OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
Supplement dated January 25, 1994
to the Prospectus dated January 25, 1994
For Use in the States of Arizona, Texas and Washington
This Fund may invest primarily in lower-rated corporate bonds, commonly
known as "junk bonds." Investments of this type are subject to a greater
risk of loss of principal and interest. Purchasers should carefully
assess the risks associated with an investment in this Fund.
January 25, 1994 PA275
<PAGE>
Oppenheimer Strategic Income & Growth Fund
3410 South Galena Street, Denver, Colorado 80231
Telephone 1-800-525-7048
Oppenheimer Strategic Income & Growth Fund (referred to in this Prospectus
as the "Fund") is an investment company with a primary investment
objective of current income and a secondary investment objective of
capital appreciation. The Fund intends to seek its primary investment
objective of current income principally by investing in (i) U.S.
Government Securities, (ii) foreign fixed-income securities, and (iii)
domestic fixed-income securities, including lower-rated high yield, high
risk bonds. The Fund intends to seek its secondary investment objective
of capital appreciation principally by investing in domestic equity
securities. Some of the securities the Fund intends to invest in are
considered to be speculative. An investment in the Fund does not
constitute a complete investment program and is not appropriate for
persons unwilling or unable to assume the high degree of risk associated
with investing in high yield, lower rated securities.
The Fund offers two classes of shares which may be purchased at a
price equal to their respective net asset value per share, plus a sales
charge. The investor may elect to purchase shares with a sales charge
imposed (1) at the time of purchase (the "Class A shares"), or (2) on a
contingent deferred basis (the "Class B shares"). Class B shares are also
subject to an asset-based sales charge. The contingent deferred sales
charge will be imposed on most redemptions of Class B shares within six
years of purchase. These alternatives permit an investor to choose the
method of purchasing shares that is more beneficial to that investor
depending on the amount of the purchase, the length of time the investor
expects to hold the shares and other circumstances. See "How to Buy
Shares -Alternative Sales Arrangements" below for further details.
This Prospectus sets forth concisely information about the Fund that
prospective investors should know before investing. A Statement of
Additional Information about the Fund (the "Additional Statement") dated
January 25, 1994, has been filed with the Securities and Exchange
Commission ("SEC") and is available without charge upon written request
to Oppenheimer Shareholder Services (the "Transfer Agent"), P.O. Box 5270,
Denver, Colorado 80217, or by calling the Transfer Agent at the toll-free
number shown above. The Additional Statement (which is incorporated in
its entirety by reference in this Prospectus) contains more detailed
information about the Fund, its management, and more information
concerning certain risk factors. These securities may be considered to
be speculative.
Investors are advised to read and retain this Prospectus for future
reference. Shares of the Fund are not deposits or obligations of any
bank, are not guaranteed by any bank, and are not insured by the FDIC or
any other agency, and involve investment risks, including the possible
loss of principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus is effective January 25, 1994.
<PAGE>
Table of Contents
Page
Fund Expenses
Financial Highlights
The Fund and Its Investment Policies
Special Investment Methods
Investment Restrictions
Management of the Fund
How to Buy Shares
Alternative Sales Arrangements
Class A Shares
Class A Sales Charge Table
Class A Contingent Deferred Sales Charge
Reduced Sales Charges for Class A Purchases
Class A Service Plan
Class B Shares
Class B Contingent Deferred Sales Charge
Class B Conversion Feature
Class B Distribution and Service Plan
Purchase Programs for Class A and Class B Shares
AccountLink
PhoneLink
Asset Builder Plans
How to Redeem Shares
Regular Redemption Procedures
Telephone Redemptions
Distributions from Retirement Plans
Automatic Withdrawal and Exchange Plans
Repurchase
Reinvestment Privilege
General Information on Redemptions
Exchanges of Shares and Retirement Plans
Dividends, Distributions and Taxes
Fund Performance Information
Additional Information
Appendix: Description of Ratings
<PAGE>
Fund Expenses
The following table sets forth the fees that an investor in the Fund
might pay and expenses paid by the Fund during its fiscal year ending
September 30, 1993. The public sale of Class B shares of the Fund
commenced on or about November 30, 1992.
Shareholder Transaction Expenses Class A Shares Class B Shares
Maximum Sales Charge on Purchases
(as a percentage of offering price) 4.75% None
Sales Charge on Reinvested Dividends None None
Maximum Contingent Deferred Sales
Charge on Redemptions None(1) 5.0%(2)
Redemption Fee None None
Exchange Fee $5.00 $5.00
Annual Fund Operating Expenses (as a percentage of average net assets)
Class A Shares Class B Shares
Management Fees .75% .75%
12b-1 (Distribution and/or .25% 1.00%
Service Plan) Fees
Other Expenses .36% .46%
Total Fund Operating Expenses(1) .36% 2.21%
_______________________
(1) Certain Class A share purchases of $1 million or more are not subject
to front-end sales charges, but a contingent deferred sales charge
(maximum of 1.0%) is imposed on the proceeds of such shares redeemed
within 18 months of the end of the calendar month of their purchase,
subject to certain conditions. See "How to Buy Shares - Class A
Contingent Deferred Sales Charge," below.
(2) A contingent deferred sales charge is imposed on the proceeds of
Class B shares redeemed within six years of the end of the calendar month
of their purchase, subject to certain exceptions. That charge is imposed
as a percentage of net asset value at the time of purchase or redemption,
whichever is less, and declines from 5.0% in the first year that shares
are held, to 4.0% in the second year, 3.0% in the third and fourth years,
2.0% in the fifth year, 1.0% in the sixth year and eliminated thereafter.
There is no charge on Class B shares held for more than six years. See
"How to Buy Shares - Class B Contingent Deferred Sales Charge," below.
The purpose of this table is to assist an investor in understanding
the various costs and expenses that an investor in the Fund will bear
directly (shareholder transaction expenses) or indirectly (annual fund
operating expenses). The sales charge rate shown for Class A shares is
the current maximum rate applicable to purchases of Class A shares of the
Fund. Investors in Class A shares may be entitled to reduced sales
charges based on the amount purchased or the value of shares already owned
and may be subject to a contingent deferred sales charge in limited
circumstances (see "How to Buy Shares - Class A Contingent Deferred Sales
Charge"). "Other Expenses" includes such expenses as custodial and
transfer agent fees, audit, legal and other business operating expenses,
but excludes extraordinary expenses. For further details, see "Dual Class
Methodology" and the Fund's financial statements, both included in the
Additional Statement.
The following examples apply the above-stated expenses and the
current maximum sales charges to a hypothetical $1,000 investment in
shares of the Fund over the time periods shown below, assuming a 5% annual
rate of return on the investment. The amounts shown below are the
cumulative costs of such hypothetical $1,000 investment for the periods
shown and, except as indicated in lines 3 and 4, assume that the shares
are redeemed at the end of each stated period.
1 year 3 years 5 years 10 years(1)
1. Class A Shares $61 $89 $118 $203
2. Class B Shares $72 $99 $138 $213
3. Class A Shares,
assuming no redemption $61 $89 $118 $203
4. Class B Shares,
assuming no redemption $22 $69 $118 $213
______________
(1)Class B shares convert to Class A shares under the terms and conditions
described under "How to Buy Shares - Class B Conversion Feature."
Therefore, years 7 through 10 reflect the Class A expenses shown above.
Long-term shareholders of Class B shares could pay the economic
equivalent, through the asset-based sales charge and contingent deferred
sales charge imposed on Class B shares, of more than the maximum front-end
sales charges permitted under applicable regulatory requirements. The
Class B Conversion Feature is intended to minimize the likelihood that
this will occur.
These examples should not be considered a representation of past or future
expenses or performance. Expenses are subject to change and actual
performance and expenses may be less or greater than those illustrated
above.
<PAGE>
Financial Highlights
Selected data for a Class A share and Class B share of the Fund
outstanding throughout each period.
The information in the table below has been audited by Deloitte &
Touche, independent auditors, whose report on the financial statements of
the Fund for the fiscal year ended September 30, 1993 is included in the
Additional Statement. The public sale of Class B shares of the Fund
commenced on or about November 30, 1992.
<TABLE>
<CAPTION>
Class A Class B
Year Ended Period Ended
September 30, September 30,
1993 1992++ 1993+++
<S> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $ 5.03 $ 5.00 $ 5.10
Income from investment operations:
Net investment income .22 .07+ .14
Net realized and unrealized gain on investments,
options written and foreign currencies .22 .02 .16
Total income from investment operations .44 .09 .30
Dividends and distributions to shareholders:
Dividends from net investment income (.20) (.06) (.13)
Distributions from net realized gain on investments (.01) -- (.01)
and options written
Total dividends and distributions to shareholders (.21) (.06) (.14)
Net asset value, end of period $ 5.26 $ 5.03 $ 5.26
Total Return, at Net Asset Value** 8.84% 1.74% 5.86%
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $55,291 $48,397 $12,386
Average net assets (in thousands) $59,209 $30,264 $ 7,541
Number of shares outstanding at end of period
(in thousands) 10,513 9,628 2,357
Ratios to average net assets:
Net investment income 5.69% 4.59%* 5.53%*
Expenses 1.36% 1.46%*+ 2.21%*
Portfolio turnover rate*** 122.4% 25.8% 122.4%
<FN>
*Annualized.
**Assumes a hypothetical initial investment on the business day before
distributions reinvested in additional shares on the reinvestment date,
and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total
returns.
***The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the year ended September 30, 1993 were
$96,138,345 and $76,691,071, respectively.
+Net investment income would have been $.07 absent the voluntary expense
reimbursement, resulting in an expense ratio of 1.74%.
++For the period from June 1, 1992 (commencement of operations) to
September 30, 1992.
+++For the period from November 30, 1992 (inception of offering) to
September 30, 1993.
</TABLE>
<PAGE>
The Fund and Its Investment Policies
The Fund is an open-end diversified management investment company
with a primary investment objective of current income and a secondary
investment objective of capital appreciation. It is a Massachusetts
business trust organized on April 14, 1992.
The Fund intends to seek its primary investment objective of current
income principally by investing in: (i) U.S. Government Securities, (ii)
foreign fixed-income securities, and (iii) domestic fixed-income
securities, including lower-rated, high yield, high risk bonds. Factors
that the Fund's investment adviser, Oppenheimer Management Corporation
(the "Manager"), will consider in selecting foreign obligations for the
Fund's portfolio are discussed below under "Foreign Fixed-Income
Securities." The Fund intends to seek its secondary investment objective
of capital appreciation principally by investing in domestic equity
securities. For a discussion of approaches which may be utilized by the
Manager to determine the allocation of the Fund's assets between the fixed
income sectors and the domestic equity sector, see "Asset Allocation
Approaches". The Fund's investment policies and practices are not
"fundamental" policies (as defined below) unless a particular policy is
identified as fundamental. The Board may change non-fundamental
investment policies without shareholder approval.
Under normal circumstances, the assets of the Fund will principally
be invested in each of the four sectors described above. However, the
Fund may from time to time invest up to 100% of its total assets in any
one sector (other than in the domestic equity securities sector) if, in
the judgment of the Manager, the Fund has the opportunity of seeking a
high level of current income without undue risk to principal.
Accordingly, the Fund's investments should be considered speculative.
Distributable income will fluctuate as the Fund shifts assets among these
sectors. The Fund's emphasis on securities with short, intermediate or
longer term maturities will change over time in response to market
conditions as will the Fund's investments in domestic equity securities.
There can be no assurance that the Fund will achieve its investment
objectives.
The Fund's assets may be invested in the following manner and will
be managed in accordance with the investment policies described below.
Further details are in "Investment Objective and Policies" in the
Additional Statement.
Domestic Fixed-Income Securities
The Fund may invest in fixed-income securities issued by domestic
corporations in any industry (e.g., industrial, financial or utility)
which may be denominated in U.S. dollars or in non-U.S. currencies. There
is no restriction as to the size of the issuer, although most will have
total assets in excess of $100 million. These investments may include
debt obligations such as bonds, debentures (i.e., unsecured bonds) and
notes (including variable and floating rate instruments described in
"Investment Objective and Policies" in the Additional Statement), together
with the other instruments discussed below. These investments may also
include sinking fund and callable bonds. Fixed-income securities are
subject to credit risk (the ability of the issuer to meet interest or
principal payments or both as they become due) and interest rate risk
(fluctuations in value resulting from the inverse relationship between
price and yield of fixed-income securities).
-Special Risk Considerations - High Yield Securities and Borrowing.
The higher yields and high income sought by the Fund are generally
obtainable from securities in the lower rating categories of the
established rating services. Such securities are rated "Baa" or lower by
Moody's Investors Service, Inc. ("Moody's") or "BBB" or lower by Standard
& Poor's Corporation ("Standard & Poor's"). The Fund may invest in
securities rated as low as "C" by Moody's or "D" by Standard & Poor's.
Such ratings indicate that the obligations are speculative in a high
degree and may be in default. The Fund is not obligated to dispose of
securities whose issuers subsequently are in default or if such securities
fall below the above-stated ratings. The Appendix to this Prospectus
describes these rating categories. The Fund may also invest in unrated
securities which, as determined by the Manager, offer yields and risks
comparable to those securities which are rated. Risks of high yield
securities may include: (i) limited liquidity and secondary market
support, (ii) substantial market price volatility resulting from changes
in prevailing interest rates, (iii) subordination to the prior claims of
banks and other senior lenders, (iv) the operation of mandatory sinking
fund or call/redemption provisions during periods of declining interest
rates whereby the Fund may be able to reinvest premature redemption
proceeds only in lower yielding portfolio securities, (v) the possibility
that earnings of the issuer may be insufficient to meet its debt service,
and (vi) the issuer's low creditworthiness and potential for insolvency
during periods of rising interest rates and economic downturn. As a
result of the limited liquidity of high yield securities, their prices
have at times experienced significant and rapid decline when a substantial
number of holders decided to sell. A decline is also likely in the high
yield bond market during an economic downturn. An economic downturn or
an increase in interest rates could severely disrupt the market for high
yield bonds and adversely affect the value of outstanding bonds and the
ability of the issuers to repay principal and interest. 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.
The Fund's portfolio at September 30, 1993 contained domestic
corporate bonds rated by Standard & Poor's as follows (the percentages
relate to the weighted average value of the bonds in each rating category
as a percentage of the Fund's total assets): BBB, .89%; BB-, 2.55%; B,
8.14%; CCC, .82%; and unrated, 4.46%. If a bond was not rated by Standard
& Poor's but was rated by Moody's, it is included in the comparable
category. Bonds shown as unrated were not rated by either Moody's or
Standard & Poor's. 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 relative
proportion of securities in particular rating categories in the Fund's
portfolio will fluctuate over time.
The Fund may also leverage its purchases of portfolio securities by
borrowing, which is considered to be a speculative investment method and
subjects an investment in the Fund to relatively greater risks and costs
that may not be present in a fund that does not borrow, including possible
reduction of income and increased fluctuation of net asset value per
share. See "Special Risk Considerations - Borrowing," below.
-Participation Interests. The Fund may acquire participation
interests in senior, fully-secured floating rate loans. The Fund
currently intends to invest no more than 5% of its net assets during the
coming year in participation interests. Such participation interests,
which may take the form of interests in, or assignments of, the loan, may
be acquired from banks or other lenders which have made loans or are
members of a lending syndicate. The Fund's investments in participation
interests are subject to its limitation on investments in illiquid
securities (see "Illiquid and Restricted Securities," below). Further
details are set forth in the Additional Statement under "Domestic Fixed
Income Securities - Participation Interests."
-Zero Coupon Securities. The Fund may invest in zero coupon
securities issued by private issuers. These zero coupon securities are:
(i) notes or debentures which do not pay current interest and are issued
at substantial discounts from par value, or (ii) notes or debentures that
pay no current interest until a stated date one or more years in the
future, after which the issuer is obligated to pay interest until
maturity, usually at a higher rate than if interest were payable from the
date of issuance. Such zero coupon securities, in addition to the risks
identified below under "U.S. Government Securities - Zero Coupon
Securities," are subject to the risk of the issuer's failure to pay
interest and repay principal in accordance with the terms of the
obligation. While the Fund does not receive cash payments of interest on
zero coupon securities, it does accrue taxable income on such securities.
-Asset-Backed Securities. The Fund may invest in securities which
represent fractional undivided interests in pools of consumer loans,
similar in structure to the mortgage-backed securities in which the Fund
may invest, described below. Payments of principal and interest are
passed through to holders of asset-backed securities and are typically
supported by some form of credit enhancement, such as a letter of credit,
surety bond, limited guarantee by another entity or having a priority to
certain of the borrower's other obligations. The degree of credit
enhancement varies and generally applies, until exhausted, to only a
fraction of the asset-backed security's par value. If the credit
enhancement of an asset-backed security held by the Fund has been
exhausted, and if any required payments of principal and interest are not
made with respect to the underlying loans, the Fund may then experience
losses or delays in receiving payment and a decrease in the value of the
asset-backed security. Further details are set forth in the Additional
Statement under "Domestic Fixed-Income Securities - Asset-Backed
Securities."
-Bank Obligations. The Fund may invest in the following Bank
Obligations (which are debt obligations generally having a maturity of one
year or less): 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 and which the Manager has
determined to be creditworthy, considering, among other factors, ratings
assigned to such securities by one or more "nationally-recognized
statistical rating organizations" ("NRSROs"), as such term is defined in
Rule 2a-7 under the Investment Company Act of 1940 (the "Investment
Company Act"), if rated.
-Commercial Paper. The Fund may invest in commercial paper rated at
least "A-3" by Standard & Poor's or at least "Prime-3" by Moody's or, if
not rated, issued by a corporation having an existing debt security rated
at least "BBB" or "Baa" by Standard & Poor's or Moody's, respectively.
The Fund's commercial paper investments may include variable amount master
demand notes and floating rate or variable rate notes, described under
"Domestic Fixed-Income Securities" in the Additional Statement.
-Board-Approved Instruments. The Fund may invest in other
investments, including those which may be developed in the future, of a
type which the Fund's Board of Trustees or the Manager under guidelines
established by the Board determines will enable the Fund to seek its
investment objective and are consistent with the Fund's other investment
policies.
U.S. Government Securities
The Fund may invest in debt obligations issued or guaranteed by the
U.S. Government or its agencies or instrumentalities ("U.S. Government
Securities"). Although U.S. Government Securities are considered among
the most creditworthy of fixed-income investments and their yields are
generally lower than the yields available from corporate debt securities,
the values of U.S. Government Securities (and of most fixed-income
securities generally) will vary inversely to changes in prevailing
domestic interest rates.
U.S. Government Securities are debt obligations issued by or
guaranteed by the United States Government or one of its agencies or
instrumentalities. Certain of these obligations, including U.S. Treasury
notes and bonds, and mortgage-backed securities guaranteed by the
Government National Mortgage Association ("Ginnie Maes"), are supported
by the full faith and credit of the United States. 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 United States. These latter securities may include
obligations supported by the right of the issuer to borrow from the U.S.
Treasury (which is not under a legal obligation to make such loans), such
as obligations of Federal Home Loan Mortgage Corporation ("Freddie Macs"),
and obligations supported by the credit of the instrumentality, such as
Federal National Mortgage Association bonds ("Fannie Maes"). Among other
U.S. Government Securities in which the Fund may invest are zero coupon
U.S. Treasury securities, mortgage-backed securities and money market
instruments.
-Zero Coupon Securities. The Fund may invest in zero coupon
securities issued by the U.S. Treasury. Zero coupon Treasury securities
are U.S. Treasury notes and bonds which have been stripped of their
unmatured interest coupons and receipts. Because a zero coupon security
pays no interest to its holder during its life or for a substantial period
of time, it usually trades at a discount from its face or par value, does
not pay current cash income, and will be subject to greater fluctuations
of market value in response to changing interest rates than debt
obligations of comparable maturities which make current distributions of
interest. While the Fund does not receive cash payments of interest on
zero coupon securities, it does accrue taxable income on such securities.
-Mortgage-Backed Securities and CMOs. The Fund's investments may
include securities which represent participation interests in pools of
residential mortgage loans, including collateralized mortgage-backed
obligations ("CMOs"), which may be issued or guaranteed by (i) agencies
or instrumentalities of the U.S. Government (e.g. Ginnie Maes, Freddie
Macs and Fannie Maes), or (ii) private issuers. Such securities differ
from conventional debt securities which provide for periodic payment of
interest in fixed amounts (usually semi-annually) with principal payments
at maturity or specified call dates. Mortgage-backed securities provide
monthly payments which are, in effect, a "pass-through" of the monthly
interest and principal payments (including any prepayments) made by the
individual borrowers on the pooled mortgage loans. The Fund's
reinvestment of scheduled principal payments and unscheduled prepayments
it receives may occur at lower rates than the original investment, thus
reducing the yield of the Fund. The issuer's obligation to make interest
and principal payments is secured by the underlying portfolio of mortgages
or mortgage-backed securities. Mortgage-backed securities created by
private issuers (such as commercial banks, savings and loan institutions,
private mortgage insurance companies, mortgage bankers and other secondary
market issuers) may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance,
and letters of credit, which may be issued by governmental entities,
private insurers or the mortgage poolers. There can be no assurance that
private issuers will be able to meet their obligations. The Fund may
invest in CMOs that are "stripped"; that is, the security is divided into
two parts, one of which receives some or all of the principal payments and
the other which receives some or all of the interest. Stripped securities
that receive interest only are subject to increased volatility due to
interest rate changes, and have the additional risk that if the principal
underlying the CMO is prepaid, which is more likely to happen if interest
rates fall, the Fund will lose the anticipated cash flow from the interest
on the mortgages that were prepaid. See "Mortgage-backed Securities" in
the Additional Statement for more details.
The Fund may also enter into "forward roll" transactions under which
it sells the mortgage-backed securities in which it may invest to banks
or other permitted entities and simultaneously agrees to repurchase a
similar security from that party at a later date at an agreed-upon price.
Forward rolls are considered to be a borrowing by the Fund (see "Special
Investment Methods - Special Risk Considerations - Borrowing"). The Fund
would be required to place liquid assets (e.g., 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;
that amount is subject to the limitation on borrowing described in
"Borrowing" below. The principal risk is the risk of default by the
counterparty. 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 objective and policies, consider making investments in such new
types of mortgage-related securities.
Foreign Fixed-Income Securities
The Fund may invest in debt obligations of the types identified in
"Domestic Fixed-Income Securities," above (which may be denominated in
U.S. dollars or in non-U.S. currencies) issued or guaranteed by foreign
corporations, certain supranational entities (such as the World Bank) and
foreign governments (including political subdivisions having taxing
authority) or their agencies or instrumentalities, and debt obligations
issued by U.S. corporations denominated in non-U.S. currencies ("Foreign
Fixed-Income Securities"). These include U.S. dollar denominated debt
obligations known as "Brady Bonds," which are issued for the exchange of
existing commercial bank loans to foreign entities for new obligations
that generally are collateralized by zero coupon Treasury securities
having the same maturity. No more than 25% of the Fund's total assets,
at the time of purchase, will be invested in government securities of any
one foreign country or in debt securities issued by companies organized
under the laws of any one foreign country.
The percentage of the Fund's assets that will be allocated to Foreign
Fixed-Income Securities will vary from time to time depending on, among
other things, the relative yields of foreign and U.S. securities, the
economies of foreign countries, the condition of such countries' financial
markets, the interest rate climate of such countries, sovereign credit
risk and the relationship of such countries' currency to the U.S. dollar.
The Manager will consider an issuer's affiliation, if any, with a foreign
government as one of the factors in determining whether to purchase any
particular foreign security. These factors are judged on the basis of
fundamental economic criteria (e.g., relative inflation levels and trends,
growth rate forecasts, balance of payments status, and economic policies)
as well as technical and political data. The Fund's portfolio of foreign
securities may include those of a number of foreign countries or,
depending upon market conditions, those of a single country.
Because the Fund may purchase securities denominated in foreign
currencies, a change in the value of any such currency against the U.S.
dollar will result in a change in the U.S. dollar value of the Fund's
assets and its income available for distribution. In addition, although
a portion of the Fund's investment income may be received or realized in
foreign currencies, the Fund will be required to compute and distribute
its income in U.S. dollars, and absorb the cost of currency fluctuations.
Subsequent foreign currency losses may result in the Fund having
previously distributed more income in a particular period than was
available from investment income, which could result in a return of
capital to shareholders.
Other than as set forth above, the Fund has no restriction on the
amount of its assets that may be invested in foreign securities and may
purchase securities issued in any country, developed or underdeveloped.
Investments in securities of issuers in non-industrialized countries
generally involve more risk and may be considered highly speculative.
Securities of foreign issuers that are represented by American depository
receipts, or that are listed on a U.S. securities exchange, or are traded
in the U.S. over-the-counter market are not considered "foreign
securities" because they are not subject to many of the special
considerations and risks (discussed below and in the Additional Statement)
that apply to foreign securities traded and held abroad. If the Fund's
securities are held abroad, the countries in which such securities may be
held and the sub-custodians holding them must be, in most cases, approved
by the Fund's Board of Trustees under applicable SEC rules. Investment
in foreign securities involves considerations and risks not associated
with investment in securities of U.S. issuers. For example, foreign
issuers are not required to use generally-accepted accounting principles
("G.A.A.P."). If foreign securities are not registered under the
Securities Act of 1933, the issuer may not have to comply with the
disclosure requirements of the Securities Exchange Act of 1934. The
values of foreign securities investments will be affected by a variety of
factors, including among others, incomplete or inaccurate information
available as to foreign issuers, changes in currency rates, exchange
control regulations or currency blockage, expropriation or nationalization
of assets, application of foreign tax laws (including withholding taxes),
changes in governmental administration or economic or monetary policy in
the U.S. or abroad, or changed circumstances in dealings between nations.
In addition, it is generally more difficult to obtain court judgments
outside the United States. Additional costs may be incurred in connection
with investments in foreign securities because of generally higher foreign
commissions and the additional custodial costs associated with monitoring
foreign securities. See "Foreign Fixed-Income Securities" in the
Additional Statement for the risks and possible rewards of investing in
securities of foreign corporations and governments and for further
information on Brady Bonds.
Domestic Equity Securities
The Fund may invest in equity securities issued by domestic
corporations in any industry (e.g., industrial, financial or utility).
There is no restriction as to the size of the issuer, although most will
have assets in excess of $100 million. These investments may include
common stocks, preferred stocks, convertible securities and warrants. The
Fund's investment in common and preferred stocks will emphasize issues
that are listed on a U.S. securities exchange or quoted on the automatic
quotation system of the National Association of Securities Dealers, Inc.
("NASDAQ"). Although the Fund may invest in securities of small
unseasoned companies, investments in securities of such companies
(including predecessors) that have operated less than three years may not
exceed 5% of the Fund's total assets.
Portfolio Turnover
During periods of falling interest rates, the values of outstanding
fixed-income securities generally rise. Conversely, during periods of
rising interest rates, the values of such securities generally decline.
The magnitude of these fluctuations will generally be greater for
securities with longer maturities. Because the Fund will actively use
trading to benefit from short-term yield disparities among different
issues of fixed-income securities, to increase its income, and to change
its investments in domestic equity securities the Fund may be subject to
a greater degree of portfolio turnover than might be expected from
investment companies which invest substantially all of their assets on
a long-term basis. The Fund anticipates that it will invest in fixed-
income securities of longer maturity as interest rates decline and fixed-
income securities of shorter maturity as interest rates rise.
Higher portfolio turnover results in increased Fund expenses,
including brokerage commissions, dealer mark-ups and other transaction
costs on the sale of securities and on the reinvestment of sale proceeds
in other securities, and results in the acceleration of realization of
capital gains or losses for tax purposes. To the extent that increased
portfolio turnover results in gains from sales of securities held less
than three months, the Fund's ability to qualify as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code") may be affected. Although changes in the
value of the Fund's portfolio securities subsequent to their acquisition
are reflected in the net asset value of the Fund's shares, such changes
will not affect the income received by the Fund from such securities. The
dividends paid by the Fund will increase or decrease in relation to the
income received by the Fund from its investments, which will in any case
be reduced by the Fund's expenses before being distributed to the Fund's
shareholders.
Asset Allocation Approaches
The Manager may, from time to time, employ different approaches to
determine the allocation of the Fund's assets between the three fixed
income sectors and the domestic equity sector. The Manager determines
that allocation periodically, in the following manner: First, the Manager
establishes a target level of current income from the Fund's portfolio
investments (which may be established with reference to a measure of
current interest rates, such as 3-month U.S. Treasury Bills). Second, the
Manager estimates what proportion of the Fund's assets are to be allocated
to the fixed income sectors to seek to achieve that level of current
income. Third, the remainder of the Fund's assets not allocated to
investment in fixed-income securities are allocated to the domestic equity
sector to attempt to achieve capital appreciation. The Manager determines
this allocation monthly (although the frequency of such determination may
vary) and to utilize the 3-month Treasury Bill rate as the measure of
current interest rates used as a benchmark to target desired portfolio
income (although a different measure may be adopted). Since the Fund's
objective of capital appreciation is secondary to its objective of current
income, there may be periods in which relatively little or none of the
Fund's assets are invested in equity securities.
Using the asset allocation approach set forth above, the proportion
of the Fund's assets allocated to the fixed income sectors and to the
domestic equity sector will vary from time to time, depending on the level
of current portfolio income targeted by the Manager, the Manager's
estimates of earnings available from the fixed income sectors, and other
factors. In general, the more that the Manager's estimate of projected
earnings available from the fixed income sectors exceeds the targeted
level of current portfolio income, the higher the percentage of the Fund's
assets that will be available to allocate to the domestic equity sector.
The Manager may, from time to time, vary, revise or discontinue this
asset allocation approach or adopt a different asset allocation approach.
The utilization of this approach is not an objective of the Fund, but
merely illustrates the investment selection and allocation methodology the
Manager presently intends to employ in seeking the Fund's objectives and
in implementing the Fund's investment policies. There can be no assurance
that any asset allocation approach will be successful in providing the
Fund or investors a particular amount of current income or achieving
particular investment results. The Fund's expenses will reduce the amount
of any income available for distribution to shareholders from the Fund's
investments, whether or not the targeted level sought by the Manager is
achieved. Investors are cautioned that the Fund is designed for the long-
term investor and should not be considered as a short-term investment
vehicle.
Special Investment Methods
In pursuing its investment objectives, the Fund may use the following
special investment methods.
Special Risk Considerations - Borrowing
From time to time, the Fund may increase its ownership of securities
by borrowing from banks on an unsecured basis and investing the borrowed
funds (on which the Fund will pay interest), subject to the 300% asset
coverage requirement of the Investment Company Act of 1940 (the
"Investment Company Act"). "Forward roll" transactions, discussed under
"Mortgage-Backed Securities and CMOs," are also considered to be a form
of borrowing by the Fund subject to that asset coverage requirement.
Purchasing securities with borrowed funds is a speculative investment
method known as leverage. There are risks associated with leveraging
purchases of portfolio securities by borrowing, including possible
reduction of income and increased fluctuation of net asset value per
share. If the Fund borrows, it will be subject to relatively greater
risks and costs than a fund that does not use leverage. For further
discussion of such risks and other details, see "Borrowing" under "Special
Investment Methods" in the Additional Statement.
Writing Covered Calls
The Fund may write (i.e., sell) call options ("calls") on debt
securities, preferred stock, common stock and other securities that are
traded on U.S. and foreign securities exchanges and over-the-counter
markets, to enhance income through the receipt of premiums from expired
calls and any net profits from closing purchase transactions. After any
such sale, up to 100% of the Fund's total assets may be subject to calls.
All such calls written by the Fund must be "covered" while the call is
outstanding (i.e. the Fund must own the securities subject to the call or
other securities acceptable for applicable escrow requirements). The Fund
may also write calls on Futures (discussed below) which must be covered
by deliverable securities or by liquid assets (e.g., cash, U.S. Government
Securities or other high-grade debt securities) segregated to satisfy the
Futures contract.
Hedging
For hedging purposes, the Fund may enter into (a) contracts for the
purchase or sale for future delivery of fixed-income securities ("Interest
Rate Futures") or foreign currencies ("Forward Contracts"), (b) contracts
based on financial indices including any index of U.S. Government
securities, foreign government securities or corporate debt securities
("Financial Futures") (collectively, "Futures"), (c) call and put options
on debt securities, Futures and foreign currencies, and (d) Interest Rate
Swap transactions (all of the foregoing are referred to as "Hedging
Instruments"). Hedging Instruments may be used to attempt to: (i) protect
against possible declines in the market value of the Fund's portfolio
resulting from downward market trends (generally due to a rise in interest
rates), (ii) protect unrealized gains or limit unrealized losses in the
value of the Fund's debt securities, (iii) facilitate selling debt
securities for investment reasons, (iv) establish a position in the debt
securities markets as a temporary substitute for purchasing particular
debt securities, or (v) reduce the risk of adverse currency fluctuations.
A call or put may be purchased only if, after such purchase, the value of
all call and put options held by the Fund would not exceed 5% of the
Fund's total assets. The Fund will not use Futures and options on Futures
for speculation. At present, the Fund does not intend to enter into
Futures, Forward Contracts and options on Futures if, after any such
purchase or sale, the sum of margin deposits on Futures and premiums paid
on Futures options exceeds 5% of the value of the Fund's total assets.
The Fund's potential liability under Futures contracts and options
generally will be significantly in excess of such amount. The Hedging
Instruments the Fund may use are described below.
-Interest Rate Futures and Financial Futures. The Fund may buy and
sell Futures. An Interest Rate Future obligates the seller to deliver and
the purchaser to take a specific type of debt security at a specific
future date for a fixed price. That obligation may be satisfied by actual
delivery of the debt security or by entering into an offsetting contract.
A financial index assigns relative values to the securities included in
that index and is used as a basis for trading Financial Futures contracts.
Financial Futures reflect the price movements of securities included in
the index. They differ from Interest Rate Futures in that settlement is
made in cash rather than by delivery of the underlying investment.
-Purchasing Calls on Securities and Futures. The Fund may purchase
calls on debt securities or on Futures that are traded on U.S. or foreign
securities exchanges or over-the-counter markets, in order to protect
against the possibility that the Fund's portfolio will not fully
participate in an anticipated rise in value of long-term debt securities.
The value of debt securities underlying calls purchased by the Fund will
not exceed the value of the Fund's portfolio invested in cash or cash
equivalents (i.e., securities with maturities of less than one year).
-Puts on Securities and Futures. The Fund may purchase put options
("puts") which relate to debt securities (whether or not it holds such
securities in its portfolio) or Futures. It may also write puts on debt
securities or Futures but only if such puts are covered by segregated
liquid assets. Such options may be traded on U.S. or foreign securities
exchanges or over-the-counter markets. The Fund will not write puts if,
as a result, more than 50% of the Fund's net assets would be required to
be segregated to cover such put obligations.
-Foreign Currency Options. The Fund may purchase and write puts and
calls on foreign currencies that are traded on a securities or commodities
exchange or over-the-counter market or quoted by major recognized dealers
in such options, for the purpose of protecting against declines in the
dollar value of foreign securities and against increases in the dollar
cost of foreign securities to be acquired. If a rise is anticipated in
the dollar value of a foreign currency in which securities to be acquired
are denominated, the increased cost of such securities may be partially
offset by purchasing calls or writing puts on that foreign currency. If
a decline in the dollar value of a foreign currency is anticipated, the
decline in value of portfolio securities denominated in that currency may
be partially offset by writing calls or purchasing puts on that foreign
currency. However, in the event of currency rate fluctuations adverse to
the Fund's position, the Fund would lose the premium it paid and will have
incurred transactions costs.
-Forward Contracts. The Fund may enter into foreign currency
exchange contracts ("Forward Contracts"), which obligate the seller to
deliver and the purchaser to take a specific amount of foreign currency
at a specific future date for a fixed price. The Fund may enter into a
Forward Contract in order to "lock in" the U.S. dollar price of a security
denominated in a foreign currency which it has purchased or sold but which
has not yet settled, or to protect against a possible loss resulting from
an adverse change in the relationship between the U.S. dollar and a
foreign currency. There is a risk that use of Forward Contracts may
reduce the gain that would otherwise result from a change in the
relationship between the U.S. dollar and a foreign currency. Forward
Contracts include standardized foreign currency futures contracts 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 depends on many factors,
including the ability of the Manager to correctly identify and monitor the
correlation between foreign currencies and the U.S. dollar. To the extent
that the correlation is not identical, the Fund may experience losses or
gains on both the underlying security and the cross currency hedge.
The Fund will not speculate in foreign currency exchange contracts.
There is no limitation as to the percentage of the Fund's assets that may
be committed to foreign currency exchange contracts. The Fund does not
enter into such Forward Contracts or maintain a net exposure in such
contracts to the extent that the Fund would be obligated to deliver an
amount of foreign currency in excess of the value of the Fund's assets
denominated in that currency, 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
Hedging Instruments" in the Additional Statement for a discussion of the
tax treatment of foreign currency exchange contracts.
- Interest Rate Swap Transactions. The Fund may enter into interest
rate swaps. In an interest rate swap, the Fund and another party exchange
their respective commitments to pay or receive interest on a security
(e.g., an exchange of floating rate payments for fixed rate payments.)
The Fund will not use interest rate swaps for leverage. Swap transactions
will be entered into only as to security positions held by the Fund.
Under its current policy, the Fund may not enter into swap transactions
in excess of 50% of its total assets.
The Fund will segregate assets (e.g., cash, U.S. Government
securities or other appropriate high grade debt obligations) equal to the
net excess, if any, of its obligations over its entitlements under the
swap and will mark to market that amount daily. Interest rate swaps are
subject to interest rate risks, in that the Fund could be obligated to pay
more under its swap agreements than it receives as a result of interest
rate changes. The credit risk of an interest rate swap depends on the
counterparty's ability to perform. The value of the swap may decline if
the counterparty's creditworthiness deteriorates. If the counter party
defaults, the Fund risks the loss of the net amount of interest payments
that it is contractually entitled to receive. The Fund may be able to
reduce or eliminate its exposure to losses under swap agreements either
by assigning them to another party, or by entering into an offsetting swap
agreement with the same counterparty or another creditworthy counterparty.
See "Covered Calls and Hedging" in the Additional Statement for further
details.
-Risks of Options and Hedging. "Covered Calls and Hedging" in the
Additional Statement contains more information about the characteristics,
risks, tax effects and possible benefits of options, Futures, Forward
Contracts, segregation arrangements for Forward Contracts and the Fund's
other limitations (which are not fundamental policies) relating to
investment in Futures and options. There are certain risks in writing
calls. If a call written by the Fund is exercised, the Fund forgoes any
profit from any increase in the market price above the call price of the
underlying investment on which the call was written. In addition, the
Fund could experience capital losses which might cause previously
distributed short-term capital gains to be re-characterized as a non-
taxable return of capital to shareholders. In writing puts, there is the
risk that the Fund may be required to buy the underlying security at a
disadvantageous price. The principal risks of futures trading are: (a)
possible imperfect correlation between the prices of the Futures and the
market value of the debt securities in the Fund's portfolio; (b) possible
lack of a liquid secondary market for closing out a Futures position; (c)
the need for additional skills and techniques beyond those required for
normal portfolio management; and (d) losses on Futures resulting from
interest rate movements not anticipated by the Manager.
Repurchase Agreements
The Fund may acquire securities subject to repurchase agreements for
investment and liquidity purposes, to meet anticipated redemptions, or
pending the investment of proceeds from sales of Fund shares or settlement
of purchases of portfolio investments. The Fund's repurchase agreements
will be fully collateralized. However, if the vendor fails to pay the
agreed-upon resale price on the delivery date, the Fund's risks may
include any costs of disposing of the collateral and any loss from any
delay in foreclosing on the collateral. The Fund will not enter into a
repurchase agreement that will cause more than 15% of the Fund's net
assets to be subject to repurchase agreements maturing in more than seven
days. There is no limit on the amount of the Fund's net assets that may
be subject to repurchase agreements maturing in seven days or less. See
"Special Investment Methods - Repurchase Agreements" in the Additional
Statement for more details.
Loans of Portfolio Securities
To attempt to increase its income, the Fund may lend its portfolio
securities to qualified borrowers if the loan is collateralized in
accordance with applicable regulatory requirements, and if, after any
loan, the value of securities loaned does not exceed 25% of the value of
the Fund's total assets. The Fund presently does not intend that the
value of securities loaned will exceed 5% of the value of the Fund's total
assets during the coming year. See "Special Investment Methods - Loans
of Portfolio Securities" in the Additional Statement for further
information on securities loans.
Restricted and Illiquid Securities
The Fund will not purchase or otherwise acquire any security, if, as
a result, more than 15% of its net assets (taken at current value) would
be invested in securities that are illiquid by virtue of the absence of
a readily available market, or because of legal or contractual
restrictions on resale ("restricted securities"). This limitation applies
to participation interests, bank time deposits, master demand notes,
repurchase agreements having a maturity beyond seven days, over-the-
counter options held by the Fund, and that portion of Fund assets used to
cover such options. This limitation is not a fundamental policy and does
not limit the acquisition of restricted securities eligible for resale to
qualified institutional purchasers pursuant to Rule 144A under the
Securities Act of 1933 that are determined to be liquid by the Board of
Trustees, or by the Manager under Board-approved guidelines. Such
guidelines take into account trading activity for such securities and the
availability of reliable pricing information, among other factors. If
there is a lack of trading interest in particular Rule 144A securities,
the Fund's holdings of those securities may be illiquid. There may be
undesirable delays in selling illiquid securities at prices representing
their fair value (see "Restricted and Illiquid Securities" in "Special
Investment Methods" in the Additional Statement for further details). The
Fund currently intends to invest no more than 10% of its net assets in
illiquid and restricted securities, excluding securities eligible for
resale pursuant to Rule 144A under the Securities Act of 1933 that are
determined to be liquid by the Board of Trustees or by the Manager under
Board-approved guidelines.
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. "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. The Fund does not intend to make such
purchases for speculative purposes. During the period between the
purchase and settlement, no payment is made for the security and no
interest accrues to the buyer from the investment. 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. See "Special
Investment Methods -When-Issued and Delayed Delivery Transactions" in the
Additional Statement for further details.
Short Sales Against-the-Box
The Fund may not sell securities short except "short sales against-
the-box." No more than 15% of the Fund's net assets will be held as
collateral for such short sales at any one time. In such short sales,
while the short position is open, the Fund must own an equal amount of
such securities, or by virtue of ownership of securities have the right,
without payment of further consideration, to obtain an equal amount of the
securities sold short. Short sales against-the-box may be made to defer,
for Federal income tax purposes, recognition of gain or loss on the sale
of securities "in the box" until the short position is closed out.
Investment Restrictions
The Fund has certain investment restrictions which, together with its
investment objective, are fundamental policies changeable only by the vote
of a "majority" (as defined in the Investment Company Act) of the Fund's
outstanding voting securities. Under some of those restrictions, the Fund
cannot: (1) purchase securities issued or guaranteed by any one issuer
(except the U.S. Government or its agencies or instrumentalities), if,
with respect to 75% of its total assets, more than 5% of the Fund's total
assets would be invested in securities of that issuer or the Fund would
then own more than 10% of that issuer's voting securities; (2) concentrate
investments to the extent that 25% or more of the value of its total
assets is invested in securities of issuers in the same industry
(excluding the U.S. Government, its agencies and instrumentalities); for
purposes of this limitation, utilities will be divided according to their
services; for example, gas, gas transmission, electric and telephone each
will be considered a separate industry; (3) make loans, except by
purchasing debt obligations in accordance with its investment objectives
and policies, or by entering into repurchase agreements, or by lending
portfolio securities in accordance with applicable regulations; (4) buy
securities of an issuer which, together with any predecessor, has been in
operation for less than three years, if as a result, the aggregate of such
investments would exceed 5% of the value of the Fund's total assets; or
(5) make short sales of securities or maintain a short position, unless
as short sales against-the-box.
The percentage restrictions described above and in the Additional
Statement, other than those described under "Special Investment Methods -
Special Risk Considerations - Borrowing," are applicable only at the time
of investment and require no action by the Fund as a result of subsequent
changes in value of the investment or the size of the Fund. A
supplementary list of investment restrictions is contained in the
Additional Statement, which also contains further information regarding
the Fund's investment policies.
Management of the Fund
The Fund's Board of Trustees has overall responsibility for the
management of the Fund under the laws of Massachusetts governing the
responsibilities of trustees of business trusts. Subject to the authority
of the Board of Trustees, the Manager is responsible for day-to-day
management of the Fund's business, supervises the investment operations
of the Fund and the composition of its portfolio and furnishes the Fund
advice and recommendations with respect to investments, investment
policies and the purchase and sale of securities, pursuant to an
investment advisory agreement with the Fund (the "Agreement").
The Agreement contains provisions relating to the selection of
brokers and dealers ("brokers") for the Fund's portfolio transactions.
Subject to the Agreement, the Manager may also consider sales of shares
of the Fund and other investment companies managed by the Manager and its
affiliates as a factor in the selection of brokers for the Fund's
portfolio transactions. Under the Agreement, the Fund pays a monthly
management fee to the Manager at the following annual rates, which are
higher than the rates paid by most other investment companies: 0.75% of
the first $200 million of average annual net assets, 0.72% of the next
$200 million, 0.69% of the next $200 million, 0.66% of the next $200
million, 0.60% of the next $200 million, and 0.50% of the net assets in
excess of $1 billion. "Investment Management Services" in the Additional
Statement contains further information about the Agreement, including a
description of expense reimbursement arrangements, exculpation provisions,
and brokerage practices.
Robert Doll, Jr. is an Executive Vice President of the Manager,
Arthur P. Steinmetz is a Senior Vice President of the Manager and Margaret
M. Johnson and David P. Negri are Vice Presidents of the Manager and each
serves as a Portfolio Manager and as Vice President of the Fund, except
for Mr. Doll who is Senior Vice President and Portfolio Manager of the
Fund. Since the Fund's inception in 1992, they have been the persons
principally responsible for the day-to-day management of the Fund's
portfolio. During the past five years, Messrs. Doll, Steinmetz and Negri
and Ms. Johnson have also served as officers and portfolio managers for
other OppenheimerFunds. Ms. Johnson formerly was an assistant portfolio
manager for the Manager, prior to which she was a portfolio manager and
analyst for SLH, a division of Shearson Lehman Hutton, Inc., a securities
firm. For more information about the Fund's other officers and Trustees,
see "Trustees and Officers" in the Additional Statement.
The Manager has operated as an investment adviser since April 30,
1959. The Manager and its affiliates currently advise U.S. investment
companies with assets aggregating over $25 billion as of December 31,
1993, and having more than 1.8 million shareholder accounts. The Manager
is owned by Oppenheimer Acquisition Corp., a holding company owned in part
by senior management of the Manager and ultimately controlled by
Massachusetts Mutual Life Insurance Company, a mutual life insurance
company which also advises pension plans and investment companies.
How to Buy Shares
Alternative Sales Arrangements
Two classes of shares of the Fund are offered under the Fund's
"Alternative Sales Arrangements". The investor may elect to purchase
shares with a sales charge imposed (i) at the time of purchase or on a
contingent deferred basis on redemption of shares purchased in amounts
over $1 million (the "Class A shares"), or (ii) on a contingent deferred
basis (the "Class B Shares"). The contingent deferred sales charge will
be imposed on most redemptions of Class B Shares made within six years of
purchase. The Alternative Sales Arrangements permit an investor to choose
the method of purchasing shares of the Fund regarded as most beneficial
to that investor, taking into account the amount of the purchase, the
length of time the investor expects to hold the shares and other relevant
circumstances. The Fund's distributor, Oppenheimer Funds Distributor,
Inc. (the "Distributor") will not knowingly accept any order for $1
million or more of Class B shares of one or more of the "Eligible Funds"
listed in "Right of Accumulation" below on behalf of a single investor
(not including street name or omnibus accounts) because it generally will
be more advantageous for such investor to purchase Class A shares of such
Eligible Fund(s) instead. Investors should understand that the purpose
and function of the deferred sales charge and asset-based sales charge
with respect to Class B shares are the same as those of the initial sales
charge with respect to the Class A shares. Any financial intermediaries
or other person entitled to receive compensation for selling or servicing
Fund shares may receive different compensation with respect to one class
of shares than the other.
The two classes of shares each represent an interest in the same
portfolio investments of the Fund. However, as described in this
Prospectus, each class has different shareholder privileges and features.
The net income attributable to Class B Shares and the dividends payable
on Class B Shares will be reduced by incremental expenses borne solely by
that class, including the asset-based sales charge to which Class B Shares
are subject. For further information, see "Purchase, Redemption and
Pricing of Shares" in the Additional Statement.
The Fund's shares of either class may be purchased through any dealer
or broker which has a sales agreement with the Distributor, a subsidiary
of the Manager. There are two ways to make an initial investment: either
(1) complete an OppenheimerFunds New Account Application and mail it with
payment to the Distributor at P.O. Box 5270, Denver, Colorado 80217 (if
no dealer or broker is named in the Application, the Distributor will be
listed as the dealer of record), or (2) order the shares through your
dealer or broker. Be certain to specify whether you intend to purchase
Class A shares or Class B shares. If no such investments are provided,
initial investments will be made in Class A shares and subsequent
investments will be made in the same class as the most recent previous
investment.
The minimum initial investment is $1,000, except as otherwise
described in this Prospectus. Subsequent purchases must be at least $25,
and may be made (1) through authorized dealers or brokers, (2) by
forwarding payment to the Distributor with the names of all account
owners, the account number and the name of the Fund, (3) automatically
through Asset Builder Plans or (4) by telephone using AccountLink or
PhoneLink, described below. Under an Asset Builder Plan, Automatic
Exchange Plan, 403(b)(7) custodial plan or military allotment plan,
initial and subsequent investments must be at least $25. The minimum
initial and subsequent purchase requirements are waived on purchases made
by reinvesting dividends from any of the "Eligible Funds" listed in "Right
of Accumulation" below, or by reinvesting distributions from unit
investment trusts for which reinvestment arrangements have been made with
the Distributor. No share certificates will be issued for Class B Shares.
No share certificates will be issued for Class A Shares unless
specifically requested in writing by an investor or the dealer or broker.
The net asset value per share of each class is determined as of 4:00
P.M. (all references to time in this Prospectus mean New York time) each
day The New York Stock Exchange is open (a "regular business day") by
dividing the value of the Fund's net assets attributable to that class by
the number of shares of that class outstanding. The Fund's Board of
Trustees has established procedures for valuing the Fund's securities.
In general, those valuations are based on market value, with special
provisions for: (i) securities (including restricted securities) not
having readily-available market quotations, (ii) short-term debt
securities and (iii) covered calls and Hedging Instruments. Further
details are in "Purchase, Redemption and Pricing of Shares" in the
Additional Statement. The net asset values per share of Class A and Class
B Shares are expected to be substantially the same; however, from time to
time the net asset value may differ due to differences in expenses borne
by each class, as described under "Dual Class Methodology" in the
Additional Statement.
All purchase orders received by the Distributor at its office in
Denver, Colorado prior to 4:00 P.M. on a regular business day are
processed at that day's offering price. However, an order received by the
Distributor from a dealer or broker after the offering price is determined
that day will receive such offering price if the order was received by the
dealer or broker from its customer prior to 4:00 P.M., and was transmitted
to and received by the Distributor prior to its close of business that day
(normally 5:00 P.M.). Purchase orders received on other than a regular
business day will be executed on the next regular business day. The
Distributor, in its sole discretion, may accept or reject any order for
purchase of the Fund's shares. The sale of shares will be suspended
during any period when the determination of net asset value is suspended
and may be suspended by the Board of Trustees whenever the Board judges
it in the Fund's best interest to do so.
Class A Shares
Class A Shares are sold at their offering price, which (as used in
this Prospectus and the Additional Statement) is net asset value plus a
front-end sales charge, except that as to certain purchases described
below that are not subject to a front-end sales charge, the offering price
is net asset value. The offering price is determined as of 4:00 P.M. each
regular business day. Class A shares may not be converted into Class B
shares.
The table below shows the regular front-end sales charge rates for
Class A shares for a "single purchaser" (defined below), together with the
dealer discounts paid to authorized dealers and the agency commissions
paid to authorized brokers (collectively, "commissions"):
<TABLE>
<CAPTION>
Front-End
Front-End Sales Charge Commission
Sales Charge as Approximate as Percentage
as Percentage Percentage of of Offering
Amount of Purchase of Offering Price Amount Invested Price
- ------------------ ----------------- --------------- -------------
<S> <C> <C> <C>
Less than $50,000 4.75% 4.98% 4.00%
$50,000 or more but
less than $100,000 4.50% 4.71% 3.75%
$100,000 or more but
less than $250,000 3.50% 3.63% 2.75%
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
$1 million or more None* None* None*
________________________
<FN>
*See "Class A Contingent Deferred Sales Charge," below.
</TABLE>
Under certain circumstances, commissions up to the amount of the
entire sales charge may be paid to dealers or brokers, who then may be
deemed to be "underwriters" as defined in the Securities Act of 1933.
Commission rates may vary among the funds for which the Manager and its
affiliates act as investment advisers.
The Distributor may advance up to 13 months' commissions to dealers
that have entered into special arrangements with the Distributor as to
purchases made by their clients under Oppenheimer Asset Builder Plans.
If a registered representative of a securities dealer sells more than $2.5
million of Class A shares of "Eligible Funds" other than "Money Market
Funds" (defined below) in a calendar year, the dealer firm is eligible to
send such representative, with a guest, to a three-day sales conference
(generally held in a resort), if one is sponsored and held by the
Distributor; or in lieu of sending such representative, that firm may, at
its option, receive the equivalent cash value of such award as additional
commission. The Distributor may, from time to time, enter into
arrangements with specific dealers whereby the Distributor may make
additional payments to that dealer based, in part, on that dealer meeting
certain sales criteria. Such additional payments may be based on sales
for a specific period of time, shares of certain or all of the "Eligible
Funds" held by the dealer and/or its customers or some combination
thereof.
Dealers whose sales of Class A shares of "Eligible Funds" other than
"Money Market Funds" under OppenheimerFunds-sponsored 403(b)(7) custodial
plans exceed a rate of $5 million per year, calculated per calendar
quarter, will receive monthly one-half of the Distributor's retained
commissions on such sales. Dealers whose sales of such plans exceed a
rate of $10 million per year, calculated per calendar quarter, will
receive the Distributor's entire retained commission on such sales.
-Class A Contingent Deferred Sales Charge. On certain purchases of
Class A shares of any one or more "Eligible Funds" by a "single purchaser"
(defined below in "Right of Accumulation") aggregating $1 million or more,
the Distributor will pay authorized dealers a commission equal to 1.0% of
the first $2.5 million of such purchases, plus 0.50% of the next $2.5
million, plus 0.25% of such purchases in excess of $5 million. However,
that commission will be paid only on the amount of those share purchases
in excess of $1 million that were not previously subject to a front-end
sales charge and dealer commission (the shares with respect to which this
commission is paid are called "Class A CDSC Shares"). A contingent
deferred sales charge (the "Class A CDSC") will be deducted from the
redemption proceeds of Class A CDSC shares redeemed within 18 months of
the end of the calendar month of their purchase. The Class A CDSC shall
be an amount equal to 1.0% of the lesser of either (1) the aggregate net
asset value of the Class A CDSC shares (not including shares purchased by
reinvestment of dividends or capital gains) or (2) the original cost of
such shares. However, the total Class A CDSC paid on the redemption of
those shares shall not exceed the aggregate commissions paid to dealers
on all Class A shares of "Eligible Funds" purchased by that "single
purchaser."
The Class A CDSC does not apply to purchases at net asset value
described in "Other Circumstances" below and will be waived in the case
of redemptions of shares made for: (i) retirement distributions (or loans)
to participants or beneficiaries from retirement plans qualified under
Section 401(a) of the Internal Revenue Code or from Individual Retirement
Accounts ("IRAs"), 403(b)(7) plans, deferred compensation plans created
under Section 457 of the Code or other employee benefit plans
(collectively, "Retirement Plans"); (ii) returns of excess contributions
to such Retirement Plans; (iii) Automatic Withdrawal Plan payments limited
to no more than 12% of the original account value annually; and (iv)
involuntary redemptions of shares by operation of law or under procedures
set forth in the Fund's Declaration of Trust or as adopted by the Board
of Trustees (collectively, "Involuntary Redemptions"). See "Transfer of
Shares" in "Purchase, Redemption and Pricing of Shares" in the Additional
Statement for further details.
Some or all of the proceeds of redeemed shares on which a CDSC was
paid at the time of redemption and which are subsequently reinvested under
the "Reinvestment Privilege" (described below) may be reinvested within
6 months of redemption without sales charge at net asset value on the
reinvestment date if the investor notifies the Distributor that the
privilege applies. Additionally, no Class A CDSC is charged on exchanges,
pursuant to the Fund's Exchange Privilege (described below), of shares
purchased subject to a Class A CDSC, except that if Class A shares
acquired by exchange are redeemed within 18 months of the end of the
calendar month of the initial purchase of the exchanged shares, the Class
A CDSC will apply. In determining whether a CDSC is payable, and the
amount of any such charge, shares not subject to a CDSC are redeemed
first, including shares purchased by reinvestment of dividends and capital
gains distributions, and then other shares are redeemed in the order of
purchase.
-Reduced Sales Charges for Class A Purchases. The sales charge rates
in the table above may be reduced as follows:
Right of Accumulation. In calculating the sales charge rate
applicable to current purchases of Class A shares, a "single purchaser"
(defined below) is entitled to cumulate current purchases with the greater
of: (1) amounts previously paid for, or (2) the current value (at offering
price) of Class A shares of certain other "Eligible Funds" and of the Fund
if sold subject to an initial sales charge and if the investment is still
held in one of the Eligible Funds. The Eligible Funds are those for which
the Distributor or an affiliate acts as the distributor and include the
following: (i) the Fund, Oppenheimer Strategic Income Fund, Oppenheimer
Strategic Investment Grade Bond Fund, Oppenheimer Strategic Short-Term
Income Fund, Oppenheimer Time Fund, Oppenheimer Target Fund, Oppenheimer
Tax-Free Bond Fund, Oppenheimer New York Tax-Exempt Fund, Oppenheimer
California Tax-Exempt Fund, Oppenheimer High Yield Fund, Oppenheimer
Champion High Yield Fund, Oppenheimer Total Return Fund, Inc., Oppenheimer
Asset Allocation Fund, Oppenheimer Mortgage Income Fund, Oppenheimer
Discovery Fund, Oppenheimer U.S. Government Trust, Oppenheimer Global Bio-
Tech Fund, Oppenheimer Global Environment Fund, Oppenheimer Global Growth
& Income Fund, Oppenheimer Multi-State Tax-Exempt Trust, Oppenheimer
Global Fund, Oppenheimer Fund, Oppenheimer Special Fund, Oppenheimer
Equity Income Fund, Oppenheimer Gold & Special Minerals Fund, Oppenheimer
Investment Grade Bond Fund, Oppenheimer Value Stock Fund, Oppenheimer
Intermediate Tax-Exempt Bond Fund, Oppenheimer Insured Tax-Exempt Bond
Fund, Oppenheimer Main Street Funds, Inc., Oppenheimer Government
Securities Fund; and (ii) the following "Money Market Funds": Centennial
Money Market Trust, Centennial Tax Exempt Trust, Centennial Government
Trust, Centennial New York Tax Exempt Trust, Centennial California Tax
Exempt Trust, Centennial America Fund, L.P., Oppenheimer Money Market
Fund, Inc., Daily Cash Accumulation Fund, Inc., Oppenheimer Cash Reserves
and Oppenheimer Tax-Exempt Cash Reserves. There is an initial sales
charge on the purchase of Class A shares of each Eligible Fund except
Money Market Funds (under certain circumstances described herein,
redemption proceeds of Money Market Fund shares may be subject to a
CDSC). The reduced sales charge applies only to current purchases.
The term "single purchaser" refers to: (i) an individual; (ii) an
individual and spouse purchasing shares of the Fund for their own account
or for trust or custodial accounts for their minor children; or (iii) a
fiduciary purchasing for any one trust, estate or fiduciary account,
including employee benefit plans created under Sections 401 or 457 of the
Internal Revenue Code, including related plans of the same employer. To
be entitled to a reduced sales charge under the Right of Accumulation, at
the time of purchase, the investor must ask the Distributor for such
entitlement and provide the account number(s) for shares of Eligible Funds
owned by the "single purchaser," and the age of any minor children for
whom shares are held.
Letter of Intent. By making an initial investment of at least $1,000
and submitting a Letter of Intent to the Distributor, a "single purchaser"
may purchase Class A shares of the Fund and other Eligible Funds (other
than the Money Market Funds) during a 13-month period at the reduced sales
charge rates, or at net asset value but subject to the Class A CDSC, if
applicable, applying to the aggregate amount of the intended purchases
stated in the Letter. The Letter may apply to purchases made up to 90
days before the date of the Letter. The Fund and the Distributor reserve
the right to amend or terminate such program at any time without prior
notice. For further details, including escrow requirements, see "Letters
of Intent" in the Additional Statement.
Other Circumstances. No sales charge is imposed on Class A shares
of the Fund: (i) sold to the Manager or its affiliates, or to present or
former officers, trustees or directors and employees (and their "immediate
families," as defined in "Reduced Sales Charges" in the Additional
Statement) of the Fund, the Manager and its affiliates, and to retirement
plans established by them for employees; (ii) issued in plans of
reorganization, such as mergers, asset acquisitions and exchange offers,
to which the Fund is a party; (iii) sold to registered investment
companies or to separate accounts of insurance companies having an
agreement with the Manager or the Distributor; (iv) sold to dealers or
brokers that have a sales agreement with the Distributor, for their own
account or for retirement plans for their employees, or sold to employees
(and their spouses) of such dealers or brokers or of financial
institutions which have entered into a sales arrangement with such dealer
or broker or the Distributor (and are identified to the Distributor by
such dealer or broker); the purchaser must certify to the Distributor at
the time of purchase that such purchase is for its own account (or for the
benefit of such employee's spouse or minor children); (v) sold to dealers,
brokers or registered investment advisers that have entered into an
agreement with the Distributor providing specifically for the use of
shares of the Fund in particular investment products made available to the
clients of the dealer, broker or investment adviser; or (vi) purchased by
the reinvestment of (a) loan repayments by a participant in a retirement
plan for which the Manager or its affiliates acts as sponsor, or (b)
dividends or other distributions reinvested from the Fund or other
"Eligible Funds" (other than Cash Reserves Funds) or unit investment
trusts for which reinvestment arrangements have been made with the
Distributor. "Reduced Sales Charges" in the Additional Statement
discusses this policy.
Class A Service Plan. The Fund has adopted a service plan (the
"Class A Plan") pursuant to Rule 12b-1 of the Investment Company Act under
which the Fund will reimburse the Distributor quarterly for a portion of
its costs incurred in connection with the personal service and maintenance
of accounts that hold Class A shares. The Distributor will use such fees
received from the Fund in their entirety: (i) to compensate brokers,
dealers, banks and other institutions (collectively, "Recipients") each
quarter for providing personal service and maintenance of accounts that
hold Class A shares; and (ii) to reimburse itself (to the extent
authorized by the Board of Trustees) for its other expenditures under the
Plan and its direct costs for personal service and maintenance of
accounts. The Board of Trustees has not presently authorized any
reimbursement to the Distributor under (ii) above. The services to be
provided under the Class A Plan include, but shall not be limited to, the
following: answering routine inquiries from the Recipient's customers
concerning the Fund, providing such customers with information on their
investment in Class A shares, assisting in the establishment and
maintenance of accounts or sub-accounts in the Fund, making the Fund's
investment plans and dividend payment options available, and providing
such other information and customer liaison services and the maintenance
of accounts as the Distributor or the Fund may reasonably request.
Payments by the Distributor to Recipients will be made quarterly and
computed as of the close of business each day at a rate not to exceed
.0625% (0.25% annually) of the net assets of Class A shares of the Fund
held in accounts of the Recipient or its customers.
The Class A Plan has the effect of increasing annual expenses of
Class A shares of the Fund by up to 0.25% of the class's average annual
net assets from what its expenses would otherwise be. In addition, the
Manager and the Distributor may, under the Class A Plan, from time to time
from their own resources (which, as to the Manager, may include profits
previously derived from the advisory fee it receives from the Fund) make
payments to Recipients for distribution and administrative services they
perform. For further details, see "Distribution Plans" in the Additional
Statement.
Class B Shares
Class B shares are sold at net asset vlaue per share without the
imposition of a sales charge at the time of purchase.
-Class B Contingent Deferred Sales Charge. A contingent deferred
sales charge (the "Class B CDSC") will be deducted from the redemption
proceeds of Class B Shares redeemed within six years of the end of the
calendar month of their purchase (not including shares purchased by
reinvestment of dividends or capital gains). The charge will be assessed
on an amount equal to the lesser of the then current market value or the
original purchase price of the Class B shares being redeemed.
Accordingly, no Class B CDSC will be imposed on increases in net asset
value above the initial purchase price, nor on shares purchased by
reinvestment of dividends or capital gains. In determining whether a
Class B CDSC is applicable to a redemption, Class B shares are redeemed
in the following order: (1) those acquired pursuant to reinvestment of
dividends or distributions, (2) those held for over six years, and (3)
those held longest during the six year period.
Proceeds from the Class B CDSC are paid to the Distributor and are
used by it to reimburse its expenses related to providing distribution-
related services to the Fund in connection with the sale of Class B
shares. The combination of the Class B CDSC and the distribution fee
retained by the Distributor (as described under "Class B Distribution
Plan") facilitate the sale of Class B Shares without a sales charge being
deducted at the time of purchase. Any CDSC required to be imposed on
Class B share redemptions will be assessed according to the following
schedule:
Year(s) Since End of Month Contingent Deferred Sales Charge in
In Which Order Was Accepted That Year (as % of Applicable Proceeds)
- --------------------------- ---------------------------------------
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 or more None
In the table above, a "year" is a period of twelve months. In
determining the amount of the Class B CDSC that applies and when Class B
shares convert as described in the following paragraph, all purchases
shall be considered as having been made on the first regular business day
of the month in which the purchase was made. The Class B CDSC will be
waived upon the request of the shareholder for redemptions of shares made
for: (1) distributions to participants or beneficiaries from Retirement
Plans, which distributions are made either (a) under an Automatic
Withdrawal Plan (described under "How to Redeem Shares") after the
participant attains age 59-1/2, and which are limited to no more than 10%
of the account value annually (determined in the first year, as of the
date the redemption request is received by the Transfer Agent, and in
subsequent years, as of the most recent anniversary of that date) or (b)
following the participant's or beneficiary's (i) "disability" (as defined
in the Internal Revenue Code) that occurs since the account was
established, or (ii) death; (2) redemptions other than from Retirement
Plans following the (i) death or (ii) complete disability (as evidenced
by a certificate from the U.S. Social Security Administration), of all
persons individually owning such shares of record and not as fiduciaries
or agents, that occurs since the account was established, and (3) returns
of excess contributions to such Retirement Plans. In addition, no CDSC
is imposed on shares of the Fund (i) sold to the Manager or its
affiliates; (ii) sold to registered investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor, (iii) issued in plans of reorganization, such as mergers,
asset acquisitions and exchange offers to which the Fund is a party, or
(iv) redeemed in Involuntary Redemptions. See "Transfer of Shares" in
"Purchase, Redemption and Pricing of Shares" in the Additional Statement
for further details.
-Class B Conversion Feature. At the end of the month seventy-two
months after an investor's purchase order for Class B shares is accepted,
such "Matured Class B shares" automatically will convert to Class A
shares, on the basis of the relative net asset value of the two classes,
without the imposition of any sales load or other charge. Each time any
Matured Class B shares convert to Class A shares, any Class B shares
acquired by the reinvestment of dividends or distributions on such Matured
Class B shares that are still held will also convert to Class A Shares,
on the same basis. The conversion feature is intended to relieve holders
of Matured Class B shares of the asset-based sales charge under the Class
B Distribution Plan after such shares have been outstanding long enough
that the Distributor may have been compensated for distribution expenses
related to such shares.
The conversion of Matured Class B shares to Class A shares is subject
to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax adviser, to the
effect that the conversion of Matured Class B shares does not constitute
a taxable event for the holder under Federal income tax law. If such a
private letter ruling, or opinion is no longer available, the automatic
conversion feature may be suspended, in which event no further conversions
of Matured Class B shares would occur while such suspension remained in
effect. Although Matured 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.
-Class B Distribution and Service Plan. The Fund has adopted a
Distribution and Service Plan (the "Class B Plan") under Rule 12b-1 of the
Investment Company Act, pursuant to which it will compensate the
Distributor for its services and costs incurred in connection with the
distribution and service of the Fund's Class B shares. Pursuant to the
Class B Plan, the Fund will pay the Distributor an asset-based sales
charge of 0.75% per annum on Class B shares outstanding for 6 years or
less, plus a service fee of 0.25% per annum, each of which is computed on
the average net assets of Class B shares of the Fund as of the close of
each regular business day.
The Distributor will use the service fee payment to compensate
Recipients for providing personal service and the maintenance of
shareholder accounts that hold Class B shares, examples of which are
described under "Class A Service Plan." Service fee payments by the
Distributor to Recipients will be made (i) in advance for the first year
Class B shares are outstanding, following the purchase of such shares, in
an amount equal to 0.25% of the net asset value of the Class B shares
purchased by the Recipient or its customers and (ii) thereafter, on a
quarterly basis, computed as of the close of business each day at an
annual rate of 0.25% of the net asset value of Class B shares held in
accounts of the Recipient or its customers. Other terms and options under
the Class B Plan for payment of the service fee by the Distributor to
Recipients, and other terms and conditions of the Class B Plan, are
described under "Distribution Plans" in the Additional Statement.
The Distributor currently expects to pay sales commissions from its
own resources to authorized dealers or brokers at the time of sale equal
to 3.75% of the purchase price of Fund shares sold by such dealer or
broker, and to advance the first year service fee of 0.25%. The asset-
based sales charge payments by the Fund to the Distributor under the Class
B Plan are intended to allow it to recoup such sales commissions plus
financing costs. The Distributor anticipates that it will take a number
of years to recoup the sales commissions paid to authorized brokers or
dealers from the Fund's payments to it under the Class B Plan.
Asset-based sales charge payments are designed to permit an investor
to purchase shares of the Fund without the assessment of a front-end sales
load and at the same time permit the Distributor to compensate brokers and
dealers in connection with the sale of shares of the Funds. Actual
distribution expenses for any given year may exceed the aggregate of
payments received pursuant to the Class B Plan and contingent deferred
sales charges, and such expenses will be carried forward and paid in
future years. The Fund will be charged only for interest expenses,
carrying charges or other financial costs that are directly related to the
carry-forward of actual distribution expenses. For example, if the
Distributor incurred distribution expenses of $4 million in a given fiscal
year, of which $2,000,000 was recovered in the form of contingent deferred
sales charges paid by investors and $1,600,000 were reimbursed in the form
of payments made by the Fund to the Distributor under the Class B Plan,
the balance of $400,000 (plus interest) would be subject to recovery in
future fiscal years from such sources. If the Class B Plan were
terminated or not continued, the Fund would be contractually obligated to
pay the Distributor for any expenses incurred for shares sold prior to
termination that were not previously reimbursed by the Fund or recovered
through contingent deferred sales charges. At September 30, 1993, the
Distributor had incurred unreimbursed expenses under the Class B Plan of
$670,084 (equal to 5.41% of the Fund's net assets attributable to Class
B shares of the Fund on that date) which have been carried over into the
present Class B Plan Year.
The Class B Plan contains a provision which contractually obligates
the Fund to continue payments to the Distributor for certain expenses it
incurred for Class B shares sold prior to termination of the Class B Plan.
If the Class B Plan is terminated, the Distributor is entitled to continue
to receive the asset-based sales charge on Class B shares sold prior to
termination until the Distributor has recovered its Class B distribution
expenses (incurred prior to termination) from such payments and from the
Class B CDSC.
The accounting treatment of the Fund's obligations under the Class
B plan for future payments is discussed in "Distribution Plans" in the
Additional Statement. The accounting standards now used are currently
under review by the American Institute of Certified Public Accountants and
it is possible that those standards will change and that the Fund's plan
would be changed as a result.
The Class B Plan has the effect of increasing annual expenses of
Class B shares of the Fund by up to 1.00% of its average annual net assets
from what its expenses would otherwise be. In addition, the Manager and
the Distributor may, under the Class B Plan, from time to time from their
own resources (which, as to the Manager, may include profits derived from
the advisory fee it receives from the Fund) make payments to Recipients
for distribution and administrative services they perform. For further
details, see "Distribution and Service Plans" in the Additional Statement.
Purchase Programs for Class A and Class B Shares
The special purchase programs described below may be used to purchase
either Class A or Class B shares.
-AccountLink. OppenheimerFunds AccountLink is a means to link a
shareholder's Fund account with an account at a U.S. bank or other
financial institution that is an Automated Clearing House ("ACH") member.
AccountLink can be used to transmit funds by electronic funds transfers
for account transactions, including subsequent share purchases. The
minimum investment by AccountLink is $25. Purchases of up to $250,000 may
be made by telephone using AccountLink (the maximum is $100,000 if the
transaction is done by PhoneLink, described below). To speak to service
operators to initiate such purchases, call the Distributor at 1-800-852-
8457. All such calls will be recorded. To initiate such purchases
automatically using PhoneLink, call 1-800-533-3310. Shares will be
purchased on the regular business day the Distributor is instructed to
initiate the ACH transfer to buy the shares. Dividends will begin to
accrue on such shares on the day the Fund receives Federal Funds for such
purchase through the ACH system before 4:00 P.M., which is normally three
days after the ACH transfer is initiated. If such Federal Funds are
received after that time, dividends will begin to accrue on the next
regular business day on which such Federal Funds are received.
AccountLink may also be used as a means of transmitting redemption
proceeds to a designated bank account (see "How to Redeem Shares") or to
transmit distributions paid by the Fund directly to a bank account (see
"Dividends, Distributions and Taxes"). AccountLink privileges must be
requested on the application used to buy shares or the dealer settlement
instructions establishing the account, or on subsequent signature-
guaranteed instructions to Oppenheimer Shareholder Services (the "Transfer
Agent") from all shareholders of record for an account, and such
privileges thereupon apply to each shareholder of record and the dealer
representative of record unless and until the Transfer Agent receives
written instructions from a shareholder of record canceling such
privileges. Changes of bank account information must be made by
signature-guaranteed instructions to the Transfer Agent by all
shareholders of record for an account. If an account has multiple owners,
the Transfer Agent and the Distributor may rely on instructions from any
registered owner. The Transfer Agent and the Distributor have adopted
reasonable procedures to confirm that telephone instructions under
AccountLink (described above) and "PhoneLink," "Telephone Redemptions" and
the "Exchange Privilege" (described below) are genuine, by requiring
callers to provide tax identification number(s) and other account data and
by recording calls and confirming such transactions in writing. If the
Transfer Agent and the Distributor do not use such procedures, they may
be liable for losses due to unauthorized transactions, but otherwise they
will not be liable for losses or expenses arising out of telephone
instructions reasonably believed to be genuine. The Fund reserves the
right to amend, suspend or discontinue AccountLink privileges at any time
without prior notice.
-PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system which enables shareholders of the Fund to initiate account
transactions automatically by telephone, including exchanges between
existing accounts (see "Exchange Privilege" below), redemptions (see "How
to Redeem Shares-Telephone Redemptions," below) and purchases (see
"AccountLink" above). PhoneLink transactions may be done automatically
using a touchtone telephone provided that the shareholder uses a Personal
Indentification Number ("PIN") which may be obtained through PhoneLink by
calling 1-800-533-3310. If an account has multiple owners, the Transfer
Agent or the Distributor may rely on any instructions initiated through
PhoneLink using a PIN. The Fund reserves the right to amend, suspend or
discontinue PhoneLink privileges at any time without prior notice.
-Asset Builder Plans. Investors may purchase shares of the Fund (and
up to four other Eligible Funds) automatically under Asset Builder Plans.
With AccountLink, Asset Builder Plans may be used to make regular monthly
investments ($25 minimum) from the investor's account at a bank or other
financial institution. See "AccountLink" in "How To Buy Shares" for
details. To establish an Asset Builder Plan from a bank account, a check
(minimum $25) for the initial purchase must accompany the application.
Shares purchased by Asset Builder Plan payments from bank accounts are
subject to the redemption restrictions for recent purchases described in
"How To Redeem Shares."
Asset Builder Plans also enable shareholders of Oppenheimer Tax-
Exempt Cash Reserves or Oppenheimer Cash Reserves to use those accounts
for monthly automatic purchases of shares of up to four other Eligible
Funds. There is a sales charge on the purchase of certain Eligible Funds,
and an application should be obtained from the Transfer Agent and
completed and a prospectus of the selected fund(s) (available from the
Distributor) should be obtained before initiating payments. The amount
of the Asset Builder investment may be changed or the automatic
investments terminated at any time by writing to the Transfer Agent. A
reasonable period (approximately 15 days) is required after receipt of
such instructions to implement them. The Fund reserves the right to
amend, suspend, or discontinue offering such plans at any time without
prior notice.
How to Redeem Shares
Regular Redemption Procedures
To redeem some or all shares in an account (whether or not
represented by certificates), under the Fund's regular redemption
procedures, a shareholder must send the following to the Transfer Agent,
P.O. Box 5270, Denver, Colorado 80217 [send courier or express mail
deliveries to 10200 E. Girard Avenue, Building D, Denver, Colorado 80231]:
(1) a written request for redemption signed by all registered owners
exactly as the account is registered, including fiduciary titles, if any,
and specifying the account number and the dollar amount or number of
shares to be redeemed; (2) a guarantee of the signatures of all registered
owners on the redemption request or on the endorsement on the share
certificate or accompanying stock power, by a U.S. bank, trust company,
credit union or savings association, or a foreign bank having a U.S.
correspondent bank, or by a U.S.-registered dealer or broker in
securities, municipal securities or government securities, or by a U.S.
national securities exchange, registered securities association or
clearing agency; (3) any share certificates issued for any of the shares
to be redeemed; and (4) any additional documents which may be required by
the Transfer Agent for redemption by corporations, partnerships or other
organizations, executors, administrators, trustees, custodians, guardians,
or from an OppenheimerFunds-sponsored Retirement Plan, or if the
redemption is requested by anyone other than the shareholder(s) of record,
or to demonstrate eligibility for waiver of the Class B CDSC on the
grounds of age or disability. Transfers of shares are subject to similar
requirements.
A signature guarantee is not required for redemptions of $50,000 or
less, requested by and payable to all shareholders of record, to be sent
to the address of record for that account. To avoid delay in redemption
or transfer, shareholders having questions about these requirements should
contact the Transfer Agent in writing or by calling 1-800-525-7048 before
submitting a request. From time to time the Transfer Agent in its
discretion may waive any or certain of the foregoing requirements in
particular cases. Redemption or transfer requests will not be honored
until the Transfer Agent receives all required documents in proper form.
Shareholders owning shares of both classes must specify whether they
intend to redeem Class A or Class B shares.
Telephone Redemptions
To redeem shares by telephone through a service representative, call
the Transfer Agent at 1-800-852-8457. To use PhoneLink to redeem shares
automatically, without a service representative, call 1-800-533-3310.
Under either method of telephone redemptions, proceeds may be paid by
check or through AccountLink as described below. The Transfer Agent may
record any calls. Telephone redemptions may not be available if all lines
are busy, and shareholders would have to use the Fund's regular redemption
procedure described above. Requests received by the Transfer Agent prior
to 4:00 P.M., on a regular business day will be processed at the net asset
value per share determined that day. Telephone redemption privileges are
not available for newly-purchased (within the prior 15 days) shares, for
OppenheimerFunds-sponsored Retirement Plans, or for shares represented by
certificates.
Telephone redemption privileges apply automatically to each
shareholder and the dealer representative of record unless the Transfer
Agent receives cancellation instructions from a shareholder of record.
If an account has multiple owners, the Transfer Agent may rely on the
instructions of any one owner. Telephone redemption privileges may be
amended, suspended or discontinued by the Fund at any time without prior
notice.
-Telephone Redemptions Paid by Check. For redemptions paid by check,
amounts up to $50,000 may be redeemed by telephone, once in every seven-
day period. The check must be payable to the shareholder(s) of record and
sent to the address of record for the account. Telephone redemptions paid
by check are not available within 30 days of a change of the address of
record.
-Redemptions Paid Through AccountLink. If AccountLink privileges
have been established for an account, any amount may be redeemed by
telephone, wire or written instructions to the Transfer Agent, and the ACH
transfer of the redemption proceeds to the designated bank account
normally will be initiated by the Transfer Agent on the next bank business
day after the redemption. There are no dollar or frequency limitations
on telephone redemptions sent to a designated bank account through
AccountLink. No dividends are paid on the proceeds of redeemed shares
awaiting transmittal by ACH transfer. See "AccountLink" under "Purchase
Programs for Class A and Class B Shares," above, for instructions on
establishing this privilege.
Distributions From Retirement Plans
Requests for distributions from OppenheimerFunds-sponsored IRAs,
403(b)(7) custodial plans, or pension or profit-sharing plans for which
the Manager or its affiliates act as sponsors should be addressed to
"Trustee, OppenheimerFunds Retirement Plans, c/o Oppenheimer Shareholder
Services" at the above address, and must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if the
distribution is premature; and (iii) conform to the requirements of the
plan and the Fund's redemption requirements above. Participants (other
than self-employed persons) in OppenheimerFunds-sponsored pension or
profit-sharing plans may not directly request redemption of their
accounts. The employer or plan administrator must sign the request.
Distributions from such plans are subject to additional requirements under
the Internal Revenue Code and certain documents (available from the
Transfer Agent) must be completed before the distribution may be made.
Distributions from retirement plans are subject to withholding
requirements under the Internal Revenue Code, and IRS Form W-4P (available
from the Transfer Agent) must be submitted to the Transfer Agent with the
distribution request, or the distribution may be delayed. Unless the
shareholder has provided the Transfer Agent with a certified tax
identification number, the Internal Revenue Code requires that tax be
withheld from any distribution even if the shareholder elects not to have
tax withheld. The Fund, the Manager, the Distributor, the Trustee and the
Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not
be responsible for any penalties assessed.
Automatic Withdrawal and Exchange Plans
Investors owning shares of the Fund valued at $5,000 or more can
authorize the Transfer Agent to redeem shares (minimum $50) automatically
on a monthly, quarterly, semi-annual or annual basis under an Automatic
Withdrawal Plan. Shares will be redeemed three business days prior to the
date requested by the shareholder for receipt of the payment. Automatic
withdrawals of up to $1,500 per month may be requested by telephone if
payments are by check payable to all shareholders of record and sent to
the address of record for the account (and if the address has not been
changed within the prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored Retirement Plans may not be arranged on this
basis. Payments are normally made by check, but shareholders having
AccountLink privileges (see "How To Buy Shares") may arrange to have
Automatic Withdrawal Plan payments transferred to the bank account
designated on the OppenheimerFunds New Account Application or signature-
guaranteed instructions. The Fund cannot guarantee receipt of the payment
on the date requested and reserves the right to amend, suspend or
discontinue offering such plans at any time without prior notice. Because
of the sales charge assessed on share purchases, Class A shareholders
should not make regular additional purchases while participating in an
Automatic Withdrawal Plan. Class B shareholders normally should not
establish withdrawal plans because of the imposition of the Class B CDSC
on such withdrawals (except where the Class B CDSC is waived as described
in "Class B Contingent Deferred Sales Charge"). For further details,
refer to "Automatic Withdrawal Plan Provisions" in the Additional
Statement.
Shareholders can also authorize the Transfer Agent to exchange a pre-
determined amount of shares of the Fund for shares of up to five other
"Eligible Funds" (minimum $25 per fund account) automatically on a
monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. Exchanges made pursuant to such Plans are otherwise
subject to the conditions and terms applicable to exchanges described in
"Exchange Privilege" below.
Repurchase
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price will be the net asset
value next computed after the receipt of an order placed by such dealer
or broker, except that orders received from dealers or brokers after 4:00
P.M. on a regular business day will be processed at that day's net asset
value if such orders were received by the dealer or broker from its
customers prior to 4:00 P.M., and were transmitted to and received by the
Distributor prior to its close of business that day (normally 5:00 P.M.).
Payment ordinarily will be made within seven days after the Distributor's
receipt of the required documents, with signature(s) guaranteed as
described above.
Reinvestment Privilege
Within six months of a redemption of Class A shares or of Class B
shares on which a Class B CDSC was paid, the investor may reinvest all or
part of the redemption proceeds in Class A shares of the Fund or any of
the Eligible Funds into which shares of the Fund are exchangeable as
described below. The reinvestment price will be the net asset value next
computed after receipt by the Transfer Agent of the reinvestment order and
will not be subject to sales charge. The shareholder must ask the
Distributor for such entitlement at the time of reinvestment. A realized
gain on the redemption is taxable, and reinvestment will not alter any
capital gains tax payable on that gain. If there has been a loss on the
redemption, some or all of the loss may not be tax deductible, depending
on the timing and amount of the reinvestment in the Fund. Under the
Internal Revenue Code, if the redemption proceeds of Fund shares on which
a sales charge was paid are reinvested in shares of the Fund or another
Eligible Fund within 90 days of payment of the sales charge, the
shareholder's basis in the Fund shares redeemed may not include the amount
of the sales charge paid, thereby reducing the loss or increasing the gain
recognized from the redemption. The Fund may amend, suspend or cease
offering this reinvestment privilege at any time as to shares redeemed
after the date of such amendment, suspension or cessation.
General Information on Redemptions
The redemption price will be the net asset value per share next
determined after the Transfer Agent receives redemption instructions in
proper form. The market value of the securities in the Fund's portfolio
is subject to daily fluctuations and the net asset value of each class of
the Fund's shares will fluctuate accordingly. Therefore, the redemption
value may be more or less than the investor's cost. Under certain unusual
circumstances, shares may be redeemed in kind (i.e., by payment in
portfolio securities). Under certain circumstances, the Fund may
involuntarily redeem small accounts (if the value of the account has
fallen below $200 for reasons other than market value fluctuation and may
redeem shares in amounts sufficient to compensate the Distributor for any
loss due to cancellation of a share purchase order; for details, see
"Purchase, Redemption and Pricing of Shares" in the Additional Statement.
Under the Internal Revenue Code, the Fund may be required to impose
"backup" withholding of Federal income tax at the rate of 31% from
dividends, distributions and redemption proceeds (including exchanges),
if the shareholder has not furnished the Fund a certified tax
identification number or has not complied with provisions of the Code
relating to reporting dividends.
Payment for redeemed shares is made ordinarily in cash and forwarded
within seven days after receipt by the Transfer Agent of redemption
instructions in proper form, except under unusual circumstances as
determined by the SEC. The Transfer Agent may delay forwarding a
redemption check for recently purchased shares only until the purchase
payment has cleared, which may take up to 15 or more days from the
purchase date. Such delay may be avoided if the shareholder arranges
telephone or written assurance satisfactory to the Transfer Agent from the
bank on which the purchase payment was drawn. The Fund makes no charge
for redemption. Dealers or brokers may charge a fee for handling
redemption transactions, but such charge can be avoided by requesting the
redemption directly by the Fund through the Transfer Agent. Under certain
circumstances, the Class A and Class B CDSCs described under "How to Buy
Shares" may apply to the proceeds of redemptions.
Exchanges of Shares and Retirement Plans
Exchange Privilege
Shares of the Fund and of the other Eligible Funds listed under
"Right of Accumulation" may be exchanged at net asset value per share at
the time of exchange, without sales charge, if all of the following
conditions are met: (1) shares of the fund selected for exchange are
available for sale in the investor's state of residence; (2) the
respective prospectuses of the funds whose shares are to be exchanged and
acquired offer the Exchange Privilege to the investor; (3) newly-purchased
(by initial or subsequent investment) shares are held in an account for
at least 7 days and all other shares at least 1 day prior to the exchange;
and (4) the aggregate net asset value of shares surrendered for exchange
is at least equal to the minimum investment requirements of the fund whose
shares are to be acquired.
In addition to the conditions stated above, shares of a particular
class of an Eligible Fund may be exchanged only for shares of the same
class of another Eligible Fund. If a Fund has only one class of shares
that is not otherwise denominated, its shares shall be considered "Class
A" shares for this purpose. Certain of the Eligible Funds offer Class A,
Class B and/or Class C shares, and a list can be obtained by calling the
Distributor at 1-800-525-7048, or by referring to "Purchase, Redemption
and Pricing of Shares" in the Additional Statement. In addition, Class
A shares of Eligible Funds may be exchanged for shares of any Money Market
Fund (Class A shares in the case of Oppenheimer Cash Reserves); shares of
any Money Market Fund purchased without a sales charge may be exchanged
for shares of Eligible Funds offered with a sales charge upon payment of
the sales charge (or, if applicable, may be used to purchase shares of
Eligible Funds subject to a contingent deferred sales charge ["CDSC"]);
and shares of this Fund acquired by reinvestment of dividends or
distributions from any other Eligible Fund or from any unit investment
trust for which reinvestment arrangements have been made with the
Distributor may be exchanged at net asset value for shares of any Eligible
Fund. No CDSC is imposed on exchanges of shares of either class purchased
subject to a CDSC. However, when Class A shares acquired by exchange of
Class A shares purchased subject to a Class A CDSC are redeemed within 18
months of the end of the calendar month of the initial purchase of the
exchanged Class A shares, the Class A CDSC is imposed on the redeemed
shares (see "Class A Contingent Deferred Sales Charge" above), and the
Class B CDSC is imposed on Class B shares redeemed within six years of the
end of the calendar month of the initial purchase of the exchanged Class
B shares (see "Class B Contingent Deferred Sales Charge" above).
-How to Exchange Shares. An exchange may be made by either: (1)
submitting an OppenheimerFunds Exchange Authorization Form to the Transfer
Agent, signed by all registered owners, or (2) telephone exchange
instructions to the Transfer Agent by a shareholder or the dealer
representative of record for an account. The Fund may modify, suspend or
discontinue either of these exchange privileges at any time and will do
so on 60 days' notice. The Fund reserves the right to reject telephone
or written exchange requests submitted in bulk on behalf of 10 or more
accounts. Telephone and written exchange requests must be received by the
Transfer Agent by 4:00 P.M. on a regular business day to be effected that
day. The number of shares exchanged may be less than the number requested
if the number requested would include shares subject to a restriction
cited above or shares covered by a certificate that is not tendered with
such request. Only the shares available for exchange without restriction
will be exchanged.
When Class B shares are redeemed to effect an exchange, , the
priorities described in "How to Buy Shares" for the imposition of the
Class B CDSC for redeeming such shares will be followed in determining
which shares are exchanged. Shareholders should take into account the
effect of any exchange on the applicability and rate of any CDSC that may
be imposed in the subsequent redemption of remaining shares. Shareholders
owning shares of both classes must specify whether they intend to exchange
Class A or Class B shares.
- Telephone Exchanges. Telephone exchange requests may either be
placed through a service representative by calling the Transfer Agent at
1-800-852-8457 or automatically by PhoneLink, by calling 1-800-533-3310.
If all telephone lines are busy (which might occur, for example, during
periods of substantial market fluctuations), shareholders might not be
able to request telephone exchanges and would have to submit written
exchange requests. Telephone exchange calls may be recorded by the
Transfer Agent. Telephone exchanges are subject to the rules described
above. By exchanging shares by telephone, the shareholder is
acknowledging receipt of a prospectus of the fund to which the exchange
is made and that for full or partial exchanges, any special account
features such as Asset Builder Plans, Automatic Withdrawal or Exchange
Plans and retirement plan contributions will be switched to the new
account unless the Transfer Agent is otherwise instructed. Telephone
exchange privileges automatically apply to each shareholder of record and
the dealer representative of record unless and until the Transfer Agent
receives written instructions from a shareholder of record canceling such
privileges. If an account has multiple owners, the Transfer Agent may
rely on the instructions of any one owner. The Transfer Agent and the
Fund believe its policy is proper. The Transfer Agent reserves the right
to require shareholders to confirm in writing their election of telephone
exchange privileges for an account. Shares acquired by telephone exchange
must be registered exactly as the account from which the exchange was
made. Certificated shares are not eligible for telephone exchange.
-General Information on Exchanges. Shares to be exchanged are
redeemed on the regular business day the Transfer Agent receives an
exchange request in proper form (the "Redemption Date"). Normally, shares
of the fund to be acquired are purchased on the Redemption Date, but such
purchases may be delayed by either fund up to five business days if it
determines that it would be disadvantaged by an immediate transfer of the
redemption proceeds. The Fund in its discretion reserves the right to
refuse any exchange request that will disadvantage it, for example if the
receipt of multiple exchange requests from a dealer might require the
disposition of securities at a time or at a price disadvantageous to the
Fund. No sales commissions are paid by the Distributor on exchanges of
shares unless a front-end sales charge is assessed on the exchange.
The Eligible Funds have different investment objectives and policies.
For complete information, including sales charges and expenses, a
prospectus of the fund into which the exchange is being made should be
read prior to an exchange. A $5 service charge will be deducted from the
account to which the exchange is made to help defray administrative costs.
That charge is waived for telephone exchanges made by PhoneLink between
existing accounts. Dealers or brokers who process exchange orders on
behalf of customers may charge for their services. Those charges may be
avoided by requesting the Fund directly to exchange shares. For Federal
tax purposes an exchange is treated as a redemption and purchase of shares
(see "How to Redeem Shares - Reinvestment Privilege" for a discussion of
certain tax effects of exchanges).
Retirement Plans
The Distributor has available forms of: (i) pension and profit-
sharing plans for corporations and self-employed individuals, (ii) IRAs,
including Simplified Employee Pension Plans ("SEP IRAs" and "SAR-SEPs"),
and (iii) 403(b)(7) tax-deferred custodial plans for employees of
qualified employers. Loans are permitted only from Oppenheimer 403(b)(7)
plan accounts holding Class A shares. The minimum initial investment for
pension and profit-sharing plans is $250, and for IRAs also unless made
under an Asset Builder Plan. For further details, including the
administrative fees, the appropriate retirement plan should be requested
from the Distributor. The Fund reserves the right to discontinue offering
its shares to such plans at any time without prior notice.
Dividends, Distributions and Taxes
This discussion relates solely to Federal tax laws. The Fund's
dividends and distributions may also be subject to state and local
taxation. See "Tax Aspects of Hedging Instruments" and "Tax Status of the
Fund's Dividends and Distributions" in the Additional Statement for more
information on tax aspects of the Fund's investments in Hedging
Instruments and other tax matters. This discussion is not exhaustive, and
a qualified tax adviser should be consulted.
Dividends and Distributions
The Fund intends to declare dividends separately for Class A and
Class B shares from net investment income on each regular business day,
and to pay such dividends monthly. Such dividends for both classes of
shares will normally be paid on the first Tuesday of the following month,
or such other day as the Board of Trustees may select. In addition,
distributions may be made monthly out of any net short-term capital gains
realized from the sale of securities. The amount of a class's
distributions may vary from time to time depending upon market conditions,
the composition of the Fund's portfolio, and expenses borne by the Fund,
or borne separately by that class, as described under "Dual Class
Methodology" in the Additional Statement. Dividends are calculated in the
same manner, at the same time and on the same day for shares of each
class. However, dividends on Class B shares are expected to be lower than
on Class A shares on a pro rata basis as a result of the asset-based sales
charge on Class B shares, and such dividends will also differ in amount
as a consequence of any difference between the net asset values of Class
A and Class B shares.
Dividends will be payable on shares held of record at the time of the
previous determination of net asset value, or as otherwise described in
"How to Buy Shares". Daily dividends on newly purchased shares will not
be declared or paid until such time as Federal Funds (funds credited to
a member bank's account at the Federal Reserve Bank) are available from
the purchase payment for such shares. Normally, purchase checks received
from investors are converted to Federal Funds on the next business day.
Dividends will be declared on shares repurchased by a dealer or broker for
four business days following the trade date (i.e., to and including the
day prior to settlement of the repurchase). If all shares in an account
are redeemed, all dividends accrued on shares of the same class in the
account will be paid together with the redemption proceeds.
In addition, distributions may be made annually in December out of
any net short-term or long-term capital gains realized from the sale of
securities, premiums from expired calls written by the Fund, and net
profits from Hedging Instruments, realized in the twelve months ending on
October 31 of that year. Any difference in net asset values between Class
A and Class B shares will be reflected in such distributions.
Distributions from net short-term capital gains are taxable to
shareholders as ordinary income and when paid are considered "dividends."
The Fund may make a supplemental distribution of capital gains and
ordinary income following the end of its fiscal year. Any long-term
capital gains distribution will be identified separately when paid and
when tax information is distributed by the Fund. Any disparity in net
asset value between Class A and Class B shares will be reflected in such
distributions. If prior distributions must be recharacterized at the end
of the fiscal year as a result of the effect of the Fund's investment
policies, shareholders may have a non-taxable return of capital which will
be identified in notices to shareholders.
During the Fund's fiscal year ended September 30, 1993, the Fund
sought to pay distributions to shareholders at a targeted level of 100
basis points above the 3-month Treasury Bill rate per Class A share each
month, to the extent that target was consistent with the Fund's net
investment income and other distributable income sources, although the
amount of distributions could vary from time to time, depending on market
conditions, the composition of the Fund's portfolio, and expenses borne
by that class. The Board of Trustees could change that targeted level at
any time, and there is otherwise no fixed dividend rate. There can be no
assurance as to the payment of any dividends or the realization of any
capital gains. The Fund was able to pay dividends at the targeted level
from net investment income and other distributable income, without any
impact on the Manager's portfolio management practices or on the Fund's
net asset value per share.
All dividends and capital gains distributions are automatically
reinvested in Fund shares at net asset value, as of a date selected by the
Board of Trustees, unless the shareholder notifies the Transfer Agent in
writing to pay dividends and capital gains distributions in cash, or to
reinvest them in another Eligible Fund, as described in "Additional
Information" in the Additional Statement. That request must be received
prior to the record date for a dividend to be effective as to that
dividend. Under AccountLink, dividends and distributions may be
automatically transferred to a designated account at a financial
institution. See "AccountLink" in "How to Buy Shares" for more details.
For existing accounts, such privileges may be established only by
signature-guaranteed instructions from all shareholders to the Transfer
Agent. Dividends, distributions and the proceeds of the redemption of
Fund shares represented by checks returned to the Transfer Agent by the
Postal Service as undeliverable will be invested in shares of Oppenheimer
Money Market Fund, Inc., as promptly as possible after the return of such
checks to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds.
Tax Status of the Fund's Dividends and Distributions
Dividends paid by the Fund derived from net investment income or net
short-term capital gains are taxable to shareholders as ordinary income,
whether received in cash or reinvested. Long-term
capital gains distributions, if any, are taxable as long-term capital
gains whether received in cash or reinvested and regardless of how long
Fund shares have been held. A shareholder purchasing Fund shares
immediately prior to the declaration of a capital gains distribution will
receive a distribution subject to income tax, and the distribution will
have the effect of reducing a class's net asset value per share by the
amount of the distribution. For information as to "backup" withholding
on dividends, see "How to Redeem Shares."
Tax Status of the Fund
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on
amounts paid by it as dividends and distributions. The Fund qualified
during its initial fiscal period, and intends to qualify in current and
future fiscal years, but reserves the right not to do so. The Code
contains a number of complex tests relating to qualification which the
Fund might not meet in any particular year. For example, if the Fund
derives 30% or more of its gross income from the sale of securities held
less than 3 months, it may fail to qualify (see "Investment Objective and
Policies - Tax Aspects of Hedging Instruments" in Additional Statement for
more information). If it did not qualify, the Fund would be treated for
tax purposes as an ordinary corporation and receive no tax deduction for
payments made to shareholders.
Fund Performance Information
Yield and Total Return Information
From time to time the "standardized yield," "dividend yield,"
"average annual total return," "total return," and "total return at net
asset value" of an investment in each class of shares of the Fund may be
advertised. Under rules adopted by the SEC, the "yield" is computed in
a standardized manner for mutual funds, by dividing the net investment
income per share earned during a 30-day base period by the maximum
offering price per share on the last day of the period. This yield
calculation is compounded on a semi-annual basis, and multiplied by 2 to
provide an annualized yield.
Total return is the change in value of a hypothetical investment in
a class of shares of the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested. 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 actual year-by-year performance of a class of
shares. When total returns are quoted for Class A shares, they reflect
the payment of the maximum initial sales charge. Total returns may be
quoted at "net asset value," without considering the sales charge, and
those returns would be reduced if sales charges were deducted. When total
returns are shown for Class B shares, they reflect the effect of the
contingent deferred sales charge that applies to the period for which the
total return is shown, or else they may not be shown based on the change
in net asset value without considering the sales charge. All total
returns are based on historical earnings and are not intended to predict
future performance. The Additional Statement contains more information
about the calculation of the performance data used by the Fund.
The "dividend yield" of a class of shares represents dividends
derived from net investment income during a stated period divided by the
maximum offering price on the last day of the period, to show the rate of
return based on actual distributions paid to shareholders of that class.
Yields and returns are based on historical per share earnings and are not
intended to indicate future performance. The yield and returns are
calculated separately and will differ for shares of each class, and the
anticipated higher expenses of Class B shares should result in shares of
that class having lower yields than Class A shares for the same period of
time. See "Yield, Total Return and Tax Information" in the Additional
Statement for more detailed information on calculating the Fund's yields
and returns, and other performance information.
Management's Discussion of Fund Performance
During the Fund's fiscal period from June 1, 1992 (inception) to
September 30, 1993, U.S. interest rates declined and the U.S. economy
remained in a slow-growth mode. The Manager strategically allocated
assets among U.S. Government securities, higher-yielding, lower-rated
corporate bonds and foreign fixed-income securities, to seek its objective
of high current income. The remainder of the portfolio was invested in
stocks, to seek the Fund's secondary objective of capital appreciation.
The Manager expanded the Fund's diversification in foreign markets
to help reduce risk, and maintained a short average portfolio maturity to
control interest rate fluctuation risk. The Manager sold a portion of the
Fund's investments in long-term U.S. Government bonds. That strategy
produced capital gains and reduced the average maturity of the Fund's U.S.
Government investments, limiting the risks associated with a rise in U.S.
interest rates. The Manager also emphasized investment in the stocks of
financial services companies which have experienced strong profit growth
due to low interest rates.
Comparison of Total Return of Oppenheimer Strategic Income & Growth Fund
with The Lehman Aggregate Bond Index and
The Standard & Poors 500 Index -
Change in Value of a $10,000 Hypothetical Investment
[PERFORMANCE GRAPH]
Attached hereto as Appendix A
Past Performance is not predictive of future performance.
Oppenheimer Strategic Income & Growth Fund
Average Annual Total Returns
1 Year Since Inception (6/1/92)
------ ------------------------
Class A 3.67% 4.09%
Class B 1.03%*
__________________
*Class B shares were first offered for sale on November 30, 1992.
The performance graph set forth above compares the Fund's total
return of Class A shares since commencement of operations (June 1, 1992),
and the Fund's total return of Class B shares since November 30, 1992,
against the performance of The Lehman Aggregate Bond Index and The
Standard & Poors 500 Index. The Lehman Aggregate Bond Index is an
unmanaged index of investment grade debt securities with a maturity of at
least one year, consisting of treasury issues, agency issues, corporate
bond issues and mortgage-backed securities, and is widely regarded as a
measure of the performance of the general fixed-rate investment grade debt
market. That Index includes a factor for the reinvestment of interest but
does not reflect expenses or taxes. The Standard & Poors 500 Index is an
unmanaged index of 500 widely-held common stocks traded on the New York
and American Stock Exchanges and the over-the-counter market, and is
widely recognized as a general measure of stock performance. It includes
a factor for reinvestment of dividends but does not reflect expenses or
taxes. The Fund's return for Class A shares reflects the deduction of the
current maximum sales charge of 4.75% and includes reinvestment of all
dividends and capital gains distributions, but does not consider taxes.
Additional Information
Description of the Fund and Its Shares
The Board of Trustees may divide the Fund into more than one series,
each of which would issue its own shares, having its own investment
portfolio and having its own assets and liabilities. Shares of any series
may be divided by the Board, without shareholder approval, into two or
more classes, each having its own dividends, distributions and expenses.
Each class may have a different net asset value per share. The Fund
currently has only one series which has been divided into two classes of
shares, Class A and Class B. Each share has one vote at shareholder
meetings, with fractional shares voting proportionately. Shares of a
class vote together as a single class on matters that affect only that
class. Shares are freely transferable. When issued, such shares are
fully-paid and (except as described in "Additional Information" in the
Additional Statement) non-assessable, and have no preemptive, subscription
or cumulative voting rights. Shareholders may be held personally liable
as "partners" for the Fund's obligations; however, the risk of a
shareholder incurring any financial loss is limited to the relatively
remote circumstances in which the Fund is unable to meet its obligations.
See "Additional Information" in the Additional Statement for details.
The Custodian and the Transfer Agent
The Custodian of the assets of the Fund is The Bank of New York. The
Manager and its affiliates have banking relationships with the Custodian.
See "Additional Information" in the Additional Statement for further
information. 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.
Oppenheimer Shareholder Services, a division of the Manager, acts as
transfer and shareholder servicing agent on an at-cost basis for the Fund
and certain other open-end funds advised by the Manager. The fees to the
Transfer Agent do not include payments for any services of the type paid,
or to be paid, by the Fund to Recipients under the Distribution Plans.
Shareholders should direct any inquiries to the Transfer Agent at the
address or toll-free phone number listed on the back cover of this
Prospectus.
<PAGE>
APPENDIX A TO PROSPECTUS OF
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
Graphic material included in Prospectus of Oppenheimer Strategic
Income & Growth Fund: "Comparison of Total Return of Oppenheimer Strategic
Income & Growth Fund with The Lehman Aggregate Bond Index and The Standard
& Poors 500 Index - Change in Value of a $10,000 Hypothetical Investment"
A linear graph will be included in the Prospectus of Oppenheimer Strategic
Income & Growth Fund (the "Fund") depicting the initial account value and
subsequent account value of a hypothetical $10,000 investment in the Fund
during each of the Fund's fiscal periods since the commencement of the
Fund's operations (June 1, 1992) and comparing such values with the same
investments over the same time periods with The Lehman Aggregate Bond
Index and The Standard & Poors 500 Index. Set forth below are the
relevant data points that will appear on the linear graph. Additional
information with respect to the foregoing, including a description of The
Lehman Aggregate Bond Index and The Standard & Poors 500 Index, is set
forth in the Prospectus under "Fund Performance Information - Management's
Discussion of Performance."
<TABLE>
<CAPTION>
Oppenheimer
Fiscal Year Strategic Income Lehman Aggregate
(Period) Ended & Growth Fund A Bond Index S&P 500 Index
- -------------- ---------------- ---------------- -------------
<S> <C> <C> <C>
06/01/92 $ 9,525 $10,000 $10,000
09/30/92 9,659 10,573 10,162
09/30/93 10,547 11,628 11,480
Oppenheimer
Fiscal Year Strategic Income Lehman Aggregate
(Period) Ended & Growth Fund B Bond Index S&P 500 Index
- -------------- ---------------- ---------------- -------------
11/30/92 $10,000 $10,000 $10,000
09/30/93 10,586 11,141 10,809
</TABLE>
<PAGE>
Appendix: Description of Ratings
Description of Moody's Investors Service, Inc. Bond Ratings
Aaa: Bonds which are rated "Aaa" are judged to be the best quality
and to carry the smallest degree of investment risk. Interest payments
are protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are likely to
change, the changes that can be expected are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated "Aa" are judged to be of high quality by
all standards. Together with the "Aaa" group, they comprise what are
generally known as "high-grade" bonds. They are rated lower than the best
bonds because margins of protection may not be as large as with "Aaa"
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-term
risks appear somewhat larger than those of "Aaa" securities.
A: Bonds which are rated "A" possess many favorable investment
attributes and are to be considered as upper-medium grade obligations.
Factors giving security to principal and interest are considered adequate
but elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa: Bonds which are rated "Baa" are considered medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and have speculative
characteristics as well.
Ba: Bonds which are rated "Ba" are judged to have speculative
elements; their future cannot be considered well-assured. Often the
protection of interest and principal payments may be very moderate and not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B: Bonds which are rated "B" generally lack characteristics of
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa: Bonds which are rated "Caa" are of poor standing and may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds which are rated "Ca" represent obligations which are
speculative in a high degree and are often in default or have other marked
shortcomings.
C: Bonds which are rated "C" can be regarded as having extremely
poor prospects of ever retaining any real investment standing.
Description of Standard & Poor's Bond Ratings
AAA: "AAA" is the highest rating assigned to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA: Bonds rated "AA" also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority
of instances they differ from "AAA" issues only in small degree.
A: Bonds rated "A" have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to adverse effects
of change in circumstances and economic conditions.
BBB: The bond investments in which the Fund will principally invest
will be in the lower-rated categories, described below. Bonds rated "BBB"
are regarded as having an adequate capacity to pay principal and interest.
Whereas they normally exhibit protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay principal and interest for bonds in this category than for
bonds in the "A" category.
BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded,
on balance, as predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the terms
of the obligation. "BB" indicates the lowest degree of speculation and
"CC" the highest degree. While such bonds will likely have some quality
and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
C, D: Bonds on which no interest is being paid are rated "C." Bonds
rated "D" are in default and payment of interest and/or repayment of
principal is in arrears.
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson & Adams, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in
this Prospectus or the Additional Statement, and if given or made, such
information and representation must not be relied upon as having been
authorized by the Fund, Oppenheimer Management Corporation, Oppenheimer
Funds Distributor, Inc., or any affiliate thereof. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any
of the securities offered hereby in any state to any person to whom it is
unlawful to make such offer in such state.
PR275 (1\94) * Printed on recycled paper
<PAGE>
1993 Prospectus
OPPENHEIMER
Strategic
Income & Growth
Fund
Effective January 25, 1994
[OppenheimerFunds Logo]
<PAGE>
1993 Prospectus and
New Account Application
OPPENHEIMER
Strategic
Income & Growth
Fund
Effective January 25, 1994
[OppenheimerFunds Logo]
