliable execution at the most favorable price obtainable) of
such transactions. The Manager need not seek competitive
commission bidding but is expected to minimize the commissions paid
to the extent consistent with the interest and policies of the Fund
as established by its Board of Trustees. Purchases of securities
from underwriters include a commission or concession paid by the
issuer to the underwriter, and purchases from dealers include a
spread between the bid and asked price.
Under the advisory agreement, the Manager is authorized to
select brokers that provide brokerage and/or research services for
the Fund and/or the other accounts over which the Manager or its
affiliates have investment discretion. The commissions paid to
such brokers may be higher than another qualified broker would have
charged if a good faith determination is made by the Manager that
the commission is fair and reasonable in relation to the services
provided. Subject to the foregoing considerations, the Manager may
also consider sales of shares of the Fund and other investment
companies managed by the Manager or its affiliates as a factor in
the selection of brokers for the Fund's portfolio transactions.
Description of Brokerage Practices Followed by the Manager.
Subject to the provisions of the advisory agreement, and the
procedures and rules described above, allocations of brokerage are
generally made by the Manager's portfolio traders based upon
recommendations from the Manager's portfolio managers. In certain
instances, portfolio managers may directly place trades and
allocate brokerage, also subject to the provisions of the advisory
agreement and the procedures and rules described above. In either
case, brokerage is allocated under the supervision of the Manager's
executive officers. Transactions in securities other than those
for which an exchange is the primary market are generally done with
principals or market makers. Brokerage commissions are paid
primarily for effecting transactions in listed securities or for
certain fixed-income agency transactions in the secondary market
and are otherwise paid only if it appears likely that a better
price or execution can be obtained. When the Fund engages in an
option transaction, ordinarily the same broker will be used for the
purchase or sale of the option and any transaction in the
securities to which the option relates. When possible, concurrent
orders to purchase or sell the same security by more than one of
the accounts managed by the Manager or its affiliates are combined.
The transactions effected pursuant to such combined orders are
averaged as to price and allocated in accordance with the purchase
or sale orders actually placed for each account.
The research services provided by a particular broker may be
useful only to one or more of the advisory accounts of the Manager
and its affiliates, and investment research received for the
commissions of those other accounts may be useful both to the Fund
and one or more of such other accounts. Such research, which may
be supplied by a third party at the instance of a broker, includes
information and analyses on particular companies and industries as
well as market or economic trends and portfolio strategy, receipt
of market quotations for portfolio evaluations, information
systems, computer hardware and similar products and services. If
a research service also assists the Manager in a non-research
capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to
the Manager in the investment decision-making process may be paid
in commission dollars. The Board of Trustees has permitted the
Manager to use concessions on fixed-price offerings to obtain
research, in the same manner as is permitted for agency
transactions. The Board has also permitted the Manager to use
stated commissions on secondary fixed-income agency trades to
obtain research where the broker has represented to Manager that:
(i) the trade is not from or for the broker's own inventory, (ii)
the trade was executed by the broker on an agency basis at the
stated commission, and (iii) the trade is not a riskless principal
transaction.
The research services provided by brokers broaden the scope and
supplement the research activities of the Manager, by making
available additional views for consideration and comparisons, and
by enabling the Manager to obtain market information for the
valuation of securities held in the Fund's portfolio or being
considered for purchase. The Board of Trustees, including the
"independent" Trustees of the Fund (those Trustees of the Fund who
are not "interested persons" as defined in the Investment Company
Act, and who have no direct or indirect financial interest in the
operation of the advisory agreement or the Distribution Plans
described below) annually reviews information furnished by the
Manager as to the commissions paid to brokers furnishing such
services so that the Board may ascertain whether the amount of such
commissions was reasonably related to the value or benefit of such
services.
During the Fund's fiscal years ended September 30, 1994, 1995
and 1996, total brokerage commissions paid by the Fund (not
including spreads or concessions on principal transactions on a net
trade basis) were $720,379, $771,868 and $1,355,647, respectively.
During the fiscal year ended September 30, 1996, $1,024,988 was
paid to brokers as commissions in return for research services; the
aggregate dollar amount of those transactions was $306,971,053.
The transactions giving rise to those commissions were allocated in
accordance with the Manager's internal allocation procedures.
Performance of the Fund
Total Return Information. As described in the Prospectus, from
time to time the "average annual total return," "cumulative total
return," "average annual total return at net asset value" and
"total return at net asset value" of an investment in a class of
shares of the Fund may be advertised. An explanation of how these
total returns are calculated for each class and the components of
those calculations is set forth below.
The Fund's advertisements of its performance data must, under
applicable rules of the Securities and Exchange Commission, include
the average annual total returns for each advertised class of
shares of the Fund for the 1, 5, and 10-year periods (or the life
of the class, if less) ending as of the most recently-ended
calendar quarter prior to the publication of the advertisement.
This enables an investor to compare the Fund's performance to the
performance of other funds for the same periods. However, a number
of factors should be considered before using such information as a
basis for comparison with other investments. An investment in the
Fund is not insured; its returns and share prices are not
guaranteed and normally will fluctuate on a daily basis. When
redeemed, an investor's shares may be worth more or less than their
original cost. Returns for any given past period are not a
prediction or representation by the Fund of future returns. The
returns of Class A, Class B and Class C shares of the Fund are
affected by portfolio quality, the type of investments the Fund
holds and its operating expenses allocated to the particular class.
Average Annual Total Returns. The "average annual total
return" of each class is an average annual compounded rate of
return for each year in a specified number of years. It is the
rate of return based on the change in value of a hypothetical
initial investment of $1,000 ("P" in the formula below) held for a
number of years ("n") to achieve an Ending Redeemable Value ("ERV")
of that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
Cumulative Total Returns. The cumulative "total return"
calculation measures the change in value of a hypothetical
investment of $1,000 over an entire period of years. Its
calculation uses some of the same factors as average annual total
return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current
maximum sales charge of 5.75% (as a percentage of the offering
price) is deducted from the initial investment ("P") (unless the
return is shown at net asset value, as described below). For Class
B shares, the payment of the applicable contingent deferred sales
charge (5.0% for the first year, 4.0% for the second year, 3.0% for
the third and fourth years, 2.0% for the fifth year, 1.0% for the
sixth year and none thereafter) is applied to the investment result
for the period shown (unless the total return is shown at net asset
value, as described below). For Class C shares, a 1.0% contingent
deferred sales charge is applied to the investment result for the
one-year period (or less). Total returns also assume that all
dividends and capital gains distributions during the period are
reinvested to buy additional shares at net asset value per share,
and that the investment is redeemed at the end of the period. The
"average annual total returns" on an investment in Class A shares
of the Fund for the one and five year periods ended September 30,
1996 and for the period October 22, 1990 (commencement of
operations) to September 30, 1996 were 6.76%, 9.21% and 9.73%,
respectively. The cumulative "total return" on Class A shares for
the period October 22, 1990 (commencement of operations) to
September 30, 1996 was 73.59%. The cumulative "total return" on
Class B shares for the period October 10, 1995 (inception of the
class) to September 30, 1996 was 9.33%. The "average annual total
returns" on an investment in Class C shares of the Fund for the
fiscal year ended September 30, 1996 and the period from December
1, 1993 through September 30, 1996 were 11.45% and 9.34%,
respectively. The cumulative total return on Class C shares for
the period from December 1, 1993 (the commencement of the offering
of the shares) through September 30, 1996 was 28.77%.
Total Returns at Net Asset Value. From time to time the Fund
may also quote an average annual total return at net asset value or
a cumulative total return at net asset value for Class A, Class B
or Class C shares. Each is based on the difference in net asset
value per share at the beginning and the end of the period for a
hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and
takes into consideration the reinvestment of dividends and capital
gains distributions. The cumulative total return at net asset
value of the Fund's Class A shares for the period from October 22,
1990 (commencement of operations) to September 30, 1996 was 84.19%.
The average annual total returns at net asset value for the one and
five year periods ended September 30, 1996 and for the period
October 22, 1990 (commencement of operations) through September 30,
1996, for Class A shares were 13.28%, 10.51% and 10.83%,
respectively. The cumulative total return at net asset value of
Class B shares of the Fund for the period October 10, 1995
(inception of class) to September 30, 1996, was 14.33%. The
cumulative total return at net asset value on the Fund's Class C
shares for the fiscal period from December 1, 1993 (inception of
class) through September 30, 1996 was 28.77%. The average annual
total returns of the Fund's Class C shares at net asset value for
the fiscal year ended September 30, 1996 and the period from
December 1, 1993 (inception of class) through September 30, 1996
were 12.45% and 9.34%, respectively.
Total return information may be useful to investors in reviewing
the Fund's performance. However, when comparing total return of an
investment in the Fund with that of other alternatives, investors
should understand that as the Fund is an aggressive equity fund
seeking capital appreciation, its shares are subject to greater
market risks and volatility than shares of funds having other
investment objectives and that the Fund is designed for investors
who are willing to accept greater risk of loss in the hopes of
realizing greater gains.
Other Performance Comparisons. From time to time the Fund may
publish the ranking of its Class A, Class B or Class C shares by
Lipper Analytical Services, Inc. ("Lipper"), a widely-recognized
independent mutual fund monitoring service. Lipper monitors the
performance of regulated investment companies, including the Fund,
and ranks their performance for various periods based on categories
relating to investment objectives. The performance of the Fund 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 rankings are based on total returns that
include the reinvestment of capital gain distributions and income
dividends but do not take sales charges or taxes into
consideration.
From time to time the Fund may publish the star ranking of the
performance of its Class A, Class B and Class C shares by
Morningstar, Inc., an independent mutual fund monitoring service.
Morningstar ranks mutual funds in broad investment categories:
domestic stock funds, international stock funds, taxable bond funds
and municipal bond funds, based on risk-adjusted total investment
returns. The Fund is ranked among international stock funds.
Investment return measures a fund's or class' one, three, five and
ten-year average annual total returns (depending on the inception
of the fund or class) in excess of 90-day U.S. Treasury bill
returns after considering the fund's sales charges and expenses.
Risk measures a fund's or class' performance below 90-day U.S.
Treasury bill returns. Risk and investment return are combined to
produce star rankings reflecting performance relative to the
average fund in the fund's category. Five stars is the "highest"
ranking (top 10%), four stars is "above average" (next 22.5%),
three stars is "average" (next 35%), two stars is "below average"
(next 22.5%) and one star is "lowest" (bottom 10%). The current
star ranking is the fund's or class' 3-year ranking or its combined
3- and 5-year ranking (weighted 60%/40%, respectively, or its
combined 3-, 5- and 10-year ranking (weighted 40%, 30% and 30%,
respectively), depending on the inception of the fund or class.
Rankings are subject to change monthly.
The Fund may also compare its performance to that of other funds
in its Morningstar Category. In addition to its star ranking,
Morningstar also categorizes and compares a fund's 3-year
performance based on Morningstar's classification of the fund's
investments and investment style, rather than how a fund defines
its investment objective. Morningstar's four broad categories
(domestic equity, international equity, municipal bond and taxable
bond) are each further subdivided into categories based on types of
investments and investment styles. Those comparisons by
Morningstar are based on the same risk and return measurements as
its star rankings but do not consider the effect of sales charges.
From time to time, the Fund may include in its advertisements
and sales literature performance information about the Fund cited
in other newspapers and periodicals, such as The New York Times,
which may include performance quotations from other sources,
including Lipper.
The total return on an investment in the Fund's Class A, Class
B or Class C shares may be compared with performance for the same
period of either the Morgan Stanley Capital International World
Index or the Lehman Aggregate Bond Index, as described in the
Prospectus. The performance of each index includes a factor for
the reinvestment of income dividends, but does not reflect
reinvestment of capital gains, expenses or taxes. The performance
of the Fund's Class A, Class B or Class C shares may also be
compared in publications to (i) the performance of various market
indices or to other investments for which reliable performance data
is available, and (ii) to averages, performance rankings or other
benchmarks prepared by recognized mutual fund statistical services.
Total return information may be useful to investors in reviewing
the performance of the Fund's Class A, Class B or Class C shares.
However, when comparing total return of an investment in Class A,
Class B or Class C shares of the Fund, a number of factors should
be considered before using such information as a basis for
comparison with other investments. For example, investors may also
wish to compare the Fund's Class A, Class B or Class C return to
the returns on fixed income investments available from banks and
thrift institutions, such as certificates of deposit, ordinary
interest-paying checking and savings accounts, and other forms of
fixed or variable time deposits, and various other instruments such
as Treasury bills. However, the Fund's returns and share price are
not guaranteed by the FDIC or any other agency and will fluctuate
daily, while bank depository obligations may be insured by the FDIC
and may provide fixed rates of return, and Treasury bills are
guaranteed as to principal and interest by the U.S. Government.
From time to time, the Fund's Manager may publish rankings or
ratings of the Manager (or Transfer Agent) or the investor services
provided by them to shareholders of the Oppenheimer funds, other
than performance rankings of the Oppenheimer funds themselves.
Those ratings or rankings of shareholder/investor services by third
parties may compare the Oppenheimer funds' services to those of
other mutual fund families selected by the rating or ranking
services and may be based upon the opinions of the rating or
ranking service itself, based on its research or judgment, or based
upon surveys of investors, brokers, shareholders or others.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares and
Distribution and Service Plans for Class B and Class C shares under
Rule 12b-1 of the Investment Company Act pursuant to which the Fund
will make payments to the Distributor 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. For the Distribution and Service Plans for the
Fund's Class B and Class C shares, that vote was cast by the
Manager as the sole initial holder of Class B and Class C shares of
the Fund.
In addition, under the Plans the Manager and the Distributor,
in their sole discretion, from time to time may use their own
resources (which, in the case of the Manager, may include profits
from the advisory fee it receives from the Fund) to make payments
to brokers, dealers or other financial institutions (each is
referred to as a "Recipient" under the Plans) for distribution and
administrative services they perform at no cost to the Fund. The
Distributor and the Manager may, in their sole discretion, increase
or decrease the amount of payments they make from their own
resources to Recipients.
Unless terminated as described below, each Plan continues in
effect from year to year but only as long as its continuance is
specifically approved at least annually by the Fund's Board of
Trustees and its Independent Trustees by a vote cast in person at
a meeting called for the purpose of voting on such continuance.
Any Plan may be terminated at any time by the vote of a majority of
the Independent Trustees or by the vote of the holders of a
"majority" (as defined in the Investment Company Act) of the
outstanding shares of that class. None of the Plans may be amended
to increase materially the amount of payments to be made unless
such amendment is approved by shareholders of the class affected by
the amendment. In addition, because Class B shares of the Fund
automatically convert into Class A shares after six years, the
Fund, is required by a Securities and Exchange Commission rule to
obtain the approval of Class B as well as Class A shareholders for
a proposed amendment to the Class A Plan that would materially
increase the amount to be paid by Class A shareholders under the
Class A Plan. Such approval must be by a "majority of the Class A
and Class B shares (as defined in the Investment Company Act),
voting separately by class. All material amendments must be
approved by the Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall
provide separate written reports to the Fund's Board of Trustees at
least quarterly on the amount of all payments made pursuant to each
Plan, the purpose for which the payments were made and the identity
of each Recipient that received any payment. The report for the
Class B and Class C Plan should also include the distribution costs
for that quarter and such costs for previous fiscal years 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 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 on any such selection or
nomination is approved by a majority of the Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by
the Recipient for itself and its customers, did not exceed a
minimum amount, if any, that may be determined from time to time by
a majority of the Fund's Independent Trustees. Initially, the
Board of Trustees has set the fees at the maximum rate and set no
requirement for a minimum amount of assets.
For the fiscal year ended September 30, 1996, payments under the
Class A Plan totalled $279,012, all of which was paid by the
Distributor to Recipients, including $17,848 paid to an affiliate
of the Distributor. Any unreimbursed expenses incurred by the
Distributor with respect to Class A shares for any fiscal year may
not be recovered in subsequent fiscal years. Payments received by
the Distributor under the Plan for Class A shares will not be used
to pay any interest expense, carrying charge, or other financial
costs, or allocation of overhead by the Distributor.
The Class B and the Class C Plans allow the service fee payment
to be paid by the Distributor to Recipients in advance for the
first year such shares are outstanding, and thereafter on a
quarterly basis, as described in the Prospectus. The advance
payment is based on the net asset value of the shares sold. An
exchange of shares does not entitle the Recipient to an advance
service fee payment. In the event shares are redeemed during the
first year that the shares are outstanding, the Recipient will be
obligated to repay a pro rata portion of the advance payment to the
Distributor. Payments made under the Class B Plan during the
fiscal period ended September 30, 1996 totalled $36,930, of which
$35,141 was retained by the Distributor. Payments made under the
Class C Plan during the fiscal period ended September 30, 1996
totalled $313,921, of which $97,416 was retained by the Distributor
and $8,710 was paid to a dealer affiliated with the Distributor.
Although the Class B Plan and the Class C Plan permits the
Distributor to retain both the asset-based sales charges and the
service fees on such shares, or to pay Recipients the service fee
on a quarterly basis, without payment in advance, the Distributor
presently intends to pay the service fee to Recipients in the
manner described above. A minimum holding period may be
established from time to time under the Class B and the Class C
Plan by the Board. Initially, the Board has set no minimum holding
period. All payments under the Class B and the Class C Plans are
subject to the limitations imposed by the Conduct Rules of Fair
Practice of the National Association of Securities Dealers, Inc. on
payments of asset-based sales charges and service fees.
Asset-based sales charge payments are designed to permit an
investor to purchase shares of the Fund without the assessment of
a front-end sales load and at the same time permit the Distributor
to compensate brokers and dealers in connection with the sale of
Class B and Class C shares of the Fund. The Class B and the Class
C Plans provide for the Distributor to be compensated at a flat
rate, whether the Distributor's distribution expenses are more or
less than the amounts paid by the Fund during that period. Such
payments are made in recognition that the Distributor (i) pays
sales commissions to authorized brokers and dealers at the time of
sale, as described in the Prospectus, (ii) may finance such
commissions and/or the advance of the service fee payment to
Recipients under those Plans, (iii) employs personnel to support
distribution of shares, and (iv) may bear the costs of sales
literature, advertising and prospectuses (other than those
furnished to current shareholders) and state "blue sky"
registration fees.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C
Shares. The availability of three classes of shares permits the
individual investor to choose the method of purchasing shares that
is more beneficial to the investor depending on the amount of the
purchase, the length of time the investor expects to hold shares
and other relevant circumstances. Investors should understand that
the purpose and function of the deferred sales charge and asset-
based sales charge with respect to Class B and Class C shares are
the same as those of the initial sales charge with respect to Class
A shares. Any salesperson or other person entitled to receive
compensation for selling Fund shares may receive different
compensation with respect to one class of shares than the other.
The Distributor will not accept any order for $500,000 or $1
million or more of Class B or Class C shares, respectively, on
behalf of a single investor (not including dealer "street name" or
omnibus accounts) because generally it will be more advantageous
for that investor to purchase Class A shares of the Fund instead.
The three classes of shares each represent an interest in the
same portfolio investments of the Fund. However, each class has
different shareholder privileges and features. The net income
attributable to Class B and Class C shares and the dividends
payable on Class B and Class C shares will be reduced by
incremental expenses borne solely by that class, including the
asset-based sales charge to which Class B and Class C shares are
subject.
The conversion of Class B shares to Class A shares after six
years is subject to the continuing availability of a private letter
ruling from the Internal Revenue Service, or an opinion of counsel
or tax advisor, to the effect that the conversion of Class B shares
does not constitute a taxable event for the holder under Federal
income tax law. If such a revenue ruling or opinion is no longer
available, the automatic conversion feature may be suspended, in
which event no further conversions of Class B shares would occur
while such suspension remained in effect. Although Class B shares
could then be exchanged for Class A shares on the basis of relative
net asset value of the two classes, without the imposition of a
sales charge or fee, such exchange could constitute a taxable event
for the holder, and absent such exchange, Class B shares might
continue to be subject to the asset-based sales charge for longer
than six years.
The methodology for calculating the net asset value, dividends
and distributions of the Fund's Class A, Class B and Class C shares
recognizes two types of expenses. General expenses that do not
pertain specifically to any class are allocated pro rata to the
shares of each class, based on the percentage of the net assets of
such class to the Fund's total assets, and then equally to each
outstanding share within a given class. Such general expenses
include (i) management fees, (ii) legal, bookkeeping and audit
fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other
materials for current shareholders, (iv) fees to Independent
Trustees, (v) custodian expenses, (vi) share issuance costs, (vii)
organization and start-up costs, (viii) interest, taxes and
brokerage commissions, and (ix) non-recurring expenses, such as
litigation costs. Other expenses that are directly attributable to
a class are allocated equally to each outstanding share within that
class. Such expenses include (a) Distribution and Service Plan
fees, (b) incremental transfer and shareholder servicing agent fees
and expenses, (c) registration fees and (d) shareholder meeting
expenses, to the extent that such expenses pertain to a specific
class rather than to the Fund as a whole.
Determination of Net Asset Values Per Share. The net asset values
per share of Class A, Class B and Class C shares of the Fund are
determined as of the close of business of The New York Stock
Exchange (the "Exchange") on each day that the Exchange is open, by
dividing the Fund's net assets attributable to a class by the
number of shares of that class that are outstanding. The Exchange
normally closes at 4:00 P.M. New York time, but may close earlier
on some days (for example, in case of weather emergencies or on
days falling before a holiday). The Exchange's most recent annual
holiday schedule (which is subject to change) states that it will
close on New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day. It may also close on other days. The Fund may invest a
substantial portion of its assets in foreign securities primarily
listed on foreign exchanges which may trade on Saturdays or
customary U.S. business holidays on which the Exchange is closed.
Because the Fund's net asset value will not be calculated on those
days, the Fund's net asset values per share of Class A, Class B and
Class C shares may be significantly affected on such days when
shareholders may not purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally as follows: (i)
equity securities traded on a U.S. securities exchange or on NASDAQ
for which last sale information is regularly reported are valued at
the last reported sale price on their primary exchange or NASDAQ
that day (or, in the absence of sales that day, at values based on
the last sale prices of the preceding trading day or closing "bid"
prices that day); (ii) securities traded on a foreign securities
exchange are valued generally at the last sales price available to
the pricing service approved by the Fund's Board of Trustees or to
the Manager as reported by the principal exchange on which the
security is traded at its last trading session on or immediately
preceding the valuation date, or at the mean between "bid" and
"ask" prices obtained from the principal exchange or two active
market makers in the security on the basis of reasonable inquiry;
(iii) long-term debt securities having a remaining maturity in
excess of 60 days are valued based on the mean between the "bid"
and "ask" prices determined by a portfolio pricing service approved
by the Fund's Board of Trustees or obtained by the Manager from two
active market makers in the security on the basis of reasonable
inquiry; (iv) debt instruments having a maturity of more than 397
days when issued, and non-money market type instruments having a
maturity of 397 days or less when issued, which have a remaining
maturity of 60 days or less are valued at the mean between the
"bid" and "ask" prices determined by a pricing service approved by
the Fund's Board of Trustees or obtained by the Manager from two
active market makers in the security on the basis of reasonable
inquiry; (v) money market debt securities that had a maturity of
less than 397 days when issued that have a remaining maturity of 60
days or less are valued at cost, adjusted for amortization of
premiums and accretion of discounts; and (vi) securities (including
restricted securities) not having readily-available market
quotations are valued at fair value determined under the Board's
procedures. If the Manager is unable to locate two market makers
willing to give quotes (see (ii), (iii) and (iv) above), the
security may be priced at the mean between the "bid" and "ask"
prices provided by a single active market maker (which in certain
cases may be the "bid" price if no "ask" price is available).
In the case of U.S. Government Securities and mortgage-backed
securities, where last sale information is not generally available,
such pricing procedures may include "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield,
maturity and other special factors involved. The Manager may use
pricing services approved by the Board of Trustees to price U.S.
Government Securities for which last sale information is not
generally available. The Manager will monitor the accuracy of such
pricing services, which may include comparing prices used for
portfolio evaluation to actual sales prices of selected securities.
Trading in securities on European and Asian exchanges and over-
the-counter markets is normally completed before the close of the
New York Stock Exchange. Events affecting the values of foreign
securities traded in securities markets that occur between the time
their prices are determined and the close of the New York Stock
Exchange will not be reflected in the Fund's calculation of net
asset value unless the Board of Trustees or the Manager, under
procedures established by the Board of Trustees, determines that
the particular event is likely to effect a material change in the
value of such security. Foreign currency, including forward
contracts, will be valued at the closing price in the London
foreign exchange market that day as provided by a reliable bank,
dealer or pricing service. The values of securities denominated in
foreign currency will be converted to U.S. dollars at the closing
price in the London foreign exchange market that day as provided by
a reliable bank, dealer or pricing service.
Puts, calls and Futures are valued at the last sales price on
the principal exchange on which they are traded or on NASDAQ, as
applicable, as determined by a pricing service approved by the
Board of Trustees or by the Manager. If there were no sales that
day, value shall be the last sale price on the preceding trading
day if it is within the spread of the closing "bid" and "ask"
prices on the principal exchange or on NASDAQ on the valuation
date, or, if not, value shall be the closing "bid" price on the
principal exchange or on NASDAQ on the valuation date. If the put,
call or future is not traded on an exchange or on NASDAQ, it shall
be valued at the mean between "bid" and "ask" prices obtained by
the Manager from two active market makers (which in certain cases
may be the "bid" price if no "ask" price is available).
AccountLink. When shares are purchased through AccountLink, each
purchase must be at least $25.00. Shares will be purchased on the
regular business day the Distributor is instructed to initiate the
Automated Clearing House ("ACH") transfer to buy the shares.
Dividends will begin to accrue on shares purchased by the proceeds
of ACH transfers on the business day the Fund receives Federal
Funds for the purchase through the ACH system before the close of
The New York Stock Exchange. The Exchange normally closes at 4:00
P.M., but may close earlier on certain days. If Federal Funds are
received on a business day after the close of the Exchange, the
shares will be purchased and dividends will begin to accrue on the
next regular business day. The proceeds of ACH transfers are
normally received by the Fund 3 days after the transfers are
initiated. The Distributor and the Fund are not responsible for
any delays in purchasing shares resulting from delays in ACH
transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced
sales charge rate may be obtained for Class A shares under Right of
Accumulation and Letters of Intent because of the economies of
sales efforts and reduction in expenses realized by the
Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in the
Prospectus because the Distributor incurs little or no selling
expenses. The term "immediate family" refers to one's spouse,
children, grandchildren, grandparents, parents, parents-in-law,
aunts, uncles, nieces and nephews, siblings, sons-and daughters-in-
law, a sibling's spouse and a spouse's siblings.
The Oppenheimer funds. The Oppenheimer funds are those mutual
funds for which the Distributor acts as the distributor or the sub-
distributor and include the following:
Oppenheimer Municipal Fund
Oppenheimer New York Municipal Fund
Oppenheimer California Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Main Street California Municipal Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer New Jersey Municipal
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Rochester Fund Municipals*
Rochester Fund Series - The Bond Fund for Growth*
Rochester Portfolio Series - Limited Term New York Municipal Fund*
Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund
Oppenheimer Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer International Bond Fund
Oppenheimer Enterprise Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer International Growth Fund
Oppenheimer Disciplined Value Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer LifeSpan Growth Fund
Oppenheimer Developing Markets Fund
<PAGE>
- -----------------------
* Shares of the Fund are not presently exchangeable for shares of
these funds.
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
<PAGE>
There is an initial sales charge on the purchase of Class A
shares of each of the Oppenheimer funds except Money Market Funds
(under certain circumstances described herein, redemption proceeds
of Money Market Fund shares may be subject to a contingent
deferred sales charge).
Letters of Intent. A Letter of Intent (referred to as a
"Letter") is an investor's statement in writing to the Distributor
of the intention to purchase Class A shares or Class A and Class B
shares of the Fund and other OppenheimerFunds during a 13-month
period (the "Letter of Intent period"), which may, at the
investor's request, include purchases made up to 90 days prior to
the date of the Letter. The Letter states the investor's intention
to make the aggregate amount of purchases of shares which, when
added to the investor's holdings of shares of those funds, will
equal or exceed the amount specified in the Letter. Purchases made
at net asset value without sales charge do not count toward
satisfying the amount of the Letter. A letter enables an investor
to count the Class A and Class B shares purchased under the Letter
to obtain the reduced sales charge rate on purchases of Class A
shares of the Fund (and other OppenheimerFunds) that applies under
the Right of Accumulation to current purchases of Class A shares.
Each purchase of Class A shares under the Letter will be made at
the public offering price (including the sales charge) that applies
to a single lump-sum purchase of shares in the amount intended to
be purchased under the Letter.
In submitting a Letter, the investor makes no commitment to
purchase shares, but if the investor's purchases of shares within
the Letter of Intent period, when added to the value (at offering
price) of the investor's holdings of shares on the last day of that
period, do not equal or exceed the intended purchase amount, the
investor agrees to pay the additional amount of sales charge
applicable to such purchases, as set forth in "Terms of Escrow,"
below (as those terms may be amended from time to time). The
investor agrees that shares equal in value to 5% of the intended
purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be
bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and
if such terms are amended, as they may be from time to time by the
Fund, that those amendments will apply automatically to existing
Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer funds
by OppenheimerFunds prototype 401(k) plans under a Letter of
Intent, the Transfer Agent will not hold shares in escrow. If the
intended purchase amount under the Letter entered into by an
OppenheimerFunds prototype 401(k) plan is not purchased by the plan
by the end of the Letter of Intent period, there will be no
adjustment of commissions paid to the broker-dealer or financial
institution of record for accounts held in the name of that plan.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended purchase amount, the
commissions previously paid to the dealer of record for the account
and the amount of sales charge retained by the Distributor will be
adjusted to the rates applicable to actual purchases. If total
eligible purchases during the Letter of Intent period exceed the
intended purchase amount and exceed the amount needed to qualify
for the next sales charge rate reduction set forth in the
applicable prospectus, the sales charges paid will be adjusted to
the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid
to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the
investor's account at the net asset value per share in effect on
the date of such purchase, promptly after the Distributor's receipt
thereof.
In determining the total amount of purchases made under a
Letter, shares redeemed by the investor prior to the termination of
the Letter of Intent period will be deducted. It is the
responsibility of the dealer of record and/or the investor to
advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All
of such purchases must be made through the Distributor.
Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in
value to 5% of the intended purchase amount specified in the Letter
shall be held in escrow by the Transfer Agent. For example, if the
intended purchase amount is $50,000, the escrow shall be shares
valued in the amount of $2,500 (computed at the public offering
price adjusted for a $50,000 purchase). Any dividends and capital
gains distributions on the escrowed shares will be credited to the
investor's account.
2. If the intended purchase amount specified under the Letter
is completed within the thirteen-month Letter of Intent period, the
escrowed shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period
the total purchases pursuant to the Letter are less than the
intended purchase amount specified in the Letter, the investor must
remit to the Distributor an amount equal to the difference between
the dollar amount of sales charges actually paid and the amount of
sales charges which would have been paid if the total amount
purchased had been made at a single time. Such sales charge
adjustment will apply to any shares redeemed prior to the
completion of the Letter. If such difference in sales charges is
not paid within twenty days after a request from the Distributor or
the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares
necessary to realize such difference in sales charges. Full and
fractional shares remaining after such redemption will be released
from escrow. If a request is received to redeem escrowed shares
prior to the payment of such additional sales charge, the sales
charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes
and appoints the Transfer Agent as attorney-in-fact to surrender
for redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of a Letter)
include (a) Class A shares sold with a front-end sales charge or
subject to a Class A contingent deferred sales charge, (b) Class B
shares acquired subject to a contingent deferred sales charge, and
(c) Class A or Class B shares acquired in exchange for either (i)
Class A shares of one of the other Oppenheimer funds that were
acquired subject to a Class A initial or contingent deferred sales
charge or (ii) Class B shares of one of the other Oppenheimer funds
that were acquired subject to a contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be
exchanged for shares of another fund to which an exchange is
requested, as described in the section of the Prospectus entitled
"Exchange Privilege," and the escrow will be transferred to that
other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a
bank account, a check (minimum $25) for the initial purchase must
accompany the application. Shares purchased by Asset Builder Plan
payments from bank accounts are subject to the redemption
restrictions for recent purchases described in "How To Sell
Shares," in the Prospectus. Asset Builder Plans also enable
shareholders of Oppenheimer Cash Reserves to use those accounts for
monthly automatic purchases of shares of up to four other
Oppenheimer funds.
There is a front-end sales charge on the purchase of certain
Oppenheimer funds, or a contingent deferred sales charge may apply
to shares purchased by Asset Builder payments. An application
should be obtained from the Distributor, completed and returned,
and a prospectus of the selected fund(s) should be obtained from
the Distributor or your financial advisor before initiating Asset
Builder payments. The amount of the Asset Builder investment may
be changed or the automatic investments may be terminated at any
time by writing to the Transfer Agent. A reasonable period
(approximately 15 days) is required after the Transfer Agent's
receipt of such instructions to implement them. The Fund reserves
the right to amend, suspend, or discontinue offering such plans at
any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders
for the Fund's shares (for example, when a purchase check is
returned to the Fund unpaid) causes a loss to be incurred when the
net asset value of the Fund's shares on the cancellation date is
less than on the purchase date. That loss is equal to the amount
of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is
responsible for that loss. If the investor fails to compensate the
Fund for the loss, the Distributor will do so. The Fund may
reimburse the Distributor for that amount by redeeming shares from
any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
Retirement Plans. In describing certain types of employee benefit
plans that may purchase Class A shares without being subject to the
Class A contingent deferred sales charge, the term "employee
benefit plan" means any plan or arrangement, whether or not
"qualified" under the Internal Revenue Code, including, medical
savings accounts, payroll deduction plans or similar plans in which
Class A shares are purchased by a fiduciary or other person for the
account of participants who are employees of a single employer or
of affiliated employers, if the Fund account is registered in the
name of the fiduciary or other person for the benefit of
participants in the plan.
The term "group retirement plan" means any qualified or non-
qualified retirement plan (including 457 plans, SEPs, SARSEPs,
403(b) plans, and SIMPLE plans) for employees of a corporation or
a sole proprietorship, members and employees of a partnership or
association or other organized group of persons (the members of
which may include other groups), if the group has made special
arrangements with the Distributor and all members of the group
participating in the plan purchase Class A shares of the Fund
through a single investment dealer, broker or other financial
institution designated by the group.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and
conditions for redemptions set forth in the Prospectus.
Involuntary Redemptions. The Fund's Board of Trustees has the
right to cause the involuntary redemption of the shares held in any
account if the aggregate net asset value of those shares is less
than $200 or such lesser amount as the Board may fix. The Board of
Trustees will not cause the involuntary redemption of shares in an
account if the aggregate net asset value of the shares has fallen
below the stated minimum solely as a result of market fluctuations.
Should the Board elect to exercise this right, it may also fix, in
accordance with the Investment Company Act, the requirements for
any notice to be given to the shareholders in question (not less
than 30 days), or the Board may set requirements for granting
permission to the Shareholder to increase the investment, and set
other terms and conditions so that the shares would not be
involuntarily redeemed.
Payments "In Kind". The Prospectus states that payment for
shares tendered for redemption is ordinarily made in cash.
However, the Board of Trustees of the Fund may determine that it
would be detrimental to the best interests of the remaining
shareholders of the Fund to make payment of a redemption order
wholly or partly in cash. In that case the Fund may pay the
redemption proceeds in whole or in part by a distribution "in kind"
of securities from the portfolio of the Fund, in lieu of cash, in
conformity with applicable rules of the Securities and Exchange
Commission. The Fund has elected to be governed by Rule 18f-1
under the Investment Company Act, pursuant to which the Fund is
obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net assets of the Fund during any 90-day
period for any one shareholder. If shares are redeemed in kind,
the redeeming shareholder might incur brokerage or other costs in
selling the securities for cash. The method of valuing securities
used to make redemptions in kind will be the same as the method the
Fund uses to value its portfolio securities described above under
the "Determination of Net Asset Values Per Share" and that
valuation will be made as of the time the redemption price is
determined.
Reinvestment Privilege. Within six months of a redemption, a
shareholder may reinvest all or part of the redemption proceeds of
(i) Class A shares that you purchased subject to an initial sales
charge or the Class A contingent deferred sales charge, or (ii)
Class B shares that were subject to the Class B contingent deferred
sales charge when redeemed. This privilege does not apply to Class
C shares. The reinvestment may be made without sales charge only
in Class A shares of the Fund or any of the other Oppenheimer funds
into which shares of the Fund are exchangeable as described below,
at the net asset value next computed after the Transfer Agent
receives the reinvestment order. The shareholder must ask the
Distributor for that privilege at the time of reinvestment. Any
capital gain that was realized when the shares were redeemed is
taxable, and reinvestment will not alter any capital gains tax
payable on that gain. If there has been a capital loss on the
redemption, some or all of the loss may not be tax deductible,
depending on the timing and amount of the reinvestment. Under the
Internal Revenue Code, if the redemption proceeds of Fund shares on
which a sales charge was paid are reinvested in shares of the Fund
or another of the Oppenheimer funds within 90 days of payment of
the sales charge, the shareholder's basis in the shares of the Fund
that were redeemed may not include the amount of the sales charge
paid. That would reduce the loss or increase the gain recognized
from the redemption. However, in that case the sales charge would
be added to the basis of the shares acquired by the reinvestment of
the redemption proceeds. The Fund may amend, suspend or cease
offering this reinvestment privilege at any time as to shares
redeemed after the date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of any class at the time of
transfer to the name of another person or entity (whether the
transfer occurs by absolute assignment, gift or bequest, not
involving, directly or indirectly, a public sale). The transferred
shares will remain subject to the contingent deferred sales charge,
calculated as if the transferee shareholder had acquired the
transferred shares in the same manner and at the same time as the
transferring shareholder. If less than all shares held in an
account are transferred, and some but not all shares in the account
would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus
under "How to Buy Shares" for the imposition of the Class B and
Class C contingent deferred sales charge will be followed in
determining the order in which shares are transferred.
Distributions From Retirement Plans. Requests for distributions
from OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans,
401(k) plans, or pension or profit-sharing plans should be
addressed to "Trustee, OppenheimerFunds Retirement Plans," c/o the
Transfer Agent at its address listed in "How To Sell Shares" in the
Prospectus or on the back cover of this Statement of Additional
Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if
the distribution is premature; and (iii) conform to the
requirements of the plan and the Fund's other redemption
requirements. Participants (other than self-employed person
maintaining a plan account in their own name) in OppenheimerFunds-
sponsored prototype pension or profit-sharing 401(k) plans may not
directly redeem or exchange shares held for their account under
those plans. The employer or plan administrator must sign the
request. Distributions from pension, profit sharing plans or
401(k) plans are subject to special requirements under the Internal
Revenue Code and certain documents (available from the Transfer
Agent) must be completed before the distribution may be made.
Distributions from retirement plans are subject to withholding
requirements under the Internal Revenue Code, and IRS Form W-4P
(available from the Transfer Agent) must be submitted to the
Transfer Agent with the distribution request, or the distribution
may be delayed. Unless the shareholder has provided the Transfer
Agent with a certified tax identification number, the Internal
Revenue Code requires that tax be withheld from any distribution
even if the shareholder elects not to have tax withheld. The Fund,
the Manager, the Distributor, the Trustee and the Transfer Agent
assume no responsibility to determine whether a distribution
satisfies the conditions of applicable tax laws and will not be
responsible for any tax penalties assessed in connection with a
distribution.
Special Arrangements for Repurchase of Shares from Dealers and
Brokers. The Distributor is the Fund's agent to repurchase its
shares from authorized dealers or brokers on behalf of their
customers. The shareholder should contact the broker or dealer to
arrange this type of redemption. The repurchase price per share
will be the net asset value next computed after the Distributor
receives the order placed by the dealer or broker, except that if
the Distributor receives a repurchase order from the dealer or
broker after the close of The New York Stock Exchange on a regular
business day, it will be processed at that day's net asset value,
if the order was received by the dealer or broker from its customer
prior to the time the Exchange closes (normally, that is 4:00 P.M.,
but may be earlier on some days) and the order was transmitted to
and received by the Distributor prior to its close of business that
day (normally 5:00 P.M.). Ordinarily, for accounts redeemed by a
broker-dealer under this procedure, payment will be made within
three business days after the shares have been redeemed upon the
Distributor's receipt of the required redemption documents in
proper form, with the signature(s) of the registered owners
guaranteed on the redemption document as described in the
Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares
of the Fund valued at $5,000 or more can authorize the Transfer
Agent to redeem shares (minimum $50) automatically on a monthly,
quarterly, semi-annual or annual basis under an Automatic
Withdrawal Plan. Shares will be redeemed three business days prior
to the date requested by the shareholder for receipt of the
payment. Automatic withdrawals of up to $1,500 per month may be
requested by telephone if payments are to be made by check payable
to all shareholders of record and sent to the address of record for
the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on
this basis. Payments are normally made by check, but shareholders
having AccountLink privileges (see "How To Buy Shares") may arrange
to have Automatic Withdrawal Plan payments transferred to the bank
account designated on the OppenheimerFunds New Account Application
or signature-guaranteed instructions. The Fund cannot guarantee
receipt of a payment on the date requested and reserves the right
to amend, suspend or discontinue offering such plans at any time
without prior notice. Because of the sales charge assessed on
Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an
Automatic Withdrawal Plan. Class B and Class C shareholders should
not establish withdrawal plans because of the imposition of the
contingent deferred sales charges on such withdrawals (except where
the Class B and Class C contingent deferred sales charges are
waived as described in the Prospectus under "Waivers of Class B and
Class C Sales Charges").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such
plans, as stated below and in the provisions of the
OppenheimerFunds Application relating to such Plans, as well as the
Prospectus. These provisions may be amended from time to time by
the Fund and/or the Distributor. When adopted, such amendments
will automatically apply to existing Plans.
Automatic Exchange Plans. Shareholders can authorize the
Transfer Agent (on the OppenheimerFunds Application or signature-
guaranteed instructions) to exchange a pre-determined amount of
shares of the Fund for shares (of the same class) of other
Oppenheimer funds automatically on a monthly, quarterly, semi-
annual or annual basis under an Automatic Exchange Plan. The
minimum amount that may be exchanged to each other fund account is
$25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to
Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a
sales charge will be redeemed first and shares acquired with
reinvested dividends and capital gains distributions will be
redeemed next, followed by shares acquired with a sales charge, to
the extent necessary to make withdrawal payments. Depending upon
the amount withdrawn, the investor's principal may be depleted.
Payments made under withdrawal plans should not be considered as a
yield or income on your investment. It may not be desirable to
purchase additional Class A shares while making automatic
withdrawals because of the sales charges that apply to purchases
when made. Accordingly, a shareholder normally may not maintain an
Automatic Withdrawal Plan while simultaneously making regular
purchases of Class A shares.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the
"Planholder") who executed the Plan authorization and application
submitted to the Transfer Agent. Neither the Fund nor the Transfer
Agent shall incur any liability to the Planholder for any action
taken or omitted by the Transfer Agent in good faith to administer
the Plan. Certificates will not be issued for shares of the Fund
purchased for and held under the Plan, but the Transfer Agent will
credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder
may be surrendered unendorsed to the Transfer Agent with the Plan
application so that the shares represented by the certificate may
be held under the Plan.
For accounts subject to Automatic Withdrawal Plans,
distributions of capital gains must be reinvested in shares of the
Fund, which will be done at net asset value without a sales charge.
Dividends on shares held in the account may be paid in cash or
reinvested.
Redemptions of shares needed to make withdrawal payments will
be made at the net asset value per share determined on the
redemption date. Checks or ACH transfer payments of the proceeds
of Plan withdrawals will normally be transmitted three business
days prior to the date selected for receipt of the payment (receipt
of payment on the date selected cannot be guaranteed), according to
the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the
address to which checks are to be mailed or AccountLink payments
are to be sent may be changed at any time by the Planholder by
writing to the Transfer Agent. The Planholder should allow at
least two weeks' time in mailing such notification for the
requested change to be put in effect. The Planholder may, at any
time, instruct the Transfer Agent by written notice (in proper form
in accordance with the requirements of the then-current Prospectus
of the Fund) to redeem all, or any part of, the shares held under
the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will
mail a check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by
writing to the Transfer Agent. A Plan may also be terminated at
any time by the Transfer Agent upon receiving directions to that
effect from the Fund. The Transfer Agent will also terminate a
Plan upon receipt of evidence satisfactory to it of the death or
legal incapacity of the Planholder. Upon termination of a Plan by
the Transfer Agent or the Fund, shares that have not been redeemed
from the account will be held in uncertificated form in the name of
the Planholder, and the account will continue as a dividend-
reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the Class A shares
in certificated form. Upon written request from the Planholder,
the Transfer Agent will determine the number of shares for which a
certificate may be issued without causing the withdrawal checks to
stop because of exhaustion of uncertificated shares needed to
continue payments. However, should such uncertificated shares
become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the
Fund, the Planholder will be deemed to have appointed any successor
transfer agent to act as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of
Oppenheimer funds having more than one class of shares may be
exchanged only for shares of the same class of other Oppenheimer
funds. Shares of the Oppenheimer funds that have a single class
without a class designation are deemed "Class A" shares for this
purpose. All of the Oppenheimer funds offer Class A, B and C
shares except Oppenheimer Money Market Fund, Inc., Centennial Tax
Exempt Trust, Centennial Government Trust, Centennial New York Tax
Exempt Trust, Centennial California Tax Exempt Trust, Centennial
America Fund, L.P. and Daily Cash Accumulation Fund Inc., which
only offer Class A shares and Oppenheimer Main Street California
Tax Exempt Fund which only offers Class A and Class B shares (Class
B and Class C shares of Oppenheimer Cash reserves are generally
available only by exchange from the same class of shares of other
Oppenheimer funds or through OppenheimerFunds sponsored 401 (k)
plans). A current list of funds showing which funds offer which
classes can be obtained by calling the Distributor at 1-800-525-
7048.
Class A shares of Oppenheimer funds may be exchanged at net
asset value for shares of any Money Market Fund. Shares of any
Money Market Fund purchased without a sales charge may be exchanged
for shares of Oppenheimer funds offered with a sales charge upon
payment of the sales charge (or, if applicable, may be used to
purchase shares of Oppenheimer funds subject to a contingent
deferred sales charge). However, shares of Oppenheimer Money
Market Fund, Inc. purchased with the redemption proceeds of shares
of other mutual funds (other than funds managed by the Manager or
its subsidiaries) redeemed within the 12 months prior to that
purchase may subsequently be exchanged for shares of other
Oppenheimer funds without being subject to an initial or contingent
deferred sales charge, whichever is applicable. To qualify for
that privilege, the investor or the investor's dealer must notify
the Distributor of eligibility for this privilege at the time the
shares of Oppenheimer Money Market Fund, Inc. are purchased, and,
if requested, must supply proof of entitlement to this privilege.
Shares of this Fund acquired by reinvestment of dividends or
distributions from any other of the Oppenheimer funds, except
Oppenheimer Cash Reserves, or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor
may be exchanged at net asset value for shares of any of the
Oppenheimer funds.
No contingent deferred sales charge is imposed on exchanges of
shares of any class purchased subject to a contingent deferred
sales charge. However, when Class A shares acquired by exchange of
Class A shares of other Oppenheimer funds purchased subject to a
Class A contingent deferred sales charge are redeemed within 18
months of the end of the calendar month of the initial purchase of
the exchanged Class A shares, the Class A contingent deferred sales
charge is imposed on the redeemed shares (see "Class A Contingent
Deferred Sales Charge" in the Prospectus). The Class B contingent
deferred sales charge is imposed on Class B shares acquired by
exchange if they are redeemed within 6 years of the initial
purchase of the exchanged Class B shares. The Class C contingent
deferred sales charge is imposed on Class C shares acquired by
exchange if they are redeemed within 12 months of the initial
purchase of the exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an
exchange, the priorities described in "How To Buy Shares" in the
Prospectus for the imposition of the Class B and Class C contingent
deferred sales charge will be followed in determining the order in
which the shares are exchanged. Shareholders should take into
account the effect of any exchange on the applicability and rate of
any contingent deferred sales charge that might be imposed in the
subsequent redemption of remaining shares. Shareholders owning
shares of more than one class must specify whether they intend to
exchange Class A, Class B or Class C shares.
The Fund reserves the right to reject telephone or written
exchange requests submitted in bulk by anyone on behalf of more
than one account. The Fund may accept requests for exchanges of up
to 50 accounts per day from representatives of authorized dealers
that qualify for this privilege. In connection with any exchange
request, the number of shares exchanged may be less than the number
requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information or would include shares covered
by a share certificate that is not tendered with the request. In
those cases, only the shares available for exchange without
restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either
have an existing account in, or obtain and acknowledge receipt of
a prospectus of, the fund to which the exchange is to be made. For
full or partial exchanges of an account made by telephone, any
special account features such as Asset Builder Plans, Automatic
Withdrawal Plans and retirement plan contributions will be switched
to the new account unless the Transfer Agent is instructed
otherwise. If all telephone lines are busy (which might occur, for
example, during periods of substantial market fluctuations),
shareholders might not be able to request exchanges by telephone
and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day
the Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired
are purchased on the Redemption Date, but such purchases may be
delayed by either fund up to five business days if it determines
that it would be disadvantaged by an immediate transfer of the
redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it
(for example, if the receipt of multiple exchange requests from a
dealer might require the disposition of portfolio securities at a
time or at a price that might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have
different investment objectives, policies and risks, and a
shareholder should assure that the Fund selected is appropriate for
his or her investment and should be aware of the tax consequences
of an exchange. For federal income tax purposes, an exchange
transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above,
discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and
the Transfer Agent are unable to provide investment, tax or legal
advice to a shareholder in connection with an exchange request or
any other investment transaction.
Dividends, Capital Gains and Taxes
Tax Status of the Fund's Dividends and Distributions. The Federal
tax treatment of the Fund's dividends and capital gains
distributions is explained in the Prospectus under the caption
"Dividends, Capital Gains and Taxes." Special provisions of the
Internal Revenue Code govern the eligibility of the Fund's
dividends for the dividends-received deduction for corporate
shareholders. Long-term capital gains distributions are not
eligible for the deduction. In addition, the amount of dividends
paid by the Fund which may qualify for the deduction is limited to
the aggregate amount of qualifying dividends that the Fund derives
from its portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not be
eligible for the deduction on dividends paid on Fund shares held
for 45 days or less. To the extent the Fund's dividends are
derived from gross income from option premiums, interest income or
short-term gains from the sale of securities or dividends from
foreign corporations, those dividends will not qualify for the
deduction.
Under the Internal Revenue Code, by December 31 each year, the
Fund must distribute 98% of its taxable investment income earned
from January 1 through December 31 of that year and 98% of its
capital gains realized in the period from November 1 of the prior
year through October 31 of the current year, or else the Fund must
pay an excise tax on the amounts not distributed. While it is
presently anticipated that the Fund will meet those requirements,
the Fund's Board of Trustees and the Manager might determine in a
particular year that it would be in the best interest of
shareholders for the Fund not to make such distributions at the
required levels and to pay the excise tax on the undistributed
amounts. That would reduce the amount of income or capital gains
available for distribution to shareholders.
If the Fund has more than 50% of its total assets invested in
foreign securities 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, at their option, a deduction)
for foreign taxes paid by the Fund. Under Section 853,
shareholders would be entitled to treat the foreign taxes withheld
from interest and dividends paid to the Fund from its foreign
investments as a credit on their federal income taxes. 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 taxes on the income received.
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 distribution. The
Fund qualified during its last fiscal year, and intends to qualify
in current and future years, but reserves the right not to do so.
The Internal Revenue Code contains a number of complex tests
relating to such qualification in which 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 "Tax Aspects of Covered
Calls and Hedging Instruments," above). If it did not so qualify,
the Fund would be treated for tax purposes as an ordinary
corporation and receive no tax deduction for payments made to
shareholders.
The amount of a class's distributions may vary from time to time
depending on market conditions, the composition of the Fund's
portfolio, and expenses borne by the Fund or borne separately by a
class, as described in "Alternative Sales Arrangements -- Class A,
Class B and Class C Shares," above. Dividends are calculated in
the same manner, at the same time and on the same day for shares of
each class. However, dividends on Class B and Class C shares are
expected to be lower as a result of the asset-based sales charge on
Class B and Class C shares, and Class B and Class C dividends will
also differ in amount as a consequence of any difference in net
asset value between the classes.
Dividends, distributions and the proceeds of the redemption of
Fund shares represented by checks returned to the Transfer Agent by
the Postal Service as undeliverable will be invested in shares of
Oppenheimer Money Market Fund, Inc., as promptly as possible after
the return of such checks to the Transfer Agent, to enable the
investor to earn a return on otherwise idle funds.
Dividend Reinvestment in Another Fund. Shareholders of the Fund
may elect to reinvest all dividends and/or capital gains
distributions in shares of the same class of any of the other
Oppenheimer funds listed in "Reduced Sales Charges," above, at net
asset value without sales charge. To elect this option, a
shareholder must notify the Transfer Agent in writing and either
have an existing account in the fund selected for reinvestment or
must obtain a prospectus for that fund and an application from the
Distributor to establish an account. The investment will be made
at the net asset value per share in effect at the close of business
on the payable date of the dividend or distribution. Dividends
and/or distributions from shares of other Oppenheimer funds may be
invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's
assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities, collecting income on
the portfolio securities and handling the delivery of such
securities to and from the Fund. The Manager has represented to
the Fund that the banking relationships between the Manager and the
Custodian have been and will continue to be unrelated to and
unaffected by the relationship between the Fund and the Custodian.
It will be the practice of the Fund to deal with the Custodian in
a manner uninfluenced by any banking relationship the Custodian may
have with the Manager and its affiliates. The Fund's cash balances
with the Custodian in excess of $100,000 are not protected by
Federal deposit insurance. Such uninsured balances may at times be
substantial.
Independent Auditors. The independent auditors of the Fund audit
the Fund's financial statements and perform other related audit
services. They also act as auditors for certain other funds
advised by the Manager and its affiliates.
<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, 1996, 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 five year period then ended.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with
generally accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of September
30, 1996, 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, 1996, 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 five year period then ended, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG PEAT MARWICK LLP
Denver, Colorado
October 21, 1996
<PAGE>
STATEMENT OF INVESTMENTS September 30, 1996
<TABLE>
<CAPTION>
FACE MARKET
VALUE
AMOUNT(1) SEE NOTE
1
================================================================================================================
======
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--4.3%
- ----------------------------------------------------------------------------------------------------------------
- ------
U.S. Treasury Bonds, STRIPS, Zero Coupon:
7.467%, 11/15/18(2) $ 5,000,000 $
1,032,349
7.265%, 11/15/22(2) 8,000,000
1,260,744
7.41%, 11/15/22(2) 7,000,000
1,103,151
7.467%, 8/15/20(2) 7,000,000
1,275,736
7.377%, 8/15/22(2) 8,000,000
1,280,055
7.305%, 8/15/23(2) 7,000,000
1,062,572
- -----------
Total U.S. Government Obligations (Cost $6,731,653)
7,014,607
================================================================================================================
======
FOREIGN GOVERNMENT OBLIGATIONS--6.9%
- ----------------------------------------------------------------------------------------------------------------
- ------
Argentina (Republic of) Past Due Interest Bonds, Series L, 6.625%,
3/31/05(3) 1,470,000
1,232,963
- --------------------------------------------------------------------------------------------------------------
Bonos de la Tesoreria de la Federacion, Zero Coupon:
36.915%, 4/3/97(2) (MXP) 31,320,000
3,637,259
31.237%, 4/30/97(2) (MXP) 15,000,000
1,710,691
- --------------------------------------------------------------------------------------------------------------
Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion del Estado,
10.30%, 6/15/02 (ESP) 150,000,000
1,315,369
- --------------------------------------------------------------------------------------------------------------
Venezuela (Republic of) Front-Loaded Interest Reduction Bonds,
Series B, 6.50%, 3/31/07(3) 4,000,000
3,372,500
- -----------
Total Foreign Government Obligations (Cost $9,676,831)
11,268,782
================================================================================================================
======
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--6.2%
- ----------------------------------------------------------------------------------------------------------------
- ------
AMC Entertainment, Inc., 12.625% Sr. Sub. Gtd. Nts., 8/1/02 500,000
544,375
- --------------------------------------------------------------------------------------------------------------
Carbide/Graphite Group, Inc. (The), 11.50% Sr. Nts., 9/1/03 316,000
346,810
- --------------------------------------------------------------------------------------------------------------
Chiquita Brands International, Inc., 9.625% Sr. Nts., 1/15/04 500,000
510,000
- --------------------------------------------------------------------------------------------------------------
Foodmaker, Inc., 9.25% Sr. Nts., 3/1/99 1,000,000
1,002,500
- --------------------------------------------------------------------------------------------------------------
Grand Union Co., 12% Sr. Nts., 9/1/04 2,000,000
2,027,500
- --------------------------------------------------------------------------------------------------------------
Magellan Health Services, Inc., 11.25% Sr. Sub. Nts., Series A, 4/15/04 500,000
547,500
- --------------------------------------------------------------------------------------------------------------
Matahari International Finance Co. BV, 11.25% Gtd. Nts., 3/15/01 500,000
540,000
- --------------------------------------------------------------------------------------------------------------
OPI International, Inc., 12.875% Sr. Gtd. Nts., 7/15/02 500,000
552,500
- --------------------------------------------------------------------------------------------------------------
Oryx Energy Co., 10% Debs., 4/1/01 1,000,000
1,087,763
- --------------------------------------------------------------------------------------------------------------
Rabobank Nederland, 10.375% Debs., 6/21/00 (ITL) 1,500,000,000
1,065,586
- --------------------------------------------------------------------------------------------------------------
Sequa Corp., 9.375% Sr. Sub. Nts., 12/15/03 1,000,000
987,500
- --------------------------------------------------------------------------------------------------------------
Tultex Corp., 10.625% Sr. Gtd. Nts., 3/15/05(4) 1,000,000
1,057,500
- -----------
Total Non-Convertible Corporate Bonds and Notes (Cost $10,019,601)
10,269,534
<CAPTION>
SHARES
================================================================================================================
======
<S> <C> <C>
COMMON STOCKS--78.7%
- ----------------------------------------------------------------------------------------------------------------
- ------
BASIC MATERIALS--4.9%
- ----------------------------------------------------------------------------------------------------------------
- ------
CHEMICALS--2.3%
Freeport-McMoRan Resource Partners, LP 200,000
3,775,000
- ----------------------------------------------------------------------------------------------------------------
- ------
METALS--2.6%
Cia de Minas Buenaventura SA, Series A 465,000
4,186,783
- ----------------------------------------------------------------------------------------------------------------
- ------
CONSUMER CYCLICALS--16.0%
- ----------------------------------------------------------------------------------------------------------------
- ------
AUTOS & HOUSING--5.3%
IRSA Inversiones y Representaciones, SA 406,002
1,185,678
- --------------------------------------------------------------------------------------------------------------
Porsche AG, Preference(5) 11,000
7,521,972
- -----------
8,707,650
</TABLE>
7 Oppenheimer Global Growth & Income Fund
<PAGE> 8
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET
VALUE
SHARES SEE NOTE
1
- ----------------------------------------------------------------------------------------------------------------
- ------
<S> <C> <C>
MEDIA--2.2%
Viacom, Inc., Cl. B(5) 100,000
$3,550,000
- ----------------------------------------------------------------------------------------------------------------
- ------
RETAIL: GENERAL--1.8%
Galeries Lafayette(5) 6,030
1,747,809
- --------------------------------------------------------------------------------------------------------------
Trade House GUM, Sponsored ADR(5) 30,000
1,170,000
- -----------
2,917,809
- ----------------------------------------------------------------------------------------------------------------
- ------
RETAIL: SPECIALTY--6.7%
Reebok International Ltd. 90,000
3,127,500
- --------------------------------------------------------------------------------------------------------------
Wella AG 8,000
4,830,636
- --------------------------------------------------------------------------------------------------------------
Wolford AG 12,000
3,064,266
- -----------
11,022,402
- ----------------------------------------------------------------------------------------------------------------
- ------
CONSUMER NON-CYCLICALS--11.1%
- ----------------------------------------------------------------------------------------------------------------
- ------
BEVERAGES--5.9%
Allied Domecq PLC 700,000
4,902,819
- --------------------------------------------------------------------------------------------------------------
Remy Cointreau 126,400
3,193,520
- --------------------------------------------------------------------------------------------------------------
Serm Suk Public Co. Ltd. 50,000
1,534,377
- -----------
9,630,716
- ----------------------------------------------------------------------------------------------------------------
- ------
HEALTHCARE/DRUGS--3.4%
Amgen, Inc.(5) 20,000
1,262,500
- --------------------------------------------------------------------------------------------------------------
Genzyme Corp.(5) 150,000
3,825,000
- --------------------------------------------------------------------------------------------------------------
Neurogen Corp.(5) 20,000
505,000
- -----------
5,592,500
- ----------------------------------------------------------------------------------------------------------------
- ------
HEALTHCARE/SUPPLIES &
SERVICES--1.8%
United States Surgical Corp. 70,000
2,975,000
- ----------------------------------------------------------------------------------------------------------------
- ------
ENERGY--1.4%
- ----------------------------------------------------------------------------------------------------------------
- ------
OIL-INTEGRATED--1.4%
Lukoil Oil Co., Sponsored ADR 33,200
1,210,947
- --------------------------------------------------------------------------------------------------------------
Petroleo Brasileiro SA, Preference 10,000,000
1,145,886
- -----------
2,356,833
- ----------------------------------------------------------------------------------------------------------------
- ------
FINANCIAL--10.1%
- ----------------------------------------------------------------------------------------------------------------
- ------
BANKS--3.3%
Banco Bradesco SA, Preference 334,618,073
2,834,791
- --------------------------------------------------------------------------------------------------------------
Grupo Financiero Banorte SA de CV, Series B 700,000
743,574
- --------------------------------------------------------------------------------------------------------------
Industrial Credit & Investment Corp. of India Ltd. (The), GDR(5) (6) 162,500
1,807,812
- -----------
5,386,177
- ----------------------------------------------------------------------------------------------------------------
- ------
DIVERSIFIED FINANCIAL--6.7%
Cie Financiere de Paribas, Series A 80,000
5,146,039
- --------------------------------------------------------------------------------------------------------------
Hopewell Holdings Ltd. 9,000,000
5,091,802
- --------------------------------------------------------------------------------------------------------------
Taubman Centers, Inc. 75,000
834,375
- -----------
11,072,216
- ----------------------------------------------------------------------------------------------------------------
- ------
INSURANCE--0.1%
Marschollek, Lautenschlaeger und Partner AG 1,000
137,681
- ----------------------------------------------------------------------------------------------------------------
- ------
INDUSTRIAL--5.0%
- ----------------------------------------------------------------------------------------------------------------
- ------
ELECTRICAL EQUIPMENT--1.3%
FORE Systems, Inc.(5) 20,000
827,500
- --------------------------------------------------------------------------------------------------------------
Weg SA, Preference 2,846,000
1,337,925
- -----------
2,165,425
</TABLE>
8 Oppenheimer Global Growth & Income Fund
<PAGE> 9
<TABLE>
<CAPTION>
MARKET
VALUE
SHARES SEE NOTE
1
- ----------------------------------------------------------------------------------------------------------------
- ------
<S> <C> <C>
INDUSTRIAL SERVICES--0.5%
Adecco SA 1,490 $
410,075
- --------------------------------------------------------------------------------------------------------------
Intelligroup, Inc.(5) 28,000
388,500
- -----------
798,575
- ----------------------------------------------------------------------------------------------------------------
- ------
MANUFACTURING--1.8%
Berkshire Hathaway, Inc., Cl. A(5) 10
321,500
- --------------------------------------------------------------------------------------------------------------
Bic Corp. 20,000
2,627,270
- -----------
2,948,770
- ----------------------------------------------------------------------------------------------------------------
- ------
TRANSPORTATION--1.4%
Sea Containers Ltd., Cl. A 120,000
2,355,000
- ----------------------------------------------------------------------------------------------------------------
- ------
TECHNOLOGY--30.2%
- ----------------------------------------------------------------------------------------------------------------
- ------
AEROSPACE/DEFENSE--2.7%
Rolls-Royce PLC 1,200,000
4,490,957
- ----------------------------------------------------------------------------------------------------------------
- ------
COMPUTER HARDWARE--3.9%
QUALCOMM, Inc.(5) 150,000
6,375,000
- ----------------------------------------------------------------------------------------------------------------
- ------
COMPUTER SOFTWARE--13.6%
Cap Gemini SA(5) 75,000
3,284,088
- --------------------------------------------------------------------------------------------------------------
Ines Corp. 290,000
5,233,669
- --------------------------------------------------------------------------------------------------------------
Nintendo Co. Ltd. 110,000
7,061,727
- --------------------------------------------------------------------------------------------------------------
PLATINUM Technology, Inc.(5) 200,000
2,525,000
- --------------------------------------------------------------------------------------------------------------
SAP AG, Preference 25,000
4,195,992
- -----------
22,300,476
- ----------------------------------------------------------------------------------------------------------------
- ------
ELECTRONICS--10.0%
Burr-Brown Corp.(5) 75,000
1,500,000
- --------------------------------------------------------------------------------------------------------------
Coherent, Inc.(5) 170,000
5,992,500
- --------------------------------------------------------------------------------------------------------------
National Semiconductor Corp.(5) 360,000
7,245,000
- --------------------------------------------------------------------------------------------------------------
Texas Instruments, Inc. 30,000
1,653,750
- -----------
16,391,250
- ----------------------------------------------------------------------------------------------------------------
- ------
TELECOMMUNICATIONS-
TECHNOLOGY--0.0%
Millicom, Inc.(5) 15,500
--
- -----------
Total Common Stocks (Cost $124,601,241)
129,136,220
================================================================================================================
======
PREFERRED STOCKS--0.8%
- ----------------------------------------------------------------------------------------------------------------
- ------
Marschollek, Lautenschlaeger und Partner-VO, Non-vtg.
Preferred Stock (Cost $626,533) 10,000
1,258,798
================================================================================================================
======
OTHER SECURITIES--2.4%
- ----------------------------------------------------------------------------------------------------------------
- ------
U.S. Surgical Corp., $2.20 Depositary Shares representing
one-fiftieth share of Series A Preferred Stock (Cost $2,823,941) 95,000
3,930,625
<CAPTION>
UNITS
================================================================================================================
======
<S> <C>
<C>
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- ----------------------------------------------------------------------------------------------------------------
- ------
American Satellite Network, Inc. Wts., Exp. 6/99 (Cost $0) 3,875
--
</TABLE>
9 Oppenheimer Global Growth & Income Fund
<PAGE> 10
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET
VALUE
AMOUNT(1) SEE NOTE
1
================================================================================================================
======
<S> <C> <C>
REPURCHASE AGREEMENT--1.1%
- ----------------------------------------------------------------------------------------------------------------
- ------
Repurchase agreement with Zion First National Bank, 5.62%,
dated 9/30/96, to be repurchased at $1,800,281 on 10/1/96,
collateralized by U.S. Treasury Nts., 5.75%--8.875%, 5/15/97--8/15/04,
with a value of $1,837,008 (Cost $1,800,000) $1,800,000 $
1,800,000
- ----------------------------------------------------------------------------------------------------------------
- ------
TOTAL INVESTMENTS, AT VALUE (COST $156,279,800) 100.4%
164,678,566
- ----------------------------------------------------------------------------------------------------------------
- ------
LIABILITIES IN EXCESS OF OTHER ASSETS (0.4)
(627,834)
----------
- ------------
NET ASSETS 100.0%
$164,050,732
==========
============
</TABLE>
Distribution of investments by country of issue, as a percentage of
total investments at value, is as follows:
<TABLE>
<CAPTION>
COUNTRY MARKET VALUE
PERCENT
- --------------------------------------------------------------------------------------------------------------
<S> <C>
<C>
United States $70,447,304
42.8%
- --------------------------------------------------------------------------------------------------------------
Germany 17,945,078
10.9
- --------------------------------------------------------------------------------------------------------------
France 15,998,726
9.7
- --------------------------------------------------------------------------------------------------------------
Japan 12,295,397
7.5
- --------------------------------------------------------------------------------------------------------------
Great Britain 9,393,776
5.7
- --------------------------------------------------------------------------------------------------------------
Mexico 6,091,525
3.7
- --------------------------------------------------------------------------------------------------------------
Brazil 5,318,602
3.2
- --------------------------------------------------------------------------------------------------------------
Hong Kong 5,091,802
3.1
- --------------------------------------------------------------------------------------------------------------
Peru 4,186,783
2.5
- --------------------------------------------------------------------------------------------------------------
Venezuela 3,372,500
2.0
- --------------------------------------------------------------------------------------------------------------
Austria 3,064,266
1.9
- --------------------------------------------------------------------------------------------------------------
Argentina 2,418,640
1.5
- --------------------------------------------------------------------------------------------------------------
Russia 2,380,947
1.4
- --------------------------------------------------------------------------------------------------------------
India 1,807,813
1.1
- --------------------------------------------------------------------------------------------------------------
The Netherlands 1,605,586
1.0
- --------------------------------------------------------------------------------------------------------------
Thailand 1,534,377
0.9
- --------------------------------------------------------------------------------------------------------------
Spain 1,315,369
0.8
- --------------------------------------------------------------------------------------------------------------
Switzerland 410,075
0.2
------------
- -----
Total $164,678,566
100.0%
============
=====
</TABLE>
1. Face amount is reported in U.S. Dollars, except for those denoted in
the following currencies:
ESP -- Spanish Peseta MXP -- Mexican Peso
ITL -- Italian Lira
2. For zero coupon bonds, the interest rate shown is the effective
yield on the date of purchase.
3. Represents the current interest rate for a variable rate security.
4. A sufficient amount of securities has been designated to cover
outstanding forward foreign currency exchange contracts. See Note 5 of
Notes to Financial Statements.
5. Non-income producing security.
6. Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This
security has been determined to be liquid under guidelines established
by the Board of Trustees. This security amounts to $1,807,812 or 1.10%
of the Fund's net assets, at September 30, 1996.
See accompanying Notes to Financial Statements.
10 Oppenheimer Global Growth & Income Fund
<PAGE> 11
STATEMENT OF ASSETS AND LIABILITIES September 30, 1996
<TABLE>
<S> <C>
================================================================================================================
======
ASSETS
Investments, at value (cost $156,279,800)--see accompanying statement
$164,678,566
- --------------------------------------------------------------------------------------------------------------
Cash
187,281
- --------------------------------------------------------------------------------------------------------------
Unrealized appreciation on forward foreign currency exchange contracts--Note 5
502,455
- --------------------------------------------------------------------------------------------------------------
Receivables:
Investments sold
1,910,336
Interest, dividends and principal paydowns
756,080
Closed forward foreign currency exchange contracts
624,788
Shares of beneficial interest sold
96,778
- --------------------------------------------------------------------------------------------------------------
Other
6,362
- -----------
Total assets
168,762,646
================================================================================================================
======
LIABILITIES
Unrealized depreciation on forward foreign currency exchange contracts--Note 5
125
- --------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased
3,622,276
Shares of beneficial interest redeemed
466,786
Closed forward foreign currency exchange contracts
300,961
Distribution and service plan fees
96,131
Trustees' fees
64,399
Transfer and shareholder servicing agent fees
16,583
Other
144,653
- -----------
Total liabilities
4,711,914
================================================================================================================
======
NET ASSETS
$164,050,732
============
================================================================================================================
======
COMPOSITION OF
NET ASSETS
Paid-in capital
$141,204,705
- --------------------------------------------------------------------------------------------------------------
Overdistributed net investment income
(82,568)
- --------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions
14,010,713
- --------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation
of assets and liabilities denominated in foreign currencies
8,917,882
- ------------
Net assets
$164,050,732
============
================================================================================================================
======
NET ASSET VALUE
PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net
assets of $120,213,516 and 7,695,121 shares of beneficial interest outstanding)
$15.62
Maximum offering price per share (net asset value plus sales
charge of 5.75% of offering price)
$16.57
- --------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $8,131,241 and 522,313 shares of beneficial interest outstanding)
$15.57
- --------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $35,705,975 and 2,296,829 shares of beneficial interest outstanding)
$15.55
</TABLE>
See accompanying Notes to Financial Statements.
11 Oppenheimer Global Growth & Income Fund
<PAGE> 12
STATEMENT OF OPERATIONS For the Year Ended September 30, 1996
<TABLE>
<S> <C>
================================================================================================================
======
INVESTMENT INCOME
Interest (net of foreign withholding taxes of $16,179) $
4,181,335
- --------------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $40,875)
1,905,491
- -----------
Total income
6,086,826
================================================================================================================
======
EXPENSES
Management fees--Note 4
1,202,416
- --------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A
279,012
Class B
36,930
Class C
313,921
- --------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4
331,590
- --------------------------------------------------------------------------------------------------------------
Shareholder reports
146,065
- --------------------------------------------------------------------------------------------------------------
Custodian fees and expenses
132,439
- --------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses--Note 1
46,472
- --------------------------------------------------------------------------------------------------------------
Legal and auditing fees
25,120
- --------------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A
2,944
Class B
2,685
Class C
1,528
- --------------------------------------------------------------------------------------------------------------
Other
26,826
- -----------
Total expenses
2,547,948
================================================================================================================
======
NET INVESTMENT INCOME
3,538,878
================================================================================================================
======
REALIZED AND UNREALIZED
GAIN (LOSS)
Net realized gain (loss) on:
Investments
19,555,753
Foreign currency transactions
(1,415,230)
- -----------
Net realized gain
18,140,523
- --------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments
(1,271,146)
Translation of assets and liabilities denominated in foreign currencies
(2,016,174)
- -----------
Net change
(3,287,320)
- -----------
Net realized and unrealized gain
14,853,203
================================================================================================================
======
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$18,392,081
===========
</TABLE>
See accompanying Notes to Financial Statements.
12 Oppenheimer Global Growth & Income Fund
<PAGE> 13
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1996 1995
================================================================================================================
======
<S> <C> <C>
OPERATIONS
Net investment income $ 3,538,878 $
4,236,981
- --------------------------------------------------------------------------------------------------------------
Net realized gain 18,140,523
3,971,942
- --------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (3,287,320)
1,504,804
------------
- ------------
Net increase in net assets resulting from operations 18,392,081
9,713,727
================================================================================================================
======
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net investment income:
Class A (3,012,171)
(3,285,784)
Class B (89,925)
--
Class C (615,071)
(496,103)
- --------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (5,806,943)
(6,986,724)
Class B (48,484)
--
Class C (1,559,313)
(1,095,339)
================================================================================================================
======
BENEFICIAL INTEREST
TRANSACTIONS
Net increase (decrease) in net assets resulting from beneficial
interest transactions--Note 2:
Class A 1,387,903
(8,270,645)
Class B 7,852,376
--
Class C 5,914,656
11,031,033
================================================================================================================
======
NET ASSETS
Total increase 22,415,109
610,165
- --------------------------------------------------------------------------------------------------------------
Beginning of period 141,635,623
141,025,458
------------
- ------------
End of period [including undistributed (overdistributed) net
investment income of $(82,568) and $182,347, respectively] $164,050,732
$141,635,623
============
============
</TABLE>
See accompanying Notes to Financial Statements.
13 Oppenheimer Global Growth & Income Fund
<PAGE> 14
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
------------------------
YEAR ENDED SEPTEMBER 30,
1996 1995
================================================================================
<S> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $14.98 $15.21
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .47 .45
Net realized and unrealized gain (loss) 1.40 .54
-------- --------
Total income (loss) from investment operations 1.87 .99
- --------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.49) (.40)
Distributions from net realized gain (.74) (.82)
Total dividends and distributions to shareholders (1.23) (1.22)
- --------------------------------------------------------------------------------
Net asset value, end of period $15.62 $14.98
======== ========
================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 13.28% 7.43%
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $120,214 $113,341
- --------------------------------------------------------------------------------
Average net assets (in thousands) $115,186 $120,267
- --------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 2.65% 3.09%
Expenses 1.52% 1.63%
- --------------------------------------------------------------------------------
Portfolio turnover rate(5) 207.8% 135.2%
Average brokerage commission rate(6) $0.0004 --
</TABLE>
1. For the period from December 1, 1993 (inception of offering) to September
30, 1994.
2. For the period from October 10, 1995 (inception of offering) to September
30, 1996.
3. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
4. Annualized.
14 Oppenheimer Global Growth & Income Fund
<PAGE> 15
<TABLE>
<CAPTION>
CLASS B CLASS C
- -------------------------- ------------- -----------------------------
PERIOD ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
1994 1993 1992 1996(2) 1996 1995 1994(1)
===========================================================================
<S> <C> <C> <C> <C> <C> <C>
$14.09 $11.91 $12.43 $14.72 $14.92 $15.17 $14.85
- ---------------------------------------------------------------------------
.33 .29 .26 .36 .35 .35 .22
1.62 2.17 (.47) 1.63 1.40 .53 .87
------ ------ ------ ------ ------ ------ ------
1.95 2.46 (.21) 1.99 1.75 .88 1.09
- ---------------------------------------------------------------------------
(.35) (.17) (.28) (.40) (.38) (.31) (.29)
(.48) (.11) (.03) (.74) (.74) (.82) (.48)
------ ------ ------ ------ ------ ------ ------
(.83) (.28) (.31) (1.14) (1.12) (1.13) (.77)
- ---------------------------------------------------------------------------
$15.21 $14.09 $11.91 $15.57 $15.55 $14.92 $15.17
====== ====== ====== ====== ====== ====== ======
===========================================================================
13.96% 21.00% (1.76)% 14.33% 12.45% 6.61% 7.41%
===========================================================================
$124,017 $86,019 $49,735 $8,131 $35,706 $28,295 $17,008
- ---------------------------------------------------------------------------
$117,164 $59,951 $37,116 $3,815 $31,371 $22,211 $7,896
- ---------------------------------------------------------------------------
2.44% 2.68% 2.41% 1.64%(4) 1.87% 2.36% 1.85%(4)
1.49% 1.56% 1.74% 2.28%(4) 2.28% 2.39% 2.44%(4)
- ---------------------------------------------------------------------------
87.4% 90.6% 51.3% 207.8% 207.8% 135.2% 87.4%
-- -- -- $0.0004 $0.0004 -- --
</TABLE>
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the period ended September 30, 1996 were $306,553,668 and $296,763,170,
respectively.
6. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period divided by the total number of related
shares purchased and sold.
See accompanying Notes to Financial Statements.
15 Oppenheimer Global Growth & Income Fund
<PAGE> 16
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 objective
is to seek capital appreciation consistent with preservation of
principal while providing current income. The Fund invests primarily in
common stocks and fixed income securities of U.S. and foreign
companies. The Fund's investment adviser is OppenheimerFunds, Inc. (the
Manager). The Fund offers Class A, Class B and Class C shares. Class A
shares are sold with a front-end sales charge. Class B and Class C
shares may be subject to a contingent deferred sales charge. All three
classes of shares have identical rights to earnings, assets and voting
privileges, except that each class has its own distribution and/or
service plan, expenses directly attributable to a particular class and
exclusive voting rights with respect to matters affecting a single
class. Class B shares will automatically convert to Class A shares six
years after the date of purchase. The following is a summary of
significant accounting policies consistently followed by the Fund.
------------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at the close of
the New York Stock Exchange on each trading day. Listed and unlisted
securities for which such information is regularly reported are valued
at the last sale price of the day or, in the absence of sales, at
values based on the closing bid or the last sale price on the prior
trading day. Long-term and short-term "non-money market" debt
securities are valued by a portfolio pricing service approved by the
Board of Trustees. Such securities which cannot be valued by the
approved portfolio pricing service are valued using dealer-supplied
valuations provided the Manager is satisfied that the firm rendering
the quotes is reliable and that the quotes reflect current market
value, or are valued under consistently applied procedures established
by the Board of Trustees to determine fair value in good faith.
Short-term "money market type" debt securities having a remaining
maturity of 60 days or less are valued at cost (or last determined
market value) adjusted for amortization to maturity of any premium or
discount. Forward foreign currency exchange contracts are valued based
on the closing prices of the forward currency contract rates in the
London foreign exchange markets on a daily basis as provided by a
reliable bank or dealer.
------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are
maintained in U.S. dollars. Prices of securities denominated in foreign
currencies are translated into U.S. dollars at the closing rates of
exchange. Amounts related to the purchase and sale of securities and
investment income are translated at the rates of exchange prevailing on
the respective dates of such transactions.
The effect of changes in foreign currency
exchange rates on investments is separately identified from the
fluctuations arising from changes in market values of securities held
and reported with all other foreign currency gains and losses in the
Fund's Statement of Operations.
------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund requires the custodian to take
possession, to have legally segregated in the Federal Reserve Book
Entry System or to have segregated within the custodian's vault, all
securities held as collateral for repurchase agreements. The market
value of the underlying securities is required to be at least 102% of
the resale price at the time of purchase. If the seller of the
agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income, expenses
(other than those attributable to a specific class) and gains and
losses are allocated daily to each class of shares based upon the
relative proportion of net assets represented by such class. Operating
expenses directly attributable to a specific class are charged against
the operations of that class.
------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to continue to comply with provisions
of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income, including any
net realized gain on investments not offset by loss carryovers, to
shareholders. Therefore, no federal income or excise tax provision is
required.
------------------------------------------------------------------------
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, 1996, a provision of
$17,727 was made for the Fund's projected benefit obligations and
payments of $1,214 were made to retired trustees, resulting in an
accumulated liability of $45,115 at September 30, 1996.
------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders are recorded on the ex-dividend date.
16 Oppenheimer Global Growth & Income Fund
<PAGE> 17
================================================================================
1. SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income
(loss) and net realized gain (loss) may differ for financial statement
and tax purposes. The character of the distributions made during the
year from net investment income or net realized gains may differ from
their ultimate characterization for federal income tax purposes. Also,
due to timing of dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that the income or
realized gain (loss) was recorded by the Fund.
During the year ended September 30, 1996, the
Fund adjusted the classification of distributions to shareholders to
reflect the differences between the financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, during the year ended September 30, 1996, amounts have
been reclassified to reflect an increase in overdistributed net
investment income and an increase in accumulated net realized gain on
investments of $7,719. In addition, to properly reflect foreign
currency gain in the components of capital, $78,907 of foreign exchange
loss determined according to U.S. federal income tax rules has been
reclassified from net realized gain to net investment income.
------------------------------------------------------------------------
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.
The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
================================================================================
2. SHARES OF
BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1996(1) YEAR ENDED SEPTEMBER
30, 1995
-----------------------------------
- --------------------------------
SHARES AMOUNT SHARES
AMOUNT
- ----------------------------------------------------------------------------------------------------------------
- -------
<S> <C> <C> <C>
<C>
Class A:
Sold 2,501,931 $ 37,638,075 2,855,688
$ 40,758,281
Dividends and distributions reinvested 587,255 8,491,936 727,590
9,907,173
Redeemed (2,961,528) (44,742,108) (4,170,123)
(58,936,099)
---------- ------------ ----------
------------
Net increase (decrease) 127,658 $ 1,387,903 (586,845)
$ (8,270,645)
========== ============ ==========
============
- ----------------------------------------------------------------------------------------------------------------
- -------
Class B:
Sold 587,069 $ 8,834,948 --
$ --
Dividends and distributions reinvested 8,689 128,325 --
--
Redeemed (73,445) (1,110,897) --
--
---------- ------------ ----------
------------
Net increase 522,313 $ 7,852,376 --
$ --
========== ============ ==========
============
- ----------------------------------------------------------------------------------------------------------------
- -------
Class C:
Sold 686,840 $ 10,288,855 1,026,146
$ 14,591,637
Dividends and distributions reinvested 144,291 2,072,833 109,993
1,498,250
Redeemed (431,369) (6,447,032) (360,371)
(5,058,854)
---------- ------------ ----------
------------
Net increase 399,762 $ 5,914,656 775,768
$ 11,031,033
========== ============ ==========
============
</TABLE>
1. For the year ended September 30, 1996 for Class A and Class C shares
and for the period from October 10, 1995 (inception of offering) to
September 30, 1996 for Class B shares.
================================================================================
3. UNREALIZED GAINS AND
LOSSES ON INVESTMENTS
At September 30, 1996, net unrealized appreciation on investments of
$8,398,766 was composed of gross appreciation of $11,793,507, and gross
depreciation of $3,394,741.
17 Oppenheimer Global Growth & Income Fund
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
4. MANAGEMENT FEES
AND OTHER TRANSACTIONS
WITH AFFILIATES
Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee of
0.80% of the first $250 million of net assets, 0.77% of the next $250
million, 0.75% of the next $500 million, 0.69% of the next $1 billion
and 0.67% on net assets in excess of $2 billion. The Manager has agreed
to reimburse the Fund if aggregate expenses (with specified exceptions)
exceed the most stringent applicable regulatory limit on Fund expenses.
For the year ended September 30, 1996,
commissions (sales charges paid by investors) on sales of Class A
shares totaled $507,729, of which $171,752 was retained by
OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of the Manager,
as general distributor, and by an affiliated broker/dealer. Sales
charges advanced to broker/dealers by OFDI on sales of the Fund's Class
B and Class C shares totaled $245,232 and $83,332 of which $12,591 and
$5,148, respectively, was paid to an affiliated broker/dealer. During
the year ended September 30, 1996, OFDI received contingent deferred
sales charges of $6,391 and $3,710, respectively, upon redemption of
Class B and Class C shares, as reimbursement for sales commissions
advanced by OFDI at the time of sale of such shares.
OppenheimerFunds Services (OFS), a division of
the Manager, is the transfer and shareholder servicing agent for the
Fund, and for other registered investment companies. OFS's total costs
of providing such services are allocated ratably to these companies.
The Fund has adopted a Service Plan for Class A
shares to reimburse OFDI for a portion of its costs incurred in
connection with the personal service and maintenance of accounts that
hold Class A shares. Reimbursement is made quarterly at an annual rate
that may not exceed 0.25% of the average annual net assets of Class A
shares of the Fund. OFDI uses the service fee to reimburse brokers,
dealers, banks and other financial institutions quarterly for providing
personal service and maintenance of accounts of their customers that
hold Class A shares. During the year ended September 30, 1996, OFDI
paid $17,848 to an affiliated broker/dealer as reimbursement for Class
A personal service and maintenance expenses.
The Fund has adopted a compensation type
Distribution and Service Plan for Class B shares to compensate OFDI for
its services and costs in distributing Class B shares and servicing
accounts. Under the Plan, the Fund pays OFDI an annual asset-based
sales charge of 0.75% per year on Class B shares. OFDI also receives a
service fee of 0.25% per year to compensate dealers for providing
personal services for accounts that hold Class B shares. Both fees are
computed on the average annual net assets of Class B shares, determined
as of the close of each regular business day. If the Plan is terminated
by the Fund, the Board of Trustees may allow the Fund to continue
payments of the asset-based sales charge to OFDI for certain expenses
it incurred before the Plan was terminated. OFDI retained $35,141 as
compensation for Class B sales commissions and service fee advances, as
well as financing costs. As of September 30, 1996, OFDI had incurred
unreimbursed expenses of $255,659 for Class B.
The Fund has adopted a reimbursement type
Distribution and Service Plan for Class C shares to reimburse OFDI for
its services and costs in distributing Class C shares and servicing
accounts. Under the Plan, the Fund pays OFDI an annual asset-based
sales charge of 0.75% per year on Class C shares. OFDI also receives a
service fee of 0.25% per year to reimburse dealers for providing
personal services for accounts that hold Class C shares. Both fees are
computed on the average annual net assets of Class C shares, determined
as of the close of each regular business day. If the Plan is terminated
by the Fund, the Board of Trustees may allow the Fund to continue
payments of the asset-based sales charge to OFDI for certain expenses
it incurred before the Plan was terminated. During the year ended
September 30, 1996, OFDI paid $8,710 to an affiliated broker/dealer as
reimbursement for Class C personal service and maintenance expenses and
retained $97,416 as reimbursement for Class C sales commissions and
service fee advances, as well as financing costs. As of September 30,
1996, OFDI had incurred unreimbursed expenses of $339,000 for Class C.
18 Oppenheimer Global Growth & Income Fund
<PAGE> 19
================================================================================
5. FORWARD CONTRACTS
A forward foreign currency exchange contract (forward contract) is a
commitment to purchase or sell a foreign currency at a future date, at
a negotiated rate.
The Fund uses forward contracts to seek to manage
foreign currency risks. They may also be used to tactically shift
portfolio currency risk. The Fund generally enters into forward
contracts as a hedge upon the purchase or sale of a security
denominated in a foreign currency. In addition, the Fund may enter into
such contracts as a hedge against changes in foreign currency exchange
rates on portfolio positions.
Forward contracts are valued based on the closing
prices of the forward currency contract rates in the London foreign
exchange markets on a daily basis as provided by a reliable bank or
dealer. The Fund will realize a gain or loss upon the closing or
settlement of the forward transaction.
Securities held in segregated accounts to cover
net exposure on outstanding forward contracts are noted in the
Statement of Investments where applicable. Unrealized appreciation or
depreciation on forward contracts is reported in the Statement of
Assets and Liabilities. Realized gains and losses are reported with all
other foreign currency gains and losses in the Fund's Statement of
Operations.
Risks include the potential inability of the
counterparty to meet the terms of the contract and unanticipated
movements in the value of a foreign currency relative to the U.S.
dollar.
At September 30, 1996, the Fund had outstanding forward contracts to
purchase and sell foreign currencies as follows:
<TABLE>
<CAPTION>
CONTRACT
EXPIRATION AMOUNT VALUATION AS OF UNREALIZED
UNREALIZED
CONTRACTS TO PURCHASE DATE (000s) SEPT. 30, 1996 APPRECIATION
DEPRECIATION
- ----------------------------------------------------------------------------------------------------------------
- ------------------
<S> <C> <C> <C> <C>
<C>
French Franc (FRF) 10/31/96 183 FRF $ 35,460 $ --
$ 125
=========== --------
------
CONTRACTS TO SELL
- ----------------------------------------------------------------------------------------------------------------
- ------------------
French Franc (FRF) 10/11/96 40,384 FRF $ 7,827,381 $154,435
$ --
German Deutsche
Mark (DEM) 10/15/96--1/21/97 17,665 DEM 11,651,980 348,020
--
----------- --------
------
$19,479,361 502,455
--
=========== --------
------
Total Appreciation and Depreciation $502,455
$ 125
========
======
</TABLE>
<PAGE>
<PAGE>
Appendix A: Ratings of Investments
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>
Appendix B: Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
<PAGE>
Food
Gas Utilities*
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking<PAGE>
_______________
* For purposes of the Fund's investment policy not to concentrate
in securities of issuers in the same industry, utilities are
divided into "industries" according to their services (e.g. gas
utilities, gas transmission utilities, electric utilities and
telephone utilities and each considered a separate industry).<PAGE>
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
