OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
Prospectus dated October 1, 1995
Oppenheimer Strategic Income & Growth Fund (the "Fund") is a mutual
fund with a primary investment objective of current income and a secondary
investment objective of capital appreciation. The Fund intends to seek
its primary objective principally by investing in (1) U.S. Government
Securities, (2) foreign debt securities, and (3) domestic debt securities,
including lower-rated, high yield securities commonly called "junk bonds."
The Fund can invest some or all of its assets in each of these three types
of securities, although it will normally invest some assets in each
sector. The Fund intends to seek its secondary investment objective of
capital appreciation principally by investing in domestic equity
securities.
The Fund may invest up to 100% of its assets in "junk bonds" or
foreign debt securities rated below investment grade. These securities
may be considered to be speculative and involve greater risks, including
risk of default, than higher-rated securities. 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.
Investors should carefully consider these risks before investing.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep it
for future reference. You can find more detailed information about the
Fund in the October 1, 1995 Statement of Additional Information. For a
free copy, call Oppenheimer Shareholder Services, the Fund's Transfer
Agent, at 1-800-525-7048, or write to the Transfer Agent at the address
on the back cover. The Statement of Additional Information has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference (which means that it is legally part of this
Prospectus).
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, and are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of the
principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
ABOUT THE FUND
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objectives and Policies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Appendix: Description of Securities Ratings
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services, and
those expenses are subtracted from the Fund's assets to calculate the
Fund's net asset value per share. All shareholders therefore pay those
expenses indirectly. Shareholders pay other expenses directly, such as
sales charges and account transaction charges. The following tables are
provided to help you understand your direct expenses of investing in the
Fund and your share of the Fund's business operating expenses that you
will bear indirectly. The numbers below are based on the Fund's expenses
during its last fiscal year ended September 30, 1994.
- Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to "About Your Account," from
pages ____ through ____, for an explanation of how and when these charges
apply.
<TABLE>
<CAPTION> Class Class Class
A Shares B SharesC Shares
<S> <C> <C> <C>
Maximum Sales Charge
on Purchases(as a %
of offering price) 4.75% None None
Sales Charge on
Reinvested Dividends None None None
Deferred Sales Charge
(as a % of the lower
of the original
purchase price or
redemption proceeds) None(1) 5% in the first 1% if shares
year, declining are redeemed
to 1% in the sixth within 12 months
year and eliminated of purchase(2)
thereafter(2)
Exchange Fee None None None
</TABLE>
(1)If you invest $1 million or more ($500,000 or more for purchases by
OppenheimerFunds prototype 401(k) plans) in Class A shares, you may have
to pay a sales charge of up to 1% if you sell your shares within 18
calendar months from the end of the calendar month during which you
purchased those shares. See "How to Buy Shares - Class A Shares," below.
(2)See "How to Buy Shares - Class B Shares" and "How to Buy Shares - Class
C Shares" below.
- Annual Fund Operating Expenses are paid out of the Fund's assets
and represent the Fund's expenses in operating its business. For example,
the Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (which is referred to in this Prospectus as the
"Manager"). The rates of the Manager's fees are set forth in "How the
Fund is Managed," below. The Fund has other regular expenses for
services, such as transfer agent fees, custodial fees paid to the bank
that holds its portfolio securities, audit fees and legal expenses. Those
expenses are detailed in the Fund's Financial Statements in the Statement
of Additional Information.
The numbers in the table below are projections of the Fund's
business expenses based on the Fund's expenses in its last fiscal year.
These amounts are shown as a percentage of the average net assets of each
class of the Fund's shares for that year. The 12b-1 Distribution Plan
Fees for Class A shares are service fees. For Class B and Class C shares
the 12b-1 Distribution Plan Fees are service fees and asset based sales
charges. The service fee for each class is a maximum of 0.25% of average
annual net assets of the class and the asset-based sales charge for Class
B and Class C shares is 0.75%. These plans are described in greater
detail in "How to Buy Shares" below.
The actual expenses for each class of shares in future years may be
more or less than the numbers in the chart, depending on a number of
factors, including the actual value of the Fund's assets represented by
each class of shares. Class C shares were not publicly offered during the
fiscal year ended September 30, 1994. Therefore, the Annual Fund
Operating Expenses for Class C Shares are estimates based on amounts that
would have been payable in that period assuming Class C shares were
outstanding during such fiscal year.
<TABLE>
<CAPTION>
Class A Shares Class B SharesClass C Shares
<S> <C> <C> <C>
Management Fees 0.75% 0.75% 0.75%
12b-1 Distribution Plan Fees 0.25% 1.00% 1.00%
Other Expenses 0.43% 0.42% 0.42%
Total Fund Operating Expenses 1.43% 2.17% 2.17%
</TABLE>
- Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of shares
of the Fund, and that the Fund's annual return is 5%, and that its
operating expenses for each class are the ones shown in the Annual Fund
Operating Expenses table above. If you were to redeem your shares at the
end of each period shown below, your investment would incur the following
expenses by the end of 1, 3, 5 and 10 years:
1 year 3 years 5 years 10 years*
Class A Shares $ 61 $ 91 $122 $211
Class B Shares $ 72 $ 98 $136 $214
Class C Shares $ 32 $ 68 $116 $250
If you did not redeem your investment, it would incur the following
expenses:
Class A Shares $ 61 $ 91 $122 $211
Class B Shares $ 22 $ 68 $116 $214
Class C Shares $ 22 $ 68 $116 $250
*The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts Class B
shares into Class A shares after 6 years. Because of the effect of the
asset-based sales charge and the contingent deferred sales charge on Class
B and Class C shares long-term Class B and Class C shareholders could pay
the economic equivalent of an amount greater than the maximum front-end
sales charge allowed under applicable regulatory requirements. For Class
B shareholders, the automatic conversion of Class B shares to Class A
Shares is designed to minimize the likelihood that this will occur.
Please refer to "How to Buy Shares - for Class B Shares" for more
information.
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment
returns of the Fund, all of which will vary.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below,
with references to the section of this Prospectus where more complete
information can be found. You should carefully read the entire Prospectus
before making a decision about investing in the Fund. Keep the Prospectus
for reference after you invest, particularly for information about your
account, such as how to sell or exchange shares.
- What Are The Fund's Investment Objectives? The Fund's primary
investment objective is to seek current income. The Fund's secondary
investment objective is to seek capital appreciation.
- What Does the Fund Invest In? To seek current income, the Fund
primarily invests in three types of securities, or "sectors" of the
market: (i) U.S. Government securities, (ii) foreign debt securities, and
(iii) domestic debt securities, including lower-rated, high yield
securities commonly called "junk bonds." While all securities investments
entail risks, foreign securities and junk bonds have special risks,
described in more detail in "Investment Objectives and Policies." To seek
its secondary objective, the Fund normally will invest in common stocks
that the Manager believes have growth potential. The Fund may also write
covered calls and use certain types of securities called "derivative
investments" and hedging instruments to try to manage investment risks.
These investments are more fully explained in "Investment Objectives and
Policies" starting on page __.
- Who Manages the Fund? The Fund's investment adviser (the
"Manager") is Oppenheimer Management Corporation, which (including a
subsidiary) manages investment company portfolios currently having over
$35 billion in assets at June 30, 1995. The Manager is paid an advisory
fee by the Fund, based on its assets. The Fund has three portfolio
managers, employed by the Manager, who are primarily responsible for the
selection of the Fund's securities: Robert C. Doll, Jr., Arthur P.
Steinmetz and David P. Negri. The Fund's Board of Trustees, elected by
shareholders, oversees the investment adviser and the portfolio managers.
Please refer to "How the Fund is Managed," starting on page ___ for more
information about the Manager and its fees.
- How Risky is the Fund? All investments carry risks to some
degree. The Fund's investments in stocks and bonds are subject to changes
in their value from a number of factors such as changes in general bond
and stock market movements. The change in value of particular stocks or
bonds may result from an event affecting the issuer, or changes in
interest rates that can affect bond prices. These changes affect the
value of the Fund's investments and its share prices for each class of its
shares. In the OppenheimerFunds spectrum, the Fund is generally
considered moderately aggressive, more aggressive than investment grade
bond funds, because it may hold high yield securities and may invest for
capital appreciation in common stocks. While the Manager tries to reduce
risks by diversifying investments, by carefully researching securities
before they are purchased for the portfolio, and in some cases by using
hedging techniques, there is no guarantee of success in achieving the
Fund's objectives and your shares may be worth more or less than their
original cost when you redeem them. Please refer to "Investment
Objectives and Policies" starting on page ___ for a more complete
discussion of the Fund's investment risks.
- How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic
Investment Plan under AccountLink. Please refer to "How To Buy Shares"
on page ___ for more details.
- Will I Pay a Sales Charge to Buy Shares? The Fund has three
classes of shares. Each has the same investment portfolio but different
expenses. Class A shares are offered with a front-end sales charge,
starting at 4.75%, and reduced for larger purchases. Class B and Class
C shares are offered without a front-end sales charge, but may be subject
to a contingent deferred sales charge if redeemed within 6 years or 12
months, respectively, of purchase. There is also an annual asset-based
sales charge on Class B and Class C shares. Please review "How To Buy
Shares" starting on page ___ for more details, including a discussion
about factors you and your financial advisor should consider in
determining which class may be appropriate for you.
- How Can I Sell My Shares? Shares can be redeemed by mail or by
telephone call to the Transfer Agent on any business day, or through your
dealer. Please refer to "How To Sell Shares" on page ___. The Fund also
offers exchange privileges to other OppenheimerFunds, described in "How
to Exchange Shares" on page ___.
- How Has the Fund Performed? The Fund measures its performance
by quoting its yield, average annual total return and cumulative total
return, which measure historical performance. Those yields and returns
can be compared to the yield and returns (over similar periods) of other
funds. Of course, other funds may have different objectives, investments,
and levels of risk. The Fund's performance can also be compared to broad
market indices, which we have done on page ___. Please remember that past
performance does not guarantee future results.
<PAGE>
Financial Highlights
The table on the following pages presents selected financial
information about the Fund, including per share data and expense ratios
and other data based on the Fund's average net assets. This information
has been audited by Deloitte & Touche LLP, the Fund's independent
auditors, whose report on the Fund's financial statements for the fiscal
year ended September 30, 1994, is included in the Statement of Additional
Information, together with the Fund's unaudited financial statements for
the six months ended March 31, 1995. Class C shares were not publicly
offered during the periods shown. Accordingly, no information on Class
C shares is reflected in the table below or in the Fund's other financial
statements.
Financial Highlights
<TABLE>
<CAPTION>
Class A Class B
------- ------------------------------ ------- -------------------
Six Months Year Six Months Year
Ended Mar. 31, Ended Ended Mar. 31 Ended
1995 Sept. 30, 1995 Sept. 30,
(Unaudited) 1994 1993 1992(2) (Unaudited) 1994 1993(1)
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $ 4.92 $ 5.26 $ 5.03 $ 5.00 $ 4.91 $ 5.26 $ 5.10
------- ------- ------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income .15 .21 .22 .07(3) .13 .19 .14
Net realized and unrealized gain (loss)
on investments, options written and
foreign currency transactions (.09) (.23) .22 .02 (.08) (.25) .16
------- ------- ------- ------- ------- ------- -------
Total income (loss) from investment
operations .06 (.02) .44 .09 .05 (.06) .30
------- ------- ------- ------- ------- ------- -------
Dividends and distributions to shareholders:
Dividends from net investment income (.15) (.21) (.20) (.06) (.14) (.18) (.13)
Dividends in excess of net investment income -- (.01) -- -- -- (.01) --
Distributions from net realized gain on
investments, options written and foreign
currency transactions -- -- (.01) -- -- -- (.01)
Distributions in excess of net realized
gain on investments, options written
and foreign currency transactions -- (.10) -- -- -- (.10) --
------- ------- ------- ------- ------- ------- -------
Total dividends and distributions to
shareholders (.15) (.32) (.21) (.06) (.14) (.29) (.14)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period $ 4.83 $ 4.92 $ 5.26 $ 5.03 $ 4.82 $ 4.91 $ 5.26
======= ======= ======= ======= =======
======= =======
Total Return, at Net Asset Value(4) 1.34% (.23)% 8.84% 1.74% .96% (1.17)% 5.86%
------- ------- ------- ------- ------- ------- -------
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $39,428 $42,733 $55,291 $48,397 $16,587 $16,053 $12,386
------- ------- ------- ------- ------- ------- -------
Average net assets (in thousands) $40,759 $48,360 $59,209 $30,264 $16,277 $14,986 $ 7,541
------- ------- ------- ------- ------- ------- -------
Number of shares outstanding at end of
period (in thousands) 8,162 8,683 10,513 9,628 3,440 3,267 2,357
------- ------- ------- ------- ------- ------- -------
Ratios to average net assets:
Net investment income 6.19%(5) 4.56% 4.33% 4.59%(5) 5.43%(5) 3.86% 3.32%(5)
Expenses 1.39%(5) 1.43% 1.36% 1.46%(3)(5) 2.14%(5) 2.17% 2.21%(5)
------- ------- ------- ------- ------- ------- -------
Portfolio turnover rate 85.1%(7) 80.0%(6) 122.4% 25.8% 85.1%(7) 80.0%(6) 122.4%
</TABLE>
1. For the period from November 30, 1992 (inception of offering) to
September
30, 1993.
2. For the period from June 1, 1992 (commencement of operations) to
September
30, 1992.
3. Net investment income would have been $.07 absent the voluntary expense
reimbursement, resulting in an expense ratio of 1.74%.
4. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
5. Annualized.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the year ended September 30, 1994 were
$53,695,271 and $49,725,672, respectively.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the six months ended March 31, 1995 were
$48,908.363 and $46,268,719,
respectively.
<PAGE>
Investment Objectives and Policies
Objectives. The Fund has primary and secondary investment
objectives. First, the Fund invests its assets to try to provide current
income. As a secondary objective, the Fund seeks capital appreciation.
Investment Policies and Strategies. The Fund intends to seek its
primary investment objective of current income principally by investing
in securities in three sectors of the investment market: (1) U.S.
Government Securities, (2) foreign debt securities, including lower-rated,
high yield foreign securities that have special risks, and (3) domestic
debt 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.
The term "equity security" generally refers to a security, such as
a common stock, which represents an ownership interest in the company
issuing the security. The term "debt security" refers to a wide variety
of different types of securities that, in general terms, represent a loan
of money to the issuer, which promises to pay back the amount loaned (the
"principal") plus interest, which may be at a fixed-rate or a variable
rate. Debt securities are sometimes generally referred to as "fixed-
income" securities.
Under normal circumstances, the Fund will invest at least some of
its assets in each of the four sectors described above. There is no
specific percentage of its assets that must be invested in any one or more
of these sectors at any time. However, from time to time the Fund may
invest up to 100% of its total assets in any one sector (other than in
domestic equity securities) 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. Because that means the Fund could invest all of
its assets in lower-rated securities, an investment in the Fund may be
considered to be speculative. There can be no assurance that the Fund
will achieve its objectives.
The amount of income the Fund earns and distributes to shareholders
will fluctuate over time as the Fund shifts its assets among these
sectors. Also, from time to time the Fund may shift its emphasis on debt
securities having a particular maturity, whether long, short or
intermediate.
When investing the Fund's assets, the Manager considers many
factors, including the financial condition of particular companies it is
considering investing in as well as general economic conditions in the
U.S. relative to foreign economies, and the trends in domestic and foreign
debt securities and stock markets. In evaluating the potential for income
from particular securities, the Manager examines many factors, such as the
consistency of the company's earnings, the industry group the company is
in (and the prospects for that industry in the overall economy), how well
the company is managed, and the size of the company's capitalization.
The Manager may use different approaches at different times to
determine how to allocate the Fund's assets between the three debt
securities sectors to seek income and the domestic equity sector to seek
capital growth. The Manager determines that allocation periodically, in
the following manner. First, the Manager establishes a target level of
current income to seek from the Fund's portfolio investments. That target
may use, as a point of reference, a measure of current interest rates,
such as the interest rate then being paid on 3-month U.S. Treasury bills.
Second, the Manager estimates what proportion of the Fund's assets are to
be allocated to the debt securities sectors to seek that level of current
income. Third, the remainder of the Fund's assets that are not allocated
to debt securities are allocated to the domestic equity sector to attempt
to achieve capital appreciation.
The Manager intends to determine this allocation monthly (although
the frequency of the determination may vary) and to utilize the 3-month
Treasury bill rate as the benchmark measure of current interest rates 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.
Under this asset allocation approach, the proportion of the Fund's
assets allocated to the different debt securities sectors and to the
domestic equity sector will vary from time to time. The allocation will
depend 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, if the Manager's estimate of
projected earnings available from the fixed income sectors exceeds the
targeted level of current portfolio income, a greater percentage of the
Fund's assets will be available to allocate to the domestic equity sector.
The Manager may vary, revise or discontinue this asset allocation
approach or adopt a different approach. The use of this approach is not
an objective or fundamental investment policy of the Fund, but merely
illustrates the investment selection and allocation techniques the Manager
currently 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 its shareholders a particular amount of current income or
achieving particular investment results. The Fund's expenses will reduce
the amount of any income the Fund earns that is available for distribution
to shareholders, whether or not the targeted income 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.
The Fund may try to hedge against losses in the value of its
portfolio of securities by using hedging strategies and derivative
investments described below. The Fund's portfolio managers may employ
special investment techniques in selecting securities for the Fund. These
are also described below. Additional information may be found about them
under the same headings in the Statement of Additional Information.
- Can the Fund's Investment Objectives and Policies Change? The
Fund has investment objectives, described above, as well as investment
policies it follows to try to achieve its objectives. Additionally, the
Fund uses certain investment techniques and strategies in carrying out
those investment policies. The Fund's investment policies and techniques
are not "fundamental" unless this Prospectus or the Statement of
Additional Information says that a particular policy is "fundamental."
The Fund's investment objectives are fundamental policies.
Fundamental policies are those that cannot be changed without the
approval of a "majority" of the Fund's outstanding voting shares. The
term "majority" is defined in the Investment Company Act to be a
particular percentage of outstanding voting shares (and this term is
explained in the Statement of Additional Information). The Fund's Board
of Trustees may change non-fundamental policies without shareholder
approval, although significant changes will be described in amendments to
this Prospectus.
- Interest Rate Risks. In addition to credit risks, described
below, debt securities are subject to changes in their value due to
changes in prevailing interest rates. When prevailing interest rates
fall, the values of already-issued debt securities generally rise. When
interest rates rise, the values of already-issued debt securities
generally decline. The magnitude of these fluctuations will often be
greater for longer-term debt securities than shorter-term debt securities.
Changes in the value of securities held by the Fund mean that the Fund's
share prices can go up or down when interest rates change, because of the
effect of the change on the value of the Fund's portfolio of debt
securities.
- Stock Investment Risks. Because the Fund can invest a portion
of its assets in stocks, the value of the Fund's portfolio will be
affected by changes in the stock markets. At times, the stock markets can
be volatile and stock prices can change substantially. This market risk
will affect the Fund's net asset value per share, which will fluctuate as
the values of the Fund's portfolio securities change. Not all stock
prices change uniformly or at the same time, and other factors can affect
a particular stock's prices (for example, poor earnings reports by an
issuer, loss of major customers, major litigation against an issuer, or
changes in government regulations affecting an industry). Not all of
these factors can be predicted.
- Special Risks of Lower-Rated Securities. The domestic and
foreign debt securities the Fund can invest in may include higher yielding
"lower-grade" debt securities, commonly known as "junk bonds". There is
no restriction on the amount of the Fund's assets that could be invested
in these types of securities. "Lower-grade" securities are those rated
below "investment grade," which means they have a rating of "BBB" or lower
by Standard & Poor's Corporation or "Baa" or lower by Moody's Investors
Service, Inc. or similar ratings by other rating organizations. "Lower-
grade" debt securities the Fund may invest in also include securities that
are not rated by a nationally-recognized rating organization like Standard
& Poor's or Moody's, but which the Manager judges to be comparable to
lower-rated securities. The Fund may invest in securities rated as low
as "C" or "D" or may be in default at time of purchase. For a description
of these securities ratings, please refer to the Appendix to this
Prospectus.
The Fund's portfolio at June 30, 1995, contained domestic and
foreign debt securities in the categories that follow. The ratings were
by Standard & Poor's or if unrated, determined by the Manager to be
comparable to the category indicated (the percentages shown are the
dollar-weighted average value of the bonds in each rating category
measured as a percentage of the Fund's total assets: AAA, none; AA, none;
A, none; BBB, 1.93%; BB, 6.57%; B, 15.47%; CCC, 2.37%; CC, none; C, none;
D, .34%. If a bond was not rated by Standard & Poor's but was rated by
Moody's, it is included in Standard & Poor's comparable category. Unrated
bonds were not rated by either Moody's or Standard & Poor's.
The Manager does not rely solely on ratings of securities by rating
agencies when selecting investments for the Fund, but evaluates other
economic and business factors as well. The Fund may invest in unrated
securities that the Manager believes offer yields and risks comparable to
rated securities. High yield, lower-grade securities, whether rated or
unrated, often have speculative characteristics. Lower-grade securities
have special risks that make them riskier investments than investment
grade securities. They may be subject to greater market fluctuations and
risk of loss of income and principal than lower yielding, investment grade
securities. There may be less of a market for them and therefore they may
be harder to sell at an acceptable price. There is a relatively greater
possibility that the issuer's earnings may be insufficient to make the
payments of interest due on the bonds. The issuer's low creditworthiness
may increase the potential for its insolvency ("credit risk"). For
foreign lower-grade debt securities, these risks are in addition to the
risks of investing in foreign securities, described in "Foreign Debt
Securities," below.
These risks mean that the Fund may not achieve the expected income
from lower-grade securities, and that the Fund's net asset value per share
may be affected by declines in value of these securities. The Fund is not
obligated to dispose of securities when issuers are in default or if the
rating of the security is reduced. However, the Fund's use of three
different debt securities sectors under normal conditions may reduce some
of the effect that the risk of investing in these securities can have, as
will the Fund's policy of diversifying its investments. Also, convertible
securities may be less subject to some of these risks than other debt
securities, to the extent they can be converted into stock, which may be
more liquid and less affected by these other risk factors.
- Investments in Bonds and Convertible Securities. The Fund
invests in bonds, debentures and other debt securities to help seek its
primary objective of current income. The Fund may invest in a variety of
different types of income-producing securities. The Fund is not required
to limit those investments to securities having particular ratings by
nationally-recognized rating agencies. The Manager does not rely solely
on ratings of securities in making investment decisions, but evaluates
other business and economic factors affecting the issues as well.
When investing in convertible securities, the Manager looks to the
conversion feature and treats the securities as "equity securities." The
Fund can buy unrated securities, and when doing so, the Manager will
determine in its judgement whether unrated securities are of comparable
quality to securities rated by rating organizations.
- Board-Approved Instruments. The Fund may invest in other
investments in any of the three debt securities sectors (including new
investments that may be developed in the future) that the Fund's Board of
Trustees (or the Manager, under guidelines established by the Board)
determines are consistent with the Fund's investment objectives and
investment policies.
- Certain Types of Securities Are in More Than One Sector. The
types of securities described below may be included in two or more of the
three debt securities sectors the Fund invests in.
- Bank Obligations. The Fund may invest in certain kinds of bank
obligations, which may fall within the domestic or foreign debt securities
sectors. Generally, these are debt obligations that have a maturity of
one year or less, and include: certificates of deposit, bankers'
acceptances, time deposits, and letters of credit if they are payable in
the United States or London, England. Those letters of credit must be
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, any ratings assigned to
the securities by one or more "nationally-recognized statistical rating
organizations" as that term is defined in Rule 2a-7 under the Investment
Company Act.
- Commercial Paper. The Fund may invest in foreign or domestic
commercial paper, which in general terms is short-term corporate debt.
If rated, it must be rated at least "A-3" by Standard & Poor's or at least
"Prime-3" by Moody's. If not rated, it must be issued by a corporation
having an already-issued debt security rated at least "BBB" by Standard
& Poor's or "Baa" by Moody's. The Fund's commercial paper investments may
include variable amount master demand notes and floating rate or variable
rate notes, described in the Statement of Additional Information.
- Mortgage-Backed Securities and CMOs. The Fund may invest in
securities that represent an interest in a pool of residential mortgage
loans. These include collateralized mortgage-backed obligations (referred
to as "CMOs"). CMOs are considered U.S. Government Securities if they are
issued or guaranteed by agencies or instrumentalities of the U.S.
Government (for example, Ginnie Maes, Freddie Macs and Fannie Maes).
However, other mortgage-backed securities represent pools of mortgages
"packaged" and offered by private issuers, and these are part of the
Fund's domestic debt securities investments.
CMOs and mortgage-backed securities differ from conventional debt
securities that provide periodic payments of interest in fixed amounts and
repay the principal at maturity or specified call dates. Mortgage-backed
securities provide monthly payments that are, in effect, a "pass-through"
of the monthly interest and principal payments made by the individual
borrowers on the pooled mortgage loans. Those payments may include
prepayments of mortgages, which have the effect of paying the debt on the
CMO early. When the Fund receives scheduled principal payments and
unscheduled prepayments it will have cash to reinvest but may have to
invest that cash in investments having lower interest rates than the
original investment. That could reduce the yield of the Fund.
The issuer's obligation to make interest and principal payments on
a mortgage-backed security 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, and private mortgage insurance companies) may be supported
by insurance or guarantees, such as letters of credit issued by
governmental entities, private insurers or the private issuer of the
mortgage pool. There can be no assurance that private insurers will be
able to meet their obligations.
The Fund may also invest in CMOs that are "stripped." That means
that 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 only interest are
subject to increased price volatility when interest rates change. They
have an 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. Stripped securities that receive principal payments
are also subject to increased volatility in price due to interest rate
changes and have the additional risk that the securities will be less
liquid during demand or supply imbalances.
The Fund may also enter into "forward roll" transactions with
mortgage-backed securities. In this investment strategy, the Fund sells
mortgage-backed securities it holds to banks or other buyers 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 (which is a technique explained in "Special
Investment Methods - Borrowing," below). The Fund would be required to
segregate liquid assets (such as cash, U.S. Government securities or other
high-grade debt securities) 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 main investment risk of
this strategy is the risk of default by the counterparty.
- Participation Interests. This type of security may include
securities in the domestic and foreign debt securities sectors. The Fund
may acquire participation interests in loans that are made to U.S. or
foreign companies. These interests are acquired from banks or brokers
that have made the loan or are members of the lending syndicate. No more
than 5% of the Fund's net assets can be invested in participation
interests of the same borrower. The value of loan participation interests
depends primarily upon the creditworthiness of the borrower, and its
ability to pay interest and repay the principal. The Manager has set
creditworthiness standards for issuers of loan participations, and
monitors their creditworthiness. Borrowers may have difficulty making
payments. Under the Fund's standard for creditworthiness, some borrowers
may have senior securities rated as low as "C" by Moody's or "D" by
Standard & Poor's, but may be considered to be acceptable credit risks.
If a borrower fails to make scheduled interest or principal payments, the
value of the Fund's participation in that loan could decline, and the Fund
could experience a decline in the net asset value of its shares.
Participation interests are subject to the Fund's limitations on
investments in illiquid securities, described in "Illiquid and Restricted
Securities".
- Zero Coupon Securities. The Fund may invest in zero coupon
securities issued either by private issuers or by the U.S. Treasury, and
which therefore may be in those two sectors. Some zero coupon securities
of private issuers are notes or debentures that do not pay current
interest and are issued at substantial discounts from par value. Other
private issuer zero coupon securities are 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 that interest rate is higher than if interest were payable from
the date the security is issued. Private issuer zero coupon securities
are subject to the risk of the issuer's failure to pay interest and repay
the principal value of the security.
Zero coupon Treasury securities are U.S. Treasury notes and bonds
that have been stripped of their 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, and does not pay current cash income. It will be
subject to greater fluctuations in market value in response to changing
interest rates than other debt obligations that have comparable maturities
and 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 these securities.
- Domestic Debt Securities. The Fund may invest in debt securities
issued by U.S. companies in any type of industry. Domestic debt
securities may be denominated in U.S. dollars or in non-U.S. currencies.
The Fund is not required to limit those investments to issuers having a
particular size capitalization, although it is expected that most will
have total assets in excess of $100 million. These investments may
include debt obligations such as bonds, debentures (unsecured bonds) and
notes (including variable and floating rate instruments described in
"Investment Objectives and Policies" in the Statement of Additional
Information), as well as the other investments discussed below. These
investments may also include sinking fund and callable bonds.
- Municipal Securities. The Fund may invest in municipal
securities. These are debt obligations issued by or on behalf of states,
the District of Columbia, or any commonwealths, territories or possessions
of the United States. They also include securities issued by their
political subdivisions, agencies, instrumentalities or authorities. The
Fund will invest in these securities if the Manager believes the interest
income opportunities are favorable compared to other debt securities, but
not to seek income exempt from income taxes.
- Asset-Backed Securities. The Fund may invest in "asset-backed"
securities. These represent interests in pools of consumer loans and
other trade receivables similar to mortgage-backed securities. They are
issued by trusts and "special purpose corporations." They are backed by
a pool of assets, such as credit card or auto loan receivables, which are
the obligations of a number of different parties. The income from the
underlying pool is passed through to holders, such as the Fund. These
securities may be supported by a credit enhancement, such as a letter of
credit, a guarantee or a preference right. However, the extent of the
credit enhancement may be different for different securities and generally
applies to only a fraction of the security's value. These securities
present special risks. For example, in the case of credit card
receivables, the issuer of the security may have no security interest in
the related collateral.
- U.S. Government Securities. The Fund's investment in debt
obligations issued or guaranteed by the U.S. Government or its agencies
or instrumentalities are referred to as "U.S. Government Securities."
Although U.S. Government Securities are considered among the most
creditworthy investments, their yields are generally lower than the yields
available from corporate debt securities. Additionally, the values of
U.S. Government Securities are subject to changes in prevailing domestic
interest rates, as described above in "Interest Rate Risks."
U.S. Government Securities are debt obligations issued by or
guaranteed by the United States government or any of its agencies or
instrumentalities. Some of these obligations, including U.S. Treasury
notes and bonds, and mortgage-backed securities (referred to as "Ginnie
Maes") guaranteed by the Government National Mortgage Association, are
supported by the full faith and credit of the United States, which means
that the government pledges to use its taxing power to repay the debt.
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. They may include obligations supported
by the ability of the issuer to borrow from the U.S. Treasury. However,
the Treasury is not under a legal obligation to make a loan. Examples of
these are obligations of Federal Home Loan Mortgage Corporation (these
securities are often called "Freddie Macs"). Other obligations are
supported by the credit of the instrumentality, such as Federal National
Mortgage Association bonds (these securities are often called "Fannie
Maes"). Some of the 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.
- Foreign Debt Securities. When investing in the foreign sector
for the portfolio, the Fund may include debt obligations of the types
identified in "Domestic Debt Securities," above. These foreign securities
may be denominated in U.S. dollars or in non-U.S. currencies. They may
be issued or guaranteed by foreign corporations, supranational entities
(such as the World Bank) and foreign governments. Foreign government
securities also include debt securities issued by political subdivisions
of foreign governments that have taxing authority or by their agencies or
instrumentalities.
No more than 25% of the Fund's total assets 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 foreign securities sector also may include debt obligations issued by
U.S. corporations denominated in non-U.S. currencies. These include debt
obligations known as "Brady Bonds." Brady Bonds are issued to exchange
existing commercial bank loans to foreign governments for new obligations
that are usually collateralized by zero coupon U.S. Treasury securities
that have the same maturity as the debt obligation.
- Foreign Securities Have Special Risks. There are certain risks
of holding foreign securities. The first is the risk of changes in
foreign currency values. Because the Fund may purchase securities
denominated in foreign currencies, a change in the value of a foreign
currency against the U.S. dollar will result in a change in the U.S.
dollar value of the Fund's securities denominated in that currency. The
currency rate change will also affect its income available for
distribution. Although the Fund's investment income from foreign
securities may be received in foreign currencies, the Fund will be
required to distribute its income in U.S. dollars. Therefore, the Fund
will absorb the cost of currency fluctuations. If the Fund suffers losses
on foreign currencies after it has distributed its income during the year,
the Fund may find that it has distributed more income than was available
from actual investment income. That could result in a return of capital
to shareholders.
The Fund may invest in foreign securities issued in any country,
developed or underdeveloped. Securities of issuers in non-industrialized
countries generally involve more risk and may be considered highly
speculative. There are other risks of foreign investing. For example,
foreign issuers are not required to use generally-accepted accounting
principles. If foreign securities are not registered for sale in the U.S.
under U.S. securities laws, the issuer does not have to comply with the
disclosure requirements of our laws, which are generally more stringent
than foreign laws. The values of foreign securities investments will be
affected by other factors, including exchange control regulations or
currency blockage and possible expropriation or nationalization of assets.
There may also be changes in governmental administration or economic or
monetary policy in the U.S. or abroad that can affect foreign investing.
In addition, it is generally more difficult to obtain court judgments
outside the United States if the Fund has to sue a foreign broker or
issuer. Additional costs may be incurred because foreign broker
commissions are generally higher than U.S. rates, and there are additional
custodial costs associated with holding securities abroad.
- Domestic Equity Securities. When investing for the Fund's
secondary objective of capital appreciation, it may buy equity securities
of domestic corporations in any industry. The Fund's equity investments
are not limited to companies of a particular size, although it is
currently expected that most will have assets in excess of $100 million.
These investments may include common stocks, preferred stocks,
convertible securities and warrants. In selecting stocks, the Fund will
emphasize issues listed on a U.S. securities exchange or quoted on the
automatic quotation system of the National Association of Securities
Dealers, Inc. ("NASDAQ").
- Investments in Small, Unseasoned Companies. The Fund may invest
in securities of small, unseasoned companies, but as a matter of
fundamental policy, purchases of investments in companies that have
operated less than three years (counting the operations of any
predecessors) may not exceed 5% of the Fund's total assets. Securities
of these companies may have limited liquidity (which means that the Fund
may have difficulty selling them at an acceptable price when it wants to),
and the prices of these securities may be volatile.
- Portfolio Turnover. A change in the securities held by the Fund
is known as "portfolio turnover." The Fund will actively use portfolio
trading to try to benefit from differences in short-term yields among
different issues of debt securities, to try to increase its income. The
Fund therefore may have a greater rate of portfolio turnover than
investment companies that invest on a long-term basis. As a result, the
Fund's portfolio turnover rate is likely to be more than 100% per year.
The "Financial Highlights," above, show the Fund's portfolio turnover rate
during past fiscal years.
High portfolio turnover may affect the ability of the Fund to
qualify as a "regulated investment company" under the Internal Revenue
Code for tax deductions for dividends and capital gains distributions the
Fund pays to shareholders. Portfolio turnover affects brokerage costs,
dealer markups and other transaction costs, and results in the Fund's
realization of capital gains or losses for tax purposes.
Other Investment Techniques and Strategies
The Fund may also use the investment techniques and strategies
described below. These techniques involve certain risks. The Statement
of Additional Information contains more information about these practices,
including limitations on their use that are designed to reduce some of the
risks.
- Special Risks - Borrowing for Leverage. The Fund may borrow
money from banks to buy securities. The Fund will borrow only if it can
do so without putting up assets as security for a loan. This is a
speculative investment method known as "leverage." Leveraging may subject
the Fund to greater risks and costs than funds that do not borrow. These
risks may include the possible reduction of income and increased
fluctuation in the Fund's net asset value per share, since the Fund pays
interest on borrowings. Borrowing is subject to regulatory limits
described in more detail in the Statement of Additional Information.
- Derivative Investments. The Fund can invest in a number of
different kinds of "derivative investments." They are used in some cases
for hedging purposes and in other cases to attempt to seek income or total
return. In general, a "derivative investment" is a specially designed
investment whose performance is linked to the performance of another
investment or security, such as an option, future, index, currency or
commodity. In the broadest sense, exchange-traded options and futures
contracts (discussed in "Hedging," below) may be considered "derivative
investments."
The Fund may invest in different types of derivatives. "Index-
linked" or "commodity-linked" notes are debt securities of companies that
call for interest payment and/or payment on the maturity of the note in
different terms than the typical note where the borrower agrees to make
fixed interest payments and/or to pay a fixed sum on the maturity of the
note. Principal and/or interest payments on an index-linked note depend
on the performance of one or more market indices, such as the S & P 500
Index or a weighted index of commodity futures, such as crude oil,
gasoline and natural gas. The Fund may invest in debt exchangeable for
common stock of an issuer or "equity-linked" debt securities of an issuer.
At maturity, the principal amount of the debt security is exchanged for
common stock of the issuer or is payable in an amount based on the
issuer's common stock price at the time of maturity. In either case there
is a risk that the amount payable at maturity will be less than the
principal amount of the debt.
The Fund may also invest in currency-indexed securities. Typically,
these are short-term or intermediate-term debt securities having a value
at maturity, and/or an interest rate determined by reference to one or
more foreign currencies. The currency-indexed securities purchased by the
Fund may make payments based on a formula. The payment of principal or
periodic interest may be calculated as a multiple of the movement of one
currency against another currency, or against an index. These investments
may entail increased risk to principal and increased price volatility.
There are special risks in investing in derivative investments. The
company issuing the instrument may fail to pay the amount due on the
maturity of the instrument. Also, the underlying investment or security
on which the derivative is based might not perform the way the Manager
expected it to perform. Markets, underlying securities and indices may
move in a direction not anticipated by the Manager. Performance of
derivative investments may also be influenced by interest rate changes in
the U.S. and abroad. All of this can mean that the Fund will realize less
principal or income from the investment than expected. Certain derivative
investments held by the Fund may trade in the over-the-counter market and
may be illiquid. Please refer to "Illiquid and Restricted Securities".
- Hedging. As described below, the Fund may purchase and sell
certain kinds of futures contracts, put and call options, forward
contracts, and options on futures, broadly-based stock or bond indices and
foreign currency, or enter into interest rate swap agreements. These are
all referred to as "hedging instruments." The Fund does not use hedging
instruments for speculative purposes, and has limits on the use of them,
described below. The hedging instruments the Fund may use are described
below and in greater detail in the Statement of Additional Information.
The Fund may buy and sell options, futures and forward contracts for
a number of purposes. It may do so to try to manage its exposure to the
possibility that the prices of its portfolio securities may decline, or
to establish a position in the securities market as a temporary substitute
for purchasing individual securities. It may do so to try to manage its
exposure to changing interest
rates. Some of these strategies, such as selling futures, buying puts and
writing covered calls, hedge the Fund's portfolio against price
fluctuations.
Other hedging strategies, such as buying futures and call options,
tend to increase the Fund's exposure to the securities market. Forward
contacts are used to try to manage foreign currency risks on the Fund's
foreign investments. Foreign currency options are used to try to protect
against declines in the dollar value of foreign securities the Fund owns,
or to protect against an increase in the dollar cost of buying foreign
securities. Writing covered call options may also provide income to the
Fund for liquidity purposes, defensive reasons, or to raise cash to
distribute to shareholders. At present, the Fund does not intend to enter
into Futures contracts, forward contracts or options on Futures if, after
any purchase or sale, the value of all put and call options held by the
Fund would exceed 5% of its total assets.
- Futures. The Fund may buy and sell futures contracts that relate
to (1) foreign currencies (these are Forward Contracts), (2) financial
indices such as U.S. or foreign government securities or corporate debt
securities indices (these are referred to as Financial Futures), and (3)
interest rates (these are referred to as Interest Rate Futures). These
types of Futures are described in "Hedging" in the Statement of Additional
Information.
- Put and Call Options. The Fund may buy and sell certain kinds
of put options (puts) and call options (calls).
The Fund may buy calls only on debt securities, foreign currencies,
or Futures, or to terminate its obligation on a call the Fund previously
wrote. The value of debt securities underlying calls bought by the Fund
will not exceed the value of the Fund's cash or cash-equivalent portfolio
holdings (that is, securities with maturity of less than one year). The
Fund may write (that is, sell) call options on debt or equity securities,
foreign currency or Futures, but only if they are "covered." That means
the Fund must own the security subject to the call while the call is
outstanding (or own other securities acceptable for applicable escrow
requirements). Calls on Futures must be covered by securities or other
liquid assets the Fund owns and segregates to enable it to satisfy its
obligations if the call is exercised. When the Fund writes a call, it
receives cash (called a premium). The call gives the buyer the ability
to buy the investment on which the call was written from the Fund at the
call price during the period in which the call may be exercised. If the
value of the investment does not rise above the call price, it is likely
that the call will lapse without being exercised, while the Fund keeps the
cash premium (and the investment). Up to 100% of the Fund's total assets
may be subject to calls.
The Fund may purchase put options. Buying a put on an investment
gives the Fund the right to sell the investment at a set price to a seller
of a put on that investment. The Fund can buy only those puts that relate
to (1) debt securities, (2) Futures, or (3) foreign currencies. The Fund
can buy a put on a debt security whether or not the Fund owns the
particular debt security in its portfolio. The Fund may sell a put on
debt securities or Futures, but only if the puts are covered by segregated
liquid assets. The Fund will not write puts if more than 50% of the
Fund's net assets would have to be segregated to cover put obligations.
A call or put may be purchased only if, after the purchase, the
value of all call and put options held by the Fund will not exceed 5% of
the Fund's total assets. The Fund may buy and sell put and call options
that are traded on U.S. or foreign securities or commodity exchanges or
are traded in the over-the-counter markets. In the case of foreign
currency options, they may be quoted by major recognized dealers in those
options. Options traded in the over-the-counter market may be "illiquid,"
and therefore may be subject to the Fund's restrictions on illiquid
investments, described in "Illiquid and Restricted Securities," below.
- Forward Contracts. Forward Contracts are foreign currency
exchange contracts. They are used to buy or sell foreign currency for
future delivery at a fixed price. The Fund uses them to try to "lock in"
the U.S. dollar price of a security denominated in a foreign currency that
the Fund has purchased or sold, or to protect against possible losses from
changes in the relative value of the U.S. dollar and a foreign currency.
The Fund may also use "cross hedging," where the Fund hedges against
changes in currencies other than the currency in which a security it holds
is denominated.
- Interest Rate Swaps. In an interest rate swap, the Fund and
another party exchange their right to receive, or their obligation to pay,
interest on a security. For example, they may swap a right to receive
floating rate interest payments for fixed rate payments. The Fund enters
into swaps only on securities it owns. The Fund may not enter into swaps
with respect to more than 50% of its total assets. The Fund will
segregate liquid assets (such as cash or U.S. Government securities) to
cover any amounts it could owe under swaps that exceed the amounts it is
entitled to receive, and it will adjust that amount daily, as needed.
- Hedging instruments can be volatile investments and may involve
special risks. The use of hedging instruments requires special skills and
knowledge of investment techniques that are different from what is
required for normal portfolio management. If the Manager uses a hedging
instrument at the wrong time or judges market conditions incorrectly,
hedging strategies may reduce the Fund's return. The Fund could also
experience losses if the prices of its futures and options positions were
not correlated with its other investments or if it could not close out a
position because of an illiquid market for the future or option.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. For example, in writing puts, there is a risk that the Fund
may be required to buy the underlying security at a disadvantageous price.
The use of Forward Contracts may reduce the gain that would otherwise
result from a change in the relationship between the U.S. dollar and a
foreign currency. The Fund limits its exposure in foreign currency
exchange contracts to the amount of its assets denominated in the foreign
currency, to avoid having to buy or sell foreign currency at
disadvantageous prices. Interest rate swaps are subject to the risk that
the other party will fail to meet its obligations (or that the underlying
issuer will fail to pay on time), as well as interest rate risks. The
Fund could be obligated to pay more under its swap agreements than it
receives under them, as a result of interest rate changes. If a covered
call written by the Fund is exercised on an investment that has increased
in value, the Fund will be required to sell the investment at the call
price and will not be able to realize any profit if the investment has
increased in value above the call price. These risks are described in
greater detail in the Statement of Additional Information.
- Repurchase Agreements. The Fund may enter into repurchase
agreements. In a repurchase transaction, the Fund buys a security and
simultaneously sells it to the vendor for delivery at a future date.
Repurchase agreements must be fully collateralized. However, if the
vendor fails to pay the resale price on the delivery date, the Fund may
incur costs in disposing of the collateral and may experience losses if
there is any delay in its ability to do so. The Fund will not enter into
a repurchase agreement that will cause more than 10% of its 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 of seven days or less. See the Statement
of Additional Information for more details.
- Loans of Portfolio Securities. To attempt to increase its
income, the Fund may lend its portfolio securities to brokers, dealers and
other financial institutions. The Fund must receive collateral for a
loan. These loans are limited to not more than 25% of the value of the
Fund's total assets and are subject to other conditions described in the
Statement of Additional Information. The Fund presently does not intend
to lend its portfolio securities, but if it does, the value of securities
loaned is not expected to exceed 5% of the value of the Fund's total
assets in the coming year.
- Illiquid and Restricted Securities. Under the policies and
procedures established by the Fund's Board of Trustees, the Manager
determines the liquidity of certain of the Fund's investments.
Investments may be illiquid because of the absence of an active trading
market, making it difficult to value them or dispose of them promptly at
an acceptable price. A restricted security is one that has a contractual
restriction on its resale or which cannot be sold publicly until it is
registered under the Securities Act of 1933. The Fund will not invest
more than 10% of its net assets in illiquid or restricted securities (that
limit may increase to 15% if certain state laws are changed or the Fund's
shares are no longer sold in those states). The Fund's percentage
limitation on these investments does not apply to certain restricted
securities that are eligible for resale to qualified institutional
purchasers.
- 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. These terms refer to
securities that have been created and for which a market exists, but which
are not available for immediate delivery. There may be a risk of loss to
the Fund if the value of the security declines prior to the settlement
date.
- Short Sales "Against-the-Box". As a matter of fundamental
policy, the Fund may not sell securities short except in collateralized
transactions referred to as short sales "against-the-box. No more than
15% of the Fund's net assets will be held as collateral for such short
sales at any one time.
Other Investment Restrictions. The Fund has other investment restrictions
which are fundamental policies. Under these fundamental policies, the
Fund cannot do any of the following:
- - purchase securities issued or guaranteed by any one issuer (except the
U.S. Government or any of 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;
- - concentrate 25% or more of its total assets in investments 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 utilities are each considered a separate industry);
- - make loans, except that it may purchase debt obligations in accordance
with its investment objectives and policies, or enter into repurchase
agreements, or lend portfolio securities in accordance with applicable
regulations;
- - 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 these investments would exceed 5% of the value of the Fund's total
assets; or
- - make short sales of securities or maintain a short position, unless as
short sales against-the-box.
All of the percentage restrictions described above (except those
restricting borrowing money) and elsewhere in this Prospectus apply only
at the time the Fund purchases a security, and the Fund need not dispose
of a security merely because the size of the Fund's assets has changed or
the security has increased in value relative to the size of the Fund.
There are other fundamental policies discussed in the Statement of
Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized in 1992 as a
Massachusetts business trust. The Fund is a diversified open-end,
management investment company, with an unlimited number of authorized
shares of beneficial interest.
The Fund is governed by a Board of Trustees, which is responsible
under Massachusetts law for protecting the interests of shareholders. The
Trustees meet periodically throughout the year to oversee the Fund's
activities, review its performance, and review the actions of the Manager.
"Trustees and Officers of the Fund" in the Statement of Additional
Information names the Trustees and provides more information about them
and the officers of the Fund. Although the Fund is not required by law
to hold annual meetings, it may hold shareholder meetings from time to
time on important matters, and shareholders have the right to call a
meeting to remove a Trustee or to take other action described in the
Fund's Declaration of Trust.
The Board of Trustees has the power, without shareholder approval,
to divide unissued shares of this Fund into two or more classes. The
Board has done so, and the Fund currently has three classes of shares,
Class A, Class B and Class C. All classes invest in the same investment
portfolio. Each class has its own dividends and distributions and pays
certain expenses which may be different for the different classes. Each
class may have a different net asset value. Each share has one vote at
shareholder meetings, with fractional shares voting proportionally on
matters submitted to the vote of shareholders. Shares of each class may
have separate voting rights on matters in which interests of one class are
different from the interests of other classes, and shares of a particular
class vote together on matters that affect that class. Shares are freely
transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager,
Oppenheimer Management Corporation, which is responsible for selecting the
Fund's investments and handles its day-to-day business. The Manager
carries out its duties, subject to the policies established by the Board
of Trustees, under an Investment Advisory Agreement which states the
Manager's responsibilities. The Agreement sets forth the fees paid by the
Fund to the Manager and describes the expenses that the Fund is
responsible to pay to conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager (including a subsidiary) currently manages investment companies,
including other OppenheimerFunds, with assets of more than $35 billion as
of June 30, 1995, and with more than 2.6 million shareholder accounts.
The Manager is owned by Oppenheimer Acquisition Corp., a holding company
that is owned in part by senior officers of the Manager and controlled by
Massachusetts Mutual Life Insurance Company.
- Portfolio Managers. The Fund has three portfolio managers:
Robert C. Doll, Jr. is an Executive Vice President of the Manager and a
Senior Vice President of the Fund; Arthur P. Steinmetz is a Senior Vice
President of the Manager and David P. Negri is a Vice President of the
Manager and each is also a Vice President of the Fund. Since the Fund's
inception in 1992, they have been principally responsible for the day-to-
day management of the Fund's portfolio, with Mr. Doll selecting equity
investments and Messrs. Steinmetz and Negri selecting debt securities.
During the past five years, Messrs. Doll, Steinmetz and Negri have also
served as officers of the Manager and as officers and portfolio managers
for other OppenheimerFunds. For more information about the Fund's other
officers and Trustees, see "Trustees and Officers of the Fund" in the
Statement of Additional Information.
- Fees and Expenses. Under the investment advisory agreement, the
Fund pays the Manager the following annual fees, which decline on
additional assets as the Fund grows: 0.75% of the first $200 million of
average 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 net assets in excess of $1 billion. The Fund's management
fee for its last fiscal year was 0.75% of average annual net assets for
both its Class A and Class B shares, which may be higher than the rate
paid by some other mutual funds.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal and auditing
costs. Those expenses are paid out of the Fund's assets and are not paid
directly by shareholders. However, those expenses reduce the net asset
value of shares, and therefore are indirectly borne by shareholders
through their investment. More information about the investment advisory
agreement and the other expenses paid by the Fund is contained in the
Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. That section discusses how brokers and dealers are
selected for the Fund's portfolio transactions. When deciding which
brokers to use, the Manager is permitted by the investment advisory
agreement to consider whether brokers have sold shares of the Fund or any
other funds for which the Manager serves as investment adviser.
- The Distributor. The Fund's shares are sold through dealers and
brokers that have a sales agreement with Oppenheimer Funds Distributor,
Inc., a subsidiary of the Manager that acts as the Fund's Distributor.
The Distributor also distributes the shares of other mutual funds managed
by the Manager (the "OppenheimerFunds") and is sub-distributor for funds
managed by a subsidiary of the Manager.
- The Transfer Agent. The Fund's transfer agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund and the other OppenheimerFunds
on an "at-cost" basis. Shareholders should direct inquiries about their
accounts to the Transfer Agent at the address and toll-free numbers shown
below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms "total
return," "average annual total return" and "yield" to illustrate its
performance. The performance of each class of shares is shown separately,
because the performance of each class of shares will usually be different
as a result of the different kinds of expenses each class bears. This
performance information may be useful to help you see how well your
investment has done and to compare it to other funds or market indices,
as we have done below.
It is important to understand that the Fund's total returns and
yield represent past performance and should not be considered to be
predictions of future returns or performance. This performance data is
described below, but more detailed information about how total returns are
calculated is contained in the Statement of Additional Information, which
also contains information about other ways to measure and compare the
Fund's performance. The Fund's investment performance will vary over time,
depending on market conditions, the composition of the portfolio, expenses
and which class of shares you purchase.
- Total Returns. There are different types of total returns used
to measure the Fund's performance. Total return is the change in value
of a hypothetical investment in the Fund over a given period, assuming
that all dividends and capital gains distributions are reinvested in
additional shares. The cumulative total return measures the change in
value over the entire period (for example, ten years). An average annual
total return shows the average rate of return for each year in a period
that would produce the cumulative total return over the entire period.
However, average annual total returns do not show the Fund's actual year-
by-year performance.
When total returns are quoted for Class A shares, normally they
include the payment of the maximum initial sales charge. When total
returns are shown for Class B shares, they reflect the effect of the
applicable contingent deferred sales charge. When total returns are shown
for Class C shares, for a one-year period, they reflect the effect of the
contingent deferred sales charge. Total returns for Class A shares may
also be quoted "at net asset value," without including the sales charge.
Total returns for Class B and Class C shares may be shown based on the
change in net asset value, without including the contingent deferred sales
charges. Those returns would be reduced if sales charges were deducted.
- Yield. Each class of shares calculates its yield by dividing the
annualized net investment income per share from the portfolio during a 30-
day period by the maximum offering price on the last day of the period.
The yield of each class will differ because of the different expenses of
each class of shares. The yield data represents a hypothetical investment
return on the portfolio, and does not measure an investment return based
on dividends actually paid to shareholders. To show that return, a
dividend yield may be calculated. Dividend yield is calculated by
dividing the dividends of a class derived from net investment income
during a stated period by the maximum offering price on the last day of
the period. Yields and dividend yields for Class A shares reflect the
deduction of the maximum initial sales charge, but may also be shown based
on the Fund's net asset value per share. Yields for Class B and Class C
shares do not reflect the deduction of the contingent deferred sales
charge.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year, ended September 30, 1994,
followed by a graphical comparison of the Fund's performance to a broad-
based bond market index and a broad-based stock market index. Two market
indices have been shown for comparison, because the Fund invests in both
debt and equity securities. There is no single appropriate broad market
index of both debt and equity investments that the Manager believes to be
appropriate to compare the Fund's performance.
- Management's Discussion of Fund Performance. During the Fund's
last fiscal year, the U.S. Federal Reserve Board and central banks
worldwide moved aggressively to raise short-term interest rates to attempt
to fight the possibility of inflation. Those increases in short-term
interest rates had a depressing effect on the prices of already-issued
bonds, especially longer-term bonds. Those price changes also reduced the
value of the Fund's portfolio debt securities. However, the portfolio
managers sought to address this trend by reducing the Fund's holdings of
long-term U.S. Government Securities and of corporate debt securities
issued by interest rate sensitive companies. The Manager then purchased
high yield bonds issued by larger industrial companies, to seek current
income. Also, because foreign interest rates rose and the value of the
dollar deteriorated against major foreign currencies, the Fund reduced its
holdings in Latin America and other emerging markets and invested the
proceeds in European securities markets.
To seek its secondary objective of capital growth, the Fund had
invested approximately 42% of its assets in equity and preferred stocks.
The Fund's new equity investments emphasized growth companies in the
financial services and consumer sectors.
- Comparing the Fund's Performance to the Market. The graphs below
show the performance of a hypothetical $10,000 investment in shares of the
Fund held until September 30, 1994. In the case of Class A shares,
performance is measured from the Fund's inception on June 1, 1992, and in
the case of Class B shares, from the inception of the Class on November
30, 1992. In both cases, all dividends and capital gains distributions
were reinvested in additional shares. The graph for Class A shares
reflects the deduction of the 4.75% current maximum initial sales charge
for Class A shares and the graph for Class B shares reflects the 4%
contingent deferred sales charge that applies to redemptions of Class B
shares held from 11/30/92 until 9/30/94. Class C shares were not publicly
offered during the fiscal year ended September 30, 1994. Accordingly, no
performance information is presented for Class C shares in the graphs
below.
The performance of each class of the Fund's shares is compared to
the performance of the Lehman Brothers Aggregate Bond Index and the S&P
500 Index. The Lehman Brothers Aggregate Bond Index is a broad-based,
unmanaged index of U.S. corporate bond issues, U.S. government securities
and mortgage-backed securities widely regarded as a measure of the
performance of the domestic debt securities market. The S&P 500 Index is
a broad-based index of equity securities widely regarded as a general
measurement of the performance of the U.S. equity securities market. Index
performance reflects the reinvestment of dividends but does not consider
the effect of capital gains or transaction costs, and none of the data
below shows the effect of taxes. Also, the Fund's performance reflects
the effect of Fund business and operating expenses. While index
comparisons may be useful to provide a benchmark for the Fund's
performance, it must be noted that the Fund's investments are not limited
to the securities in any one index. Moreover, the index performance data
does not reflect any assessment of the risk of the investments included
in the index.
Comparison of Change in Value
of a $10,000 Hypothetical Investments in:
Oppenheimer Strategic Income & Growth Fund,
Lehman Brothers Aggregate Bond Index and the S&P 500 Index
(Graph) (with Class A shares of the Fund)
(Graph) (with Class B shares of the Fund)
Past performance is not predictive of future performance.
Average Annual Total Returns
of the Fund at 9/30/94
A Shares 1-Year Life*
-4.97% 2.21%
B Shares 1-Year Life**
-5.84% 0.42%
- -----------------------
* The inception date of the Fund (Class A shares) was 06/01/92.
**Class B shares of the Fund were first publicly offered on 11/30/92.
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors three different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will
likely have different share prices.
- Class A Shares. If you buy Class A shares, you may pay an
initial sales charge on investments up to $1 million (up to $500,000 for
purchases by OppenheimerFunds prototype 401(k) plans). If you purchase
Class A shares as part of an investment of at least $1 million ($500,000
for OppenheimerFunds prototype 401(k) plans) in shares of one or more
OppenheimerFunds, you will not pay an initial sales charge, but if you
sell any of those shares within 18 months of buying them, you may pay a
contingent deferred sales charge. The amount of that sales charge will
vary depending on the amount you invested. Sales charge rates are
described in "Buying Class A Shares" below.
- Class B Shares. If you buy Class B shares, you pay no sales
charge at the time of purchase, but if you sell your shares within six
years of buying them, you will normally pay a contingent deferred sales
charge that varies depending on how long you own your shares. It is
described below in "Buying Class B Shares".
- Class C Shares. If you buy Class C shares, you pay no sales
charge at the time of purchase, but if you sell your shares within 12
months of buying them, you will normally pay a contingent deferred sales
charge of 1%. It is described in "Buying Class C Shares" below.
Which Class of Shares Should You Choose? Once you decide that the Fund
is an appropriate investment for you, the decision as to which class of
shares is better suited to your needs depends on a number of factors which
you should discuss with your financial advisor. The Fund's operating
costs that apply to a class of shares and the effect of the different
types of sales charges on your investment will vary your investment
results over time. The most important factors are how much you plan to
invest, how long you plan to hold your investment, and whether you
anticipate exchanging your shares for shares of other OppenheimerFunds
(not all of which currently offer Class B and Class C shares). If your
goals and objectives change over time and you plan to purchase additional
shares, you should re-evaluate those factors to see if you should consider
another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the
sales charge rates that apply to each class of shares, considering the
effect of the annual asset-based sales charge on Class B and Class C
expenses (which, like all expenses, will affect your investment return).
For the sake of comparison, we have assumed that there is a 10% rate of
appreciation in the investment each year. Of course, the actual
performance of your investment cannot be predicted and will vary, based
on the Fund's actual investment returns and the operating expenses borne
by each class of shares, and which class you invest in. The results could
differ if different assumptions were used about rates of return, or if
varying rates are used.
The factors discussed below are not intended to be investment advice
or recommendations, because each investor's financial considerations are
different. The assumptions we have made in assessing the factors to
consider in purchasing a particular class of shares assume that you will
purchase only one class of shares, and not a combination of shares of
different classes.
- How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, knowing how long you
expect to hold your investment will assist you in selecting the
appropriate class of shares. Because of the effect of class-based
expenses, your choice will also depend on how much you plan to invest.
For example, the reduced sales charges available for larger purchases of
Class A shares may, over time, offset the effect of paying an initial
sales charge on your investment (which reduces the amount of your
investment dollars used to buy shares for your account), compared to the
effect over time of higher class-based expenses on shares of Class B or
C for which no initial sales charge is paid.
- Investing for the Short Term. If you have a short-term
investment horizon (that is, you plan to hold your shares for not more
than six years), you should probably consider purchasing Class A or Class
C shares rather than Class B shares, because of the effect of the Class
B contingent deferred sales charge if you redeem in less than 7 years, as
well as the effect of the Class B asset-based sales charge on the
investment return for that class in the short-term. Class C shares might
be the appropriate choice (especially for investments of less than
$100,000), because there is no initial sales charge on Class C shares, and
the contingent deferred sales charge does not apply to amounts you sell
after holding them one year.
However, if you plan to invest more than $100,000 for the shorter
term, then the more you invest and the more your investment horizon
increases toward six years, Class C shares might not be as advantageous
as Class A shares. That is because the annual asset-based sales charge
on Class C shares will have a greater impact on your account over the
longer term than the reduced front-end sales charge available for larger
purchases of Class A shares. For example, Class A might be more
advantageous than Class C (as well as Class B) for investments of more
than $100,000 expected to be held for 5 or 6 years (or more). For
investments over $250,000 expected to be held 4 to 6 years (or more),
Class A shares may become more advantageous than Class C (and B). If
investing $500,000 or more, Class A may be more advantageous as your
investment horizon approaches 3 years or more.
And for most investors who invest $1 million or more, in most cases
Class A shares will be the most advantageous choice, no matter how long
you intend to hold your shares. For that reason, the Distributor normally
will not accept purchase orders of $500,000 or more or $1 million or more
of Class B or C shares respectively from a single investor. Of course,
these examples are based on approximations of the effect of current sales
charges and expenses on a hypothetical investment over time, using the
assumed annual performance return stated above, and therefore should not
be relied on as rigid guidelines.
- Investing for the Longer Term. If you are investing for the
longer-term, for example, for retirement, and do not expect to need access
to your money for seven years or more, Class B shares may be an
appropriate consideration, if you plan to invest less than $100,000. If
you plan to invest more than $100,000 over the long term, Class A shares
will likely be more advantageous than Class B shares or C shares, as
discussed above, because of the effect of the expected lower expenses for
Class A shares and the reduced initial sales charges available for larger
investments in Class A shares under the Fund's Right of Accumulation.
Of course, these examples are based on approximations of the effect
of current sales charges and expenses on a hypothetical investment over
time, using the assumed annual performance return stated above, and you
should analyze your options carefully.
- Are There Differences in Account Features That Matter to You?
Because some account features may not be available to Class B or Class C
shareholders, or other features (such as Automatic Withdrawal Plans) may
not be advisable (because of the effect of the contingent deferred sales
charge) in non-retirement accounts for Class B or Class C shareholders,
you should carefully review how you plan to use your investment account
before deciding which class of shares to buy. For example, share
certificates are not available for Class B or Class C shares and if you
are considering using your shares as collateral for a loan, that may be
a factor to consider. Additionally, dividends payable to Class B and
Class C shareholders will be reduced by the additional expenses borne by
those classes that are not borne by Class A, such as the Class B and Class
C asset-based sales charges described below and in the Statement of
Additional Information. Also, because not all OppenheimerFunds currently
offer Class B and Class C shares, and because exchanges are permitted only
to the same class of shares in other OppenheimerFunds, you should consider
how important the exchange privilege is likely to be for you.
- How Does It Affect Payments to My Broker? A salesperson, such
as a broker, or any other person who is entitled to receive compensation
for selling Fund shares may receive different compensation for selling one
class of shares than for selling another class. It is important that
investors understand that the purpose of the Class B and Class C
contingent deferred sales charge and asset-based sales charge is the same
as the purpose of the front-end sales charge on sales of Class A shares:
to compensate the Distributor for commissions it pays to dealers and
financial institutions for selling shares.
How Much Must You Invest? You can open a Fund account with a minimum
initial investment of $1,000 and make additional investments at any time
with as little as $25. There are reduced minimum investments under special
investment plans:
With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7)
custodial plans and military allotment plans, you can make initial and
subsequent investments of as little as $25. Subsequent purchases of at
least $25 can be made by telephone through AccountLink.
Under pension and profit-sharing plans and Individual Retirement
Accounts (IRAs), you can make an initial investment of as little as $250
(if your IRA is established under an Asset Builder Plan, the $25 minimum
applies), and subsequent investments may be as little as $25.
There is no minimum investment requirement if you are buying
shares by reinvesting dividends from the Fund or other OppenheimerFunds
(a list of them appears in the Statement of Additional Information, or you
can ask your dealer or call the Transfer Agent), or by reinvesting
distributions from unit investment trusts that have made arrangements with
the Distributor.
- How Are Shares Purchased? You can buy shares several ways --
through any dealer, broker or financial institution that has a sales
agreement with the Distributor, or directly through the Distributor, or
automatically from your bank account through an Asset Builder Plan under
the OppenheimerFunds AccountLink service. When you buy shares, be sure
to specify Class A, Class B or Class C shares. If you do not choose, your
investment will be made in Class A shares.
- Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
- Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "Oppenheimer Funds Distributor, Inc." Mail it to P.O. Box 5270,
Denver, Colorado 80217. If you don't list a dealer on the application,
the Distributor will act as your agent in buying the shares. However, we
recommend that you discuss your investment first with a financial advisor,
to be sure it is appropriate for you.
- Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
member. You can then transmit funds electronically to purchase shares,
or to have the Transfer Agent send redemption proceeds or transmit
dividends and distributions.
Shares are purchased for your account on AccountLink on the regular
business day the Distributor is instructed by you to initiate the ACH
transfer to buy shares. You can provide those instructions automatically,
under an Asset Builder Plan, described below, or by telephone instructions
using OppenheimerFunds PhoneLink, also described below. You should request
AccountLink privileges on the application or dealer settlement
instructions used to establish your account. Please refer to "AccountLink"
below for more details.
- Asset Builder Plans. You may purchase shares of the Fund (and up
to four other OppenheimerFunds) automatically each month from your account
at a bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of
Additional Information.
- At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value (and any initial sales charge
that applies) that is next determined after the Distributor receives the
purchase order in Denver. In most cases, to enable you to receive that
day's offering price, the Distributor must receive your order by the time
of day The New York Stock Exchange closes, which is normally 4:00 P.M.,
New York time, but may be earlier on some days (all references to time in
this Prospectus mean "New York time"). The net asset value of each class
of shares is determined as of that time each day The New York Stock
Exchange is open (which is a "regular business day").
If you buy shares through a dealer, the dealer must receive your
order by the close of The New York Stock Exchange on a regular business
day and transmit it to the Distributor so that it is received before the
Distributor's close of business that day, which is normally 5:00 P.M. The
Distributor may reject any purchase order for the Fund's shares, in its
sole discretion.
Buying Class A Shares. Class A shares are sold at their offering price,
which is normally net asset value plus an initial sales charge. However,
in some cases, described below, purchases are not subject to an initial
sales charge, and the offering price be the net asset value. In some
cases, reduced sales charges may be available, as described below. Out
of the amount you invest, the Fund receives the net asset value to invest
for your account. The sales charge varies depending on the amount of your
purchase. A portion of the sales charge may be retained by the
Distributor and allocated to your dealer. The current sales charge rates
and commissions paid to dealers and brokers are as follows:
_______________________________________________________________________
Front-End Front-End
Sales Charge Sales Charge
as as Commission as
Percentage of Percentage of Percentage
of
Amount of Purchase Offering Price Amount Invested Offering
Price
_______________________________________________________________________
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%
<PAGE>
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
_______________________________________________________________________
__________
The Distributor reserves the right to reallow the entire commission to
dealers. If that occurs, the dealer may be considered an "underwriter"
under Federal securities laws.
- Class A Contingent Deferred Sales Charge. There is no initial
sales charge on purchases of Class A shares of any one or more of the
OppenheimerFunds in the following cases:
- purchases aggregating $1 million or more, or
- purchases by an OppenheimerFunds prototype 401(k)
plan that: (1) buys shares costing $500,000 or more or
(2) has, at the time of purchase, 100 or more eligible
participants, or (3) certifies that it projects to have
annual plan purchases of $200,000 or more.
Shares of any of the OppenheimerFunds that offer only one class of
shares that has no designation are considered "Class A shares" for this
purpose. The Distributor pays dealers of record commissions on those
purchases in an amount equal to the sum of 1.0% of the first $2.5 million,
plus 0.50% of the next $2.5 million, plus 0.25% of purchases over $5
million. That commission will be paid only on the amount of those
purchases in excess of $1 million ($500,000 for purchases by
OppenheimerFunds 401(k) prototype plans) that were not previously subject
to a front-end sales charge and dealer commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") will be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
the aggregate net asset value of either (1) the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate amount of the commissions the Distributor paid to your dealer
on all Class A shares of all OppenheimerFunds you purchased subject to
the Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is
payable, the Fund will first redeem shares that are not subject to the
sales charge, including shares purchased by reinvestment of dividends and
capital gains, and then will redeem other shares in the order that you
purchased them. The Class A contingent deferred sales charge is waived
in certain cases described in "Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges
of shares under the Fund's Exchange Privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
contingent deferred sales charge will apply.
- Special Arrangements With Dealers. The Distributor may advance
up to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients. Dealers whose sales of Class A shares of OppenheimerFunds (other
than money market funds) under OppenheimerFunds-sponsored 403(b)(7)
custodial plans exceed $5 million per year (calculated per quarter), will
receive monthly one-half of the Distributor's retained commissions on
those sales, and if those sales exceed $10 million per year, those dealers
will receive the Distributor's entire retained commission on those sales.
Reduced Sales Charges for Class A Share Purchases. You may be eligible
to buy Class A shares at reduced sales charge rates in one or more of the
following ways:
- Right of Accumulation. To qualify for the lower sales charge
rates that apply to larger purchases of Class A shares, you and your
spouse can add together Class A and Class B shares you purchase for your
individual accounts, or jointly, or for trust or custodial accounts on
behalf of your children who are minors. A fiduciary can count all shares
purchased for a trust, estate or other fiduciary account (including one
or more employee benefit plans of the same employer) that has multiple
accounts.
Additionally, you can add together current purchases of Class A
shares and Class B of the Fund and other OppenheimerFunds to reduce the
sales charge rate that applies to current purchases of Class A shares.
You can also count Class A and Class B shares of OppenheimerFunds you
previously purchased subject to an initial or contingent deferred sales
charge to reduce the sales charge rate for current purchases of Class A
shares, provided that you still hold your investment in one of the
OppenheimerFunds. The value of those shares will be based on the greater
of the amount you paid for the shares or their current value (at offering
price). The OppenheimerFunds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Distributor. The reduced sales charge will apply only to current
purchases and must be requested when you buy your shares.
- Letter of Intent. Under a Letter of Intent, if you purchase
Class A shares or Class A shares and Class B shares of the Fund and other
OppenheimerFunds during a 13-month period, you can reduce the sales charge
rate that applies to your purchases of Class A shares. The total amount
of your intended purchases of both Class A and Class B shares will
determine the reduced sales charge rate for the Class A shares purchased
during that period. This can include purchases made up to 90 days before
the date of the Letter. More information is contained in the Application
and in "Reduced Sales Charges" in the Statement of Additional Information.
- Waivers of Class A Sales Charges. The Class A sales charges are
not imposed in the circumstances described below. There is an explanation
of this policy in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not
subject to any Class A sales charges:
- the Manager or its affiliates;
- present or former officers, directors, trustees and
employees (and their "immediate families" as defined in
"Reduced Sales Charges" in the Statement of Additional
Information) of the Fund, the Manager and its
affiliates, and retirement plans established by them
for their employees;
- registered management investment companies, or separate
accounts of insurance companies having an agreement
with the Manager or the Distributor for that purpose;
- dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or
for retirement plans for their employees;
- employees and registered representatives (and their spouses) of
dealers or brokers described above or financial institutions
that have entered into sales arrangements with such dealers or
brokers (and are identified to the Distributor) or with the
Distributor; the purchaser must certify to the Distributor at
the time of purchase that the purchase is for the purchaser's
own account (or for the benefit of such employee's spouse or
minor children);
- dealers, brokers 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 their clients;
- dealers, brokers or registered investment advisers that
have entered into an agreement with the Distributor to
sell shares to defined contribution employee retirement
plans for which the dealer, broker or investment
adviser provides administrative services.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following
transactions are not subject to Class A sales charges:
- shares issued in plans of reorganization, such as
mergers, asset acquisitions and exchange offers, to
which the Fund is a party,
- shares purchased by the reinvestment of loan repayments
by a participant in a retirement plan for which the
Manager or its affiliates acts as sponsor,
- shares purchased by the reinvestment of dividends or
other distributions reinvested from the Fund or other
OppenheimerFunds (other than Oppenheimer Cash Reserves)
or unit investment trusts for which reinvestment
arrangements have been made with the Distributor, or
- shares purchased and paid for with the proceeds of
shares redeemed in the prior 12 months from a mutual
fund (other than a fund managed by the Manager or any
of its subsidiaries) on which an initial sales charge
or contingent deferred sales charge was paid (this
waiver also applies to shares purchased by exchange of
shares of Oppenheimer Money Market Fund, Inc. that were
purchased and paid for in this manner); this waiver
must be requested when the purchase order is placed for
your shares of the Fund, and the Distributor may
require evidence of your qualification for this waiver.
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge does not apply
to purchases of Class A shares at net asset value without sales charge as
described in the two sections above. It is also waived if shares that
would otherwise be subject to the contingent deferred sales charge are
redeemed in the following cases:
- for retirement distributions or loans to participants
or beneficiaries from qualified retirement plans,
deferred compensation plans or other employee benefit
plans, including OppenheimerFunds prototype 401(k)
plans (these are all referred to as "Retirement
Plans"); or
- to return excess contributions made to Retirement
Plans; or
- to make Automatic Withdrawal Plan payments that are
limited annually to no more than 12% of the original
account value; or
- involuntary redemptions of shares by operation of law
or involuntary redemptions of small accounts (see
"Shareholder Account Rules and Policies," below); or
_ if, at the time a purchase order is placed for Class A
shares that would otherwise be subject to the Class A
contingent deferred sales charge, the dealer agrees to
accept the dealer's portion of the commission payable
on the sale in installments of 1/18th of the commission
per month (and no further commission will be payable if
the shares are redeemed within 18 months of purchase);
or
- for distributions from OppenheimerFunds prototype
401(k) plans for any of the following cases or
purposes: (1) following the death or disability (as
defined in the Internal Revenue Code) of the
participant or beneficiary (the death or disability
must occur after the participant's account was
established); (2) hardship withdrawals, as defined in
the plan; (3) under a Qualified Domestic Relations
Order, as defined in the Internal Revenue Code; (4) to
meet the minimum distribution requirements of the
Internal Revenue Code; (5) to establish "substantially
equal periodic payments" as described in Section 72(t)
of the Internal Revenue Code, or (6) separation from
service.
- Service Plan for Class A Shares. The Fund has adopted a Service
Plan for Class A shares to reimburse the Distributor for a portion of its
costs incurred in connection with the personal service and maintenance of
accounts that hold Class A shares. Reimbursement is made quarterly at an
annual rate that may not exceed 0.25% of the average annual net asset
value of Class A shares of the Fund. The Distributor uses all of those
fees to compensate dealers, brokers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares and to reimburse
itself (if the Fund's Board of Trustees authorizes such reimbursements,
which it has not yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net asset value of Class A shares held
in accounts of the dealer or its customers. The payments under the Plan
increase the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of Additional
Information.
Buying Class B Shares. Class B shares are sold at net asset value per
share without an initial sales charge. However, if Class B shares are
redeemed within 6 years of their purchase, a contingent deferred sales
charge will be deducted from the redemption proceeds. That sales charge
will not apply to shares purchased by the reinvestment of dividends or
capital gains distributions. The charge will be assessed on the lesser of
the net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is not
imposed on the amount of your account value represented by the increase
in net asset value over the initial purchase price (including increases
due to the reinvestment of dividends and capital gains distributions). The
Class B contingent deferred sales charge is paid to the Distributor to
reimburse its expenses of providing distribution-related services to the
Fund in connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies
to a redemption, the Fund redeems shares in the following order: (1)
shares acquired by reinvestment of dividends and capital gains
distributions, (2) shares held for over 6 years, and (3) shares held the
longest during the 6-year period.
The amount of the contingent deferred sales charge will depend on
the number of years since you invested and the dollar amount being
redeemed, according to the following schedule:
<PAGE>
Contingent Deferred Sales Charge
Years Since Beginning of Month In on Redemptions in that Year
Which Purchase Order Was Accepted (As % of Amount Subject to Charge)
0 - 1 5.0%
1 - 2 4.0%
2 - 3 3.0%
3 - 4 3.0%
4 - 5 2.0%
5 - 6 1.0%
6 and following None
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of the
month in which the purchase was made.
- Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to Class
A shares. This conversion feature relieves Class B shareholders of the
asset-based sales charge that applies to Class B shares under the Class
B Distribution and Service Plan, described below. The conversion is based
on the relative net asset value of the two classes, and no sales load or
other charge is imposed. When Class B shares convert, any other Class B
shares that were acquired by the reinvestment of dividends and
distributions on the converted shares will also convert to Class A shares.
The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A, Class B and
Class C Shares" in the Statement of Additional Information.
- Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to compensate
the Distributor for its services and costs in distributing Class B shares
and servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B shares that
are outstanding for 6 years or less. The Fund also pays the Distributor
a service fee of 0.25% per year. Both fees are computed on the average
annual net assets of Class B shares, determined as of the close of each
regular business day. The asset-based sales charge allows investors to buy
Class B shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell Class B shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class B shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class B expenses by 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class B shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 3.75% of the
purchase price to dealers from its own resources at the time of sale. The
Distributor retains the asset-based sales charge (and the first year's
service fee) to recoup the sales commissions it pays, the advances of
service fee payments it makes, and its financing costs.
The Distributor's actual expenses in selling Class B shares may be
more than the payments it receives from contingent deferred sales charges
collected on redeemed shares and from the Fund under the Distribution and
Service Plan for Class B shares. Therefore, those expenses may be carried
over and paid in future years. At September, 30, 1994, the end of the
Plan year, the Distributor had incurred unreimbursed expenses under the
Plan of $910,477 (equal to 5.67% of the Fund's net assets represented by
Class B shares on that date), which have been carried over into the
present Plan year. If the Plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based sales
charge to the Distributor for expenses it incurred before the plan was
terminated.
Buying Class C Shares. Class C shares are sold at net asset value
per share without an initial sales charge. However, if Class C shares are
redeemed within 12 months of their purchase, a contingent deferred sales
charge of 1.0% will be deducted from the redemption proceeds. That sales
charge will not apply to shares purchased by the reinvestment of dividends
or capital gains distributions. The charge will be assessed on the lesser
of the net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is not
imposed on the amount of your account value represented by the increase
in net asset value over the initial purchase price (including increases
due to the reinvestment of dividends and capital gains distributions).
The Class C contingent deferred sales charge is paid to the Distributor
to reimburse its expenses of providing distribution-related services to
the Fund in connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies
to a redemption, the Fund redeems shares in the following order: (1)
shares acquired by reinvestment of dividends and capital gains
distributions, (2) shares held for over 12 months, and (3) shares held the
longest during the 12-month period. All purchases are considered to have
been made on the first regular business day of the month in which the
purchase was made.
- Distribution and Service Plan for Class C Shares. The Fund has
adopted a Distribution and Service Plan for Class C shares to compensate
the Distributor for distributing Class C shares and servicing accounts.
Under the Plan, the Fund pays the Distributor an annual "asset-based sales
charge" of 0.75% per year on Class C shares. The Fund also pays the
Distributor a service fee of 0.25% per year. Both fees are computed on
the average annual net assets of Class C shares, determined as of the
close of each regular business day. The asset-based sales charge allows
investors to buy Class C shares without a front-end sales charge while
allowing the Distributor to compensate dealers that sell Class C shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class C shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class C expenses by 1.00% of average net assets per year.
The Distributor pays the service fee to dealers in advance for the
first year after Class C shares have been sold by the dealer. After the
shares have been held for a year, the Distributor pays the service fee on
a quarterly basis. The Distributor pays sales commissions of 0.75% of the
purchase price to dealers from its own resources at the time of sale. The
total up-front commission paid by the Distributor to the dealer at the
time of sale of Class C shares is 1.00% of the purchase price. The
Distributor plans to pay the asset-based sales charge as an ongoing
commission to the dealer on Class C shares that have been outstanding for
a year or more.
The Fund pays the asset-based sales charge to the Distributor for
its services rendered in connection with the distribution of Class C
shares. Those payments are at a fixed rate which is not related to the
Distributor's expenses. The services rendered by the Distributor include
paying and financing the payment of sales commissions, service fees, and
other costs of distributing and selling Class C shares, including
compensating personnel of the Distributor who support distribution of
Class C shares. If the Plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based sales
charge to the Distributor for distributing Class C shares before the Plan
was terminated.
- Waivers of Class B and Class C Sales Charge. The Class B and
Class C contingent deferred sales charge will not be applied to shares
purchased in certain types of transactions nor will it apply to Class B
and Class C shares redeemed in certain circumstances as described below.
The reasons for this policy are in "Reduced Sales Charges" in the
Statement of Additional Information.
Waivers for Redemptions of Shares in Certain Cases. The Class B and
Class C contingent deferred sales charge will be waived for redemptions
of shares in the following cases:
- to make distributions to participants or beneficiaries
from Retirement Plans, if the distributions are made
(a) under an Automatic Withdrawal Plan after the
participant reaches age 59-1/2, as long as the payments
are no more than 10% of the account value annually
(measured from the date the Transfer Agent receives the
request), or (b) following the death or disability (as
defined in the Internal Revenue Code) of the
participant or beneficiary which occurred after the
account was opened;
- redemptions from accounts other than Retirement Plans
following the death or disability of the last surviving
shareholder (the disability must have occurred after
the account was established and you must provide
evidence of a determination of disability by the Social
Security Administration);
- to make returns of excess contributions to Retirement
Plans;
- to make distributions from IRAs (including SEP-IRAs and
SAR/SEP accounts) before the participant is age 591/2,
and distributions from 403(b)(7) custodial plans or
pension or profit sharing plans before the participant
is age 591/2 but only after the participant has
separated from service, if the distributions are made
in substantially equal periodic payments over the life
(or life expectancy) of the participant or the joint
lives (or joint life and last survivor expectancy) of
the participant and the participant's designated
beneficiary (and the distributions must comply with
other requirements for such distributions under the
Internal Revenue Code and may not exceed 10% of the
account value annually, measured from the date the
Transfer Agent receives the request);
- shares redeemed involuntarily, as described in "Shareholder
Account Rules and Policies," below; or
- for distributions from OppenheimerFunds prototype
401(k) plans (1) for hardship withdrawals; (2) under a
Qualified Domestic Relations Order, as defined in the
Internal Revenue Code; (3) to meet minimum distribution
requirements as defined in the Internal Revenue Code;
(4) to make "substantially equal periodic payments" as
described in Section 72(t) of the Internal Revenue
Code; or (5) for separation from service.
Waivers for Shares Sold or Issued in Certain Transactions. The
contingent deferred sales charge is also waived on Class B and
Class C shares in the following cases:
- shares sold to the Manager or its affiliates;
-shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with
the Manager or the Distributor for that purpose;
- shares issued in plans of reorganization to which the Fund is a
party; and
- shares redeemed in involuntary redemptions as described below.
Further details about this policy are contained in "Reduced Sales
Charges" in the Statement of Additional Information.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send
money electronically between those accounts to perform a number of types
of account transactions. These include purchases of shares by telephone
(either through a service representative or by PhoneLink, described
below), automatic investments under Asset Builder Plans, and sending
dividends and distributions or Automatic Withdrawal Plan payments directly
to your bank account. Please refer to the Application for details or call
the Transfer Agent for more information.
AccountLink privileges must be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges on signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each shareholder
listed in the registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent receives
written instructions terminating or changing those privileges. After you
establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the
Transfer Agent signed by all shareholders who own the account.
- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase shares
in amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be used
on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number: 1-
800-533-3310.
- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
- Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another OppenheimerFunds account you have already
established by calling the special PhoneLink number. Please refer to "How
to Exchange Shares," below, for details.
- Selling Shares. You can redeem shares by telephone automatically
by calling the PhoneLink number and the Fund will send the proceeds
directly to your AccountLink bank account. Please refer to "How to Sell
Shares," below, for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that
enable you to sell shares automatically or exchange them to another
OppenheimerFunds account on a regular basis:
- Automatic Withdrawal Plans. If your Fund account is $5,000 or
more, you can establish an Automatic Withdrawal Plan to receive payments
of at least $50 on a monthly, quarterly, semi-annual or annual basis. The
checks may be sent to you or sent automatically to your bank account on
AccountLink. You may even set up certain types of withdrawals of up to
$1,500 per month by telephone. You should consult the Application and
Statement of Additional Information for more details.
- Automatic Exchange Plans. You can authorize the Transfer Agent
to exchange an amount you establish in advance automatically for shares
of up to five other OppenheimerFunds on a monthly, quarterly, semi-annual
or annual basis under an Automatic Exchange Plan. The minimum purchase
for each OppenheimerFunds account is $25. These exchanges are subject to
the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A or B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other
OppenheimerFunds without paying a sales charge. This privilege applies to
Class A shares that you purchased subject to an initial sales charge and
to Class A or B shares on which you paid a contingent deferred sales
charge when you redeemed them. It does not apply to Class C shares. You
must be sure to ask the Distributor for this privilege when you send your
payment. Please consult the Statement of Additional Information for more
details.
Retirement Plans. Fund shares are available as an investment for your
retirement plans. If you participate in a plan sponsored by your employer,
the plan trustee or administrator must make the purchase of shares for
your retirement plan account. The Distributor offers a number of different
retirement plans that can be used by individuals and employers:
- Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
- 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
- SEP-IRAs (Simplified Employee Pension Plans) for small
business owners or people with income from self-employment, including
SAR/SEP-IRAs
- Pension and Profit-Sharing Plans for self-employed persons and
small business owners
- 401(k) prototype retirement plans for businesses.
Please call the Distributor for the OppenheimerFunds plan documents,
which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account on any regular
business day by selling (redeeming) some or all of your shares. Your
shares will be sold at the next net asset value calculated after your
order is received and accepted by the Transfer Agent. The Fund offers you
a number of ways to sell your shares: in writing or by telephone. You can
also set up Automatic Withdrawal Plans to redeem shares on a regular
basis, as described above. If you have questions about any of these
procedures, and especially if you are redeeming shares in a special
situation, such as due to the death of the owner, or from a retirement
plan, please call the Transfer Agent first, at 1-800-525-7048, for
assistance.
- Retirement Accounts. To sell shares in an OppenheimerFunds
retirement account in your name, call the Transfer Agent for a
distribution request form. There are special income tax withholding
requirements for distributions from retirement plans and you must submit
a withholding form with your request to avoid delay. If your retirement
plan account is held for you by your employer, you must arrange for the
distribution request to be sent by the plan administrator or trustee.
There are additional details in the Statement of Additional Information.
- Certain Requests Require a Signature Guarantee. To protect you
and the Fund from fraud, certain redemption requests must be in writing
and must include a signature guarantee in the following situations (there
may be other situations also requiring a signature guarantee):
- You wish to redeem more than $50,000 worth of shares and receive
a check
- A redemption check is not payable to all shareholders listed
on the account statement
- A redemption check is not sent to the address of record on
your account statement
- Shares are being transferred to a Fund account with a
different owner or name
- Shares are redeemed by someone other than the owners (such as
an Executor)
- Where Can I Have My Signature Guaranteed? The Transfer Agent
will accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or by a foreign bank that has a U.S. correspondent
bank, or by a U.S. registered dealer or broker in securities, municipal
securities or government securities, or by a U.S. national securities
exchange, a registered securities association or a clearing agency. If you
are signing on behalf of a corporation, partnership or other business, or
as a fiduciary, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
- Your name
- The Fund's name
- Your Fund account number (from your account statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling
- The signatures of all registered owners exactly as the account
is registered, and
- Any special requirements or documents requested by the
Transfer Agent to assure proper authorization of the person asking to sell
shares.
Use the following address for requests by mail to:
Send courier or Express Mail requests to:
Oppenheimer Shareholder Oppenheimer Shareholder
Services Service
P.O. Box 5270 10200 E. Girard Avenue, Building D
Denver, Colorado 80217 Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer
Agent by the close of The New York Stock Exchange that day, which is
normally 4:00 P.M., but may be earlier on some days. You may not redeem
shares held in an OppenheimerFunds retirement plan or under a share
certificate by telephone.
- To redeem shares through a service representative, call 1-800-
852-8457
- To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address
on the account statement, or, if you have linked your Fund account to your
bank account on AccountLink, you may have the proceeds wired to that bank
account.
- Telephone Redemptions Paid by Check. Up to $50,000 may be
redeemed by telephone in any 7-day period. The check must be payable to
all owners of record of the shares and must be sent to the address on the
account. This service is not available within 30 days of changing the
address on an account.
- Telephone Redemptions Through AccountLink. There are no dollar
limits on telephone redemption proceeds sent to a bank account designated
when you establish AccountLink. Normally the ACH wire to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be wired.
Selling Shares Through Your Dealer. The Distributor has made arrangements
to repurchase Fund shares from dealers and brokers on behalf of their
customers. Brokers or dealers may charge for that service. Please refer
to "Special Arrangements for Repurchase of Shares from Dealers and
Brokers" in the Statement of Additional Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
OppenheimerFunds at net asset value per share at the time of exchange,
without sales charge. To exchange shares, you must meet several
conditions:
- Shares of the fund selected for exchange must be available for
sale in your state of residence
- The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege
- You must hold the shares you buy when you establish your account
for at least 7 days before you can exchange them; after the account is
open 7 days, you can exchange shares every regular business day
- You must meet the minimum purchase requirements for the fund you
purchase by exchange
- Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class may be exchanged only for shares of the
same class in the other OppenheimerFunds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, not all of the OppenheimerFunds offer the Class B and Class C
shares. A list showing which funds offer which classes can be obtained
by calling the Distributor at 1-800-525-7048 If a fund has only one class
of shares that does not have a class designation, they are "Class A"
shares for exchange purposes. In some cases, sales charges may be imposed
on exchange transactions. Please refer to "How to Exchange Shares" in the
Statement of Additional Information for more details.
Exchanges may be requested in writing or by telephone:
- Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the
Transfer Agent at the addresses listed in "How to Sell Shares."
- Telephone Exchange Requests. Telephone exchange requests may be
made either by calling a service representative at 1-800-852-8457 or by
using PhoneLink for automated exchanges, by calling 1-800-533-3310.
Telephone exchanges may be made only between accounts that are registered
with the same name(s) and address. Shares held under certificates may not
be exchanged by telephone.
You can find a list of OppenheimerFunds currently available for
exchanges in the Statement of Additional Information or by calling a
service representative at 1-800-525-7048. Exchanges of shares involve a
redemption of the shares of the fund you own and a purchase of shares of
the other fund.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day
on which the Transfer Agent receives an exchange request that is in proper
form by the close of The New York Stock Exchange that day, which is
normally 4:00 P.M., but may be earlier on some days. However, either fund
may delay the purchase of shares of the fund you are exchanging into up
to 7 days if it determines it would be disadvantaged by a same-day
transfer of the proceeds to buy shares. For example, the receipt of
multiple exchange requests from a dealer in a "market-timing" strategy
might require the disposition of securities at a time or price
disadvantageous to the Fund.
- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request
that will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
- The Fund may amend, suspend or terminate the exchange privilege
at any time. Although the Fund will attempt to provide you notice
whenever it is reasonably able to do so, it may impose these changes at
any time.
- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
Shareholder Account Rules and Policies
- Net Asset Value Per Share is determined for each class of shares
as of the close of The New York Stock Exchange, which is normally 4:00
P.M. but may be earlier on some days, on each day the Exchange is open by
dividing the value of the Fund's net assets attributable to a class by the
number of shares of that class that are outstanding. The Fund's Board of
Trustees has established procedures to value the Fund's securities to
determine net asset value. In general, securities values are based on
market value. There are special procedures for valuing illiquid and
restricted securities, obligations for which market values cannot be
readily obtained, and call options and hedging instruments. These
procedures are described more completely in the Statement of Additional
Information.
- The offering of shares may be suspended during any period in
which the determination of net asset value is suspended, and the offering
may be suspended by the Board of Trustees at any time the Board believes
it is in the Fund's best interest to do so.
- Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any
time. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone privileges
apply to each owner of the account and the dealer representative of record
for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.
- The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not
use reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund will
be liable for losses or expenses arising out of telephone instructions
reasonably believed to be genuine. If you are unable to reach the
Transfer Agent during periods of unusual market activity, you may not be
able to complete a telephone transaction and should consider placing your
order by mail.
- Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time
to time, the Transfer Agent in its discretion may waive certain of the
requirements for redemptions stated in this Prospectus.
- Dealers that can perform account transactions for their clients
by participating in NETWORKING through the National Securities Clearing
Corporation are responsible for obtaining their clients' permission to
perform those transactions and are responsible to their clients who are
shareholders of the Fund if the dealer performs any transaction
erroneously or improperly.
- The redemption price for shares will vary from day to day because
the value of the securities in the Fund's portfolio fluctuates, and the
redemption price, which is the net asset value per share, will normally
be different for Class A, Class B and Class C shares. Therefore, the
redemption value of your shares may be more or less than their original
cost.
- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the shareholder
under the redemption procedures described above) within 7 days after the
Transfer Agent receives redemption instructions in proper form, except
under unusual circumstances determined by the Securities and Exchange
Commission delaying or suspending such payments. For accounts registered
in the name of a broker-dealer, payment will be forwarded within 3
business days. The Transfer Agent may delay forwarding a check or
processing a payment via AccountLink for recently purchased shares, but
only until the purchase payment has cleared. That delay may be as much
as 10 days from the date the shares were purchased. That delay may be
avoided if you purchase shares by certified check or arrange to have your
bank provide telephone or written assurance to the Transfer Agent that
your purchase payment has cleared.
- Involuntary redemptions of small accounts may be made by the Fund
if the account value has fallen below $200 for reasons other than the fact
that the market value of shares has dropped, and in some cases involuntary
redemptions may be made to repay the Distributor for losses from the
cancellation of share purchase orders.
- Under unusual circumstances, shares of the Fund may be redeemed
"in kind," which means that the redemption proceeds will be paid with
securities from the Fund's portfolio. Please refer to "How to Sell
Shares" in the Statement of Additional Information for more details.
- "Backup Withholding" of Federal income tax may be applied at the
rate of 31% from dividends, distributions and redemption proceeds
(including exchanges) if you fail to furnish the Fund a certified Social
Security or Employer Identification Number when you sign your application,
or if you violate Internal Revenue Service regulations on tax reporting
of income.
- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charges when redeeming certain
Class A, Class B and Class C shares.
- To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
However, each shareholder may call the Transfer Agent at 1-800-525-7048
to ask that copies of those materials be sent personally to that
shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B and
Class C shares from net investment income on each regular business day and
pays those dividends to shareholders monthly. Normally, dividends are
paid on or about the first Tuesday of the following month, but the Board
of Trustees can change that date. Also, dividends paid on Class A shares
generally are expected to be higher than for Class B and Class C shares
because expenses allocable to Class B and Class C shares will generally
be higher.
During the Fund's fiscal year ended September 30, 1994, the Fund
attempted to pay dividends on its Class A shares at a targeted level above
3-month Treasury bill rates, to the extent that was consistent with the
amount of net investment income and other distributable income available
from the Fund's portfolio investments. However, the targeted level can
change and the amount of each dividend can change from time to time (or
there might not be a dividend at all on any class) depending on market
conditions, the Fund's expenses, and the composition of the Fund's
portfolio. Attempting to pay dividends at a targeted level required the
Manager to monitor the Fund's income stream from its investments compared
to Treasury bill rates and at times to select higher yielding securities
(appropriate to the Fund's objectives and investment restrictions) to try
to earn income at the targeted level. This practice did not affect the
net asset values of any class of shares. There is no targeted dividend
level for Class B shares. There is no fixed dividend rate and there can
be no assurance as to payment of any dividends.
Capital Gains. The Fund may make distributions annually in December out
of any net short-term or long-term capital gains, and the Fund may make
supplemental distributions of dividends and capital gains following the
end of its fiscal year. Long-term capital gains will be separately
identified in the tax information the Fund sends you after the end of the
year. Short-term capital gains are treated as dividends for tax purposes.
There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are reinvested.
For other accounts, you have four options:
- Reinvest All Distributions in the Fund. You can elect to reinvest
all dividends and long-term capital gains distributions in additional
shares of the Fund.
- Reinvest Long-Term Capital Gains Only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or
sent to your bank account on AccountLink.
- Receive All Distributions in Cash. You can elect to receive a
check for all dividends and long-term capital gains distributions or have
them sent to your bank on AccountLink.
- Reinvest Your Distributions in Another OppenheimerFunds Account.
You can reinvest all distributions in another OppenheimerFunds account you
have established.
Taxes. If your account is not a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the
Fund. Long-term capital gains are taxable as long-term capital gains when
distributed to shareholders. It does not matter how long you held your
shares. Dividends paid from short-term capital gains and net investment
income are taxable as ordinary income. Distributions are subject to
federal income tax and may be subject to state or local taxes. Your
distributions are taxable when paid, whether you reinvest them in
additional shares or take them in cash. Every year the Fund will send you
and the IRS a statement showing the amount of each taxable distribution
you received in the previous year.
- "Buying a Dividend": When a fund goes ex-dividend, its share
price is reduced by the amount of the distribution. If you buy shares on
or just before the ex-dividend date, or just before the Fund declares a
capital gains distribution, you will pay the full price for the shares and
then receive a portion of the price back as a taxable dividend or capital
gain.
- Taxes on Transactions: Share redemptions, including redemptions
for exchanges, are subject to capital gains tax. A capital gain or loss
is the difference between the price you paid for the shares and the price
you received when you sold them.
- Returns of Capital: In certain cases distributions made by the
Fund may be considered a non-taxable return of capital to shareholders.
If that occurs, it will be identified in notices to shareholders. A non-
taxable return of capital may reduce your tax basis in your Fund shares.
This information is only a summary of certain federal tax
information about your investment. More information is contained in the
Statement of Additional Information, and in addition you should consult
with your tax adviser about the effect of an investment in the Fund on
your particular tax situation.
<PAGE>
Appendix: Description of Ratings Categories of Rating Services
Description of Moody's Investors Service, Inc. Bond Ratings
Aaa: Bonds rated "Aaa" are judged to be the best quality and to
carry the smallest degree of investment risk. Interest payments are
protected by a large or by an exceptionally stable margin and principal
is secure. While the various protective elements are likely to change,
the changes that can be expected are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group, they comprise what are generally
known as "high-grade" bonds. They are rated lower than the best bonds
because margins of protection may not be as large as with "Aaa" securities
or fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than those of "Aaa" securities.
A: Bonds rated "A" possess many favorable investment attributes and
are to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Baa: Bonds rated "Baa" are considered medium grade obligations, that
is, they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and have speculative characteristics as well.
Ba: Bonds rated "Ba" are judged to have speculative elements; their
future cannot be considered well-assured. Often the protection of
interest and principal payments may be very moderate and not well
safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.
B: Bonds rated "B" generally lack characteristics of desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa: Bonds rated "Caa" are of poor standing and may be in default
or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds rated "Ca" represent obligations which are speculative in
a high degree and are often in default or have other marked shortcomings.
C: Bonds rated "C" can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Description of Standard & Poor's Bond Ratings
AAA: "AAA" is the highest rating assigned to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA: Bonds rated "AA" also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority
of instances they differ from "AAA" issues only in small degree.
A: Bonds rated "A" have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to adverse effects
of change in circumstances and economic conditions.
BBB: Bonds rated "BBB" are regarded as having an adequate capacity
to pay principal and interest. Whereas they normally exhibit protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for
bonds in this category than for bonds in the "A" category.
BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded,
on balance, as predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the terms
of the obligation. "BB" indicates the lowest degree of speculation and
"CC" the highest degree. While such bonds will likely have some quality
and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
C, D: Bonds on which no interest is being paid are rated "C."
Bonds rated "D" are in default and payment of interest and/or repayment
of principal is in arrears.
<PAGE>
APPENDIX 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 Brothers Aggregate Bond Index and The
Standard & Poor's 500 Index - Change in Value of $10,000 Hypothetical
Investments"
Linear graphs 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 each
class of shares of 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 graphs.
Additional information with respect to the foregoing, including a
description of The Lehman Aggregate Bond Index and The Standard & Poor's
500 Index, is set forth in the Prospectus under "Performance of the Fund--
How Has the Fund Performed?"
Oppenheimer
Fiscal Year Strategic Income Lehman Brothers
(Period) Ended & Growth Fund A Aggregate Bond IndexS&P 500 Index
06/01/92 $9,525 $10,000 $10,000
09/30/92 $9,659 $10,573 $10,162
11/30/92 $9,855 $10,437 $10,543
09/30/93 $10,513 $11,627 $11,479
09/30/94 $10,526 $11,253 $11,902
Oppenheimer
Fiscal Year Strategic Income Lehman Brothers
(Period) Ended & Growth Fund B Aggregate Bond IndexS&P 500 Index
11/30/92 $10,000 $10,000 $10,000
09/30/93 $10,565 $11,141 $10,888
09/30/94 $10,080 $10,782 $11,289
<PAGE>
Oppenheimer Strategic Income & Growth Fund
3410 South Galena Street
Denver, Colorado 80231
1-800-525-7048
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
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 LLP
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, broker, salesperson or any other person has been authorized to
give any information or to make any representations other than those
contained in this Prospectus or the Statement of Additional Information
and, if given or made, such information and representations must not be
relied upon as having been authorized by the Fund, Oppenheimer Management
Corporation, Oppenheimer Funds Distributor, Inc. or any affiliate thereof.
This Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any of the securities offered hereby in any state to any
person to whom it is unlawful to make such an offer in such state.
* Printed on Recycled Paper
<PAGE>
Oppenheimer Strategic Income & Growth Fund
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
Statement of Additional Information dated October 1, 1995
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated October 1, 1995. It should be read
together with the Prospectus, which may be obtained by writing to the
Fund's Transfer Agent, Oppenheimer Shareholder Services, at P.O. Box 5270,
Denver, Colorado 80217 or by calling the Transfer Agent at the toll-free
number shown above.
TABLE OF CONTENTS
Page
About the Fund
Investment Objectives and Policies 2
Investment Policies and Strategies 2
Other Investment Techniques and Strategies 11
Other Investment Restrictions 23
How the Fund is Managed 24
Organization and History 24
Trustees and Officers of the Fund 25
The Manager and Its Affiliates 29
Brokerage Policies of the Fund 30
Performance of the Fund 32
Distribution and Service Plans 37
About Your Account
How To Buy Shares 40
How To Sell Shares 46
How To Exchange Shares 50
Dividends, Capital Gains and Taxes 53
Additional Information About the Fund 54
Financial Information About the Fund
Independent Auditors' Report 55
Financial Statements 56
Appendix A: Industry Classifications A-1
<PAGE>
ABOUT THE FUND
Investment Objectives and Policies
Investment Policies and Strategies. The investment objectives and
policies of the Fund are discussed in the Prospectus. Set forth below is
supplemental information about those policies and the types of securities
in which the Fund may invest, as well as the strategies the Fund may use
to try to achieve its objective. Certain capitalized terms used in this
Statement of Additional Information are defined in the Prospectus.
In selecting securities for the Fund's portfolio, the Fund's investment
adviser, Oppenheimer Management Corporation (referred to as the
"Manager"), evaluates the investment merits of fixed-income and domestic
equity securities primarily through the exercise of its own investment
analysis. This may include, among other things, consideration of the
financial strength of an issuer, including its historic and current
financial condition, the trading activity in its securities, present and
anticipated cash flow, estimated current value of its assets in relation
to their historical cost, the issuer's experience and managerial
expertise, responsiveness to changes in interest rates and business
conditions, debt maturity schedules, current and future borrowing
requirements, and any change in the financial condition of an issuer and
the issuer's continuing ability to meet its future obligations. The
Manager also may consider anticipated changes in business conditions,
levels of interest rates of bonds as contrasted with levels of cash
dividends, industry and regional prospects, the availability of new
investment opportunities and the general economic, legislative and
monetary outlook for specific industries, the nation and the world.
All fixed-income securities are subject to two types of risks: credit
risk and interest rate risk (these are in addition to other investment
risks that may affect a particular security). Credit risk relates to the
ability of the issuer to meet interest or principal payments or both as
they become due. Generally, higher yielding bonds are subject to credit
risk to a greater extent than higher quality bonds. Interest rate risk
refers to the fluctuations in value of fixed-income securities resulting
solely from the inverse relationship between price and yield of
outstanding fixed-income securities. An increase in interest rates will
generally reduce the market value of fixed-income investments, and a
decline in interest rates will tend to increase their value. In addition,
debt securities with longer maturities, which tend to produce higher
yields, are subject to potentially greater capital appreciation and
depreciation than obligations with shorter maturities. Fluctuations in
the market value of fixed-income securities subsequent to their
acquisition will not affect the interest payable on those securities, and
thus the cash income from such securities, but will be reflected in the
valuations of those securities used to compute the Fund's net asset
values.
Because some of the securities the Fund invests in may be in more than
one of the three sectors the Fund invests in, they are discussed below in
this section, rather than in the sections discussing the individual
sectors. Among those securities are the following:
-- Participation Interests. The Fund may invest in participation
interests, subject to the limitation, described in "Restricted and
Illiquid Securities" in the Prospectus on investments by the Fund in
illiquid investments. Participation interests provide the Fund an
undivided interest in a loan made by the issuing financial institution in
the proportion that the Fund's participation interest bears to the total
principal amount of the loan. No more than 5% of the Fund's net assets
can be invested in participation interests of the same issuing bank. The
issuing financial institution may have no obligation to the Fund other
than to pay the Fund the proportionate amount of the principal and
interest payments it receives. Participation interests are primarily
dependent upon the creditworthiness of the borrowing corporation, which
is obligated to make payments of principal and interest on the loan, and
there is a risk that such borrowers may have difficulty making payments.
In the event the borrower fails to pay scheduled interest or principal
payments, the Fund could experience a reduction in its income and might
experience a decline in the value of that participation interest and in
the net asset value of its shares. In the event of a failure by the
financial institution to perform its obligation in connection with the
participation agreement, the Fund might incur certain costs and delays in
realizing payment or may suffer a loss of principal and/or interest.
-- Collateralized Mortgage-Backed Obligations ("CMOs"). CMOs are
fully-collateralized bonds that are the general obligations of the issuer
thereof, either the U.S. Government, a U.S. government instrumentality,
or a private issuer, which may be a domestic or foreign corporation. Such
bonds generally are secured by an assignment to a trustee (under the
indenture pursuant to which the bonds are issued) of collateral consisting
of a pool of mortgages. Payments with respect to the underlying mortgages
generally are made to the trustee under the indenture. Payments of
principal and interest on the underlying mortgages are not passed through
to the holders of the CMOs as such (i.e., the character of payments of
principal and interest is not passed through, and therefore payments to
holders of CMOs attributable to interest paid and principal repaid on the
underlying mortgages do not necessarily constitute income and return of
capital, respectively, to such holders), but such payments are dedicated
to payment of interest on and repayment of principal of the CMOs. CMOs
often are issued in two or more classes with different characteristics
such as varying maturities and stated rates of interest. Because interest
and principal payments on the underlying mortgages are not passed through
to holders of CMOs, CMOs of varying maturities may be secured by the same
pool of mortgages, the payments on which are used to pay interest on each
class and to retire successive maturities in sequence. Unlike other
mortgage-backed securities (discussed above), CMOs are designed to be
retired as the underlying mortgages are repaid. In the event of
prepayment on such mortgages, the class of CMO first to mature generally
will be paid down. Therefore, although in most cases the issuer of CMOs
will not supply additional collateral in the event of such prepayment,
there will be sufficient collateral to secure CMOs that remain
outstanding.
-- Bank Obligations and Instruments Secured Thereby. The bank
obligations the Fund may invest in include time deposits, certificates of
deposit, and bankers' acceptances if they are: (i) obligations of a
domestic bank with total assets of at least $1 billion or (ii) U.S.
dollar-denominated obligations of a foreign bank with total assets of at
least U.S. $1 billion. The Fund may also invest in instruments secured
by such obligations (e.g., debt which is guaranteed by the bank). For
purposes of this section, the term "bank" includes commercial banks,
savings banks, and savings and loan associations which may or may not be
members of the Federal Deposit Insurance Corporation.
Time deposits are non-negotiable deposits in a bank for a specified
period of time at a stated interest rate, whether or not subject to
withdrawal penalties. However, time deposits that are subject to
withdrawal penalties, other than those maturing in seven days or less, are
subject to the limitation on investments by the Fund in illiquid
investments, set forth in the Prospectus under "Restricted and Illiquid
Securities."
Banker's acceptances are marketable short-term credit instruments used
to finance the import, export, transfer or storage of goods. They are
deemed "accepted" when a bank guarantees their payment at maturity.
-- Commercial Paper. The Fund's commercial paper investments, in
addition to those described in the Prospectus, include the following:
Variable Amount Master Demand Notes. Master demand notes are corporate
obligations which permit the investment of fluctuating amounts by the Fund
at varying rates of interest pursuant to direct arrangements between the
Fund, as lender, and the borrower. They permit daily changes in the
amounts borrowed. The Fund has the right to increase the amount under the
note at any time up to the full amount provided by the note agreement, or
to decrease the amount, and the borrower may prepay up to the full amount
of the note without penalty. These notes may or may not be backed by bank
letters of credit. Because these notes are direct lending arrangements
between the lender and borrower, it is not generally contemplated that
they will be traded. There is no secondary market for these notes,
although they are redeemable (and thus immediately repayable by the
borrower) at principal amount, plus accrued interest, at any time.
Accordingly, the Fund's right to redeem such notes is dependent upon the
ability of the borrower to pay principal and interest on demand. The Fund
has no limitations on the type of issuer from whom these notes will be
purchased; however, in connection with such purchases and on an ongoing
basis, the Manager will consider the earning power, cash flow and other
liquidity ratios of the issuer, and its ability to pay principal and
interest on demand, including a situation in which all holders of such
notes made demand simultaneously. Investments in master demand notes are
subject to the limitation on investments by the Fund in illiquid
securities, described in the Prospectus.
Floating Rate/Variable Rate Notes. Some of the notes the Fund may
purchase may have variable or floating interest rates. Variable rates are
adjustable at stated periodic intervals; floating rates are automatically
adjusted according to a specified market rate for such investments, such
as the percentage of the prime rate of a bank, or the 91-day U.S. Treasury
Bill rate. Such obligations may be secured by bank letters of credit or
other credit support arrangements.
-- Zero Coupon Securities. The Fund may invest in zero coupon
securities issued by the U.S. Treasury or by private issuers, such as
corporations. Zero coupon U.S. Treasury securities include: (1) U.S.
Treasury bills without interest coupons, (2) U.S. Treasury notes and bonds
that have been stripped of their unmatured interest coupons and (3)
receipts or certificates representing interests in such stripped debt
obligations or coupons. These securities usually trade at a deep discount
from their face or par value and will be subject to greater fluctuations
in market value in response to changing interest rates than debt
obligations of comparable maturities that make current payments of
interest. However, the lack of periodic interest payments means that the
interest rate is "locked in" and there is no risk of having to reinvest
periodic interest payments in securities having lower rates.
Because the Fund accrues taxable income from zero coupon securities
without receiving cash, the Fund may be required to sell portfolio
securities in order to pay dividends or redemption proceeds for its
shares, which require the payment of cash. This will depend on several
factors: the proportion of shareholders who elect to receive dividends in
cash rather than reinvesting dividends in additional shares of the Fund,
and the amount of cash income the Fund receives from other investments and
the sale of shares. In either case, cash distributed or held by the Fund
that is not reinvested by investors in additional Fund shares will hinder
the Fund from seeking current income.
-- Portfolio Turnover. 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.
-- Domestic Debt Securities. Further information about the Fund's
investments in short-term debt obligations is provided below.
-- Asset-Backed Securities. The value of an asset-backed security is
affected by changes in the market's perception of the asset backing the
security, the creditworthiness of the servicing agent for the loan pool,
the originator of the loans, or the financial institution providing any
credit enhancement, and is also affected if any credit enhancement has
been exhausted. The risks of investing in asset-backed securities are
ultimately dependent upon payment of consumer loans by the individual
borrowers. As a purchaser of an asset-backed security, the Fund would
generally have no recourse to the entity that originated the loans in the
event of default by a borrower. The underlying loans are subject to
prepayments, which may shorten the weighted average life of asset-backed
securities and may lower their return, in the same manner as described in
the Prospectus and in "Mortgage-Backed Securities" below for prepayments
of a pool of mortgage loans underlying mortgage-backed securities.
-- Municipal Securities. The two principal classifications of
Municipal Securities are "general obligations" (secured by the issuer's
pledge of its full faith, credit and taxing power) and "revenue
obligations" (payable only from the revenues derived from a particular
facility or class of facilities, or a specific excise tax or other revenue
source.) The Fund may invest in Municipal Securities of both
classifications.
-- U.S. Government Securities. U.S. Government Securities are debt
obligations issued or guaranteed by the U.S. Government or one of its
agencies or instrumentalities, and include "zero coupon" Treasury
securities, mortgage-backed securities and money market instruments.
-- Mortgage-Backed Securities. These securities represent
participation interests in pools of residential mortgage loans which are
guaranteed by agencies or instrumentalities of the U.S. Government. Such
securities differ from conventional debt securities which generally
provide for periodic payment of interest in fixed or determinable amounts
(usually semi-annually) with principal payments at maturity or specified
call dates. Some of the mortgage-backed securities in which the Fund may
invest may be backed by the full faith and credit of the U.S. Treasury
(e.g., direct pass-through certificates of Government National Mortgage
Association); some are supported by the right of the issuer to borrow from
the U.S. Government (e.g., obligations of Federal Home Loan Mortgage
Corporation); and some are backed by only the credit of the issuer itself.
Those guarantees do not extend to the value of or yield of the mortgage-
backed securities themselves or to the net asset value of the Fund's
shares. Any of these government agencies may also issue collateralized
mortgage-backed obligations ("CMOs"), discussed below.
The yield on mortgage-backed securities is based on the average
expected life of the underlying pool of mortgage loans. The actual life
of any particular pool will be shortened by any unscheduled or early
payments of principal and interest. Principal prepayments generally
result from the sale of the underlying property or the refinancing or
foreclosure of underlying mortgages. The occurrence of prepayments is
affected by a wide range of economic, demographic and social factors and,
accordingly, it is not possible to predict accurately the average life of
a particular pool. Yield on such pools is usually computed by using the
historical record of prepayments for that pool, or, in the case of newly-
issued mortgages, the prepayment history of similar pools. The actual
prepayment experience of a pool of mortgage loans may cause the yield
realized by the Fund to differ from the yield calculated on the basis of
the expected average life of the pool.
Prepayments tend to increase during periods of falling interest rates,
while during periods of rising interest rates prepayments will most likely
decline. When prevailing interest rates rise, the value of a pass-through
security may decrease, as do the values of other debt securities, but,
when prevailing interest rates decline, the value of a pass-through
security is not likely to rise to the extent that the value of other debt
securities rise, because of the prepayment feature of pass-through
securities. The Fund's reinvestment of scheduled principal payments and
unscheduled prepayments it receives may occur at times when available
investments offer higher or lower rates than the original investment, thus
affecting the yield of the Fund. Monthly interest payments received by
the Fund have a compounding effect which may increase the yield to the
Fund more than debt obligations that pay interest semi-annually. Because
of those factors, mortgage-backed securities may be less effective than
Treasury bonds of similar maturity at maintaining yields during periods
of declining interest rates. The Fund may purchase mortgage-backed
securities at par or at a premium or at a discount. Accelerated
prepayments adversely affect yields for pass-through securities purchased
at a premium (i.e., at a price in excess of their principal amount) and
may involve additional risk of loss of principal because the premium may
not have been fully amortized at the time the obligation is repaid. The
opposite is true for pass-through securities purchased at a discount.
The Fund may invest in "stripped" mortgage backed securities, in which
the principal and interest portions of the security are separated and
sold. Stripped mortgage-backed securities usually have at least two
classes each of which receives different proportions of interest and
principal distributions on the underlying pool of mortgage assets. One
common variety of stripped mortgage-backed security has one class that
receives some of the interest and most of the principal, while the other
class receives most of the interest and remainder of the principal. In
some cases, one class will receive all of the interest (the "interest-
only" or "IO" class), while the other class will receive all of the
principal (the "principal-only" or "PO" class). Interest only securities
are extremely sensitive to interest rate changes, and prepayments of
principal on the underlying mortgage assets. An increase in principal
payments or prepayments will reduce the income available to the IO
security. In other types of CMOs, the underlying principal payments may
apply to various classes in a particular order, and therefore the value
of certain classes or "tranches" of such securities may be more volatile
than the value of the pool as a whole, and losses may be more severe than
on other classes.
Mortgage-backed securities may be less effective than debt obligations
of similar maturity at maintaining yields during periods of declining
interest rates. As new types of mortgage-related securities are developed
and offered to investors, the Manager will, subject to the direction of
the Board of Trustees and consistent with the Fund's investment objective
and policies, consider making investments in such new types of mortgage-
related securities.
-- GNMA Certificates. Certificates of Government National Mortgage
Association ("GNMA") are mortgage-backed securities of GNMA that evidence
an undivided interest in a pool or pools of mortgages ("GNMA
Certificates"). The GNMA Certificates that the Fund may purchase are of
the "modified pass-through" type, which entitle the holder to receive
timely payment of all interest and principal payments due on the mortgage
pool, net of fees paid to the "issuer" and GNMA, regardless of whether the
mortgagor actually makes the payments.
The National Housing Act authorizes GNMA to guarantee the timely
payment of principal and interest on securities backed by a pool of
mortgages insured by the Federal Housing Administration ("FHA") or
guaranteed by the Veterans Administration ("VA"). The GNMA guarantee is
backed by the full faith and credit of the U.S. Government. GNMA is also
empowered to borrow without limitation from the U.S. Treasury if necessary
to make any payments required under its guarantee.
The average life of a GNMA Certificate is likely to be substantially
shorter than the original maturity of the mortgages underlying the
securities. Prepayments of principal by mortgagors and mortgage
foreclosures will usually result in the return of the greater part of
principal investment long before the maturity of the mortgages in the
pool. Foreclosures impose no risk to principal investment because of the
GNMA guarantee, except to the extent that the Fund has purchased the
certificates at a premium in the secondary market.
-- FNMA Securities. The Federal National Mortgage Association
("FNMA") was established to create a secondary market in mortgages insured
by the FHA. FNMA issues guaranteed mortgage pass-through certificates
("FNMA Certificates"). FNMA Certificates resemble GNMA Certificates in
that each FNMA Certificate represents a pro rata share of all interest and
principal payments made and owed on the underlying pool. FNMA guarantees
timely payment of interest and principal on FNMA Certificates. The FNMA
guarantee is not backed by the full faith and credit of the U.S.
Government.
-- FHLMC Securities. The Federal Home Loan Mortgage Corporation
("FHLMC") was created to promote development of a nationwide secondary
market for conventional residential mortgages. FHLMC issues two types of
mortgage pass-through certificates ("FHLMC Certificates"): mortgage
participation certificates ("PCs") and guaranteed mortgage certificates
("GMCs"). PCs resemble GNMA Certificates in that each PC represents a pro
rata share of all interest and principal payments made and owed on the
underlying pool. FHLMC guarantees timely monthly payment of interest on
PCs and the ultimate payment of principal. The FHLMC guarantee is not
backed by the full faith and credit of the U.S. Government.
GMCs also represent a pro rata interest in a pool of mortgages.
However, these instruments pay interest semi-annually and return principal
once a year in guaranteed minimum payments. The expected average life of
these securities is approximately ten years. The FHLMC guarantee is not
backed by the full faith and credit of the U.S. Government.
-- Mortgage-Backed Security Rolls. The Fund may enter into "forward
roll" transactions with respect to mortgage-backed securities issued by
GNMA, FNMA or FHLMC. In a forward roll transaction, which is considered
to be a borrowing by the Fund, the Fund will sell a mortgage security to
a bank or other permitted entity and simultaneously agree to repurchase
a similar security from the institution at a later date at an agreed upon
price. The mortgage securities that are repurchased will bear the same
interest rate as those sold, but generally will be collateralized by
different pools of mortgages with different prepayment histories than
those sold. Risks of mortgage-backed security rolls include: (i) the risk
of prepayment prior to maturity, (ii) the possibility that the Fund may
not be entitled to receive interest and principal payments on the
securities sold and that the proceeds of the sale may have to be invested
in money market instruments (typically repurchase agreements) maturing not
later than the expiration of the roll, and (iii) the possibility that the
market value of the securities sold by the Fund may decline below the
price at which the Fund is obligated to purchase the securities. Upon
entering into a mortgage-backed security roll, the Fund will be required
to place cash, U.S. Government Securities or other high-grade debt
securities in a segregated account with its Custodian in an amount equal
to its obligation under the roll.
-- Foreign Debt Securities. As noted in the Prospectus, the Fund may
invest in debt obligations and other securities (which may be denominated
in U.S. dollars or non-U.S. currencies) issued or guaranteed by foreign
corporations, certain supranational entities (described below) and foreign
governments or their agencies or instrumentalities, and in debt
obligations and other securities issued by U.S. corporations denominated
in non-U.S. currencies. The types of foreign debt obligations and other
securities in which the Fund may invest are the same types of debt
obligations identified under "Domestic Fixed-Income Securities," above.
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.
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) 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 must be, in most cases, approved by the Fund's Board
of Trustees under applicable SEC rules.
The Fund may invest in U.S. dollar-denominated, collateralized "Brady
Bonds", as described in the Prospectus. These debt obligations of foreign
entities may be fixed-rate par bonds or floating- rate discount bonds and
are generally collateralized in full as to principal due at maturity by
U.S. Treasury zero coupon obligations that have the same maturity as the
Brady Bonds. Brady Bonds are often viewed as having three or four
valuation components: (i) the collateralized repayment of principal at
final maturity; (ii) the collateralized interest payments; (iii) the
uncollateralized interest payments; and (iv) any uncollateralized
repayment of principal at maturity (these uncollateralized amounts
constitute the "residual risk"). In the event of a default with respect
to collateralized Brady Bonds as a result of which the payment obligations
of the issuer are accelerated, the zero coupon Treasury securities held
as collateral for the payment of principal will not be distributed to
investors, nor will such obligations be sold and the proceeds distributed.
The collateral will be held by the collateral agent to the scheduled
maturity of the defaulted Brady Bonds, which will continue to be
outstanding, at which time the face amount of the collateral will equal
the principal payments which would have then been due on the Brady Bonds
in the normal course. In addition, in light of the residual risk of Brady
Bonds and, among other factors, the history of defaults with respect to
commercial bank loans to public and private entities of countries issuing
Brady Bonds, investments in Brady Bonds are to be viewed as speculative.
The obligations of foreign governmental entities may or may not be
supported by the full faith and credit of a foreign government.
Obligations of supranational entities include those of international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and of international banking
institutions and related government agencies. Examples include the
International Bank for Reconstruction and Development (the "World Bank"),
the European Coal and Steel Community, the Asian Development Bank and the
Inter-American Development Bank. The governmental members, or
"stockholders," of these entities usually make initial capital
contributions to the supranational entity and in many cases are committed
to make additional capital contributions if the supranational entity is
unable to repay its borrowings. Each supranational entity's lending
activities are limited to a percentage of its total capital (including
"callable capital" contributed by members at the entity's call), reserves
and net income. There is no assurance that foreign governments will be
able or willing to honor their commitments.
Investing in foreign securities involves considerations and possible
risks not typically associated with investing in securities in the U.S.
The values of foreign securities will be affected by changes in currency
rates or exchange control regulations or currency blockage, application
of foreign tax laws, including withholding taxes, changes in governmental
administration or economic or monetary policy (in the U.S. or abroad) or
changed circumstances in dealings between nations. Costs will be incurred
in connection with conversions between various currencies. Foreign
brokerage commissions are generally higher than commissions in the U.S.,
and foreign securities markets may be less liquid, more volatile and less
subject to governmental regulation than in the U.S. Investments in foreign
countries could be affected by other factors not generally thought to be
present in the U.S., including expropriation or nationalization,
confiscatory taxation and potential difficulties in enforcing contractual
obligations, and could be subject to extended settlement periods.
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.
The Fund may engage in foreign currency exchange transactions for hedging
purposes to protect against changes in future exchange rates. See "Other
Investment Techniques and Strategies - Hedging," below.
The values of foreign investments and the investment income derived
from them may also be affected unfavorably by changes in currency exchange
control regulations. Although the Fund will invest only in securities
denominated in foreign currencies that at the time of investment do not
have significant government-imposed restrictions on conversion into U.S.
dollars, there can be no assurance against subsequent imposition of
currency controls. In addition, the values of foreign securities will
fluctuate in response to a variety of factors, including changes in U.S.
and foreign interest rates.
Investments in foreign securities offer potential benefits not
available from investing solely in securities of domestic issuers, by
offering the opportunity to invest in foreign issuers that appear to offer
growth potential, or in foreign countries with economic policies or
business cycles different from those of the U.S., or to reduce
fluctuations in portfolio value by taking advantage of foreign bond or
other markets that do not move in a manner parallel to U.S. markets. From
time to time, U.S. government policies have discouraged certain
investments abroad by U.S. investors, through taxation or other
restrictions, and it is possible that such restrictions could be
reimposed.
-- Domestic Equity Securities. Information about some of the types
of domestic equity securities the Fund may invest in is provided below.
-- Convertible Securities. While convertible securities are a form
of debt security in many cases, their conversion feature (allowing
conversion into equity securities) causes them to be regarded more as
"equity equivalents." As a result, the rating assigned to the security
has less impact on the Manager's investment decision with respect to
convertible securities than in the case of non-convertible debt
securities. To determine whether convertible securities should be
regarded as "equity equivalents," the Manager examines the following
factors: (1) whether, at the option of the investor, the convertible
security can be exchanged for a fixed number of shares of common stock of
the issuer, (2) whether the issuer of the convertible securities has
restated its earnings per share of common stock on a fully diluted basis
(considering the effect of converting the convertible securities), and (3)
the extent to which the convertible security may be a defensive "equity
substitute," providing the ability to participate in any appreciation in
the price of the issuer's common stock.
-- Warrants and Rights. Warrants basically are options to purchase
equity securities at set prices valid for a specified period of time. The
prices of warrants do not necessarily move in a manner parallel to the
prices of the underlying securities. The price the Fund pays for a
warrant will be lost unless the warrant is exercised prior to its
expiration. Rights are similar to warrants, but normally have a short
duration and are distributed directly by the issuer to its shareholders.
Rights and warrants have no voting rights, receive no dividends and have
no rights with respect to the assets of the issuer.
Other Investment Techniques and Strategies
-- Hedging. As described in the Prospectus, the Fund may employ one
or more types of Hedging Instruments. When hedging to attempt to protect
against declines in the market value of the Fund's portfolio, to permit
the Fund to retain unrealized gains in the value of portfolio securities
which have appreciated, or to facilitate selling securities for investment
reasons, the Fund may: (i) sell Futures, (ii) buy puts on such Futures
or securities, or (iii) write calls on securities held by it or on
Futures. When hedging to attempt to protect against the possibility that
portfolio securities are not fully included in a rise in value of the debt
securities market, the Fund may: (i) buy Futures, or (ii) buy calls on
such Futures or on securities. Covered calls and puts may also be written
on debt securities to attempt to increase the Fund's income. When hedging
to protect against declines in the dollar value of a foreign currency-
denominated security, the Fund may: (a) buy puts on that foreign currency
and on foreign currency Futures, (b) write calls on that currency or on
such Futures, or (c) enter into Forward Contracts at a higher or lower
rate than the spot ("cash") rate.
The Fund's strategy of hedging with Futures and options on Futures will
be incidental to the Fund's activities in the underlying cash market.
Additional Information about the Hedging Instruments the Fund may use is
provided below. In the future, the Fund may employ hedging instruments
and strategies that are not presently contemplated but which may be
developed, to the extent such investment methods are consistent with the
Fund's investment objective, legally permissible and adequately disclosed.
-- Writing Covered Call Options. When the Fund writes a call on a
security, it receives a premium and agrees to sell the callable investment
to a purchaser of a corresponding call on the same security during the
call period (usually not more than 9 months) at a fixed exercise price
(which may differ from the market price of the underlying security),
regardless of market price changes during the call period. The Fund has
retained the risk of loss should the price of the underlying security
decline during the call period, which may be offset to some extent by the
premium.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." A
profit or loss will be realized, depending upon whether the net of the
amount of the option transaction costs and the premium received on the
call written is more or less than the price of the call subsequently
purchased. A profit may also be realized if the call lapses unexercised,
because the Fund retains the underlying investment and the premium
received. Any such profits are considered short-term capital gains for
Federal income tax purposes, and when distributed by the Fund are taxable
as ordinary income. An option position may be closed out only on a market
that provides secondary trading for option of the same series, and there
is no assurance that a liquid secondary market will exist for a particular
option. If the Fund could not effect a closing purchase transaction due
to lack of a market, it would have to hold the callable investments until
the call lapsed or was exercised.
The Fund may also write calls on Futures without owning a futures
contract or a deliverable bond, provided that at the time the call is
written, the Fund covers the call by segregating in escrow an equivalent
dollar amount of liquid assets. The Fund will segregate additional liquid
assets if the value of the escrowed assets drops below 100% of the
obligation under the Future. In no circumstances would an exercise notice
require the Fund to deliver a futures contract; it would simply put the
Fund in a short futures position, which is permitted by the Fund's hedging
policies.
-- Writing Put Options. A put option on securities gives the
purchaser the right to sell, and the writer the obligation to buy, the
underlying investment at the exercise price during the option period.
Writing a put covered by segregated liquid assets equal to the exercise
price of the put has the same economic effect to the Fund as writing a
covered call. The premium the Fund receives from writing a put option
represents a profit, as long as the price of the underlying investment
remains above the exercise price. However, the Fund has also assumed the
obligation during the option period to buy the underlying investment from
the buyer of the put at the exercise price, even though the value of the
investment may fall below the exercise price. If the put lapses
unexercised, the Fund (as the writer of the put) realizes a gain in the
amount of the premium. If the put is exercised, the Fund must fulfill its
obligation to purchase the underlying investment at the exercise price,
which will usually exceed the market value of the investment at that time.
In that case, the Fund may incur a loss, equal to the sum of the current
market value of the underlying investment and the premium received minus
the sum of the exercise price and any transaction costs incurred.
When writing put options on securities, to secure its obligation to pay
for the underlying security, the Fund will deposit in escrow liquid assets
with a value equal to or greater than the exercise price of the put
option. The Fund therefore forgoes the opportunity of investing the
segregated assets or writing calls against those assets. As long as the
obligation of the Fund as the put writer continues, it may be assigned an
exercise notice by the broker-dealer through whom such option was sold,
requiring the Fund to take delivery of the underlying security against
payment of the exercise price. The Fund has no control over when it may
be required to purchase the underlying security, since it may be assigned
an exercise notice at any time prior to the termination of its obligation
as the writer of the put. This obligation terminates upon expiration of
the put, or such earlier time at which the Fund effects a closing
purchase transaction by purchasing a put of the same series as that
previously sold. Once the Fund has been assigned an exercise notice, it
is thereafter not allowed to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a profit
on an outstanding put option it has written or to prevent an underlying
security from being put. Furthermore, effecting such a closing purchase
transaction will permit the Fund to write another put option to the extent
that the exercise price thereof is secured by the deposited assets, or to
utilize the proceeds from the sale of such assets for other investments
by the Fund. The Fund will realize a profit or loss from a closing
purchase transaction if the cost of the transaction is less or more than
the premium received from writing the option. As above for writing
covered calls, any and all such profits described herein from writing puts
are considered short-term gains for Federal tax purposes, and when
distributed by the Fund, are taxable as ordinary income.
-- Purchasing Calls and Puts. When the Fund purchases a call (other
than in a closing purchase transaction), it pays a premium and, except as
to calls on indices or Futures, has the right to buy the underlying
investment from a seller of a corresponding call on the same investment
during the call period at a fixed exercise price. When the Fund purchases
a call on an index or Future, it pays a premium, but settlement is in cash
rather than by delivery of the underlying investment to the Fund. In
purchasing a call, the Fund benefits only if the call is sold at a profit
or if, during the call period, the market price of the underlying
investment is above the sum of the call price plus the transaction costs
and the premium paid and the call is exercised. If the call is not
exercised or sold (whether or not at a profit), it will become worthless
at its expiration date and the Fund will lose its premium payment and the
right to purchase the underlying investment.
When the Fund purchases a put, it pays a premium and, except as to puts
on indices, has the right to sell the underlying investment to a seller
of a corresponding put on the same investment during the put period at a
fixed exercise price. Buying a put on an investment the Fund owns enables
the Fund to protect itself during the put period against a decline in the
value of the underlying investment below the exercise price by selling
such underlying investment at the exercise price to a seller of a
corresponding put. If the market price of the underlying investment is
equal to or above the exercise price and as a result the put is not
exercised or resold, the put will become worthless at its expiration date,
and the Fund will lose its premium payment and the right to sell the
underlying investment. The put may, however, be sold prior to expiration
(whether or not at a profit.)
Buying a put on an investment it does not own, either a put on an index
or a put on a Future not held by the Fund, permits the Fund either to
resell the put or buy the underlying investment and sell it at the
exercise price. The resale price of the put will vary inversely with the
price of the underlying investment. If the market price of the underlying
investment is above the exercise price and as a result the put is not
exercised, the put will become worthless on its expiration date. When the
Fund purchases a put on an index, or on a Future not held by it, the put
protects the Fund to the extent that the index moves in a similar pattern
to the securities held. In the case of a put on an index or Future,
settlement is in cash rather than by delivery by the Fund of the
underlying investment.
Puts and calls on broadly-based indices or Futures are similar to puts
and calls on securities or futures contracts except that all settlements
are in cash and gain or loss depends on changes in the index in question
(and thus on price movements in the stock market generally) rather than
on price movements in individual securities or futures contracts. When
the Fund buys a calls on an index or Future, it pays a premium. During
the call period, upon exercise of a call by the Fund, a seller of a
corresponding call on the same investment will pay the Fund an amount of
cash to settle the call if the closing level of the index or Future upon
which the call is based is greater than the exercise price of the call.
That cash payment is equal to the difference between the closing price of
the index and the exercise price of the call times a specified multiple
(the "multiplier"), which determines the total dollar value for each point
of difference. When the Fund buys a put on an index or Future, it pays
a premium and has the right during the put period to require a seller of
a corresponding put, upon the Fund's exercise of its put, to deliver to
the Fund an amount of cash to settle the put if the closing level of the
index or Future upon which the put is based is less than the exercise
price of the put. That cash payment is determined by the multiplier, in
the same manner as described above as to calls.
An option position may be closed out only on a market which provides
secondary trading for options of the same series and there is no assurance
that a liquid secondary market will exist for any particular option. The
Fund's option activities may affect its turnover rate and brokerage
commissions. The exercise by the Fund of puts on securities will cause
the sale of related investments, increasing portfolio turnover. Although
such exercise is within the Fund's control, holding a put might cause the
Fund to sell the related investments for reasons which would not exist in
the absence of the put. The Fund will pay a brokerage commission each
time it buys a put or call, sells a call, or buys or sells an underlying
investment in connection with the exercise of a put or call. Such
commissions may be higher than those which would apply to direct purchases
or sales of such underlying investments. Premiums paid for options are
small in relation to the market value of the related investments, and
consequently, put or call options offer large amounts of leverage. The
leverage offered by trading in options could result in the Fund's net
asset value being more sensitive to changes in the value of the underlying
investments.
-- Options on Foreign Currencies. The Fund intends to write and
purchase calls and puts on foreign currencies. 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 markets or are quoted by major
recognized dealers in such options. It does so to protect against
declines in the dollar value of foreign securities and against increases
in the dollar cost of foreign securities to be acquired. If the Manager
anticipates a rise in the dollar value of a foreign currency in which
securities to be acquired are denominated, the increased cost of such
securities may be partially offset by purchasing calls or writing puts on
that foreign currency. If a decline in the dollar value of a foreign
currency is anticipated, the decline in value of portfolio securities
denominated in that currency may be partially offset by writing calls or
purchasing puts on that foreign currency. However, in the event of
currency rate fluctuations adverse to the Fund's position, it would lose
the premium it paid and transaction costs.
A call written on a foreign currency by the Fund is covered if the Fund
owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire that foreign currency without
additional cash consideration (or for additional cash consideration held
in a segregated account by its custodian) upon conversion or exchange of
other foreign currency held in its portfolio. A call may be written by
the Fund on a foreign currency to provide a hedge against a decline in the
U.S. dollar value of a security which the Fund owns or has the right to
acquire and which is denominated in the currency underlying the option due
to an expected adverse change in the exchange rate. This is a cross-
hedging strategy. In such circumstances, the Fund collateralizes the
option by maintaining in a segregated account with the Fund's custodian,
cash or U.S. Government Securities in an amount not less than the value
of the underlying currency in U.S. dollars marked-to market daily.
-- Interest Rate Futures. No price is paid or received upon the
purchase or sale of an Interest Rate Future. Interest Rate Futures
obligate one party to deliver and the other party to take a specific debt
security or amount of foreign currency, respectively, at a specified price
on a specified date. Upon entering into a Futures transaction, the Fund
will be required to deposit an initial margin payment with the futures
commission merchant (the "futures broker"). The initial margin will be
deposited with the Fund's Custodian in an account registered in the
futures broker's name; however the futures broker can gain access to that
account only under specified conditions. As the Future is marked to
market to reflect changes in its market value, subsequent margin payments,
called variation margin, will be made to and from the futures broker on
a daily basis. Prior to expiration of the Future, if the Fund elects to
close out its position by taking an opposite position, a final
determination of variation margin is made, additional cash is required to
be paid by or released to the Fund, and any loss or gain is realized for
tax purposes. Although Interest Rate Futures by their terms call for
settlement by delivery or acquisition of debt securities, in most cases
the obligation is fulfilled by entering into an offsetting position. All
futures transactions are effected through a clearinghouse associated with
the exchange on which the contracts are traded.
-- Financial Futures. Financial Futures are similar to Interest Rate
Futures except that settlement is made in cash, and net gain or loss on
options on Financial Futures depends on price movements of the securities
included in the index. The strategies which the Fund employs regarding
Financial Futures are similar to those described above with regard to
Interest Rate Futures.
-- Forward Contracts. A Forward Contract involves bilateral
obligations of one party to purchase, and another party to sell, a
specific currency at a future date (which may be any fixed number of days
from the date of the contract agreed upon by the parties), at a price set
at the time the contract is entered into. These contracts are traded in
the interbank market conducted directly between currency traders (usually
large commercial banks) and their customers.
The Fund may use Forward Contracts to protect against uncertainty in
the level of future exchange rates. The use of Forward Contracts does not
eliminate fluctuations in the prices of the underlying securities the Fund
owns or intends to acquire, but it does fix a rate of exchange in advance.
In addition, although Forward Contracts limit the risk of loss due to a
decline in the value of the hedged currencies, at the same time they limit
any potential gain that might result should the value of the currencies
increase.
The Fund may enter into Forward Contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when
the Fund anticipates receipt of dividend payments in a foreign currency,
the Fund may desire to "lock-in" the U.S. dollar price of the security or
the U.S. dollar equivalent of such payment by entering into a Forward
Contract, for a fixed amount of U.S. dollars per unit of foreign currency,
for the purchase or sale of the amount of foreign currency involved in the
underlying transaction ("transaction hedge"). The Fund will thereby be
able to protect itself against a possible loss resulting from an adverse
change in the relationship between the currency exchange rates during the
period between the date on which the security is purchased or sold, or on
which the payment is declared, and the date on which such payments are
made or received.
The Fund may also use Forward Contracts to lock in the U.S. dollar
value of portfolio positions ("position hedge"). In a position hedge, for
example, when the Fund believes that foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a forward
sale contract to sell an amount of that foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in
such foreign currency, or when the Fund believes that the U.S. dollar may
suffer a substantial decline against a foreign currency, it may enter into
a forward purchase contract to buy that foreign currency for a fixed
dollar amount. In this situation the Fund may, in the alternative, enter
into a forward contract to sell a different foreign currency for a fixed
U.S. dollar amount where the Fund believes that the U.S. dollar value of
the currency to be sold pursuant to the forward contract will fall
whenever there is a decline in the U.S. dollar value of the currency in
which portfolio securities of the Fund are denominated ("cross hedge").
The Fund will not enter into such Forward Contracts or maintain a net
exposure to such contracts where the consummation of the contracts would
obligate the Fund to deliver an amount of foreign currency in excess of
the value of the Fund's portfolio securities or other assets denominated
in that currency. The Fund, however, in order to avoid excess
transactions and transaction costs, may maintain a net exposure to Forward
Contracts in excess of the value of the Fund's portfolio securities or
other assets denominated in that currency provided the excess amount is
"covered" by liquid, high-grade debt securities, denominated in any
currency, at least equal at all times to the amount of such excess. As
an alternative, the Fund may purchase a call option permitting the Fund
to purchase the amount of foreign currency being hedged by a forward sale
contract at a price no higher than the forward contract price or the Fund
may purchase a put option permitting the Fund to sell the amount of
foreign currency subject to a forward purchase contract at a price as high
or higher than the forward contract price. Unanticipated changes in
currency prices may result in poorer overall performance for the Fund than
if it had not entered into such contracts.
The precise matching of the Forward Contract amounts and the value of
the securities involved will not generally be possible because the future
value of such securities in foreign currencies will change as a
consequence of market movements in the value of these securities between
the date the Forward Contract is entered into and the date it is sold.
Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot (i.e., cash) market (and bear the expense
of such purchase), if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some
of the foreign currency received upon the sale of the portfolio security
if its market value exceeds the amount of foreign currency the Fund is
obligated to deliver. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-
term hedging strategy is highly uncertain. Forward Contracts involve the
risk that anticipated currency movements will not be accurately predicted,
causing the Fund to sustain losses on these contracts and transactions
costs.
At or before the maturity of a Forward Contract requiring the Fund to
sell a currency, the Fund may either sell a portfolio security and use the
sale proceeds to make delivery of the currency or retain the security and
offset its contractual obligation to deliver the currency by purchasing
a second contract pursuant to which the Fund will obtain, on the same
maturity date, the same amount of the currency that it is obligated to
deliver. Similarly, the Fund may close out a Forward Contract requiring
it to purchase a specified currency by entering into a second contract
entitling it to sell the same amount of the same currency on the maturity
date of the first contract. The Fund would realize a gain or loss as a
result of entering into such an offsetting Forward Contract under either
circumstance to the extent the exchange rate or rates between the
currencies involved moved between the execution dates of the first
contract and offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because Forward Contracts are
usually entered into on a principal basis, no fees or commissions are
involved. Because such contracts are not traded on an exchange, the Fund
must evaluate the credit and performance risk of each particular
counterparty under a Forward Contract.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Fund may convert foreign currency from time
to time, and investors should be aware of the costs of currency
conversion. Foreign exchange dealers do not charge a fee for conversion,
but they do seek to realize a profit based on the difference between the
prices at which they buy and sell various currencies. Thus, a dealer may
offer to sell a foreign currency to the Fund at one rate, while offering
a lesser rate of exchange should the Fund desire to resell that currency
to the dealer.
-- Interest Rate Swap Transactions. Swap agreements entail both
interest rate risk and credit risk. There is a risk that, based on
movements of interest rates in the future, the payments made by the Fund
under a swap agreement will have been greater than those received by it.
Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap defaults, the
Fund's loss will consist of the net amount of contractual interest
payments that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap
transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements.
A master netting agreement provides that all swaps done between the
Fund and that counterparty under the master agreement shall be regarded
as parts of an integral agreement. If on any date amounts are payable in
the same currency in respect of one or more swap transactions, the net
amount payable on that date in that currency shall be paid. In addition,
the master netting agreement may provide that if one party defaults
generally or on one swap, the counterparty may terminate the swaps with
that party. Under such agreements, if there is a default resulting in a
loss to one party, the measure of that party's damages is calculated by
reference to the average cost of a replacement swap with respect to each
swap (i.e., the mark-to-market value at the time of the termination of
each swap). The gains and losses on all swaps are then netted, and the
result is the counterparty's gain or loss on termination. The termination
of all swaps and the netting of gains and losses on termination is
generally referred to as "aggregation."
-- Additional Information About Hedging Instruments and Their Use.
The Fund's Custodian, or a securities depository acting for the Custodian,
will act as the Fund's escrow agent, through the facilities of the Options
Clearing Corporation ("OCC"), as to the investments on which the Fund has
written options traded on exchanges or as to other acceptable escrow
securities, so that no margin will be required for such transactions. OCC
will release the securities on the expiration of the option or upon the
Fund's entering into a closing transaction. An option position may be
closed out only on a market which provides secondary trading for options
of the same series, and there is no assurance that a liquid secondary
market will exist for any particular option.
When the Fund writes an over-the-counter("OTC") option, it will enter
into an arrangement with a primary U.S. Government securities dealer,
which would establish a formula price at which the Fund would have the
absolute right to repurchase that OTC option. That formula price would
generally be based on a multiple of the premium received for the option,
plus the amount by which the option is exercisable below the market price
of the underlying security (that is, the extent to which the option is
"in-the-money"). When the Fund writes an OTC option, it will treat as
illiquid (for purposes of the limit on its assets that may be invested in
illiquid securities, stated in the Prospectus) the mark-to-market value
of any OTC option held by it. The Securities and Exchange
Commission is evaluating whether OTC options should be considered liquid
securities, and the procedure described above could be affected by the
outcome of that evaluation.
The Fund's option activities may affect its turnover rate and brokerage
commissions. The exercise of calls written by the Fund may cause the Fund
to sell related portfolio securities, thus increasing its turnover rate
in a manner beyond the Fund's control. The exercise by the Fund of puts
on securities or Futures may cause the sale of related investments, also
increasing portfolio turnover. Although such exercise is within the
Fund's control, holding a put might cause the Fund to sell the related
investments for reasons which would not exist in the absence of the put.
The Fund will pay a brokerage commission each time it buys or sells a put,
a call, or an underlying investment in connection with the exercise of a
put or call. Such commissions may be higher than those which would apply
to direct purchases or sales of the underlying investments. Premiums paid
for options are small in relation to the market value of the related
investments, and consequently, put and call options offer large amounts
of leverage. The leverage offered by trading in options could result in
the Fund's net asset value being more sensitive to changes in the value
of the underlying investments.
-- Regulatory Aspects of Hedging Instruments. The Fund is required
to operate within certain guidelines and restrictions with respect to its
use of Futures and options on Futures established by the Commodity Futures
Trading Commission ("CFTC"). In particular, the Fund is exempted from
registration with the CFTC as a "commodity pool operator" if the Fund
complies with the requirements of the Rule adopted by the CFTC. The Rule
does not limit the percentage of the Fund's assets that may be used for
Futures margin and related options premiums for a bona fide hedging
position. However, under the Rule the Fund must limit its aggregate
Futures margin and related options premiums to no more than 5% of the
Fund's net assets for hedging strategies that are not considered bona fide
hedging strategies under the Rule.
Transactions in options by the Fund are subject to limitations
established by option exchanges governing the maximum number of options
that may be written or held by a single investor or group of investors
acting in concert, regardless of whether the options were written or
purchased on the same or different exchanges or are held in one or more
accounts or through one or more different exchanges or through one or more
brokers. Thus, the number of options which the Fund may write or hold may
be affected by options written or held by other entities, including other
investment companies having the same adviser as the Fund (or an adviser
that is an affiliate of the Fund's adviser. The exchanges also impose
position limits on Futures transactions which apply to Futures. An
exchange may order the liquidation of positions found to be in violation
of those limits and may impose certain other sanctions.
Due to requirements under the Investment Company Act, when the Fund
purchases a Future, the Fund will maintain, in a segregated account or
accounts with its Custodian, cash or readily-marketable, short-term
(maturing in one year or less) debt instruments in an amount equal to the
market value of the securities underlying such Future, less the margin
deposit applicable to it.
-- Tax Aspects of Covered Calls and Hedging Instruments. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code (although it reserves the right not to qualify). That
qualification enables the Fund to "pass through" its income and realized
capital gains to shareholders without having to pay tax on them. This
avoids a "double tax" on that income and capital gains, since shareholders
normally will be taxed on the dividends and capital gains they receive
from the Fund (unless the Fund's shares are held in a retirement account
or the shareholder is otherwise exempt from tax). One of the tests for
the Fund's qualification as a regulated investment company is that less
than 30% of its gross income must be derived from gains realized on the
sale of securities held for less than three months. To comply with this
30% cap, the Fund will limit the extent to which it engages in the
following activities, but will not be precluded from them: (i) selling
investments, including Futures, held for less than three months, whether
or not they were purchased on the exercise of a call held by the Fund;
(ii) purchasing calls or puts which expire in less than three months;
(iii) effecting closing transactions with respect to calls or puts
purchased less than three months previously; (iv) exercising puts or calls
held by the Fund for less than three months; or (v) writing calls on
investments held for less than three months.
Certain foreign currency exchange contracts ("Forward Contracts") in
which the Fund may invest are treated as "section 1256 contracts." Gains
or losses relating to section 1256 contracts generally are characterized
under the Internal Revenue Code as 60% long-term and 40% short-term
capital gains or losses. However, foreign currency gains or losses
arising from certain section 1256 contracts (including Forward Contracts)
generally are treated as ordinary income or loss. In addition, section
1256 contracts held by the Fund at the end of each taxable year are
"marked-to-market" with the result that unrealized gains or losses are
treated as though they were realized. These contracts also may be marked-
to-market for purposes of the excise tax applicable to investment company
distributions and for other purposes under rules prescribed pursuant to
the Internal Revenue Code. An election can be made by the Fund to exempt
these transactions from this marked-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a position
making up a straddle is allowed only to the extent such loss exceeds any
unrecognized gain in the offsetting positions making up the straddle.
Disallowed loss is generally allowed at the point where there is no
unrecognized gain in the offsetting positions making up the straddle, or
the offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates that occur between the time the Fund
accrues interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the Fund
actually collects such receivables or pays such liabilities generally are
treated as ordinary income or ordinary loss. Similarly, on disposition
of debt securities denominated in a foreign currency and on disposition
of foreign currency forward contracts, gains or losses attributable to
fluctuations in the value of a foreign currency between the date of
acquisition of the security or contract and the date of disposition also
are treated as ordinary gain or loss. Currency gains and losses are
offset against market gains and losses before determining a net "Section
988" gain or loss under the Internal Revenue Code, which may increase or
decrease the amount of the Fund's investment company income available for
distribution to its shareholders.
-- Risks of Hedging With Options and Futures. An option position may
be closed out only on a market that provides secondary trading for options
of the same series, and there is no assurance that a liquid secondary
market will exist for any particular option. In addition to the risks
associated with hedging that are discussed in the Prospectus and above,
there is a risk in using short hedging by selling Futures to attempt to
protect against decline in value of the Fund's portfolio securities (due
to an increase in interest rates) that the prices of such Futures will
correlate imperfectly with the behavior of the cash (i.e., market value)
prices of the Fund's securities. The ordinary spreads between prices in
the cash and futures markets are subject to distortions due to differences
in the natures of those markets. First, all participants in the futures
markets are subject to margin deposit and maintenance requirements. Rather
than meeting additional margin deposit requirements, investors may close
out futures contracts through offsetting transactions which could distort
the normal relationship between the cash and futures markets. Second, the
liquidity of the futures markets depend on participants entering into
offsetting transactions rather than making or taking delivery. To the
extent participants decide to make or take delivery, liquidity in the
futures markets could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures
markets are less onerous than margin requirements in the securities
markets. Therefore, increased participation by speculators in the futures
markets may cause temporary price distortions.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable
index. To compensate for the imperfect correlation of movements in the
price of the equity securities being hedged and movements in the price of
the hedging instruments, the Fund may use hedging instruments in a greater
dollar amount than the dollar amount of equity securities being hedged if
the historical volatility of the prices of the equity securities being
hedged is more than the historical volatility of the applicable index.
It is also possible that if the Fund has used hedging instruments in a
short hedge, the market may advance and the value of equity securities
held in the Fund's portfolio may decline. If that occurred, the Fund would
lose money on the hedging instruments and also experience a decline in
value in its portfolio securities. However, while this could occur for
a very brief period or to a very small degree, over time the value of a
diversified portfolio of equity securities will tend to move in the same
direction as the indices upon which the hedging instruments are based.
If the Fund uses hedging instruments to establish a position in the
debt securities markets as a temporary substitute for the purchase of
individual debt securities (long hedging) by buying Futures and/or calls
on such Futures or on debt securities, it is possible that the market may
decline; if the Fund then concludes not to invest in such securities at
that time because of concerns as to possible further market decline or for
other reasons, the Fund will realize a loss on the hedging instruments
that is not offset by a reduction in the price of the debt securities
purchased.
-- Repurchase Agreements. In a repurchase transaction, the Fund
acquires a security from, and simultaneously resells it to, an approved
vendor (a U.S. commercial bank, the U.S. branch of a foreign bank or a
broker-dealer which has been designated a primary dealer in government
securities, which must meet the credit requirements set by the Fund's
Board of Trustees from time to time), for delivery on an agreed-upon
future date. The resale price exceeds the purchase price by an amount
that reflects an agreed-upon interest rate effective for the period during
which the repurchase agreement is in effect. The majority of these
transactions run from day to day, and delivery pursuant to resale
typically will occur within one to five days of the purchase. Repurchase
agreements are considered "loans" under the Investment Company Act,
collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in
effect, the collateral's value must equal or exceed the repurchase price
to fully collateralize the repayment obligation. Additionally, the
Manager will impose creditworthiness requirements to confirm that the
vendor is financially sound and will continuously monitor the collateral's
value.
-- Small, Unseasoned Companies. The Fund may invest in securities of
small, unseasoned companies. These are companies that have been in
operation for less than three years, even after including the operations
of any of their predecessors. Securities of these companies may have
limited liquidity (which means that the Fund may have difficulty selling
them at an acceptable price when it wants to) and the prices of these
securities may be volatile. The Fund currently intends to invest no more
than 5% of its net assets in the next year in securities of small,
unseasoned issuers.
-- Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, at least equal the market value of
the loaned securities and must consist of cash, bank letters of credit,
U.S. Government Securities, or other cash equivalents in which the Fund
is permitted to invest. To be acceptable as collateral, letters of credit
must obligate a bank to pay amounts demanded by the Fund if the demand
meets the terms of the letter. Such terms and the issuing bank must be
satisfactory to the Fund. In a portfolio securities lending transaction,
the Fund receives from the borrower an amount equal to the interest paid
or the dividends declared on the loaned securities during the term of the
loan as well as the interest on the collateral securities, less any
finders' or administrative fees the Fund pays in arranging the loan. The
Fund may share the interest it receives on the collateral securities with
the borrower as long as it realizes at least a minimum amount of interest
required by the lending guidelines established by its Board of Trustees.
The Fund will not lend its portfolio securities to any officer, trustee,
employee or affiliate of the Fund or its Manager. The terms of the Fund's
loans must meet certain tests under the Internal Revenue Code and permit
the Fund to reacquire loaned securities on five business days' notice or
in time to vote on any important matter.
-- Borrowing. From time to time, the Fund may increase its ownership
of securities by borrowing from banks on a unsecured basis and investing
the borrowed funds, subject to the restrictions stated in the Prospectus.
Any such borrowing will be made only from banks, and pursuant to the
requirements of the Investment Company Act, will be made only to the
extent that the value of that Fund's assets, less its liabilities other
than borrowings, is equal to at least 300% of all borrowings including the
proposed borrowing and amounts covering the Fund's obligations under
"forward roll" transactions. If the value of the Fund's assets so computed
should fail to meet the 300% asset coverage requirement, it is required
within three days to reduce its bank debt to the extent necessary to meet
such requirement and may have to sell a portion of its investments at a
time when independent investment judgment would not dictate such sale.
Borrowing for investment increases both investment opportunity and risk.
Since substantially all of the Fund's assets fluctuate in value, but
borrowing obligations are fixed, when the Fund has outstanding borrowings,
its net asset value per share correspondingly will tend to increase and
decrease more when portfolio assets fluctuate in value than otherwise
would be the case.
-- Illiquid and Restricted Securities. To enable the Fund to sell
restricted securities not registered under the Securities Act of 1933, the
Fund may have to cause those securities to be registered. The expenses
of registration of restricted securities may be negotiated by the Fund
with the issuer at the time such securities are purchased by the Fund, if
such registration is required before such securities may be sold publicly.
When registration must be arranged because the Fund wishes to sell the
security, a considerable period may elapse between the time the decision
is made to sell the securities and the time the Fund would be permitted
to sell them. The Fund would bear the risks of any downward price
fluctuation during that period. The Fund may also acquire, through
private placements, securities having contractual restrictions on their
resale, which might limit the Fund's ability to dispose of such securities
and might lower the amount realizable upon the sale of such securities.
The Fund has percentage limitations that apply to purchases of
restricted securities, as stated in the Prospectus. Those percentage
restrictions do not limit purchases of restricted securities that are
eligible for sale to qualified institutional purchasers pursuant to Rule
144A under the Securities Act of 1933, provided that those securities have
been determined to be liquid by the Board of Trustees of the Fund or by
the Manager under Board-approved guidelines. Those guidelines take into
account the trading activity for such securities and the availability of
reliable pricing information, among other factors. If there is a lack of
trading interest in a particular Rule 144A security, the Fund's holding
of that security may be deemed to be illiquid.
-- When-Issued and Delayed Delivery Transactions. The Fund may
purchase securities on a "when-issued" basis, and may purchase or sell
such securities on a "delayed delivery" basis. Although the Fund will
enter into such transactions for the purpose of acquiring securities for
its portfolio or for delivery pursuant to options contracts it has entered
into, the Fund may dispose of a commitment prior to settlement. "When-
issued" or "delayed delivery" refers to securities whose terms and
indenture are available and for which a market exists, but which are not
available for immediate delivery. When such transactions are negotiated,
the price (which is generally expressed in yield terms) is fixed at the
time the commitment is made, but delivery and payment for the securities
take place at a later date. The Fund does not intend to make such
purchases for speculative purposes. The commitment to purchase a security
for which payment will be made on a future date may be deemed a separate
security and involve risk of loss if the value of the security declines
prior to the settlement date. During the period between commitment by the
Fund and settlement (generally within two months but not to exceed 120
days), no payment is made for the securities purchased by the purchaser,
and no interest accrues to the purchaser from the transaction. Such
securities are subject to market fluctuation; the value at delivery may
be less than the purchase price. The Fund will segregate assets account
with its Custodian, consisting of cash, U.S. Government securities or
other high grade debt obligations at least equal to the value of purchase
commitments until payment is made.
The Fund will engage in when-issued transactions in order to secure
what is considered to be an advantageous price and yield at the time of
entering into the obligation. When the Fund engages in when-issued or
delayed delivery transactions, it relies on the buyer or seller, as the
case may be, to consummate the transaction. Failure of the buyer or
seller to do so may result in the Fund losing the opportunity to obtain
a price and yield considered to be advantageous. At the time the Fund
makes a commitment to purchase or sell a security on a when-issued or
forward commitment basis, it records the transaction and reflects the
value of the security purchased, or if a sale, the proceeds to be
received, in determining its net asset value. If the Fund chooses to (i)
dispose of the right to acquire a when-issued security prior to its
acquisition or (ii) dispose of its right to deliver or receive against a
forward commitment, it may incur a gain or loss.
To the extent the Fund engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling
securities consistent with its investment objective and policies and not
for the purposes of investment leverage. The Fund enters into such
transactions only with the intention of actually receiving or delivering
the securities, although (as noted above), when-issued securities and
forward commitments may be sold prior to settlement date. In addition,
changes in interest rates before settlement in a direction other than that
expected by the Manager will affect the value of such securities and may
cause a loss to the Fund.
When-issued transactions and forward commitments allow the Fund a
technique to use against anticipated changes in interest rates and prices.
For instance, in periods of rising interest rates and falling prices, the
Fund might sell securities in its portfolio on a forward commitment basis
to attempt to limit its exposure to anticipated falling prices. In
periods of falling interest rates and rising prices, the Fund might sell
portfolio securities and purchase the same or similar securities on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher cash yields.
-- Short Sales "Against-the-Box." In this type of short sale, while
the short position is open, the Fund must own an equal amount of
securities sold short, or by virtue of ownership of other securities have
the right, without payment of further consideration, to obtain an equal
amount of the securities sold short. Short sales against-the-box may be
made to defer, for Federal income tax purposes, recognition of gain or
loss on the sale of securities "in-the-box" until the short position is
closed out. They may also be used to protect a gain on the security "in-
the-box" when the Fund does not want to sell it and recognize a capital
gain.
Other Investment Restrictions
The Fund's most significant investment restrictions are set forth in
the Prospectus. There are additional investment restrictions that the
Fund must follow that are also fundamental policies. Fundamental
policies and the Fund's investment objectives cannot be changed without
the vote of a "majority" of the Fund's outstanding voting securities.
Under the Investment Company Act, such a "majority" vote is defined as the
vote of the holders of the lesser of: (1) 67% or more of the shares
present or represented by proxy at a shareholder meeting if the holders
of more than 50% of the outstanding shares are present, or (2) more than
50% of the outstanding shares.
Under these additional restrictions, the Fund cannot:
(1) buy or sell real estate, or commodities or commodity contracts
including futures contracts; however, the Fund may invest in debt
securities secured by real estate or interests therein or issued by
companies, including real estate investment trusts, which invest in real
estate or interests therein, and the Fund may buy and sell any of the
Hedging Instruments which it may use as approved by the Fund's Board of
Trustees, whether or not such Hedging Instrument is considered to be a
commodity or commodity contract;
(2) buy securities on margin, except that the Fund may make margin
deposits in connection with any of the Hedging Instruments which it may
use;
(3) underwrite securities issued by other persons except to the extent
that, in connection with the disposition of its portfolio investments, it
may be deemed to be an underwriter for purposes of the Securities Act of
1933;
(4) buy and retain securities of any issuer if those officers, Trustees
or Directors of the Fund or the Manager who beneficially own more than
0.5% of the securities of such issuer together own more than 5% of the
securities of such issuer;
(5) invest in oil, gas, or other mineral exploration or development
programs; or
(6) buy the securities of any company for the purpose of exercising
management control, except in connection with a merger, consolidation,
reorganization or acquisition of assets.
For purposes of the Fund's policy not to concentrate described in the
investment restrictions in the Prospectus, the Fund has adopted the
industry classifications set forth in Appendix A to this Statement of
Additional Information. This is not a fundamental policy.
How the Fund Is Managed
Organization and History. As a Massachusetts business trust, the Fund is
not required to hold, and does not plan to hold, regular annual meetings
of shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder
meeting is called by the Trustees. Shareholders have the right, upon the
declaration in writing or vote of two-thirds of the outstanding shares of
the Fund, to remove a Trustee. The Trustees will call a meeting of
shareholders to vote on the removal of a Trustee upon the written request
of the record holders of 10% of its outstanding shares. In addition, if
the Trustees receive a request from at least 10 shareholders (who have
been shareholders for at least six months) holding shares of the Fund
valued at $25,000 or more or holding at least 1% of the Fund's outstanding
shares, whichever is less, stating that they wish to communicate with
other shareholders to request a meeting to remove a Trustee, the Trustees
will then either make the Fund's shareholder list available to the
applicants or mail their communication to all other shareholders at the
applicants' expense, or the Trustees may take such other action as set
forth under Section 16(c) of the Investment Company Act.
Shares of the Fund represent an interest in the Fund proportionately
equal to the interest of each other share of the same class and entitle
the holder to one vote per share (and a fractional vote for a fractional
share) on matters submitted to their vote at shareholders' meetings.
Shareholders of the Fund and of the Trust's other series vote together in
the aggregate on certain matters at shareholders' meetings, such as the
election of Trustees and ratification of appointment of auditors for the
Trust. Shareholders of a particular series or class vote separately on
proposals which affect that series or class, and shareholders of a series
or class which is not affected by that matter are not entitled to vote on
the proposal. For example, only shareholders of a series, such as the
Fund, vote exclusively on any material amendment to the investment
advisory agreement with respect to the series. Only shareholders of a
class of a series vote on certain amendments to the Distribution and/or
Service Plans if the amendments affect that class.
The Trustees are authorized to create new series and classes of series.
The Trustees may
reclassify unissued shares of the Trust or its series or classes into
additional series or classes of shares. The Trustees may also divide or
combine the shares of a class into a greater or lesser number of shares
without thereby changing the proportionate beneficial interest of a
shareholder in the Fund. Shares do not have cumulative voting rights or
preemptive or subscription rights. Shares
may be voted in person or by proxy.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides
for indemnification and reimbursement of expenses out of its property for
any shareholder held personally liable for its obligations. The
Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a business trust (such as the
Fund) to be held personally liable as a "partner" under certain
circumstances, the risk of a Fund shareholder incurring financial loss on
account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any
shareholder of the Trust, agrees under the Trust's Declaration of Trust
to look solely to the assets of the Trust for satisfaction of any claim
or demand which may arise out of any dealings with the Trust, and the
Trustees shall have no personal liability to any such person, to the
extent permitted by law.
Trustees and Officers of the Fund. The Fund's Trustees and officers and
their principal occupations and business affiliations during the past five
years are set forth below. Each Trustee is also a Trustee, Director or
Managing General Partner of Daily Cash Accumulation Fund, Inc., Centennial
Money Market Trust, Centennial Tax Exempt Trust, Centennial Government
Trust, Centennial New York Tax Exempt Trust, Centennial California Tax
Exempt Trust, Oppenheimer Total Return Fund, Inc., Oppenheimer Equity
Income Fund, Oppenheimer Champion Income Fund, Oppenheimer High Yield
Fund, Oppenheimer Cash Reserves, Oppenheimer Variable Account Funds,
Oppenheimer Main Street Funds, Inc., Oppenheimer Integrity Funds,
Oppenheimer Strategic Funds Trust, Centennial America Fund, L.P.,
Oppenheimer Tax-Exempt Bond Fund, Oppenheimer Limited-Term Government
Fund, Oppenheimer International Bond Fund, and The New York Tax-Exempt
Income Fund, Inc. (collectively, the "Denver-based Oppenheimer funds").
Mr. Fossel is President and Mr. Swain is Chairman of each of the Denver-
based Oppenheimer funds. As of September 25, 1995, the Trustees and
officers of the Fund as a group owned of record or beneficially less than
1% of each class of shares of the Fund. The foregoing statement does not
reflect ownership of shares held of record by an employee benefit plan for
employees of the Manager (for which plan two of the officers listed below,
Messrs. Fossel and Donohue, are trustees), other than the shares
beneficially owned under that plan by the officers of the Fund listed
above.
Robert G. Avis, Trustee*, Age: 64
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G.
Edwards, Inc. (its parent holding company); Chairman of A.G.E. Asset
Management and A.G. Edwards Trust Company (its affiliated investment
adviser and trust company, respectively).
William A. Baker, Trustee; Age: 80
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Trustee; Age: 65
19411 Merion Circle, Huntington Beach, California 92648
Vice President of McDonnell Douglas Space Systems, Co.; formerly
associated with the National Aeronautics and Space Administration.
Jon S. Fossel, President and Trustee*: Age: 53
Two World Trade Center, New York, New York 10048-0203
Chairman, and a director of the Manager; President and a director of
Oppenheimer Acquisition Corp. ("OAC"), the Manager's parent holding
company; President and a director of HarbourView Asset Management
Corporation ("HarbourView"), a subsidiary of the Manager; a director of
Shareholder Services, Inc. ("SSI") and Shareholder Financial Services,
Inc. ("SFSI"), transfer agent subsidiaries of the Manager; formerly
President of the Manager.
Raymond J. Kalinowski, Trustee; Age: 66
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc.; formerly Vice Chairman
and a director of A.G. Edwards, Inc., parent holding company of A.G.
Edwards & Sons, Inc. (a broker-dealer), of which he was a Senior Vice
President.
C. Howard Kast, Trustee; Age: 73
2552 East Alameda, Denver, Colorado 80209
Formerly the Managing Partner of Deloitte, Haskins & Sells (an accounting
firm).
Robert M. Kirchner, Trustee; Age: 73
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Ned M. Steel, Trustee; Age: 80
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; Director of Visiting Nurse
Corporation of Colorado; formerly Senior Vice President and a Director of
Van Gilder Insurance Corp. (insurance brokers).
James C. Swain, Chairman and Trustee*; Age: 61
3410 South Galena Street, Denver, Colorado 80231
Vice Chairman and a director of the Manager; President and a director of
Centennial Asset Management Corporation, an investment adviser subsidiary
of the Manager ("Centennial"); formerly Chairman of the Board of SSI.
Andrew J. Donohue, Vice President; Age: 45
Two World Trade Center, New York, New York 10048-0203
Executive Vice President and General Counsel of the Manager and
Oppenheimer Funds Distributor, Inc. (the "Distributor"); an officer of
other Oppenheimer funds; formerly Senior Vice President and Associate
General Counsel of the Manager and the Distributor; formerly a Partner in
Kraft & McManimon (a law firm), prior to which he was an officer of First
Investors Corporation (a broker-dealer) and First Investors Management
Company, Inc. (broker-dealer and investment adviser) and a director and
an officer of the First Investors Family of Funds and First Investors Life
Insurance Company.
George C. Bowen, Vice President, Secretary and Treasurer; Age: 59
3410 South Galena Street Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President and
Treasurer of the Distributor and HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a director of Centennial; Vice
President, Treasurer and Secretary of SSI and SFSI; an officer of other
Oppenheimer funds.
Robert C. Doll, Jr., Senior Vice President and Portfolio Manager; Age: 41
Two World Trade Center, New York, New York 10048-0203
Executive Vice President of the Manager; an officer of other Oppenheimer
funds.
Arthur P. Steinmetz, Vice President and Portfolio Manager; Age: 36
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager; an officer of other Oppenheimer
funds.
David P. Negri, Vice President and Portfolio Manager; Age: 41
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager; an officer of other Oppenheimer funds.
Robert G. Zack, Assistant Secretary; Age: 47
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other Oppenheimer
funds.
Robert J. Bishop, Assistant Treasurer; Age: 36
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an officer
of other Oppenheimer funds; formerly a Fund Controller for the Manager,
prior to which he was an Accountant for Yale & Seffinger, P.C., an
accounting firm, and previously an Accountant and Commissions Supervisor
for Stuart James Company Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer; Age: 30
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting, an officer
of other Oppenheimer funds; previously a Fund Controller for the Manager,
prior to which he was an International Mutual Fund Supervisor for Brown
Brothers Harriman & Co. (a bank) and previously a Senior Fund Accountant
for State Street Bank & Trust Company.
__________________
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
-- Remuneration of Trustees. The officers of the Fund are
affiliated with the Manager; they and the Trustees of the Fund who are
affiliated with the Manager (Messrs. Fossel and Swain, who are both
officers and Trustees) receive no salary or fee from the Fund. The
Trustees of the Fund (excluding Messrs. Fossel and Swain) received the
total amounts shown below from all 21 of the Denver-based Oppenheimer
funds (including the Fund) listed in the first paragraph of this section,
for services in the positions shown:
<TABLE>
<CAPTION>
Total Compensation
Aggregate From All
Compensation Denver-based
Name and Position from Fund Oppenheimer funds1
<S> <C> <C>
Robert G. Avis $362 $53,000.00
Director
William A. Baker $503 $73,257.01
Audit and Review
Committee Chairman
and Director
Charles Conrad, Jr. $467 $68,293.67
Audit and Review
Committee Member
and Director
Raymond J. Kalinowski $362 $53,000.00
Director
C. Howard Kast $362 $53,000.00
Director
Robert M. Kirchner $467 $68,293.67
Audit and Review
Committee Member
and Director
Ned M. Steel $362 $53,000.00
Director
</TABLE>
______________________
1 For the 1994 calendar year.
-- Major Shareholders. As of September 25, 1995, no person owns
of record or was known by the Fund to own beneficially 5% or more of the
Fund as a whole or the Fund's outstanding Class A, Class B or Class C
shares.
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by
Massachusetts Mutual Life Insurance Company. OAC is also owned in part
by certain of the Manager's directors and officers, some of whom also
serve as officers of the Fund, and two of whom (Mr. Swain and Mr. Fossel)
serve as Trustees of the Fund.
The Manager and the Fund have a Code of Ethics. It is designed to detect
and prevent improper personal trading by certain employees, including
portfolio managers, that would compete with or take advantage of the
Fund's portfolio transactions. Compliance with the Code of Ethics is
carefully monitored and strictly enforced by the Manager.
-- The Investment Advisory Agreement. The investment advisory
agreement between the Manager and the Fund requires the Manager, at its
expense, to provide the Fund with adequate office space, facilities and
equipment, and to provide and supervise the activities of all
administrative and clerical personnel required to provide effective
corporate administration for the Fund, including the compilation and
maintenance of records with respect to its operations, the preparation and
filing of specified reports, and composition of proxy materials and
registration statements for continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the General Distributor's Agreement
are paid by the Fund. The advisory agreement lists examples of expenses
paid by the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Trustees, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs, certain
printing and registration costs and non-recurring expenses, including
litigation costs. For the Fund's fiscal years ended September 30, 1992,
1993, and 1994, the management fees paid or payable by the Fund to the
Manager were $75,665, $491,202, and $475,265, respectively. During the
fiscal year ended September 30, 1992, the Manager assumed $27,360 of the
Fund's expenses, which are not deducted from the amount shown for the
management fee, above.
The advisory agreement contains no provision limiting the Fund's
expenses. However, independently of the advisory agreement, the Manager
has undertaken that the total expenses of the Fund in any fiscal year
(including the management fee but excluding taxes, interest, brokerage
commissions, distribution assistance payments and extraordinary expenses
such as litigation costs) shall not exceed the most stringent expense
limitation imposed under state law applicable to the Fund. Pursuant to the
undertaking, the Manager's fee will be reduced at the end of a month so
that there will not be any accrued but unpaid liability under this
undertaking. Currently, the most stringent state expense limitation is
imposed by California, and limits the Fund's expenses (with specified
exclusions) to 2.5% of the first $30 million of average annual net assets,
2% of the next $70 million of average annual net assets, and 1.5% of
average annual net assets in excess of $100 million. The Manager reserves
the right to terminate or amend the undertaking at any time. Any
assumption of the Fund's expenses under this limitation would lower the
Fund's overall expense ratio and increase its total return during any
period in which expenses are limited.
The advisory agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence in the performance of its
duties, or reckless disregard for its obligations and duties under the
advisory agreement, the Manager is not liable for any loss resulting from
a good faith error or omission on its part with respect to any of its
duties thereunder. The advisory agreement permits the Manager to act as
investment adviser for any other person, firm or corporation and to use
the name "Oppenheimer" in connection with other investment companies for
which it may act as investment adviser or general distributor. If the
Manager shall no longer act as investment adviser to the Fund, the right
of the Fund to use the name "Oppenheimer" as part of its name may be
withdrawn.
-- The Distributor. Under its General Distributor's Agreement
with the Fund, the Distributor acts as the Fund's principal underwriter
in the continuous public offering of the Fund's Class A, Class B and Class
C shares, but is not obligated to sell a specific number of shares.
Expenses normally attributable to sales excluding payments (other than
those paid under the Distribution and Service Plans but including
advertising and the cost of printing and mailing prospectuses) other than
those furnished to existing shareholders, are borne by the Distributor.
During the Fund's fiscal period ended September 30, 1992, and the fiscal
years ended September 30, 1993 and September 30, 1994, the aggregate
amounts of sales charges on sales of the Fund's Class A shares were
$231,950, $841,033 and $1,699,780, respectively, of which the Distributor
and an affiliated broker retained $380,084, $213,712 and $73,286 in those
respective periods. During the Fund's fiscal year ended September 30,
1994, the contingent deferred sales charges on the Fund's Class B shares
totalled $50,191, all of which the Distributor retained. Class C shares
were not publicly offered during that period and no contingent deferred
sales charges were collected. For additional information about
distribution of the Fund's shares and the expenses connected with such
activities, please refer to "Distribution and Service Plans," below.
-- The Transfer Agent. Oppenheimer Shareholder Services, the
Fund's Transfer Agent, is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for
shareholder servicing and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager under the advisory agreement is to arrange the
portfolio transactions for the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers ("brokers") to
effect the Fund's portfolio transactions. In doing so, the Manager is
authorized by the advisory agreement to employ broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment Company
Act, as may, in its best judgment based on all relevant factors,
implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" (prompt and reliable execution at the most favorable
price obtainable) of such transactions. The Manager need not seek
competitive commission bidding but is expected to minimize the commissions
paid to the extent consistent with interest and policies of the Fund as
established by its Board of Trustees.
Under the advisory agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher
than another qualified broker would have charged if a good faith
determination is made by the Manager that the commission is fair and
reasonable in relation to the services provided. Subject to the foregoing
considerations, the Manager may also consider sales of shares of the Fund
and other investment companies managed by the Manager or its affiliates
as a factor in the selection of brokers for the Fund's portfolio
transactions.
Description of Brokerage Practices Followed by the Manager. Subject to
the provisions of the advisory agreement, and the procedures and rules
described above, allocations of brokerage are generally made by portfolio
managers of the Manager under the supervision of the Manager's executive
officers. Transactions in securities other than those for which an
exchange is the primary market are generally done with principals or
market makers. Brokerage commissions are paid primarily for effecting
transactions in listed securities or for certain fixed-income agency
transactions in the secondary market, and are otherwise paid only if it
appears likely that a better price or execution can be obtained. When the
Fund engages in an option transaction, ordinarily the same broker will be
used for the purchase or sale of the option and any transaction in the
securities to which the option relates. When possible, concurrent orders
to purchase or sell the same security by more than one of the accounts
managed by the Manager or its affiliates are combined. The transactions
effected pursuant to such combined orders are averaged as to price and
allocated in accordance with the purchase or sale orders actually placed
for each account. Option commissions may be relatively higher than those
that would apply to direct purchases and sales of portfolio securities.
Most purchases of money market instruments and debt obligations
are principal transactions at net prices. Instead of using a broker for
those transactions, the Fund normally deals directly with the selling or
purchasing principal or market maker unless it determines that a better
price or execution can be obtained by using a broker. Purchases of these
securities from underwriters include a commission or concession paid by
the issuer to the underwriter. Purchases from dealers include a spread
between the bid and asked prices. The Fund seeks to obtain prompt
execution of these orders at the most favorable net price.
The research services provided by a particular broker may be
useful only to one or more of the advisory accounts of the Manager and its
affiliates, and investment research received for the commissions of those
other accounts may be useful both to the Fund and one or more of such
other accounts. Such research, which may be supplied by a third party at
the instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid in
commission dollars. The Manager may use concessions on fixed-price
offerings to obtain research and may also use stated commissions or
secondary fixed-income agency trades to obtain research. The Board has
also permitted the Manager to use stated commissions on secondary fixed-
income agency trades to obtain research where the broker has represented
to Manager that: (i) the trade is not from or for the broker's own
inventory, (ii) the trade was executed by the broker on an agency basis
at the stated commission, and (iii) the trade is not a riskless principal
transaction.
The research services provided by brokers broadens the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and by enabling the
Manager to obtain market information for the valuation of securities held
in the Fund's portfolio or being considered for purchase. The Board of
Trustees, including the "independent" Trustees of the Fund (those Trustees
of the Fund who are not "interested persons" as defined in the Investment
Company Act, and who have no direct or indirect financial interest in the
operation of the advisory agreement or the Distribution Plans described
below) annually reviews information furnished by the Manager as to the
commissions paid to brokers furnishing such services so that the Board may
ascertain whether the amount of such commissions was reasonably related
to the value or benefit of such services.
During the Fund's fiscal period from June 1, 1992 (commencement
of operations) to September 30, 1992, and the fiscal years ended September
30, 1993 and 1994, total brokerage commissions paid by the Fund were
$11,309, $70,753 and $44,137, respectively. During the fiscal year ended
September 30, 1994, $35,678 was paid to brokers as commissions in return
for research services; the aggregate dollar amount of those transactions
was $25,173,056. The transactions giving rise to those commissions were
allocated in accordance with the Manager's internal allocation procedures.
Performance of the Fund
Yield and Total Return Information. As described in the Prospectus, from
time to time the "standardized yield," "dividend yield," "average annual
total return," "cumulative total return," "average annual total return at
net asset value" and "cumulative total return at net asset value" of an
investment in a class of shares of the Fund may be advertised. An
explanation of how these total returns are calculated for each class and
the components of those calculations is set forth below. No total return
and yield calculations are presented below for Class C because no shares
of that class were publicly issued during the Fund's fiscal year ended
September 30, 1994.
The Fund's advertisements of its performance data must, under
applicable rules of the Securities and Exchange Commission, include the
average annual total returns for each class of shares of the Fund for the
1, 5, and 10-year periods (or the life of the class, if less) ending as
of the most recently-ended calendar quarter prior to the publication of
the advertisement. This enables an investor to compare the Fund's
performance to the performance of other funds for the same periods.
However, a number of factors should be considered before using such
information as a basis for comparison with other investments. An
investment in the Fund is not insured; its returns and share prices are
not guaranteed and normally will fluctuate on a daily basis. When
redeemed, an investor's shares may be worth more or less than their
original cost. Returns for any given past period are not a prediction or
representation by the Fund of future returns. The returns of Class A,
Class B and Class C shares of the Fund are affected by portfolio quality,
the type of investments the Fund holds and its operating expenses
allocated to the particular class.
-- Standardized Yields.
-- Yield. The Fund's "yield" (referred to as "standardized
yield") for a given 30-day period for a class of shares is calculated
using the following formula set forth in rules adopted by the Securities
and Exchange Commission that apply to all funds (other than money market
funds) that quote yields:
a-b 6
Standardized Yield = 2 ((------ + 1) - 1)
cd
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class outstanding
during the 30-day period that were entitled to receive
dividends.
d = the maximum offering price per share of that class on the
last day of the period, adjusted for undistributed net
investment income.
The standardized yield of a class of shares for a 30-day period
may differ from its yield for any other period. The SEC formula assumes
that the standardized yield for a 30-day period occurs at a constant rate
for a six-month period and is annualized at the end of the six-month
period. This standardized yield is not based on actual distributions paid
by the Fund to shareholders in the 30-day period, but is a hypothetical
yield based upon the net investment income from the Fund's portfolio
investments calculated for that period. The standardized yield may differ
from the "dividend yield" of that class, described below. Additionally,
because each class of shares is subject to different expenses, it is
likely that the standardized yields of the Fund's classes of shares will
differ. For the 30-day period ended September 30, 1994, the standardized
yields for the Fund's Class A and Class B shares were 4.79% and 4.45%,
respectively.
-- Dividend Yield and Distribution Return. From time to time
the Fund may quote a "dividend yield" or a "distribution return" for each
class. Dividend yield is based on the dividends paid on shares of a class
from net investment income during a stated period. Distribution return
includes dividends derived from net investment income and from realized
capital gains declared during a stated period. Under those calculations,
the dividends and/or distributions for that class declared during a stated
period of one year or less (for example, 30 days) are added together, and
the sum is divided by the maximum offering price per share of that class
on the last day of the period. When the result is annualized for a period
of less than one year, the "dividend yield" is calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
- ----------------------------------------------------
Max Offering Price of the Class (last day of period)
Divided by number of days (accrual period) x 365
The maximum offering price for Class A shares includes the
maximum front-end sales charge. For Class B and Class C shares, the
maximum offering price is the net asset value per share without
considering the effect of contingent deferred sales charges.
From time to time similar yield or distribution return
calculations may also be made using the Class A net asset value (instead
of its respective maximum offering price) at the end of the period. The
dividend yields on Class A shares for the 30-day period ended September
30, 1994, were 5.37% and 5.64% when calculated at maximum offering price
and at net asset value, respectively. The dividend yield on Class B
shares for the 30-day period ended September 30, 1994 was 5.43% when
calculated at net asset value.
-- Total Return Information.
-- Average Annual Total Returns. The "average annual total
return" of each class is an average annual compounded rate of return for
each year in a specified number of years. It is the rate of return based
on the change in value of a hypothetical initial investment of $1,000 ("P"
in the formula below) held for a number of years ("n") to achieve an
Ending Redeemable Value ("ERV") of that investment, according to the
following formula:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
-- Cumulative Total Returns. The cumulative "total return"
calculation measures the change in value of a hypothetical investment of
$1,000 over an entire period of years. Its calculation uses some of the
same factors as average annual total return but it does not average the
rate of return on an annual basis. Cumulative total return is determined
as follows:
ERV - P
- ------- = Total Return
P
In calculating total returns for Class A shares, the current
maximum sales charge of 4.75% (as a percentage of the offering price) is
deducted from the initial investment ("P") (unless the return is shown at
net asset value, as described below). For Class B shares, payment of a
contingent deferred sales charge of 5.0% for the first year, 4.0% for the
second year, 3.0% for the third and fourth years, 2.0% for the fifth year
and 1.0% for the sixth year, and none thereafter, is applied, as described
in the Prospectus. For Class C shares, the payment of the 1% contingent
deferred sales charge for the first 12 months is applied, as described in
the prospectus. Total returns also assume that all dividends and capital
gains distributions during the period are reinvested to by additional
shares, at net asset value per share, and that the investment is redeemed
at the end of the period. The average annual total returns on an
investment in Class A shares for the fiscal year ended September 30, 1994,
and for the period June 1, 1992 (commencement of operations) to September
30, 1994, were (4.97)% and 2.21%, respectively. The average annual total
returns on an investment in Class B shares for the fiscal year ended
September 30, 1994, and for the period November 30, 1992 (inception of the
class) to September 30, 1994 were (5.84)% and 0.42%, respectively. The
cumulative total return on Class A shares for the period June 1, 1992
(commencement of operations) through September 30, 1994 was 5.23%. The
cumulative total return on Class B shares for the period November 30, 1992
through September 30, 1994 was 0.77%.
-- Total Returns At Net Asset Value. From time to time the Fund
may also quote an average annual total return at net asset value or a
cumulative total return at net asset value for Class A, Class B or Class
C shares. Each is based on the difference in net asset value per share
at the beginning and the end of the period for a hypothetical investment
in that class of shares (without considering front-end or contingent
deferred sales charges) and takes into consideration the reinvestment of
dividends and capital gains distributions. The cumulative total return
at net asset value on the Fund's Class A shares for the fiscal year ended
September 30, 1994, was (0.23)%. The average annual total return at net
asset value for the period June 1, 1992 (commencement of operations) to
September 30, 1994, for Class A shares was 4.37%. The average annual
total returns at net asset value for Class B shares for the fiscal year
ended September 30, 1994 and for the period November 30, 1992 (inception
of that class) to September 30, 1994 were (1.17)% and 2.49%, respectively.
Total return information may be useful to investors in reviewing
the performance of the Fund's Class A, Class B or Class C shares.
However, when comparing total return of an investment in Class A or Class
B shares of the Fund, a number of factors should be considered before
using such information as a basis for comparison with other investments.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its Class A, Class B or Class C shares by Lipper Analytical
Services, Inc. ("Lipper"), a widely-recognized independent service.
Lipper monitors the performance of regulated investment companies,
including the Fund, and ranks their performance for various periods based
on categories relating to investment objectives. The performance of the
Fund is ranked against (i) all other funds, (ii) all other "growth and
income" funds, and (iii) all other fixed-income funds, excluding money
market funds. The Lipper performance rankings are based on total returns
that include the reinvestment of capital gains distributions and income
dividends but do not take sales charges or taxes into consideration.
From time to time, the Fund may include in its advertisements and
sales literature performance information about the Fund cited in other
newspapers and periodicals, such as The New York Times, which may include
performance quotations from other sources, including Lipper.
From time to time the Fund may publish the ranking of the
performance of its Class A, Class B or Class C shares by Morningstar,
Inc., an independent mutual fund monitoring service, that ranks mutual
funds, including the Fund, monthly in broad investment categories (equity,
taxable bond, municipal bond and hybrid) based on risk-adjusted investment
return. Investment return measures a fund's three, five and ten-year
average annual total returns (when available) in excess of 90-day U.S.
Treasury bill returns after considering sales charges and expenses. Risk
reflects fund performance below 90-day U.S. Treasury bill monthly returns.
Risk and return are combined to produce star rankings reflecting
performance relative to the average fund in a fund's category. Five stars
is the "highest" ranking (top 10%), four stars is "above average" (next
22.5%), three stars is "average" (next 35%), two stars is "below average"
(next 22.5%) and one star is "lowest" (bottom 10%). Morningstar ranks the
Fund in relation to other hybrid funds. Rankings are subject to change.
The total return on an investment in the Fund's Class A, Class
B or Class C shares may be compared with the performance for the same
period of one or more of the following indices: the Consumer Price Index,
the Salomon Brothers World Government Bond Index, the Salomon Brothers
High Grade Corporate Bond Index, the Lehman Government/Corporate Bond
Index, the Lehman Brothers Aggregate Bond Index, the Standard & Poor's 500
Index and the J.P. Morgan Government Bond Index. The Consumer Price Index
is generally considered to be a measure of inflation. The Salomon
Brothers World Government Bond Index generally represents the performance
of government debt securities of various markets throughout the world,
including the United States. The Salomon Brothers High Grade Corporate
Bond Index generally represents the performance of high grade long-term
corporate bonds, and the Lehman Brothers Government/Corporate Bond Index
generally represents the performance of intermediate and long-term
government and investment grade corporate debt securities. The Lehman
Brothers Aggregate Bond Index generally represents the performance of the
general fixed-rate investment grade debt market. The Standard & Poor's
500 Index is widely recognized as a general measure of stock performance.
The J.P. Morgan Government Bond Index generally represents the performance
of government bonds issued by various countries including the United
States. Each index includes a factor for the reinvestment of interest but
does not reflect expenses or taxes. The performance of the Fund's Class
A, Class B or Class C shares may also be compared in publications to (i)
the performance of various market indices or to other investments for
which reliable performance data is available, and (ii) to averages,
performance rankings or other benchmarks prepared by recognized mutual
fund statistical services.
Investors may also wish to compare the Fund's Class A, Class B
or Class C return to the returns on fixed income investments available
from banks and thrift institutions, such as certificates of deposit,
ordinary interest-paying checking and savings accounts, and other forms
of fixed or variable time deposits, and various other instruments such as
Treasury bills. However, the Fund's returns and share price are not
guaranteed by the FDIC or any other agency and will fluctuate daily, while
bank depository obligations may be insured by the FDIC and may provide
fixed rates of return, and Treasury bills are guaranteed as to principal
and interest by the U.S. government.
From time to time, the Fund's Manager may publish rankings or
ratings of the Manager (or Transfer Agent) or the investor services
provided by them to shareholders of the Oppenheimer funds, other than
performance rankings of the Oppenheimer funds themselves. Those ratings
or rankings of shareholder/investor services by third parties may compare
the OppenheimerFunds' services to those of other mutual fund families
selected by the rating or ranking services and may be based upon the
opinions of the rating or ranking service itself, based on its research
or judgment, or based upon surveys of investors, brokers, shareholders or
others.
Distribution and Service Plans
The Fund has adopted a Service Plan for its Class A shares and
Distribution and Service Plans for its Class B and Class C shares under
Rule 12b-1 of the investment Company Act pursuant to which the Fund will
make payments to the Distributor in connection with the servicing and/or
distribution of the shares of each class, as described in the Prospectus.
Each Plan has been approved by the vote of (i) the Board of Trustees of
the Fund, including a majority of the Independent Trustees, as required
by the Rule, and (ii) the holders of a "majority" (as defined in the
Investment Company Act) of the shares of each class. For the Distribution
and Service Plan for Class C shares, that required shareholder vote was
cast by the Manager as the sole shareholder of Class C shares at that
time.
The Class A and Class B Plans are "reimbursement-type" Plans,
which means that they provide for the reimbursement of the distributor's
actual expenses incurred in connection with the service/and or
distribution of the Fund's shares of those classes. The Class C Plan is
a "compensation-type" plan, which means that it provides for the
compensation of the distributor for the service and distribution of the
Fund's shares of that class.
Each plan provides for the payment of a Service Fee which the
Distributor may pay to brokers, dealers and other persons or entities
("Recipients") for providing personal services and account maintenance
services to accounts and shareholders that hold shares of the Fund. The
Service Fee is described more fully below under Class A Plan. The Class
B and Class C Plans also provide for the payment of an asset-based sales
charge of up to 0.75% of the average annual net assets of Class B and
Class C shares, respectively. Asset-based sales charge payments are
designed to permit an investor to purchase Class B or Class C shares of
the Fund without the payment of a front-end sales load and at the same
time permit the Distributor to compensate Recipients in connection with
the sale of those shares. The asset-based sales charges are described
more fully below under Class B Plan and Class C Plan.
Under each Plan, the Manager and the Distributor, in their sole
discretion, may from time to time use their own resources, at no cost to
the Fund, to make payments to Recipients for distribution and
administrative services they perform. In the case of the Manager, those
payments may be made from profits from the advisory fee it receives from
the Fund. The Distributor and the Manager may in their sole discretion
increase or decrease the amount of these payments. Under each Plan, the
Fund's Board of Trustees may change the amount paid to a Recipient, but
may not permit payment of an amount in excess of the maximum payment set
forth above. The Board may establish minimum assets levels to be held by
a Recipient, and may also establish a minimum holding period for
Recipients in each case to entitle a Recipient to receive any payments
under a Plan. The Board of Trustees has established the payment level at
the maximum provided for in each Plan and has not set any minimum holding
periods or minimum asset levels.
All payments under the Class B and Class C Plans are subject to
the limitations imposed by the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. on payments of asset-based sales
charges and Service Fees.
While the plans are in effect, the Treasurer of the Fund must
provide separate written reports to the Fund's Board of Trustees at least
quarterly describing the amount of payments made pursuant to each Plan and
the purposes for which the payments were made. The Class B report also
must include the Distributor's distribution costs for the quarter, and
such costs for previous quarters that have been carried forward. The
Class A and Class B reports also must include the identity of each
Recipient that received any payment. These reports are subject to the
review and approval of the Independent Trustees.
A Plan may be terminated at any time by the vote of a majority
of the Independent Trustees or by a vote of the holders of a "majority"
(as defined by the Investment Company Act) of the outstanding voting
securities of that Class. No amendment to a Plan which increases
materially the amount to be paid under the Plan may be made unless the
amendment is approved by the shareholders of the class affected by the
amendment. All material amendments must be approved by the Board of
Trustees. Unless terminated earlier, each Plan continues in effect from
year to year but only so long as its continuance is specifically approved
at least annually by the Fund's Board of Trustees and its Independent
Trustees by a vote cast in person at a meeting called for the purpose of
voting on such continuance. For the fiscal year ended September 30, 1994,
payments under the Plan for Class A shares totaled $118,925, all of which
was paid by the Distributor to Recipients including $14,477 that was paid
to an affiliate of the Distributor. Payments made under the Class B Plan
during the fiscal year ended September 30, 1994 totalled $149,517, all
paid by the Distributor to Recipients, including $1,013 paid to a dealer
affiliated with the Distributor. No payments have been made under the
Class C Plan during that period as no Class C shares were outstanding
during that fiscal year.
Class A Plan
The Class A Plan provides for the payment of a Service Fee, not
to exceed 0.25% of the average annual net assets of the class.
Class B Plan
The Class B Plan provides for the payment of a Service Fee of up
to 0.25% of the annual net assets of each class. This Service Fee is
virtually identical to the Service Fee described in Class A Plan above.
The Class B Plan allows the Service Fee payments made by the Distributor
to be paid to Recipients in advance for the first year such shares are
outstanding, and thereafter on a quarterly basis based in the average
daily net asset value of shares held in accounts at Recipients or by their
customers, as described in the Prospectus. Although the Class B Plan does
not require the Distributor to make these advance payments, the
Distributor presently intends to pay the Service Fee to Recipients in this
manner. An exchange of shares does not entitle a Recipient to an advance
Service Fee payment. If shares are redeemed during the first year they
are outstanding, the Recipient is obligated to repay to the Distributor
a pro rata portion of the advance payment for those shares.
The Class B Plan also provides for the payment of an asset-based
sales charge of up to 0.75% of the annual net assets of the Class B
shares. The asset-based sales charge paid to the Distributor under the
Class B Plan is intended to allow the Distributor to recoup the cost of
sales commission paid to authorized Recipients at the time of sale, plus
financing costs.
The Class B Plan provides that the Fund may reimburse the
Distributor for its distribution expenses in connection with the
distribution of Class B shares which include sales commissions and Service
Fees paid to Recipients, financing costs with respect to distribution
payments, compensation and expenses of personnel employed by the
Distributor to support distribution of Class B shares, and the costs of
sales literature, advertising and prospectuses (other than those furnished
to current shareholders) and state "blue sky" expenses.
The Distributor's actual Class B distribution expenses for any
given year may exceed the aggregate of payments received under the Class
B Plan and from recoveries of contingent deferred sales charges. The
Distributor anticipates that it will take a number of years for it to
recoup its Class B distriubtion expenses. The Class B Plan allows such
expenses to be carried forward and paid in future years. The Class B
shares will be charged only for interest expenses, carrying charges or
other financing costs that are directly related to the carry forward of
actual distribution expenses.
Class C Plan
The Class C Plan provides for the payment of a Service Fee of up
to 0.25% of the annual net assets of each class. This Service Fee is
virtually identical to the Service Fee described in Class A Plan above.
The Class C Plan allows the Service Fee payments made by the Distributor
to be paid to Recipients in advance for the first year such shares are
outstanding, and thereafter on a quarterly basis based on the average
daily net asset value of shares held in accounts at Recipients or by their
customers, as described in the Prospectus. Although the Class C Plan does
not require the Distributor to make these advance payments, the
Distributor presently intends to pay the Service Fee to Recipients in this
manner. An exchange of shares does not entitle a Recipient to an advance
Service Fee payment. If shares are redeemed during the first year they
are outstanding, the Recipient is obligated to repay to the Distributor
a pro rata portion of the advance payment for those shares.
The Class C Plan also provides for the payment of an asset-based
sales charge of 0.75% of the annual net assets of the Class B shares. The
Class C Plan provides for the Distributor to be compensated at a flat
rate, whether the Distributor's distribution expenses are more or less
that the amount paid by the Fund.
The Distributor's services to the Class C shareholders of the
Fund include paying sales commissions and Service Fee payments to
Recipients, providing personnel to support distribution of shares, and
bearing other costs of distribution including the costs of sales
literature, advertising and prospectuses (other than those furnished to
current shareholders) and state "blue sky" expenses.
The Class C asset-based sales charge paid during the first year
is retained by the Distributor and thereafter paid to the Recipient as an
ongoing commission on Class C shares that have been outstanding for a year
or more.
<PAGE>
About Your Account
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits an investor to choose the
method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor
expects to hold shares and other relevant circumstances. 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 Class A shares. Any
salesperson or other person entitled to receive compensation for selling
Fund shares may receive different compensation with respect to one class
of shares than another. The Distributor will not accept any order for
$500,000 or $1 million or more of Class B or Class C shares, respectively,
on behalf of a single investor (not including dealer "street name" or
omnibus accounts) because generally it will be more advantageous for that
investor to purchase Class A shares of the Fund instead.
The three classes of shares each represent an interest in the
same portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B and Class C shares and the dividends payable on Class B and Class C
shares will be reduced by incremental expenses borne solely by that class,
including the asset-based sales charge to which Class B and Class C shares
are subject.
The conversion of Class B shares to Class A shares after six
years is subject to the continuing availability of a private letter ruling
from the Internal Revenue Service, or an opinion of counsel or tax
adviser, to the effect that the conversion of B shares does not constitute
a taxable event for the holder under Federal income tax law. If such a
revenue ruling or opinion is no longer available, the automatic conversion
feature may be suspended, in which event no further conversions of Class
B shares would occur while such suspension remained in effect. Although
Class B shares could then be exchanged for Class A shares on the basis of
relative net asset value of the two classes, without the imposition of a
sales charge or fee, such exchange could constitute a taxable event for
the holder, and absent such exchange, Class B shares might continue to be
subject to the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends
and distributions of the Fund's Class A, Class B and Class C shares
recognizes two types of expenses. General expenses that do not pertain
specifically to any class are allocated pro rata to the shares of each
class, based on the percentage of the net assets of such class to the
Fund's total assets, and then equally to each outstanding share within a
given class. Such general expenses include (i) management fees, (ii)
legal, bookkeeping and audit fees, (iii) printing and mailing costs of
shareholder reports, Prospectuses, Statements of Additional Information
and other materials for current shareholders, (iv) fees to unaffiliated
Trustees, (v) custodian expenses, (vi) share issuance costs, (vii)
organization and start-up costs, (viii) interest, taxes and brokerage
commissions, and (ix) non-recurring expenses, such as litigation costs.
Other expenses that are directly attributable to a class are allocated
equally to each outstanding share within that class. Such expenses
include (i) Distribution Plan fees, (ii) incremental transfer and
shareholder servicing agent fees and expenses, (iii) registration fees and
(iv) shareholder meeting expenses, to the extent that such expenses
pertain to a specific class rather than to the Fund as a whole.
Determination of Net Asset Value Per Share. The net asset values per
share of Class A, Class B and Class C shares of the Fund are determined
as of the close of business of The New York Stock Exchange (the
"Exchange") on each day that the Exchange is open, by dividing the value
of the Fund's net assets attributable to a class by the number of shares
of that class that are outstanding. The Exchange normally closes at 4:00
P.M., New York time, but may close earlier on some days (for example, in
case of weather emergencies or on days falling before a holiday). The
Exchange's most recent annual holiday schedule (which is subject to
change) states that it will close on New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. It may also close on other days. Dealers may conduct
trading at times when the Exchange is closed (including weekends and
holidays). The Fund may invest a substantial portion of its assets in
foreign securities primarily listed on foreign exchanges or in foreign
over-the-counter markets that may trade on Saturdays or customary U.S.
business holidays on which the Exchange is closed. Because the Fund's net
asset values will not be calculated on those days, the Fund's net asset
value per share may be significantly affected on such days when
shareholders may not purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally as follows: (i) equity
securities traded on a securities exchange or on NASDAQ for which last
sale information is regularly reported are valued at the last reported
sale price on their primary exchange or NASDAQ that day (or, in the
absence of sales that day, at values based on the last sales prices of the
preceding trading day, or closing bid and asked prices); (ii) securities
actively traded on a foreign securities exchange are valued at the last
sales price available to the pricing service approved by the Fund's Board
of Trustees or to the Manager as reported by the principal exchange on
which the security is traded; (iii) unlisted foreign securities or listed
foreign securities not actively traded are valued as in (i) above, if
available, or at the mean between "bid" and "asked" prices obtained from
active market makers in the security on the basis of reasonable inquiry;
(iv) long-term debt securities having a remaining maturity in excess of
60 days are valued at the mean between the "bid and "asked" prices
determined by a portfolio pricing service approved by the Fund's Board of
Trustees or obtained form active market makers in the security on the
basis of reasonable inquiry; (v) debt instruments having a maturity of
more than one year when issued, and non-money market type instruments
having a maturity of one year or less when issued,which have a remaining
maturity of 60 days or less are valued at the mean between the "bid" and
"asked" prices determined by a pricing service approved by the Fund's
Board of Trustees or obtained from active market makers in the security
on the basis of reasonable inquiry; (vi) money market-type debt securities
having a maturity of less than one year when issued that have a remaining
maturity of 60 days or less are valued at cost, adjusted for amortization
of premiums and accretion of discounts; and (vii) securities (including
restricted securities) not having readily-available market quotations are
valued at fair value under the Board's procedures.
Trading in securities on European and Asian exchanges and over-
the-counter markets is normally completed before the close of The New York
Stock Exchange. Events affecting the values of foreign securities traded
in stock markets that occur between the time their prices are determined
and the close of the Exchange will not be reflected in the Fund's
calculation of net asset value unless the Board of Trustees or the
Manager, under procedures established by the Board of Trustees, determines
that the particular event would materially affect the Fund's net asset
value, in which case an adjustment would be made, if necessary. Foreign
currency will be valued as close to the time fixed for the valuation date
as is reasonably practicable. The values of securities denominated in
foreign currency will be converted to U.S. dollars at the prevailing rates
of exchange at the time of valuation.
In the case of U.S. Government Securities, mortgage-backed
securities and corporate bonds, when last sale information is not
generally available, such pricing procedures may include "matrix"
comparisons to the prices for comparable instruments on the basis of
quality, yield, maturity, and other special factors involved. The Fund's
Board of Directors has authorized the Manager to employ a pricing service
to price U.S. Government Securities, mortgage-backed securities, and
foreign government and corporate bonds. The Directors will monitor the
accuracy of such pricing services by comparing prices used for portfolio
evaluation to actual sales prices of selected securities.
Puts, calls and Futures held by the Fund are valued at the last
sales price on the principal exchange on which they are traded, or on
NASDAQ, as applicable as determined by a pricing service approved by the
Board of Directors or by the Manager, or, if there are no sales that day,
in accordance with (i), above. Forward currency contracts are valued at
the closing price on the London foreign exchange market as provided by a
reliable bank, dealer or pricing service. When the Fund writes an option,
an amount equal to the premium received by the Fund is included in the
Fund's Statement of Assets and Liabilities as an asset, and an equivalent
deferred credit is included in the liability section. The deferred credit
is adjusted ("marked-to-market") to reflect the current market value of
the option. In determining the Fund's gain on investments, if a call
written by the Fund is exercised, the proceeds are increased by the
premium received. If a call or put written by the Fund expires, the Fund
has a gain in the amount of the premium; if the Fund enters into a closing
purchase transaction, it will have a gain or loss depending on whether the
premium was more or less than the cost of the closing transaction. If
the Fund exercises a put it holds, the amount the Fund receives on its
sale of the underlying investment is reduced by the amount of premium paid
by the Fund.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25.00. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
transfer to buy shares. Dividends will begin to accrue on shares
purchased by the proceeds of ACH transfers on the business day the Fund
receives Federal Funds for the purchase through the ACH system before the
close of The New York Stock Exchange. The Exchange normally closes at
4:00 P.M., but may close earlier on certain days. If Federal Funds are
received on a business day after the close of the Exchange, the shares
will be purchased and dividends will begin to accrue on the next regular
business day. The proceeds of ACH transfers are normally received by the
Fund 3 days after the transfers are initiated. The Distributor and the
Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Right of Accumulation
and Letters of Intent because of the economies of sales efforts and
expenses realized by the Distributor, dealers and brokers making such
sales. No sales charge is imposed in certain circumstances described in
the Prospectus because the Distributor or dealer or broker incurs little
or no selling expenses. The term "immediate family" refers to one's
spouse, children, grandchildren, grandparents, parents, parents-in-law,
sons- and daughters-in-law, siblings, a sibling's spouse and a spouse's
siblings.
-- The Oppenheimer Funds. The OppenheimerFunds are those mutual
funds for which the Distributor acts as the distributor or the sub-
distributor and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
<PAGE>
Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund
Oppenheimer U.S. Government Trust
Oppenheimer Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer International Bond Fund
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
<PAGE>
There is an initial sales charge on the purchase of Class A
shares of each of the Oppenheimer funds except Money Market Funds (under
certain circumstances described herein, redemption proceeds of Money
Market Fund shares may be subject to a contingent deferred sales charge).
-- Letters of Intent. A Letter of Intent (referred to as a
"Letter") is an investor's statement in writing to the Distributor of the
intention to purchase Class A shares, or Class A and Class B shares of the
Fund (and other Oppenheimer funds during a 13-month period (the "Letter
of Intent period"), which may, at the investor's request, include
purchases made up to 90 days prior to the date of the Letter. The Letter
states the investor's intention to make the aggregate amount of purchases
of shares which, when added to the investor's holdings of shares of those
funds, will equal or exceed the amount specified in the Letter. Purchases
made by reinvestment of dividends or distributions of capital gains and
purchases made at net asset value without sales charge do not count toward
satisfying the amount of the Letter. A Letter enables an investor to
count the Class A and Class B shares purchased under the Letter to obtain
the reduced sales charge rate on purchases of Class A shares of the Fund
(and other Oppenheimer funds) that applies under the Right of Accumulation
to current purchases of Class A shares.
Each purchase of Class A shares under the Letter will be made at
the public offering price (including the sales charge) that applies to a
single lump-sum purchase of shares in the amount intended, to be purchased
under the Letter.
In submitting a Letter, the investor makes no commitment to
purchase shares, but if the investor's purchases of shares within the
Letter of Intent period, when added to the value (at offering price) of
the investor's holdings of shares on the last day of that period, do not
equal or exceed the intended purchase amount, the investor agrees to pay
the additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow," below (as those terms may be amended from time
to time). The investor agrees that shares equal in value to 5% of the
intended purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be bound by
the terms of the Prospectus, this Statement of Additional Information and
the Application used for such Letter of Intent, and if such terms are
amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer funds
by OppenheimerFunds prototype 401(k) plans under a Letter of Intent, the
Transfer Agent will not hold shares in escrow. If the intended purchase
amount under the letter entered into by an OppenheimerFunds prototype
401(k) plan is not purchased by the plan by the end of the Letter of
Intent period, there will be no adjustment of commissions paid to the
broker-dealer or financial institution of record for accounts held in the
name of that plan.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended purchase amount, the
commissions previously paid to the dealer of record for the account and
the amount of sales charge retained by the Distributor will be adjusted
to the rates applicable to actual purchases. If total eligible purchases
during the Letter of Intent period exceed the intended purchase amount and
exceed the amount needed to qualify for the next sales charge rate
reduction set forth in the applicable prospectus, the sales charges paid
will be adjusted to the lower rate, but only if and when the dealer
returns to the Distributor the excess of the amount of commissions allowed
or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the investor's
account at the net asset value per share in effect on the date of such
purchase, promptly after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to advise the Distributor about the Letter
in placing any purchase orders for the investor during the Letter of
Intent period. All of such purchases must be made through the
Distributor.
-- Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in value
up to 5% of the intended purchase amount specified in the Letter shall be
held in escrow by the Transfer Agent. For example, if the intended
purchase amount is $50,000, the escrow shall be shares valued in the
amount of $2,500 (computed at the public offering price adjusted for a
$50,000 purchase). Any dividends and capital gains distributions on the
escrowed shares will be credited to the investor's account.
2. If the intended purchase amount specified under the Letter
is completed within the thirteen-month Letter of Intent period, the
escrowed shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period
the total purchases pursuant to the Letter are less than the intended
purchase amount specified in the Letter, the investor must remit to the
Distributor an amount equal to the difference between the dollar amount
of sales charges actually paid and the amount of sales charges which would
have been paid if the total amount purchased had been made at a single
time. Such sales charge adjustment will apply to any shares redeemed
prior to the completion of the Letter. If such difference in sales
charges is not paid within twenty days after a request from the
Distributor or the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares necessary
to realize such difference in sales charges. Full and fractional shares
remaining after such redemption will be released from escrow. If a
request is received to redeem escrowed shares prior to the payment of such
additional sales charge, the sales charge will be withheld from the
redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes
and appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of a Letter) include (a)
Class A shares sold with a front-end sales charge or subject to a Class
A contingent deferred sales charge, (b) Class B shares acquired subject
to a contingent deferred sales charge, and (c) Class A or B shares
acquired in exchange for either (i) Class A shares of one of the other
Oppenheimer funds that were acquired subject to a Class A initial or
contingent deferred sales charge or (ii) Class B shares of one of the
other Oppenheimer funds that were acquired subject to a contingent
deferred sales charge.
6. Shares held in escrow hereunder will automatically be
exchanged for shares of another fund to which an exchange is requested,
as described in the section of the Prospectus entitled "How to Exchange
Shares," and the escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Cash Reserves to use those
accounts for monthly automatic purchases of shares of up to four other
Eligible Funds.
There is a sales charge on the purchase of certain Eligible
Funds. An application (available from the Distributor), completed and
returned, and a prospectus of the selected fund(s) should be obtained from
the Distributor or your financial advisor before initiating Asset Builder
payments. The amount of the Asset Builder investment may be changed or
the automatic investments may be terminated at any time by writing to the
Transfer Agent. A reasonable period (approximately 15 days) is required
after the Transfer Agent's receipt of such instructions to implement them.
The Fund reserves the right to amend, suspend, or discontinue offering
such plans at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset value of the
Fund's shares on the cancellation date is less than on the purchase date.
That loss is equal to the amount of the decline in the net asset value per
share multiplied by the number of shares in the purchase order. The
investor is responsible for that loss. If the investor fails to
compensate the Fund for the loss, the Distributor will do so. The Fund
may reimburse the Distributor for that amount by redeeming shares from any
account registered in that investor's name, or the Fund or the Distributor
may seek other redress.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
-- Involuntary Redemptions. The Fund's Board of Trustees has the
right to cause the involuntary redemption of the shares held in any
account if the aggregate net asset value of those shares is less than $200
or such lesser amount as the Board may fix. The Board of Trustees will
not cause the involuntary redemption of shares in an account if the
aggregate net asset value of the shares has fallen below the stated
minimum solely as a result of market fluctuations. Should the Board elect
to exercise this right, it may also fix, in accordance with the Investment
Company Act, the requirements for any notice to be given to the
shareholders in question (not less than 30 days), or the Board may set
requirements for granting permission to the Shareholder to increase the
investment, and set other terms and conditions so that the shares would
not be involuntarily redeemed.
-- Payments "In Kind". The Prospectus states that payment for
shares tendered for redemption is ordinarily made in cash. However, the
Board of Trustees of the Fund may determine that it would be detrimental
to the best interests of the remaining shareholders of the Fund to make
payment of a redemption order wholly or partly in cash. In that case the
Fund may pay the redemption proceeds in whole or in part by a distribution
"in kind" of securities from the portfolio of the Fund, in lieu of cash,
in conformity with applicable rules of the Securities and Exchange
Commission. The Fund has elected to be governed by Rule 18f-1 under the
Investment Company Act, pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets
of the Fund during any 90-day period for any one shareholder. If shares
are redeemed in kind, the redeeming shareholder might incur brokerage or
other costs in selling the securities for cash. The method of valuing
securities used to make redemptions in kind will be the same as the method
the Fund uses to value its portfolio securities described above under
"Determination of Net Asset Values Per Share" and that valuation will be
made as of the time the redemption price is determined.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of (i) Class A shares,
or (ii) Class B shares that were subject to the Class B contingent
deferred sales charge when redeemed. The reinvestment may be made without
sales charge only in Class A shares of the Fund or any of the other
Oppenheimer funds into which shares of the Fund are exchangeable as
described below, at the net asset value next computed after the Transfer
Agent receives the reinvestment order. The Reinvestment Privilege does
not apply to Class C shares. The shareholder must ask the Distributor for
that privilege at the time of reinvestment. Any capital gain that was
realized when the shares were redeemed is taxable, and reinvestment will
not alter any capital gains tax payable on that gain. If there has been
a capital loss on the redemption, some or all of the loss may not be tax
deductible, depending on the timing and amount of the reinvestment. Under
the Internal Revenue Code, if the redemption proceeds of Fund shares on
which a sales charge was paid are reinvested in shares of the Fund or
another of the Oppenheimer funds within 90 days of payment of the sales
charge, the shareholder's basis in the shares of the Fund that were
redeemed may not include the amount of the sales charge paid. That would
reduce the loss or increase the gain recognized from the redemption.
However, in that case the sales charge would be added to the basis of the
shares acquired by the reinvestment of the redemption proceeds. The Fund
may amend, suspend or cease offering this reinvestment privilege at any
time as to shares redeemed after the date of such amendment, suspension
or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of any class at the time of transfer to
the name of another person or entity (whether the transfer occurs by
absolute assignment, gift or bequest, not involving, directly or
indirectly, a public sale). The transferred shares will remain subject
to the contingent deferred sales charge, calculated as if the transferee
shareholder had acquired the transferred shares in the same manner and at
the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the
account would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus under
"How to Buy Shares" for the imposition of the Class B and Class C
contingent deferred sales charges will be followed in determining the
order in which shares are transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, 401(k) plans,
pension or profit-sharing should be addressed to "Trustee,
OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its address
listed in "How To Sell Shares" in the Prospectus or on the back cover of
this Statement of Additional Information. The request must: (i) state the
reason for the distribution; (ii) state the owner's awareness of tax
penalties if the distribution is premature; and (iii) conform to the
requirements of the plan and the Fund's other redemption requirements.
Participants (other than self-employed persons maintaining a plan account
in their own name) in OppenheimerFunds-sponsored prototype pension or
profit-sharing or 401 (k) plans may not directly redeem or exchange shares
held for their account under those plans. The employer or plan
administrator must sign the request. Distributions from pension and
profit sharing plans are subject to special requirements under the
Internal Revenue Code and certain documents (available from the Transfer
Agent) must be completed before the distribution may be made.
Distributions from retirement plans are subject to withholding
requirements under the Internal Revenue Code, and IRS Form W-4P (available
from the Transfer Agent) must be submitted to the Transfer Agent with the
distribution request, or the distribution may be delayed. Unless the
shareholder has provided the Transfer Agent with a certified tax
identification number, the Internal Revenue Code requires that tax be
withheld from any distribution even if the shareholder elects not to have
tax withheld. The Fund, the Manager, the Distributor, the Trustee and the
Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not
be responsible for any tax penalties assessed in connection with a
distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price per share will be the
net asset value next computed after the Distributor receives the order
placed by the dealer or broker, except that if the Distributor receives
a repurchase order from a dealer or broker after the close of The New York
Stock Exchange on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker
from its customers prior to the time the Exchange closes (normally, that
is 4:00 P.M., but may be earlier on some days) and the order was
transmitted to and received by the Distributor prior to its close of
business that day (normally 5:00 P.M.). Ordinarily, for accounts redeemed
by a broker-dealer under this procedure, payment will be made within three
business days after the shares have been redeemed upon the Distributor's
receipt of the required redemption documents in proper form, with
signatures(s) of the registered owners guaranteed on the redemption
document as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the
Fund valued at $5,000 or more can authorize the Transfer Agent to redeem
shares (minimum $50) automatically on a monthly, quarterly, semi-annual
or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are to be made
by check payable to all shareholders of record and sent to the address of
record for the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from OppenheimerFunds-
sponsored retirement plans may not be arranged on this basis. Payments
are normally made by check, but shareholders having AccountLink privileges
(see "How To Buy Shares") may arrange to have Automatic Withdrawal Plan
payments transferred to the bank account designated on the
OppenheimerFunds New Account Application or signature-guaranteed
instructions. The Fund cannot guarantee receipt of a payment on the date
requested and reserves the right to amend, suspend or discontinue offering
such plans at any time without prior notice. Because of the sales charge
assessed on Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an Automatic
Withdrawal Plan. Class B and Class C shareholders should not establish
withdrawal plans because of the imposition of the contingent deferred
sales charge on such withdrawals (except where the Class B contingent
deferred sales charge is waived as described in the Prospectus under
"Waivers of Class B Contingent Deferred Sales Charge or in "Waivers of
Class C Contingent Deferred sales charge").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and in the provisions of the OppenheimerFunds Application
relating to such Plans, as well as the Prospectus. These provisions may
be amended from time to time by the Fund and/or the Distributor. When
adopted, such amendments will automatically apply to existing Plans.
-- Automatic Exchange Plans. Shareholders can authorize the
Transfer Agent (on the OppenheimerFunds Application or signature-
guaranteed instructions) to exchange a pre-determined amount of shares of
the Fund for shares (of the same class) of other OppenheimerFunds
automatically on a monthly, quarterly, semi-annual or annual basis under
an Automatic Exchange Plan. The minimum amount that may be exchanged to
each other fund account is $25. Exchanges made under these plans are
subject to the restrictions that apply to exchanges as set forth in "How
to Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
-- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales
charge will be redeemed first and shares acquired with reinvested
dividends and capital gains distributions will be redeemed next, followed
by shares acquired with a sales charge, to the extent necessary to make
withdrawal payments. Depending upon the amount withdrawn, the investor's
principal may be depleted. Payments made under withdrawal plans should
not be considered as a yield or income on your investment.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. The Transfer Agent and the Fund shall incur no liability
to the Planholder for any action taken or omitted by the Transfer Agent
in good faith to administer the Plan. Certificates will not be issued for
shares of the Fund purchased for and held under the Plan, but the Transfer
Agent will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions
of capital gains must be reinvested in shares of the Fund, which will be
done at net asset value without a sales charge. Dividends on shares held
in the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be
made at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (receipt of payment on the date selected cannot be
guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the
address to which checks are to be mailed or AccountLink payments are to
be sent may be changed at any time by the Planholder by writing to the
Transfer Agent. The Planholder should allow at least two weeks' time in
mailing such notification for the requested change to be put in effect.
The Planholder may, at any time, instruct the Transfer Agent by written
notice (in proper form in accordance with the requirements of the then-
current Prospectus of the Fund) to redeem all, or any part of, the shares
held under the Plan. In that case, the Transfer Agent will redeem the
number of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by
writing to the Transfer Agent. A Plan may also be terminated at any time
by the Transfer Agent upon receiving directions to that effect from the
Fund. The Transfer Agent will also terminate a Plan upon receipt of
evidence satisfactory to it of the death or legal incapacity of the
Planholder. Upon termination of a Plan by the Transfer Agent or the Fund,
shares that have not been redeemed from the account will be held in
uncertificated form in the name of the Planholder, and the account will
continue as a dividend-reinvestment, uncertificated account unless and
until proper instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the
Fund, the Planholder will be deemed to have appointed any successor
transfer agent to act as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of
OppenheimerFunds having more than one class of shares may be exchanged
only for shares of the same class of other Oppenheimer funds. Shares of
Oppenheimer funds that have a single class without a class designation are
deemed "Class A" shares for this purpose. All of the Oppenheimer funds
offer Class A shares, but certain other Oppenheimer funds do not presently
offer either or both of Class B or Class C shares. A list showing which
funds offer which class can be obtained by calling the Distributor at 1-
800-525-7048.
Class A shares of Oppenheimer funds may be exchanged at net asset
value for shares of any Money Market Fund. Shares of any Money Market
Fund purchased without a sales charge may be exchanged for shares of
OppenheimerFunds offered with a sales charge upon payment of the sales
charge (or, if applicable, may be used to purchase shares of Oppenheimer
funds subject to a contingent deferred sales charge). However, shares of
Oppenheimer Money Market Fund, Inc. purchased with the redemption proceeds
of shares of other mutual funds (other than funds managed by the Manager
or its subsidiaries) redeemed within the 12 months prior to that purchase
may subsequently be exchanged for shares of the Fund and other
OppenheimerFunds without being subject to an initial or contingent
deferred sales charge, whichever is applicable. To qualify for that
privilege, the investor or the investor's dealer must notify the
Distributor of eligibility for this privilege at the time the shares of
Oppenheimer Money Market Fund, Inc. are purchased, and, if requested, must
supply proof of entitlement to this privilege. Shares of this Fund
acquired by reinvestment of dividends or distributions from any other of
the Oppenheimer funds or from any unit investment trust for which
reinvestment arrangements have been made with the Distributor may be
exchanged at net asset value for shares of any of the OppenheimerFunds.
No contingent deferred sales charge is imposed on exchanges of shares of
any class purchased subject to a contingent deferred sales charge.
However, when Class A shares acquired by exchange of Class A shares of
other Oppenheimer funds purchased subject to a Class A contingent deferred
sales charge are redeemed within 18 months of the end of the calendar
month of the initial purchase of the exchanged Class A shares, the Class
A contingent deferred sales charge is imposed on the proceeds of the
redeemed shares (see "Class A Contingent Deferred Sales Charge" in the
Prospectus). The Class B contingent deferred sales charge is imposed on
the proceeds of Class B shares acquired by exchange if they are redeemed
within 6 years of the initial purchase of the exchanged Class B shares.
The Class C contingent deferred sales charge is imposed on the proceeds
of Class C shares acquired by exchange if they are redeemed within 12
months of the initial purchase of the exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an
exchange, the priorities described in "How To Buy Shares" in the
Prospectus for the imposition of the Class B or the Class C contingent
deferred sales charge will be followed in determining the order in which
the shares are exchanged. Shareholders should take into account the
effect of any exchange on the applicability and rate of any contingent
deferred sales charge that might be imposed in the subsequent redemption
of remaining shares. Shareholders owning shares of more than one class
must specify whether they intend to exchange Class A, Class B or Class
shares.
The Fund reserves the right to reject telephone or written
exchange requests submitted in bulk by anyone on behalf of 10 or more
accounts. The Fund may accept requests for exchanges of up to 50 accounts
per day from representatives of authorized dealers that qualify for this
privilege. In connection with any exchange request, the number of shares
exchanged may be less than the number requested if the exchange or the
number requested would include shares subject to a restriction cited in
the Prospectus or this Statement of Additional Information or would
include shares covered by a share certificate that is not tendered with
the request. In those cases, only the shares available for exchange
without restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either
have an existing account in, or obtain and acknowledge receipt of a
prospectus of, the fund to which the exchange is to be made. For full or
partial exchanges of an account made by telephone, any special account
features such as Asset Builder Plans, Automatic Withdrawal Plans and
retirement plan contributions will be switched to the new account unless
the Transfer Agent is instructed otherwise. If all telephone lines are
busy (which might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day
the Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
requests from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different OppenheimerFunds available for exchange have
different investment objectives, policies and risks, and a shareholder
should assure that the Fund selected is appropriate for his or her
investment and should be aware of the tax consequences of an exchange.
For federal income tax purposes, an exchange transaction is treated as a
redemption of shares of one fund and a purchase of shares of another.
"Reinvestment Privilege," above, discusses some of the tax consequences
of reinvestment of redemption proceeds in such cases. The Fund, the
Distributor, and the Transfer Agent are unable to provide investment, tax
or legal advice to a shareholder in connection with an exchange request
or any other investment transaction.
Dividends, Capital Gains and Taxes
Tax Status of the Fund's Dividends and Distributions. The Federal tax
treatment of the Fund's dividends and capital gains distributions is
explained in the Prospectus under the caption "Dividends, Capital Gains
and Taxes." Special provisions of the Internal Revenue Code govern the
eligibility of the Fund's dividends for the dividends-received deduction
for corporate shareholders. Long-term capital gains distributions are not
eligible for the deduction. In addition, the amount of dividends paid by
the Fund which may qualify for the deduction is limited to the aggregate
amount of qualifying dividends that the Fund derives from its portfolio
investments that the Fund has held for a minimum period, usually 46 days.
A corporate shareholder will not be eligible for the deduction on
dividends paid on Fund shares held for 45 days or less. To the extent the
Fund's dividends are derived from gross income from option premiums,
interest income or short-term gains from the sale of securities or
dividends from foreign corporations, those dividends will not qualify for
the deduction.
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, in order to enable the investor to earn a
return on otherwise idle funds.
Under the Internal Revenue Code, by December 31 each year, the
Fund must distribute 98% of its taxable investment income earned from
January 1 through December 31 of that year and 98% of its capital gains
realized in the period from November 1 of the prior year through October
31 of the current year, or else the Fund must pay an excise tax on the
amounts not distributed. While it is presently anticipated that the Fund
will meet those requirements, the Fund's Board of Trustees and the Manager
might determine in a particular year that it would be in the best interest
of shareholders for the Fund not to make such distributions at the
required levels and to pay the excise tax on the undistributed amounts.
That would reduce the amount of income or capital gains available for
distribution to shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect
to reinvest all dividends and/or capital gains distributions in shares of
the same class of any of the other OppenheimerFunds listed in "Reduced
Sales Charges," above, at net asset value without sales charge. Not all
of the OppenheimerFunds offer Class B and Class C shares. To elect this
option, a shareholder must notify the Transfer Agent in writing and
either have an existing account in the fund selected for reinvestment or
must obtain a prospectus for that fund and an application from the
Distributor to establish an account. The investment will be made at the
net asset value per share in effect at the close of business on the
payable date of the dividend or distribution. Dividends and/or
distributions from shares of other OppenheimerFunds may be invested in
shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's
assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities and handling the delivery of
such securities to and from the Fund. The Manager and its affiliates
currently have banking relationships with the custodian. The Manager and
its affiliates currently have banking relationships with the Custodian.
The Manager has represented to the Fund that its banking relationships
with the Custodian have been and will continue to be unrelated to and
unaffected by the relationship between the Fund and the Custodian. It
will be the practice of the Fund to deal with the Custodian in a manner
uninfluenced by any banking relationship the Custodian may have with the
Manager and its affiliates. The Fund's cash balances with the Custodian
in excess of $100,000 are not protected by Federal deposit insurance.
Those uninsured balances at times may be substantial.
Independent Auditors. The independent auditors of the Fund audit the
Fund's financial statements and perform other related audit services.
They also act as auditors for the Manager and certain other funds advised
by the Manager and its affiliates.
<PAGE>
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INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders of
Oppenheimer Strategic Income & Growth Fund:
We have audited the accompanying statement of
assets and liabilities, including the statement of
investments, of Oppenheimer Strategic Income &
Growth Fund as of September 30, 1994, the related
statement of operations for the year then ended,
the statements of changes in net assets for the
years ended September 30, 1994 and 1993 and the
financial highlights for the period June 1, 1992
(commencement of operations) to September 30,
1994. These financial statements and financial
highlights are the responsibility of the Fund's
management. Our responsibility is to express an
opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance
with generally accepted auditing standards. Those
standards require that we plan and perform the
audit to obtain reasonable assurance about whether
the financial statements and financial highlights
are free of material misstatement. An audit also
includes examining, on a test basis, evidence
supporting the amounts and disclosures in the
financial statements. Our procedures included
confirmation of securities owned at September 30,
1994 by correspondence with the custodian and
brokers; where replies were not received from
brokers, we performed other auditing procedures.
An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall
financial statement presentation. We believe that
our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements
and financial highlights present fairly, in all
material respects, the financial position of
Oppenheimer Strategic Income & Growth Fund at
September 30, 1994, the results of its operations,
the changes in its net assets, and the financial
highlights for the respective stated periods, in
conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
/s/ Deloitte & Touche LLP
Denver, Colorado
October 21, 1994
-----------------------------------------------------------
STATEMENT OF INVESTMENTS SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS--3.2%
- ---------------------------------------------------------------------------------------------------------------------------------
Repurchase agreement with First Chicago Capital Markets, 4.95%,
dated 9/30/94, to be repurchased at $1,900,784 on 10/3/94,
collateralized by U.S. Treasury Nts. 4.25%--8.50%, 4/15/95--
7/15/98, with a value of $1,074,386 and U.S. Treasury Bills,
0%, 3/16/95--3/23/95, with a value of $865,377 (Cost $1,900,000) $1,900,000 $1,900,000
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
LONG-TERM GOVERNMENT OBLIGATIONS--24.0%
- ---------------------------------------------------------------------------------------------------------------------------------
Argentina (Republic of) Bonds, Bonos de Consolidacion de Deudas,
Series I:
3.704%, 4/1/01(4)(6) 1,264,378(1) 737,853
4.375%, 4/1/01(4)(6) 1,723,903 1,306,567
4.8125%, 9/1/02(4)(6) 267,900 180,399
4.8125%, 4/1/07(4)(6) 287,317 178,886
---------------------------------------------------------------------------------------------------
Banco Nacional de Mexico S.A., 7% Exch. Sub. Debs., 12/15/99(5) 400,000 464,500
---------------------------------------------------------------------------------------------------
Denmark (Kingdom of) Bonds., 9%, 11/15/98 2,980,000(1) 493,948
---------------------------------------------------------------------------------------------------
Empresa Columbiana de Petroleos Nts., 7.25%, 7/8/98(5) 300,000 286,125
---------------------------------------------------------------------------------------------------
Italy (Republic of) Treasury Bonds, Buoni Poliennali del Tes:
12%, 1/1/96 50,000,000(1) 32,452
12%, 5/1/97 850,000,000(1) 552,228
---------------------------------------------------------------------------------------------------
Morocco (Kingdom of) Loan Participation Agreement,
Tranche A, 5.9375%, 1/1/09(4)(5) 650,000 474,500
---------------------------------------------------------------------------------------------------
New South Wales Treasury Corp., 7% Gtd. Bonds, 4/1/04 500,000(1) 292,991
---------------------------------------------------------------------------------------------------
New Zealand (Republic of) Bonds, 10%, 7/15/97 390,000(1) 240,946
---------------------------------------------------------------------------------------------------
Petacalco Topolobampo Trust, Sr. Sec. Unsub. Nts., 8.125%, 12/15/03 100,000 85,875
---------------------------------------------------------------------------------------------------
Polish People's Republic Loan Participation Agreement, 5.0625%,
2/3/24(5)(9) 500,000 276,671
---------------------------------------------------------------------------------------------------
South Australia Government Finance Authority Bonds, 10%, 1/15/03 120,000(1) 85,200
---------------------------------------------------------------------------------------------------
Spain (Kingdom of) Bonds, 11.45%, 8/30/98 74,000,000(1) 582,733
---------------------------------------------------------------------------------------------------
Treasury Corp. of Victoria Gtd. Bonds, 8.25%, 10/15/03 680,000(1) 433,036
---------------------------------------------------------------------------------------------------
United Kingdom Treasury Nts., 12%, 11/20/98 390,000(1) 681,915
---------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
7.875%, 2/15/21 600,000 592,500
7.125%, 2/15/23(10) 2,000,000 1,818,124
---------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
4.625%, 8/15/95(11) 1,130,000 1,117,994
5.125%, 11/15/95 1,470,000 1,455,300
5.75%, 10/31/97 1,300,000 1,258,563
---------------------------------------------------------------------------------------------------
Venezuela (Republic of), 6.75% Debs., 9/20/95(5) 500,000 474,375
------------
Total Long-Term Government Obligations (Cost $14,434,331) 14,103,681
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
MORTGAGE/ASSET-BACKED OBLIGATIONS--1.7%
- ---------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY--1.7%
- ---------------------------------------------------------------------------------------------------------------------------------
Federal National Mortage Assn. Interest-Only Stripped Mtg.-Backed
Security, Trust 257, Class 2, 7%, 2/25/24(8) 1,950,245 748,407
---------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 8.95%, 3/15/20 226,000 231,062
-------
Total Mortgage/Asset-Backed Obligations (Cost $916,941) 979,469
- ---------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CORPORATE BONDS AND NOTES--26.7%
- ---------------------------------------------------------------------------------------------------------------------------------
BASIC MATERIALS--3.1%
- ---------------------------------------------------------------------------------------------------------------------------------
CHEMICALS--0.5% Rexene Corp., 10% 2nd Priority Nts., 11/15/02(6) 309,000 294,838
- ---------------------------------------------------------------------------------------------------------------------------------
METALS--0.5% Kaiser Aluminum & Chemical Corp., 12.75% Sr. Sub. Nts., 2/1/03 300,000
291,750
</TABLE>
4 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PAPER AND FOREST PRODUCTS--2.1%
Equitable Bag, Inc., 12.375% Sr. Nts., 8/15/02(2) $ 50,000 $ 29,250
---------------------------------------------------------------------------------------------------
Gaylord Container Corp., 11.50% Sr. Nts., 5/15/01 600,000 615,000
---------------------------------------------------------------------------------------------------
PT Inti Indorayon Utama, 9.125% Sr. Nts., 10/15/00 100,000 87,500
---------------------------------------------------------------------------------------------------
Stone Consolidated Corp., 10.25% Sr. Sec. Nts., 12/15/00 300,000 296,250
---------------------------------------------------------------------------------------------------
Stone Container Corp., 10.75% Fst. Mtg. Nts., 10/1/02 200,000 199,750
----------
1,227,750
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--5.3%
- ---------------------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE--0.8% Envirotest Systems Corp., 9.625% Sr. Sub. Nts., 4/1/03 200,000
184,000
---------------------------------------------------------------------------------------------------
Penda Corp., 10.75% Sr. Nts., Series B, 3/1/04 300,000 277,500
----------
461,500
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
CONSTRUCTION SUPPLIES AND
DEVELOPMENT--0.9% USG Corp., 10.25% Sr. Sec. Nts., 12/15/02 500,000 512,500
- ---------------------------------------------------------------------------------------------------------------------------------
CONSUMER GOODS AND SERVICES--0.8%
Amstar Corp., 11.375% Sr. Sub. Nts., 2/15/97 300,000 297,000
---------------------------------------------------------------------------------------------------
Revlon Consumer Products Corp., 9.375% Sr. Nts., 4/1/01 200,000 175,502
----------
472,502
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT--1.3% Gillett Holdings, Inc., 12.25% Sr. Sub. Nts., Series A, 6/30/02 300,000
318,750
---------------------------------------------------------------------------------------------------
Lady Luck Gaming Finance Corp., 10.50% Fst. Mtg. Nts., 3/1/01 50,000 22,500
---------------------------------------------------------------------------------------------------
Marvel (Parent) Holdings, Inc., 0% Sr. Sec. Disc. Nts., 4/15/98 700,000 437,500
----------
778,750
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
MEDIA--0.9% SCI Television, Inc., 11% Sr. Nts., 6/30/05 500,000 509,375
- ---------------------------------------------------------------------------------------------------------------------------------
RETAIL--0.6% Finlay Fine Jewelry Corp., 10.625% Sr. Nts., 5/1/03 400,000 380,000
- ---------------------------------------------------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS--3.2%
- ---------------------------------------------------------------------------------------------------------------------------------
FOOD--0.9% Foodmaker, Inc., 14.25% Sr. Sub. Nts., 5/15/98 500,000 525,625
- ---------------------------------------------------------------------------------------------------------------------------------
FOOD AND DRUG
DISTRIBUTION--1.7% Alco Health Distribution Corp., 11.25% Sr. Debs., 7/15/05(6) 555,587
543,607
---------------------------------------------------------------------------------------------------
Grand Union Co., 11.25% Sr. Nts., 7/15/00 500,000 453,750
----------
997,357
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE--0.6% American Medical International, Inc., 13.50% Sr. Sub. Nts., 8/15/01 300,000
335,625
- ---------------------------------------------------------------------------------------------------------------------------------
ENERGY--0.5% Maxus Energy Corp., 9.875% Nts., 10/15/02 300,000 289,500
- ---------------------------------------------------------------------------------------------------------------------------------
FINANCIAL--3.6% Blue Bell Funding, Inc., 11.85% Extd. Sec. Nts., 5/1/99 400,000 428,500
---------------------------------------------------------------------------------------------------
Grupo Mexicano de Desarrollo S.A., 8.25% Gtd. Nts., 2/18/01(5) 300,000 246,750
---------------------------------------------------------------------------------------------------
International Bank for Reconstruction and Development Bonds,
12.50%, 7/25/97 1,015,000(1) 660,522
---------------------------------------------------------------------------------------------------
Life Partners Group, Inc., 12.75% Sr. Sub. Nts., 7/15/02 300,000 326,250
---------------------------------------------------------------------------------------------------
Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A,
12/1/11(5) 500,000 451,250
----------
2,113,272
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL--3.8%
- ---------------------------------------------------------------------------------------------------------------------------------
CONTAINERS--1.4% Owens-Illinois, Inc., 10% Sr. Sub. Nts., 8/1/02 400,000 402,000
---------------------------------------------------------------------------------------------------
Sea Containers Ltd., 12.50% Sr. Sub. Debs., Series A, 12/1/04 400,000 419,000
----------
821,000
</TABLE>
5 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED)
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GENERAL INDUSTRIAL--1.3% EnviroSource, Inc., 9.75% Sr. Nts., 6/15/03 $ 500,000 $
455,000
---------------------------------------------------------------------------------------------------
Polymer Group, Inc., 12.25% Sr. Nts., 7/15/02(5) 300,000 300,000
----------
755,000
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--1.1% Tiphook Financial Corp., 8% Gtd. Nts., 3/15/00 179,000
123,510
---------------------------------------------------------------------------------------------------
Transportacion Maritima Mexicana SA, 8.50% Nts., 10/15/00 585,000 515,531
----------
639,041
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--6.7%
- ---------------------------------------------------------------------------------------------------------------------------------
CABLE TELEVISION--4.2% Adelphia Communications Corp., 12.50% Sr. Nts., 5/15/02 300,000
300,000
---------------------------------------------------------------------------------------------------
Cablevision Systems Corp., 9.875% Sr. Sub. Debs., 2/15/13 250,000 233,125
---------------------------------------------------------------------------------------------------
Celcaribe SA, 0%/13.50% Sr. Sec. Nts., 3/15/04(3)(5) 400,000 253,499
---------------------------------------------------------------------------------------------------
Comcast Cellular Corp., 0% Nts., Series B, 3/5/00 300,000 186,000
---------------------------------------------------------------------------------------------------
Continental Cablevision, Inc., 9.50% Sr. Debs., 8/1/13 500,000 455,000
---------------------------------------------------------------------------------------------------
Echostar Communications Corp. Units 200,000 96,000
---------------------------------------------------------------------------------------------------
Time Warner, Inc./Time Warner Entertainment LP, 8.375% Sr. Debs.,
3/15/23 500,000 438,340
---------------------------------------------------------------------------------------------------
TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 500,000 543,125
----------
2,505,089
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS--1.5% MFS Communications, Inc., 0%/9.375% Sr. Disc. Nts., 1/15/04(3) 300,000
177,750
---------------------------------------------------------------------------------------------------
NewCity Communications, Inc., 11.375% Sr. Sub. Nts., 11/1/03 200,000 202,500
---------------------------------------------------------------------------------------------------
Panamsat LP/Panamsat Capital Corp., 0%/11.375% Sr. Sub. Disc. Nts.,
8/1/03(3) 750,000 504,375
----------
884,625
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Technology--1.0% Bell & Howell Holdings Co., 0%/11.50% Sr. Disc. Debs., Series B,
3/1/05(3) 600,000 315,000
---------------------------------------------------------------------------------------------------
Imax Corp., 7% Sr. Nts., 3/1/01(7) 320,000 280,000
----------
595,000
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
UTILITIES--0.5% El Paso Electric, 10.375% Lease Oblig. Debs., 1/2/11(9) 400,000 216,337
---------------------------------------------------------------------------------------------------
Subic Power Corp., 9.50% Sr. Sec. Nts., Series A, 12/28/08(5) 100,000 92,250
----------
308,587
-----------
Total Long-Term Coporate Bonds and Notes (Cost $16,726,455) $15,698,686
SHARES
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--39.9%
- ---------------------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--4.1%
- ---------------------------------------------------------------------------------------------------------------------------------
AUTO PARTS: AFTER MARKET
- --1.4% Goodyear Tire & Rubber Co. 24,000 801,000
- ---------------------------------------------------------------------------------------------------------------------------------
BROADCAST MEDIA--0.1% Celcaribe SA(2)(5) 65,040 79,501
- ---------------------------------------------------------------------------------------------------------------------------------
RETAIL STORES:
DEPARTMENT STORES--1.2% May Department Stores Co. 18,000 708,750
- ---------------------------------------------------------------------------------------------------------------------------------
RETAIL: SPECIALTY--1.4% Gap, Inc. (The) 25,000 821,875
- ---------------------------------------------------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS--15.7%
- ---------------------------------------------------------------------------------------------------------------------------------
BEVERAGES: SOFT DRINKS--3.4% Coca-Cola Co. (The) 22,000 1,069,750
---------------------------------------------------------------------------------------------------
PepsiCo, Inc. 28,000 927,500
----------
1,997,250
</TABLE>
6 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DRUGS--4.9% Merck & Co., Inc. 22,000 $ 781,000
---------------------------------------------------------------------------------------------------
Pfizer, Inc. 16,000 1,106,000
---------------------------------------------------------------------------------------------------
Schering-Plough Corp. 14,000 994,000
----------
2,881,000
- ---------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE: DIVERSIFIED--1.8% Abbott Laboratories 34,000 1,066,750
- ---------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--1.8% Colgate-Palmolive Co. 18,000 1,044,000
- ---------------------------------------------------------------------------------------------------------------------------------
MEDICAL PRODUCTS--2.2% Medtronic, Inc. 22,000 1,163,250
---------------------------------------------------------------------------------------------------
Stryker Corp. 3,000 104,250
----------
1,267,500
- ---------------------------------------------------------------------------------------------------------------------------------
TOBACCO--1.6% UST, Inc. 33,000 944,625
- ---------------------------------------------------------------------------------------------------------------------------------
FINANCIAL--12.1%
Financial Services:
Miscellaneous--3.4% American Express Co. 34,000 1,032,750
---------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. 12,000 945,000
----------
1,977,750
Major Banks: Regional--6.6%
Banc One Corp. 30,000 896,250
---------------------------------------------------------------------------------------------------
First Interstate Bancorp 13,000 1,054,625
---------------------------------------------------------------------------------------------------
NationsBank Corp. 19,000 931,000
---------------------------------------------------------------------------------------------------
SunTrust Banks, Inc. 21,000 1,023,750
----------
3,905,625
---------------------------------------------------------------------------------------------------
Money Center Banks--2.1%
Chase Manhattan Corp. 26,000 900,250
---------------------------------------------------------------------------------------------------
Citicorp 8,000 340,000
----------
1,240,250
- ---------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL--1.8%
- ---------------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--1.8% General Electric Co. 22,000 1,058,750
- ---------------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--6.2%
Computer Software
And Services--3.1% Automatic Data Processing, Inc. 13,000 729,625
---------------------------------------------------------------------------------------------------
Microsoft Corp.(2) 19,000 1,066,375
----------
1,796,000
- ---------------------------------------------------------------------------------------------------------------------------------
ELECTRONICS:
SEMICONDUCTORS--3.1% Intel Corp. 15,000 922,500
---------------------------------------------------------------------------------------------------
Texas Instruments, Inc. 13,000 888,875
----------
1,811,375
----------
Total Common Stocks (Cost $22,066,990) 23,402,001
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--2.0% AMR Corp., $3.00 Cum. Cv. Depositary Shares, Series A(5) 9,000
364,500
---------------------------------------------------------------------------------------------------
First Madison Bank, FSB, 11.50%(12) 2,500 262,500
---------------------------------------------------------------------------------------------------
Prime Retail, Inc., $19.00 Cv., Series B 12,000 289,500
---------------------------------------------------------------------------------------------------
Unisys Corp., $3.75 Cv., Series A 7,000 255,500
----------
Total Preferred Stocks (Cost $1,273,750) 1,172,000
</TABLE>
7 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED)
MARKET VALUE
DATE/PRICE FACE AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PUT OPTIONS PURCHASED--0.0% European OTC Deutsche Mark/U.S. Dollar Put
Nov. 2/1.60 DEM 2,072,494(1) $ 4,274
---------------------------------------------------------------------------------------------------
European OTC Deutsche Mark/U.S. Dollar Put
Nov. 4/1.60 DEM 1,036,247(1) 2,722
---------------------------------------------------------------------------------------------------
European OTC Deutsche Mark/U.S. Dollar Put
Nov. 8/1.60 DEM 1,036,247(1) 2,338
----------
Total Put Options Purchased (Cost $45,163) 9,334
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
STRUCTURED INSTRUMENTS--2.0% Bayerische Landesbank, N.Y. Branch:
Mexican Peso Linked Confidence Nt., Girozentrale Branch,
35.50%, 12/30/94(5) 170,000 167,025
---------------------------------------------------------------------------------------------------
Italian Lira Linked Confidence Nt., Girozentrale Branch, 10%, 8/7/95 190,000 185,744
---------------------------------------------------------------------------------------------------
Goldman Sachs International Limited, 5.10%, 2/28/95 70,000 68,082
---------------------------------------------------------------------------------------------------
Morgan Guaranty Trust Co. of New York
(Singapore Branch) CD, 12.15%, 2/3/95 1,056,625,000(1) 485,570
---------------------------------------------------------------------------------------------------
Swiss Bank Corp. Investment Banking, Inc.,
10% CD Sterling Rate Linked Nts., 7/3/95 300,000 295,920
----------
Total Structured Instruments (Cost $1,230,001) 1,202,341
Total Investments, at Value (Cost $58,593,631) 99.5% 58,467,512
---------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities .5 318,104
---------- ----------
Net Assets 100.0% $58,785,616
---------- ----------
---------- ----------
<FN>
1. Face amount is reported in foreign currency.
2. Non-income producing security.
3. Represents a zero coupon bond that converts to
a fixed rate of interest at a designated future
date.
4. Represents the current interest rate for a
variable rate security.
5. Restricted security--See Note 6 of Notes to
Financial Statements.
6. Interest or dividend is paid in kind.
7. Represents the current interest rate for an
increasing rate security.
8. Interest-Only Strips represent the right to
receive the monthly interest payments on an
underlying pool of mortgage loans. These
securities typically decline in price as
interest rates decline. Most other fixed-income\
securities increase in price when interest
rates decline. The principal amount of the
underlying pool represents the notional amount
on which current interest is calculated. The
price of these securities is typically more
sensitive to changes in prepayment rates than
traditional mortgage backed securities (for
example, GNMA pass-throughs).
9. Partial interest payment was received.
10. Securities with an aggregate market value of $119,996 are held in escrow to cover outstanding
call options, as follows:
</TABLE>
<TABLE>
<CAPTION>
FACE EXPIRATION EXERCISE PREMIUM MARKET
VALUE
SUBJECT TO CALL DATE PRICE RECEIVED SEE NOTE
1
--------------- -------- ----- -------- ------------
<S> <C> <C> <C> <C>
European OTC Deutsche Mark/U.S. Dollar
904,467 11/2/94 1.50 DEM $ 4,201 $ 2,385
European OTC Deutsche Mark/U.S. Dollar
406,355 11/2/94 1.60 DEM 10,598 13,542
European OTC Deutsche Mark/U.S. Dollar
452,234 11/4/94 1.50 DEM 2,177 1,336
European OTC Deutsche Mark/U.S. Dollar
203,178 11/4/94 1.60 DEM 5,339 6,711
European OTC Deutsche Mark/U.S. Dollar
452,234 11/8/94 1.54 DEM 5,396 5,560
European OTC Deutsche Mark/U.S. Dollar
203,178 11/8/94 1.60 DEM 5,525 6,952
------- -------
$33,236 $36,486
<FN>
11. Securities with an aggregate market value of
$9,894 are held in escrow to cover initial
margin requirements on open interest rate
futures sales contracts, as follows:
</TABLE>
<TABLE>
<CAPTION>
NUMBER FACE
TYPE OF CONTRACT OF CONTRACTS AMOUNT
-------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Nts., 12/94 3 $305,156
</TABLE>
The market value of the open contracts was
$304,406 at September 30, 1994 with a net
unrealized gain of $750.
See accompanying Notes to Financial Statements.
8 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES September 30, 1994
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS Investments, at value (cost $58,593,631)--see accompanying statement $58,467,512
---------------------------------------------------------------------------------------------------
Cash 212,885
Unrealized appreciation on futures contracts--Note 7 750
Receivables:
Dividends and interest 724,816
Shares of beneficial interest sold 194,089
Investments sold 215,553
---------------------------------------------------------------------------------------------------
Deferred organization costs 9,934
---------------------------------------------------------------------------------------------------
Other 21,177
---------------------------------------------------------------------------------------------------
Total assets 59,846,716
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES Options written, at value (premiums received $33,236)
--see accompanying statement--Note 4 36,485
---------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 293,833
Dividends 225,905
Shares of beneficial interest redeemed 390,956
Distribution and service plan fees--Note 5 37,514
Other 76,407
----------
Total liabilities 1,061,100
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $58,785,616
-----------
-----------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF
NET ASSETS Paid-in capital $60,049,032
---------------------------------------------------------------------------------------------------
Overdistributed net investment income (119,994)
---------------------------------------------------------------------------------------------------
Accumulated net realized loss from investment, written option and foreign
currency transactions (1,014,999)
---------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments, options written and
translation of assets and liabilities denominated in foreign currencies (128,423)
-----------
Net assets $58,785,616
-----------
-----------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE
PER SHARE Class A Shares:
Net asset value and redemption price per share (based on net assets
of $42,732,778 and 8,683,396 shares of beneficial interest outstanding) $ 4.92
Maximum offering price per share (net asset value plus sales charge of
4.75% of offering price) $ 5.17
---------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $16,052,838 and 3,267,106 shares of beneficial interest outstanding) $ 4.91
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS For the Year Ended September 30, 1994
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME Interest (net of withholding taxes of $8,073) $ 3,069,864
---------------------------------------------------------------------------------------------------
Dividends 726,569
-----------
Total income 3,796,433
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
EXPENSES Management fees--Note 5 475,265
---------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A--Note 5 118,925
Class B--Note 5 149,517
---------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 5 124,051
---------------------------------------------------------------------------------------------------
Shareholder reports 69,181
---------------------------------------------------------------------------------------------------
Custodian fees and expenses 34,248
---------------------------------------------------------------------------------------------------
Legal and auditing fees 17,736
---------------------------------------------------------------------------------------------------
Trustees' fees and expenses 2,885
---------------------------------------------------------------------------------------------------
Other 22,877
-----------
Total expenses 1,014,685
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 2,781,748
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS,
OPTIONS WRITTEN AND FOREIGN
CURRENCY TRANSACTIONS Net realized gain (loss) from:
Investments and options written (991,862)
Expiration and closing of option contracts written--Note 4 (9,184)
Foreign currency transactions 109,713
-----------
Net realized loss (891,333)
---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments and options written (2,460,438)
Translation of assets and liabilities denominated in foreign currencies 332,437
---------------------------------------------------------------------------------------------------
Net change (2,128,001)
Net realized and unrealized loss on investments, options written and foreign
currency transactions (3,019,334)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
$ (237,586)
-----------
-----------
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30,
1994 1993
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS Net investment income $ 2,781,748 $ 2,774,685
---------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments, options written and foreign
currency transactions (891,333) 726,649
---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments,
options written and translation of assets and liabilities denominated
in foreign currencies (2,128,001) 1,990,636
------------ ------------
Net increase (decrease) in net assets resulting from operations (237,586) 5,491,970
---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS Dividends from net investment income:
Class A ($.209 and $.202 per share,
respectively) (1,931,946) (2,309,909)
Class B ($.185 and $.130 per share, respectively) (722,244) (193,606)
---------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A ($.011 per share) (98,470) --
Class B ($.011 per share) (36,812) --
---------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments, options written,
and foreign currency transactions:
Class A ($.005 per share) -- (62,907)
Class B ($.005 per share) -- (1,304)
---------------------------------------------------------------------------------------------------
Distributions in excess of net realized gain on investments, options written,
and foreign currency transactions:
Class A ($.097 per share) (885,559) --
Class B ($.097 per share) (331,059) --
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST
TRANSACTIONS Net increase (decrease) in net assets resulting from Class A beneficial
interest transactions--Note 2 (9,347,360) 4,173,905
---------------------------------------------------------------------------------------------------
Net increase in net assets resulting from Class B beneficial interest
transactions--Note 2 4,699,403 12,182,278
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS Total increase (decrease) (8,891,633) 19,280,427
---------------------------------------------------------------------------------------------------
Beginning of year 67,677,249 48,396,822
------------ ------------
End of year [including undistributed (overdistributed) net investment
income of ($119,994) and $403,577, respectively] $ 58,785,616 $ 67,677,249
------------ ------------
------------ ------------
</TABLE>
See accompanying Notes to Financial Statements.
11 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Class A Class B
-------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1994 1993 1992(2) 1994 1993(1)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $5.26 $5.03 $5.00 $5.26 $5.10
---------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .21 .22 .07(3) .19 .14
Net realized and unrealized gain on
investments, options written and foreign
currency transactions (.23) .22 .02 (.25) .16
------- ------- ------- ------- ------
Total income (loss) from investment
operations (.02) .44 .09 (.06) .30
---------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.21) (.20) (.06) (.18) (.13)
Dividends in excess of net investment income (.01) -- -- (.01) --
Distributions from net realized gain on
investments, options written and foreign
currency transactions -- (.01) -- -- (.01)
Distributions in excess of net realized gain
on investments, options written, and foreign
currency transactions (.10) -- -- (.10) --
-------- ------- ------- ------- ------
Total dividends and distributions
to shareholders (.32) (.21) (.06) (.29) (.14)
---------------------------------------------------------------------------------------------------
Net asset value, end of period $4.92 $5.26 $5.03 $4.91 $5.26
------- ------- ------- ------- ------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(4) (.23)% 8.84% 1.74% (1.17)%
5.86%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $42,733 $55,291 $48,397 $16,053 $12,386
---------------------------------------------------------------------------------------------------
Average net assets (in thousands) $48,360 $59,209 $30,264 $14,986 $7,541
---------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 8,683 10,513 9,628 3,267 2,357
---------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.56% 4.33% 4.59%(5) 3.86% 3.32%(5)
Expenses 1.43% 1.36% 1.46%(3)(5) 2.17% 2.21%(5)
---------------------------------------------------------------------------------------------------
Portfolio turnover (6) 80.0% 122.4% 25.8% 80.0% 122.4%
<FN>
1. For the period from November 30, 1992 (inception
of offering) to September 30, 1993.
2. For the period from June 1, 1992 (commencement
of operations) to September 30, 1992.
3. Net investment income would have been $.07
absent the voluntary expense reimbursement,
resulting in an expense ratio of 1.74%.
4. Assumes a hypothetical initial investment on
the business day before the first day of the
fiscal period, with all dividends and
distributions reinvested in additional shares
on the reinvestment date, and redemption at
the net asset value calculated on the last
business day of the fiscal period. Sales charges
are not reflected in the total returns.
5. Annualized.
6. The lesser of purchases or sales of portfolio
securities for a period, divided by the monthly
average of the market value of portfolio
securities owned during the period. Securities
with a maturity or expiration date at the time
of acquisition of one year or less are excluded
from the calculation. Purchases and sales of
investment securities (excluding short-term
securities) for the year ended September 30,
1994 were $53,695,271 and $49,725,672,
respectively.
</TABLE>
See accompanying Notes to Financial Statements.
12 Oppenheimer Strategic Income & Growth Fund
<PAGE>
--------------------------------------------------
--------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT Oppenheimer Strategic Income & Growth Fund (the
ACCOUNTING POLICIES Fund) is registered under the Investment Company
Act of 1940, as amended, as a diversified,
open-end management investment company. The Fund's
investment advisor is Oppenheimer Management
Corporation (the Manager). The Fund offers both
Class A and Class B shares. Class A shares are
sold with a front-end sales charge. Class B shares
may be subject to a contingent deferred sales
charge. Both classes of shares have identical
rights to earnings, assets and voting privileges,
except that each class has its own distribution
and/or service plan, expenses directly
attributable to a particular class and exclusive
voting rights with respect to matters affecting a
single class. Class B shares will automatically
convert to Class A shares six years after the date
of purchase. The following is a summary of
significant accounting policies consistently
followed by the Fund.
--------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are
valued at 4:00 p.m. (New York time) on each
trading day. Listed and unlisted securities for
which such information is regularly reported are
valued at the last sale price of the day or, in
the absence of sales, at values based on the
closing bid or asked price or the last sale price
on the prior trading day. Long-term debt
securities are valued by a portfolio pricing
service approved by the Board of Trustees.
Long-term debt securities which cannot be valued
by the approved portfolio pricing service are
valued by averaging the mean between the bid and
asked prices obtained from two active market
makers in such securities. Short-term debt
securities having a remaining maturity of 60 days
or less are valued at cost (or last determined
market value) adjusted for amortization to
maturity of any premium or discount. Securities
for which market quotes are not readily available
are valued under procedures established by the
Board of Trustees to determine fair value in good
faith. An option is valued based upon the last
sales price on the principal exchange on which the
option is traded or, in the absence of any
transactions that day, the value is based upon the
last sale on the prior trading date if it is
within the spread between the closing bid and
asked prices. If the last sale price is outside
the spread, the closing bid or asked price closest
to the last reported sale price is used.
--------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The accounting
records of the Fund are maintained in U.S.
dollars. Prices of securities denominated in
foreign currencies are translated into U.S.
dollars at the closing rates of exchange. Amounts
related to the purchase and sale of securities and
investment income are translated at the rates of
exchange prevailing on the respective dates of
such transactions.
The Fund generally enters into forward
foreign currency exchange contracts as a hedge,
upon the purchase or sale of a security
denominated in a foreign currency. In addition,
the Fund may enter into such contracts as a hedge
against changes in foreign currency exchange rates
on portfolio positions. A forward exchange
contract is a commitment to purchase or sell a
foreign currency at a future date, at a negotiated
rate. Risks may arise from the potential inability
of the counterparty to meet the terms of the
contract and from unanticipated movements in the
value of a foreign currency relative to the U.S.
dollar.
The effect of changes in foreign
currency exchange rates on investments is
separately identified from the fluctuations
arising from changes in market values of
securities held and reported with all other
foreign currency gains and losses in the Fund's
results of operations.
--------------------------------------------------
OPTIONS WRITTEN. The Fund may write covered call
and put options. When an option is written, the
Fund receives a premium and becomes obligated to
sell or purchase the underlying security at a
fixed price, upon exercise of the option. In
writing an option, the Fund bears the market risk
of an unfavorable change in the price of the
security underlying the written option. Exercise
of an option written by the Fund could result in
the Fund selling or purchasing a security at a
price different from the current market value. All
securities covering call options written are held
in escrow by the custodian bank and the Fund
maintains liquid assets sufficient to cover
written put options in the event of exercise by
the holder.
--------------------------------------------------
ALLOCATION OF INCOME, EXPENSES AND GAINS AND
LOSSES. Income, expenses (other than those
attributable to a specific class) and gains and
losses are allocated daily to each class of shares
based upon the relative proportion of net assets
represented by such class. Operating expenses
directly attributable to a specific class are
charged against the operations of that class.
--------------------------------------------------
FEDERAL INCOME TAXES. The Fund intends to
continue to comply with provisions of the Internal
Revenue Code applicable to regulated investment
companies and to distribute all of its taxable
income, including any net realized gain on
investments not offset by loss carryovers, to
shareholders. Therefore, no federal income tax
provision is required. At September 30, 1994, the
Fund had available for federal income tax purposes
an unused capital loss carryover of approximately
$200,000 expiring in 2002.
13 Oppenheimer Strategic Income & Growth Fund
<PAGE>
--------------------------------------------------
--------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ORGANIZATION COSTS. The Manager advanced $26,000
ACCOUNTING POLICIES for organization and start-up costs of the Fund.
(CONTINUED) Such expenses are being amortized over a five-year
period from the date operations commenced. In the
event that all or part of the Manager's initial
investment in shares of the Fund is withdrawn
during the amortization period, the redemption
proceeds will be reduced to reimburse the Fund for
any unamortized expenses, in the same ratio as the
number of shares redeemed bears to the number of
initial shares outstanding at the time of such
redemption.
--------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends
to declare dividends separately for Class A and
Class B shares from net investment income each day
the New York Stock Exchange is open for business
and pay such dividends monthly. Distributions from
net realized gains on investments, if any, will be
declared at least once each year.
--------------------------------------------------
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO
SHAREHOLDERS. Effective October 1, 1993, the Fund
adopted Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation
of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies. As a
result, the Fund changed the classification of
distributions to shareholders to better disclose
the differences between financial statement
amounts and distributions determined in accordance
with income tax regulations. Accordingly,
subsequent to September 30, 1993, amounts have
been reclassified to reflect a decrease in
undistributed net investment income and an
increase in undistributed capital gain on
investments of $382,503. During the year ended
September 30, 1994, in accordance with Statement
of Position 93-2, undistributed net investment
income and undistributed capital loss were
decreased by $133,344.
--------------------------------------------------
OTHER. Investment transactions are accounted for
on the date the investments are purchased or sold
(trade date) and dividend income is recorded on
the ex-dividend date. Discount on securities
purchased is amortized over the life of the
respective securities, in accordance with federal
income tax requirements. Realized gains and losses
on investments and options written and unrealized
appreciation and depreciation are determined on an
identified cost basis, which is the same basis
used for federal income tax purposes.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF The Fund has authorized an unlimited number of no
BENEFICIAL INTEREST par value shares of beneficial interest of each
class. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1994 PERIOD ENDED
SEPTEMBER 30,
1993(1)
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 1,797,523 $ 9,177,865 5,776,034 $29,480,167
Dividends and distributions reinvested 535,980 2,757,772 406,080 2,091,310
Redeemed (4,163,212) (21,282,997) (5,297,441) (27,397,572)
---------- ----------- ---------- -----------
Net increase (decrease) (1,829,709) $(9,347,360) 884,673 $ 4,173,905
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
Class B:
Sold 1,752,588 $ 8,784,884 2,860,426 $14,798,939
Dividends and distributions reinvested 100,839 724,590 30,122 156,143
Redeemed (943,022) (4,810,071) (533,847) (2,772,804)
---------- ----------- ---------- -----------
Net increase 910,405 $ 4,699,403 2,356,701 $12,182,278
<FN>
1. For the year ended September 30, 1993 for Class
A shares and for the period from November 30,
1992 (inception of offering) to September 30,
1993 for Class B shares.
3. Unrealized Gains and Losses on Investments And
Options Written At September 30, 1994, net
unrealized depreciation on investments and
options written of $128,618 was composed of
gross appreciation of $2,704,691, and gross
depreciation of $2,833,309.
</TABLE>
14 Oppenheimer Strategic Income & Growth Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. OPTION ACTIVITY Option activity for the year ended September 30,
1994 was as follows:
<TABLE>
<CAPTION>
CALL OPTIONS PUT OPTIONS
---------------------------------------------
NUMBER AMOUNT NUMBER AMOUNT
OF OPTIONS OF PREMIUMS OF OPTIONS OF PREMIUMS
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at September 30, 1993 400 $56,875 -- $ --
Options written 2,621,846 65,736 4,702 17,320
Options expired prior to exercise (600) (89,375) (4,702) (17,320)
Options outstanding at September 30, 1994 2,621,646 $33,236 -- $ --
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. MANAGEMENT FEES Management fees paid to the Manager were in
AND OTHER TRANSACTIONS accordance with the investment advisory
WITH AFFILIATES agreement with the Fund which provides for an
annual fee of .75% on the first $200 million of
net assets, with a reduction of .03% on each $200
million thereafter to $800 million, .60% on the
next $200 million and .50% on net assets in excess
of $1 billion. The Manager has agreed to reimburse
the Fund if aggregate expenses (with specified
exceptions) exceed the most stringent applicable
regulatory limit on Fund expenses.
For the year ended September 30, 1994,
commissions (sales charges paid by investors) on
sales of Class A shares totaled $231,950, of which
$73,286 was retained by Oppenheimer Funds
Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by an
affiliated broker/dealer. During the year ended
September 30, 1994, OFDI received contingent
deferred sales charges of $50,191 upon redemption
of Class B shares, as reimbursement for sales
commissions advanced by OFDI at the time of sale
of such shares.
Oppenheimer Shareholder Services (OSS),
a division of the Manager, is the transfer and
shareholder servicing agent for the Fund, and for
other registered investment companies. OSS's total
costs of providing such services are allocated
ratably to these companies.
Under separate approved plans, each
class may expend up to .25% of its net assets
annually to reimburse OFDI for costs incurred in
connection with the personal service and
maintenance of accounts that hold shares of the
Fund, including amounts paid to brokers, dealers,
banks and other financial institutions. In
addition, Class B shares are subject to an
asset-based sales charge of .75% of net assets
annually, to reimburse OFDI for sales commissions
paid from its own resources at the time of sale
and associated financing costs. In the event of
termination or discontinuance of the Class B plan,
the Board of Trustees may allow the Fund to
continue payment of the asset-based sales charge
to OFDI for distribution expenses incurred on
Class B shares sold prior to termination or
discontinuance of the plan. During the year ended
September 30, 1994, OFDI paid $14,477 and $1,013,
respectively, to an affiliated broker/dealer as
reimbursement for Class A and Class B personal
service and maintenance expenses and retained
$137,454 as reimbursement for Class B sales
commissions and service fee advances, as well as
financing costs.
15 Oppenheimer Strategic Income & Growth Fund
<PAGE>
--------------------------------------------------
--------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. RESTRICTED SECURITIES The Fund owns securities purchased in private
placement transactions, without registration under
the Securities Act of 1933 (the Act). The
securities are valued under methods approved by
the Board of Trustees as reflecting fair value.
The Fund intends to invest no more than 10% of its
net assets (determined at the time of purchase) in
restricted and illiquid securities, excluding
securities eligible for resale pursuant to Rule
144A of the Act that are determined to be liquid
by the Board of Trustees or by the Manager under
Board-approved guidelines. Restricted and illiquid
securities, excluding securities eligible for
resale pursuant to Rule 144A of the Act amount to
$918,196 or 1.6% of the Fund's net assets, at
September 30, 1994. Illiquid and/or restricted
securities, including those restricted securities
that are transferable under Rule 144A of the Act
are listed below.
<TABLE>
<CAPTION>
VALUATION PER UNIT
AS OF
SECURITY ACQUISITION DATE COST PER UNIT SEPTEMBER
30, 1994
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AMR Corp., $3.00 Cum. Cv.Depositary Shares,
Series A(1) 12/2/93--11/14/94 $ 53.43 $ 40.50
-----------------------------------------------------------------------------------------------------
Banco Nacional de Mexico SA, 7% Exch. Sub.
Debs., 12/15/99(1) 5/24/93 $104.00 $116.13
-----------------------------------------------------------------------------------------------------
Bayericshe Landesbank, N.Y. Branch, Mexican
Peso Linked
-----------------------------------------------------------------------------------------------------
Confidence Nt., Girozentrale Branch, 35.50%,
12/30/94 9/23/94 $100.00 $ 98.25
-----------------------------------------------------------------------------------------------------
Celcaribe SA(1) 5/17/94 $ 1.19 $ 1.22
-----------------------------------------------------------------------------------------------------
Celcaribe SA, 0%/13.50% Sr. Sec. Nts.,
3/15/04(1) 5/17/94 $ 63.33 $ 63.37
-----------------------------------------------------------------------------------------------------
Empresa Columbiana de Petroleos Nts., 7.25%,
7/8/98(1) 4/25/94 $ 93.92 $ 95.38
-----------------------------------------------------------------------------------------------------
Grupo Mexicano de Desarrollo SA, 8.25% Gtd.
Nts., 2/18/01(1) 2/8/94 $100.00 $ 82.25
-----------------------------------------------------------------------------------------------------
Morocco (Kingdom of) Loan Participation
Agreement, Tranche A, 5.9375%, 1/1/09 2/23/94--4/19/94 $ 72.57 $ 73.00
-----------------------------------------------------------------------------------------------------
Polish People's Republic Loan Participation
Agreement, 5.0625%, 2/3/24 1/12/94--1/13/94 $ 65.11 $ 55.33
-----------------------------------------------------------------------------------------------------
Polymer Group, Inc., 12.25% Sr. Nts., 7/15/02(1) 6/17/94 $100.00 $100.00
-----------------------------------------------------------------------------------------------------
Subic Power Corp., 9.50% Sr. Sec. Nts., Series A,
12/28/08(1) 12/20/93 $ 99.94 $ 92.25
-----------------------------------------------------------------------------------------------------
Tribasa Toll Road Trust, 10.50% Nts., Series
1993-A, 12/1/11(1) 11/8/93 $100.00 $ 90.25
-----------------------------------------------------------------------------------------------------
Venezuela (Republic of) 6.75% Debs., 9/20/95(1) 5/2/94 $ 96.28 $ 94.88
<FN>
1. Transferable under Rule 144A of the Act.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. FUTURES CONTRACTS At September 30, 1994, the Fund had outstanding
futures contracts to sell debt securities as
follows:
<TABLE>
<CAPTION>
EXPIRATION NUMBER OF VALUATION AS OF
UNREALIZED
DATE FUTURES CONTRACTS SEPTEMBER 30, 1994
APPRECIATION
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Nts. 12/20/94 3 $304,406 $750
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statement of Investments March 31, 1995 (Unaudited)
----------------------------------------------------------------------------------------------------------------
Face Market Value
Amount(1) See Note 1
==========================================================
==========================================================
================
<S> <C> <C>
Mortgage-Backed Obligations--7.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Government Agency--5.5%
- ------------------------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/ Federal Home Loan Mortgage Corp., Series 176, Cl. F, 8.95%, 3/15/20 $ 226,000
$ 230,027
Sponsored--2.8% ----------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
Collateralized Mtg. Obligations, Gtd. Real Estate Mtg
Investment Conduit Pass-Through Certificates, 10.50%, 11/25/20 315,000 357,128
Interest-Only Stripped Mtg.-Backed Security, Trust 257, Cl. 2, 7%, 2/25/24(2) 1,910,241 699,029
Series 1994-83, Cl. Z, 7.50%, 6/25/24 338,456 285,857
------------
1,572,041
- ------------------------------------------------------------------------------------------------------------------------------------
GNMA/Guaranteed Government National Mortgage Assn., 7.50%, 6/1/25 1,470,000
1,500,778
- --2.7%
- ------------------------------------------------------------------------------------------------------------------------------------
Private--2.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial--0.9% Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1992-CHF, Cl. D, 8.25%, 12/25/20 277,296 269,412
Series 1993-C1, Cl. D, 9.45%, 5/25/24 252,980 251,478
------------
520,890
- ------------------------------------------------------------------------------------------------------------------------------------
Multi-Family--1.2% Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1991-M6, Cl. B4, 6.45%, 6/25/21(3) 89,052 85,908
Series 1994-C2, Cl. E, 8%, 4/25/25 493,581 413,298
Series 1994-C2, Cl. G, 8%, 4/25/25 244,842 182,277
------------
681,483
------------
Total Mortgage-Backed Obligations (Cost $4,158,495) 4,275,192
==========================================================
==========================================================
================
U.S. Government Obligations--27.5%
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
10.375%, 5/15/95 1,100,000 1,105,500
11.50%, 11/15/95 900,000 928,125
8.75%, 8/15/00 650,000 697,328
11.625%, 11/15/02(4)(5) 7,600,000 9,557,000
8.125%, 8/15/19 292,000 309,611
----------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
5.125%, 11/15/95 980,000 972,956
9.375%, 4/15/96 1,300,000 1,266,280
5.75%, 10/31/97 568,000 583,798
------------
Total U.S. Government Obligations (Cost $15,286,139) 15,420,598
==========================================================
==========================================================
================
Foreign Government Argentina (Republic of):
Obligations--9.9% Bonds, Bonos de Consolidacion de Deudas, Series I, 3.032%, 4/1/01(3)(6) ARA 352,055
118,634
Bonds, Bonos del Tesoro, Series I, 6.188%, 5/31/96(3) 70,000 64,788
Bonds, Bonos del Tesoro, Series II, 6.188%, 9/1/97(3) 29,000 24,530
Discount Bonds, 4.25%, 3/31/23(3) 250,000 130,859
----------------------------------------------------------------------------------------------------------------
Corporacion Andina de Fomento Sr. Unsec. Debs., 7.25%, 4/30/98 100,000 92,500
----------------------------------------------------------------------------------------------------------------
Ecuador (Republic of) Bonds, 7.25%, 2/28/25(3) 500,000 222,500
----------------------------------------------------------------------------------------------------------------
International Bank for Reconstruction and Development Bonds, 12.50%,
7/25/97 NZD 1,015,000 721,041
----------------------------------------------------------------------------------------------------------------
Morocco (Kingdom of) Loan Participation Agreement,
Tranche A, 7.375%, 1/1/09(3) 1,100,000 640,750
----------------------------------------------------------------------------------------------------------------
New South Wales Treasury Corp. Gtd. Exch. Bonds, 12%, 12/1/01 AUD 510,000
410,694
</TABLE>
5 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
----------------------------------------------------------------------------------------------------------------
Face Market Value
Amount(1) See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Foreign Government New Zealand (Republic of) Bonds:
Obligations 10%, 7/15/97 NZD $ 390,000 $ 263,609
(continued) 8%, 11/15/95 NZD 400,000 259,812
----------------------------------------------------------------------------------------------------------------
Poland (Republic of) Past Due Interest Bonds, 3.25%, 10/27/14(7) 1,750,000 697,813
----------------------------------------------------------------------------------------------------------------
Queensland Treasury Corp. Gtd. Nts., 8%, 8/14/01 AUD 480,000 319,423
----------------------------------------------------------------------------------------------------------------
Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion del Estado,
10.25%, 11/30/98 ESP 54,000,000 407,357
----------------------------------------------------------------------------------------------------------------
United Kingdom Treasury Nts.:
12%, 11/20/98 GBP 390,000 705,901
13%, 7/14/00 GBP 182,000 351,469
----------------------------------------------------------------------------------------------------------------
United Mexican States, Combined Facility 3,
Loan Participation Agreement, Tranche A, 7.625%, 9/20/97(3)(8) 190,476 107,619
------------
Total Foreign Government Obligations (Cost $5,664,421) 5,539,299
==========================================================
==========================================================
================
Corporate Bonds and Notes--27.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Basic Materials--3.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Chemicals--1.3% NL Industries, Inc., 11.75% Sr. Sec. Nts., 10/15/03 200,000 205,500
----------------------------------------------------------------------------------------------------------------
Polymer Group, Inc., 12.25% Sr. Nts., 7/15/02(9) 300,000 291,000
----------------------------------------------------------------------------------------------------------------
UCAR Global Enterprises, Inc., 12% Sr. Sub. Nts., 1/15/05(9) 250,000 263,438
------------
759,938
- ------------------------------------------------------------------------------------------------------------------------------------
Metals--0.6% Kaiser Aluminum & Chemical Corp., 12.75% Sr. Sub. Nts., 2/1/03 100,000
103,500
----------------------------------------------------------------------------------------------------------------
Wheel-Pittsburgh Corp., 9.375% Sr. Nts., 11/15/03 250,000 219,375
------------
322,875
- ------------------------------------------------------------------------------------------------------------------------------------
Paper--1.6% Gaylord Container Corp., 11.50% Sr. Nts., 5/15/01 300,000 316,500
----------------------------------------------------------------------------------------------------------------
PT Inti Indorayon Utama, 9.125% Sr. Nts., 10/15/00 75,000 63,375
----------------------------------------------------------------------------------------------------------------
SD Warren Co., 12% Sr. Sub. Nts., 12/15/04(9) 200,000 213,000
----------------------------------------------------------------------------------------------------------------
Stone Consolidated Corp., 10.25% Sr. Sec. Nts., 12/15/00 125,000 127,031
----------------------------------------------------------------------------------------------------------------
Stone Container Corp., 10.75% Fst. Mtg. Nts., 10/1/02 200,000 207,500
------------
927,406
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Cyclicals--11.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Autos & Housing Amstar Corp., 11.375% Sr. Sub. Nts., 2/15/97 300,000 300,000
- --2.8% ----------------------------------------------------------------------------------------------------------------
Blue Bell Funding, Inc., 11.85% Extd. Sec. Nts., 5/1/99 400,000 416,000
----------------------------------------------------------------------------------------------------------------
Penda Corp., 10.75% Sr. Nts., Series B, 3/1/04 300,000 270,750
----------------------------------------------------------------------------------------------------------------
Terex Corp., 13% Sr. Nts., 8/1/96(9) 270,000 261,900
----------------------------------------------------------------------------------------------------------------
Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A, 12/1/11(9) 500,000 301,250
------------
1,549,900
- ------------------------------------------------------------------------------------------------------------------------------------
Leisure & Flagstar Corp., 10.75% Sr. Nts., 9/15/01 300,000 288,750
Entertainment--1.9% ----------------------------------------------------------------------------------------------------------------
Foodmaker, Inc., 14.25% Sr. Sub. Nts., 5/15/98 500,000 516,250
----------------------------------------------------------------------------------------------------------------
Imax Corp., 7% Sr. Nts., 3/1/01(7) 320,000 278,400
------------
1,083,400
</TABLE>
6 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Media--5.1% Adelphia Communications Corp., 12.50% Sr. Nts., 5/15/02 $ 300,000 $
288,000
----------------------------------------------------------------------------------------------------------------
American Telecasting, Inc., 0%/12.50% Sr. Disc. Nts., 6/15/04(10) 400,000 202,000
----------------------------------------------------------------------------------------------------------------
Bell & Howell Holdings Co., 0%/11.50% Sr. Disc. Debs., Series B, 3/1/05(10) 250,000
135,625
----------------------------------------------------------------------------------------------------------------
Bell Cablemedia PLC, 0%/11.95% Sr. Disc. Nts., 7/15/04(10) 500,000 303,125
----------------------------------------------------------------------------------------------------------------
Cablevision Systems Corp., 9.875% Sr. Sub. Debs., 2/15/13 250,000 241,250
----------------------------------------------------------------------------------------------------------------
Continental Cablevision, Inc., 9.50% Sr. Debs., 8/1/13 400,000 386,000
----------------------------------------------------------------------------------------------------------------
Echostar Communications Corp., Units(10) 200,000 91,000
----------------------------------------------------------------------------------------------------------------
Gillett Holdings, Inc., 12.25% Sr. Sub. Nts., Series A, 6/30/02 300,000 316,500
----------------------------------------------------------------------------------------------------------------
New City Communications, Inc., 11.375% Sr. Sub. Nts., 11/1/03 200,000 183,000
----------------------------------------------------------------------------------------------------------------
Time Warner, Inc., 9.125% Debs., 1/15/13 400,000 384,208
----------------------------------------------------------------------------------------------------------------
TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 300,000 319,500
------------
2,850,208
------------
- ------------------------------------------------------------------------------------------------------------------------------------
Retail--General PT Polysindo Eka Perkasa, Zero Coupon Promissory Nts., 10/23/96 IDR 1,200,000,000
371,314
- --0.7%
- ------------------------------------------------------------------------------------------------------------------------------------
Retail--Specialty Finlay Fine Jewelry Corp., 10.625% Sr. Nts., 5/1/03 400,000 374,000
- --0.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Non-Cyclicals--4.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Food--0.7% Grand Union Co., 11.25% Sr. Nts., 7/15/00(11) 350,000 366,188
- ------------------------------------------------------------------------------------------------------------------------------------
Healthcare/Supplies AmeriSource Corp., 11.25% Sr. Debs., 7/15/05(6) 586,838 611,229
& Services--2.5% ----------------------------------------------------------------------------------------------------------------
Capstone Capital Corp., 10.50% Cv. Sub. Debs., 4/1/02 500,000 503,750
----------------------------------------------------------------------------------------------------------------
National Medical Enterprises, Inc., 10.125% Sr. Sub. Nts., 3/1/05 300,000 309,750
------------
1,424,729
- ------------------------------------------------------------------------------------------------------------------------------------
Household Goods Synthetic Industries, Inc., 12.75% Sr. Sub. Debs., 12/1/02 200,000 195,000
- --0.8%
- ------------------------------------------------------------------------------------------------------------------------------------
Energy--0.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Energy Services & Triton Energy Corp., Zero Coupon Sr. Sub. Disc. Nts., 11/1/97 400,000
316,000
Producer--0.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Financial--0.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Insurance--0.5% Life Partners Group, Inc., 12.75% Sr. Sub. Nts., 7/15/02 300,000 328,500
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial--2.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial Owens-Illinois, Inc., 10% Sr. Sub. Nts., 8/1/02 100,000 100,500
Materials--1.0% ----------------------------------------------------------------------------------------------------------------
USG Corp., 10.25% Sr. Sec. Nts., 12/15/02 500,000 506,875
------------
607,375
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial Services EnviroSource, Inc., 9.75% Sr. Nts., 6/15/03 200,000 175,000
- --0.4% ----------------------------------------------------------------------------------------------------------------
Grupo Mexicano de Desarrollo SA, 8.25% Gtd. Nts., 2/17/01(9) 300,000 73,500
------------
248,500
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation Sea Containers Ltd., 12.50% Sr. Sub. Debs., Series A, 12/1/04 400,000 424,000
- --0.8%
- ------------------------------------------------------------------------------------------------------------------------------------
Technology--2.8%
- ------------------------------------------------------------------------------------------------------------------------------------
Telecommunications- Call-Net Enterprises, Inc., 0%/13.25% Sr. Disc. Nts., 12/1/04(10) 200,000
110,500
Technology--2.8% ----------------------------------------------------------------------------------------------------------------
Celcaribe SA, 0%/13.50% Sr. Sec. Nts., 3/15/04(9)(10) 400,000 268,624
----------------------------------------------------------------------------------------------------------------
Comcast Cellular Corp., Zero Coupon Nts., Series B, 3/5/00 250,000 177,500
----------------------------------------------------------------------------------------------------------------
MFS Communications, Inc., 0%/9.375% Sr. Disc. Nts., 1/15/04(10) 300,000 192,750
----------------------------------------------------------------------------------------------------------------
Panamsat LP/Panamsat Capital Corp., 0%/11.375% Sr. Sub. Disc. Nts., 8/1/03(10) 750,000
493,125
----------------------------------------------------------------------------------------------------------------
PriCellular Wireless Corp., 0%/14% Sr. Sub. Disc. Nts., 11/15/01(10) 500,000 370,000
------------
1,612,499
</TABLE>
7 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
----------------------------------------------------------------------------------------------------------------
Face Market Value
Amount(1) See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Utilities--2.4%
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Utilities First PV Funding Corp., 10.15% Lease Obligation Bonds, Series 1986B, 1/15/16 $ 300,000 $
292,082
- --1.4% ----------------------------------------------------------------------------------------------------------------
Subic Power Corp.:
9.50% Sinking Fund Debs., 12/28/08 482,750 392,234
9.50% Sinking Fund Debs., 12/28/08(9) 96,551 83,517
------------
767,833
- ------------------------------------------------------------------------------------------------------------------------------------
Gas Utilities--1.0% California Energy Co., 0%/10.25% Sr. Disc. Nts., 1/15/04(10) 450,000
339,750
----------------------------------------------------------------------------------------------------------------
El Paso Electric Co., 10.375% Lease Obligation Bonds, Series 1986A, 1/2/11(11) 400,000
243,912
------------
583,662
------------
Total Corporate Bonds and Notes (Cost $15,719,399) 15,113,327
Shares
==========================================================
==========================================================
================
Common Stocks--31.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Basic Materials--2.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Chemicals--2.5% Morton International, Inc. 20,000 580,000
- ------------------------------------------------------------------------------------------------------------------------------------
Union Carbide Corp. 26,000 796,250
------------
1,376,250
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Cyclicals--2.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Autos & Housing Goodyear Tire & Rubber Co. 20,000 735,000
- --1.3%
- ------------------------------------------------------------------------------------------------------------------------------------
Leisure & McDonald's Corp. 20,000 682,500
Entertainment--1.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Non-Cyclicals--10.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Beverages--2.0% Coca-Cola Co. (The) 20,000 1,130,000
- ------------------------------------------------------------------------------------------------------------------------------------
Healthcare/Drugs Pfizer, Inc. 9,000 771,750
- --2.6% ----------------------------------------------------------------------------------------------------------------
Schering-Plough 9,000 669,375
------------
1,441,125
- ------------------------------------------------------------------------------------------------------------------------------------
Healthcare/Supplies Stryker Corp. 3,000 137,250
& Services--2.6% ----------------------------------------------------------------------------------------------------------------
Medtronic, Inc. 16,000 1,110,000
------------
1,247,250
- ------------------------------------------------------------------------------------------------------------------------------------
Household Goods Colgate-Palmolive Co. 11,000 726,000
- --1.3%
- ------------------------------------------------------------------------------------------------------------------------------------
Tobacco--1.9% UST, Inc. 33,000 1,047,750
- ------------------------------------------------------------------------------------------------------------------------------------
Financial--5.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Banks--4.4% First Interstate BanCorp 8,000 632,000
----------------------------------------------------------------------------------------------------------------
NationsBank Corp. 14,000 710,500
----------------------------------------------------------------------------------------------------------------
SunTrust Banks, Inc. 21,000 1,123,500
------------
2,466,000
- ------------------------------------------------------------------------------------------------------------------------------------
Diversified Federal National Mortgage Assn. 8,000 651,000
Financial--1.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial--0.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial Equitable Bag, Inc.(12) 1,861 5,583
Materials--0.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Technology--11.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Computer Hardware Compaq Computer Corp.(12) 27,000 931,500
- --1.6%
</TABLE>
8 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Market Value
Shares See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Computer Software Automatic Data Processing, Inc. 13,000 $ 819,000
- --5.0% ----------------------------------------------------------------------------------------------------------------
Microsoft Corp.(12) 17,000 1,209,125
----------------------------------------------------------------------------------------------------------------
Oracle Systems Corp.(12) 24,000 750,000
------------
2,778,125
- ------------------------------------------------------------------------------------------------------------------------------------
Electronics--4.3% Hewlett-Packard Co. 7,000 842,625
----------------------------------------------------------------------------------------------------------------
Intel Corp. 9,000 763,875
----------------------------------------------------------------------------------------------------------------
Texas Instruments, Inc. 9,000 796,500
------------
2,403,000
- ------------------------------------------------------------------------------------------------------------------------------------
Telecommunications- Celcaribe SA(9)(12) 65,040 59,376
Technology--0.1% ------------
Total Common Stocks (Cost $14,718,755) 17,680,459
==========================================================
==========================================================
================
Preferred Stocks--1.4%
- ------------------------------------------------------------------------------------------------------------------------------------
First Nationwide Bank, 11.50% Non-Cum 2,500 251,875
----------------------------------------------------------------------------------------------------------------
Kaiser Aluminum Corp., 8.255% Provisionally Redeemable
Income Debt Exchangeable for Stock 4,400 46,200
----------------------------------------------------------------------------------------------------------------
Prime Retail, Inc., $19.00 Cv., Series B 12,000 208,500
----------------------------------------------------------------------------------------------------------------
Unisys Corp., $3.75 Cv., Series A 7,000 272,125
------------
Total Preferred Stocks (Cost $840,289) 778,700
Units
==========================================================
==========================================================
================
Rights, Warrants and Certificates--0.0%
- ------------------------------------------------------------------------------------------------------------------------------------
American Telecasting, Inc. Wts., Exp. 6/99 (Cost $0) 2,000 4,000
Date/Price Shares
==========================================================
==========================================================
================
Put Options Purchased--0.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.50% (Cost $3,867) Apr. 11/.2578 1,500 703
</TABLE>
9 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Face Market Value
----------------------------------------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
----------------------------------------------------------------------------------------------------------------
Amount(1) See Note 1
==========================================================
==========================================================
===============
<S> <C> <C>
Structured Instruments--0.5%
- -----------------------------------------------------------------------------------------------------------------------------------
Swiss Bank Corp. Investment Banking, Inc., 10% CD
Sterling Rate Linked Nts., 7/3/95 (Cost $300,000)(13) $ 300,000 $ 295,200
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $56,691,365) 105.5% 59,107,478
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (5.5) (3,091,995)
------ ------------
Net Assets 100.0% $ 56,015,483
====== ============
1. Face amount is reported in local currency. Foreign currency abbreviations are as follows:
ARA--Argentine Austral GBP--British Pound Sterling
AUD--Australian Dollar IDR--Indonesian Rupiah
DEM--German Deutsche Mark NZD--New Zealand Dollar
ESP--Spanish Peseta USD--U.S. Dollar
2. Interest-Only Strips represent the right to receive the monthly interest payments on an underlying pool of
mortgage loans. These securities typically decline in price as interest rates decline. Most other fixed-income
securities increase in price when interest rates decline. The principal amount of the underlying pool represents
the notional amount on which current interest is calculated. The price of these securities is typically more
sensitive to changes in prepayment rates than traditional mortgage-backed securities (for example, GNMA
pass-throughs).
3. Represents the current interest rate for a variable rate security.
4. A sufficient amount of securities is segregated to collateralize outstanding forward foreign currency
exchange contracts. See Note 5 of Notes to Financial Statements.
5. A sufficient amount of liquid assets has been designated to cover outstanding call and put options, as
follows:
</TABLE>
<TABLE>
<CAPTION>
Face Subject Expiration Exercise Premium Market Value
To Call/Put Date Price Received See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Call Option on Australian Dollar 247,000 AUD 4/20/95 0.74 USD/AUD $ 427 $
731
- ------------------------------------------------------------------------------------------------------------------------------------
Call Option on New South Wales
Treasury Corp. Gtd. Exch. Bonds, 12% 100 AUD 4/28/95 109.056 AUD 678
880
- ------------------------------------------------------------------------------------------------------------------------------------
Call Option on Pound Sterling 325,000 GBP 5/8/95 1.60 USD/GBP 3,211 12,584
- ------------------------------------------------------------------------------------------------------------------------------------
Call Option on Spanish Peseta/Deutsche Mark 13,000 ESP 5/4/95 89.00 ESP/DEM 725
427
- ------------------------------------------------------------------------------------------------------------------------------------
Put Option on Deutsche Mark 200,000 DEM 6/6/95 1.46 DEM/USD 1,417
1,000
------- -------
$ 6,458 $15,622
======= =======
6. Interest or dividend is paid in kind.
7. Represents the current interest rate for an increasing rate security.
8. Identifies issues considered to be illiquid--See Note 7 of Notes to Financial Statements.
9. Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of
1933, as amended. This security has been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $1,818,605, or 3.24% of the Fund's net assets, at March 31, 1995.
10. Represents a zero coupon bond that converts to a fixed rate of interest at a designated future date.
11. Non-income-producing--issuer is in default of interest payment.
12. Non-income-producing security.
13. Indexed instrument for which the principal amount and/or interest due at maturity is affected by the
relative value of a foreign currency.
See accompanying Notes to Financial Statements.
</TABLE>
10 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities March 31, 1995 (Unaudited)
----------------------------------------------------------------------------------------------------------------
==========================================================
==========================================================
================
<S> <C>
Assets Investments, at value (cost $56,691,365)--see accompanying statement $ 59,107,478
----------------------------------------------------------------------------------------------------------------
Receivables:
Investments sold 1,748,935
Interest and dividends 1,013,032
Shares of beneficial interest sold 66,104
----------------------------------------------------------------------------------------------------------------
Deferred organization costs 7,908
----------------------------------------------------------------------------------------------------------------
Other 5,450
------------
Total assets 61,948,907
==========================================================
==========================================================
================
Liabilities Bank overdraft 728,976
----------------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $6,458)--Note 4 15,622
----------------------------------------------------------------------------------------------------------------
Unrealized depreciation on forward foreign currency exchange contracts--Note 5 504
----------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 4,569,876
Shares of beneficial interest redeemed 278,590
Dividends 244,679
Distribution and service plan fees--Note 6 34,638
Other 60,539
------------
Total liabilities 5,933,424
==========================================================
==========================================================
================
Net Assets $56,015,483
============
==========================================================
==========================================================
================
Composition of
Net Assets
Paid-in capital $58,352,103
----------------------------------------------------------------------------------------------------------------
Overdistributed net investment income (170,489)
----------------------------------------------------------------------------------------------------------------
Accumulated net realized loss from investment, written option and foreign
currency transactions (4,574,558)
----------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments, options written and translation
of assets and liabilities denominated in foreign currencies 2,408,427
------------
Net assets $56,015,483
============
========================================================
========================================================
====================
Net Asset Value
Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of $39,428,448
and 8,162,126 shares of beneficial interest outstanding) $4.83
Maximum offering price per share (net asset value plus sales charge of 4.75%
of offering price) $5.07
----------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $16,587,035 and 3,439,548 shares of beneficial interest outstanding) $4.82
</TABLE>
See accompanying Notes to Financial Statements.
11 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statement of Operations For the Six Months Ended March 31, 1995 (Unaudited)
----------------------------------------------------------------------------------------------------------------
========================================================
========================================================
====================
<S> <C>
Investment Income Interest (net of foreign withholding taxes of $3,907) $1,896,670
----------------------------------------------------------------------------------------------------------------
Dividends 257,464
------------
Total income 2,154,134
========================================================
========================================================
====================
Expenses Management fees--Note 6 213,342
----------------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A--Note 6 49,373
Class B--Note 6 80,891
----------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 6 37,214
----------------------------------------------------------------------------------------------------------------
Shareholder reports 32,959
----------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 17,754
----------------------------------------------------------------------------------------------------------------
Legal and auditing fees 10,698
----------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 2,890
----------------------------------------------------------------------------------------------------------------
Registration and filing fees--Class B 339
----------------------------------------------------------------------------------------------------------------
Other 9,624
-----------
Total expenses 455,084
========================================================
========================================================
====================
Net Investment Income 1,699,050
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Net realized loss from:
Unrealized Gain Investments and options written (including premiums on options expired)
(2,590,058)
(Loss) on Closing and expiration of options written (91,090)
Investments, Foreign currency transactions (878,411)
Options Written -----------
and Foreign Net realized loss (3,559,559)
Currency
Transactions ----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments and options written 2,462,442
Translation of assets and liabilities denominated in foreign currencies 74,408
-----------
Net change 2,536,850
-----------
Net realized and unrealized loss on investments, options written and foreign
currency transactions (1,022,709)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Operations $ 676,341
===========
</TABLE>
See accompanying Notes to Financial Statements.
12 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
----------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended
March 31, 1995 September 30,
(Unaudited) 1994
========================================================
========================================================
====================
<S> <C> <C>
Operations Net investment income $1,699,050 $2,781,748
----------------------------------------------------------------------------------------------------------------
Net realized loss on investments, options written and foreign
currency transactions (3,559,559) (891,333)
----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments,
options written and translation of assets and liabilities denominated in
foreign currencies 2,536,850 (2,128,001)
------------ ------------
Net increase (decrease) in net assets resulting from operations 676,341 (237,586)
========================================================
========================================================
====================
Dividends and Dividends from net investment income:
Distributions to Class A ($.153 and $.209 per share, respectively) (1,293,242)
(1,931,946)
Shareholders Class B ($.135 and $.185 per share, respectively) (456,303) (722,244)
----------------------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A ($.011 per share) -- (98,470)
Class B ($.011 per share) -- (36,812)
----------------------------------------------------------------------------------------------------------------
Distributions in excess of net realized gain on investments, options
written and foreign currency transactions:
Class A ($.097 per share) -- (885,559)
Class B ($.097 per share) -- (331,059)
========================================================
========================================================
====================
Beneficial Interest Net decrease in net assets resulting from Class A beneficial
Transactions interest transactions--Note 2 (2,533,058) (9,347,360)
----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from Class B beneficial interest
transactions--Note 2 836,129 4,699,403
========================================================
========================================================
====================
Net Assets Total decrease (2,770,133) (8,891,633)
----------------------------------------------------------------------------------------------------------------
Beginning of period 58,785,616 67,677,249
------------ ------------
End of period (including overdistributed net investment income of $170,489
and $119,994, respectively) $ 56,015,483 $ 58,785,616
============
============
</TABLE>
See accompanying Notes to Financial Statements.
13 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Financial Highlights
----------------------------------------------------------------------------------------------------------------
Class A Class B
------------------------------------------ ---------------------------------------
Six Months Ended Six Months Ended
March 31, 1995 Year Ended September 30, March 31, 1995 Year Ended
September 30,
(Unaudited) 1994 1993 1992(2) (Unaudited) 1994 1993(1)
========================================================
========================================================
====================
<S> <C> <C> <C> <C> <C> <C>
<C>
Per Share Operating Data:
Net asset value, beginning
of period $4.92 $5.26 $5.03 $5.00 $4.91 $5.26 $5.10
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .15 .21 .22 .07(3) .13 .19 .14
Net realized and unrealized gain (loss)
on investments, options written
and foreign currency transactions (.09) (.23) .22 .02 (.08) (.25) .16
----- ----- ----- ----- ----- ----- -----
Total income (loss) from
investment operations .06 (.02) .44 .09 .05 (.06) .30
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment
income (.15) (.21) (.20) (.06) (.14) (.18) (.13)
Dividends in excess of
net investment income -- (.01) -- -- -- (.01) --
Distributions from net realized
gain on investments, options written
and foreign currency transactions -- -- (.01) -- -- -- (.01)
Distributions in excess of net
realized gain on investments,
options written, and foreign
currency transactions -- (.10) -- -- -- (.10) --
----- ----- ----- ----- ----- ----- -----
Total dividends and
distributions to shareholders (.15) (.32) (.21) (.06) (.14) (.29) (.14)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.83 $4.92 $5.26 $5.03 $4.82 $4.91 $5.26
===== ===== ===== ===== =====
===== =====
========================================================
========================================================
====================
Total Return, at Net Asset Value(4) 1.34% (.23)% 8.84% 1.74% .96% (1.17)%
5.86%
========================================================
========================================================
====================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $39,428 $42,733 $55,291 $48,397 $16,587 $16,053 $12,386
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $40,759 $48,360 $59,209 $30,264 $16,277 $14,986 $ 7,541
- ------------------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 8,162 8,683 10,513 9,628 3,440 3,267 2,357
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.19%(5) 4.56% 4.33% 4.59%(5) 5.43%(5) 3.86%
3.32%(5)
Expenses 1.39%(5) 1.43% 1.36% 1.46%(3)(5) 2.14%(5) 2.17%
2.21%(5)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 85.1% 80.0% 122.4% 25.8% 85.1% 80.0% 122.4%
</TABLE>
1. For the period from November 30, 1992 (inception of offering) to September
30, 1993.
2. For the period from June 1, 1992 (commencement of operations) to September
30, 1992.
3. Net investment income would have been $.07 absent the voluntary expense
reimbursement, resulting in an expense ratio of 1.74%.
4. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales charges
are not reflected in the total returns. Total returns are not annualized for
periods of less than one full year.
5. Annualized.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the six
months ended March 31, 1995 were $48,908,363 and $46,268,719, respectively.
See accompanying Notes to Financial Statements.
14 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
----------------------------------------------------------------------------------------------------------------
========================================================
<S> <C>
1. Significant Oppenheimer Strategic Income & Growth Fund (the Fund) is registered under the Investment Company
Act of
Accounting Policies 1940, as amended, as a diversified, open-end management investment company. The Fund's investment
advisor
is Oppenheimer Management Corporation (the Manager). The Fund offers both Class A and Class B shares.
Class
A shares are sold with a front-end sales charge. Class B shares may be subject to a contingent deferred
sales charge. Both classes of shares have identical rights to earnings, assets and voting privileges,
except that each class has its own distribution and/or service plan, expenses directly attributable to a
particular class and exclusive voting rights with respect to matters affecting a single class. Class B
shares will automatically convert to Class A shares six years after the date of purchase. The following is
a summary of significant accounting policies consistently followed by the Fund.
-----------------------------------------------------------------------------------------------------------
Investment Valuation. Portfolio securities are valued at the close of the New York Stock Exchange on each
trading day. Listed and unlisted securities for which such information is regularly reported are valued at
the last sale price of the day or, in the absence of sales, at values based on the closing bid or asked
price or the last sale price on the prior trading day. Long-term and short-term ``non-money market'' debt
securities are valued by a portfolio pricing service approved by the Board of Trustees. Such securities
which cannot be valued by the approved portfolio pricing service are valued using dealer-supplied
valuations, provided the Manager is satisfied that the firm rendering the quotes is reliable and that the
quotes reflect current market value, or under consistently applied procedures established by the Board of
Trustees to determine fair value in good faith. Short-term ``money market type'' debt securities having a
remaining maturity of 60 days or less are valued at cost (or last determined market value) adjusted for
amortization to maturity of any premium or discount. Forward contracts are valued based on the closing
prices of the forward currency contract rates in the London foreign exchange markets on a daily basis as
provided by a reliable bank or dealer. Options are valued based upon the last sale price on the principal
exchange on which the option is traded or, in the absence of any transactions that day, the value is based
upon the last sale price on the prior trading date if it is within the spread between the closing bid and
asked prices. If the last sale price is outside the spread, the closing bid or asked price closest to the
last reported sale price is used.
-----------------------------------------------------------------------------------------------------------
Foreign Currency Translation. The accounting records of the Fund are maintained in U.S. dollars. Prices
of
securities denominated in foreign currencies are translated into U.S. dollars at the closing rates of
exchange. Amounts related to the purchase and sale of securities and investment income are translated at
the rates of exchange prevailing on the respective dates of such transactions.
The effect of changes in foreign currency exchange rates on investments is separately
identified from the fluctuations arising from changes in market values of securities held and reported with
all other foreign currency gains and losses in the Fund's results of operations.
-----------------------------------------------------------------------------------------------------------
Allocation of Income, Expenses and Gains and Losses. Income, expenses (other than those attributable to
a
specific class) and gains and losses are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses directly attributable to a specific
class are charged against the operations of that class.
-----------------------------------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its taxable income, including any net
realized gain on investments not offset by loss carryovers, to shareholders. Therefore, no federal income
or excise tax provision is required.
-----------------------------------------------------------------------------------------------------------
Organization Costs. The Manager advanced $20,590 for organization and start-up costs of the Fund. Such
expenses are being amortized over a five-year period from the date operations commenced. In the event that
all or part of the Manager's initial investment in shares of the Fund is withdrawn during the amortization
period, the redemption proceeds will be reduced to reimburse the Fund for any unamortized expenses, in
the
same ratio as the number of shares redeemed bears to the number of initial shares outstanding at the time
of such redemption.
-----------------------------------------------------------------------------------------------------------
Distributions to Shareholders. The Fund intends to declare dividends separately for Class A and Class B
shares from net investment income each day the New York Stock Exchange is open for business and pay
such
dividends monthly. Distributions from net realized gains on investments, if any, will be declared at least
once each year.
</TABLE>
15 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited) (Continued)
----------------------------------------------------------------------------------------------------------------
==========================================================
==========================================================
================
<S> <C>
1. Significant Classification of Distributions to Shareholders. Net investment income (loss) and net realized gain (loss)
Accounting Policies may differ for financial statement and tax purposes primarily because of paydown gains and losses and
the
(continued) recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes. The
character of the distributions made during the year from net investment income or net realized gains may
differ from their ultimate characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the
income or realized gain (loss) was recorded by the Fund. Effective October 1, 1993, the Fund adopted
Statement of Position 93-2: Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies. As a result, the Fund changed
the classification of distributions to shareholders to better disclose the differences between financial
statement amounts and distributions determined in accordance with income tax regulations.
-----------------------------------------------------------------------------------------------------------
Other. Investment transactions are accounted for on the date the investments are purchased or sold (trade
date) and dividend income is recorded on the ex-dividend date. Discount on securities purchased is
amortized over the life of the respective securities, in accordance with federal income tax requirements.
Realized gains and losses on investments and options written and unrealized appreciation and depreciation
are determined on an identified cost basis, which is the same basis used for federal income tax purposes.
==========================================================
==========================================================
================
2. Shares of The Fund has authorized an unlimited number of no par value shares of beneficial interest of each class.
Beneficial Interest Transactions in shares of beneficial interest were as follows:
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended March 31, 1995 Year Ended September 30, 1994
------------------------------- -----------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 428,117 $ 2,047,517 1,797,523 $ 9,177,865
Dividends and distributions reinvested 229,874 1,108,861 535,980 2,757,772
Redeemed (1,179,261) (5,689,436) (4,163,212) (21,282,997)
------------ ------------ ------------ ------------
Net decrease (521,270) $ (2,533,058) (1,829,709) $ (9,347,360)
============ ============ ============
============
- --------------------------------------------------------------------------------------------------------
Class B:
Sold 535,747 $ 2,583,783 1,752,588 $ 8,784,884
Dividends and distributions reinvested 78,803 379,557 100,839 724,590
Redeemed (442,108) (2,127,211) (943,022) (4,810,071)
------------ ------------ ------------ ------------
Net increase 172,442 $ 836,129 910,405 $ 4,699,403
============ ============ ============
============
</TABLE>
<TABLE>
==========================================================
==========================================================
================
<S> <C>
3. Unrealized Gains and At March 31, 1995, net unrealized appreciation on investments and options written of $2,406,949 was
Losses on Investments composed of gross appreciation of $3,934,234 and gross depreciation of $1,527,285.
And Options Written
==========================================================
==========================================================
================
4. Option Activity The Fund may buy and sell put and call options, or write covered call options on portfolio securities in
order to produce incremental earnings or protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call options to hedge
against adverse movements in the value of portfolio holdings. When an option is written, the Fund receives
a premium and becomes obligated to sell or purchase the underlying security at a fixed price, upon exercise
of the option.
Options are valued daily based upon the last sale price on the principal exchange on
which the option is traded and unrealized appreciation or depreciation is recorded. The Fund will realize a
gain or loss upon the expiration or closing of the option transaction. When an option is exercised, the
proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of the
security for a purchased put or call option is adjusted by the amount of premium received or paid.
In this report, securities designated to cover outstanding call options are noted in
the Statement of Investments. Shares subject to call, expiration date, exercise price, premium received and
market value are detailed in a footnote to the Statement of Investments. Options written are reported as a
liability in the Statement of Assets and Liabilities. Gains and losses are reported in the Statement of
Operations.
</TABLE>
16 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
==========================================================
==========================================================
================
<S> <C>
4. Option Activity The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price
(Continued) of the security increases and the option is exercised. The risk in writing a put option is that the Fund
may incur a loss if the market price of the security decreases and the option is exercised. The risk in
buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has
the additional risk of not being able to enter into a closing transaction if a liquid secondary market does
not exist.
Written option activity for the six months ended March 31, 1995 was as follows:
</TABLE>
<TABLE>
<CAPTION>
Call Options Put Options
------------------------- ----------------------
Number Amount Number Amount
of Options of Premiums of Options of Premiums
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at September 30, 1994 2,621,646 $ 33,236 -- $ --
- -----------------------------------------------------------------------------------------------
Options written 2,064 11,063 136,986 1,416
- -----------------------------------------------------------------------------------------------
Options expired prior to exercise (2,622,829) (39,257) -- --
---------- ---------- ---------- ----------
Options outstanding at March 31, 1995 881 $ 5,042 136,986 $ 1,416
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
==========================================================
==========================================================
================
<S> <C>
5. Forward Contracts A forward foreign currency exchange contract (forward contract) is a commitment to purchase or sell
a
foreign currency at a future date, at a negotiated rate.
The Fund uses forward contracts to seek to manage foreign currency risks. They may also
be used to tactically shift portfolio currency risk. The Fund generally enters into forward contracts as a
hedge upon the purchase or sale of a security denominated in a foreign currency. In addition, the Fund may
enter into such contracts as a hedge against changes in foreign currency exchange rates on portfolio
positions.
Forward contracts are valued based on the closing prices of the forward currency
contract rates in the London foreign exchange markets on a daily basis as provided by a reliable bank or
dealer. The Fund will realize a gain or loss upon the closing or settlement of the forward transaction.
In this report, securities held in segregated accounts to cover net exposure on
outstanding forward contracts are noted in the Statement of Investments where applicable. Gains and losses
on outstanding contracts (unrealized appreciation or depreciation on forward contracts) are reported in the
Statement of Assets and Liabilities. Realized gains and losses are reported with all other foreign currency
gains and losses in the Fund's Statement of Operations.
Risks include the potential inability of the counterparty to meet the terms of the
contract and unanticipated movements in the value of a foreign currency relative to the U.S. dollar.
At March 31, 1995, the Fund had outstanding forward contracts to purchase and sell foreign currencies as
follows:
</TABLE>
<TABLE>
<CAPTION>
Contract Unrealized
Amount Valuation as of Appreciation
Contracts to Purchase Expiration Date (000's) March 31, 1995, (Depreciation)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deutsche Mark 4/10/95--5/16/95 492 $359,909 $8,891
- ----------------------------------------------------------------------------------------------
New Zealand Dollar 5/4/95 138 90,630 105
-------- ------
$450,539 $8,996
======== ======
Contract Unrealized
Amount Valuation as of Appreciation
Contracts to Sell Expiration Date (000's) March 31, 1995, (Depreciation)
- ----------------------------------------------------------------------------------------------
Australian Dollar 5/4/95 123 $ 90,656 $(131)
- ----------------------------------------------------------------------------------------------
Spanish Peseta 4/10/95--5/16/95 45,500 360,387 (9,369)
-------- ------
$451,043 (9,500)
======== ------
$(504)
======
</TABLE>
17 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited) (Continued)
----------------------------------------------------------------------------------------------------------------
==========================================================
==========================================================
================
<S> <C>
6. Management Fees and Management fees paid to the Manager were in accordance with the investment advisory agreement
with the Fund
Other Transactions which provides for an annual fee of .75% on the first $200 million of net assets, with a reduction of
.03%
With Affiliates on each $200 million thereafter to $800 million, .60% on the next $200 million and .50% on net assets
in
excess of $1 billion. The Manager has agreed to reimburse the Fund if aggregate expenses (with specified
exceptions) exceed the most stringent state regulatory limit on Fund expenses.
For the six months ended March 31, 1995, commissions (sales charges paid by investors)
on sales of Class A shares totaled $46,265, of which $13,727 was retained by Oppenheimer Funds
Distributor,
Inc. (OFDI), a subsidiary of the Manager, as general distributor, and by an affiliated broker/dealer. Sales
charges advanced to broker/dealers by OFDI on sales of the Fund's Class B shares totaled $94,320, of which
$13,601 was paid to an affiliated broker/dealer. During the six months ended March 31, 1995, OFDI
received
contingent deferred sales charges of $43,496 upon redemption of Class B shares, as reimbursement for sales
commissions advanced by OFDI at the time of sale of such shares.
Oppenheimer Shareholder Services (OSS), a division of the Manager, is the transfer and
shareholder servicing agent for the Fund, and for other registered investment companies. OSS's total costs
of providing such services are allocated ratably to these companies.
Under separate approved plans, each class may expend up to .25% of its net assets
annually to reimburse OFDI for costs incurred in connection with the personal service and maintenance of
accounts that hold shares of the Fund, including amounts paid to brokers, dealers, banks and other
institutions. In addition, Class B shares are subject to an asset-based sales charge of .75% of net assets
annually, to reimburse OFDI for sales commissions paid from its own resources at the time of sale and
associated financing costs. In the event of termination or discontinuance of the Class B plan, the Board of
Trustees may allow the Fund to continue payment of the asset-based sales charge to OFDI for distribution
expenses incurred on Class B shares sold prior to termination or discontinuance of the plan. During the six
months ended March 31, 1995, OFDI paid $5,866 and $992, respectively, to an affiliated broker/dealer as
reimbursement for Class A and Class B personal service and maintenance expenses and retained $67,680
as
reimbursement for Class B sales commissions and service fee advances, as well as financing costs.
==========================================================
==========================================================
================
7. Illiquid Securities At March 31, 1995, investments in securities included issues that are illiquid or restricted. The
securities are often purchased in private placement transactions, are not registered under the Securities
Act of 1933, may have contractual restrictions on resale, and are valued under methods approved by the
Board of Trustees as reflecting fair value. The Fund intends to invest no more than 10% of its net assets
(determined at the time of purchase) in illiquid or restricted securities. The aggregate value of these
securities subject to this limitation at March 31, 1995 was $107,619 which represents .19% of the Fund's
net assets. Information concerning these securities is as follows:
</TABLE>
<TABLE>
<CAPTION>
Valuation
Per Unit as of
Security Acquisition Date Cost Per Unit March 31, 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
United Mexican States, Combined Facility 3,
Loan Participation Agreement, Tranche A, 7.625%, 9/20/97 10/25/94 $89.00 $56.50
Pursuant to guidelines adopted by the Board of Trustees, certain unregistered securities are determined to
be liquid and are not included within the 10% limitation specified above.
</TABLE>
Appendix A
Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
<PAGE>
Food
Gas Transmission
Gas Utilities*
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking*For purposes of the Fund's investment policy not to concentrate in
securities of issues in the same industry, gas utilities and gas
transmission utilities each will be considered a separate industry.
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, NY 10015
Independent Auditors
Deloitte & Touche LLP
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202-4918
<PAGE>
