OPPENHEIMER
GLOBAL GROWTH & INCOME FUND
Prospectus dated January 28, 1998
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" and "Investment Risks" 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
28, 1998 Statement of Additional Information. For a free copy, call
OppenheimerFunds Services, the Fund's Transfer Agent, at 1-800-525-7048, or
write to the Transfer Agent at the address on the back cover. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference (which means
that it is legally part of this Prospectus).
(logo) OppenheimerFunds
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other agency, and
involve investment risks, including the possible loss of the principal amount
invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
Contents
A B O U T T H E F U N D
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objective and Policies
Investment Risks
Investment Techniques and Strategies
How the Fund is Managed
Performance of the Fund
A B O U T Y O U R A C C O U N T
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
A-1 Appendix A: Special Sales Charge Arrangements
<PAGE>
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net asset
value per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the Fund's
business operating expenses that you will bear indirectly. The numbers below are
based on the Fund's expenses during its last fiscal year ended September 30,
1997.
o Shareholder Transaction Expenses are charges you pay when you buy or sell
shares of the Fund. Please refer to "About Your Account" starting on page __ for
an explanation of how and when these charges apply.
Class A Shares Class B Shares Class C Shares
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchase 5.75% None None
(as a % of offering price)
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge None(1) 5% in the 1% if shares
(as a % of the lower of first year, are redeemed
the original offering price or declining to within 12
redemption proceeds) 1% in the months of
6th year and purchase(2)
eliminated
thereafter(2)
- --------------------------------------------------------------------------------
Maximum Sales Charge on None None None
Reinvested Dividends
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
Redemption Fee None None None
- ----------------------
(1) If you invest $1 million or more ($500,000 or more for purchases by
"Retirement Plans," as defined in "Class A Contingent Deferred Sales Charge" on
page __) in Class A shares, you may have to pay a sales charge of up to 1% if
you sell your shares within 12 calendar months (18 months for shares purchased
prior to May 1, 1997) from the end of the calendar month during which you
purchased those shares. See "How to Buy Shares - Buying Class A Shares" below.
(2) See "How to Buy Shares - Buying Class B Shares" and "How to Buy Shares -
Buying Class C Shares" for more information on the contingent deferred sales
charges below.
o Annual Fund Operating Expenses are paid out of the Fund's assets and
represent the Fund's expenses in operating its business. For example, the Fund
pays management fees to its investment advisor, OppenheimerFunds, Inc. (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 Shares Class B Shares Class C Shares
- --------------------------------------------------------------------------------
Management Fees 0.80% 0.80% 0.80%
- --------------------------------------------------------------------------------
12b-1 Distribution Plan Fees 0.24% 1.00% 1.00%
- --------------------------------------------------------------------------------
Other Expenses 0.39% 0.35% 0.38%
- --------------------------------------------------------------------------------
Total Fund Operating Expenses 1.43% 2.15% 2.18%
The numbers in the table above are based on the Fund's expenses in its
fiscal year ended September 30, 1997. These amounts are shown as a percentage of
the average net assets of each class of the Fund's shares for that year. The
12b-1 Distribution Plan Fees for Class A shares are service fees. The maximum
fee is 0.25% of average net assets of that class. For Class B and Class C
shares, the 12b-1 Distribution Plan Fees are service fees (the fee is 0.25% of
average net assets of the respective class) and the asset-based sales charge is
0.75%. These plans are described in greater detail in "How to Buy Shares."
The actual expenses for each class of shares in future years may be more
or less than the numbers in the table, depending on a number of factors,
including changes in the actual value of the Fund's assets represented by each
class of shares.
o Examples. To try to show the effect of these expenses on an investment
over time, we have created the hypothetical examples shown below. Assume that
you make a $1,000 investment in each class of shares of the Fund, that the
Fund's annual return is 5%, and that its operating expenses for each class are
the ones shown in the Annual Fund Operating Expenses table above. If you were to
redeem your shares at the end of each period shown below, your investment would
incur the following expenses by the end of 1, 3, 5 and 10 years:
1 year 3 years 5 years 10 years*
-------- --------- --------- ------------
Class A Shares $71 $100 $131 $219
Class B Shares $72 $ 97 $135 $213
Class C Shares $32 $ 68 $117 $251
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10 years*
-------- --------- --------- ------------
Class A Shares $71 $100 $131 $219
Class B Shares $22 $ 67 $115 $213
Class C Shares $22 $ 68 $117 $251
*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.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with references
to the section of this Prospectus where more complete information can be found.
You should carefully read the entire Prospectus before making a decision about
investing in the Fund. Keep the Prospectus for reference after you invest,
particularly for information about your account, such as how to sell or exchange
shares.
o What Is the Fund's Investment Objective? The Fund's investment objective
is to seek capital appreciation consistent with preservation of principal while
providing current income.
o 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
__.
o Who Manages the Fund? The Fund's investment advisor or the Manager is
OppenheimerFunds, Inc. The Manager (including subsidiaries) manages investment
company portfolios having over $75 billion in assets at December 31, 1997. The
Manager is paid an advisory fee by the Fund, based on its net assets. The Fund's
portfolio manager, 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.
o 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 Risks" starting on page __ for a more complete discussion of the
Fund's investment risks.
o How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic Investment
Plan under AccountLink. Please refer to "How to Buy Shares" on page __ for more
details.
o Will I Pay a Sales Charge to Buy Shares? The Fund offers 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.
o 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 __.
o 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, 1997 is included in
the Statement of Additional Information.
-3-
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS CLASS A
--------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1997 1996 1995 1994 1993
======================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $15.62 $14.98 $15.21 $14.09 $11.91
- ------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .40 .47 .45 .33 .29
Net realized and unrealized gain (loss) 5.12 1.40 .54 1.62 2.17
------ ------ ------ ------ ------
Total income (loss) from investment
operations 5.52 1.87 .99 1.95 2.46
- ------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.40) (.40) (.40) (.35) (.17)
Distributions from net realized gain (1.38) (.83) (.82) (.48) (.11)
------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (1.78) (1.23) (1.22) (.83) (.28)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.36 $15.62 $14.98 $15.21 $14.09
====== ====== ====== ====== ======
======================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(4) 38.83% 13.28% 7.43% 13.96% 21.00%
======================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $181,716 $120,214 $113,341 $124,017 $86,019
- ------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $141,582 $115,186 $120,267 $117,164 $59,951
- ------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 2.47% 2.65% 3.09% 2.44% 2.68%
Expenses 1.43% 1.52% 1.63% 1.49% 1.56%
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 90.5% 207.8% 135.2% 87.4% 90.6%
Average brokerage commission rate(7) $0.0015 $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.
8
<PAGE>
<TABLE>
<CAPTION>
CLASS B CLASS C
- ------------------------- ------------------------ -------------------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
1992 1991(3) 1997 1996(2) 1997 1996 1995 1994(1)
=======================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
$12.43 $11.43 $15.57 $14.72 $15.55 $14.92 $15.17 $14.85
- -------------------------------------------------------------------------------------------------------
.26 .37 .30 .36 .28 .35 .35 .22
(.47) .95 5.06 1.63 5.08 1.40 .53 .87
------ ------ ------ ------ ------ ------ ------ ------
(.21) 1.32 5.36 1.99 5.36 1.75 .88 1.09
- -------------------------------------------------------------------------------------------------------
(.28) (.32) (.28) (.31) (.27) (.29) (.31) (.29)
(.03) -- (1.38) (.83) (1.38) (.83) (.82) (.48)
------ ------ ------ ------ ------ ------ ------ ------
(.31) (.32) (1.66) (1.14) (1.65) (1.12) (1.13) (.77)
- -------------------------------------------------------------------------------------------------------
$11.91 $12.43 $19.27 $15.57 $19.26 $15.55 $14.92 $15.17
====== ====== ====== ====== ====== ====== ====== ======
=======================================================================================================
(1.76)% 11.73% 37.69% 14.33% 37.74% 12.45% 6.61% 7.41%
=======================================================================================================
$49,735 $29,239 $37,071 $8,131 $56,278 $35,706 $28,295 $17,008
- -------------------------------------------------------------------------------------------------------
$37,116 $19,340 $17,474 $3,815 $43,338 $31,371 $22,211 $7,896
- -------------------------------------------------------------------------------------------------------
2.41% 4.05%(5) 1.77% 1.64%(5) 1.71% 1.87% 2.36% 1.85%(5)
1.74% 1.94%(5) 2.15% 2.28%(5) 2.18% 2.28% 2.39% 2.44%(5)
- -------------------------------------------------------------------------------------------------------
51.3% 23.5% 90.5% 207.8% 90.5% 207.8% 135.2% 87.4%
-- -- $0.0015 $0.0004 $0.0015 $0.0004 -- --
</TABLE>
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, 1997 were $299,084,992 and $9,213,243, 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. Generally, non-U.S. commissions are lower than U.S.
commissions when expressed as cents per share but higher when expressed as a
percentage of transactions because of the lower per-share prices of many
non-U.S. securities.
9
<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. To seek growth, the Fund will invest
primarily in common stocks and securities convertible into common stocks. To
seek current income, the Fund will invest in debt securities such as corporate
and government bonds, notes and debentures and in income producing stocks. 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 attempt to select securities whose appreciation potential is, in the view
of the Manager, consistent with preservation of 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, health
care 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.
o 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 of 1940, as amended (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.
o How the Fund's Portfolio Securities are Rated. As of September 30, 1997,
the Fund's portfolio included corporate bonds in the following S&P rating
categories. The amounts shown are dollar-weighted average values of the bonds in
each category measured as a percentage of the Fund's total assets: AAA, 0%; AA,
0%; A, 0%; BBB, 0%; BB, 0.53%; B, 0%; CCC, 0%;. In addition, as of September 30,
1997, 17.81% of the Fund's total assets were invested in unrated debt
securities, consisting of U.S. Government securities (17.62%) and other unrated
securities (0.19%). U.S. Government securities are not rated by any agency. 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.
o Debt Securities. The Fund will invest no more than 25% of its total
assets in non-investment grade debt 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.
o 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.
o 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.
o Zero Coupon Securities. The Fund may invest, without limitation as to
amount, in zero coupon securities issued by the U.S. Treasury or in zero coupon
securities issued by other issuers. Zero coupon Treasury securities generally
are U.S. Treasury notes and bonds that have been "stripped" of their interest
coupons, U.S. Treasury bills issued without interest coupons, or certificates
representing an interest in the stripped securities. A zero coupon Treasury
security pays no current interest and trades at a deep discount from its face
value and will be subject to greater market fluctuations from changes in
interest rates than debt obligations of comparable maturities that make current
payments of interest. See "Investment Risks--Interest Rate Risks". The Fund
accrues interest on its holdings of zero coupon securities without receiving the
actual cash. As a result, the Fund may be required to sell portfolio securities
to pay cash dividends or to meet redemptions. Zero coupon securities issued by
issuers other than the U.S. Government are subject to the additional risk that
the issuer may fail to pay interest or repay the principal on the obligation.
o 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. CMOs issued by such private issuers are not issued or guaranteed by the
U.S. Government or its agencies and are, therefore, also subject to credit
risks. Credit risk relates to the ability of the issuer or a debt security to
make interest or principal payments on the security as they become due.
Securities issued or guaranteed by the U.S. Government are subject to little, if
any, credit risk because they are backed by the "full faith and credit of the
U.S. Government", which in general terms means that the U.S. Treasury stands
behind the obligation to pay interest and principal.
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.
o 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.
o Warrants and Rights. Warrants basically are options to purchase stock at
set prices that are valid for a limited period of time. Rights are options to
purchase securities, normally granted to current 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.
o 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.
Investment Risks
All investments carry risks to some degree, whether they are risks that market
prices of the investment will fluctuate (this is known as "market risk") or that
the underlying issuer will experience financial difficulties and may default on
its obligation under a fixed-income investment to pay interest and repay
principal (this is referred to as "credit risk"). These general investment risks
and the special risks of certain types of investments that the Fund may hold are
described below. They affect the value of the Fund's investments, its investment
performance and the prices of its shares. These risks collectively form the risk
profile of the Fund.
Because of the types of securities in which the Fund invests and the
investment techniques the Fund uses, the Fund is designed for investors who are
investing for the long term. It is not for investors seeking assured income or
assured conservation of capital. While the Manager tries to reduce risks by
diversifying investments, by carefully researching securities before they are
purchased, and in some cases by using hedging techniques, changes in overall
market prices can occur at any time. Because the income earned on securities is
subject to change and since market risks are inherent in all investments in
varying degrees, there is no assurance that the Fund will achieve its investment
objectives. When you redeem shares, they may be worth more or less than what you
paid for them.
o 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.
o 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.
Changes in interest rates may have a greater effect on certain of the debt
securities in which the Fund may invest. For example, zero coupon securities,
which trade at a deep discount from par value and do not pay current interest,
will be subject to greater market fluctuations from changes in interest rates
than debt obligations of comparable maturities that make current payments of
interest. In addition, changes in interest rates may have a greater effect on
mortgage-backed securities than on other fixed income securities because of the
potential for prepayment of the underlying mortgages. Prepayments on fixed rate
mortgage loans generally increase during periods of falling interest rates and
decrease during periods of rising interest rates. Faster than expected mortgage
prepayments during periods of declining interest rates may reduce both the
market value and the yield to maturity of the mortgage-backed securities. Slower
than expected mortgage prepayments during periods of rising interest rates may
effectively change a mortgage-backed security which was considered short or
intermediate-term at the time of purchase into a long-term security. Long-term
securities generally fluctuate more widely in response to changes in interest
rates than short or intermediate-term securities.
o 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.
o Foreign Securities 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.
o Special Risks of Hedging Instruments. The use of hedging instruments
requires special skills and knowledge of investment techniques that are
different than what is required for normal portfolio management. If the Manager
uses a hedging instrument at the wrong time or judges market conditions
incorrectly, hedging strategies may reduce the Fund's return. The Fund could
also experience losses if the prices of its futures and options positions were
not correlated with its other investments or if it could not close out a
position because of an illiquid market for the future or option.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. 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.
o Special Risks of Derivative Instruments. The Fund can invest in
different kinds of derivative instruments, as described below, which entail
special risks. The company issuing a derivative 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" below.
o Portfolio Turnover. "Portfolio turnover" describes the rate at which the
Fund traded its portfolio securities during its last fiscal year. For example,
if a fund sold all of its securities during its last fiscal year, its portfolio
turnover rate would have been 100%. Portfolio turnover affects brokerage costs
the Fund pays. The Financial Highlights table above shows the Fund's portfolio
turnover rates during prior fiscal years.
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.
o 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.
o 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. That
percentage limit is a fundamental policy. This is a speculative investment
method known as "leverage." This investing technique may subject the Fund to
greater risks and costs than funds that do not borrow. These risks may include
the possibility that the Fund's net asset value per share will fluctuate more
than funds that don't borrow. The Fund can borrow only if it maintains a 300%
ratio of net assets to borrowings at all times in the manner set forth in the
Investment Company Act. More detail is provided in "Borrowing for Leverage" in
the Statement of Additional Information.
o 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.
o 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.
o Illiquid and Restricted Securities. Under the policies and procedures
established by the Fund's Board of Trustees, the Manager determines the
liquidity of certain of the Fund's investments. Investments may be illiquid
because of the absence of an active trading market, making it difficult to value
them or dispose of them promptly at an acceptable price. A restricted security
is one that has a contractual restriction on its resale or which cannot be sold
publicly until it is registered under the Securities Act of 1933. The Fund 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 to determine whether to sell
any holdings to maintain adequate liquidity. Illiquid securities include
repurchase agreements maturing in more than seven days, or certain participation
interests other than those with puts exercisable within seven days.
o "When-Issued" and "Delayed Delivery" Transactions. The Fund may purchase
securities on a "when-issued" basis and may purchase or sell securities on a
"delayed delivery" basis. These terms refer to securities that have been created
and for which a market exists, but which are not available for immediate
delivery. There may be a risk of loss to the Fund if the value of the security
declines prior to the settlement date.
o 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.
o Hedging. As described below, the Fund may purchase and sell certain
kinds of futures contracts, put and call options, forward contracts, and options
on futures and 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.
o 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), and (4) foreign
currencies (these are called Forward Contracts and are discussed below).
o Put and Call Options. The Fund may buy and sell exchange-traded and
over-the-counter put and call options, including index options, securities
options, currency options and options on the other types of futures described in
"Futures" above. A call or put may be purchased only if, after the purchase, the
value of all call and put options held by the Fund will not exceed 5% of the
Fund's total assets.
If the Fund sells (that is, writes) a call option, it must be "covered."
That means the Fund must own the security subject to the call while the call is
outstanding, or, for other types of written calls, the Fund must segregate
liquid assets to enable it to satisfy its obligations if the call is exercised.
The Fund may buy puts whether or not it holds the underlying investment in
the portfolio. If the Fund writes a put, the put must be covered by segregated
liquid assets. The Fund will not write puts if more than 50% of the Fund's net
assets would have to be segregated to cover put options.
o 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.
o 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.
o Derivative Investments. In general, a "derivative investment" is a
specially-designed investment. Its performance is linked to the performance of
another investment or security, such as an option, future, index 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).
o 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.
o 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:
o 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.
o 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. Additional
investment restrictions are listed in "Other Investment Restrictions" in the
Statement of Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized in 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 subsidiaries) currently manages investment companies, including other
Oppenheimer funds, with assets of more than $75 billion as of December 31, 1997,
and with more than 3.5 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.
The management services provided to the Fund by the Manager, and the
services provided by the Distributor and the Transfer Agent to shareholders,
depend on the smooth functioning of their computer systems. Many computer
software systems in use today cannot distinguish the year 2000 from the year
1900 because of the way dates are encoded and calculated. That failure could
have a negative impact on handling securities trades, pricing and account
services. The Manager, the Distributor and Transfer Agent have been actively
working on necessary changes to their computer systems to deal with the year
2000 and expect that their systems will be adapted in time for that event,
although there cannot be assurance of success.
o 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.
o Fees and Expenses. Under the Investment Advisory Agreement the Fund pays
the Manager the following annual fees, which decline on additional assets as the
Fund grows: 0.80% 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, 1997 was 0.80% of
average annual net assets for its Class A, Class B and Class C shares.
The Fund pays expenses related to its daily operations, such as custodian
fees, certain 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.
o The Distributor. The Fund's shares are sold through dealers, brokers and
other financial institutions that have a sales agreement with OppenheimerFunds
Distributor, Inc., a subsidiary of the Manager that acts as the 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.
o The Transfer Agent. The Fund's transfer agent is OppenheimerFunds
Services, a division of the Manager, which acts as the shareholder servicing
agent for the Fund 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.
o Total Returns. There are different types of total returns used to measure
the Fund's performance. Total return is the change in value of a hypothetical
investment in the Fund over a given period, assuming that all dividends and
capital gains distributions are reinvested in additional shares. The cumulative
total return measures the change in value over the entire period (for example,
ten years). An average annual total return shows the average rate of return for
each year in a period that would produce the cumulative total return over the
entire period. However, average annual total returns do not show the Fund's
actual year-by-year performance.
When total returns are quoted for Class A shares, normally the current
maximum initial sales charge has been deducted. When total returns are shown for
Class B 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, 1997, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index and narrower market index.
o Management's Discussion of Performance. The performance of the Fund's
equity investments during its fiscal year ended September 30, 1997, was affected
on the equity side by the Portfolio Manager's decision to limit investments by
the Fund in Southeast Asia and Japan, which experienced sharp declines toward
the end of the Fund's fiscal year. A majority of the Fund's non- U.S. stocks
were in Europe, where the overall investing environment improved as interest
rates fell and the region moved towards a single currency. The largest industry
allocations at the end of the Fund's fiscal year were in banks, electronics and
beverages. The Fund's fixed-income investments included zero coupon bonds, which
enabled the Fund to benefit when interest rates declined in the summer and early
fall of 1997. The Fund's portfolio holdings, allocations and strategies are
subject to change.
o 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, 1997. 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)
Average Annual Total ReturnAverage Annual Total ReturnAverage Annual Total
Returns of Class A Shares of the Fuof Class B Shares of the Fuof Class C Shares
of the Fund at 9/30/97(1) at 9/30/97 (2) at 9/30/97 (3)
1 Year 5 Year Life of Class 1 Year Life 1 Year Life of Class
- -------- -------- ------------- -------- -------- -------- ------------------
30.85% 17.04% 13.52% 32.69% 24.24% 36.74% 16.14%
- ---------------------
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.
(1) Class 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.
(2) Class B shares of the Fund were first publicly offered on 10/10/95. Returns
are shown net of the applicable 5% and 4% contingent deferred sales charge for
the 1-year and life of the class periods, respectively. The performance
information for the two indices in the graph begins on 10/1/95.
(3)Class C shares of the Fund were first publicly offered on 12/1/93. The
returns for the 1- year period is shown net of the applicable 1% contingent
deferred sales charge. Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
A B O U T Y O U R A C C O U N T
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.
o 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 12 months of buying them (18 months if the shares were purchased
prior to May 1, 1997), you may pay a contingent deferred sales charge. The
amount of that sales charge will vary depending on the amount you invested.
Sales charge rates are described in "Buying Class A Shares" below.
o Class B Shares. If you buy Class B shares, you pay no sales charge at
the time of purchase, but if you sell your shares within six years of buying
them, you will normally pay a contingent deferred sales charge that varies
depending on how long you own your shares, as described in "Buying Class B
Shares" below.
o Class C Shares. If you buy Class C shares, you pay no sales charge at
the time of purchase, but if you sell your shares within 12 months of buying
them, you will normally pay a contingent deferred sales charge of 1%, as
described in "Buying Class C Shares" below.
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.
o How Long Do You Expect to Hold Your Investment? While future financial
needs cannot be predicted with certainty, knowing how long you expect to hold
your investment will assist you in selecting the appropriate class of shares.
Because of the effect of class-based expenses, your choice will also depend on
how much you plan to invest. For example, the reduced sales charges available
for larger purchases of Class A shares may, over time, offset the effect of
paying an initial sales charge on your investment (which reduces the amount of
your investment dollars used to buy shares for your account), compared to the
effect over time of higher class-based expenses on Class B or Class C shares,
for which no initial sales charge is paid.
o Investing for the Short Term. If you have a short-term investment
horizon (that is, you plan to hold your shares for not more than six years), you
should probably consider purchasing Class A or Class C shares rather than Class
B shares, because of the effect of the Class B contingent deferred sales charge
if you redeem in less than 7 years, as well as the effect of the Class B
asset-based sales charge on the investment return for that class in the
short-term. Class C shares might be the appropriate choice (especially for
investments of less than $100,000), because there is no initial sales charge on
Class C shares, and the contingent deferred sales charge does not apply to
amounts you sell after holding them one year.
However, if you plan to invest more than $100,000 for the shorter term,
then the more you invest and the more your investment horizon increases toward
six years, Class C shares might not be as advantageous as Class A shares. That
is because the annual asset-based sales charge on Class C shares will have a
greater impact on your account over the longer term than the reduced front-end
sales charge available for larger purchases of Class A shares. For example,
Class A 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.
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.
o Investing for the Longer Term. If you are investing for the longer term,
for example, for retirement, and do not expect to need access to your money for
seven years or more, Class B shares may be an appropriate consideration, if you
plan to invest less than $100,000. If you plan to invest more than $100,000 over
the long term, Class A shares will likely be more advantageous than Class B
shares or C shares, as discussed above, because of the effect of the expected
lower expenses for Class A shares and the reduced initial sales charges
available for larger investments in Class A shares under the Fund's Right of
Accumulation.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses on a hypothetical investment over time, using
the assumed annual performance return stated above, and therefore, you should
analyze your options carefully.
o Are There Differences in Account Features That Matter to You? Because
some account features 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.
o How Does It Affect Payments to My Broker? A salesperson, such as a
broker, or any other person who is entitled to receive compensation for selling
Fund shares may receive different compensation for selling one class of shares
than for selling another class. It is important that investors understand that
the purpose of the 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.
The Distributor may pay additional periodic compensation from its own resources
to securities dealers or financial institutions based upon the value of shares
of the Fund owned by the dealer or financial institution for its own account or
for its customers.
How Much Must You Invest? You can open a Fund account with a minimum initial
investment of $1,000 and make additional investments at any time with as little
as $25. There are reduced minimum investments under special investment plans.
o With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7) custodial
plans and military allotment plans, you can make initial and subsequent
investments of as little as $25; and subsequent purchases of at least $25 can be
made by telephone through AccountLink.
o Under pension, profit-sharing and 401(k) plans and Individual Retirement
Accounts (IRAs), you can make an initial investment of as little as $250 (if
your IRA is established under an Asset Builder Plan, the $25 minimum applies),
and subsequent investments may be as little as $25.
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.
o How Are Shares Purchased? You can buy shares several ways -- through any
dealer, broker or financial institution that has a sales agreement with the
Distributor, directly through the Distributor, or automatically from your bank
account through an Asset Builder Plan under the OppenheimerFunds AccountLink
service. The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase (and redemption) orders. When you buy
shares, be sure to specify Class A, Class B or Class C shares. If you do not
choose, your investment will be made in Class A shares.
o Buying Shares Through Your Dealer. Your dealer will place your order with
the Distributor on your behalf.
o Buying Shares Through the Distributor. Complete an OppenheimerFunds New
Account Application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you
don't list a dealer on the application, the Distributor will act as your agent
in buying the shares. However, it is recommended that you discuss your
investment first with a financial advisor, to be sure that it is appropriate for
you.
o Payments by Federal Funds Wire. Shares may be purchased by Federal Funds
wire. The minimum investment is $2,500. You must first call the Distributor's
Wire Department at 1-800-525- 7041 to notify the Distributor of the wire and
receive further instructions.
o 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.
o Asset Builder Plans. You may purchase shares of the Fund (and up to four
other Oppenheimer funds) automatically each month from your account at a bank or
other financial institution under an Asset Builder Plan with AccountLink.
Details are and in the Statement of Additional Information.
o 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, or the order is received and transmitted to the Distributor by
an entity authorized by the Fund to accept purchase or redemption orders. The
Fund has authorized the Distributor, certain broker-dealers and agents or
intermediaries designated by the Distributor or those broker-dealers to accept
orders. In most cases, to enable you to receive that day's offering price, the
Distributor or an authorized entity 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 normally your order must be transmitted to the Distributor so
that it is received before the Distributor's close of business that day, which
is normally 5:00 P.M. The Distributor, in its sole discretion, may reject any
purchase order for the Fund's shares.
Special Sales Charge Arrangements for Certain Persons. Appendix 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:
Front-End Front-End
Sales Charge Sales Charge
As a As a Commission as
Percentage of Percentage of Percentage of
Amount of Purchases Offering Price Amount Invested Offering Price:
- -------------------------------------------------------------------------------
Less than $25,000 5.75% 6.10% 4.75%
- -------------------------------------------------------------------------------
$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
- -------------------------------------------------------------------------------
$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
- -------------------------------------------------------------------------------
$100,000 or more but
less than $250,000 3.75% 3.90% 3.00%
- -------------------------------------------------------------------------------
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
- -------------------------------------------------------------------------------
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
The Distributor reserves the right to reallow the entire commission to
dealers. If that occurs, the dealer may be considered an "underwriter" under
Federal securities laws.
o Class A Contingent Deferred Sales Charge. There is no initial sales
charge on purchases of Class A shares of any one or more of the Oppenheimer
funds in the following cases:
o Purchases aggregating $1 million or more;
o Purchases by a retirement plan qualified under section 401(a) if the
retirement plan has total plan assets of $500,000 or more;
o Purchases by a retirement plan qualified under sections 401(a) or 401(k)
of the Internal Revenue Code, by a non-qualified deferred compensation plan,
employee benefit plan, group retirement plan (see "How to Buy Shares -
Retirement Plans" in the Statement of Additional Information for further
details), an employee's 403(b)(7) custodial plan account, SEP IRA, SARSEP, or
SIMPLE plan (all of these plans are collectively referred to as "Retirement
Plans"), that: (1) buys shares costing $500,000 or more or (2) has, at the time
of purchase, 100 or more eligible participants, or (3) certifies that it
projects to have annual plan purchases of $200,000 or more; or
o Purchases by an OppenheimerFunds Rollover IRA if the purchases are made
(1) through a broker, dealer, bank or registered investment adviser that has
made special arrangements with the Distributor for these purchases, or (2) by a
direct rollover of a distribution from a qualified retirement plan if the
administrator of that plan has made special arrangements with the Distributor
for those purchases.
The Distributor pays dealers of record commissions on those purchases in
an amount equal to (i) 1.0% for non-Retirement Plan accounts, and (ii) for
Retirement Plan accounts, 1.0% of the first $2.5 million, plus 0.50% of the next
$2.5 million, plus 0.25% of purchases over $5 million, calculated on a calendar
year basis. That commission will be paid only on those purchases that were not
previously subject to a front-end sales charge and dealer commission. No sales
commission will be paid to the dealer, broker or financial institution on Class
A shares purchased with the redemption proceeds of shares of a mutual fund
offered as an investment option in a Retirement Plan in which Oppenheimer funds
are also offered as investment options under a special arrangement with the
Distributor if the purchase occurs more than 30 days after the addition of the
Oppenheimer funds as an investment option to the Retirement Plan.
If you redeem any of those shares purchased prior to May 1, 1997, within
18 months of the end of the calendar month of their purchase, a contingent
deferred sales charge (called the "Class A contingent deferred sales charge")
may be deducted from the redemption proceeds. A Class A contingent deferred
sales charge may be deducted from the proceeds of any of those shares purchased
on or after May 1, 1997 that are redeemed within 12 months of the end of the
calendar month of their purchase. That sales charge may be equal to 1.0% of the
lesser of (1) the aggregate net asset value of the redeemed shares (not
including shares purchased by reinvestment of dividends or capital 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 12 calendar months (18 months
for shares purchased prior to May 1, 1997) of the end of the calendar month of
the purchase of the exchanged shares, the sales charge will apply.
o Special Arrangements With Dealers. The Distributor may advance up to 13
months' commissions to dealers that have established special arrangements with
the Distributor for Asset Builder Plans for their clients.
Reduced Sales Charges for Class A Share Purchases. You may be eligible to buy
Class A shares at reduced sales charge rates in one or more of the following
ways:
o Right of Accumulation. To qualify for the lower sales charge rates that
apply to larger purchases of Class A shares, you and your spouse can add
together Class A and Class B shares you purchase for your individual accounts,
or jointly, or for trust or custodial accounts on behalf of your children who
are minors. A fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit plans of the
same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A and Class B
shares of the Fund and other Oppenheimer funds to reduce the sales charge rate
that applies to current purchases of Class A shares. You can also 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 Distributor will add the value,
at current offering price, of the shares you previously purchased and currently
own to the value of current purchases to determine the sales charge rate that
applies. The Oppenheimer funds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Distributor. The reduced sales charge will apply only to current purchases and
must be requested when you buy your shares.
o Letter of Intent. Under a Letter of Intent, if you purchase Class A
shares or Class A 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.
o Waivers of Class A Sales Charges. The Class A sales charges are not
imposed in the circumstances described below. There is an explanation of this
policy in "Reduced Sales Charges" in the Statement of Additional Information. In
order to receive a waiver of the Class A contingent deferred sales charge, you
must notify the Transfer Agent as to which conditions apply.
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not subject
to any Class A sales charges:
o the Manager or its affiliates;
o present or former officers, directors, trustees and employees (and their
"immediate families" as defined in "Reduced Sales Charges" in the Statement of
Additional Information) of the Fund, the Manager and its affiliates, and
retirement plans established by them for their employees;
o registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose;
o dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for their
employees;
o employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered into
sales arrangements with such dealers or brokers (and are identified to the
Distributor) or with the Distributor; the purchaser must certify to the
Distributor at the time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor children);
o dealers, brokers, banks or registered investment advisors that have
entered into an agreement with the Distributor providing specifically for the
use of shares of the Fund in particular investment products made available to
their clients (those clients may be charged a transaction fee by their dealer,
broker or advisor for the purchase or sale of Fund shares);
o (1) investment advisors and financial planners who have entered into an
agreement with the Distributor for this purpose and who charge an advisory,
consulting or other fee for their services and buy shares for their own accounts
or the accounts of their clients, (2) Retirement Plans and deferred compensation
plans and trusts used to fund those Plans (including, for example, plans
qualified or created under sections 401(a), 403(b) or 457 of the Internal
Revenue Code), and "rabbi trusts" that buy shares for their own accounts, in
each case if those purchases are made through a broker or agent or other
financial intermediary that has made special arrangements with the Distributor
for those purchases; and (3) clients of such investment advisors or financial
planners (that have entered into an agreement for this purpose with the
Distributor) who buy shares for their own accounts may also purchase shares
without sales charge but only if their accounts are linked to a master account
of their investment advisor or financial planner on the books and records of the
broker, agent or financial intermediary with which the Distributor has made such
special arrangements (each of these investors may be charged a fee by the
broker, agent or financial intermediary for purchasing shares);
o directors, trustees, officers or full-time employees of OpCap Advisors
or its affiliates, their relatives or any trust, pension, profit sharing or
other benefit plan which beneficially owns shares for those persons;
o accounts for which Oppenheimer Capital is the investment advisor (the
Distributor must be advised of this arrangement) and persons who are directors
or trustees of the company or trust which is the beneficial owner of such
accounts;
o any unit investment trust that has entered into an appropriate agreement
with the Distributor; or
o qualified retirement plans that had agreed with the former Quest for
Value Advisors to purchase shares of any of the Former Quest for Value Funds at
net asset value, with such shares to be held through DCXchange, a sub-transfer
agency mutual fund clearinghouse, provided that such arrangements are
consummated and share purchases 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:
o shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
o shares purchased by the reinvestment of loan repayments by a participant
in a retirement plan for which the Manager or its affiliates acts as sponsor;
o shares purchased by the reinvestment of dividends or other distributions
reinvested from the Fund or other Oppenheimer funds (other than Oppenheimer Cash
Reserves) or unit investment trusts for which reinvestment arrangements have
been made with the Distributor;
o shares purchased and paid for with the proceeds of shares redeemed in
the past 30 days from a mutual fund (other than a fund managed by the Manager or
any of its subsidiaries) on which an initial sales charge or contingent sales
charge was paid (this waiver also applies to shares purchased by exchange of
shares of Oppenheimer Money Market Fund, Inc. that were purchased and paid for
in this manner); this waiver must be requested when the purchase order is placed
for your shares of the Fund, and the Distributor may require evidence of your
qualification for this waiver; or
o shares purchased with the proceeds of maturing principal of units of any
Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge is also waived if
shares that would otherwise be subject to the contingent deferred sales charge
are redeemed in the following cases:
o to make Automatic Withdrawal Plan payments that are limited annually to
no more than 12% of the original account value;
o involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (see "Shareholder Account Rules and Policies,"
below);
o if, at the time of purchase of shares (prior to May 1, 1997) the dealer
agreed in writing to accept the dealer's portion of the sales commission in
installments of 1/18th of the commission per month (and no further commission
will be payable if the shares are redeemed within 18 months of purchase);
o if, at the time of purchase of shares (for the period May 1, 1997
through December 31, 1997) the dealer agreed in writing to accept the dealer's
portion of the sales commission in installments of 1/12th of the commission per
month (and no further commission will be payable if the shares are redeemed
within 12 months of purchase);
o for distributions from 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;
o for distributions from Retirement Plans having 500 or more eligible
participants, except distributions due to termination of all of the Oppenheimer
funds as an investment option under the Plan; or
o for distributions from 401(k) plans sponsored by broker-dealers that have
entered into a special agreement with the Distributor allowing this waiver.
o Service Plan for Class A Shares. The Fund has adopted a Service Plan for
Class A shares to reimburse the Distributor for a portion of its costs incurred
in connection with the personal service and maintenance of shareholder accounts
that hold Class A shares. Reimbursement is made quarterly at an annual rate that
may not exceed 0.25% of the average annual net assets of Class A shares of the
Fund. The Distributor uses all of those fees to compensate dealers, brokers,
banks and other financial institutions quarterly for providing personal service
and maintenance of accounts of their customers that hold Class A shares and to
reimburse itself (if the Fund's Board of Trustees authorizes such
reimbursements, which it has not yet done) for its other expenditures under the
Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining 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 of Month In on Redemptions in that Year
Which Purchase Order Was Accepted (As % of Amount Subject to Charge)
- -------------------------------------------------------------------------
0 - 1 5.0%
- -------------------------------------------------------------------------
1 - 2 4.0%
- -------------------------------------------------------------------------
2 - 3 3.0%
- -------------------------------------------------------------------------
3 - 4 3.0%
- -------------------------------------------------------------------------
4 - 5 2.0%
- -------------------------------------------------------------------------
5 - 6 1.0%
- -------------------------------------------------------------------------
6 and following None
- -------------------------------------------------------------------------
In the table, a "year" is a 12-month period. All purchases are considered
to have been made on the first regular business day of the month in which the
purchase was made.
o Automatic Conversion of Class B Shares. 72 months after you purchase
Class B shares, those shares will automatically convert to Class A shares. This
conversion feature relieves Class B shareholders of the asset-based sales charge
that applies to Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset value of the
two classes, and no sales load or other charge is imposed. When Class B shares
convert, any other Class B shares that were acquired by the reinvestment of
dividends and distributions on the converted shares will also convert to Class A
shares. The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A, Class B and Class
C Shares" in the Statement of Additional Information.
Buying Class C Shares. Class C shares are sold at net asset value per share
without an initial sales charge. However, if Class C shares are redeemed within
12 months of their purchase, a contingent deferred sales charge of 1.0% will be
deducted from the redemption proceeds. That sales charge will not apply to
shares purchased by the reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge will be based on the lesser
of the net asset value of the redeemed shares at the time of redemption or the
original offering price (which is the original net asset value). The contingent
deferred sales charge is not imposed on the amount of your account value
represented by the increase in net asset value over the initial purchase price.
The Class C contingent deferred sales charge is paid to 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, in the case of the Class B shares, and to reimburse
the Distributor, in the case of the Class C shares, for distributing and
servicing accounts. Under the Plans, the Fund pays the Distributor an annual
"asset-based sales charge" of 0.75% per year on Class B shares that are
outstanding for 6 years or less and on Class C shares. The Distributor also
receives a service fee of 0.25% per year under each Plan..
Under each Plan, both fees are computed on the average of the net asset
value of shares in the respective class, determined as of the close of each
regular business day during the period. The asset-based sales charge and service
fees increase Class B and Class C expenses by up to 1.00% of the net assets per
year of the respective class.
The Distributor uses the service fees to compensate dealers for providing
personal services for accounts that hold Class B or Class C shares. Those
services are similar to those provided under the Class A Service Plan, described
above. The Distributor pays the 0.25% service fees to dealers in advance for the
first year after Class B or Class C shares have been sold by the dealer and
retains the service fee paid by the Fund in that year. After the shares have
been held for a year, the Distributor pays the service fees to dealers on a
quarterly basis.
The asset-based sales charge allows investors to buy Class B or Class C
shares without a front-end sales charge while allowing the Distributor to
compensate dealers that sell those shares. The Fund pays the asset-based sales
charges to the Distributor for its services rendered in distributing Class B and
Class C shares. Those payments are at a fixed rated that is not related to the
Distributor's expenses. The services rendered by the Distributor including
paying and financing the payment of sales commissions, service fees and other
costs of distributing and selling Class B and Class C shares.
The Distributor currently pays sales commissions of 3.75% of the purchase
price of Class B shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class B shares is therefore
4.00% of the purchase price. The Distributor may pay the Class B service fee and
the asset- based sales charge to the dealer quarterly in lieu of paying the
sales commission and service fee advance at the time of purchase.
The Distributor currently pays sales commissions of 0.75% of the purchase
price of Class C shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class C shares is therefore
1.00% of the purchase price. The Distributor plans to pay the asset-based sales
charge as an ongoing commission to the dealer on Class C shares that have been
outstanding for a year or more. The Distributor may pay the Class C service fee
and the asset-based sales charge to the dealer quarterly in lieu of paying the
sales commission and service fee advance at the time of purchase.
The Distributor'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. At September 30, 1997, the end of
the Plan year, the Distributor had incurred unreimbursed expenses under the
Class B Plan of $924,133 (equal to 2.49% 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 $432,824 (equal to 0.77% of the Fund's net
assets represented by Class C shares on that date). If the Fund terminates
either of its Plans, the Board of Trustees may allow the Fund to continue
payments of the asset-based sales charge to the Distributor for distributing
shares before the Plan was terminated.
Waivers of Class B and Class C Sales Charges. The Class B and Class C contingent
deferred sales charges will not be applied to shares purchased in certain types
of transactions nor will it apply to Class B and Class C shares redeemed in
certain circumstances as described below. The reasons for this policy are in
"Reduced Sales Charges" in the Statement of Additional Information. In order to
receive a waiver of the Class B or Class C contingent deferred sales charge, you
must notify the Transfer Agent as to which conditions apply.
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:
o distributions to participants or beneficiaries from Retirement Plans, if
the distributions are made (a) under an Automatic Withdrawal Plan after the
participant reaches age 59-1/2, as long as the payments are no more than 10% of
the account value annually (measured from the date the Transfer Agent receives
the request), or (b) following the death or disability (as defined in the
Internal Revenue Code) of the participant or beneficiary (the death or
disability must have occurred after the account was established);
o redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder (the death or disability
must have occurred after the account was established, and for disability you
must provide evidence of a determination of disability by the Social Security
Administration);
o returns of excess contributions to Retirement Plans;
o distributions from retirement plans to make "substantially equal periodic
payments" as permitted in Section 72(t) of the Internal Revenue Code that do not
exceed 10% of the account value annually, measured from the date the Transfer
Agent receives the request;
o shares redeemed involuntarily, as described in "Shareholder Account Rules
and Policies," below;
o distributions from OppenheimerFunds prototype 401(k) plans and from
certain Massachusetts Mutual Life Insurance Company prototype 401(k) plans (1)
for hardship withdrawals; (2) under a Qualified Domestic Relations Order, as
defined in the Internal Revenue Code; (3) to meet minimum distribution
requirements as defined in the Internal Revenue Code; (4) to make "substantially
equal periodic payments" as described in Section 72(t) of the Internal Revenue
Code; (5) for separation from service; or (6) for loans to participants or
beneficiaries ; or
o distributions from 401(k) plans sponsored by broker-dealers that have
entered into a special agreement with the Distributor allowing this waiver.
Waivers for Shares Sold or Issued in Certain Transactions. The contingent
deferred sales charge is also waived on Class B and Class C shares sold or
issued in the following cases:
o shares sold to the Manager or its affiliates;
o shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or the
Distributor for that purpose; or
o shares issued in plans of reorganization to which the Fund is a party.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send money
electronically between those accounts to perform a number of types of account
transactions. These include 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.
o Using AccountLink to Buy Shares. Purchases may be made by telephone only
after your account has been established. To purchase shares in amounts up to
$250,000 through a telephone representative, call the Distributor at
1-800-852-8457. The purchase payment will be debited from your bank account.
o PhoneLink. PhoneLink is the OppenheimerFunds automated telephone system
that enables shareholders to perform a number of account transactions
automatically using a touch-tone phone. PhoneLink may be used on
already-established Fund accounts after you obtain a Personal Identification
Number (PIN), by calling the special PhoneLink number: 1-800-533-3310.
o Purchasing Shares. You may purchase shares in amounts up to $100,000 by
phone, by calling 1-800-533-3310. You must have established AccountLink
privileges to link your bank account with the Fund, to pay for these purchases.
o Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your Fund
account to another Oppenheimer funds account you have already established by
calling the special PhoneLink number. Please refer to "How to Exchange Shares"
below for details.
o Selling Shares. You can redeem shares by telephone automatically by
calling the PhoneLink number and the Fund will send the proceeds directly to
your AccountLink bank account. Please refer to "How to Sell Shares" below for
details.
Shareholder Transactions by Fax. Requests for certain account transactions may
be sent to the Transfer Agent by fax (telecopier). Please call 1-800-525-7048
for information about which transactions are included. Transaction requests
submitted by fax are subject to the same rules and restrictions as written and
telephone requests described in this Prospectus.
OppenheimerFunds Internet Web Site. Information about the Fund, including your
account balance, daily share prices, market and Fund portfolio information, may
be obtained by visiting the OppenheimerFunds Internet Web Site, at the following
Internet address: http://www.oppenheimerfunds.com. In 1998, the Transfer Agent
anticipates offering certain account transactions through the Internet Web Site.
To find out more information about those transactions and procedures, please
visit the Web Site.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that enable
you to sell shares automatically or exchange them to another Oppenheimer funds
account on a regular basis:
o Automatic Withdrawal Plans. If your Fund account is worth $5,000 or
more, you can establish an Automatic Withdrawal Plan to receive payments of at
least $50 on a monthly, quarterly, semi-annual or annual basis. The checks may
be sent to you or sent automatically to your bank account on AccountLink. You
may even set up certain types of withdrawals of up to $1,500 per month by
telephone. You should consult the Statement of Additional Information for more
details.
o Automatic Exchange Plans. You can authorize the Transfer Agent to
automatically exchange an amount you establish in advance for shares of up to
five other Oppenheimer funds on a monthly, quarterly, semi-annual or annual
basis under an Automatic Exchange Plan. The minimum purchase for each
Oppenheimer funds account is $25. These exchanges are subject to the terms of
the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A 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:
o Individual Retirement Accounts including rollover IRAs, for individuals
and their spouses and SIMPLE IRAs offered by employers
o 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
o SEP-IRAs (Simplified Employee Pension Plans) for small business owners
or people with income from self-employment, including SARSEP-IRAs
o Pension and Profit-Sharing Plans for self-employed persons and other
employers
o 401(k) Prototype Retirement Plans for businesses
Please call the Distributor for the OppenheimerFunds plan documents, which
contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account by selling (redeeming) some or
all of your shares on any regular business day. Your shares will be sold at the
next net asset value calculated after your order is received and accepted by the
Transfer Agent. The Fund offers you a number of ways to sell your shares in
writing or by telephone. You can also set up Automatic Withdrawal Plans to
redeem shares on a regular basis, as described above. If you have questions
about any of these procedures, and especially if you are redeeming shares in a
special situation, such as due to the death of the owner, or from a retirement
plan, please call the Transfer Agent first at 1-800-525-7048, for assistance.
o Retirement Accounts. To sell shares in an OppenheimerFunds retirement
account in your name, call the Transfer Agent for a distribution request form.
There are special income tax withholding requirements for distributions from
retirement plans and you must submit a withholding form with your request to
avoid delay. If your retirement plan account is held for you by your employer,
you must arrange for the distribution request to be sent by the plan
administrator or trustee. There are additional details in the Statement of
Additional Information.
o Certain Requests Require a Signature Guarantee. To protect you and the
Fund from fraud, certain redemption requests must be in writing and must include
a signature guarantee in the following situations (there may be other situations
also requiring a signature guarantee):
o You wish to redeem more than $50,000 worth of shares and receive a check
o The redemption check is not payable to all shareholders listed on the
account statement
o The redemption check is not sent to the address of record on your account
statement
o Shares are being transferred to a Fund account with a different owner or
name
o Shares are redeemed by someone other than the owners (such as an
Executor)
o Where Can I Have My Signature Guaranteed? The Transfer Agent will accept
a guarantee of your signature by a number of financial institutions, including:
a U.S. bank, trust company, credit union or savings association, or by a foreign
bank that has a U.S. correspondent bank, or by a U.S. registered dealer or
broker in securities, municipal securities or government securities, or by a
U.S. national securities exchange, a registered securities association or a
clearing agency. If you are signing on behalf of a corporation, partnership or
other business, or as a fiduciary, you must also include your title in the
signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
o Your name
o The Fund's name
o Your Fund account number (from your account statement)
o The dollar amount or number of shares to be redeemed
o Any special payment instructions
o Any share certificates for the shares you are selling
o The signatures of all registered owners exactly as the account is
registered, and
o Any special requirements or documents requested by the Transfer Agent to
assure proper authorization of the person asking to sell shares.
Use the following address 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.
o To redeem shares through a service representative, call 1-800-852-8457
o To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address on the
account statement, or, if you have linked your Fund account to your bank account
on AccountLink, you may have the proceeds sent to that bank account.
o 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.
o 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:
o Shares of the fund selected for exchange must be available for sale in
your state of residence.
o The prospectuses of this Fund and the fund whose shares you want to buy
must offer the exchange privilege.
o You must hold the shares you buy when you establish your account for at
least 7 days before you can exchange them; after the account is open 7 days, you
can exchange shares every regular business day.
o You must meet the minimum purchase requirements for the fund you purchase
by exchange.
o Before exchanging into a fund, you should obtain and read its prospectus.
Shares of a particular class of the Fund may be exchanged only for shares
of the same class in the other Oppenheimer funds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At present,
Oppenheimer Money Market Fund, Inc. offers only one class of shares, which are
considered to be Class A shares for this purpose. In some cases, sales charges
may be imposed on exchange transactions. Please refer to "How to Exchange
Shares" in the Statement of Additional Information for more details.
Exchanges may be requested in writing or by telephone:
o Written Exchange Requests. Submit an OppenheimerFunds Exchange Request
form, signed by all owners of the account. Send it to the Transfer Agent at the
addresses listed in "How
to Sell Shares."
o Telephone Exchange Requests. Telephone exchange requests may be made
either by calling a service representative at 1-800-852-8457 or by using
PhoneLink for automated exchanges, by calling 1-800-533-3310. Telephone
exchanges may be made only between accounts that are registered with the same
name(s) and address. Shares held under certificates may not be exchanged by
telephone.
You can find a list of Oppenheimer funds currently available for exchanges
in the Statement of Additional Information or obtain one by calling a service
representative at 1-800-525-7048. That list can change from time to time.
There are certain exchange policies you should be aware of:
o Shares are normally redeemed from one fund and purchased from the other
fund in the exchange transaction on the same regular business day on which the
Transfer Agent receives an exchange request that is in proper form by the close
of The New York Stock Exchange that day, which is normally 4:00 P.M., but may be
earlier on some days. However, either fund may delay the purchase of shares of
the fund you are exchanging into up to 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.
o Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request that
will disadvantage it, or to refuse multiple exchange requests submitted by a
shareholder or dealer.
o The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund will attempt to provide you notice whenever it is
reasonably able to do so, it may impose these changes at any time.
o For tax purposes, exchanges of shares involve a redemption of the shares
of the Fund you own and a purchase of the shares of the other fund, which may
result in a capital gain or loss. For more information about taxes affecting
exchanges, please refer to "How to Exchange Shares" in the Statement of
Additional Information.
o If the Transfer Agent cannot exchange all the shares you request because
of a restriction cited above, only the shares eligible for exchange will be
exchanged.
Shareholder Account Rules and Policies
o Net asset value per share is determined for each class of shares as of
the close of The New York Stock Exchange on each day the Exchange is open by
dividing the value of the Fund's net assets attributable to a class by the
number of shares of that class that are outstanding. The Fund's Board of
Trustees has established procedures to value the Fund's securities to determine
net asset value. In general, securities values are based on market value. There
are special procedures for valuing illiquid and restricted securities and
obligations for which market values cannot be readily obtained. These procedures
are described more completely in the Statement of Additional
Information.
o The offering of shares may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be suspended
by the Board of Trustees at any time the Board believes it is in the Fund's best
interest to do so.
o Telephone transaction privileges for purchases, redemptions or exchanges
may be modified, suspended or terminated by the Fund at any time. If an account
has more than one owner, the Fund and the Transfer Agent may rely on the
instructions of any one owner. Telephone privileges apply to each owner of the
account and the dealer representative of record for the account unless and until
the Transfer Agent receives cancellation instructions from an owner of the
account.
o The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not use
reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund will be
liable for losses or expenses arising out of telephone instructions reasonably
believed to be genuine. If you are unable to reach the Transfer Agent during
periods of unusual market activity, you may not be able to complete a telephone
transaction and should consider placing your order by mail.
o Redemption or transfer requests will not be honored until the Transfer
Agent receives all required documents in proper form. From time to time, the
Transfer Agent in its discretion may waive certain of the requirements for
redemptions stated in this Prospectus.
o Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing Corporation
are responsible for obtaining their clients' permission to perform those
transactions and are responsible to their clients who are shareholders of the
Fund if the dealer performs any transaction erroneously or improperly.
o The redemption price for shares will vary from day to day because the
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.
o Payment for redeemed shares is made ordinarily in cash and forwarded by
check or through AccountLink (as elected by the shareholder under the redemption
procedures described above) within 7 days after the Transfer Agent receives
redemption instructions in proper form, except under unusual circumstances
determined by the Securities and Exchange Commission delaying or suspending such
payments. For accounts registered in the name of a broker/dealer, payment will
be forwarded within 3 business days. The Transfer Agent may delay forwarding a
check or processing a payment via AccountLink for recently purchased shares, but
only until the purchase payment has cleared. That delay may be as much as 10
days from the date the shares were purchased. That delay may be avoided if you
purchase shares by federal funds wire or certified check, or arrange with your
bank to provide telephone or written assurance to the Transfer Agent that your
purchase payment has cleared.
o Involuntary redemptions of small accounts may be made by the Fund if the
account value has fallen below $200 for reasons other than the fact that the
market value of shares has dropped, and in some cases involuntary redemptions
may be made to repay the Distributor for losses from the cancellation of share
purchase orders.
o Under unusual circumstances, shares of the Fund may be redeemed "in
kind," which means that the redemption proceeds will be paid with securities
from the Fund's portfolio. Please refer to "How to Sell Shares" in the Statement
of Additional Information for more details.
o "Backup Withholding" of Federal income tax may be applied at the rate of
31% from taxable dividends, distributions and redemption proceeds (including
exchanges) if you fail to furnish the Fund a correct and properly certified
Social Security or Employer Identification Number when you sign your
application, or if you underreport your income to the Internal Revenue Service.
o The Fund does not charge a redemption fee, but if your dealer or broker
handles your redemption, they may charge a fee. That fee can be avoided by
redeeming your Fund shares directly through the Transfer Agent. Under the
circumstances described in "How to Buy Shares," you may be subject to a
contingent deferred sales charge when redeeming certain Class A, Class B and
Class C shares.
o To avoid sending duplicate copies of materials to households, the Fund
will mail only one copy of each annual and semi-annual report to shareholders
having the same last name and address on the Fund's records. However, each
shareholder may call the Transfer Agent at 1-800- 525-7048 to ask that copies of
those materials be sent personally to that shareholder.
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:
o Reinvest All Distributions in the Fund. You can elect to reinvest all
dividends and long- term capital gains distributions in additional shares of the
Fund.
o Reinvest Long-Term Capital Gains Only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or sent
to your bank account on AccountLink.
o Receive All Distributions in Cash. You can elect to receive a check for
all dividends and long-term capital gains distributions or have them sent to
your bank on AccountLink.
o Reinvest Your Distributions in Another Oppenheimer fund Account. You can
reinvest all distributions in the same class of shares of another Oppenheimer
fund account you have established.
Taxes. If your account is not a tax-deferred retirement account, you should be
aware of the following tax implications of investing in the Fund. Long-term
capital gains are taxable as long-term capital gains when distributed to
shareholders. It does not matter how long you have held your shares. Dividends
paid from short-term capital gains and net investment income are taxable as
ordinary income. Distributions are subject to federal income tax and may be
subject to state or local taxes. Your distributions are taxable when paid,
whether you reinvest them in additional shares or take them in cash. Every year
the Fund will send you and the IRS a statement showing the amount of each
taxable distribution you received in the previous year. So that the Fund will
not have to pay taxes on the amounts it distributes to shareholders as dividends
and capital gains, the Fund intends to manage its investments so that it will
qualify as a "regulated investment company" under the Internal Revenue Code,
although it reserves the right not to qualify in a particular year.
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.
o "Buying a Dividend". If you buy shares on or just before the ex-dividend
date, or just before the Fund declares a capital gains distribution, you will
pay the full price for the shares and then receive a portion of the price back
as a taxable dividend or capital gain, respectively.
o Taxes on Transactions. Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. Generally speaking, a capital gain
or loss is the difference between the price you paid for the shares and the
price you receive when you sell them.
o Returns of Capital. In certain cases distributions made by the Fund may
be considered a non-taxable return of capital to shareholders. If that occurs,
it will be identified in notices to shareholders. A non-taxable return of
capital may reduce your tax basis in your Fund shares.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax advisor
about the effect of an investment in the Fund on your particular tax situation.
-4-
<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) Oppenheimer Quest
Value Fund, Inc., Oppenheimer Quest Growth & Income Value Fund, Oppenheimer
Quest Opportunity Value Fund, Oppenheimer Quest Small Cap Value Fund and
Oppenheimer Quest Global Value Fund, Inc. on November 24, 1995, when
OppenheimerFunds, Inc. became the investment advisor to those funds, and (ii)
Quest for Value U.S. Government Income Fund, Quest for Value Investment Quality
Income Fund, Quest for 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) purchased by such shareholder by exchange of shares of other Oppenheimer
funds that were acquired pursuant to the merger of any of the Former Quest for
Value Funds into an Oppenheimer fund on November 24, 1995.
Class A Sales Charges
o Reduced Class A Initial Sales Charge Rates for Certain Former Quest
Shareholders
o Purchases by Groups, Associations and Certain Qualified Retirement
Plans. The following table sets forth the initial sales charge rates for Class A
shares purchased by a "Qualified Retirement Plan" through a single broker,
dealer or financial institution, or by members of "Associations" formed for any
purpose other than the purchase of securities if that Qualified Retirement Plan
or that Association purchased shares of any of the Former Quest for Value Funds
or received a proposal to purchase such shares from OCC Distributors prior to
November 24, 1995. For this purpose only, a "Qualified Retirement Plan" includes
any 401(k) plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a single
employer.
Front-End Front-End
Sales Charge Sales Charge Commission
Number of as a Percentage as a Percentage as a Percentage
Eligible Employees of Offering of Amount of Offering
or Members Price Invested Price
- ------------------------------------------------------------------------------
9 or fewer .50% 2.56% 2.00%
- ------------------------------------------------------------------------------
At least 10 but not
more than 49 2.00% 2.04% 1.60%
For purchases by Qualified Retirement plans and Associations having 50 or
more eligible employees or members, there is no initial sales charge on
purchases of Class A shares, but those shares are subject to the Class A
contingent deferred sales charge described on pages___ of this Prospectus.
Purchases made under this arrangement qualify for the lower of the sales
charge rate in the table based on the number of eligible employees in a
Qualified Retirement Plan or members of an Association or the sales charge rate
that applies under the Rights of Accumulation described above in the Prospectus.
In addition, purchases by 401(k) plans that are Qualified Retirement Plans
qualify for the waiver of the Class A initial sales charge if they qualified to
purchase shares of any of the Former Quest For Value Funds by virtue of
projected contributions or investments of $1 million or more each year.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations, or as eligible employees in Qualified Retirement Plans
also may purchase shares for their individual or custodial accounts at these
reduced sales charge rates, upon request to the Fund's Distributor.
o Waiver of Class A Sales Charges for Certain Shareholders. Class A shares
of the Fund purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
o Shareholders of the Fund who were shareholders of the AMA Family of
Funds on February 28, 1991 and who acquired shares of any of the Former Quest
for Value Funds by merger of a portfolio of the AMA Family of Funds.
o Shareholders of the Fund who acquired shares of any Former Quest for
Value Fund by merger of any of the portfolios of the Unified Funds.
o Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions. The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares of the Fund purchased by the following investors
who were shareholders of any Former Quest for Value Fund:
o Investors who purchased Class A shares from a dealer that is or was not
permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship under the Employee Retirement
Income Security Act of 1974 and regulations adopted under that law.
o Participants in Qualified Retirement Plans that purchased shares of any
of the Former Quest For Value Funds pursuant to a special "strategic alliance"
with the distributor of those funds. The Fund's Distributor will pay a
commission to the dealer for purchases of Fund shares as described above in
"Class A Contingent Deferred Sales Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge Waivers
o Waivers for Redemptions of Shares Purchased Prior to March 6, 1995. In
the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, 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.
o Waivers for Redemptions of Shares Purchased on or After March 6, 1995 but
Prior to November 24, 1995. In the following cases, the contingent deferred
sales charge will be waived for redemptions of Class A, 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.
A-1
<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
OppenheimerFunds Internet Web Site
http://www.oppenheimerfunds.com
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.
PR0215.001.0198 Printed on recycled paper
<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 9/30/97. In the case of Class B
shares, that graph will cover the period from 10/10/95 (inception of the class)
through 9/30/97, 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 9/30/97. 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>
Oppenheimer Global Morgan Stanley Lehman Brothers
Fiscal Year Growth & Income Capital International Aggregate Bond
(Period) Ended 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
09/30/97 $24,100 $24,386 $18,011
Oppenheimer Global Morgan Stanley Lehman Brothers
Fiscal Year Growth & Income Capital International Aggregate Bond
(Period) Ended Fund B World Index Index
- ----------------------------------------------------------------------------------------
10/10/95(2) $10,000 $10,000 $10,000
09/30/96 $11,432 $11,420 $10,490
09/30/97 $15,342 $14,232 $11,509
Oppenheimer Global Morgan Stanley Lehman Brothers
Fiscal Year Growth & Income Capital International Aggregate Bond
(Period) Ended Fund C World Index Index
- ---------------------------------------------------------------------------------------
12/01/93(3) $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
09/30/97 $17,737 $18,236 $12,765
- ----------------------
</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.
(3) Class C shares of the Fund were first publicly offered on December
1, 1993.
<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 28, 1998
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated January 28, 1998. It should be read together
with the Prospectus, which may be obtained by writing to the Fund's Transfer
Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado 80217 or by
calling the Transfer Agent at the toll-free number shown above.
CONTENTS
Page
About the Fund
Investment Objective and Policies.............................................
Investment Policies and Strategies.......................................
Other Investment Techniques and Strategies...............................
Other Investment Restrictions............................................
How the Fund is Managed.......................................................
Organization and History.................................................
Trustees and Officers of the Fund........................................
The Manager and Its Affiliates...........................................
Brokerage Policies of the Fund
Performance of the Fund.......................................................
Distribution and Service Plans................................................
About Your Account
How To Buy Shares.............................................................
How To Sell Shares............................................................
How To Exchange Shares........................................................
Dividends, Capital Gains and Taxes............................................
Additional Information About the Fund.........................................
Financial Information About the Fund
Independent Auditors' Report..................................................
Financial Statements..........................................................
Appendices
Appendix A: Ratings of Investments........................................A-1
Appendix B: Industry Classifications......................................B-1
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.
o 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.
o 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.
o 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.
o 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.
o 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.
o Special Risks of Emerging Market Countries. Investments in emerging
market countries may involve further risks in addition to those identified above
for investments in foreign securities. Securities issued by emerging market
countries and companies located in those countries may be subject to extended
settlement periods, whereby the Fund might not receive principal and/or income
on a timely basis and its net asset value could be affected. There may be a lack
of liquidity for emerging market securities; interest rates and foreign currency
exchange rates may be more volatile; sovereign limitations on foreign
investments may be more likely to be imposed; there may be significant balance
of payment deficits; and their economies and markets may respond in a more
volatile manner to economic changes than those in developed countries.
o 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.
o U.S. Government Securities. U.S. Government Securities are debt
obligations issued or guaranteed by the U.S. Government or one of its agencies
or instrumentalities, and include "zero coupon" Treasury securities,
mortgage-backed securities, collateralized mortgage-backed obligations and money
market instruments. See "Temporary Investments" for further discussion.
o 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.
o 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.
o 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.
o FNMA Securities. The Federal National Mortgage Association ("FNMA") was
established to create a secondary market in mortgages insured by the FHA. FNMA
issues guaranteed mortgage pass-through certificates ("FNMA Certificates"). FNMA
Certificates resemble 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.
o 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.
o Collateralized Mortgage-Backed Obligations ("CMOs"). CMOs are
fully-collateralized bonds that are the general obligations of the issuer
thereof, either the U.S. Government, a U.S. Government instrumentality, or a
private issuer. Such bonds generally are secured by an assignment to a trustee
(under the indenture pursuant to which the bonds are issued) of collateral
consisting of a pool of mortgages. Payments with respect to the underlying
mortgages generally are made to the trustee under the indenture. Payments of
principal and interest on the underlying mortgages are not passed through to the
holders of the CMOs as such (i.e., the character of payments of principal and
interest is not passed through, and therefore payments to holders of CMOs
attributable to interest paid and principal repaid on the underlying mortgages
do not necessarily constitute income and return of capital, respectively, to
such holders), but such payments are dedicated to payment of interest on and
repayment of principal of the CMOs. CMOs often are issued in two or more classes
with different characteristics such as varying maturities and stated rates of
interest. Because interest and principal payments on the underlying mortgages
are not passed through to holders of CMOs, CMOs of varying maturities may be
secured by the same pool of mortgages, the payments on which are used to pay
interest on each class and to retire successive maturities (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.
o 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.
o 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."
o U.S. Government Securities. U.S. Government securities are debt
obligations issued or guaranteed by the U.S. Government or one of its agencies
or instrumentalities. 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 (see
discussion above), mortgage-backed securities and CMOs (see discussion above)
and money market instruments.
o Commercial Paper. The Fund's commercial paper investments include the
following:
o 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.
o 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.
o 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
o 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.
o 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.
o 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.
o 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.
o Participation Interests. The Fund may invest in participation interests,
subject to the limitation, described in "Illiquid and Restricted Securities" in
the Prospectus on investments by the Fund in illiquid investments. Participation
interests 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.
o "When-Issued" and Delayed Delivery Transactions. The Fund may purchase
securities on a "when-issued" basis, and may purchase or sell such securities on
a "delayed delivery" basis. Although the Fund will enter into such transactions
for the purpose of acquiring securities for its portfolio or for delivery
pursuant to options contracts it has entered into, the Fund may dispose of a
commitment prior to settlement. "When-issued" or "delayed delivery" refers to
securities whose terms and indenture are available and for which a market
exists, but which are not available for immediate delivery or 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
o 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.
o 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.
o 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.
o 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.
o 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.
o Forward Contracts. The Fund may enter into foreign currency exchange
contracts ("Forward Contracts"), which obligate the seller to deliver and the
purchaser to take a specific amount of foreign currency at a specific future
date for a fixed price. A Forward Contract involves 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.
o 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.
o Regulatory Aspects of Hedging Instruments. The Fund is required to
operate within certain guidelines and restrictions with respect to its use of
futures and options 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.
o 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).
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.
o 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
o Fundamental 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:
o buy the securities issued by any company for the purpose of exercising
management control;
o 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;
o 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;
o buy securities on margin, except that the Fund may make margin deposits
in connection with any of the Hedging Instruments which it may use;
o 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;
o 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;
o 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;
o 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;
o 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
o invest in oil, gas or other mineral exploration or development programs.
o Non-Fundamental Investment Restrictions. The Fund operates under certain
investment restrictions which are non-fundamental policies of the Fund and
which, as such, can be changed by the Board of Trustees without shareholder
approval. These policies provide that 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. No more than 15% of the Fund's net assets will be held as collateral
for such short sales at any one time. In addition, 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 during the past five years are
set forth below. The address for 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 Enterprise
Fund, Oppenheimer Growth Fund, Oppenheimer Municipal Bond Fund, Oppenheimer
Money Market Fund, Inc., Oppenheimer Capital Appreciation Fund, Oppenheimer U.S.
Government Trust, Oppenheimer New York Municipal Fund, Oppenheimer California
Municipal Fund, Oppenheimer Multi-State Municipal Trust, Oppenheimer Multiple
Strategies Fund, Oppenheimer Gold & Special Minerals Fund, Oppenheimer Global
Fund, Oppenheimer Discovery Fund, Oppenheimer International Small Company Fund,
Oppenheimer International Growth Fund, Oppenheimer Developing Markets Fund,
Oppenheimer Series Fund, Inc., Oppenheimer Multi- Sector Income Trust, and
Oppenheimer World Bond Fund (collectively, the "New York-based Oppenheimer
funds"), except that Ms. Macaskill is not a director of Oppenheimer Money Market
Fund, Inc. Ms. Macaskill and Messrs. Spiro, Donohue, Bishop, Bowen, Farrar and
Zack hold the same respective offices with the New York-based Oppenheimer funds
as with the Fund. As of January 16, 1998, the Trustees and officers of the Fund
as a group owned less than 1% of the outstanding Class A, Class B, or Class C
shares of the Fund. That statement does not include ownership of shares held of
record by an employee benefit plan for employees of the Manager (one of the
Trustees of the Fund listed below, 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 above.
Leon Levy, Chairman of the Board of Trustees; Age: 72
31 West 52nd Street, New York, NY 10019
General Partner of Odyssey Partners, L.P. (investment partnership)(since 1982)
and Chairman of Avatar Holdings, Inc. (real estate development).
Robert G. Galli, Trustee; Age: 64
19750 Beach Road, Jupiter Island, FL 33469
Formerly he held the following positions: Vice Chairman of OppenheimerFunds,
Inc. (the "Manager") (October 1995-December 1997); 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 adviser
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: 74
591 Breezy Hill Road, Hillsdale, NY 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: 49
President (since June 1991), Chief Executive Officer (since September 1995) and
a Director (since December 1994) of the Manager; President and director (since
June 1991) of HarbourView; Chairman and a director of SSI (since August 1994),
and SFSI (September 1995); President (since September 1995) and a director
(since October 1990) of OAC; President (since September 1995) and a director
(since November 1989) of Oppenheimer Partnership Holdings, Inc., a holding
company subsidiary of the Manager; a director of Oppenheimer Real Asset
Management, Inc. (since July 1996); President and a director (since October
1997) of OppenheimerFunds International Ltd., an offshore fund manager
subsidiary of the Manager ("OFIL") and Oppenheimer Millennium Funds plc (since
October 1997); President and a director of other Oppenheimer funds; a director
of the NASDAQ Stock Market, Inc. and of Hillsdown Holdings plc (a U.K. food
company); formerly an Executive Vice President of the Manager.
Elizabeth B. Moynihan, Trustee; Age: 68
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: 70
6 Whittaker's Mill, Williamsburg, VA 23185
A director of Dominion Resources, Inc. (electric utility holding company),
Dominion Energy, Inc. (electric power and oil & gas producer), Texan
Cogeneration Company (cogeneration company), Prime Retail, Inc. (real estate
investment trust); 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.
Edward V. Regan, Trustee; Age: 67
40 Park Avenue, New York, NY 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 River Bank America (real estate
manager); Trustee, Financial Accounting Foundation (FASB and GASB); formerly New
York State Comptroller and trustee, New York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Trustee; Age: 66
8 Sound Shore Drive, Greenwich, CT 06830
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: 72
Chairman Emeritus (since August 1991) and a director (since January 1969) of the
Manager; formerly Chairman of the Manager and the Distributor.
Pauline Trigere, Trustee; Age: 85
498 Seventh Avenue, New York, NY 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and sale of
women's fashions).
Clayton K. Yeutter, Trustee; Age: 67
1325 Merrie Ridge Road, McLean, VA 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) and Texas Instruments, Inc. (electronics);
formerly (in descending chronological order) IMC Global Inc. (chemicals and
animal feed), 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.
Frank Jennings, Vice President and Portfolio Manager; Age: 50
Vice President of the Manager (since September 1995); and an officer of other
Oppenheimer funds; formerly, Managing Director of Global Equities at Mitchell
Hutchins Asset Management, Inc., a subsidiary of Paine Webber Inc.
George C. Bowen, Treasurer; Age: 61
6803 South Tucson Way, Englewood, CO 80112
Senior Vice President (since September 1987) and Treasurer (since March 1985) of
the Manager; Vice President (since June 1983) and Treasurer (since March 1985)
of the Distributor; Vice President (since October 1989) and Treasurer (since
April 1986) of HarbourView; Senior Vice President (since February 1992),
Treasurer (since July 1991)and a director (since December 1991) of Centennial;
President, Treasurer and a director of Centennial Capital Corporation (since
June 1989); Vice President and Treasurer (since August 1978) and Secretary
(since April 1981) of SSI; Vice President, Treasurer and Secretary of SFSI
(since November 1989); Treasurer of OAC (since June 1990); Treasurer of
Oppenheimer Partnership Holdings, Inc. (since November 1989); Vice President and
Treasurer of Oppenheimer Real Asset Management, Inc. (since July 1996); Chief
Executive Officer, Treasurer and a director of MultiSource Services, Inc., a
broker-dealer (since December 1995); an officer of other Oppenheimer funds.
Andrew J. Donohue, Secretary; Age: 47
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President (since September 1993), and a director (since January 1992) of the
Distributor; Executive Vice President, General Counsel and a director of
HarbourView, SSI, SFSI and Oppenheimer Partnership Holdings, Inc. since
(September 1995) and MultiSource Services, Inc. (a broker-dealer) (since
December 1995); President and a director of Centennial (since September 1995);
President and a director of Oppenheimer Real Asset Management, Inc. (since July
1996); General Counsel (since May 1996) and Secretary (since April 1997) of OAC;
Vice President of OFIL and Oppenheimer Millennium Funds plc (since October
1997); an officer of other Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer; Age: 39
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
Scott T. Farrar, Assistant Treasurer; Age: 32
6803 South Tucson Way, Englewood, CO 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
Robert G. Zack, Assistant Secretary; Age: 49
Senior Vice President (since May 1985) and Associate General Counsel (since May
1981) of the Manager, Assistant Secretary of SSI (since May 1985), and SFSI
(since November 1989); Assistant Secretary of Oppenheimer Millennium Funds plc
(since October 1997); an officer of other Oppenheimer funds.
o Remuneration of Trustees. The officers of the Fund and certain Trustees
of the Fund (Ms. Macaskill and Mr. Swain) who are affiliated with the Manager
receive no salary or fee from the Fund. Mr. Galli received no salary or fee
prior to January 1, 1998. The remaining Trustees of the Fund received the
compensation shown below. The compensation from the Fund was paid during its
fiscal year ended September 30, 1997. The compensation from all of the New
York-based Oppenheimer funds includes the Fund and is compensation received as a
director, trustee or member of a committee of the Board during the 1997 calendar
year.
Retirement Total
Aggregate Benefits Compensation
Compensation Accrued as From All
From Part of Fund New York-based
Name and Position the Fund(1) Expenses Oppenheimer Funds(3)
Leon Levy, $11,910 $2,924 $158,500
Chairman and Trustee
Benjamin Lipstein $10,295 $2,528 $137,000
Study Committee Chairman,
Audit Committee Member
and Trustee(2)
Elizabeth B. Moynihan $7,251 $1,780 $96,500
Study Committee Member
and Trustee
Kenneth A. Randall $6,650 $1,633 $88,500
Audit Committee Chairman
and Trustee
Edward V. Regan $6,575 $1,614 $87,500
Proxy Committee Chairman,
Audit Committee Member
and Trustee
Russell S. Reynolds, Jr. $4,922 $1,208 $65,500
Proxy Committee Member
and Trustee
Pauline Trigere, Trustee $4,396 $1,079 $58,500
Clayton K. Yeutter $4,922 $1,208 $65,500
Proxy Committee Member
and Trustee
- ----------------------
(1) For the fiscal year ended September 30, 1997. (2) Committee position held
during a portion of the period shown.
(3) For the 1997 calendar year.
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 those benefits cannot be
determined as of this time nor can the Fund estimate the number of years of
credited service that will be used to determine those benefits.
o Deferred Compensation Plan. The Board of Trustees has adopted a Deferred
Compensation Plan for disinterested trustees that enables Trustees to elect to
defer receipt of all or a portion of the annual fees they are entitled to
receive from the Fund. Under the plan, the compensation deferred by a Trustee is
periodically adjusted as though an equivalent amount had been invested in shares
of one or more Oppenheimer funds selected by the Trustee. The amount paid to the
Trustee under the plan will be determined based upon the performance of the
selected funds. Deferral of Trustees' fees under the plan will not materially
affect the Fund's assets, liabilities and net income per share. The plan will
not obligate the Fund to retain the services of any Trustee or to pay any
particular amount of compensation to any Trustee. Pursuant to an Order issued by
the Securities and Exchange Commission, the Fund may, without shareholder
approval and notwithstanding its fundamental policy restricting investments in
other open-end investment companies) invest in the funds selected by the Trustee
under the plan for the limited purpose of determining the value of the Trustee's
deferred fee account.
o Major Shareholders. As of January 16, 1998, 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., 4800 Deer Lake Drive, East,
Jacksonville, Florida 32246 which was the record owner of 226,239.28 Class B
shares (representing 8.93% of the Class B shares then outstanding and
373,264.584 Class C shares (representing 8.88% 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 two
of whom (Ms. Macaskill 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.
o Portfolio Management. The Portfolio Manager of the Fund is Frank
Jennings, who is principally responsible for the day-to-day management of the
Fund's portfolio. Mr. Jennings' background is described in the Prospectus under
"Portfolio Manager." Other members of the Manager's Equity Portfolio Department,
particularly William Wilby, provide the portfolio manager with counsel and
support in managing the Fund's portfolio.
o 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 Investment Advisory
Agreement or by the Distributor under the General Distributor's Agreement are
paid by the Fund. The Investment Advisory Agreement lists examples of expenses
paid by the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Trustees, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs, certain printing
and registration costs and non-recurring expenses, including litigation costs.
For the Fund's fiscal years ended September 30, 1995, 1996 and 1997, the
management fees paid by the Fund to the Manager were $1,140,233, $1,202,416 and
$1,615,565, 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 Investment 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 Investment 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
Investment 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.
o The Distributor. Under its General Distributor's Agreement with the Fund,
the Distributor acts as the Fund's principal underwriter in the continuous
public offering of the Fund's Class A, Class B 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, 1995, 1996 and 1997, the aggregate sales
charges on sales of the Fund's Class A shares were $684,243, $507,729 and
$614,969, respectively, of which the Distributor and an affiliated broker-dealer
retained in the aggregate $205,662, $171,752 and $193,537 in those respective
years. During the Fund's fiscal years ended September 30, 1996 and 1997,
contingent deferred sales charges collected on the Fund's Class B shares totaled
$6,391 and $30,299, respectively, all of which the Distributor retained. During
the Fund's fiscal year ended September 30, 1996 and 1997, contingent deferred
sales charges collected on the Fund's Class C shares totaled $3,710 and $4,200,
respectively, all of which the Distributor retained. For additional information
about distribution of the Fund's shares and the expenses connected with such
activities, please refer to "Distribution and Service Plans" below.
o The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent,
is responsible for maintaining the Fund's shareholder registry and shareholder
accounting records, and for shareholder servicing and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the duties of
the Manager under the Investment Advisory Agreement is to arrange the portfolio
transactions for the Fund. The Investment Advisory Agreement contains provisions
relating to the employment of broker-dealers ("brokers") to effect the Fund's
portfolio transactions. In doing so, the Manager is authorized by the Investment
Advisory Agreement to employ broker-dealers, including "affiliated" brokers, as
that term is defined in the Investment Company Act, as may, in its best judgment
based on all relevant factors, implement the policy of the Fund to obtain, at
reasonable expense, the "best execution" (prompt and reliable execution at the
most favorable price obtainable) of such transactions. The Manager need not seek
competitive commission bidding but is expected to minimize the commissions paid
to the extent consistent with the interest and policies of the Fund as
established by its Board of Trustees. 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 Investment Advisory Agreement, the Manager is authorized to
select brokers that provide brokerage and/or research services for the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher than
another qualified broker would have charged if a good faith determination is
made by the Manager that the commission is fair and reasonable in relation to
the services provided. Subject to the foregoing considerations, the Manager may
also consider sales of shares of the Fund and other investment companies managed
by the Manager or its affiliates as a factor in the selection of brokers for the
Fund's portfolio transactions.
Description of Brokerage Practices Followed by the Manager. Subject to the
provisions of the Investment Advisory Agreement, and the procedures and rules
described above, allocations of brokerage are generally made by the Manager's
portfolio traders based upon recommendations from the Manager's portfolio
managers. In certain instances, portfolio managers may directly place trades and
allocate brokerage, also subject to the provisions of the Investment Advisory
Agreement and the procedures and rules described above. In either case,
brokerage is allocated under the supervision of the Manager's executive
officers. Transactions in securities other than those for which an exchange is
the primary market are generally done with principals or market makers.
Brokerage commissions are paid primarily for effecting transactions in listed
securities 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 Investment
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, 1995, 1996 and 1997,
total brokerage commissions paid by the Fund (not including spreads or
concessions on principal transactions on a net trade basis) were $771,868,
$1,355,647 and $819,815, respectively. During the fiscal year ended September
30, 1997, $709,615 was paid to brokers as commissions in return for research
services; the aggregate dollar amount of those transactions was $243,000,548.
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.
o Average Annual Total Returns. The "average annual total return" of each
class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below) held
for a number of years ("n") to achieve an Ending Redeemable Value ("ERV") of
that investment, according to the following formula:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
o Cumulative Total Returns. The cumulative "total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses some of the same factors as average
annual total return, but it does not average the rate of return on an annual
basis. 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, 1997 and for the period October 22, 1990
(commencement of operations) to September 30, 1997 were 30.85%, 17.04% and
13.52%, respectively. The cumulative "total return" on Class A shares for the
period October 22, 1990 (commencement of operations) to September 30, 1997 was
141.01%. The "average annual total returns" on an investment in Class B shares
of the Fund for the fiscal year ended September 30, 1997 and the period from
October 10, 1995 (inception of the class) through September 30, 1997 were 32.69%
and 24.24%, respectively. The cumulative "total return" on Class B shares for
the period October 10, 1995 (inception of the class) to September 30, 1997 was
53.42%. The "average annual total returns" on an investment in Class C shares of
the Fund for the fiscal year ended September 30, 1997 and the period from
December 1, 1993 through September 30, 1997 were 36.74% and 16.14%,
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, 1997 was 77.36%.
o Total Returns at Net Asset Value. From time to time the Fund may also
quote an average annual total return at net asset value or a cumulative total
return at net asset value for Class A, Class B 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
average annual total returns at net asset value of the Fund's Class A shares for
the one and five year periods ended September 30, 1997 and for the period
October 22, 1990 (commencement of operations) through September 30, 1997 were
38.83%, 18.43% and 14.49%, respectively. 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, 1997 was 155.71%. The average
annual total returns of the Fund's Class B shares at net asset value for the one
year period and for the period October 10, 1995 (inception of class) were 37.69%
and 25.87%, 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, 1997, was 57.42%. The average annual total returns of the
Fund's Class C shares at net asset value for the fiscal year ended September 30,
1997 and the period from December 1, 1993 (inception of class) through September
30, 1997 were 37.74% and 16.14%, respectively. The cumulative total return at
net asset value of the Fund's Class C shares for the fiscal period from December
1, 1993 (inception of class) through September 30, 1997 was 77.36%.
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, 1997, payments under the Class A
Plan totaled $343,873, all of which was paid by the Distributor to Recipients,
including $24,383 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, 1997 totaled $173,886, of
which $158,050 was retained by the Distributor. Payments made under the Class C
Plan during the fiscal period ended September 30, 1997 totaled $432,789, of
which $97,301 was retained by the Distributor and $13,952 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 value of the Fund's net assets attributable to
that class by the number of shares of that class outstanding. The Exchange
normally closes at 4:00 P.M. New York time, but may close earlier on some days
(for example, in case of weather emergencies or on days falling before a
holiday). The Exchange's most recent annual holiday schedule (which is subject
to change) states that it will close on New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. It may also close on other days. Trading may
occur in debt securities and in foreign securities when the Exchange is closed
(including weekends and holidays). Because the Fund's net asset value will not
be calculated at those times, if securities held in the Fund's portfolio are
traded at such time, the net asset values per share of Class A, Class B and
Class C shares of the Fund may be significantly affected at times when
shareholders 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 securities exchange or on the Automated Quotation System ("NASDAQ") of the
Nasdaq Stock Market, Inc. 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
price of the preceding trading day, or closing "bid" prices that day); (ii)
securities traded on a foreign securities exchange are generally valued at the
last sale 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 "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-type debt
securities held by a non-money market fund that had a maturity of less than 397
days when issued that have a remaining maturity of 60 days or less, and debt
instruments held by a money market fund that have a remaining maturity of 397
days or less, shall be valued at cost, adjusted for amortization of premiums and
accretion of discount; 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, or mortgage-backed securities for which last sale
information is not generally available. The Manager will monitor the accuracy of
such pricing services, which may include comparing prices used for portfolio
evaluation to actual sales prices of selected securities.
Trading in securities on European and Asian exchanges and over-the-counter
markets is normally completed before the close of the 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).
When the Fund writes an option, an amount equal to the premium received is
included in the Fund's Statement of Assets and Liabilities as an asset, and an
equivalent credit is included in the liability section. The credit is adjusted
("marked-to-market") to reflect the current market value of the option. In
determining the Fund's gain on investments, if a call or put written by the Fund
is exercised, the proceeds are increased by the premium received. If a call or
put written by the Fund expires, the Fund has a gain in the amount of the
premium; if the Fund enters into a closing purchase transaction, it will have a
gain or loss depending on whether the premium received was more or less than the
cost of the closing transaction. If the Fund exercises a put it holds, the
amount the Fund receives on its sale of the underlying investment is reduced by
the amount of premium paid by the Fund.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25.00. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House ("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.
Relations by virtue of a remarriage (step-children, step-parents, etc.) are
included.
o The Oppenheimer funds. The Oppenheimer funds are those mutual funds for
which the Distributor acts as the distributor or the sub-distributor and include
the following:
Limited Term New York Municipal Fund
Oppenheimer Bond Fund for Growth
Oppenheimer California Municipal Fund
Oppenheimer Champion Income Fund
Oppenheimer Developing Markets Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer Disciplined Value Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Equity Income Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer International Bond Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Growth Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street California Municipal Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer MidCap Fund
Oppenheimer Municipal Bond Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer New York Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Real Asset Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer U.S. Government Trust
Panorama Series Fund Inc.
Rochester Fund Municipals
the following "Money Market Funds":
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Oppenheimer Cash Reserves
Oppenheimer Money Market Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of each
of the Oppenheimer funds except Money Market Funds (under certain circumstances
described herein, redemption proceeds of Money Market Fund shares may be subject
to a contingent deferred sales charge).
o Letters of Intent. A Letter of Intent (referred to as a "Letter") is an
investor's statement in writing to the Distributor of the intention to purchase
Class A shares or Class A and Class B shares of the Fund and other
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.
o Terms of Escrow That Apply to Letters of Intent.
(1) Out of the initial purchase (or subsequent purchases if necessary)
made pursuant to a Letter, shares of the Fund equal in value 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. If you make payments from your
bank account to purchase shares of the Fund, your bank account will be
automatically debited normally four to five business days prior to the
investment dates selected in the Account Application. Neither the Distributor
the Transfer Agent nor the Fund shall be responsible for any delays in
purchasing shares resulting from delays in ACH transmission.
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 other than
public school 403(b) plans, and SIMPLE plans) for employees of a corporation or
a sole proprietorship, members and employees of a partnership or association or
other organized group of persons (the members of which may include other
groups), if the group or association has made special arrangements with the
Distributor and all members of the group or association participating in or who
are eligible to participate in the plan(s) purchase Class A shares of the Fund
through a single investment dealer, broker, or other financial institution
designated by the group. "Group retirement plan" also includes qualified
retirement plans and non-qualified deferred compensation plans and IRAs that
purchase Class A shares of the Fund through a single investment dealer, broker,
or other financial institution, if that broker-dealer has made special
arrangements with the Distributor enabling those plans to purchase Class A
shares of the Fund at net asset value but subject to a contingent deferred sales
charge.
In addition to the discussion in the Prospectus relating to the ability of
Retirement Plans to purchase Class A shares at net asset value in certain
circumstances, there is no initial sales charge on purchases of Class A shares
of any one or more of the Oppenheimer funds by a Retirement Plan in the
following cases:
(i) the recordkeeping for the Retirement Plan is performed on a daily
valuation basis by Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch")
and, on the date the plan sponsor signs the Merrill Lynch recordkeeping service
agreement, the Retirement Plan has $3 million or more in assets invested in
mutual funds other than those advised or managed by Merrill Lynch Asset
Management, L.P. ("MLAM") that are made available pursuant to a Service
Agreement between Merrill Lynch and the mutual fund's principal underwriter or
distributor and in funds advised or managed by MLAM (collectively, the
"Applicable Investments"); or
(ii) the recordkeeping for the Retirement Plan is performed on a daily
valuation basis by an independent record keeper whose services are provided
under a contract or arrangement between the Retirement Plan and Merrill Lynch.
On the date the plan sponsor signs the Merrill Lynch record keeping service
agreement, the Plan must have $3 million or more in assets, excluding assets
held in money market funds, invested in Applicable Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by the
Merrill Lynch plan conversion manager on the date the plan sponsor signs the
Merrill Lynch record keeping service agreement.
If a Retirement Plan's records are maintained on a daily valuation basis
by Merrill Lynch or an independent record keeper under a contract or alliance
arrangement with Merrill Lynch, and if on the date the plan sponsor signs the
Merrill Lynch record keeping service agreement the Retirement Plan has less than
$3 million in assets, excluding money market funds, invested in Applicable
Investments, then the Retirement Plan may purchase only Class B shares of one or
more of the Oppenheimer funds. Otherwise, the Retirement Plan will be permitted
to purchase Class A shares of one or more of the Oppenheimer funds. Any of those
Retirement Plans that currently invest in Class B shares of the Fund will have
their Class B shares be converted to Class A shares of the Fund once the Plan's
Applicable Investments have reached $5 million.
Any redemptions of shares of the Fund held by Retirement Plans whose
records are maintained on a daily valuation basis by Merrill Lynch or an
independent record keeper under a contract with Merrill Lynch that are currently
invested in Class B shares of the Fund shall not be subject to the Class B CDSC.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the Prospectus. The
information below supplements the terms and conditions for redemptions set forth
in the Prospectus.
o Involuntary Redemptions. The Fund's Board of Trustees has the right to
cause the involuntary redemption of the shares held in any account if the
aggregate net asset value of those shares is less than $200 or such lesser
amount as the Board may fix. The Board of Trustees will not cause the
involuntary redemption of shares in an account if the aggregate net asset value
of the shares has fallen below the stated minimum solely as a result of market
fluctuations. Should the Board elect to exercise this right, it may also fix, in
accordance with the Investment Company Act, the requirements for any notice to
be given to the shareholders in question (not less than 30 days), or the Board
may set requirements for granting permission to the Shareholder to increase the
investment, and set other terms and conditions so that the shares would not be
involuntarily redeemed.
o Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, the Board of
Trustees of the Fund may determine that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make payment of a
redemption order wholly or partly in cash. In that case the Fund may pay the
redemption proceeds in whole or in part by a distribution "in kind" of
securities from the portfolio of the Fund, in lieu of cash, in conformity with
applicable rules of the Securities and Exchange Commission. The Fund has elected
to be governed by Rule 18f-1 under the Investment Company Act, pursuant to which
the Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net assets of the Fund during any 90-day period for any
one shareholder. If shares are redeemed in kind, the redeeming shareholder might
incur brokerage or other costs in selling the securities for cash. The method of
valuing securities used to make redemptions in kind will be the same as the
method the Fund uses to value its portfolio securities described above under the
"Determination of Net Asset Values Per Share" and that valuation will be made as
of the time the redemption price is determined.
Reinvestment Privilege. Within 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. Shares are
normally redeemed pursuant to an Automatic Withdrawal Plan three business days
before the date you select in the Account Application. If a contingent deferred
sales charge applies to the redemption, the amount of the check or payment will
be reduced accordingly. The Fund cannot guarantee receipt of 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 as
well as in the Prospectus. These provisions may be amended from time to time by
the Fund and/or the Distributor. When adopted, such amendments will
automatically apply to existing Plans.
o Automatic Exchange Plans. Shareholders can authorize the Transfer Agent
(on the OppenheimerFunds Application or signature-guaranteed instructions) to
exchange a pre-determined amount of shares of the Fund for shares (of the same
class) of other Oppenheimer funds automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount
that may be exchanged to each other fund account is $25. Exchanges made under
these plans are subject to the restrictions that apply to exchanges as set forth
in "How to Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
o Automatic Withdrawal Plans. Fund shares will be redeemed as necessary to
meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first and 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, and Centennial America Fund, L.P., 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.
For accounts established on or before March 8, 1996 holding Class M shares
of Oppenheimer Bond Fund for Growth, Class M shares can be exchanged only for
Class A shares of other Oppenheimer funds. Exchanges to Class M shares of
Oppenheimer Bond Fund for Growth are permitted from Class A shares of
Oppenheimer Money Market Fund, Inc. or Oppenheimer Cash Reserves that were
acquired by exchange from Class M shares. Otherwise no exchanges of any class of
any Oppenheimer fund into Class M shares are permitted.
Class A shares of Oppenheimer funds may be exchanged at net asset value for
shares of any Money Market Fund. Shares of any Money Market Fund purchased
without a sales charge may be exchanged for shares of Oppenheimer funds offered
with a sales charge upon payment of the sales charge (or, if applicable, may be
used to purchase shares of Oppenheimer funds subject to a contingent deferred
sales charge). However, shares of Oppenheimer Money Market Fund, Inc. purchased
with the redemption proceeds of shares of other mutual funds (other than funds
managed by the Manager or its subsidiaries) redeemed within 30 days 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 12 months (18 months for shares purchased prior to May 1, 1997) 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. 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,
1997, 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, 1997, 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, 1997,
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, 1997
<PAGE>
FINANCIALS
- -------------------------------------------------------------------------------
9 Oppenheimer Global Growth & Income Fund
<PAGE>
STATEMENT OF INVESTMENTS September 30, 1997
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
====================================================================================
<S> <C> <C>
COMMON STOCKS--76.3%
- ------------------------------------------------------------------------------------
CONSUMER CYCLICALS--13.0%
- ------------------------------------------------------------------------------------
AUTOS & HOUSING--6.9%
Porsche AG, Preference 11,000 $19,058,005
- ------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT--5.0%
Cedar Fair LP 30,000 1,432,500
- ------------------------------------------------------------------------------------
Nintendo Co. Ltd. 130,000 12,167,643
------------
13,600,143
- ------------------------------------------------------------------------------------
RETAIL: SPECIALTY--1.1%
Christies International plc 700,000 2,917,416
- ------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS--23.7%
- ------------------------------------------------------------------------------------
BEVERAGES--9.7%
Allied Domecq plc 1,500,000 11,909,550
- ------------------------------------------------------------------------------------
Cadbury Schweppes plc 600,000 5,786,370
- ------------------------------------------------------------------------------------
Guinness plc 500,000 4,721,012
- ------------------------------------------------------------------------------------
Remy Cointreau 225,000 4,361,778
------------
26,778,710
- ------------------------------------------------------------------------------------
FOOD--3.5%
Dairy Farm International Holdings Ltd. 4,765,000 4,526,750
- ------------------------------------------------------------------------------------
Great Atlantic & Pacific Tea Co., Inc. (The) 160,000 5,080,000
------------
9,606,750
- ------------------------------------------------------------------------------------
HEALTHCARE/DRUGS--3.3%
Genzyme Corp. (General Division)(1) 50,000 1,487,500
- ------------------------------------------------------------------------------------
Gilead Sciences, Inc.(1) 70,000 3,106,250
- ------------------------------------------------------------------------------------
Glaxo (India) Ltd. 110,000 1,339,644
- ------------------------------------------------------------------------------------
Neurogen Corp.(1) 120,000 3,240,000
------------
9,173,394
- ------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES--3.1%
United States Surgical Corp. 295,535 8,625,928
- ------------------------------------------------------------------------------------
HOUSEHOLD GOODS--4.1%
Pond's (India) Ltd. 26,000 1,365,411
- ------------------------------------------------------------------------------------
Wella AG, Preference 13,000 9,914,579
------------
11,279,990
</TABLE>
10 Oppenheimer Global Growth & Income Fund
<PAGE>
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL--16.7%
- --------------------------------------------------------------------------------------------------
BANKS--14.0%
Banca di Roma(1) 6,000,000 $ 6,209,302
- --------------------------------------------------------------------------------------------------
Banco Bradesco SA, Preference 800,618,073 8,330,789
- --------------------------------------------------------------------------------------------------
Cie Financiere de Paribas, Series A 150,000 11,125,694
- --------------------------------------------------------------------------------------------------
Grupo Financiero Banorte SA de CV, Series B(1) 2,000,000 3,859,514
- --------------------------------------------------------------------------------------------------
Merita Ltd., Cl. A 600,000 2,848,803
- --------------------------------------------------------------------------------------------------
Societe Generale 41,570 6,019,444
------------
38,393,546
- --------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL--2.7%
Industrial Credit & Investment Corp. of India Ltd. 3,000,000 7,340,327
- --------------------------------------------------------------------------------------------------
TECHNOLOGY--22.9%
- --------------------------------------------------------------------------------------------------
COMPUTER HARDWARE--2.8%
International Business Machines Corp. 72,000 7,627,500
- --------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE--3.0%
Cap Gemini SA 90,000 5,840,990
- --------------------------------------------------------------------------------------------------
JBA Holdings plc 171,000 2,347,987
------------
8,188,977
- --------------------------------------------------------------------------------------------------
ELECTRONICS--11.1%
Coherent, Inc.(1) 250,000 13,843,750
- --------------------------------------------------------------------------------------------------
National Semiconductor Corp.(1) 410,000 16,810,000
------------
30,653,750
- --------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-TECHNOLOGY--6.0%
QUALCOMM, Inc.(1) 260,000 16,558,750
------------
Total Common Stocks (Cost $159,708,502) 209,803,186
==================================================================================================
PREFERRED STOCKS--4.3%
- --------------------------------------------------------------------------------------------------
Reckitt & Coleman Capital, 9.50% Cv. (Cost $9,969,238) 3,600,000 11,776,280
UNITS
==================================================================================================
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- --------------------------------------------------------------------------------------------------
American Satellite Network, Inc. Wts., Exp. 6/99 (Cost $0) 3,875 --
</TABLE>
11 Oppenheimer Global Growth & Income Fund
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
==========================================================================================================
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--18.6%
- ----------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, STRIPS, Zero Coupon:
7.464%, 11/15/18(2) $ 5,000,000 $ 1,268,539
6.902%, 11/15/22(2) 36,000,000 7,095,921
7.41%, 11/15/22(2) 7,000,000 1,376,396
7.243%, 2/15/22(2) 20,000,000 4,118,500
7.008%, 2/15/24(2) 20,000,000 3,664,139
6.70%, 2/15/26(2) 20,000,000 3,329,538
6.497%, 2/15/27(2) 90,000,000 14,389,650
7.028%, 8/15/20(2) 25,000,000 5,648,998
7.299%, 8/15/22(2) 20,000,000 3,996,817
7.305%, 8/15/23(2) 7,000,000 1,331,021
6.693%, 8/15/25(2) 30,000,000 5,099,336
-------------
Total U.S. Government Obligations (Cost $46,796,230) 51,318,855
==========================================================================================================
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--0.8%
- ----------------------------------------------------------------------------------------------------------
AMC Entertainment, Inc., 12.625% Gtd. Sr. Sub. Nts., 8/1/02(3) 500,000 542,500
- ----------------------------------------------------------------------------------------------------------
Matahari International Finance Co. BV, 11.25% Gtd. Nts., 3/15/01 1,500,000 1,543,830
-------------
Total Non-Convertible Corporate Bonds and Notes (Cost $2,190,000) 2,086,330
==========================================================================================================
REPURCHASE AGREEMENTS--2.7%
- ----------------------------------------------------------------------------------------------------------
Repurchase agreement with First Chicago Capital Markets,
6.125%, dated 9/30/97, to be repurchased at $7,501,276 on
10/1/97, collateralized by U.S. Treasury Bonds, 6.875%-12%,
5/15/05-8/15/25, with a value of $5,888,583, and U.S. Treasury
Nts., 5.875%-7.25%, 8/15/98-5/15/04, with a value of $1,765,953
(Cost $7,500,000) 7,500,000 7,500,000
- ----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $226,163,970) 102.7% 282,484,651
- ----------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (2.7) (7,418,734)
------------ -------------
NET ASSETS 100.0% $275,065,917
============ =============
</TABLE>
12 Oppenheimer Global Growth & Income Fund
<PAGE>
- --------------------------------------------------------------------------------
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 $137,173,534 48.5%
- -------------------------------------------------------------------------------
Great Britain 39,458,614 14.0
- -------------------------------------------------------------------------------
Germany 28,972,583 10.3
- -------------------------------------------------------------------------------
France 27,347,906 9.7
- -------------------------------------------------------------------------------
Japan 12,167,643 4.3
- -------------------------------------------------------------------------------
India 10,045,383 3.6
- -------------------------------------------------------------------------------
Brazil 8,330,789 2.9
- -------------------------------------------------------------------------------
Italy 6,209,302 2.2
- -------------------------------------------------------------------------------
Singapore 4,526,750 1.6
- -------------------------------------------------------------------------------
Mexico 3,859,514 1.4
- -------------------------------------------------------------------------------
Finland 2,848,803 1.0
- -------------------------------------------------------------------------------
The Netherlands 1,543,830 0.5
------------ -----
Total $282,484,651 100.0%
============ =====
</TABLE>
1. Non-income producing security.
2. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
3. Identifies issues considered to be illiquid or restricted--See Note 6 of
Notes to Financial Statements.
See accompanying Notes to Financial Statements.
13 Oppenheimer Global Growth & Income Fund
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES September 30, 1997
<TABLE>
<S> <C>
==================================================================================================
ASSETS
Investments, at value (cost $226,163,970)--see accompanying statement $282,484,651
- --------------------------------------------------------------------------------------------------
Receivables:
Investments sold 5,074,861
Closed forward foreign currency exchange contracts 1,485,189
Interest and dividends 1,130,275
Shares of beneficial interest sold 1,127,459
- --------------------------------------------------------------------------------------------------
Other 5,889
------------
Total assets 291,308,324
==================================================================================================
LIABILITIES
Bank overdraft 4,449,416
- --------------------------------------------------------------------------------------------------
Unrealized depreciation on forward foreign currency
exchange contracts--Note 5 26,576
- --------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 9,852,091
Shares of beneficial interest redeemed 1,195,096
Closed forward foreign currency exchange contracts 302,078
Distribution and service plan fees 153,088
Trustees' fees--Note 1 88,068
Transfer and shareholder servicing agent fees 33,908
Other 142,086
------------
Total liabilities 16,242,407
==================================================================================================
NET ASSETS $275,065,917
============
==================================================================================================
COMPOSITION OF NET ASSETS
Paid-in capital $202,134,246
- --------------------------------------------------------------------------------------------------
Undistributed net investment income 4,780,876
- --------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions 11,849,830
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies--Note 3 56,300,965
------------
Net assets $275,065,917
============
</TABLE>
14 Oppenheimer Global Growth & Income Fund
<PAGE>
<TABLE>
<S> <C>
===========================================================================================
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $181,716,279 and 9,388,596 shares of beneficial interest outstanding) $19.36
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $20.54
- -------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net assets
of $37,071,370 and 1,924,286 shares of beneficial interest outstanding) $19.27
- -------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net assets
of $56,278,268 and 2,922,787 shares of beneficial interest outstanding) $19.26
See accompanying Notes to Financial Statements.
</TABLE>
15 Oppenheimer Global Growth & Income Fund
<PAGE>
STATEMENT OF OPERATIONS For the Year Ended September 30, 1997
<TABLE>
<S> <C>
============================================================================================================
INVESTMENT INCOME
Interest $ 4,380,087
- ------------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $184,108) 3,513,378
------------
Total income 7,893,465
============================================================================================================
EXPENSES
Management fees--Note 4 1,615,565
- ------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 343,873
Class B 173,886
Class C 432,789
- ------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 401,994
- ------------------------------------------------------------------------------------------------------------
Shareholder reports 113,224
- ------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 94,583
- ------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses--Note 1 59,495
- ------------------------------------------------------------------------------------------------------------
Legal and auditing fees 32,429
- ------------------------------------------------------------------------------------------------------------
Registration and filing fees 11,964
- ------------------------------------------------------------------------------------------------------------
Other 61,057
------------
Total expenses 3,340,859
============================================================================================================
NET INVESTMENT INCOME 4,552,606
============================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain on:
Investments 15,880,162
Foreign currency transactions 1,244,907
------------
Net realized gain 17,125,069
- ------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 50,947,987
Translation of assets and liabilities denominated in foreign currencies (3,564,904)
------------
Net change 47,383,083
------------
Net realized and unrealized gain 64,508,152
============================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $69,060,758
============
</TABLE>
See accompanying Notes to Financial Statements.
16 Oppenheimer Global Growth & Income Fund
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended September 30,
1997 1996
=================================================================================================================
<S> <C> <C>
OPERATIONS
Net investment income $ 4,552,606 $ 3,538,878
- -----------------------------------------------------------------------------------------------------------------
Net realized gain 17,125,069 18,140,523
- -----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 47,383,083 (3,287,320)
------------ ------------
Net increase in net assets resulting from operations 69,060,758 18,392,081
=================================================================================================================
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Class A (3,458,736) (3,012,171)
Class B (340,317) (89,925)
Class C (732,211) (615,071)
- -----------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (10,399,198) (5,806,943)
Class B (812,462) (48,484)
Class C (3,233,192) (1,559,313)
=================================================================================================================
BENEFICIAL INTEREST TRANSACTIONS
Net increase in net assets resulting from beneficial
interest transactions--Note 2:
Class A 27,284,959 1,387,903
Class B 23,583,896 7,852,376
Class C 10,061,688 5,914,656
=================================================================================================================
NET ASSETS
Total increase 111,015,185 22,415,109
- -----------------------------------------------------------------------------------------------------------------
Beginning of period 164,050,732 141,635,623
------------ ------------
End of period [including undistributed (overdistributed) net
investment income of $4,780,876 and $(82,568), respectively] $275,065,917 $164,050,732
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
17 Oppenheimer Global Growth & Income Fund
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------
YEAR ENDED SEPTEMBER 30,
1997 1996 1995 1994
========================================================================================
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $15.62 $14.98 $15.21 $14.09
- ----------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .40 .47 .45 .33
Net realized and
unrealized gain (loss) 5.12 1.40 .54 1.62
-------- -------- -------- --------
Total income (loss) from
investment operations 5.52 1.87 .99 1.95
- ----------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net
investment income (.40) (.40) (.40) (.35)
Distributions from net realized gain (1.38) (.83) (.82) (.48)
-------- -------- -------- --------
Total dividends and distributions
to shareholders (1.78) (1.23) (1.22) (.83)
- ----------------------------------------------------------------------------------------
Net asset value, end of period $19.36 $15.62 $14.98 $15.21
======== ======== ======== ========
========================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 38.83% 13.28% 7.43% 13.96%
========================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $181,716 $120,214 $113,341 $124,017
- ----------------------------------------------------------------------------------------
Average net assets (in thousands) $141,582 $115,186 $120,267 $117,164
- ----------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 2.47% 2.65% 3.09% 2.44%
Expenses 1.43% 1.52% 1.63% 1.49%
- ----------------------------------------------------------------------------------------
Portfolio turnover rate(5) 90.5% 207.8% 135.2% 87.4%
Average brokerage commission rate(6) $0.0015 $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.
18 Oppenheimer Global Growth & Income Fund
<PAGE>
<TABLE>
<CAPTION>
CLASS B CLASS C
- ------- ----------------------- --------------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
1993 1997 1996(2) 1997 1996 1995 1994(1)
=================================================================================
<S> <C> <C> <C> <C> <C> <C>
$11.91 $15.57 $14.72 $15.55 $14.92 $15.17 $14.85
- ---------------------------------------------------------------------------------
.29 .30 .36 .28 .35 .35 .22
2.17 5.06 1.63 5.08 1.40 .53 .87
- -------- -------- -------- -------- -------- -------- --------
2.46 5.36 1.99 5.36 1.75 .88 1.09
- ---------------------------------------------------------------------------------
(.17) (.28) (.31) (.27) (.29) (.31) (.29)
(.11) (1.38) (.83) (1.38) (.83) (.82) (.48)
- -------- -------- -------- -------- -------- -------- --------
(.28) (1.66) (1.14) (1.65) (1.12) (1.13) (.77)
- ---------------------------------------------------------------------------------
$14.09 $19.27 $15.57 $19.26 $15.55 $14.92 $15.17
======== ======== ======== ======== ======== ======== ========
=================================================================================
21.00% 37.69% 14.33% 37.74% 12.45% 6.61% 7.41%
=================================================================================
$86,019 $37,071 $8,131 $56,278 $35,706 $28,295 $17,008
- ---------------------------------------------------------------------------------
$59,951 $17,474 $3,815 $43,338 $31,371 $22,211 $ 7,896
- ---------------------------------------------------------------------------------
2.68% 1.77% 1.64%(4) 1.71% 1.87% 2.36% 1.85%(4)
1.56% 2.15% 2.28%(4) 2.18% 2.28% 2.39% 2.44%(4)
- ---------------------------------------------------------------------------------
90.6% 90.5% 207.8% 90.5% 207.8% 135.2% 87.4%
-- $0.0015 $0.0004 $0.0015 $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, 1997 were $229,084,992 and $179,213,243,
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. Generally, non-U.S. commissions are lower than U.S.
commissions when expressed as cents per share but higher when expressed as a
percentage of transactions because of the lower per-share prices of many
non-U.S. securities.
See accompanying Notes to Financial Statements.
19 Oppenheimer Global Growth & Income Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
===============================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Global Growth & Income Fund (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment objective is to seek
capital appreciation consistent with preservation of principal while providing
current income by investing primarily in common stocks and fixed income
securities of U.S. and foreign companies. The Fund's investment advisor 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
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 that particular class and exclusive
voting rights with respect to matters affecting that 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 an
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.
20 Oppenheimer Global Growth & Income Fund
<PAGE>
===============================================================================
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 foreign 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, 1997, a provision of $44,888 was made for the Fund's projected
benefit obligations and payments of $3,313 were made to retired trustees,
resulting in an accumulated liability of $86,690 at September 30, 1997.
21 Oppenheimer Global Growth & Income Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
===============================================================================
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders are
recorded on the ex-dividend date.
- -------------------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes primarily because of the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes. The character of the
distributions made during the year from net investment income or net realized
gains may differ from its 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 fiscal year in which the
income or realized gain was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended September 30, 1997, amounts have been reclassified to reflect a
decrease in overdistributed net investment income of $4,842,102, a decrease in
accumulated net realized gain on investments of $4,841,100, and a decrease in
paid-in capital of $1,002.
- -------------------------------------------------------------------------------
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.
22 Oppenheimer Global Growth & Income Fund
<PAGE>
===============================================================================
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, 1997 YEAR ENDED SEPTEMBER 30, 1996(1)
----------------------------- -----------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 4,125,858 $ 69,304,365 2,501,931 $ 37,638,075
Dividends and
distributions reinvested 878,791 13,300,225 587,255 8,491,936
Redeemed (3,311,174) (55,319,631) (2,961,528) (44,742,108)
---------- ------------ ---------- ------------
Net increase 1,693,475 $ 27,284,959 127,658 $ 1,387,903
========== ============ ========== ============
- ---------------------------------------------------------------------------------------------------------------------
Class B:
Sold 1,501,153 $ 25,320,751 587,069 $ 8,834,948
Dividends and
distributions reinvested 70,126 1,070,339 8,689 128,325
Redeemed (169,306) (2,807,194) (73,445) (1,110,897)
---------- ------------ ---------- ------------
Net increase 1,401,973 $ 23,583,896 522,313 $ 7,852,376
========== ============ ========== ============
- ---------------------------------------------------------------------------------------------------------------------
Class C:
Sold 772,796 $ 12,832,416 686,840 $ 10,288,855
Dividends and
distributions reinvested 250,530 3,750,170 144,291 2,072,833
Redeemed (397,368) (6,520,898) (431,369) (6,447,032)
---------- ------------ ---------- ------------
Net increase 625,958 $ 10,061,688 399,762 $ 5,914,656
========== ============ ========== ============
</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, 1997, net unrealized appreciation on investments of
$56,320,681 was composed of gross appreciation of $59,258,880, and gross
depreciation of $2,938,199.
23 Oppenheimer Global Growth & Income Fund
<PAGE>
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 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% on
average annual net assets in excess of $2 billion.
For the year ended September 30, 1997, commissions (sales charges paid
by investors) on sales of Class A shares totaled $614,969, of which $193,537
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 $33,371 and $5,820, respectively, of which $708,109 and
$105,187, respectively, was paid to an affiliated broker/dealer. During the
year ended September 30, 1997, OFDI received contingent deferred sales charges
of $30,299 and $4,200, 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 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. OFDI uses the
service fee to reimburse brokers, dealers, banks and other financial
institutions quarterly for providing personal service and maintaining accounts
of their customers that hold Class A shares. During the year ended September
30, 1997, OFDI paid $24,383 to an affiliated broker/dealer as reimbursement for
Class A personal service and maintenance expenses.
24 Oppenheimer Global Growth & Income Fund
<PAGE>
===============================================================================
The Fund has adopted a 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. OFDI retained $158,050 as compensation for Class B sales
commissions and service fee advances, as well as financing costs. 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 distributing shares before
the Plan was terminated. As of September 30, 1997, OFDI had incurred
unreimbursed expenses of $924,133 for Class B.
The Fund has adopted a 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. During the year ended September 30, 1997, OFDI paid $13,952 to an
affiliated broker/dealer as reimbursement for Class C personal service and
maintenance expenses and retained $97,301 as reimbursement for Class C sales
commissions and service fee advances, as well as financing costs. 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. As of September 30, 1997, OFDI had
incurred unreimbursed expenses of $432,824 for Class C.
25 Oppenheimer Global Growth & Income Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
===============================================================================
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, 1997, the Fund had outstanding forward contracts as
follows:
<TABLE>
<CAPTION>
CONTRACT VALUATION AS OF UNREALIZED
EXPIRATION DATE AMOUNT (000S) SEPTEMBER 30, 1997 DEPRECIATION
- --------------------------------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
- ---------------------
<S> <C> <C> <C> <C>
British Pound Sterling (GBP) 10/1/97 180 GBP $ 428,643 $ 3,741
Italian Lira (ITL) 10/2/97 2,666,369 ITL 7,118,384 22,835
-------
Total Unrealized Depreciation $26,576
=======
</TABLE>
26 Oppenheimer Global Growth & Income Fund
<PAGE>
===============================================================================
6. ILLIQUID AND RESTRICTED SECURITIES
At September 30, 1997, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933,
may have contractual restrictions on resale, and are valued under methods
approved by the Board of Trustees as reflecting fair value. A security may be
considered illiquid if it lacks a readily-available market or if its valuation
has not changed for a certain period of time. The Fund intends to invest no
more than 10% of its net assets (determined at the time of purchase and
reviewed from time to time) in illiquid or restricted securities. Certain
restricted securities, eligible for resale to qualified institutional
investors, are not subject to that limit. The aggregate value of illiquid or
restricted securities subject to this limitation at September 30, 1997 was
$542,500, which represents 0.20% of the Fund's net assets.
===============================================================================
7. BANK BORROWINGS
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other OppenheimerFunds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.0575% per annum.
The Fund had no borrowings outstanding during the year ended September
30, 1997.
27 Oppenheimer Global Growth & Income Fund
<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.
A-1
<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
Information Technology
Insurance Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
Wireless Services
- ---------------
* 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).
B-1
<PAGE>
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer 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
PX0215.001.0198
