Registration No. 33-47378
File No. 811-6639
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. ___ / /
POST-EFFECTIVE AMENDMENT NO. 10 / X /
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / X /
AMENDMENT NO. 9 / X /
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
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(Exact Name of Registrant as Specified in Charter)
3410 South Galena Street
Denver, Colorado 80231
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(Address of Principal Executive Offices)
(303) 671-3200
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(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box):
/ / Immediately upon filing pursuant to paragraph (b)
/X / On January 15, 1997, pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / On _______________, pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / On ________________, pursuant to paragraph (a)(2)
of Rule (485)
The Registrant has registered an indefinite number of shares under
the Securities Act of 1933 pursuant to Rule 24f-2 promulgated under
the Investment Company Act of 1940. A Rule 24f-2 Notice for the
Registrant's fiscal year ended September 30, 1996, was filed on
November 27, 1996.
<PAGE>
FORM N-1A
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
Cross Reference Sheet
Part A of
Form N-1A
Item No. Prospectus Heading
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1 Front Cover Page
2 Expenses; Brief Overview of the Fund
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; How the Fund is Managed--
Organization and History; Investment Objectives and
Policies
5 How the Fund is Managed; Expenses; Back Cover
5A Performance of the Fund
6 How the Fund is Managed-Organization and History; The
Transfer Agent; Dividends, Capital Gains and Taxes;
Investment Objectives and Policies-Portfolio Turnover
7 Shareholder Account Rules and Policies; How To Buy
Shares; How to Exchange Shares; Special Investor
Services; Service Plan for Class A Shares;
Distribution and Service Plan for Class B Shares;
Distribution and Service Plan for Class C Shares; How
to Sell Shares
8 How to Sell Shares; Special Investor Services
9 *
Part B of
Form N-1A
Item No. Heading In Statement of Additional Information
- --------- ----------------------------------------------
10 Cover Page
11 Cover Page
12 *
13 Investment Objectives and Policies; Other Investment
Techniques and Strategies; Additional Investment
Restrictions
14 How the Fund is Managed - Trustees and Officers of the
Fund
15 How the Fund is Managed - Major Shareholders
16 How the Fund is Managed; Distribution and Service Plans
17 Brokerage Policies of the Fund
18 Additional Information About the Fund
19 Your Investment Account - How to Buy Shares; How to
Sell Shares; How to Exchange Shares
20 Dividends, Capital Gains and Taxes
21 How the Fund is Managed; Brokerage Policies of the
Fund
22 Performance of the Fund
23 *
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* Not applicable or negative answer.
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
Prospectus dated January 15, 1997
Oppenheimer Strategic Income & Growth 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 risk, 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. Please refer to "Special Risks of
Lower-Rated Securities" on pages __ and __.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and
keep it for future reference. You can find more detailed
information about the Fund in the January 15, 1997 Statement of
Additional Information. For a free copy, call OppenheimerFunds
Services, the Fund's Transfer Agent, at 1-800-525-7048, or write to
the Transfer Agent at the address on the back cover. The Statement
of Additional Information has been filed with the Securities and
Exchange Commission and is incorporated into this Prospectus by
reference (which means that it is legally part of this Prospectus).
(Oppenheimer funds logo)
Shares of the Fund are not deposits or obligations of any bank, are
not guaranteed by any bank, and are not insured by the F.D.I.C. or
any other agency, and involve investment risks, including the
possible loss of the principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
Contents
ABOUT THE FUND
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objectives and Policies
Investment Risks
Other Investment Techniques and Strategies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Appendix A: Description of Securities
Ratings
Appendix B: Special Sales Charge Arrangements
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of
its assets, administration, distribution of its shares and other
services, and those expenses are subtracted from the Fund's assets
to calculate the Fund's net asset value per share. All
shareholders therefore pay those expenses indirectly. Shareholders
pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you
understand your direct expenses of investing in the Fund and your
share of the Fund's business operating expenses that you will bear
indirectly. The numbers below are based on the Fund's expenses
during its last fiscal year ended September 30, 1996.
Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to "About Your Account,"
beginning on page __, for an explanation of how and when these
charges apply.
Class A Shares Class B Shares Class C Shares
Maximum Sales Charge
on Purchases (as a %
of offering price) 4.75% None None
Maximum 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)
Maximum Sales Charge on
Reinvested Dividends None None None
Exchange Fee None None None
Redemption Fee None None None
(1) If you invest $1 million or more ($500,000 or more for
purchases by "Retirement Plans," as defined in "Class A
Contingent Deferred Sales Charge" on page __) in Class A
shares, you may have to pay a sales charge of up to 1% if you
sell your shares within 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
advisor, OppenheimerFunds, Inc. (which is referred to in this
Prospectus as the "Manager"). The rates of the Manager's fees are
set forth in "How the Fund is Managed," below. The Fund has other
regular expenses for services, such as transfer agent fees,
custodial fees paid to the bank that holds its portfolio
securities, audit fees and legal expenses. Those expenses are
detailed in the Fund's Financial Statements in the Statement of
Additional Information.
Annual Fund Operating Expenses
(as a Percentage of Average Net Assets)
Class A Class B Class C
Shares Shares Shares
Management Fees 0.75% 0.75% 0.75%
12b-1 Plan Fees 0.24% 1.00% 1.00%
Other Expenses 0.44% 0.44% 0.53%
Total Fund Operating Expenses 1.43% 2.19% 2.28%
The numbers in the above chart are based on the Fund's
expenses in its fiscal year ended September 30, 1996. These
amounts are shown as a percentage of the average net assets of each
of those classes of the Fund's shares for that year. The 12b-1
Distribution Plan Fees for Class A shares are service plan fees.
For Class B and Class C shares the 12b-1 Distribution Plan Fees are
service plan fees and asset based sales charges. The service plan
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 before October 2, 1995. Therefore, the Annual
Fund Operating Expenses for Class C shares are based on amounts
that would have been payable in that period assuming that Class C
shares were outstanding during the entire fiscal year. These plans
are described in greater detail in "How to Buy Shares."
Examples. To try to show the effect of these expenses on
an investment over time, we have created the hypothetical examples
shown below. Assume that you make a $1,000 investment in each
class of shares of the Fund, 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 chart 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 $99 $137 $215
Class C Shares $33 $71 $122 $262
If you did not redeem your investment, it would incur the
following expenses:
Class A Shares $61 $91 $122 $211
Class B Shares $22 $69 $117 $215
Class C Shares $23 $71 $122 $262
* In the first example, expenses include the Class A initial sales
charge and the applicable Class B or Class C contingent deferred
sales charge. In the second example, Class A expenses include the
initial sales charge, but Class B and Class C expenses do not
include contingent deferred sales charges. The Class B expenses in
years 7 through 10 are based on the Class A expenses shown above,
because the Fund automatically converts 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 - Buying Class B Shares" for more information.
These examples show the effect of expenses on an investment, but
are not meant to state or predict actual or expected costs or
investment returns of the Fund, all of which may be more or less
than those shown.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized
below, with references to the section of this Prospectus where more
complete information can be found. You should carefully read the
entire Prospectus before making a decision about investing in the
Fund. Keep the Prospectus for reference after you invest,
particularly for information about your account, such as how to
sell or exchange shares.
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, including emerging market 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 domestic 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 advisor (the
"Manager") is OppenheimerFunds, Inc. The Manager (including a
subsidiary) manages investment company portfolios currently having
over $62 billion in assets as of December 31, 1996. The Manager is
paid an advisory fee by the Fund, based on its net 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 advisor 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 Oppenheimer
funds spectrum, the Fund is generally considered moderately
aggressive, more risky 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 offers
the individual investor three classes of shares. All classes have
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 buying them. There is also an
annual asset-based sales charge on Class B and Class C shares.
Please review "How To Buy Shares" starting on page ___ for more
details, including a discussion about which class may be
appropriate for you.
How Can I Sell My Shares? Shares can be redeemed by mail
or by telephone call to the Transfer Agent on any business day, or
through your dealer. Please refer to "How To Sell Shares" on page
___. The Fund also offers exchange privileges to other Oppenheimer
funds, described in "How to Exchange Shares" on page ___.
How Has the Fund Performed? The Fund measures its
performance by quoting its 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 pages ___ and ___. Please remember that past
performance does not guarantee future results.
Financial Highlights
The table on the following pages presents selected financial
information about the Fund, including per share data, expense
ratios and other data based on the Fund's average net assets. This
information has been audited by Deloitte & Touche LLP, the Fund's
independent auditors, whose report on the Fund's financial
statements for the fiscal year ended September 30, 1996, is
included in the Statement of Additional Information.
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------
YEAR ENDED SEPTEMBER 30,
1996 1995 1994 1993 1992(3)
===================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $5.36 $4.92 $5.26 $5.03 $5.00
- -----------------------------------------------------------------------------------
Income from investment operations:
Net investment income .32 .32 .21 .22 .07(4)
Net realized and unrealized
gain (loss) .54 .44 (.23) .22 .02
----- ----- ----- ----- -----
Total income (loss) from
investment operations .86 .76 (.02) .44 .09
- -----------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.34) (.32) (.21) (.20) (.06)
Dividends in excess of net
investment income -- -- (.01) -- --
Distributions from net realized gain -- -- -- (.01) --
Distributions in excess of net
realized gain -- -- (.10) -- --
----- ----- ----- ----- -----
Total dividends and distributions
to shareholders (.34) (.32) (.32) (.21) (.06)
- -----------------------------------------------------------------------------------
Net asset value, end of period $5.88 $5.36 $4.92 $5.26 $5.03
===== ===== ===== ===== =====
===================================================================================
TOTAL RETURN, AT NET ASSET VALUE(5) 16.53% 16.09% (0.23)% 8.84% 1.74%
===================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $46,747 $40,977 $42,733 $55,291 $48,3973
- -----------------------------------------------------------------------------------
Average net assets (in thousands) $43,764 $40,799 $48,360 $59,209 $30,2643
- -----------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.75% 6.37% 4.56% 4.33% 4.59%(6)
Expenses 1.43% 1.35% 1.43% 1.36% 1.46%(4)(6)
- -----------------------------------------------------------------------------------
Portfolio turnover rate(7) 147.3% 114.0% 80.0% 122.4% 25.8%
Average brokerage
commission rate(8) $0.0595 -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------- --------
PERIOD
ENDED
YEAR ENDED SEPTEMBER 30, SEPT. 30,
1996 1995 1994 1993(2) 1996(1)
====================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $5.35 $4.91 $5.26 $5.10 $5.36
- ----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .29 .28 .19 .14 .28
Net realized and unrealized
gain (loss) .53 .44 (.25) .16 .49
----- ----- ----- ----- -----
Total income (loss) from
investment operations .82 .72 (.06) .30 .77
- ----------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.30) (.28) (.18) (.13) (.27)
Dividends in excess of net
investment income -- -- (.01) -- --
Distributions from net realized gain -- -- -- (.01) --
Distributions in excess of net
realized gain -- -- (.10) -- --
----- ----- ----- ----- -----
Total dividends and distributions
to shareholders (.30) (.28) (.29) (.14) (.27)
- ----------------------------------------------------------------------------------------------------
Net asset value, end of period $5.87 $5.35 $4.91 $5.26 $5.86
===== ===== ===== ===== =====
====================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(5) 15.69% 15.26% (1.17)% 5.86% 15.18%
====================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $28,93 $19,885 $16,053 $12,386 $1,106
- ----------------------------------------------------------------------------------------------------
Average net assets (in thousands) $24,26 $17,316 $14,986 $ 7,541 $ 400
- ----------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.94% 5.61% 3.86% 3.32%(6) 4.58%(6)
Expenses 2.19% 2.10% 2.17% 2.21%(6) 2.28%(6)
- ----------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 147.3 114.0% 80.0% 122.4% 147.3%
Average brokerage
commission rate(8) $0.0595 -- -- -- $0.0595
</TABLE>
1. For the period from October 2, 1995 (inception of offering)
to September 30, 1996.
2. For the period from November 30, 1992 (inception of offering)
to September 30, 1993.
3. For the period from June 1, 1992 (commencement of operations)
to September 30, 1992.
4. Net investment income would have been $.07 per share absent
the voluntary expense reimbursement, resulting in an expense ratio of
1.74%.
5. Assumes a hypothetical initial investment on the business day
before the first day of the fiscal period (or inception of offering),
with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated
on the last business day of the fiscal period. Sales charges are not
reflected in the total returns. Total returns are not annualized for
periods of less than one full year.
6. Annualized.
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 period ended
September 30, 1996 were $106,528,444 and $95,769,996, respectively.
8. Total brokerage commissions paid on applicable purchases and
sales of portfolio securities for the period divided by the total number
of related shares purchased and sold. See accompanying Notes to
Financial Statements.
<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.
Investments in Bonds and Convertible Securities. The Fund
may invest in a variety of different types of income-producing
securities to help seek its primary objective of current income.
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 or rated similarly by another nationally recognized
statistical rating organization. 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, 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. 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 or private issuers 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 identify liquid assets to its custodian
bank 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", below.
Zero Coupon Securities. The Fund may invest in zero coupon
securities issued either by foreign banks, foreign companies and
domestic private issuers or by the U.S. Treasury, and which
therefore may be in all three debt 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 may present an additional risk, 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." Because 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
below 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 and mortgage-backed
securities.
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.
The Fund may also invest in emerging market debt securities.
Emerging market countries generally (i) have no market for longer-
term debt securities denominated in its local currency; (ii) borrow
money in currencies other than its local currency; (iii) lack a
developed yield curve for their local currencies; and (iv) with the
exception of Mexico, are not members of the Organization for
Economic Cooperation and Development.
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. This sector also includes 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.
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. In addition, the Manager trades equity
securities when the Manager determines that these securities should
be purchased or sold. 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. See "Tax Aspects of
Covered Calls and Hedging Instruments" in the Statement of
Additional Information. 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.
Investment Risks
All investments carry risks to some degree, whether they are
risks that market prices of investments may fluctuate (this is
known as "market risk") or that the issuer may experience financial
difficulties and default on its obligations under a fixed income
investment to pay interest and principal (this is known as "credit
risk"). These general investment risks and the special investment
risks of certain types of investments that the Fund may purchase
are described below. They affect the value of the Fund's
investments, its investment performance, and the value of its
shares. These risks collectively form the risk profile of the
Fund.
Interest Rate Risks. In addition to credit risk, described
above, 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 high
risk, 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 "BB" or lower by Standard &
Poor's Corporation ("Standard & Poor's") or "Ba" or lower by
Moody's Investors Service, Inc. ("Moody's") 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 that may be in default at time of purchase.
As of September 30, 1996, the Fund's portfolio included
corporate bonds in the following S&P rating categories, 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, .09%; A, .29%; BBB, 1.61%; BB,
2.87%; B, 9.87%; CCC, 1.40%; D, 0.00%. 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. For a description of
these securities ratings, please refer to the Appendix A to this
Prospectus.
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. All corporate debt securities,
whether foreign or domestic, are subject to some degree of credit
risk. Additionally, during an economic downturn, high yield bonds
might decline in value more than lower yielding, investment grade
bonds. For foreign lower-grade debt securities, these risks are in
addition to the risks of investing in foreign securities, described
in "Special Risks of Foreign 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.
Special Risks of Foreign Securities. 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. See "Returns of Capital" below.
The Fund may invest in foreign securities issued in any
country, developed or underdeveloped. Securities of issuers in
non-industrialized and emerging market 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.
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.
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. In general, a "derivative
investment" is a specially designed investment. Its performance is
linked to the performance of another investment or security, such
as an option, future, index, currency or commodity. The Fund may
not purchase or sell physical commodities or commodity contracts,
however, this shall not prevent the Fund from buying or selling
options and futures contracts or from investing in securities or
other instruments backed by physical commodities. The Fund may
purchase and sell foreign currency in hedging transactions.
Derivative investments used by the Fund are used in some cases
for hedging purposes and in other cases for "non-hedging"
investment purposes to seek income or total return. 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 payments 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 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. Principal
and/or interest payments on a commodity-linked note may depend on
the performance of an index of commodity futures, or on the
performance of an individual commodity such as crude oil, gasoline,
natural gas, livestock, agricultural grains, or metals. 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
expected 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.
Derivatives may entail special risks. The company
issuing the instrument may fail to pay the amount due on the
maturity of the instrument. Also, the underlying investment or
security 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 and
stock market 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 be illiquid. Please refer to "Illiquid and Restricted
Securities," below.
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.
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,
corporate debt securities or equity 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 on (1) debt securities, (2) foreign
currencies, (3) Futures, (4) broadly-based securities indices, (5)
interest rate spreads, (6) equity securities, or to terminate its
obligation on a call the Fund previously wrote. 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 and segregate liquid assets to satisfy its
obligation if the call is exercised). 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 covered 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
those puts that relate to (1) debt securities, (2) Futures, (3)
foreign currencies, (4) broadly-based securities indices, (5)
interest rate spreads, or (6) equity securities. 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
25% of its total assets. The Fund will segregate liquid assets 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 attempts to limit 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 (the Board may increase that
limit to 15%). The Fund's percentage limitation on these
investments does not apply to certain restricted securities that
are eligible for resale to qualified institutional purchasers. The
Manager monitors holdings of illiquid securities on an ongoing
basis and at times the Fund may be required to sell some holdings
to maintain adequate liquidity.
When-Issued and Delayed Delivery Transactions. The Fund
may purchase securities on a "when-issued" basis, and may purchase
or sell 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.
Unless the Prospectus or the Statement of Additional
Information states that a percentage restriction applies on an
ongoing basis, it applies only at the time the Fund makes an
investment and the Fund need not sell securities to meet the
percentage limits if the value of the investment increases in
proportion to the size of the Fund. Other investment restrictions
are listed in "Investment Restrictions" in the Statement of
Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized in 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
officers of the Fund and provides more information about them.
Although the Fund will not normally hold annual meetings of its
shareholders, it may hold shareholder meetings from time to time on
important matters, and shareholders have the right to call a
meeting to remove a Trustee or to take other action described in
the Fund's Declaration of Trust.
The Board of Trustees has the power, without shareholder
approval, to divide unissued shares of 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. Only shares of a particular
class vote as a class on matters that affect that class alone.
Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager,
OppenheimerFunds, Inc., which is responsible for selecting the
Fund's investments and handles its day-to-day business. The
Manager carries out its duties, subject to the policies established
by the Board of Trustees, under an Investment Advisory Agreement
which states the Manager's responsibilities. The Agreement sets
forth the fees paid by the Fund to the Manager and describes the
expenses that the Fund is responsible to pay to conduct its
business.
The Manager has operated as an investment advisor since 1959.
The Manager (including a subsidiary) currently manages investment
companies, including other Oppenheimer funds, with assets of more
than $62 billion as of December 31, 1996, and with more than 3
million shareholder accounts. The Manager is owned by Oppenheimer
Acquisition Corp., a holding company that is owned in part by
senior officers of the Manager and controlled by Massachusetts
Mutual Life Insurance Company.
Portfolio 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 Oppenheimer funds. 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 annual net assets, 0.72% of the next $200
million, 0.69% of the next $200 million, 0.66% of the next $200
million, 0.60% of the next $200 million, and 0.50% of average
annual 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 its Class A, Class B and Class C 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 fees
and auditing costs. Those expenses are paid out of the Fund's
assets and are not paid directly by shareholders. However, those
expenses reduce the net asset value of the Fund's shares, and
therefore are indirectly borne by shareholders through their
investment. More information about the investment advisory
agreement and the other expenses paid by the Fund is contained in
the Statement of Additional Information.
There is also information about the Fund's brokerage policies
and practices in "Brokerage Policies of the Fund" in the Statement
of Additional Information. That section discusses how brokers and
dealers are selected for the Fund's portfolio transactions. When
deciding which brokers to use, the Manager is permitted by the
investment advisory agreement to consider whether brokers have sold
shares of the Fund or any other funds for which the Manager serves
as investment advisor.
The Distributor. The Fund's shares are sold through
dealers, brokers and other financial institutions that have a sales
agreement with OppenheimerFunds Distributor, Inc., a subsidiary of
the Manager that acts as the Fund's Distributor. The Distributor
distributes the shares of other Oppenheimer funds and is sub-
distributor for funds managed by a subsidiary of the Manager.
The Transfer Agent. The Fund's transfer agent is
OppenheimerFunds Services, a division of the Manager, which acts as
the shareholder servicing agent for the Fund on an "at-cost" basis.
It also acts as the shareholder servicing agent for other
Oppenheimer funds. Shareholders should direct inquiries about
their accounts to the Transfer Agent at the address and toll-free
number shown below under "How to Sell Shares" 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. These returns measure the
performance of a hypothetical account in the Fund over various
periods, and do not show the performance of each shareholder's
account (which will vary if dividends are received in cash or
shares are sold or purchased). The Fund's performance information
may be useful to help you see how well your investment has done
over time and to compare it to other mutual 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. More detailed
information about how total returns are calculated is contained in
the Statement of Additional Information, which also contains
information about other ways to measure and compare the Fund's
performance. The Fund's investment performance will vary over
time, depending on market conditions, the composition of the
portfolio, expenses and which class of shares you purchase.
Total Returns. There are different types of total returns
used to measure the Fund's performance. Total return is the change
in value of a hypothetical investment in the Fund over a given
period, assuming that all dividends and capital gains distributions
are reinvested in additional shares. The cumulative total return
measures the change in value over the entire period (for example,
ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the
cumulative total return over the entire period. However, average
annual total returns do not show the Fund's actual year-by-year
performance.
When total returns are quoted for Class A shares, normally the
current maximum initial sales charge has been deducted. When total
returns are shown for Class B shares, normally the contingent
deferred sales charge that applies to the period for which total
return is shown has been deducted. When total returns are shown
for Class C shares, for a one-year period (or less), they reflect
the effect of the contingent deferred sales charge. However, total
returns may also be quoted "at net asset value," without
considering the sales charge, and those returns would be less 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, 1996, 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 fiscal year ended September 30, 1996, the U.S. fixed income
market declined slightly as interest rates rose. To compensate for
the under performance of U.S. Government bonds and mortgage backed
securities, the Manager shifted the Fund s assets into emerging
market bonds. Foreign government bonds, particularly those issued
by the governments of Italy and Australia performed well over the
past year. In addition, the Manager increased the Fund s holdings
of short term money market instruments in the local currency of
foreign countries. These instruments have a high current yield
compared to similar maturity U.S. Government instruments and
provide the Fund with the ability to move out of these investments
should interest rate situations in those foreign countries
deteriorate.
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, 1996. In the case of
Class A shares, performance is measured from the Fund's inception
on June 1, 1992. In the case of Class B shares, performance is
measured from the inception of the Class on November 30, 1992. In
the case of Class C shares, performance is measured from the
inception of the class on October 2, 1995. In all 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. The graph for Class B shares reflects the
applicable contingent deferred sales charge that applies to
redemptions of Class B shares held from 11/30/92 until 9/30/95.
The graph for Class C shares reflects the applicable 1% contingent
deferred sales charge for the period shown.
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]
[Graph] [with Class C shares of the Fund]
Past performance is not predictive of future performance.
Average Annual Total Returns Cumulative Total Return
of the Fund at 9/30/96 of the Fund at 9/30/96
Life of Life of
A Shares 1-Year Class(1) C Shares Class(3)
11.00% 8.51% 14.18%
B Shares 1-Year Life of Class(2)
10.69% 8.46%
____________________
Total returns and the ending account values in the graph show
change in share value and include reinvestment of all dividends and
capital gains distributions.
1Class A returns are shown net of the applicable 4.75% maximum
initial sales charge. The inception date of the Fund (Class A
shares) was 6/1/92.
2Class B shares of the Fund were first publicly offered on
11/30/92. Returns are shown net of the applicable 5% and 2%
contingent deferred sales charge, respectively, for the 1-year
period and the Life of Class. The ending account value in the
graph is net of the applicable 3% contingent deferred sales charge.
3Class C shares of the Fund were first publicly offered on 10/2/95.
The Life of Class return is shown net of the applicable 2%
contingent deferred sales charge.
Past performance is not predicative of future performance.
Graphs may not be drawn to same scale.
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 "Retirement Plans," as defined in "Class
A Contingent Deferred Sales Charge" on page __). If you purchase
Class A shares as part of an investment of at least $1 million
($500,000 for Retirement Plans) in shares of one or more
Oppenheimer funds, you will not pay an initial sales charge, but if
you sell any of those shares within 18 months of buying them, you
may pay a contingent deferred sales charge. The amount of that
sales charge will vary depending on the amount you invested. Sales
charge rates are described in "Buying Class A Shares" below.
Class B Shares. If you buy Class B shares, you pay no
sales charge at the time of purchase, but if you sell your shares
within six years of buying them, you will normally pay a contingent
deferred sales charge that varies depending on how long you own
your shares, as described in "Buying Class B Shares" below.
Class C Shares. If you buy Class C shares, you pay no
sales charge at the time of purchase, but if you sell your shares
within 12 months of buying them, you will normally pay a contingent
deferred sales charge of 1%, as described in "Buying Class C
Shares" below.
Which Class of Shares Should You Choose? Once you decide that the
Fund is an appropriate investment for you, the decision as to which
class of shares is better suited to your needs depends on a number
of factors which you should discuss with your financial advisor.
The Fund's operating costs that apply to a class of shares and the
effect of the different types of sales charges on your investment
will vary your investment results over time. The most important
factors to consider are how much you plan to invest and how long
you plan to hold your investment. If your goals and objectives
change over time and you plan to purchase additional shares, you
should re-evaluate those factors to see if you should consider
another class of shares.
In the following discussion, to help provide you and your
financial advisor with a framework in which to choose a class, we
have made some assumptions using a hypothetical investment in the
Fund. We used the sales charge rates that apply to each class of
shares and considered the effect of the annual asset-based sales
charge on Class B and Class C expenses (which, like all expenses,
will affect your investment return). For the sake of comparison,
we have assumed that there is a 10% rate of appreciation in the
investment each year. Of course, the actual performance of your
investment cannot be predicted and will vary, based on the Fund's
actual investment returns and the operating expenses borne by each
class of shares, and which class of shares you invest in.
The factors discussed below are not intended to be investment
advice or recommendations, because each investor's financial
considerations are different. The discussion below of the factors
to consider in purchasing a particular class of shares assumes that
you will purchase only one class of shares, and not a combination
of shares of different classes.
How Long Do You Expect to Hold Your Investment? While
future financial needs cannot be predicted with certainty, knowing
how long you expect to hold your investment will assist you in
selecting the appropriate class of shares. Because of the effect
of class-based expenses, your choice will also depend on how much
you plan to invest. For example, the reduced sales charges
available for larger purchases of Class A shares may, over time,
offset the effect of paying an initial sales charge on your
investment (which reduces the amount of your investment dollars
used to buy shares for your account), compared to the effect over
time of higher class-based expenses on Class B or Class C shares
for which no initial sales charge is paid.
Investing for the Short Term. If you have a short-term
investment horizon (that is, you plan to hold your shares for not
more than six years), you should probably consider purchasing Class
A or Class C shares rather than Class B shares, because of the
effect of the Class B contingent deferred sales charge if you
redeem in less than 7 years, as well as the effect of the Class B
asset-based sales charge on the investment return for that class in
the short-term. Class C shares might be the appropriate choice
(especially for investments of less than $100,000), because there
is no initial sales charge on Class C shares, and the contingent
deferred sales charge does not apply to amounts you sell after
holding them one year.
However, if you plan to invest more than $100,000 for the
shorter term, then the more you invest and the more your investment
horizon increases toward six years, Class C shares might not be as
advantageous as Class A shares. That is because the annual asset-
based sales charge on Class C shares will have a greater impact on
your account over the longer term than the reduced front-end sales
charge available for larger purchases of Class A shares. For
example, Class A might be more advantageous than Class C (as well
as Class B) for investments of more than $100,000 expected to be
held for 5 or 6 years (or more). For investments over $250,000
expected to be held 4 to 6 years (or more), Class A shares may
become more advantageous than Class C (and B). If investing
$500,000 or more, Class A may be more advantageous as your
investment horizon approaches 3 years or more.
And for investors who invest $1 million or more, in most cases
Class A shares will be the most advantageous choice, no matter how
long you intend to hold your shares. For that reason, the
Distributor normally will not accept purchase orders of $500,000 or
more or $1 million or more of Class B or Class C shares,
respectively, from a single investor.
Investing for the Longer Term. If you are investing for
the longer-term, for example, for retirement, and do not expect to
need access to your money for seven years or more, Class B shares
may be an appropriate consideration, if you plan to invest less
than $100,000. If you plan to invest more than $100,000 over the
long term, Class A shares will likely be more advantageous than
Class B shares or C shares, as discussed above, because of the
effect of the expected lower expenses for Class A shares and the
reduced initial sales charges available for larger investments in
Class A shares under the Fund's Right of Accumulation.
Of course, these examples are based on approximations of the
effect of current sales charges and expenses on a hypothetical
investment over time, using the assumed annual performance return
stated above, and therefore you should analyze your options
carefully.
Are There Differences in Account Features That Matter to
You? Because some account features may not be available to Class
B or Class C shareholders, or other features (such as Automatic
Withdrawal Plans) 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. 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.
How Does It Affect Payments to My Broker? A salesperson,
such as a broker, or any other person who is entitled to receive
compensation for selling Fund shares may receive different
compensation for selling one class of shares than for selling
another class. It is important that investors understand that the
purpose of the Class B and Class C contingent deferred sales
charges and asset-based sales charges is the same as the purpose of
the front-end sales charge on sales of Class A shares: that is, to
compensate the Distributor for commissions it pays to dealers and
financial institutions for selling shares.
How Much Must You Invest? You can open a Fund account with a
minimum initial investment of $1,000 and make additional
investments at any time with as little as $25. There are reduced
minimum investments under special investment plans.
With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7)
custodial plans and military allotment plans, you can make initial
and subsequent investments of as little as $25. Subsequent
purchases of at least $25 can be made by telephone through
AccountLink.
Under pension, profit-sharing and 401(k) plans and Individual
Retirement Accounts (IRAs), you can make an initial investment of
as little as $250 (if your IRA is established under an Asset
Builder Plan, the $25 minimum applies), and subsequent investments
may be as little as $25.
There is no minimum investment requirement if you are buying
shares by reinvesting dividends from the Fund or other Oppenheimer
funds (a list of them appears in the Statement of Additional
Information, or you can ask your dealer or call the Transfer
Agent), or by reinvesting distributions from unit investment trusts
that have made arrangements with the Distributor.
How Are Shares Purchased? You can buy shares several ways
- -- through any dealer, broker or financial institution that has a
sales agreement with the Distributor, or directly through the
Distributor, or automatically from your bank account through an
Asset Builder Plan under the OppenheimerFunds AccountLink service.
The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase (and redemption) orders.
When you buy shares, be sure to specify Class A, Class B or Class
C shares. If you do not choose, your investment will be made in
Class A shares.
Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.
Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "OppenheimerFunds Distributor, Inc." Mail it to P.O. Box
5270, Denver, Colorado 80217. If you don't list a dealer on the
application, the Distributor will act as your agent in buying the
shares. However, it is recommended that you discuss your
investment first with a financial advisor, to be sure 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 have the Transfer Agent send
redemption proceeds or transmit dividends and distributions to your
bank account.
Shares are purchased for your account on AccountLink on the
regular business day the Distributor is instructed by you to
initiate the ACH transfer to buy shares. You can provide those
instructions automatically, under an Asset Builder Plan, described
below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. You should request AccountLink
privileges on the application or dealer settlement instructions
used to establish your account. Please refer to "AccountLink" below
for more details.
Asset Builder Plans. You may purchase shares of the Fund
(and up to four other Oppenheimer funds) automatically each month
from your account at a bank or other financial institution under an
Asset Builder Plan with AccountLink. Details are on the Application
and in the Statement of Additional Information.
At What Price Are Shares Sold? Shares are sold at the
public offering price based on the net asset value (and any initial
sales charge that applies) that is next determined after the
Distributor receives the purchase order in Denver, Colorado. In
most cases, to enable you to receive that day's offering price, the
Distributor or its designated agent must receive your order by the
time of day The New York Stock Exchange closes, which is normally
4:00 P.M., New York time, but may be earlier on some days (all
references to time in this Prospectus mean "New York time"). The
net asset value of each class of shares is determined as of that
time each day The New York Stock Exchange is open (which is a
"regular business day").
If you buy shares through a dealer, the dealer must receive
your order by the close of The New York Stock Exchange on a regular
business day and transmit it to the Distributor so that it is
received before the Distributor's close of business that day, which
is normally 5:00 P.M. The Distributor may reject any purchase
order for the Fund's shares, in its sole discretion.
Special Sales Charge Arrangements for Certain Persons. Appendix B
to this Prospectus sets forth conditions for the waiver of, or
exemption from, sales charges or the special sales charge rates
that apply to purchases of shares of the Fund (including purchases
by exchange) by a person who was a shareholder of one of the Former
Quest for Value Funds (as defined in that Appendix).
Buying Class A Shares. Class A shares are sold at their offering
price, which is normally net asset value plus an initial sales
charge. However, in some cases, described below, purchases are not
subject to an initial sales charge, and the offering price is 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
paid to your dealer as commission. The current sales charge rates
and commissions paid to dealers and brokers are as follows:
_________________________________________________________________
Front-End Front-End
Sales Charge Sales Charge
as as Commission as
Percentage of Percentage of Percentage
Amount of Purchase Offering Price Amount Invested of 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%
$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 Oppenheimer funds in the following cases:
Purchases aggregating $1 million or more;
Purchases by a retirement plan qualified under section
401(a) if the retirement plan has total plan assets of $500,000 or
more;
Purchases by a retirement plan qualified under sections
401(a) or 401(k) of the Internal Revenue Code, by a non-qualified
deferred compensation plan (not including Section 457 plans),
employee benefit plan, group retirement plan (see "How to Buy
Shares - Retirement Plans" in the Statement of Additional
Information for further details), an employee's 403(b)(7) custodial
plan account, SEP IRA, SARSEP, or SIMPLE plan (all of these plans
are collectively referred to as "Retirement Plans") that: (1) buys
shares costing $500,000 or more or (2) has, at the time of
purchase, 100 or more eligible participants, or (3) certifies that
it projects to have annual plan purchases of $200,000 or more; or
Purchases by an OppenheimerFunds Rollover IRA if the
purchases are made (1) through a broker, dealer, bank or
registered investment advisor that has made special arrangements
with the Distributor for these purchases, or (2) by a direct
rollover of a distribution from a qualified retirement plan if the
administrator of that plan has made special arrangements with the
Distributor for those purchases.
The Distributor pays dealers of record commissions on those
purchases in an amount equal to (i) 1.0% for non-Retirement Plan
accounts, and (ii) for Retirement Plan accounts, 1.0% of the first
$2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of
purchases over $5 million. That commission will be paid only on
those purchases that were not previously subject to a front-end
sales charge and dealer commission. No sales commission will be
paid to the dealer, broker or financial institution on sales of
Class A shares purchased with the redemption proceeds of shares of
a mutual fund offered as an investment option in a Retirement Plan
in which Oppenheimer funds are also offered as investment options
under a special arrangement with the Distributor if the purchase
occurs more than 30 days after the addition of the Oppenheimer
funds as an investment option to the Retirement Plan.
If you redeem any of those shares within 18 months of the end
of the calendar month of their purchase, a contingent deferred
sales charge (called the "Class A contingent deferred sales
charge") will be deducted from the redemption proceeds. That sales
charge may be equal to 1.0% of the lesser of the aggregate net
asset value of either (1) the redeemed shares (not including shares
purchased by reinvestment of dividends or capital gains
distributions) or (2) the original offering price (which is the
original net asset value) of the redeemed shares. However, the
Class A contingent deferred sales charge will not exceed the
aggregate amount of the commissions the Distributor paid to your
dealer on all Class A shares of all Oppenheimer funds you
purchased subject to the Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is
payable, the Fund will first redeem shares that are not subject to
the sales charge, including shares purchased by reinvestment of
dividends and capital gains, and then will redeem other shares in
the order that you purchased them. The Class A contingent deferred
sales charge is waived in certain cases described in "Waivers of
Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on
exchanges of shares under the Fund's Exchange Privilege (described
below). However, if the shares acquired by exchange are redeemed
within 18 months of the end of the calendar month of the purchase
of the exchanged shares, the 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.
Reduced Sales Charges for Class A Share Purchases. You may be
eligible to buy Class A shares at reduced sales charge rates in one
or more of the following ways:
Right of Accumulation. To qualify for the lower sales
charge rates that apply to larger purchases of Class A shares, you
and your spouse can add together Class A and Class B shares you
purchase for your individual accounts, or jointly, or for trust or
custodial accounts on behalf of your children who are minors. A
fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit
plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class
A and Class B shares of the Fund and other Oppenheimer funds to
reduce the sales charge rate that applies to current purchases of
Class A shares. You can also include Class A and Class B shares of
Oppenheimer funds you previously purchased subject to an initial or
contingent deferred sales charge to reduce the sales charge rate
for current purchases of Class A shares, provided that you still
hold your investment in one of the Oppenheimer funds. The value of
those shares will be based on the greater of the amount you paid
for the shares or their current value (at offering price). The
Oppenheimer funds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from
the Distributor. The reduced sales charge will apply only to
current purchases and must be requested when you buy your shares.
Letter of Intent. Under a Letter of Intent, if you
purchase Class A shares or Class A shares and Class B shares of the
Fund and other Oppenheimer funds during a 13-month period, you can
reduce the sales charge rate that applies to your purchases of
Class A shares. The total amount of your intended purchases of both
Class A and Class B shares will determine the reduced sales charge
rate for the Class A shares purchased during that period. This can
include purchases made up to 90 days before the date of the Letter.
More information is contained in the Application and in "Reduced
Sales Charges" in the Statement of Additional Information.
Waivers of Class A Sales Charges. The Class A sales
charges are not imposed in the circumstances described below. There
is an explanation of this policy in "Reduced Sales Charges" in the
Statement of Additional Information.
Waivers of Initial and Contingent Deferred Sales Charges for
Certain Purchasers. Class A shares purchased by the following
investors are not subject to any Class A sales charges:
the Manager or its affiliates;
present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced
Sales Charges" in the Statement of Additional Information) of the
Fund, the Manager and its affiliates, and retirement plans
established by them for their employees;
registered management investment companies, or separate
accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose;
dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees;
employees and registered representatives (and their spouses
and minor children) 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
or registered representative's spouse or minor children);
dealers, brokers, banks or registered investment advisors
that have entered into an agreement with the Distributor providing
specifically for the use of shares of the Fund in particular
investment products made available to their clients (those clients
may be charged a transaction fee by their broker, dealer or advisor
for the purchase or sale of Fund shares);
directors, trustees, officers or full-time employees of
OpCap Advisors or its affiliates, their relatives or any trust,
pension, profit sharing or other benefit plan which beneficially
owns shares for those persons;
accounts for which Oppenheimer Capital is the investment
advisor (the Distributor must be advised of this arrangement) and
persons who are directors or trustees of the company or trust which
is the beneficial owner of such accounts;
any unit investment trust that has entered into an
appropriate agreement with the Distributor;
a TRAC-2000 401(k) plan (sponsored by the former Quest for
Value Advisors) whose Class B or Class C shares of a Former Quest
for Value Fund were exchanged for Class A shares of that Fund due
to the termination of the Class B and C TRAC-2000 program on
November 24, 1995; or
qualified retirement plans that had agreed with the former
Quest for Value Advisors to purchase shares of any of the Former
Quest for Value Funds at net asset value, with such shares to be
held through DCXchange, a sub-transfer agency mutual fund
clearinghouse, provided that such arrangements are consummated and
share purchases commence, by December 31, 1996.
Waivers of Initial and Contingent Deferred Sales Charges in
Certain Transactions. Class A shares issued or purchased in the
following transactions are not subject to Class A sales charges:
(1) investment advisors and financial planners who charge an
advisory, consulting or other fee for their services and buy shares
for their own accounts or the accounts of their clients, (2)
Retirement Plans and deferred compensation plans and trusts used to
fund those Plans (including, for example, plans qualified or
created under sections 401(a), 403(b) or 457 of the Internal
Revenue Code), and "rabbi trusts" that buy shares for their own
accounts, in each case if those purchases are made through a broker
or agent or other financial intermediary that has made special
arrangements with the Distributor for those purchases; and (3)
clients of such investment advisors or financial planners who buy
shares for their own accounts may also purchase shares without
sales charge but only if their accounts are linked to a master
account of their investment advisor or financial planner on the
books and records of the broker, agent or financial intermediary
with which the Distributor has made such special arrangements (each
of these investors may be charged a fee by the broker, agent or
financial intermediary for purchasing shares),
shares issued in plans of reorganization, such as mergers,
asset acquisitions and exchange offers, to which the Fund is a
party,
shares purchased by the reinvestment of loan repayments by
a participant in a retirement plan for which the Manager or its
affiliates acts as sponsor,
shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds
(other than Oppenheimer Cash Reserves) or unit investment trusts
for which reinvestment arrangements have been made with the
Distributor,
shares purchased and paid for with the proceeds of shares
redeemed in the 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, or
purchased with the proceeds of maturing principal of units
of any Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for
Certain Redemptions. The Class A contingent deferred sales charge
is also waived if shares that would otherwise be subject to the
contingent deferred sales charge are redeemed in the following
cases:
to make Automatic Withdrawal Plan payments that are limited
annually to no more than 12% of the original account value;
involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (see "Shareholder Account
Rules and Policies," below);
if, at the time a purchase order is placed for Class A
shares that would otherwise be subject to the Class A contingent
deferred sales charge, the dealer agrees in writing to accept the
dealer's portion of the commission payable on the sale in
installments of 1/18th of the commission per month ( and no further
commission will be payable if the shares are redeemed within 18
months of purchase);
for distributions from a TRAC-2000 401(k) plan sponsored by
the Distributor due to the termination of the TRAC-2000 program; or
for distributions from Retirement Plans, deferred
compensation plans or other employee benefit plans for any of the
following purposes: (1) following the death or disability (as
defined in the Internal Revenue Code) of the participant or
beneficiary (the death or disability must occur after the
participant's account was established); (2) to return excess
contributions; (3) to return contributions made due to a mistake of
fact; (4) hardship withdrawals, as defined in the plan; (5) under
a Qualified Domestic Relations Order, as defined in the Internal
Revenue Code; (6) to meet the minimum distribution requirements of
the Internal Revenue Code; (7) to establish "substantially equal
periodic payments" as described in Section 72(t) of the Internal
Revenue Code; (8) for retirement distributions or loans to
participants or beneficiaries; (9) separation from service; (10)
participant-directed redemptions to purchase shares of a mutual
fund (other than a fund managed by the Manager or its subsidiary)
offered as an investment option in a Retirement Plan in which
Oppenheimer funds are also offered as investment options under a
special arrangement with the Distributor; or (11) plan termination
or "in-service distributions", if the redemption proceeds are
rolled over directly to an OppenheimerFunds IRA.
Service Plan for Class A Shares. The Fund has adopted a
Service Plan for Class A shares to reimburse the Distributor for a
portion of its costs incurred in connection with the personal
service and maintenance of 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
service providers or their customers. The payments under the Plan
increase the annual expenses of Class A shares. For more details,
please refer to "Distribution and Service Plans" in the Statement
of Additional Information.
Buying Class B Shares. Class B shares are sold at net asset value
per share without an initial sales charge. However, if Class B
shares are redeemed within 6 years of their purchase, a contingent
deferred sales charge will be deducted from the redemption
proceeds. That sales charge will not apply to shares purchased by
the reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge will be based on the lesser of the
net asset value of the shares at the time of redemption or the
original offering price (which is the original net asset value).
The contingent deferred sales charge is not imposed on the amount
of your account value represented by the increase in net asset
value over the initial purchase price. The Class B contingent
deferred sales charge is paid to the Distributor to reimburse its
expenses of providing distribution-related services to the Fund in
connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge
applies to a redemption, the Fund redeems shares in the following
order: (1) shares acquired by reinvestment of dividends and capital
gains distributions, (2) shares held for over 6 years, and (3)
shares held the longest during the 6-year period. The contingent
deferred sales charge is not imposed in the circumstances described
in "Waivers of Class B and Class C Sales Charges," below.
The amount of the contingent deferred sales charge will depend
on the number of years since you invested and the dollar amount
being redeemed, according to the following schedule:
Contingent Deferred Sales Charge
Years Since Beginning of Month In on Redemptions in that Year
Which Purchase Order Was Accepted (As % of Amount Subject to Charge)
0 - 1 5.0%
1 - 2 4.0%
2 - 3 3.0%
3 - 4 3.0%
4 - 5 2.0%
5 - 6 1.0%
6 and following None
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of
the month in which the purchase was made.
Automatic Conversion of Class B Shares. 72 months after
you purchase Class B shares, those shares will automatically
convert to Class A shares. This conversion feature relieves Class
B shareholders of the asset-based sales charge that applies to
Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset
value of the two classes, and no sales load or other charge is
imposed. When Class B shares convert, any other Class B shares that
were acquired by the reinvestment of dividends and distributions on
the converted shares will also convert to Class A shares. The
conversion feature is subject to the continued availability of a
tax ruling described in "Alternative Sales Arrangements - Class A,
Class B and Class C Shares" in the Statement of Additional
Information.
Buying Class C Shares. Class C shares are sold at net asset value
per share without an initial sales charge. However, if Class C
shares are redeemed within 12 months of their purchase, a
contingent deferred sales charge of 1.0% will be deducted from the
redemption proceeds. That sales charge will not apply to shares
purchased by the reinvestment of dividends or capital gains
distributions. The charge will be assessed on the lesser of the
net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is
not imposed on the amount of your account value represented by the
increase in net asset value over the initial purchase price. 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 Plans for Class B and Class C Shares. The
Fund has adopted Distribution and Service Plans for Class B and
Class C shares to compensate the Distributor for its services and
costs in distributing Class B and C shares and servicing accounts.
Under the Plans, the Fund pays the Distributor an annual "asset-
based sales charge" of 0.75% per year on Class B shares that are
outstanding for 6 years or less and on Class C shares. The
Distributor also receives a service fee of 0.25% per year under
each Plan. If either Plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based
sales charge to the Distributor for distributing shares before the
Plan was terminated.
Under each Plan, both fees are computed on the average of the
net asset value of shares in the respective class, determined as of
the close of each regular business day during the period. The
asset-based sales charge allows investors to buy Class B or C
shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell those shares. The
asset-based sales charge and service fees increase Class B and
Class C expenses by up to 1.00% of the net assets per year of the
respective class.
The Distributor uses the service fees to compensate dealers
for providing personal services for accounts that hold Class B or
C shares. Those services are similar to those provided under the
Class A Service Plan, described above. The Distributor pays the
0.25% service fees to dealers in advance for the first year after
Class B or Class C shares have been sold by the dealer and retains
the service fee paid by the Fund in that year. After the shares
have been held for a year, the Distributor pays the service fees to
dealers on a quarterly basis.
The Distributor currently pays sales commissions of 3.75% of
the purchase price of Class B shares to dealers from its own
resources at the time of sale. Including the advance of the
service fee, the total amount paid by the Distributor to the dealer
at the time of sale of Class B shares is 4.00% of the purchase
price. The Distributor retains the asset-based sales charge to
recoup the sales commissions it pays, the advances of service fee
payments it makes, and its financing costs of distributing and
selling Class B shares.
The Distributor currently pays sales commissions of 0.75% of
the purchase price of Class C shares to dealers from its own
resources at the time of sale. Including the advance of the
service fee, the total amount paid by the Distributor to the dealer
at the time of sale of Class C shares is 1.00% of the purchase
price. Those payments, retained by the Distributor during the
first year Class C shares are outstanding, are at a fixed rate that
is not related to the Distributor's expenses. The Distributor
plans to pay the asset-based sales charge as an ongoing commission
to the dealer on Class C shares that have been outstanding for a
year or more.
The Distributor's actual expenses in selling Class B 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, 1996, the end of the Class B Plan year, the
Distributor had incurred unreimbursed expenses under the Plan of
$1,292,158 (equal to 4.47% of the Fund's net assets represented by
Class B shares on September 30, 1996), which has been carried over
into the present Plan year. At September 30, 1996, the end of the
Class C Plan year, the Distributor had incurred unreimbursed
expenses under the Plan of $35,790, (equal to 3.25% of the Fund's
net assets represented by Class C shares on September 30, 1996),
which has been carried over into the next Plan year. If the Plan
is terminated by the Fund, the Board of Trustees may allow the Fund
to continue payments of the service fee and asset-based sales
charge to the Distributor for expenses it incurred before the Plan
was terminated.
Waivers of Class B and Class C Sales Charges. The Class B and
Class C contingent deferred sales charges will not be applied to
shares purchased in certain types of transactions nor will it apply
to Class B and Class C shares redeemed in certain circumstances as
described below. The reasons for this policy are discussed 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 charges will be waived for
redemptions of shares in the following cases, if the Transfer Agent
is notified that these conditions apply to the redemption:
distributions to participants or beneficiaries from
Retirement Plans, if the distributions are made (a) under an
Automatic Withdrawal Plan after the participant reaches age 59-1/2,
as long as the payments are no more than 10% of the account value
annually (measured from the date the Transfer Agent receives the
request), or (b) following the death or disability (as defined in
the Internal Revenue Code) of the participant or beneficiary (the
death or disability must have occurred after the account was
established);
redemptions from accounts other than Retirement Plans
following the death or disability of the last surviving shareholder
including a trustee of a "grantor" trust or revocable living trust
for which the trustee is also the sole beneficiary (the death or
disability must have occurred after the account was established,
and for disability you must provide evidence of a determination of
disability by the Social Security Administration);
returns of excess contributions to Retirement Plans;
distributions from retirement plans to make "substantially
equal periodic payments" as permitted in Section 72(t) of the
Internal Revenue Code that do not exceed 10% of the account value
annually measured from the date the Transfer Agent receives the
request;
shares redeemed involuntarily, as described in "Shareholder
Account Rules and Policies," below; or
distributions from OppenheimerFunds prototype 401(k) plans
(1) for hardship withdrawals; (2) under a Qualified Domestic
Relations Order, as defined in the Internal Revenue Code; (3) to
meet minimum distribution requirements as defined in the Internal
Revenue Code; (4) to make "substantially equal periodic payments"
as described in Section 72(t) of the Internal Revenue Code; or (5)
for separation from service.
Waivers for Shares Sold or Issued in Certain Transactions.
The contingent deferred sales charge is also waived on Class B and
Class C shares sold or issued in the following cases:
shares sold to the Manager or its affiliates;
shares sold to registered management investment companies
or separate accounts of insurance companies having an agreement
with the Manager or the Distributor for that purpose; or
shares issued in plans of reorganization to which the Fund
is a party.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account
to your account at your bank or other financial institution to
enable you to send money electronically between those accounts to
perform a number of types of account transactions. These include
purchasing shares by telephone (either through a service
representative or by PhoneLink, described below), automatic
investments under Asset Builder Plans, and sending dividends and
distributions or Automatic Withdrawal Plan payments directly to
your bank account. Please refer to the Application for details or
call the Transfer Agent for more information.
AccountLink privileges should be requested on the Application
you use to buy shares, or on your dealer's settlement instructions
if you buy your shares through your dealer. After your account is
established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent.
AccountLink privileges will apply to each shareholder listed in the
registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent
receives written instructions terminating or changing those
privileges. After you establish AccountLink for your account, any
change of bank account information must be made by signature-
guaranteed instructions to the Transfer Agent signed by all
shareholders who own the account.
Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase
shares in amounts up to $250,000 through a telephone
representative, call the Distributor at 1-800-852-8457. The
purchase payment will be debited from your bank account.
PhoneLink. PhoneLink is the OppenheimerFunds automated
telephone system that enables shareholders to perform a number of
account transactions automatically using a touch-tone phone.
PhoneLink may be used on already-established Fund accounts after
you obtain a Personal Identification Number (PIN), by calling the
special PhoneLink number: 1-800-533-3310.
Purchasing Shares. You may purchase shares in amounts up
to $100,000 by phone, by calling 1-800-533-3310. You must have
established AccountLink privileges to link your bank account with
the Fund, to pay for these purchases.
Exchanging Shares. With the OppenheimerFunds Exchange
Privilege, described below, you can exchange shares automatically
by phone from your Fund account to another 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 Oppenheimer funds account on a regular basis:
Automatic Withdrawal Plans. If your Fund account is worth
$5,000 or more, you can establish an Automatic Withdrawal Plan to
receive payments of at least $50 on a monthly, quarterly, semi-
annual or annual basis. The checks may be sent to you or sent
automatically to your bank account on AccountLink. You may even set
up certain types of withdrawals of up to $1,500 per month by
telephone. You should consult the Application and Statement of
Additional Information for more details.
Automatic Exchange Plans. You can authorize the Transfer
Agent to exchange an amount you establish in advance automatically
for shares of the same class of up to five other Oppenheimer funds
on a monthly, quarterly, semi-annual or annual basis under an
Automatic Exchange Plan. The minimum purchase for each Oppenheimer
funds account is $25. These exchanges are subject to the terms of
the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A
or Class B shares of the Fund, you have up to 6 months to reinvest
all or part of the redemption proceeds in Class A shares of the
Fund or other Oppenheimer funds without paying a sales charge. This
privilege applies to Class A shares that you purchased subject to
an initial sales charge and to Class A or Class B shares on which
you paid a contingent deferred sales charge when you redeemed them.
This privilege does not apply to Class C shares. You must be sure
to ask the Distributor for this privilege when you send your
payment. Please consult the Statement of Additional Information for
more details.
Retirement Plans. Fund shares are available as an investment for
your retirement plans. If you participate in a plan sponsored by
your employer, the plan trustee or administrator must make the
purchase of shares for your retirement plan account. The
Distributor offers a number of different retirement plans that can
be used by individuals and employers:
Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
403(b)(7) Custodial Plans for employees of eligible tax-
exempt organizations, such as schools, hospitals and charitable
organizations
SEP-IRAs (Simplified Employee Pension Plans) for small
business owners or people with income from self-employment,
including SAR/SEP-IRAs
Pension and Profit-Sharing Plans for self-employed persons
and other employers
401(k) Prototype Retirement Plans for businesses.
Please call the Distributor for the OppenheimerFunds plan
documents, which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account by selling
(redeeming) some or all of your shares on any regular business day.
Your shares will be sold at the next net asset value calculated
after your order is received and accepted by the Transfer Agent.
The Fund offers you a number of ways to sell your shares in writing
or by telephone. You can also set up Automatic Withdrawal Plans to
redeem shares on a regular basis, as described above. If you have
questions about any of these procedures, and especially if you are
redeeming shares in a special situation, such as due to the death
of the owner, or from a retirement plan, please call the Transfer
Agent first, at 1-800-525-7048, for assistance.
Retirement Accounts. To sell shares in an Oppenheimer
funds retirement account in your name, call the Transfer Agent for
a distribution request form. There are special income tax
withholding requirements for distributions from retirement plans
and you must submit a withholding form with your request to avoid
delay. If your retirement plan account is held for you by your
employer, you must arrange for the distribution request to be sent
by the plan administrator or trustee. There are additional details
in the Statement of Additional Information.
Certain Requests Require a Signature Guarantee. To protect
you and the Fund from fraud, certain redemption requests must be in
writing and must include a signature guarantee in the following
situations (there may be other situations also requiring a
signature guarantee):
You wish to redeem more than $50,000 worth of shares and
receive a check
The redemption check is not payable to all shareholders
listed on the account statement
The redemption check is not sent to the address of record on
your account statement
Shares are being transferred to a Fund account with a
different owner or name
Shares are redeemed by someone other than the owners (such
as an Executor)
Where Can I Have My Signature Guaranteed? The Transfer
Agent will accept a guarantee of your signature by a number of
financial institutions, including: a U.S. bank, trust company,
credit union or savings association, or by a foreign bank that has
a U.S. correspondent bank, or by a U.S. registered dealer or broker
in securities, municipal securities or government securities, or by
a U.S. national securities exchange, a registered securities
association or a clearing agency. If you are signing on behalf of
a corporation, partnership or other business, or as a fiduciary,
you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that
includes:
Your name
The Fund's name
Your Fund account number (from your account statement)
The dollar amount or number of shares to be redeemed
Any special payment instructions
Any share certificates for the shares you are selling
The signatures of all registered owners exactly as the
account is registered, and
Any special requirements or documents requested by the
Transfer Agent to assure proper authorization of the person asking
to sell shares.
Use the following address for Send courier or Express Mail
requests by mail to: requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue
Denver, Colorado 80217 Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of
record may also sell your shares by telephone. To receive the
redemption price on a regular business day, your request must be
received by the Transfer Agent or its 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 once in any 7-day period. The check must be
payable to all owners of record of the shares and must be sent to
the address on the account statement. This service is not
available within 30 days of changing the address on an account.
Telephone Redemptions Through AccountLink. There are no
dollar limits on telephone redemption proceeds sent to a bank
account designated when you establish AccountLink. Normally the ACH
transfer to your bank is initiated on the business day after the
redemption. You do not receive dividends on the proceeds of the
shares you redeemed while they are waiting to be transferred.
Selling Shares Through Your Dealer. The Distributor has made
arrangements to repurchase Fund shares from dealers and brokers on
behalf of their customers. Brokers or dealers may charge for that
service. Please call your dealer for more information about this
procedure. Please refer to "Special Arrangements for Repurchase of
Shares from Dealers and Brokers" in the Statement of Additional
Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
Oppenheimer funds at net asset value per share at the time of
exchange, without sales charge. To exchange shares, you must meet
several conditions:
Shares of the fund selected for exchange must be available
for sale in your state of residence
The prospectuses of this Fund and the fund whose shares you
want to buy must offer the exchange privilege
You must hold the shares you buy when you establish your
account for at least 7 days before you can exchange them; after the
account is open 7 days, you can exchange shares every regular
business day
You must meet the minimum purchase requirements for the
fund you purchase by exchange
Before exchanging into a fund, you should obtain and read
its prospectus
Shares of a particular class of the Fund may be exchanged only
for shares of the same class in the other Oppenheimer funds. For
example, you can exchange Class A shares of this Fund only for
Class A shares of another fund. Oppenheimer Money Market Fund,
Inc. offers only one class of shares which are considered "Class A"
shares for this purpose. In some cases, sales charges may be
imposed on exchange transactions. Please refer to "How to Exchange
Shares" in the Statement of Additional Information for more
details.
Exchanges may be requested in writing or by telephone:
Written Exchange Requests. Submit an OppenheimerFunds
Exchange Request form, signed by all owners of the account. Send
it to the Transfer Agent at the addresses listed in "How to Sell
Shares."
Telephone Exchange Requests. Telephone exchange requests
may be made either by calling a service representative at 1-800-
852-8457 or by using PhoneLink for automated exchanges, by calling
1-800-533-3310. Telephone exchanges may be made only between
accounts that are registered with the same name(s) and address.
Shares held under certificates may not be exchanged by telephone.
You can find a list of Oppenheimer funds currently available
for exchanges in the Statement of Additional Information or obtain
one by calling a service representative at 1-800-525-7048. That
list can change from time to time.
There are certain exchange policies you should be aware of:
Shares are normally redeemed from one fund and purchased
from the other fund in the exchange transaction on the same regular
business day on which the Transfer Agent receives an exchange
request that is in proper form by the close of The New York Stock
Exchange that day, which is normally 4:00 P.M., but may be earlier
on some days. However, either fund may delay the purchase of
shares of the fund you are exchanging into up to 7 days if it
determines it would be disadvantaged by a same-day transfer of the
proceeds to buy shares. For example, the receipt of multiple
exchange requests from a dealer in a "market-timing" strategy might
require the sale of portfolio securities at a time or price
disadvantageous to the Fund.
Because excessive trading can hurt fund performance and
harm shareholders, the Fund reserves the right to refuse any
exchange request that will disadvantage it, or to refuse multiple
exchange requests submitted by a shareholder or dealer.
The Fund may amend, suspend or terminate the exchange
privilege at any time. Although the Fund will attempt to provide
you notice whenever it is reasonably able to do so, it may impose
these changes at any time.
For tax purposes, exchanges of shares involve a redemption
of the shares of the Fund you own and a purchase of the shares of
the other fund, which may result in a capital gain or loss. For
more information about taxes affecting exchanges, please refer to
"How to Exchange Shares" in the Statement of Additional
Information.
If the Transfer Agent cannot exchange all the shares you
request because of a restriction cited above, only the shares
eligible for exchange will be exchanged.
Shareholder Account Rules and Policies
Net Asset Value Per Share is determined for each class of
shares as of the close of The New York Stock Exchange, 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 and obligations for which market values cannot be
readily obtained. These procedures are described more completely
in the Statement of Additional Information.
The offering of shares may be suspended during any period
in which the determination of net asset value is suspended, and the
offering may be suspended by the Board of Trustees at any time the
Board believes it is in the Fund's best interest to do so.
Telephone Transaction Privileges for purchases, redemptions
or exchanges may be modified, suspended or terminated by the Fund
at any time. If an account has more than one owner, the Fund and
the Transfer Agent may rely on the instructions of any one owner.
Telephone privileges apply to each owner of the account and the
dealer representative of record for the account unless and until
the Transfer Agent receives cancellation instructions from an owner
of the account.
The Transfer Agent will record any telephone calls to
verify data concerning transactions and has adopted other
procedures to confirm that telephone instructions are genuine, by
requiring callers to provide tax identification numbers and other
account data or by using PINs, and by confirming such transactions
in writing. If the Transfer Agent does not use reasonable
procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund
will be liable for losses or expenses arising out of telephone
instructions reasonably believed to be genuine. If you are unable
to reach the Transfer Agent during periods of unusual market
activity, you may not be able to complete a telephone transaction
and should consider placing your order by mail.
Redemption or transfer requests will not be honored until
the Transfer Agent receives all required documents in proper form.
From time to time, the Transfer Agent in its discretion may waive
certain of the requirements for redemptions stated in this
Prospectus.
Dealers that can perform account transactions for their
clients by participating in NETWORKING through the National
Securities Clearing Corporation are responsible for obtaining their
clients' permission to perform those transactions and are
responsible to their clients who are shareholders of the Fund if
the dealer performs any transaction erroneously or improperly.
The redemption price for shares will vary from day to day
because the 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 taxable dividends, distributions and
redemption proceeds (including exchanges) if you fail to furnish
the Fund a certified Social Security or Employer Identification
Number when you sign your application, or if you violate Internal
Revenue Service regulations on tax reporting of income.
The Fund does not charge a redemption fee, but if your
dealer or broker handles your redemption, they may charge a fee.
That fee can be avoided by redeeming your Fund shares directly
through the Transfer Agent. Under the circumstances described in
"How To Buy Shares," you may be subject to a contingent deferred
sales 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, 1995, 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 investment
objectives and 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
or Class C 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 calendar 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 Oppenheimer Fund
Account. You can reinvest all distributions in another Oppenheimer
fund account you have established.
Taxes. If your account is not a tax-deferred retirement account,
you should be aware of the following tax implications of investing
in the Fund. Long-term capital gains are taxable as long-term
capital gains when distributed to shareholders. It does not matter
how long you 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 the Fund makes a capital
distribution, its share price is reduced by the amount of the
distribution. If you buy shares on 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
capital gain.
Taxes on Transactions: Share redemptions, including
redemptions for exchanges, are subject to capital gains tax.
Generally speaking, a capital gain or loss is the difference
between the price you paid for the shares and the price you
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 advisor about the effect of an
investment in the Fund on your particular tax situation.
<PAGE>
Appendix A: 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 B
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent sales charge rates and waivers for
Class A, Class B and Class C shares of the Fund described elsewhere
in this Prospectus are modified as described below for those
shareholders of (i) Quest for Value Fund, Inc., Quest for Value
Growth and Income Fund, Quest for Value Opportunity Fund, Quest for
Value Small Capitalization Fund and Quest for Value Global Equity
Fund, Inc. on November 24, 1995, when OppenheimerFunds, Inc. became
the investment advisor to those funds, and (ii) Quest for Value
U.S. Government Income Fund, Quest for Value Investment Quality
Income Fund, Quest for Global Income Fund, Quest for Value New York
Tax-Exempt Fund, Quest for Value National Tax-Exempt Fund and Quest
for Value California Tax-Exempt Fund when those funds merged into
various Oppenheimer funds on November 24, 1995. The funds listed
above are referred to in this Prospectus as the "Former Quest for
Value Funds." The waivers of initial and contingent deferred sales
charges described in this Appendix apply to shares of the Fund (i)
acquired by such shareholder pursuant to an exchange of shares of
one of the Oppenheimer funds that was one of the Former Quest for
Value Funds or (ii) received by such shareholder pursuant to the
merger of any of the Former Quest for Value Funds into an
Oppenheimer fund on November 24, 1995.
Class A Sales Charges
Reduced Class A Initial Sales Charge Rates for Certain
Former Quest Shareholders
Purchases by Groups, Associations and Certain Qualified
Retirement Plans. The following table sets forth the initial sales
charge rates for Class A shares purchased by a "Qualified
Retirement Plan" through a single broker, dealer or financial
institution, or by members of "Associations" formed for any purpose
other than the purchase of securities if that Qualified Retirement
Plan or that Association purchased shares of any of the Former
Quest for Value Funds or received a proposal to purchase such
shares from OCC Distributors prior to November 24, 1995. For this
purpose only, a "Qualified Retirement Plan" includes any 401(k)
plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a
single employer.
Front-End Front-End
Sales Sales Commission
Charge Charge as
as a as a Percentage
Number of Percentage Percentage of
Eligible Employees of Offering of Amount Offering
or Members Price Invested Price
9 or fewer 2.50% 2.56% 2.00%
At least 10 but not
more than 49 2.00% 2.04% 1.60%
For purchases by Qualified Retirement plans and Associations
having 50 or more eligible employees or members, there is no
initial sales charge on purchases of Class A shares, but those
shares are subject to the Class A contingent deferred sales charge
described on pages __ to __ of this Prospectus.
Purchases made under this arrangement qualify for the lower of
the sales charge rate in the table based on the number of eligible
employees in a Qualified Retirement Plan or members of an
Association or the sales charge rate that applies under the Rights
of Accumulation described above in the Prospectus. In addition,
purchases by 401(k) plans that are Qualified Retirement Plans
qualify for the waiver of the Class A initial sales charge if they
qualified to purchase shares of any of the Former Quest For Value
Funds by virtue of projected contributions or investments of $1
millon or more each year. Individuals who qualify under this
arrangement for reduced sales charge rates as members of
Associations, or as eligible employees in Qualified Retirement
Plans also may purchase shares for their individual or custodial
accounts at these reduced sales charge rates, upon request to the
Fund's Distributor.
Special Class A Contingent Deferred Sales Charge Rates
Class A shares of the Fund purchased by exchange of shares of other
Oppenheimer funds that were acquired as a result of the merger of
Former Quest for Value Funds into those Oppenheimer funds, and
which shares were subject to a Class A contingent deferred sales
charge prior to November 24, 1995 will be subject to a contingent
deferred sales charge at the following rates: if they are redeemed
within 18 months of the end of the calendar month in which they
were purchased, at a rate equal to 1.0% if the redemption occurs
within 12 months of their initial purchase and at a rate of 0.50 of
1.0% if the redemption occurs in the subsequent six months. This
contingent deferred sales charge rate also applies to shares of the
Fund purchased by exchange of shares of other Oppenheimer funds
that were acquired as a result of the merger of Former Quest for
Value Funds into those Oppenheimer Funds, and which shares were
subject to a Class A contingent deferred sales charge prior to
November 24, 1995. Class A shares of any of the Former Quest Fund
for Value Funds purchased without an initial sales charge on or
before November 22, 1995 will continue to be subject to the
applicable contingent deferred sales charge in effect as of that
date as set forth in the then-current prospectus for such fund.
Waiver of Class A Sales Charges for Certain Shareholders
Class A shares of the Fund purchased by the following investors are
not subject to any Class A initial or contingent deferred sales
charges:
Shareholders of the Fund who were shareholders of the AMA
Family of Funds on February 28, 1991 and who acquired shares of any
of the Former Quest for Value Funds by merger of a portfolio of the
AMA Family of Funds.
Shareholders of the Fund who acquired shares of any Former
Quest for Value Fund by merger of any of the portfolios of the
Unified Funds.
Waiver of Class A Contingent Deferred Sales Charge in
Certain Transactions
The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares of the Fund purchased by the
following investors who were shareholders of any Former Quest for
Value Fund:
Investors who purchased Class A shares from a dealer that is
or was not permitted to receive a sales load or redemption fee
imposed on a shareholder with whom that dealer has a fiduciary
relationship under the Employee Retirement Income Security Act of
1974 and regulations adopted under that law.
Participants in Qualified Retirement Plans that purchased
shares of any of the Former Quest For Value Funds pursuant to a
special "strategic alliance" with the distributor of those funds.
The Fund's Distributor will pay a commission to the dealer for
purchases of Fund shares as described above in "Class A Contingent
Deferred Sales Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge
Waivers
Waivers for Redemptions of Shares Purchased Prior to March
6, 1995
In the following cases, the contingent deferred sales charge will
be waived for redemptions of Class A, B or C shares of the Fund
acquired by merger of a Former Quest for Value Fund into the Fund
or by exchange from an Oppenheimer fund that was a Former Quest for
Value Fund or into which such fund merged, if those shares were
purchased prior to March 6, 1995: in connection with
(i) distributions to participants or beneficiaries of plans
qualified under Section 401(a) of the Internal Revenue Code or from
custodial accounts under Section 403(b)(7) of the Code, Individual
Retirement Accounts, deferred compensation plans under Section 457
of the Code, and other employee benefit plans, and returns of
excess contributions made to each type of plan, (ii) withdrawals
under an automatic withdrawal plan holding only either Class B or
C shares if the annual withdrawal does not exceed 10% of the
initial value of the account, and (iii) liquidation of a
shareholder's account if the aggregate net asset value of shares
held in the account is less than the required minimum value of such
accounts.
Waivers for Redemptions of Shares Purchased on or After
March 6, 1995 but Prior to November 24, 1995.
In the following cases, the contingent deferred sales charge will
be waived for redemptions of Class A, B or C shares of the Fund
acquired by merger of a Former Quest for Value Fund into the Fund
or by exchange from an Oppenheimer fund that was a Former Quest For
Value Fund or into which such fund merged, if those shares were
purchased on or after March 6, 1995, but prior to November 24,
1995: (1) distributions to participants or beneficiaries from
Individual Retirement Accounts under Section 408(a) of the Internal
Revenue Code or retirement plans under Section 401(a), 401(k),
403(b) and 457 of the Code, if those distributions are made either
(a) to an individual participant as a result of separation from
service or (b) following the death or disability (as defined in the
Code) of the participant or beneficiary; (2) returns of excess
contributions to such retirement plans; (3) redemptions other than
from retirement plans following the death or disability of the
shareholder(s) (as evidenced by a determination of total disability
by the U.S. Social Security Administration); (4) withdrawals under
an automatic withdrawal plan (but only for Class B or C shares)
where the annual withdrawals do not exceed 10% of the initial value
of the account; and (5) liquidation of a shareholder's account if
the aggregate net asset value of shares held in the account is less
than the required minimum account value. A shareholder's account
will be credited with the amount of any contingent deferred sales
charge paid on the redemption of any Class A, B or C shares of the
Fund described in this section if within 90 days after that
redemption, the proceeds are invested in the same Class of shares
in this Fund or another Oppenheimer fund.
Special Dealer Arrangements
Dealers who sold Class B shares of a Former Quest for Value Fund to
Quest for Value prototype 401(k) plans that were maintained on the
TRAC-2000 recordkeeping system and that were transferred to an
OppenheimerFunds prototype 401(k) plan shall be eligible for an
additional one-time payment by the Distributor of 1% of the value
of the plan assets transferred, but that payment may not exceed
$5,000 as to any one plan.
Dealers who sold Class C shares of a Former Quest for Value Fund to
Quest for Value prototype 401(k) plans that were maintained on the
TRAC-2000 recordkeeping system and (i) the shares held by those
plans were exchanged for Class A shares, or (ii) the plan assets
were transferred to an OppenheimerFunds prototype 401(k) plan,
shall be eligible for an additional one-time payment by the
Distributor of 1% of the value of the plan assets transferred, but
that payment may not exceed $5,000.
<PAGE>
APPENDIX 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 Lehman Brothers
Fiscal Year Strategic Income Aggregate
(Period) Ended & Growth Fund A Bond Index S&P 500 Index
06/01/92 $9,525 $10,000 $10,000
09/30/92 $9,659 $10,573 $10,162
09/30/93 $10,522 $11,628 $11,480
09/30/94 $10,485 $11,253 $11,902
09/30/95 $12,167 $12,835 $15,438
09/30/96 $14,242 $13,464 $18,575
Oppenheimer Lehman Brothers
Fiscal Year Strategic Income Aggregate
(Period) Ended & Growth Fund B Bond Index S&P 500 Index
11/30/92 $10,000 $10,000 $10,000
09/30/93 $10,586 $11,143 $10,888
09/30/94 $10,465 $10,784 $11,289
09/30/95 $12,061 $12,300 $14,643
09/30/96 $13,653 $12,903 $17,618
Oppenheimer Lehman Brothers
Fiscal Year Strategic Income Aggregate
(Period) Ended & Growth Fund C Bond Index S&P 500 Index
10/02/95 $10,000 $10,000 $10,000
09/30/96 $11,418 $10,490 $12,032
Oppenheimer Strategic Income & Growth Fund
6803 South Tucson Way
Englewood, Colorado 80012
1-800-525-7048
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
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, OppenheimerFunds, Inc., OppenheimerFunds Distributor,
Inc. or any affiliate thereof. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any state to any person to whom it is
unlawful to make such an offer in such state.
PR275.001.0197N* Printed on Recycled Paper
<PAGE>
Oppenheimer Strategic Income & Growth Fund
6803 South Tucson Way, Englewood, Colorado 80012
1-800-525-7048
Statement of Additional Information dated January 15, 1997
This Statement of Additional Information is not a Prospectus.
This document contains additional information about the Fund and
supplements information in the Prospectus dated January 15, 1997.
It should be read together with the Prospectus, which may be
obtained by writing to the Fund's Transfer Agent, OppenheimerFunds
Services, at P.O. Box 5270, Denver, Colorado 80217 or by calling
the Transfer Agent at the toll-free number shown above.
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. . . . . . . . . . . . . . . . . . . 30
Brokerage Policies of the Fund . . . . . . . . . . . . . . . . . . . . . 31
Performance of the Fund. . . . . . . . . . . . . . . . . . . . . . . . . 33
Distribution and Service Plans . . . . . . . . . . . . . . . . . . . . . 37
About Your Account
How To Buy Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
How To Sell Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
How To Exchange Shares . . . . . . . . . . . . . . . . . . . . . . . . . 51
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: Corporate 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 objectives.
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, OppenheimerFunds, Inc. (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
historical 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.
Investment Risks. All fixed-income securities are subject
to one or more types of risks: credit risk, interest rate risk, or
foreign exchange 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. Foreign
exchange risk refers to the change in value of the currency in
which a foreign security the Fund holds is denominated against the
U.S. dollar.
Special Risks - High Yield Securities. As stated in the
Prospectus, the corporate debt securities in which the Fund will
principally invest may be in the lower rating categories. The Fund
may invest in securities rated as low as "C" by Moody's or "D" by
Standard & Poor's or other nationally recognized statistical rating
organizations. The Manager will not rely solely on the ratings
assigned by rating services and may invest, without limitation, in
unrated securities which offer, in the opinion of the Manager,
comparable yields and risks as those rated securities in which the
Fund may invest.
Risks of high yield securities may include: (i) limited
liquidity and secondary market support, (ii) substantial market
price volatility resulting from changes in prevailing interest
rates, (iii) subordination to the prior claims of banks and other
senior lenders, (iv) the operation of mandatory sinking fund or
call/redemption provisions during periods of declining interest
rates that could cause the Fund to be able to reinvest premature
redemption proceeds only in lower yielding portfolio securities,
(v) the possibility that earnings of the issuer may be insufficient
to meet its debt service, and (vi) the issuer's low
creditworthiness and potential for insolvency during periods of
rising interest rates and economic downturn. As a result of the
limited liquidity of high yield securities, their prices have at
times experienced significant and rapid decline when a substantial
number of holders decided to sell. A decline is also likely in the
high yield bond market during an economic downturn. An economic
downturn or an increase in interest rates could severely disrupt
the market for high yield bonds and adversely affect the value of
outstanding bonds and the ability of the issuers to repay principal
and interest.
Fixed-Income Securities of U.S. Companies. The Fund's
investments in fixed-income securities issued by domestic companies
and other issuers may include debt obligations (bonds, debentures,
notes, mortgage-backed and asset-backed securities, participation
interests, commercial paper and zero coupon securities) and
preferred stock (to the extent a fixed coupon or a stated dividend
rate is paid).
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 borrower. The issuing
financial institution may have no obligation to the Fund other than
to pay the Fund the proportionate amount of the principal and
interest payments it receives. Participation interests are
primarily dependent upon the creditworthiness of the borrowing
corporation, which is obligated to make payments of principal and
interest on the loan, and there is a risk that such borrowers may
have difficulty making payments. In the event the borrower fails
to pay scheduled interest or principal payments, the Fund could
experience a reduction in its income and might experience a decline
in the value of that participation interest and in the net asset
value of its shares. In the event of a failure by the financial
institution to perform its obligation in connection with the
participation agreement, the Fund might incur certain costs and
delays in realizing payment or may suffer a loss of principal
and/or interest.
Preferred Stocks. Preferred stock, unlike common stock,
offers a stated dividend rate payable from the corporation's
earnings. Such preferred stock dividends may be cumulative or non-
cumulative, participating, or auction rate. If interest rates
rise, the fixed dividend on preferred stocks may be less
attractive, causing the price of preferred stocks to decline.
Preferred stock may have mandatory sinking fund provisions, as well
as call/redemption provisions prior to maturity, a negative feature
when interest rates decline. Dividends on some preferred stock may
be "cumulative," requiring all or a portion of prior unpaid
dividends to be paid. Preferred stock also generally has a
preference over common stock on the distribution of a corporation's
assets in the event of liquidation of the corporation, and may be
"participating," which means that it may be entitled to a dividend
exceeding the stated dividend in certain cases. The rights of
preferred stocks on distribution of a corporation's assets in the
event of a liquidation are generally subordinate to the rights
associated with a corporation's debt securities.
Asset-Backed Securities. These securities, issued by trusts
and special purpose entities, are backed by pools of assets,
primarily automobile and credit-card receivables and home equity
loans, which pass through the payments on the underlying
obligations to the security holders (less servicing fees paid to
the originator or fees for any credit enhancement). The value of
an asset-backed security is affected by changes in the market's
perception of the asset backing the security, the creditworthiness
of the servicing agent for the loan pool, the originator of the
loans, or the financial institution providing any credit
enhancement, and is also affected if any credit enhancement has
been exhausted. Payments of principal and interest passed through
to holders of asset-backed securities are typically supported by
some form of credit enhancement, such as a letter of credit, surety
bond, limited guarantee by another entity or by having a priority
to certain of the borrower's other securities. The degree of
credit enhancement varies, and generally applies to only a fraction
of the asset-backed security's par value until exhausted. If the
credit enhancement of an asset-backed security held by the Fund has
been exhausted, and if any required payments of principal and
interest are not made with respect to the underlying loans, the
Fund may experience losses or delays in receiving payment. The
risks of investing in asset-backed securities are ultimately
dependent upon payment of 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 shorten the weighted average life
of asset-backed securities and may lower their return, in the same
manner as described below for prepayments of a pool of mortgage
loans underlying mortgage-backed securities. However, asset-backed
securities do not have the benefit of the same security interest in
the underlying collateral as do mortgage-backed securities.
Zero Coupon Corporate Securities. The Fund may invest in
zero coupon securities issued by corporations. Corporate zero
coupon securities are: (i) notes or debentures which do not pay
current interest and are issued at substantial discounts from par
value, or (ii) notes or debentures that pay no current interest
until a stated date one or more years into the future, after which
the issuer is obligated to pay interest until maturity, usually at
a higher rate than if interest were payable from the date of
issuance. Such corporate zero coupon securities, in addition to
the risks identified below under "Zero Coupon U.S. Government
Securities," are subject to the risk of the issuer's failure to
pay interest and repay principal in accordance with the terms of
the obligation.
Mortgage-Backed Securities. Mortgage-backed securities may
be issued by private issuers such as commercial banks, savings and
loan associations, mortgage insurance companies and other secondary
market issuers that create pass-through pools of conventional
residential mortgage loans and on commercial mortgage loans. They
may be the originators of the underlying loans as well as the
guarantors of the mortgage-backed securities. There are no direct
or indirect government guarantees of payments on these pools.
However, timely payment of interest and principal of these pools is
generally supported by various forms of insurance or guarantees.
The insurance and guarantees are issued by government entities,
private insurers and the mortgage poolers. The insurance
available, the guarantees, and the creditworthiness of the issuers
will be evaluated by the Manager to determine whether a particular
mortgage-backed security of this type meets the Fund's investment
standards. There can be no assurance that the private insurers and
guarantors can meet their obligations under the policies.
Securities issued by certain private poolers may not be readily
marketable, and will be treated as illiquid securities subject to
the Fund's limitations on investments in such securities.
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 may be 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 U.S. Government Securities. The Fund may
invest in zero coupon securities issued by the U.S. Treasury. 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
while there is no opportunity to reinvest periodic interest
payments in securities having higher rates, there is no risk of
having to reinvest such 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 any 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.
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.
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.
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. 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 "I/O" class), while the other class will receive all of
the principal (the "principal-only" or "P/O" 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 I/O security. Conversely, a decrease in
principal payments or prepayments will reduce the value of a P/O
class. 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
identify liquid securities to its Custodian in an amount equal to
its obligation under the roll.
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.
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 "Fixed-Income Securities of U.S. Companies,"
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 only 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 sub-custodians or
depositories holding them must be approved by the Fund's Board of
Trustees to the extent that approval is required under applicable
rules of the Securities and Exchange Commission.
The Fund may invest in U.S. dollar-denominated, collateralized
"Brady Bonds". 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.
Risks of Foreign Securities. 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.
Special Risks of Emerging Market Countries. Investments in
emerging market countries may involve further risks in addition to
those identified above for investments in foreign securities.
Securities issued by emerging market countries and by companies
located in those countries may be subject to extended settlement
periods, whereby the Fund might not receive principal and/or income
on a timely basis and its net asset value could be affected. There
may be a lack of liquidity for emerging market securities due to
limited trading markets; interest rates and foreign currency
exchange rates may be more volatile; sovereign limitations on
foreign investments may be more likely to be imposed; there may be
significant balance of payment deficits; and their economies and
markets may respond in a more volatile manner to economic changes
than those of developed countries.
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 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 maturity 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,
(iii) write calls on securities held by it or on Futures or (iv)
purchase Futures to hedge the value of certain assets whose values
decline as interest rates decline. 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
and equity 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
objectives, 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 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 options of the same
series, and there is no assurance that a liquid secondary market
will exist for a particular option. If the Fund could not effect
a closing purchase transaction due to lack of a market, it would
have to hold the callable 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 is similar to the Fund writing a
covered call because the Fund must own the assets subject to the
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 identify to its
Custodian 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 Financial 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, liquid 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, 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 also enter into a Forward Contract to sell a
foreign currency other than that in which the underlying security
is denominated. This is done in the expectation that there is a
significant correlation between the foreign currency of the Forward
Contract and the foreign currency of the underlying investment.
This technique is referred to as "cross hedging." A cross hedge
may be established with the U.S. dollar as the base currency or
with another currency closely correlated with the U.S. dollar as
the base currency.
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, or a closely-correlated currency, provided the
excess amount is "covered" by liquid 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 a 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 and timing of gains (or losses) recognized
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 U.S. 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. As a matter of fundamental
policy, the Fund may invest up to 5% of its total assets in
securities of small, unseasoned 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.
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',
administrative or other fees the Fund pays in connection with 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"
and certain other transactions. If the value of the Fund's assets
so computed should fail to meet the 300% asset coverage
requirement, the Fund is required within three days to reduce its
bank debt to the extent necessary to meet such requirement and may
have to sell a portion of its investments at a time when
independent investment judgment would not dictate such sale.
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 will 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, including securities purchased and sold 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 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,
or to securities to be delivered at a later date. When such
transactions are negotiated, the price (which is generally
expressed in yield terms) is fixed at the time the commitment is
made, but delivery and payment for the securities take place at a
later date. The 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 not more than 120
days), no payment is made for the securities purchased by the
purchaser, and no interest accrues to the purchaser from the
transaction. Such securities are subject to market fluctuation;
the value at delivery may be less than the purchase price. The
Fund will maintain a segregated account with, or identify liquid
assets to, its Custodian, 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 generally do so for the purpose of
acquiring or selling securities consistent with its investment
objectives and policies and not for the purposes of investment
leverage. The Fund enters into such transactions 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 at
a shareholder meeting if the holders of more than 50% of the
outstanding shares are present or represented by proxy, or (2) more
than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot:
buy 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;
buy securities on margin, except that the Fund may make
margin deposits in connection with any of the Hedging Instruments
which it may use;
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;
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;
invest in oil, gas, or other mineral exploration or
development programs; or
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 or as
otherwise provided in the Fund's Declaration of Trust.
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.
Each share of the Fund represents 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
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 Fund. Shareholders of a particular
class vote separately on proposals which affect that class, and
shareholders of a class which is not affected by that matter are
not entitled to vote on the proposal. Shareholders of a class 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 Fund 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 provided that the proportionate beneficial
interest of a shareholder in the Fund is not changed. 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
Fund, and any shareholder of the Fund, agrees under the Trust's
Declaration of Trust to look solely to the assets of the Fund for
satisfaction of any claim or demand which may arise out of any
dealings with the Fund, and the Trustees shall have no personal
liability to any such person, to the extent permitted by law.
Trustees and Officers of the Fund. The Fund's Trustees and
officers and their principal occupations and business affiliations
and occupations during the past five years are listed below. All
of the Trustees are also trustees, directors or managing general
partners of Oppenheimer Total Return Fund, Inc., Oppenheimer Equity
Income Fund, Oppenheimer High Yield Fund, Oppenheimer Cash
Reserves, Oppenheimer Municipal Fund, Oppenheimer Limited-Term
Government Fund, The New York Tax-Exempt Income Fund, Inc.,
Oppenheimer Champion Income Fund, Oppenheimer Main Street Funds,
Inc., Panorama Series Fund, Inc., Oppenheimer Strategic Income
Fund, Oppenheimer International Bond Fund, Oppenheimer Variable
Account Funds, and Oppenheimer Integrity Funds; as well as the
following "Centennial Funds": Centennial America Fund, L.P., Daily
Cash Accumulation Fund, Inc., Centennial Money Market Trust,
Centennial Government Trust, Centennial New York Tax Exempt Trust,
Centennial Tax Exempt Trust and Centennial California Tax Exempt
Trust, (all of the foregoing funds are collectively referred to as
the "Denver-based Oppenheimer funds") except for Mr. Fossel and Ms.
Macaskill, who are Trustees, Directors or Managing General
Partners of all the Denver-based Oppenheimer funds except
Oppenheimer Integrity Funds, Oppenheimer Strategic Income Fund,
Panorama Series Fund, Inc. and Oppenheimer Variable Account Funds
(in addition, Mr. Fossel is not a trustee of Centennial New York
Tax-Exempt Trust or a Managing General Partner of Centennial
America Fund, L.P.). All of the Fund's officers except Messrs.
Steinmetz, Doll and Negri are officers of the Denver-based
Oppenheimer funds. Ms. Macaskill is President and Mr. Swain is
Chairman of the Denver-based Oppenheimer funds. As of December 31,
1996, the Trustees and officers of the Fund as a group owned 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 officers of the Fund, Bridget A. Macaskill and Andrew J.
Donohue, are trustees), other than the shares beneficially owned
under that plan by officers of the Fund listed above.
Robert G. Avis, Trustee;* Age 65
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 81
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Trustee; Age 66
1501 Quail Street, Newport Beach, California 92660
Chairman and Chief Executive Officer of Universal Space Lines, Inc.
(a space services management company); formerly Vice President of
McDonnell Douglas Space Systems Co. and associated with the
National Aeronautics and Space Administration.
________________________
* A Trustee who is an "interested person" of the Fund as defined in
the Investment Company Act.
Sam Freedman, Trustee; Age 56
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly Chairman and Chief Executive Officer of OppenheimerFunds
Services, Chairman, Chief Executive Officer and a director of
Shareholder Services, Inc., Chairman, Chief Executive and Officer
and director of Shareholder Financial Services, Inc., Vice
President and director of Oppenheimer Acquisition Corporation and
a director of OppenheimerFunds, Inc.
Jon S. Fossel, Trustee;* Age 54
Box 44-Mead Street, Waccabuc, New York 10597
Member of the Board of Governors of the Investment Company
Institute (a national trade association of investment companies),
Chairman of the Investment Company Institute Education Foundation;
formerly Chairman and a director of the Manager, President and a
director of Oppenheimer Acquisition Corp. ("OAC"), the Manager's
parent holding company, and Shareholder Services, Inc. ("SSI") and
Shareholder Financial Services, Inc. ("SFSI"), transfer agent
subsidiaries of the Manager.
Raymond J. Kalinowski, Trustee; Age 67
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc. (a computer
products training company); 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 75
2552 East Alameda, Denver, Colorado 80209
Formerly the Managing Partner of Deloitte, Haskins & Sells (an
accounting firm).
Robert M. Kirchner, Trustee; Age 75
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Ned M. Steel, Trustee; Age 81
3416 S. 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, Chief Executive Officer and Trustee;* Age
63
6803 South Tucson Way, Englewood, Colorado 80012
Vice Chairman of the Manager; formerly President and a Director of
Centennial Asset Management Corporation, an investment adviser
subsidiary of the Manager ("Centennial"); a director of the Manager
and Chairman of the Board of SSI.
________________________
* A Trustee who is an "interested person" of the Fund as defined in
the Investment Company Act.
Bridget A. Macaskill, President and Trustee;* Age 48
President, Chief Executive Officer and a Director of the Manager
and HarbourView Asset Management Corporation ("HarbourView") (a
subsidiary of the Manager); Chairman and a Director of SSI and
SFSI, President and a Director of OAC and Oppenheimer Partnership
Holdings, Inc., a holding company subsidiary of the Manager; a
director of Oppenheimer Real Asset Management, Inc.; formerly
Executive Vice President of the Manager.
Andrew J. Donohue, Vice President and Secretary; Age 46
Executive Vice President and General Counsel of OppenheimerFunds,
Inc. (the "Manager") and OppenheimerFunds Distributor, Inc. (the
"Distributor"); President and a director of Centennial; Executive
Vice President, General Counsel and a director of HarbourView, SSI,
SFSI, and Oppenheimer Partnership Holdings, Inc.; President and
director of Oppenheimer Real Asset Management, Inc.; General
Counsel of OAC; Executive Vice President, Chief Legal Officer and
a director of MultiSource Services, Inc. (a broker-dealer); an
officer of other Oppenheimer funds; formerly Senior Vice President
and Associate General Counsel of the Manager and the Distributor;
Partner in, Kraft & McManimon (a law firm); an officer of First
Investors Corporation (a broker-dealer) and First Investors
Management Company, Inc. (broker-dealer and investment adviser);
director and an officer of First Investors Family of Funds and
First Investors Life Insurance Company.
George C. Bowen, Vice President, Assistant Secretary and Treasurer;
Age 60
6803 South Tucson Way, Englewood, Colorado 80012
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; Treasurer of OAC; Vice President and Treasurer of Oppenheimer
Real Asset Management, Inc.; Chief Executive Officer, Treasurer and
a director of MultiSource Services, Inc.; an officer of other
Oppenheimer funds.
Arthur P. Steinmetz, Vice President and Portfolio Manager; Age 38
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 42
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager; an officer of other Oppenheimer
funds.
Robert C. Doll, Jr., Vice President and Portfolio Manager; Age 42
Executive Vice President and Director of the Manager; Executive VP
of HarbourView; Vice President and a director of OAC; an officer
of other Oppenheimer funds.
Robert G. Zack, Assistant Secretary; Age 48
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.
________________________
* A Trustee who is an "interested person" of the Fund as defined in
the Investment Company Act.
Robert J. Bishop, Assistant Treasurer; Age 38
6803 South Tucson Way, Englewood, Colorado 80012
Vice President of the Manager/Mutual Fund Accounting; an officer of
other Oppenheimer funds; formerly a Fund Controller of the Manager,
prior to which he was an Accountant for Yale & Seffinger, P.C., and
previously an Accountant and Commissions Supervisor for Stuart
James Company Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer; Age 31
6803 South Tucson Way, Englewood, Colorado 80012
Vice President of the Manager/Mutual Fund Accounting, an officer of
other Oppenheimer funds; formerly a Fund Controller for the
Manager.
Remuneration of Trustees. The officers of the Fund and certain
Trustees of the Fund (Ms. Macaskill and Mr. Swain) who are
affiliated with the Manager receive no salary or fees from the
Fund. Mr. Fossel did not receive any salary or fees from the Fund
prior to January 1, 1997. The remaining Trustees of the Fund
received the compensation shown below from the Fund. Mr. Freedman
became a trustee June 27, 1996, and received no compensation from
the Fund before that date. The compensation from the Fund was paid
during its fiscal year ended September 30, 1996. The compensation
from all of the Denver-based Oppenheimer funds includes the Fund
and is compensation received as a director, trustee, managing
general partner or member of a committee of the Board of those
funds during the calendar year 1996.
Total Compensation
Aggregate From All
Compensation Denver-based
Name and Position from Fund Oppenheimer funds1
Robert G. Avis, $333 $58,003
Trustee
William A. Baker, $457 $79,715
Audit and Review
Committee Chairman
and Trustee
Charles Conrad, Jr., $429 $74,717
Audit and Review
Committee Member
and Trustee
Raymond J. Kalinowski, $426 $74,173
Risk Management Oversight
Committee Member and Trustee
C. Howard Kast, $426 $74,173
Risk Management Oversight
Committee Member and Trustee
Robert M. Kirchner, $429 $74,717
Audit and Review
Committee Member
and Trustee
Ned M. Steel, $333 $58,003
Trustee
Sam Freedman, $169 $29,502
Trustee
______________________
1For the 1996 calendar year during which the Denver-based
Oppenheimer funds listed in the first paragraph of this section,
including Oppenheimer Strategic Investment Grade Bond Fund and
Oppenheimer Strategic Short-Term Income Fund (which ceased
operations following the acquisition of their assets by other
Oppenheimer funds). Panorama Series Fund, Inc. became a Denver-
based Oppenheimer fund in June of 1996.
Major Shareholders. As of December 31, 1996, no person
owned of record or was known by the Fund to own beneficially 5% or
more of the Fund's outstanding Class A, Class B or Class C shares,
except (i) Merrill Lynch Pierce Fenner & Smith Inc., 4800 Deer
Lake Drive East, 3rd Floor, Jacksonville, Florida 32246-6484, which
was the record owner of 60,795.000 Class C shares (equal to 19.80%
of the Class C shares then outstanding).
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled
by Massachusetts Mutual Life Insurance Company. OAC is also owned
in part by certain of the Manager's directors and officers, some of
whom also serve as officers of the Fund, and two of whom (Ms.
Macaskill and Mr. Swain) serve as Trustees of the Fund.
The Manager and the Fund have a Code of Ethics. It is designed to
detect and prevent improper personal trading by certain employees,
including portfolio managers, that would compete with or take
advantage of the Fund's portfolio transactions. Compliance with
the Code of Ethics is carefully monitored and strictly enforced by
the Manager.
The Investment Advisory Agreement. The investment advisory
agreement between the Manager and the Fund requires the Manager, at
its expense, to provide the Fund with adequate office space,
facilities and equipment, and to provide and supervise the
activities of all administrative and clerical personnel required to
provide effective corporate administration for the Fund, including
the compilation and maintenance of records with respect to its
operations, the preparation and filing of specified reports, and
composition of proxy materials and registration statements for
continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the
advisory agreement or by the Distributor under the General
Distributor's Agreement are paid by the Fund. The advisory
agreement lists examples of expenses paid by the Fund, the major
categories of which relate to interest, taxes, brokerage
commissions, fees to certain Trustees, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs,
certain printing and registration costs and non-recurring expenses,
including litigation costs. For the Fund's fiscal years ended
September 30, 1994, 1995, and 1996, the management fees paid by the
Fund to the Manager were $425,265, $435,814 and $513,195,
respectively.
The Investment Advisory Agreement contains no expense
limitation. However, because of state regulations limiting fund
expenses that previously applied, the Manager had voluntarily
undertaken that the Fund's total expenses in any fiscal year
(including the investment advisory fee but exclusive of taxes,
interest, brokerage commissions, distribution plan payments and any
extraordinary non-recurring expenses, including litigation) would
not exceed the most stringent state regulatory limitation
applicable to the Fund. Due to changes in federal securities laws,
such state regulations no longer apply and the Manager's
undertaking has been withdrawn. During the Fund's last fiscal
year, the Fund's expenses did not exceed the most stringent state
regulatory limit and the voluntary undertaking was not invoked.
The advisory agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence in the performance of
its duties, or reckless disregard 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 under the Distribution and Service Plans but
including advertising and the cost of printing and mailing
prospectuses other than those furnished to existing shareholders)
are borne by the Distributor. During the Fund's fiscal years ended
September 30, 1994, 1995 and 1996, the aggregate amounts of sales
charges on sales of the Fund's Class A shares were $231,950,
$126,096 and $277,077, respectively, of which the Distributor and
an affiliated broker retained $73,286, $39,054 and $91,918 in those
respective periods. During the Fund's fiscal year ended September
30, 1996, the contingent deferred sales charges on the Fund's Class
B shares totalled $79,826, all of which the Distributor retained.
During the Fund's fiscal year ended September 30, 1996, contingent
deferred sales charges collected on the Fund's Class C shares
totalled $929, all of which the Distributor retained. For
additional information about distribution of the Fund's shares and
the expenses connected with such activities, please refer to
"Distribution and Service Plans," below.
The Transfer Agent. OppenheimerFunds Services, the Fund's
Transfer Agent, is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for
shareholder servicing and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of
the duties of the Manager under the advisory agreement is to
arrange the portfolio transactions for the Fund. The advisory
agreement contains provisions relating to the employment of broker-
dealers ("brokers") to effect the Fund's portfolio transactions.
In doing so, the Manager is authorized by the advisory agreement to
employ broker-dealers, including "affiliated" brokers, as that term
is defined in the Investment Company Act, as may, in its best
judgment based on all relevant factors, implement the policy of the
Fund to obtain, at reasonable expense, the "best execution" (prompt
and reliable execution at the most favorable price obtainable) of
such transactions. The Manager need not seek competitive
commission bidding but is expected to minimize the commissions paid
to the extent consistent with 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 the Manager's portfolio traders based upon
recommendations from the Manager's portfolio managers. In certain
instances, portfolio managers may directly place trades and
allocate brokerage, also subject to the provisions of the advisory
agreement and the procedures and rules described above. In either
case, brokerage is allocated under the supervision of the Manager's
executive officers. Transactions in securities other than those
for which an exchange is the primary market are generally done with
principals or market makers. Brokerage commissions are paid
primarily for effecting transactions in listed securities or for
certain fixed-income agency transactions in the secondary market,
and are otherwise paid only if it appears likely that a better
price or execution can be obtained. When the Fund engages in an
option transaction, ordinarily the same broker will be used for the
purchase or sale of the option and any transaction in the
securities to which the option relates. When possible, concurrent
orders to purchase or sell the same security by more than one of
the accounts managed by the Manager or its affiliates are combined.
The transactions effected pursuant to such combined orders are
averaged as to price and allocated in accordance with the purchase
or sale orders actually placed for each account. 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 (including
foreign 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 Board of Trustees permits the Manager
to use concessions on fixed-price offerings to obtain research, in
the same manner as is permitted for agency transactions. The Board
also permits the Manager to use stated commissions on secondary
fixed-income agency trades to obtain research where the broker has
represented to the 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 Manager provides information to the
Board of Trustees as to the commissions paid to brokers furnishing
such services together with the Manager's representation that the
amount of such commissions was reasonably related to the value or
benefit of such services.
During the Fund's fiscal years ended September 30, 1994, 1995
and 1996, total brokerage commissions paid by the Fund were
$44,137, $32,068 and $70,889, respectively. During the fiscal year
ended September 30, 1996, $47,790 was paid to brokers as
commissions in return for research services; the aggregate dollar
amount of those transactions was $38,402,460. 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.
The Fund's advertisements of its performance data must, under
applicable rules of the Securities and Exchange Commission, include
the average annual total returns for each advertised class of
shares of the Fund for the 1, 5, and 10-year periods (or the life
of the class, if less) ending as of the most recently-ended
calendar quarter prior to the publication of the advertisement.
This enables an investor to compare the Fund's performance to the
performance of other funds for the same periods. However, a number
of factors should be considered before using such information as a
basis for comparison with other investments. An investment in the
Fund is not insured; its returns and share prices are not
guaranteed and normally will fluctuate on a daily basis. When
redeemed, an investor's shares may be worth more or less than their
original cost. Returns for any given past period are not a
prediction or representation by the Fund of future returns. The
returns of Class A, Class B and Class C shares of the Fund are
affected by portfolio quality, the type of investments the Fund
holds and its operating expenses allocated to the particular
class.
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,
1996, the standardized yields for the Fund's Class A, Class B and
Class C shares were 4.46%, 3.91% and 3.93%, 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 dividends derived 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, 1996, were 5.72% and 6.00% 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, 1996 was 5.26% when calculated at net
asset value. The dividend yield on Class C shares for the 30-day
period ended September 30, 1996 was 5.30% 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:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
Cumulative Total Returns. The cumulative "total return"
calculation measures the change in value of a hypothetical
investment of $1,000 over an entire period of years. Its
calculation uses some of the same factors as average annual total
return but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current
maximum sales charge of 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 to the investment result for the
period shown (unless the total return is shown at net asset value,
as described below). For Class C shares, a 1.0% contingent
deferred sales charge is applied to the investment result for the
one-year period (or less). Total returns also assume that all
dividends and capital gains distributions during the period are
reinvested to buy additional shares, at net asset value per share,
and that the investment is redeemed at the end of the period. The
average annual total returns on an investment in Class A shares for
the fiscal year ended September 30, 1996, and for the period June
1, 1992 (commencement of operations) to September 30, 1996, were
11.0% and 8.51%, respectively. The average annual total returns on
an investment in Class B shares for the fiscal year ended September
30, 1996, and for the period November 30, 1992 (inception of the
class) to September 30, 1996 were 10.69% and 8.46%, respectively.
The cumulative total return on Class A shares for the period June
1, 1992 (commencement of operations) through September 30, 1996 was
42.42%. The cumulative total return on Class B shares for the
period November 30, 1992 through September 30, 1996 was 36.54%.
The cumulative total return on Class C shares for the period
October 2, 1995 (inception of the Class) through September 30, 1996
was 14.18%.
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, 1996, was 49.52%. The average annual total return at
net asset value for the period June 1, 1992 (commencement of
operations) to September 30, 1996, for Class A shares was 9.73%.
The average annual total returns at net asset value for Class B
shares for the fiscal year ended September 30, 1996 and for the
period November 30, 1992 (inception of the class) to September 30,
1996 were 15.69% and 9.08%, respectively. The cumulative total
return at net asset value on the Fund's Class C shares for the
fiscal year ended September 30, 1996 was 15.18%.
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
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 mutual fund monitoring service. Lipper monitors the
performance of regulated investment companies, including the Fund,
and ranks their performance for various periods based on categories
relating to investment objectives. The performance of the Fund is
ranked against (i) all other funds, (ii) all other "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 star ranking of
the performance of its Class A, Class B and Class C shares by
Morningstar, Inc., an independent mutual fund monitoring service.
Morningstar ranks mutual funds in broad investment categories:
domestic stock funds, international stock funds, taxable bond funds
and municipal bond funds, based on risk-adjusted total investment
returns. The Fund is ranked among international stock funds.
Investment return measures a fund's or class' one, three, five and
ten-year average annual total returns (depending on the inception
of the fund or class) in excess of 90-day U.S. Treasury bill
returns after considering the fund's sales charges and expenses.
Risk measures a fund's or class' performance below 90-day U.S.
Treasury bill returns. Risk and investment return are combined to
produce star rankings reflecting performance relative to the
average fund in the fund's category. Five stars is the "highest"
ranking (top 10%), four stars is "above average" (next 22.5%),
three stars is "average" (next 35%), two stars is "below average"
(next 22.5%) and one star is "lowest" (bottom 10%). The current
star ranking is the fund's or class' 3-year ranking or its combined
3- and 5-year ranking (weighted 60%/40%, respectively, or its
combined 3-, 5- and 10-year ranking (weighted 40%, 30% and 30%,
respectively), depending on the inception of the fund or class.
Rankings are subject to change monthly.
The Fund may also compare its performance to that of other
funds in its Morningstar Category. In addition to its star
ranking, Morningstar also categorizes and compares a fund's 3-year
performance based on Morningstar's classification of the fund's
investments and investment style, rather than how a fund defines
its investment objective. Morningstar's four broad categories
(domestic equity, international equity, municipal bond and taxable
bond) are each further subdivided into categories based on types of
investments and investment styles. Those comparisons by
Morningstar are based on the same risk and return measurements as
its star rankings but do not consider the effect of sales charges.
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 Oppenheimer funds' services to those of
other mutual fund families selected by the rating or ranking
services and may be based upon the opinions of the rating or
ranking service itself, based on its research or judgment, or based
upon surveys of investors, brokers, shareholders or others.
Distribution and Service Plans
The Fund has adopted a Service Plan for 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 A, Class B and Class C Plans are
subject to the limitations imposed by the Conduct Rules 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, 1996, payments under
the Plan for Class A shares totaled $105,726, all of which was paid
by the Distributor to Recipients including $13,004 that was paid to
an affiliate of the Distributor. Payments made under the Class B
Plan during the fiscal year ended September 30, 1996 totalled
$242,309, of which $200,117 was retained by the Distributor,
including $3,257 paid to a dealer affiliated with the Distributor.
Payments made under the Class C Plan during the fiscal year ended
September 30, 1996, totalled $3,963, of which $3,838 was retained
by the Distributor.
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,
for personal services and the maintenance of accounts holding Class
A shares, as described in the Prospectus.
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 that 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 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 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 Distributor may use the
asset-based sales charge to recover 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 distribution 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.
About Your Account
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C
Shares. The availability of three classes of shares permits the
individual investor to choose the method of purchasing shares that
is more beneficial to the investor depending on the amount of the
purchase, the length of time the investor expects to hold shares
and other relevant circumstances. Investors should understand that
the purpose and function of the deferred sales charge and asset-
based sales charge with respect to Class B and Class C shares are
the same as those of the initial sales charge with respect to Class
A shares. Any salesperson or other person entitled to receive
compensation for selling Fund shares may receive different
compensation with respect to one class of shares than 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 Class B shares
does not constitute a taxable event for the holder under Federal
income tax law. If such a revenue ruling or opinion is no longer
available, the automatic conversion feature may be suspended, in
which event no further conversions of Class B shares would occur
while such suspension remained in effect. Although Class B shares
could then be exchanged for Class A shares on the basis of relative
net asset value of the two classes, without the imposition of a
sales charge or fee, such exchange could constitute a taxable event
for the holder, and absent such exchange, Class B shares might
continue to be subject to the asset-based sales charge for longer
than six years.
The methodology for calculating the net asset value,
dividends and distributions of the Fund's Class A, Class B and
Class C shares recognizes two types of expenses. General expenses
that do not pertain specifically to any class are allocated pro
rata to the shares of each class, based on the percentage of the
net assets of such class to the Fund's total assets, and then
equally to each outstanding share within a given class. Such
general expenses include (i) management fees, (ii) legal,
bookkeeping and audit fees, (iii) printing and mailing costs of
shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current shareholders, (iv) fees
to 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 (a)
Distribution and Service Plan fees, (b) incremental transfer and
shareholder servicing agent fees and expenses, (c) registration
fees and (d) shareholder meeting expenses, to the extent that such
expenses pertain to a specific class rather than to the Fund as a
whole.
Determination of Net Asset 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 Fund's net assets attributable to a class by the
number of shares of that class that are outstanding. The Exchange
normally closes at 4:00 P.M., New York time, but may close earlier
on some days (for example, in case of weather emergencies or on
days falling before a holiday). The Exchange's most recent annual
holiday schedule (which is subject to change) states that it will
close on New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day. It may also close on other days. The Fund may invest a
substantial portion of its assets in foreign securities primarily
listed on foreign exchanges, in foreign over-the-counter markets or
in securities traded on the Exchange that may trade on Saturdays or
customary U.S. business holidays on which the Exchange is closed.
Because the Fund's net asset value per share of Class A, Class B
and Class C shares will not be calculated on those days, the Fund's
net asset value per share of Class A, Class B and Class C shares
may be significantly affected on such days when shareholders may
not purchase or redeem shares.
The Fund's Board of Trustees has established procedures for
the valuation of the Fund's securities as follows: (i) equity
securities traded on a U.S. securities exchange or on NASDAQ for
which last sale information is regularly reported are valued at the
last reported sale price on their primary exchange or NASDAQ that
day (or, in the absence of sales that day, at values based on the
last sale prices of the preceding trading day, or closing "bid"
price that day); (ii) securities traded on a foreign securities
exchange are valued generally at the last sales price available to
the pricing service approved by the Fund s Board of Trustees or to
the Manager as reported by the principal exchange on which the
security is traded at its last trading session on or immediately
preceding the valuation date, or at the mean between "bid" and
"asked" prices obtained from active market makers in the security
on the basis of reasonable inquiry; (iii) long-term debt securities
having a remaining maturity in excess of 60 days are valued based
on the mean between the "bid" and "asked" prices determined by a
portfolio pricing service approved by the Fund s Board of Trustees
or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry; (iv) debt instruments
having a maturity of more than 397 days when issued, and non-money
market type instruments having a maturity of 397 days or less when
issued, which have a remaining maturity of 60 days or less are
valued at the mean between the "bid" and "asked" prices determined
by a pricing service approved by the Fund s Board of Trustees or
obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry; (v) money market-type
debt securities that had a maturity of less than 397 days when
issued that have a remaining maturity of 60 days or less are valued
at cost, adjusted for amortization of premiums and accretion of
discounts; and (vi) securities (including restricted securities)
not having readily-available market quotations are valued at fair
value determined under the Board s procedures. If the Manager is
unable to locate two market makers willing to give quotes (see
(ii), (iii) and (iv) above), the security may be priced at the mean
between the "bid" and "ask" prices provided by a single active
market maker (which in certain cases may be the "bid" price if no
"ask" price is available).
In the case of U.S. Government securities and mortgage-backed
securities, where last sale information is not generally available,
such pricing procedures may include "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield,
maturity and other special factors involved. The Manager may use
pricing services approved by the Board of Trustees to price U.S.
Government securities for which last sale information is not
generally available. The Manager will monitor the accuracy of such
pricing services, which may include comparing prices used for
portfolio evaluation to actual sales prices of selected securities.
Trading in securities on European and Asian exchanges and
over-the-counter markets is normally completed before the close of
the Exchange. Events affecting the values of foreign securities
traded in securities markets that occur between the time their
prices are determined and the close of the Exchange will not be
reflected in the Fund's calculation of its net asset value unless
the Board of Trustees, or the Manager under procedures established
by the Board, determines that the particular event would materially
affect the Fund's net asset value, in which case an adjustment
would be made. Foreign currency, including forward contracts,
will be valued at the closing price in the London foreign exchange
market that day as provided by a reliable bank, dealer or pricing
service. The value of securities denominated in foreign currency
will be converted to U.S. dollars at the closing price in the
London foreign exchange market that day as provided by a reliable
bank, dealer or pricing service. In the case of U.S. Government
Securities, mortgage-backed securities, foreign fixed-income
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 Trustees has authorized the Manager to employ
a pricing service to price U.S. Government Securities, mortgage-
backed securities, foreign government securities and corporate
bonds. The Trustees will monitor the accuracy of such pricing
services by comparing prices used for portfolio evaluation to
actual sales prices of selected securities.
Calls, puts and Futures are valued at the last sale prices on
the principal exchanges or on the NASDAQ market on which they are
traded, as applicable, as determined by a pricing service approved
by the Board of Trustees or by the Manager. If there were no sales
that day, value shall be the last sale price on the preceding
trading day if it is within the spread of the closing bid and asked
prices on the principal exchange or on NASDAQ on the valuation
date, or, if not, value shall be the closing bid price on the
principal exchange or on NASDAQ on the valuation date. If the put,
call or future is not traded on an exchange or on NASDAQ, it shall
be valued at the mean between bid and asked prices obtained by the
Manager from two active market makers (which in certain cases may
be the bid price if no asked price is available).
When the Fund writes an option, an amount equal to the
premium received by the Fund is included in its Statement of Assets
and Liabilities as an asset, and an equivalent deferred credit is
included in the liability section. The deferred credit is adjusted
("marked-to-market") to reflect the current market value of the
option. 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 put written by the Fund is exercised, the
required payment by the Fund is reduced by the premium received.
If a call or put written by the Fund expires, the Fund has a gain
in the amount of the premium; if the Fund enters into a closing
purchase transaction, it will have a gain or loss depending on
whether the premium received was more or less than the cost of the
closing transaction. If the Fund exercises a put it holds, the
amount the Fund receives on its sale of the underlying investment
is reduced by the amount of premium paid by the Fund.
AccountLink. When shares are purchased through AccountLink, each
purchase must be at least $25.00. Shares will be purchased on the
regular business day the Distributor is instructed to initiate the
Automated Clearing House ("ACH") transfer to buy shares. Dividends
will begin to accrue on shares purchased by the proceeds of ACH
transfers on the business day the Fund receives Federal Funds for
the purchase through the ACH system before the close of The New
York Stock Exchange. The Exchange normally closes at 4:00 P.M.,
but may close earlier on certain days. If Federal Funds are
received on a business day after the close of the Exchange, the
shares will be purchased and dividends will begin to accrue on the
next regular business day. The proceeds of ACH transfers are
normally received by the Fund 3 days after the transfers are
initiated. The Distributor and the Fund are not responsible for
any delays in purchasing shares resulting from delays in ACH
transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced
sales charge rate may be obtained for Class A shares under Right of
Accumulation and Letters of Intent because of the economies of
sales efforts and reduction in expenses realized by the
Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in the
Prospectus because the Distributor incurs little or no selling
expenses. The term "immediate family" refers to one's spouse,
children, grandchildren, grandparents, parents, aunts, uncles,
nieces and nephews, parents-in-law, sons- and daughters-in-law,
siblings, a sibling's spouse and a spouse's siblings.
The Oppenheimer Funds. The Oppenheimer funds are those
mutual funds for which the Distributor acts as the distributor or
the sub-distributor and include the following:
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer California Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Main Street California
Municipal Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer International Growth Fund
Oppenheimer Disciplined Value Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer LifeSpan 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
Oppenheimer Enterprise Fund
Oppenheimer Developing Markets Fund
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Fund
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest Global Value Fund, Inc.
Rochester Fund Municipals*
Rochester Fund Series - The Bond Fund For Growth*
Rochester Portfolio Series - Limited Term New York Municipal 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.
_______________________
*Shares of the Fund are not presently exchangeable for shares of
these funds.
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 the investor's statement of intention to purchase
Class A shares or Class A and Class B shares of the Fund (and other
eligible Oppenheimer funds) during the 13-month period from the
investor's first purchase to the Letter (the "Letter of Intent
period"), which may, at the investor's request, include purchases
made up to 90 days prior to the date of the Letter. The Letter
states the investor's intention to make the aggregate amount of
purchases (excluding any purchases made by reinvestment of
dividends or distributions or purchases made at net asset value
without sales charge), which together with the investor's holdings
of such funds (calculated at their respective public offering
prices calculated on the date of the Letter) will equal or exceed
the amount specified in the Letter. This enables the investor to
count the Class A and Class B shares to be purchased under the
Letter to obtain the reduced sales charge rate (as set forth in the
Prospectus) 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 Class B shares acquired in exchange for either (i)
Class A shares of one of the other Oppenheimer funds that were
acquired subject to a Class A initial or contingent deferred sales
charge or (ii) Class B shares of one of the other Oppenheimer funds
that were acquired subject to a contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be
exchanged for shares of another fund to which an exchange is
requested, as described in the section of the Prospectus entitled
"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
Oppenheimer funds.
There is a front-end sales charge on the purchase of certain
Oppenheimer funds, or a contingent deferred sales charge may apply
to shares purchased by Asset Builder payments. An application may
be obtained from the Distributor, completed and returned, and a
prospectus of the selected fund(s) should be obtained from the
Distributor or your financial advisor before initiating Asset
Builder payments. The amount of the Asset Builder investment may
be changed or the automatic investments may be terminated at any
time by writing to the Transfer Agent. A reasonable period
(approximately 15 days) is required after the Transfer Agent's
receipt of such instructions to implement them. The Fund reserves
the right to amend, suspend, or discontinue offering such plans at
any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders
for the Fund's shares (for example, when a purchase check is
returned to the Fund unpaid) causes a loss to be incurred when the
net asset value of the Fund's shares on the cancellation date is
less than on the purchase date. That loss is equal to the amount
of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is
responsible for that loss. If the investor fails to compensate the
Fund for the loss, the Distributor will do so. The Fund may
reimburse the Distributor for that amount by redeeming shares from
any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
Retirement Plans. In describing certain types of employee benefit
plans that may purchase Class A shares without being subject to the
Class A contingent deferred sales charge, the term "employee
benefit plan" means any plan or arrangement, whether or not
"qualified" under the Internal Revenue Code, including, medical
savings accounts, payroll deduction plans or similar plans in which
Class A shares are purchased by a fiduciary or other person for the
account of participants who are employees of a single employer or
of affiliated employers, if the Fund account is registered in the
name of the fiduciary or other person for the benefit of
participants in the plan.
The term "group retirement plan" means any qualified or non-
qualified retirement plan (including 457 plans, SEPs, SARSEPs,
403(b) plans, and SIMPLE plans) for employees of a corporation or
a sole proprietorship, members and employees of a partnership or
association or other organized group of persons (the members of
which may include other groups), if the group has made special
arrangements with the Distributor and all members of the group
participating in the plan purchase Class A shares of the Fund
through a single investment dealer, broker or other financial
institution designated by the group.
How to Sell Shares
Information on how to sell shares of the Fund is stated in
the Prospectus. The information below supplements the terms and
conditions for redemptions set forth in the Prospectus.
Involuntary Redemptions. The Fund's Board of Trustees has
the right to cause the involuntary redemption of the shares held in
any account if the aggregate net asset value of those shares is
less than $200 or such lesser amount as the Board may fix. The
Board of Trustees will not cause the involuntary redemption of
shares in an account if the aggregate net asset value of the shares
has fallen below the stated minimum solely as a result of market
fluctuations. Should the Board elect to exercise this right, it
may also fix, in accordance with the Investment Company Act, the
requirements for any notice to be given to the shareholders in
question (not less than 30 days), or the Board may set requirements
for 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 that you purchased subject to an initial sales
charge, or (ii) Class B shares on which you paid a contingent
deferred sales charge when you redeemed them, without sales charge.
This privilege does not apply to Class C shares. The reinvestment
may be made without sales charge only in Class A shares of the Fund
or any of the other Oppenheimer funds into which shares of the Fund
are exchangeable as described below, at the net asset value next
computed after the Transfer Agent receives the reinvestment order.
The shareholder must ask the Distributor for that privilege at the
time of reinvestment. Any capital gain that was realized when the
shares were redeemed is taxable, and reinvestment will not alter
any capital gains tax payable on that gain. If there has been a
capital loss on the redemption, some or all of the loss may not be
tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption
proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another of the Oppenheimer
funds within 90 days of payment of the sales charge, the
shareholder's basis in the shares of the Fund that were redeemed
may not include the amount of the sales charge paid. That would
reduce the loss or increase the gain recognized from the
redemption. However, in that case the sales charge would be added
to the basis of the shares acquired by the reinvestment of the
redemption proceeds. The Fund may amend, suspend or cease offering
this reinvestment privilege at any time as to shares redeemed after
the date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of any class at the time of
transfer to the name of another person or entity (whether the
transfer occurs by absolute assignment, gift or bequest, not
involving, directly or indirectly, a public sale). The transferred
shares will remain subject to the contingent deferred sales charge,
calculated as if the transferee shareholder had acquired the
transferred shares in the same manner and at the same time as the
transferring shareholder. If less than all shares held in an
account are transferred, and some but not all shares in the account
would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus
under "How to Buy Shares" for the imposition of the Class B and
Class C contingent deferred sales 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, or pension or profit-sharing plans should be
addressed to "Trustee, OppenheimerFunds Retirement Plans," c/o the
Transfer Agent at its address listed in "How To Sell Shares" in the
Prospectus or on the back cover of this Statement of Additional
Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if
the distribution is premature; and (iii) conform to the
requirements of the plan and the Fund's other redemption
requirements. Participants (other than self-employed 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 on behalf of their
customers. The shareholder should contact the broker or dealer to
arrange this type of redemption. The repurchase price per share
will be the net asset value next computed after the Distributor
receives the order placed by the dealer or broker, except that if
the Distributor receives a repurchase order from 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 and Class C contingent deferred sales charges are
waived as described in the Prospectus under "Waivers of Class B and
Class C Contingent Deferred Sales Charges").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such
plans, as stated below and in the provisions of the Oppenheimer
funds Application relating to such Plans, as well as the
Prospectus. These provisions may be amended from time to time by
the Fund and/or the Distributor. When adopted, such amendments
will automatically apply to existing Plans.
Automatic Exchange Plans. Shareholders can authorize the
Transfer Agent (on the OppenheimerFunds Application or signature-
guaranteed instructions) to exchange a pre-determined amount of
shares of the Fund for shares (of the same class) of other
Oppenheimer funds automatically on a monthly, quarterly, semi-
annual or annual basis under an Automatic Exchange Plan. The
minimum amount that may be exchanged to each other fund account is
$25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to
Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
Automatic Withdrawal Plans. Fund shares will be redeemed
as necessary to meet withdrawal payments. Shares acquired without
a sales charge will be redeemed first and shares acquired with
reinvested dividends and capital gains distributions will be
redeemed next, followed by shares acquired with a sales charge, to
the extent necessary to make withdrawal payments. Depending upon
the amount withdrawn, the investor's principal may be depleted.
Payments made under withdrawal plans should not be considered as a
yield or income on your investment. It may not be desirable to
purchase additional Class A shares while making automatic
withdrawals because of the sales charges that apply to purchases
when made. Accordingly, a shareholder normally may not maintain an
Automatic Withdrawal Plan while simultaneously making regular
purchases of Class A shares.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the
"Planholder") who executed the Plan authorization and application
submitted to the Transfer Agent. 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 ACH transfer payments of the proceeds
of Plan withdrawals will normally be transmitted three business
days prior to the date selected for receipt of the payment (receipt
of payment on the date selected cannot be guaranteed), according to
the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the
address to which checks are to be mailed or AccountLink payments
are to be sent may be changed at any time by the Planholder by
writing to the Transfer Agent. The Planholder should allow at
least two weeks' time in mailing such notification for the
requested change to be put in effect. The Planholder may, at any
time, instruct the Transfer Agent by written notice (in proper form
in accordance with the requirements of the then-current Prospectus
of the Fund) to redeem all, or any part of, the shares held under
the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will
mail a check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by
writing to the Transfer Agent. A Plan may also be terminated at
any time by the Transfer Agent upon receiving directions to that
effect from the Fund. The Transfer Agent will also terminate a
Plan upon receipt of evidence satisfactory to it of the death or
legal incapacity of the Planholder. Upon termination of a Plan by
the Transfer Agent or the Fund, shares that have not been redeemed
from the account will be held in uncertificated form in the name of
the Planholder, and the account will continue as a dividend-
reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt,
the Planholder may request issuance of a portion of the Class A
shares in certificated form. Certificates for Class B and Class C
shares will not be issued. Upon written request from the
Planholder, the Transfer Agent will determine the number of shares
for which a certificate may be issued without causing the
withdrawal checks to stop because of exhaustion of uncertificated
shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will
terminate.
If the Transfer Agent ceases to act as transfer agent for the
Fund, the Planholder will be deemed to have appointed any successor
transfer agent to act as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of
Oppenheimer funds having more than one class of shares may be
exchanged only for shares of the same class of other Oppenheimer
funds. Shares of 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, Class B and
Class C shares except Oppenheimer Money Market Fund, Inc.,
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., and Daily Cash Accumulation Fund, Inc., which only offer
Class A shares and Oppenheimer Main Street California Municipal
Fund, which only offers Class A and Class B shares (Class B and
Class C shares of Oppenheimer Cash Reserves are generally available
only by exchange from the same class of shares of other Oppenheimer
funds or through OppenheimerFunds sponsored 401(k) plans). A
current list showing which funds offer which classes can be
obtained by calling the Distributor at 1-800-525-7048.
Class A shares of Oppenheimer funds may be exchanged at net
asset value for shares of any Money Market Fund. Shares of any
Money Market Fund purchased without a sales charge may be exchanged
for shares of Oppenheimer funds offered with a sales charge upon
payment of the sales charge (or, if applicable, may be used to
purchase shares of Oppenheimer funds subject to a contingent
deferred sales charge). However, shares of Oppenheimer Money
Market Fund, Inc. purchased with the redemption proceeds of shares
of other mutual funds (other than funds managed by the Manager or
its subsidiaries) redeemed within the 12 months prior to that
purchase may subsequently be exchanged for shares of the Fund and
other Oppenheimer funds without being subject to an initial or
contingent deferred sales charge, whichever is applicable. To
qualify for that privilege, the investor or the investor's dealer
must notify the Distributor of eligibility for this privilege at
the time the shares of Oppenheimer Money Market Fund, Inc. are
purchased, and, if requested, must supply proof of entitlement to
this privilege. Shares of this Fund acquired by reinvestment of
dividends or distributions from any other of the Oppenheimer funds
except Oppenheimer Cash Reserves or from any unit investment trust
for which reinvestment arrangements have been made with the
Distributor may be exchanged at net asset value for shares of any
of the Oppenheimer funds.
No contingent deferred sales charge is imposed on exchanges
of shares of any class purchased subject to a contingent deferred
sales charge. However, when Class A shares acquired by exchange of
Class A shares of other Oppenheimer funds purchased subject to a
Class A contingent deferred sales charge are redeemed within 18
months of the end of the calendar month of the initial purchase of
the exchanged Class A shares, the Class A contingent deferred sales
charge is imposed on the redeemed shares. The Class B contingent
deferred sales charge is imposed on Class B shares acquired by
exchange if they are redeemed within 6 years of the initial
purchase of the exchanged Class B shares. The Class C contingent
deferred sales charge is imposed on Class C shares acquired by
exchange if they are redeemed within 12 months of the initial
purchase of the exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an
exchange, the priorities described in "How To Buy Shares" in the
Prospectus for the imposition of the Class B 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 C shares.
The Fund reserves the right to reject telephone or written
exchange requests submitted in bulk by anyone on behalf of more
than one account. The Fund may accept requests for exchanges of up
to 50 accounts per day from representatives of authorized dealers
that qualify for this privilege. In connection with any exchange
request, the number of shares exchanged may be less than the number
requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information or would include shares covered
by a share certificate that is not tendered with the request. In
those cases, only the shares available for exchange without
restriction will be exchanged.
When exchanging shares by telephone, a shareholder must
either have an existing account in, or obtain and acknowledge
receipt of a prospectus of, the fund to which the exchange is to be
made. For full or partial exchanges of an account made by
telephone, any special account features such as Asset Builder
Plans, Automatic Withdrawal Plans and retirement plan contributions
will be switched to the new account unless the Transfer Agent is
instructed otherwise. If all telephone lines are busy (which might
occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges
by telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business
day the Transfer Agent receives an exchange request in proper form
(the "Redemption Date"). Normally, shares of the fund to be
acquired are purchased on the Redemption Date, but such purchases
may be delayed by either fund up to five business days if it
determines that it would be disadvantaged by an immediate transfer
of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it
(for example, if the receipt of multiple exchange requests from a
dealer might require the disposition of portfolio securities at a
time or at a price that might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have
different investment objectives, policies and risks, and a
shareholder should assure that the Fund selected is appropriate for
his or her investment and should be aware of the tax consequences
of an exchange. For federal income tax purposes, an exchange
transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above,
discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and
the Transfer Agent are unable to provide investment, tax or legal
advice to a shareholder in connection with an exchange request or
any other investment transaction.
Dividends, Capital Gains and Taxes
Tax Status of the Fund's Dividends and Distributions. The Federal
tax treatment of the Fund's dividends and capital gains
distributions is explained in the Prospectus under the caption
"Dividends, Capital Gains and Taxes." Special provisions of the
Internal Revenue Code govern the eligibility of the Fund's
dividends for the dividends-received deduction for corporate
shareholders. Long-term capital gains distributions are not
eligible for the deduction. In addition, the amount of dividends
paid by the Fund which may qualify for the deduction is limited to
the aggregate amount of qualifying dividends that the Fund derives
from its portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not be
eligible for the deduction on dividends paid on Fund shares held
for 45 days or less. To the extent the Fund's dividends are
derived from gross income from option premiums, interest income or
short-term gains from the sale of securities or dividends from
foreign corporations, those dividends will not qualify for the
deduction.
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.
The amount of a class's distributions may vary from time to
time depending on market conditions, the composition of the Fund's
portfolio, and expenses borne by the Fund or borne separately by a
class, as described in "Alternative Sales Arrangements -- Class A,
Class B and Class C Shares," above. Dividends are calculated in the
same manner, at the same time and on the same day for shares of
each class. However, dividends on Class B and Class C shares are
expected to be lower than dividends on Class A shares as a result
of the asset-based sales charges on Class B and Class C shares, and
dividends will also differ in amount as a consequence of any
difference in net asset value between the classes.
Dividend Reinvestment in Another Fund. Shareholders of the Fund
may elect to reinvest all dividends and/or capital gains
distributions in shares of the same class of any of the other
Oppenheimer funds, except Oppenheimer Cash Reserves, listed in
"Reduced Sales Charges," above, at net asset value without sales
charge. To elect this option, a shareholder must notify the
Transfer Agent in writing and either have an existing account in
the fund selected for reinvestment or must obtain a prospectus for
that fund and an application from the Distributor to establish an
account. The investment will be made at the net asset value per
share in effect at the close of business on the payable date of the
dividend or distribution. Dividends and/or distributions from
shares of other Oppenheimer funds may be invested in shares of this
Fund on the same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's
assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities and handling the
delivery of such securities to and from the Fund. The Manager has
represented to the Fund that the banking relationships between the
Manager and the Custodian have been and will continue to be
unrelated to and unaffected by the relationship between the Fund
and the Custodian. It will be the practice of the Fund to deal
with the Custodian in a manner uninfluenced by any banking
relationship the Custodian may have with the Manager and its
affiliates. The Fund's cash balances with the Custodian in excess
of $100,000 are not protected by Federal deposit insurance. Such
uninsured balances 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>
<PAGE>
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, 1996, the related statement of
operations for the year then ended, the statements of changes in net
assets for the years ended September 30, 1996 and 1995 and the
financial highlights for the period June 1, 1992 (commencement of
operations) to September 30, 1996. 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, 1996 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,
1996, 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
Denver, Colorado
October 21, 1996
<PAGE>
STATEMENT OF INVESTMENTS September 30, 1996
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1)
SEE NOTE 1
================================================================================================================
================
<S> <C>
<C>
MORTGAGE-BACKED OBLIGATIONS--18.0%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
GOVERNMENT AGENCY--15.7%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
FHLMC/FNMA/SPONSORED--8.2%
Federal Home Loan Mortgage Corp., Collateralized Mtg.
Obligations, Gtd. Multiclass Mtg. Participation Certificates,
Series 176, Cl. F, 8.95%, 3/15/20 $ 59,951
$ 60,139
- ----------------------------------------------------------------------------------------------------------------
- --------
Federal National Mortgage Assn.:
7.50%, 10/15/26(2) 5,000,000
4,940,650
Gtd. Real Estate Mtg. Investment Conduit Pass-Through
Certificates, Trust 1992-103, Cl. JB, 10.50%, 11/25/20 315,000
351,323
Interest-Only Stripped Mtg.-Backed Security, Trust 257, Cl. 2, 10.955%, 2/1/24(3) 1,712,531
593,766
Series 1994-83, Cl. Z, 7.50%, 6/25/24 378,624
337,801
----------
6,283,679
- ----------------------------------------------------------------------------------------------------------------
- ----------------
GNMA/GUARANTEED--7.5%
Government National Mortgage Assn.:
6%, 3/20/26 1,437,892
1,434,298
7%, 4/15/26 4,460,633
4,296,705
----------
5,731,003
- ----------------------------------------------------------------------------------------------------------------
- ----------------
PRIVATE--2.3%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
COMMERCIAL--1.6%
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through
Certificates, Series 1996-C1, Cl. F, 7.51%, 2/1/28(4)(5) 97,137
62,289
- ----------------------------------------------------------------------------------------------------------------
- --------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1992-CHF, Cl. D, 8.25%, 12/25/20 267,639
268,936
Series 1993-C1, Cl. D, 9.45%, 5/25/24 252,980
259,621
Series 1994-C2, Cl. E, 8%, 4/25/25 449,792
436,721
Series 1994-C2, Cl. G, 8%, 4/25/25 209,655
180,337
- ----------------------------------------------------------------------------------------------------------------
- --------
Structured Asset Securities Corp., Multiclass Pass-Through
Certificates, Series 1995-C4, Cl. E, 8.849%, 6/25/26(4)(5) 27,688
22,566
----------
1,230,470
- ----------------------------------------------------------------------------------------------------------------
- ----------------
MULTI-FAMILY--0.5%
Mortgage Capital Funding, Inc., Multifamily Mtg. Pass-Through
Certificates, Series 1996-MC1, Cl. G, 7.15%, 6/15/06(5) 400,000
302,625
- ----------------------------------------------------------------------------------------------------------------
- --------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates,
Series 1991-M6, Cl. B4, 7.103%, 6/25/21(4) 68,681
67,157
----------
369,782
- ----------------------------------------------------------------------------------------------------------------
- ----------------
RESIDENTIAL--0.2%
Salomon Brothers Mortgage Securities VII, Series 1996-B, Cl. 1, 7.136%, 4/25/26 299,020
174,927
----------
Total Mortgage-Backed Obligations (Cost $13,599,896)
13,789,861
================================================================================================================
================
U.S. GOVERNMENT OBLIGATIONS--0.6%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
U.S. Treasury Nts., 6%, 2/15/26 (Cost $447,860)(6) 500,000
439,844
</TABLE>
5 Oppenheimer Strategic Income & Growth Fund
<PAGE> 6
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1)
SEE NOTE 1
================================================================================================================
================
<S> <C>
<C>
FOREIGN GOVERNMENT OBLIGATIONS--20.0%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
ARGENTINA--1.6%
Argentina (Republic of):
Bonds, Bonos de Consolidacion de Deudas, Series I, 5.461%, 4/1/01(4)(7) $ 559,749
$ 510,403
Past Due Interest Bonds, Series L, 6.312%, 3/31/05(4) 834,000
699,517
- ----------------------------------------------------------------------------------------------------------------
- --------
Banco de Galicia y Buenos Aires SA Sr. Unsec. Nts., 9.387%, 4/15/99(4) 35,000
35,634
----------
1,245,554
- ----------------------------------------------------------------------------------------------------------------
- ----------------
AUSTRALIA--2.4%
Australia (Commonwealth of) Bonds:
10%, 2/15/06 AUD 500,000
453,666
9.50%, 8/15/03 AUD 15,000
13,060
- ----------------------------------------------------------------------------------------------------------------
- --------
Queensland Treasury Corp.:
Exchangeable Gtd. Nts., 8%, 8/14/01 AUD 615,000
498,166
Gtd. Nts., 8%, 5/14/03 AUD 300,000
240,793
Gtd. Nts., 10.50%, 5/15/03 AUD 90,000
81,482
- ----------------------------------------------------------------------------------------------------------------
- --------
Treasury Corp. of Victoria Gtd. Bonds, 10.25%, 11/15/06 AUD 425,000
390,210
- ----------------------------------------------------------------------------------------------------------------
- --------
Western Australia Treasury Corp. Gtd. Bonds, 10%, 7/15/05 AUD 190,000
170,279
----------
1,847,656
- ----------------------------------------------------------------------------------------------------------------
- ----------------
BRAZIL--0.9%
Brazil (Federal Republic of) Capitalization Bonds, 8%, 4/15/14 1,001,247
705,567
- ----------------------------------------------------------------------------------------------------------------
- --------
Telecomunicacoes Brasileiras SA Medium-Term Nts., 11.30%, 12/9/99(4) 10,000
10,288
----------
715,855
- ----------------------------------------------------------------------------------------------------------------
- ----------------
BULGARIA--0.6%
Bulgaria (Republic of):
Disc. Bonds, Tranche A, 6.688%, 7/28/24(4) 70,000
35,569
Front-Loaded Interest Reduction Bearer Bonds, Tranche A, 2.25%, 7/28/12(8) 755,000
248,442
Interest Arrears Bonds, 6.688%, 7/28/11(4) 325,000
149,500
----------
433,511
- ----------------------------------------------------------------------------------------------------------------
- ----------------
CANADA--2.9%
Canada (Government of) Bonds:
11.75%, 2/1/03 CAD 220,000
204,386
9.75%, 10/1/97 CAD 250,000
193,333
9.75%, 12/1/01 CAD 260,000
219,637
9.75%, 6/1/01(6) CAD 1,335,000
1,119,586
Series A-33, 11.50%, 9/1/00 CAD 140,000
122,410
Series A-76, 9%, 6/1/25 CAD 465,000
392,682
----------
2,252,034
- ----------------------------------------------------------------------------------------------------------------
- ----------------
DENMARK--0.7%
Denmark (Kingdom of) Bonds:
8%, 11/15/01 DKK 1,670,000
312,070
8%, 3/15/06 DKK 1,130,000
206,646
----------
518,716
- ----------------------------------------------------------------------------------------------------------------
- ----------------
GERMANY--2.1%
Germany (Republic of) Bonds, Series 94, 6.25%, 1/4/24(6) DEM 2,670,000
1,612,575
- ----------------------------------------------------------------------------------------------------------------
- ----------------
GREAT BRITAIN--1.4%
United Kingdom Treasury:
Bonds, 10%, 9/8/03 GBP 355,000
633,054
Debs., 8.50%, 12/7/05 GBP 55,000
91,012
Nts., 12.50%, 11/21/05 GBP 62,000
123,738
Nts., 8%, 6/10/03 GBP 125,000
202,509
----------
1,050,313
- ----------------------------------------------------------------------------------------------------------------
- ----------------
IRELAND--0.1%
Ireland (Government of) Bonds, 9.25%, 7/11/03 IEP 60,000
110,024
</TABLE>
6 Oppenheimer Strategic Income & Growth Fund
<PAGE> 7
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1)
SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------
- ----------------
<S> <C>
<C>
ITALY--0.4%
Italy (Republic of) Treasury Bonds, Buoni del Tesoro Poliennali:
10.50%, 4/1/00ITL 285,000,000
$ 201,403
10.50%, 7/15/00ITL 170,000,000
121,241
----------
322,644
- ----------------------------------------------------------------------------------------------------------------
- ----------------
JAPAN--0.4%
Japan (Government of) Bonds, Series 174, 4.60%, 9/20/04 JPY 27,500,000
279,877
- ----------------------------------------------------------------------------------------------------------------
- ----------------
MEXICO--0.7%
Banco Nacional de Comercio Exterior SNC:
International Finance BV Gtd. Bonds, 10.758%, 6/23/97(4)(5) 120,000
123,900
International Finance BV Gtd. Registered Bonds, 11.25%, 5/30/06 135,000
141,581
Nts., 7.25%, 2/2/04 75,000
64,687
- ----------------------------------------------------------------------------------------------------------------
- --------
United Mexican States Bonds:
10.375%, 1/29/03 DEM 150,000
103,851
16.50%, 9/1/08 GBP 35,000
74,486
----------
508,505
- ----------------------------------------------------------------------------------------------------------------
- ----------------
NEW ZEALAND--1.3%
New Zealand Government Bonds, 10%, 7/15/97 NZD 1,040,000
733,982
- ----------------------------------------------------------------------------------------------------------------
- --------
Transpower Finance Ltd. Gtd. Unsec. Unsub. Bonds:
8%, 2/15/01(5) NZD 165,000
113,525
8%, 3/15/02 NZD 165,000
113,459
----------
960,966
- ----------------------------------------------------------------------------------------------------------------
- ----------------
PANAMA--0.1%
Panama (Republic of) Interest Reduction Bonds, 3.50%, 7/17/14(8) 130,000
81,738
- ----------------------------------------------------------------------------------------------------------------
- ----------------
POLAND--1.1%
Poland (Republic of) Treasury Bills, Zero Coupon:
21.464%, 10/16/96(9) PLZ 2,000,000
706,837
21.656%, 10/2/96(9) PLZ 430,000
152,854
----------
859,691
- ----------------------------------------------------------------------------------------------------------------
- ----------------
RUSSIA--0.2%
Russia (Government of) Interest Nts., 6.547%, 12/29/49(2)(4) 260,000
167,294
- ----------------------------------------------------------------------------------------------------------------
- ----------------
SPAIN--1.2%
Spain (Kingdom of):
Bonds, Bonos y Obligacion del Estado, 10.15%, 1/31/06 ESP 39,200,000
349,431
Gtd. Bonds, Bonos y Obligacion del Estado, 10.25%, 11/30/98 ESP 25,800,000
212,018
Gtd. Bonds, Bonos y Obligacion del Estado, 10.30%, 6/15/02 ESP 22,500,000
197,305
Gtd. Bonds, Bonos y Obligacion del Estado, 12.25%, 3/25/00 ESP 17,700,000
157,405
----------
916,159
- ----------------------------------------------------------------------------------------------------------------
- ----------------
SWEDEN--1.2%
Sweden (Kingdom of) Bonds:
Series 1030, 13%, 6/15/01 SEK 2,200,000
414,114
Series 1033, 10.25%, 5/5/03 SEK 600,000
105,220
Series 1034, 9%, 4/20/09 SEK 1,400,000
233,811
Series 1035, 6%, 2/9/05 SEK 1,300,000
179,414
----------
932,559
- ----------------------------------------------------------------------------------------------------------------
- ----------------
VENEZUELA--0.7%
Venezuela (Republic of):
Disc. Bonds, Series DL, 6.625%, 12/18/07(4) 250,000
207,500
Front-Loaded Interest Reduction Bonds, Series A, 6.375%, 3/31/07(4) 100,000
84,313
New Money Bonds, Series A, 6.75%, 12/18/05(4) 250,000
208,438
----------
500,251
----------
Total Foreign Government Obligations (Cost $14,828,341)
15,315,922
</TABLE>
7 Oppenheimer Strategic Income & Growth Fund
<PAGE> 8
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1)
SEE NOTE 1
================================================================================================================
================
<S> <C>
<C>
LOAN PARTICIPATIONS--1.3%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Colombia (Republic of) 1989-1990 Integrated Loan
Facility Bonds, 6.563%, 7/1/01(4)(5) $ 314,320
$ 298,604
- ----------------------------------------------------------------------------------------------------------------
- --------
Morocco (Kingdom of) Loan Participation Agreement,
Tranche A, 6.437%, 1/1/09(4) 325,000
255,633
- ------------------------------------------------------------------------------------------------------------------------
Trinidad & Tobago Loan Participation Agreement,
Tranche A, 1.772%, 9/30/00(4)(5) JPY 44,836,363
358,288
- ----------------------------------------------------------------------------------------------------------------
- --------
United Mexican States, Combined Facility 3,
Loan Participation Agreement, Tranche A, 6.563%, 9/20/97(4)(5) 66,720
59,256
----------
Total Loan Participations (Cost $969,966)
971,781
================================================================================================================
================
CORPORATE BONDS AND NOTES--17.6%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
BASIC INDUSTRY--1.4%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
CHEMICALS--0.3%
NL Industries, Inc., 11.75% Sr. Sec. Nts., 10/15/03 200,000
211,000
- ----------------------------------------------------------------------------------------------------------------
- ----------------
METALS/MINING--0.2%
UCAR Global Enterprises, Inc., 12% Sr. Sub. Nts., 1/15/05 100,000
114,750
- ----------------------------------------------------------------------------------------------------------------
- ----------------
PAPER--0.9%
Repap New Brunswick, Inc., 8.937% First Priority Sr. Sec. Nts., 7/15/00(4) 200,000
200,000
- ----------------------------------------------------------------------------------------------------------------
- --------
Riverwood International Corp., 10.25% Sr. Nts., 4/1/06 300,000
303,000
- ----------------------------------------------------------------------------------------------------------------
- --------
Stone Container Corp., 10.75% First Mtg. Nts., 10/1/02 200,000
210,500
----------
713,500
- ----------------------------------------------------------------------------------------------------------------
- ----------------
CONSUMER RELATED--1.7%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
CONSUMER PRODUCTS--0.1%
Fletcher Challenge Industries Ltd., 10% Cv. Sub. Unsec. Nts., 4/30/05 NZD 70,000
50,290
- ----------------------------------------------------------------------------------------------------------------
- ----------------
HEALTHCARE--0.3%
Capstone Capital Corp., 10.50% Cv. Sub. Debs., 4/1/02 190,000
247,475
- ----------------------------------------------------------------------------------------------------------------
- ----------------
HOTEL/GAMING--0.1%
Trump Atlantic City Associates/Trump Atlantic City Funding, Inc.,
11.25% First Mtg. Nts., 5/1/06 100,000
99,250
- ----------------------------------------------------------------------------------------------------------------
- ----------------
LEISURE--0.2%
Gillett Holdings, Inc., 12.25% Sr. Sub. Nts., Series A, 6/30/02(5) 160,431
167,450
- ----------------------------------------------------------------------------------------------------------------
- ----------------
TEXTILE/APPAREL--1.0%
PT Polysindo Eka Perkasa, Zero Coupon Promissory Nts.,
36.897%, 10/23/96(9) IDR 1,200,000,000
511,932
- ----------------------------------------------------------------------------------------------------------------
- --------
Synthetic Industries, Inc., 12.75% Sr. Sub. Debs., 12/1/02 200,000
217,000
----------
728,932
- ----------------------------------------------------------------------------------------------------------------
- ----------------
ENERGY--0.5%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Triton Energy Corp., Zero Coupon Sr. Sub. Disc. Nts., 10.394%, 11/1/97(9) 400,000
371,000
- ----------------------------------------------------------------------------------------------------------------
- ----------------
FINANCIAL SERVICES--0.7%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
BANKS & THRIFTS--0.2%
Banco Bamerindus do Brasil SA, 10.50% Debs., 6/23/97 25,000
24,687
- ----------------------------------------------------------------------------------------------------------------
- --------
Banco de Colombia, 5.20% Cv. Jr. Sub. Unsec. Nts., 2/1/99 50,000
46,500
- ----------------------------------------------------------------------------------------------------------------
- --------
Siam City Bank Co. Ltd., Zero Coupon Debs., 11.084%, 10/31/96(2)(9) THB 2,000,000
77,981
----------
149,168
- ----------------------------------------------------------------------------------------------------------------
- ----------------
DIVERSIFIED FINANCIAL--0.1%
Banco del Atlantico SA, 7.875% Eurobonds, 11/5/98 50,000
48,875
- ----------------------------------------------------------------------------------------------------------------
- ----------------
INSURANCE--0.4%
Life Partners Group, Inc., 12.75% Sr. Sub. Nts., 7/15/02(10) 300,000
328,125
- ----------------------------------------------------------------------------------------------------------------
- ----------------
HOUSING RELATED--1.0%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
HOMEBUILDERS/
REAL ESTATE--1.0%
Blue Bell Funding, Inc., 11.85% Sec. Extendible Adjustable Rate Nts., 5/1/99 396,000
397,980
- ----------------------------------------------------------------------------------------------------------------
- --------
Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A, 12/1/11(5) 500,000
402,500
----------
800,480
</TABLE>
8 Oppenheimer Strategic Income & Growth Fund
<PAGE> 9
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1)
SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------
- ----------------
<S> <C>
<C>
MANUFACTURING--0.2%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
AUTOMOTIVE--0.2%
Penda Corp., 10.75% Sr. Nts., Series B, 3/1/04 $ 150,000
$ 146,250
- ----------------------------------------------------------------------------------------------------------------
- ----------------
MEDIA--3.6%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
CABLE TELEVISION--2.1%
American Telecasting, Inc., 0%/14.50% Sr. Disc. Nts., 6/15/04(11) 100,316
75,488
- ----------------------------------------------------------------------------------------------------------------
- --------
Australis Media Ltd., Units (each unit consists of $1,000
principal amount of 0%/14% sr. sub. disc. nts., 5/15/03 and
one warrant to purchase 57.721 ordinary shares)(11)(12) 200,000
121,000
- ----------------------------------------------------------------------------------------------------------------
- --------
Bell Cablemedia PLC, 0%/11.95% Sr. Disc. Nts., 7/15/04(11) 500,000
383,750
- ----------------------------------------------------------------------------------------------------------------
- --------
Cablevision Systems Corp., 10.50% Sr. Sub. Debs., 5/15/16 250,000
255,000
- ----------------------------------------------------------------------------------------------------------------
- --------
EchoStar Communications Corp., 0%/12.875% Sr. Disc. Nts., 6/1/04(11) 200,000
158,500
- ----------------------------------------------------------------------------------------------------------------
- --------
Rogers Cablesystems Ltd., 10% Sr. Sec. Second Priority Debs., 12/1/07 300,000
301,500
- ----------------------------------------------------------------------------------------------------------------
- --------
TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 300,000
333,264
----------
1,628,502
- ----------------------------------------------------------------------------------------------------------------
- ----------------
DIVERSIFIED MEDIA--0.9%
Panamsat LP/Panamsat Capital Corp., 0%/11.375% Sr. Sub. Disc. Nts., 8/1/03(11) 750,000
682,500
- ----------------------------------------------------------------------------------------------------------------
- ----------------
ENTERTAINMENT/FILM--0.4%
Imax Corp., 7% Sr. Nts., 3/1/01(8) 320,000
313,600
- ----------------------------------------------------------------------------------------------------------------
- ----------------
PUBLISHING/PRINTING--0.2%
Bell & Howell Co. (New), 0%/11.50% Sr. Disc. Debs., Series B, 3/1/05(11) 250,000
176,250
- ----------------------------------------------------------------------------------------------------------------
- ----------------
OTHER--1.1%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
ENVIRONMENTAL--0.3%
EnviroSource, Inc., 9.75% Sr. Nts., 6/15/03 200,000
191,000
- ----------------------------------------------------------------------------------------------------------------
- ----------------
SERVICES--0.8%
Grupo Elektra SA de CV, 12.75% Sr. Nts., 5/15/01(13) 500,000
525,000
- ----------------------------------------------------------------------------------------------------------------
- --------
Protection One Alarm Monitoring, Inc., 6.75% Cv. Sr. Sub. Nts., 9/15/03 110,000
108,144
----------
633,144
- ----------------------------------------------------------------------------------------------------------------
- ----------------
RETAIL--1.1%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
SUPERMARKETS--1.1%
Grand Union Co., 12% Sr. Nts., 9/1/04 198,000
200,722
- ----------------------------------------------------------------------------------------------------------------
- --------
Kash 'N Karry Food Stores, Inc., 11.50% Sr. Nts., 2/1/03(7) 564,400
567,222
- ----------------------------------------------------------------------------------------------------------------
- --------
Penn Traffic Co., 11.50% Sr. Nts., 4/15/06 50,000
44,625
----------
812,569
- ----------------------------------------------------------------------------------------------------------------
- ----------------
TRANSPORTATION--0.6%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
AIR TRANSPORTATION--0.1%
American International Group, Inc., 11.70% Unsec. Unsub. Bonds, 12/4/01 ITL 95,000,000
71,778
- ----------------------------------------------------------------------------------------------------------------
- ----------------
RAILROADS--0.5%
Transtar Holdings LP/Transtar Capital Corp.,
0%/13.375% Sr. Disc. Nts., Series B, 12/15/03(11) 500,000
378,125
- ----------------------------------------------------------------------------------------------------------------
- ----------------
UTILITIE--5.8%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
ELECTRIC UTILITIES--2.3%
CalEnergy Co., Inc., 0%/10.25% Sr. Disc. Nts., 1/15/04(11) 450,000
460,125
- ----------------------------------------------------------------------------------------------------------------
- --------
El Paso Electric Co., 9.40% First Mtg. Bonds, Series E, 5/1/11 250,000
258,750
- ----------------------------------------------------------------------------------------------------------------
- --------
First PV Funding Corp., 10.15% Lease Obligation Bonds, Series 1986B, 1/15/16 300,000
317,250
- ----------------------------------------------------------------------------------------------------------------
- --------
New Zealand Electric Corp., 10% Debs., 10/15/01 NZD 330,000
245,092
- ----------------------------------------------------------------------------------------------------------------
- --------
Subic Power Corp.:
9.50% Sr. Sec. Nts., 12/28/08 431,034
431,573
9.50% Sr. Sec. Nts., 12/28/0813 86,206
86,315
----------
1,799,105
</TABLE>
9 Oppenheimer Strategic Income & Growth Fund
<PAGE> 10
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1)
SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------
- ----------------
<S> <C>
<C>
TELECOMMUNICATIONS--3.5%
Call-Net Enterprises, Inc., 0%/13.25% Sr. Disc. Nts., 12/1/04(11) $ 200,000
$ 156,500
- ----------------------------------------------------------------------------------------------------------------
- --------
Celcaribe SA, 0%/13.50% Sr. Sec. Nts., 3/15/04(5)(11) 350,000
282,625
- ----------------------------------------------------------------------------------------------------------------
- --------
Cellular Communications International, Inc.,
Zero Coupon Sr. Disc. Nts., 12.323%, 8/15/00(9) 600,000
382,500
- ----------------------------------------------------------------------------------------------------------------
- --------
Comunicacion Celular SA, 0%/13.125% Sr. Deferred Coupon Bonds, 11/15/03(11) 300,000
186,000
- ----------------------------------------------------------------------------------------------------------------
- --------
Hyperion Telecommunications, Inc., 0%/13% Sr. Disc. Nts., 4/15/03(11)(13) 400,000
246,000
- ----------------------------------------------------------------------------------------------------------------
- --------
IntelCom Group (USA), Inc.:
0%/12.50% Gtd. Sr. Disc. Nts., 5/1/06(11) 270,000
168,075
0%/13.50% Sr. Disc. Nts., 9/15/05(11) 100,000
67,375
- ----------------------------------------------------------------------------------------------------------------
- --------
Omnipoint Corp., 11.625% Sr. Nts., 8/15/06(13) 300,000
314,250
- ----------------------------------------------------------------------------------------------------------------
- --------
ORBCOMM Global LP/ORBCOMM Global Capital Corp., 14% Sr. Nts., 8/15/04(13) 155,000
160,037
- ----------------------------------------------------------------------------------------------------------------
- --------
PriCellular Wireless Corp., 0%/14% Sr. Sub. Disc. Nts., 11/15/01(11) 500,000
471,250
- ----------------------------------------------------------------------------------------------------------------
- --------
Teleport Communications Group, Inc., 0%/11.125% Sr. Disc. Nts., 7/1/07(11) 400,000
258,000
----------
2,692,612
----------
Total Corporate Bonds and Notes (Cost $13,013,563)
13,555,730
SHARES
================================================================================================================
================
COMMON STOCKS--41.0%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
BASIC INDUSTRY--2.3%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
CHEMICALS--2.3%
Morton International, Inc. 24,000
954,000
- ----------------------------------------------------------------------------------------------------------------
- --------
Union Carbide Corp. 18,000
821,250
----------
1,775,250
- ----------------------------------------------------------------------------------------------------------------
- ----------------
CONTAINERS--0.0%
Equitable Bag, Inc.(5)(14) 1,861
4,653
- ----------------------------------------------------------------------------------------------------------------
- ----------------
CONSUMER RELATED--6.4%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
FOOD/BEVERAGES/TOBACCO--3.4%
PepsiCo, Inc. 26,000
734,500
- ----------------------------------------------------------------------------------------------------------------
- --------
Philip Morris Cos., Inc. 11,000
987,250
- ----------------------------------------------------------------------------------------------------------------
- --------
UST, Inc. 31,000
918,375
----------
2,640,125
- ----------------------------------------------------------------------------------------------------------------
- ----------------
HEALTHCARE--1.5%
Johnson & Johnson 22,000
1,127,500
- ----------------------------------------------------------------------------------------------------------------
- ----------------
TEXTILE/APPAREL--1.5%
Russell Corp. 36,000
1,161,000
- ----------------------------------------------------------------------------------------------------------------
- ----------------
ENERGY--4.9%
Phillips Petroleum Co. 29,000
1,239,750
- ----------------------------------------------------------------------------------------------------------------
- --------
Unocal Corp. 35,000
1,260,000
- ----------------------------------------------------------------------------------------------------------------
- --------
USX-Marathon Group 57,000
1,232,625
----------
3,732,375
- ----------------------------------------------------------------------------------------------------------------
- ----------------
FINANCIAL SERVICES--14.9%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
BANKS & THRIFTS--3.2%
BankAmerica Corp. 15,000
1,231,875
- ----------------------------------------------------------------------------------------------------------------
- --------
NationsBank Corp. 14,000
1,216,250
----------
2,448,125
</TABLE>
10 Oppenheimer Strategic Income & Growth Fund
<PAGE> 11
<TABLE>
<CAPTION>
MARKET VALUE
SHARES
SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------
- ----------------
<S> <C>
<C>
DIVERSIFIED FINANCIAL--8.8%
Dean Witter, Discover & Co. 3,000
$ 165,000
- ----------------------------------------------------------------------------------------------------------------
- --------
Federal Home Loan Mortgage Corp. 13,000
1,272,375
- ----------------------------------------------------------------------------------------------------------------
- --------
Federal National Mortgage Assn. 27,000
941,625
- ----------------------------------------------------------------------------------------------------------------
- --------
Green Tree Financial Corp. 36,000
1,413,000
- ----------------------------------------------------------------------------------------------------------------
- --------
Merrill Lynch & Co., Inc. 19,000
1,246,875
- ----------------------------------------------------------------------------------------------------------------
- --------
Morgan Stanley Group, Inc. 10,000
497,500
- ----------------------------------------------------------------------------------------------------------------
- --------
Salomon, Inc. 27,000
1,231,875
----------
6,768,250
- ----------------------------------------------------------------------------------------------------------------
- ----------------
INSURANCE--2.9%
Cigna Corp. 10,000
1,198,750
- ----------------------------------------------------------------------------------------------------------------
- --------
Loews Corp. 13,000
1,005,875
----------
2,204,625
- ----------------------------------------------------------------------------------------------------------------
- ----------------
HOUSING RELATED--1.7%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
HOMEBUILDERS/REAL ESTATE--1.7%
Capstone Capital Corp. 260
5,460
- ----------------------------------------------------------------------------------------------------------------
- --------
Fleetwood Enterprises, Inc. 42,000
1,291,500
----------
1,296,960
- ----------------------------------------------------------------------------------------------------------------
- ----------------
MANUFACTURING--5.3%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
AEROSPACE/ELECTRONICS/
COMPUTERS--5.1%
Applied Materials, Inc.(14) 3,000
82,875
- ----------------------------------------------------------------------------------------------------------------
- --------
Compaq Computer Corp.(14) 18,000
1,154,250
- ----------------------------------------------------------------------------------------------------------------
- --------
Data General Corp.(14) 110,000
1,540,000
- ----------------------------------------------------------------------------------------------------------------
- --------
International Business Machines Corp. 9,000
1,120,500
----------
3,897,625
- ----------------------------------------------------------------------------------------------------------------
- ----------------
CAPITAL GOODS--0.2%
Dover Corp. 4,000
191,000
- ----------------------------------------------------------------------------------------------------------------
- ----------------
MEDIA--0.0%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
CABLE TELEVISION--0.0%
EchoStar Communications Corp., Cl. A(14) 900
24,525
- ----------------------------------------------------------------------------------------------------------------
- ----------------
TRANSPORTATION--5.4%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
AIR TRANSPORTATION--3.8%
AMR Corp.(14) 22,000
1,751,750
- ----------------------------------------------------------------------------------------------------------------
- --------
Delta Air Lines, Inc. 16,000
1,152,000
----------
2,903,750
- ----------------------------------------------------------------------------------------------------------------
- ----------------
RAILROADS--1.6%
CSX Corp. 24,000
1,212,000
- ----------------------------------------------------------------------------------------------------------------
- ----------------
UTILITIES--0.1%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
TELECOMMUNICATIONS--0.1%
Celcaribe SA(5)(14) 65,040
94,308
----------
Total Common Stocks (Cost $27,693,470)
31,482,071
================================================================================================================
================
PREFERRED STOCKS--0.7%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
California Federal Bank, 10.625% Non-Cum., Series B 500
55,125
- ----------------------------------------------------------------------------------------------------------------
- --------
First Nationwide Bank, 11.50% Non-Cum. 2,000
226,500
- ----------------------------------------------------------------------------------------------------------------
- --------
Prime Retail, Inc., $19.00 Cv., Series B 12,000
240,000
----------
Total Preferred Stocks (Cost $551,813)
521,625
</TABLE>
11 Oppenheimer Strategic Income & Growth Fund
<PAGE> 12
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES
SEE NOTE 1
================================================================================================================
================
<S> <C>
<C>
OTHER SECURITIES--0.0%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Kaiser Aluminum Corp., 8.255% Cv. Preferred Redeemable
Increased Dividend Equity Securities (Cost $25,344) 2,400
$ 27,000
<CAPTION>
<S> <C>
UNITS
================================================================================================================
================
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
American Telecasting, Inc. Wts., Exp. 6/99 2,000
9,000
- ----------------------------------------------------------------------------------------------------------------
- --------
Comunicacion Celular SA Wts., Exp. 11/03(5) 300
1,500
- ----------------------------------------------------------------------------------------------------------------
- --------
Hyperion Telecommunications, Inc. Wts., Exp. 4/01(5) 400
4,000
- ----------------------------------------------------------------------------------------------------------------
- --------
In-Flight Phone Corp. Wts., Exp. 8/02(5) 300
--
----------
Total Rights, Warrants and Certificates (Cost $0)
14,500
<CAPTION>
FACE
AMOUNT(1)
================================================================================================================
================
<S> <C>
STRUCTURED INSTRUMENTS--2.7%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Bayerische Landesbank Girozentrale, New York Branch,
7.15% Deutsche Mark Currency Protected Yield Curve CD, 7/25/97 $70,000
69,454
- ----------------------------------------------------------------------------------------------------------------
- --------
Canadian Imperial Bank of Commerce, New York Branch:
14% CD Linked Nts., 11/25/96 (indexed to the cross currency rates of
Greek Drachma and European Currency Unit) 550,000
543,070
16.75% CD Linked Nts., 4/16/97 (indexed to the Federation GKO,
Zero Coupon, 4/9/97) 100,000
99,400
17.30% CD Linked Nts., 2/26/97 (indexed to the Federation GKO,
Zero Coupon, 2/19/97) 200,000
199,200
- ----------------------------------------------------------------------------------------------------------------
- --------
Internationale Nederlanden Bank NV, Prague Branch,
Zero Coupon Promissory Nts., 10.486%, 4/28/97(9)CZK 4,600,000
160,735
- ----------------------------------------------------------------------------------------------------------------
- --------
Internationale Nederlanden (U.S.) Capital Holdings Corp.:
Czech Koruna Linked Nts., 11.60%, 12/23/96 70,000
69,165
Zero Coupon Chilean Peso Linked Nts., 11.122%, 12/11/96(9) 130,000
126,386
- ----------------------------------------------------------------------------------------------------------------
- --------
Salomon Brothers, Inc., Zero Coupon Chilean Peso Indexed
Enhanced Access Nts.:
12.145%, 12/11/96(9) 70,000
68,180
10.853%, 12/18/96(9) 70,000
67,914
- ----------------------------------------------------------------------------------------------------------------
- --------
Swiss Bank Corp., New York Branch, 6.60% CD Linked Nts.,
1/30/97 (indexed to the closing Nikkei 225 Index on 1/23/97)NZD 256,720
186,629
- ----------------------------------------------------------------------------------------------------------------
- --------
United Mexican States Linked Nts., 11/27/96 (indexed to the greater of
Cetes Option Amount or USD LIBOR Option Amount, 11/27/96) 380,000
462,808
----------
Total Structured Instruments (Cost $2,010,133)
2,052,941
<CAPTION>
DATE STRIKE CONTRACTS
================================================================================================================
================
<S> <C> <C> <C>
<C>
PUT OPTIONS PURCHASED--0.0%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Italy (Republic of) Treasury Bonds, Buoni del Tesoro
Poliennali, 9.50%, 5/1/01 Put Opt. 7/97 $ 102.30 211
1,057
- ----------------------------------------------------------------------------------------------------------------
- --------
Swiss Franc Put Opt. 10/96 1.22 CHF 885,245
23,628
----------
Total Put Options Purchased (Cost $12,370)
24,685
</TABLE>
12 Oppenheimer Strategic Income & Growth Fund
<PAGE> 13
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT(1)
SEE NOTE 1
================================================================================================================
================
<S> <C>
<C>
REPURCHASE AGREEMENT--2.7%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Repurchase agreement with PaineWebber, Inc., 5.62%, dated 9/30/96,
to be repurchased at $2,100,328 on 10/1/96, collateralized by
U.S. Treasury Bonds, 6.75%, 8/15/26, with a value of $2,067,056 and
U.S. Treasury Nts., 6.125%, 5/15/98, with a value of $77,236 (Cost $2,100,000) $2,100,000
$ 2,100,000
- ----------------------------------------------------------------------------------------------------------------
- ----------------
TOTAL INVESTMENTS, AT VALUE (COST $75,252,756) 104.6%
80,295,960
- ----------------------------------------------------------------------------------------------------------------
- ----------------
LIABILITIES IN EXCESS OF OTHER ASSETS (4.6)
(3,509,389)
----------
-----------
NET ASSETS 100.0%
$76,786,571
==========
===========
</TABLE>
1. Face amount is reported in U.S. Dollars, except for those denoted
in the following currencies:
AUD -- Australian Dollar IDR -- Indonesian Rupiah
CAD -- Canadian Dollar IEP -- Irish Punt
CHF -- Swiss Franc ITL -- Italian Lira
CZK -- Czech Koruna JPY -- Japanese Yen
DEM -- German Deutsche Mark NZD -- New Zealand Dollar
DKK -- Danish Krone PLZ -- Polish Zloty
ESP -- Spanish Peseta SEK -- Swedish Krona
GBP -- British Pound Sterling THB -- Thai Baht
2. When-issued security to be delivered and settled after
September 30, 1996.
3. 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). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future
cash flows.
4. Represents the current interest rate for a variable rate security.
5. Identifies issues considered to be illiquid--See Note 8 of
Notes to Financial Statements.
6. A sufficient amount of securities has been designated to
cover outstanding written call options, as follows:
<TABLE>
<CAPTION>
CONTRACTS/FACE EXPIRATION EXERCISE PREMIUM
MARKET VALUE
SUBJECT TO CALL DATE PRICE RECEIVED SEE
NOTE 1
- ----------------------------------------------------------------------------------------------------------------
- ------------
<S> <C> <C> <C> <C>
<C>
Call Option on Australian Dollar 461,100 10/96 1.258 AUD $ 3,074
$555
- ----------------------------------------------------------------------------------------------------------------
- ------------
Call Option on New Zealand Dollar 191,675 10/96 1.435 NZD 930
1,131
- ----------------------------------------------------------------------------------------------------------------
- ------------
Call Option on New Zealand Dollar 163,560 10/96 1.437 NZD 816
1,112
- ----------------------------------------------------------------------------------------------------------------
- ------------
Call Option on Swiss Franc 939,130 10/96 1.15 CHF 2,047
94
- ----------------------------------------------------------------------------------------------------------------
- ------------
Call Option on U.S. Treasury Nts., 6%, 2/15/26 500,000 10/96 $90.438 3,711
1,016
-------
-----
$10,578
$3,908
=======
======
</TABLE>
7. Interest or dividend is paid in kind.
8. Represents the current interest rate for an increasing rate security.
9. For zero coupon bonds, the interest rate shown is the
effective yield on the date of purchase.
10. Securities with an aggregate market value of $328,125 are
held in collateralized accounts to cover initial margin requirements on
open futures sales contracts. See Note 6 of Notes to Financial
Statements.
11. Denotes a step bond: a zero coupon bond that converts to a
fixed rate of interest at a designated future date.
12. Units may be comprised of several components, such as debt and
equity and/or warrants to purchase equity at some point in the
future. For units which represent debt securities, face amount disclosed
represents total underlying principal.
13. 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 $1,331,602 or 1.73%
of the Fund's net assets, at September 30, 1996.
14. Non-income producing security.
See accompanying Notes to Financial Statements.
13 Oppenheimer Strategic Income & Growth Fund
<PAGE> 14
STATEMENT OF ASSETS AND LIABILITIES September 30, 1996
<TABLE>
================================================================================================================
================
<S>
<C>
ASSETS
Investments, at value (cost $75,252,756)--see accompanying statement
$80,295,960
- ----------------------------------------------------------------------------------------------------------------
- --------
Cash
611,472
- ----------------------------------------------------------------------------------------------------------------
- --------
Unrealized appreciation on forward foreign currency exchange contracts--Note 5
43,919
- ----------------------------------------------------------------------------------------------------------------
- --------
Receivables:
Investments sold
1,717,088
Interest, dividends and principal paydowns
926,291
Shares of beneficial interest sold
387,169
Closed forward foreign currency exchange contracts
59,215
Daily variation on futures contracts--Note 6
6,862
- ----------------------------------------------------------------------------------------------------------------
- --------
Other
2,864
-----------
Total assets
84,050,840
================================================================================================================
================
LIABILITIES
Unrealized depreciation on forward foreign currency exchange contracts--Note 5
4,400
- ----------------------------------------------------------------------------------------------------------------
- --------
Options written, at value (premiums received $15,908)--
see accompanying statement--Note 7
5,777
- ----------------------------------------------------------------------------------------------------------------
- --------
Payables and other liabilities:
Investments purchased (including $5,119,263 purchased on a when-issued basis)--Note 1
6,610,736
Dividends
313,878
Shares of beneficial interest redeemed
115,879
Daily variation on futures contracts--Note 6
1,500
Other
212,099
-----------
Total liabilities
7,264,269
================================================================================================================
================
NET ASSETS
$76,786,571
===========
================================================================================================================
================
COMPOSITION OF
NET ASSETS
Paid-in capital
$66,681,618
- ----------------------------------------------------------------------------------------------------------------
- --------
Overdistributed net investment income
(318,871)
- ----------------------------------------------------------------------------------------------------------------
- --------
Accumulated net realized gain on investments and foreign currency transactions
5,349,088
- ----------------------------------------------------------------------------------------------------------------
- --------
Net unrealized appreciation on investments and translation of assets and
liabilities denominated in foreign currencies
5,074,736
-----------
Net assets
$76,786,571
===========
================================================================================================================
================
NET ASSET VALUE
PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets of $46,746,928
and 7,956,397 shares of beneficial interest outstanding)
$5.88
Maximum offering price per share (net asset value plus sales charge of 4.75%
of offering price)
$6.17
- ----------------------------------------------------------------------------------------------------------------
- --------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $28,933,298 and 4,932,725 shares of beneficial interest outstanding)
$5.87
- ----------------------------------------------------------------------------------------------------------------
- --------
Class C Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $1,106,345 and 188,933 shares of beneficial interest outstanding)
$5.86
See accompanying Notes to Financial Statements.
</TABLE>
14 Oppenheimer Strategic Income & Growth Fund
<PAGE> 15
STATEMENT OF OPERATIONS For the Year Ended September 30, 1996
<TABLE>
================================================================================================================
================
<S>
<C>
INVESTMENT INCOME
Interest
$4,441,077
- ----------------------------------------------------------------------------------------------------------------
- --------
Dividends (net of foreign withholding taxes of $5,550)
457,180
-----------
Total income
4,898,257
================================================================================================================
================
EXPENSES
Management fees--Note 4
513,195
- ----------------------------------------------------------------------------------------------------------------
- --------
Distribution and service plan fees--Note 4:
Class A
105,726
Class B
242,309
Class C
3,963
- ----------------------------------------------------------------------------------------------------------------
- --------
Transfer and shareholder servicing agent fees--Note 4
128,032
- ----------------------------------------------------------------------------------------------------------------
- --------
Shareholder reports
86,699
- ----------------------------------------------------------------------------------------------------------------
- --------
Custodian fees and expenses
51,822
- ----------------------------------------------------------------------------------------------------------------
- --------
Legal and auditing fees
14,158
- ----------------------------------------------------------------------------------------------------------------
- --------
Insurance expenses
3,974
- ----------------------------------------------------------------------------------------------------------------
- --------
Registration and filing fees:
Class A
837
Class B
2,469
Class C
393
- ----------------------------------------------------------------------------------------------------------------
- --------
Trustees' fees and expenses
3,002
- ----------------------------------------------------------------------------------------------------------------
- --------
Other
8,985
-----------
Total expenses
1,165,564
================================================================================================================
================
NET INVESTMENT INCOME
3,732,693
================================================================================================================
================
REALIZED AND UNREALIZED
GAIN (LOSS)
Net realized gain (loss) on:
Investments and options written (including premiums on options exercised)
8,028,979
Closing of futures contracts
(14,626)
Closing and expiration of options written
(106,455)
Foreign currency transactions
44,109
-----------
Net realized gain
7,952,007
- ----------------------------------------------------------------------------------------------------------------
- --------
Net change in unrealized appreciation or depreciation on:
Investments
(1,417,530)
Translation of assets and liabilities denominated in foreign currencies
(45,705)
-----------
Net change
(1,463,235)
-----------
Net realized and unrealized gain
6,488,772
================================================================================================================
================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$10,221,465
===========
See accompanying Notes to Financial Statements.
</TABLE>
15 Oppenheimer Strategic Income & Growth Fund
<PAGE> 16
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
1996
1995
================================================================================================================
================
<S> <C>
<C>
OPERATIONS
Net investment income $ 3,732,693
$ 3,570,349
- ----------------------------------------------------------------------------------------------------------------
- --------
Net realized gain (loss) 7,952,007
(1,642,262)
- ------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (1,463,235)
6,666,394
------------
------------
Net increase in net assets resulting from operations 10,221,465
8,594,481
================================================================================================================
================
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net investment income:
Class A (2,671,884)
(2,612,318)
Class B (1,293,779)
(977,840)
Class C (20,396)
--
================================================================================================================
================
BENEFICIAL INTEREST
TRANSACTIONS
Net increase (decrease) in net assets resulting from beneficial
interest transactions--Note 2:
Class A 1,764,170
(5,203,387)
Class B 6,853,287
2,275,946
Class C 1,071,210
--
================================================================================================================
================
NET ASSETS
Total increase 15,924,073
2,076,882
- ----------------------------------------------------------------------------------------------------------------
- --------
Beginning of period 60,862,498
58,785,616
------------
------------
End of period (including overdistributed net investment income
of $318,871 and $129,448, respectively) $ 76,786,571
$ 60,862,498
============
============
See accompanying Notes to Financial Statements.
</TABLE>
16 Oppenheimer Strategic Income & Growth Fund
<PAGE> 17
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------
YEAR ENDED SEPTEMBER 30,
1996 1995 1994 1993 1992(3)
===================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $5.36 $4.92 $5.26 $5.03 $5.00
- -----------------------------------------------------------------------------------
Income from investment operations:
Net investment income .32 .32 .21 .22 .07(4)
Net realized and unrealized
gain (loss) .54 .44 (.23) .22 .02
----- ----- ----- ----- -----
Total income (loss) from
investment operations .86 .76 (.02) .44 .09
- -----------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.34) (.32) (.21) (.20) (.06)
Dividends in excess of net
investment income -- -- (.01) -- --
Distributions from net realized gain -- -- -- (.01) --
Distributions in excess of net
realized gain -- -- (.10) -- --
----- ----- ----- ----- -----
Total dividends and distributions
to shareholders (.34) (.32) (.32) (.21) (.06)
- -----------------------------------------------------------------------------------
Net asset value, end of period $5.88 $5.36 $4.92 $5.26 $5.03
===== ===== ===== ===== =====
===================================================================================
TOTAL RETURN, AT NET ASSET VALUE(5) 16.53% 16.09% (0.23)% 8.84% 1.74%
===================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $46,747 $40,977 $42,733 $55,291 $48,3973
- -----------------------------------------------------------------------------------
Average net assets (in thousands) $43,764 $40,799 $48,360 $59,209 $30,2643
- -----------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.75% 6.37% 4.56% 4.33% 4.59%(6)
Expenses 1.43% 1.35% 1.43% 1.36% 1.46%(4)(6)
- -----------------------------------------------------------------------------------
Portfolio turnover rate(7) 147.3% 114.0% 80.0% 122.4% 25.8%
Average brokerage
commission rate(8) $0.0595 -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------- --------
PERIOD
ENDED
YEAR ENDED SEPTEMBER 30, SEPT. 30,
1996 1995 1994 1993(2) 1996(1)
====================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $5.35 $4.91 $5.26 $5.10 $5.36
- ----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .29 .28 .19 .14 .28
Net realized and unrealized
gain (loss) .53 .44 (.25) .16 .49
----- ----- ----- ----- -----
Total income (loss) from
investment operations .82 .72 (.06) .30 .77
- ----------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.30) (.28) (.18) (.13) (.27)
Dividends in excess of net
investment income -- -- (.01) -- --
Distributions from net realized gain -- -- -- (.01) --
Distributions in excess of net
realized gain -- -- (.10) -- --
----- ----- ----- ----- -----
Total dividends and distributions
to shareholders (.30) (.28) (.29) (.14) (.27)
- ----------------------------------------------------------------------------------------------------
Net asset value, end of period $5.87 $5.35 $4.91 $5.26 $5.86
===== ===== ===== ===== =====
====================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(5) 15.69% 15.26% (1.17)% 5.86% 15.18%
====================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $28,93 $19,885 $16,053 $12,386 $1,106
- ----------------------------------------------------------------------------------------------------
Average net assets (in thousands) $24,26 $17,316 $14,986 $ 7,541 $ 400
- ----------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.94% 5.61% 3.86% 3.32%(6) 4.58%(6)
Expenses 2.19% 2.10% 2.17% 2.21%(6) 2.28%(6)
- ----------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 147.3 114.0% 80.0% 122.4% 147.3%
Average brokerage
commission rate(8) $0.0595 -- -- -- $0.0595
</TABLE>
1. For the period from October 2, 1995 (inception of offering)
to September 30, 1996.
2. For the period from November 30, 1992 (inception of offering)
to September 30, 1993.
3. For the period from June 1, 1992 (commencement of operations)
to September 30, 1992.
4. Net investment income would have been $.07 per share absent
the voluntary expense reimbursement, resulting in an expense ratio of
1.74%.
5. Assumes a hypothetical initial investment on the business day
before the first day of the fiscal period (or inception of offering),
with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated
on the last business day of the fiscal period. Sales charges are not
reflected in the total returns. Total returns are not annualized for
periods of less than one full year.
6. Annualized.
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 period ended
September 30, 1996 were $106,528,444 and $95,769,996, respectively.
8. Total brokerage commissions paid on applicable purchases and
sales of portfolio securities for the period divided by the total number
of related shares purchased and sold. See accompanying Notes to
Financial Statements.
17 Oppenheimer Strategic Income & Growth Fund
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
==============================================================================
1. SIGNIFICANT
ACCOUNTING POLICIES
Oppenheimer Strategic Income & Growth Fund (the Fund) is registered
under the Investment Company Act of 1940, as amended, as a diversified,
open-end management investment company. The Fund's primary investment
objective is to seek a high level of current income and capital
appreciation. The Fund's investment adviser is OppenheimerFunds, Inc.
(the Manager). The Fund offers Class A, Class B and Class C shares.
Class A shares are sold with a front-end sales charge. Class B and
Class C shares may be subject to a contingent deferred sales charge.
All three classes of shares have identical rights to earnings, assets
and voting privileges, except that each class has its own distribution
and/or service plan, expenses directly attributable to a particular
class and exclusive voting rights with respect to matters affecting a
single class. Class B shares will automatically convert to Class A
shares six years after the date of purchase. The following is a summary
of significant accounting policies consistently followed by the Fund.
----------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at the close of
the New York Stock Exchange on each trading day. Listed and unlisted
securities for which such information is regularly reported are valued
at the last sale price of the day or, in the absence of sales, at
values based on the closing bid or the last sale price on the prior
trading day. Long-term and short-term "non-money market" debt
securities are valued by a portfolio pricing service approved by the
Board of Trustees. Such securities which cannot be valued by the
approved portfolio pricing service are valued using dealer-supplied
valuations provided the Manager is satisfied that the firm rendering
the quotes is reliable and that the quotes reflect current market
value, or are valued under consistently applied procedures established
by the Board of Trustees to determine fair value in good faith.
Short-term "money market type" debt securities having a remaining
maturity of 60 days or less are valued at cost (or last determined
market value) adjusted for amortization to maturity of any premium or
discount. Forward foreign currency exchange contracts are valued based
on the closing prices of the forward currency contract rates in the
London foreign exchange markets on a daily basis as provided by a
reliable bank or dealer. 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 is used.
----------------------------------------------------------------------
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS. Delivery and payment for
securities that have been purchased by the Fund on a forward commitment
or when-issued basis can take place a month or more after the
transaction date. During this period, such securities do not earn
interest, are subject to market fluctuation and may increase or
decrease in value prior to their delivery. The Fund maintains, in a
segregated account with its custodian, assets with a market value equal
to the amount of its purchase commitments. The purchase of securities
on a when-issued or forward commitment basis may increase the
volatility of the Fund's net asset value to the extent the Fund makes
such purchases while remaining substantially fully invested. As of
September 30, 1996, the Fund had entered into outstanding when-issued
or forward commitments of $5,119,263.
In connection with its ability to purchase securities on a
when-issued or forward commitment basis, the Fund may enter into
mortgage "dollar-rolls" in which the Fund sells securities for delivery
in the current month and simultaneously contracts with the same
counterparty to repurchase similar (same type coupon and maturity) but
not identical securities on a specified future date. The Fund records
each dollar-roll as a sale and a new purchase transaction.
----------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are
maintained in U.S. dollars. Prices of securities denominated in foreign
currencies are translated into U.S. dollars at the closing rates of
exchange. Amounts related to the purchase and sale of securities and
investment income are translated at the rates of exchange prevailing on
the respective dates of such transactions.
The effect of changes in foreign currency exchange rates on
investments is separately identified from the fluctuations arising from
changes in market values of securities held and reported with all other
foreign currency gains and losses in the Fund's Statement of
Operations.
----------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund requires the custodian to take
possession, to have legally segregated in the Federal Reserve Book
Entry System or to have segregated within the custodian's vault, all
securities held as collateral for repurchase agreements. The market
value of the underlying securities is required to be at least 102% of
the resale price at the time of purchase. If the seller of the
agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
18 Oppenheimer Strategic Income & Growth Fund
<PAGE> 19
==============================================================================
1. SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
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, Class B and Class C 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.
----------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income
(loss) and net realized gain (loss) may differ for financial statement
and tax purposes. The character of the distributions made during the
year from net investment income or net realized gains may differ from
their ultimate characterization for federal income tax purposes. Also,
due to timing of dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that the income or
realized gain (loss) was recorded by the Fund.
During the year ended September 30, 1996, the Fund
adjusted the classification of distributions to shareholders to
reflect the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, during the year ended September 30, 1996, amounts have been
reclassified to reflect a decrease in paid-in capital of $128,640, a
decrease in overdistributed net investment income of $37,503, and an
increase in accumulated net realized gain on investments of $91,137. In
addition, to properly reflect foreign currency gain in the components of
capital, $26,440 of foreign exchange gain determined according to U.S.
federal income tax rules has been reclassified from net realized gain to
net investment income.
----------------------------------------------------------------------
OTHER. Investment transactions are accounted for on the date the
investments are purchased or sold (trade date) and dividend income is
recorded on the ex-dividend date. Discount on securities purchased is
amortized over the life of the respective securities, in accordance
with federal income tax requirements. Realized gains and losses on
investments and 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. Dividends-in-kind are
recognized as income on the ex-dividend date, at the current market
value of the underlying security. Interest on payment-in-kind debt
instruments is accrued as income at the coupon rate and a market
adjustment is made on the ex-date.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of income
and expenses during the reporting period. Actual results could differ
from those estimates.
19 Oppenheimer Strategic Income & Growth Fund
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (Continued)
==============================================================================
2. SHARES OF
BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1996(1) YEAR ENDED
SEPTEMBER 30, 1995
--------------------------------
- ---------------------------
SHARES AMOUNT SHARES
AMOUNT
- ----------------------------------------------------------------------------------------------------------------
- -------
<S> <C> <C> <C>
<C>
Class A:
Sold 2,387,772 $ 13,431,087 1,075,489
$ 5,403,694
Dividends and distributions reinvested 402,412 2,264,550 452,310
2,248,812
Redeemed (2,477,164) (13,931,467) (2,567,818)
(12,855,893)
---------- ------------ -----------
------------
Net increase (decrease) 313,020 $ 1,764,170 (1,040,019)
$ (5,203,387)
========== ============ ===========
============
- ----------------------------------------------------------------------------------------------------------------
- -------
Class B:
Sold 2,134,954 $ 12,031,686 1,180,146
$ 5,932,623
Dividends and distributions reinvested 179,351 1,009,405 162,515
808,194
Redeemed (1,096,517) (6,187,804) (894,830)
(4,464,871)
---------- ------------ -----------
------------
Net increase 1,217,788 $ 6,853,287 447,831
$ 2,275,946
========== ============ ===========
============
- ----------------------------------------------------------------------------------------------------------------
- -------
Class C:
Sold 253,236 $ 1,433,118 --
$ --
Dividends and distributions reinvested 2,268 12,899 --
--
Redeemed (66,571) (374,807) --
--
---------- ------------ -----------
------------
Net increase 188,933 $ 1,071,210 --
$ --
========== ============ ===========
============
</TABLE>
1. For the year ended September 30, 1996 for Class A and Class B shares
and for the period from October 2, 1995 (inception of offering) to
September 30, 1996 for Class C shares.
==============================================================================
3. UNREALIZED GAINS AND
LOSSES ON INVESTMENTS
At September 30, 1996, net unrealized appreciation on investments and
options written of $5,053,335 was composed of gross appreciation of
$5,766,008, and gross depreciation of $712,673.
==============================================================================
4. MANAGEMENT FEES
AND OTHER TRANSACTIONS
WITH AFFILIATES
Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee of
0.75% on the first $200 million of average annual net assets, 0.72% on
the next $200 million, 0.69% on the next $200 million, 0.66% on the
next $200 million, 0.60% on the next $200 million, and 0.50% 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, 1996, commissions (sales
charges paid by investors) on sales of Class A shares totaled $277,077,
of which $91,918 was retained by OppenheimerFunds Distributor, Inc.
(OFDI), a subsidiary of the Manager, as general distributor, and by an
affiliated broker/dealer. Sales charges advanced to broker/dealers by
OFDI on sales of the Fund's Class B and Class C shares totaled $415,535
and $13,819, of which $12,807 and $208, respectively, was paid to an
affiliated broker/dealer. During the year ended September 30, 1996,
OFDI received contingent deferred sales charges of $79,826 and $929,
respectively, upon redemption of Class B and Class C shares, as
reimbursement for sales commissions advanced by OFDI at the time of
sale of such shares.
OppenheimerFunds Services (OFS), a division of the Manager, is
the transfer and shareholder servicing agent for the Fund, and for
other registered investment companies. OFS's total costs of providing
such services are allocated ratably to these companies.
The Fund has adopted a Service Plan for Class A shares to
reimburse OFDI for a portion of its costs incurred in connection with
the personal service and maintenance of accounts that hold Class A
shares. Reimbursement is made quarterly at an annual rate that may not
exceed 0.25% of the average annual net assets of Class A shares of the
Fund. OFDI uses the service fee to reimburse brokers, dealers, banks
and other financial institutions quarterly for providing personal
service and maintenance of accounts of their customers that hold Class
A shares. During the year ended September 30, 1996, OFDI paid $13,004
to an affiliated broker/dealer as reimbursement for Class A personal
service and maintenance expenses.
20 Oppenheimer Strategic Income & Growth Fund
<PAGE> 21
==============================================================================
4. MANAGEMENT FEES AND
OTHER TRANSACTIONS
WITH AFFILIATES
(CONTINUED)
The Fund has adopted a reimbursement type Distribution and Service Plan
for Class B shares to reimburse OFDI for its services and costs in
distributing Class B shares and servicing accounts. Under the Plan, the
Fund pays OFDI an annual asset-based sales charge of 0.75% per year on
Class B shares. OFDI also receives a service fee of 0.25% per year to
reimburse dealers for providing personal services for accounts that
hold Class B shares. Both fees are computed on the average annual net
assets of Class B shares, determined as of the close of each regular
business day. If the Plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based
sales charge to OFDI for certain expenses it incurred before the Plan
was terminated. During the year ended September 30, 1996, OFDI paid
$3,237 to an affiliated broker/dealer as reimbursement for Class B
personal service and maintenance expenses and retained $200,117 as
reimbursement for Class B sales commissions and service fee advances,
as well as financing costs. As of September 30, 1996, OFDI had incurred
unreimbursed expenses of $1,292,158 for Class B.
The Fund has adopted a compensation type Distribution and
Service Plan for Class C shares to compensate OFDI for its services and
costs in distributing Class C shares and servicing accounts. Under the
Plan, the Fund pays OFDI an annual asset-based sales charge of 0.75%
per year on Class C shares. OFDI also receives a service fee of 0.25%
per year to compensate dealers for providing personal services for
accounts that hold Class C shares. Both fees are computed on the
average annual net assets of Class C shares, determined as of the close
of each regular business day. If the Plan is terminated by the Fund,
the Board of Trustees may allow the Fund to continue payments of the
asset-based sales charge to OFDI for certain expenses it incurred
before the Plan was terminated. During the year ended September 30,
1996, OFDI retained $3,838 as compensation for Class C sales
commissions and service fee advances, as well as financing costs. As of
September 30, 1996, OFDI had incurred unreimbursed expenses of $35,740
for Class 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.
Securities held in segregated accounts to cover net exposure on
outstanding forward contracts are noted in the Statement of Investments
where applicable. Unrealized appreciation or depreciation on forward
contracts is reported in the Statement of Assets and Liabilities.
Realized gains and losses are reported with all other foreign currency
gains and losses in the Fund's Statement of Operations.
Risks include the potential inability of the counterparty to
meet the terms of the contract and unanticipated movements in the value
of a foreign currency relative to the U.S. dollar.
At September 30, 1996, the Fund had outstanding forward contracts to
purchase and sell foreign currencies as follows:
<TABLE>
<CAPTION>
CONTRACT
AMOUNT VALUATION AS OF UNREALIZED
UNREALIZED
CONTRACTS TO PURCHASE EXPIRATION DATE (000S) SEPT. 30, 1996 APPRECIATION
DEPRECIATION
- ----------------------------------------------------------------------------------------------------------------
- -----------
<S> <C> <C> <C> <C>
<C>
Japanese Yen (JPY) 11/5/96 29,536 JPY $ 266,144 $ 6,168
$ --
New Zealand Dollar (NZD) 11/6/96 900 NZD 626,118 --
4,395
Swedish Krona (SEK) 11/1/96 1,490 SEK 224,826 747
--
Swiss Franc (CHF) 10/21/96--11/4/96 870 CHF 695,969 30,902
--
---------- -------
-------
$1,813,057 37,817
4,395
========== -------
-------
CONTRACTS TO SELL
- ----------------------------------------------------------------------------------------------------------------
- -----------
Australian Dollar (AUD) 11/6/96 795 AUD $629,016 $ 6,102
$ 4
Danish Krone (DKK) 10/1/96 3 DKK 587 --
1
---------- -------
-------
$629,603 6,102
5
========== -------
-------
Net Unrealized Appreciation and Depreciation $43,919
$ 4,400
=======
=======
</TABLE>
21 Oppenheimer Strategic Income & Growth Fund
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (Continued)
==============================================================================
6. FUTURES CONTRACTS
The Fund may buy and sell interest rate futures contracts in order to
gain exposure to or protect against changes in interest rates. The Fund
may also buy or write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against
increases in interest rates and the resulting negative effect on the
value of fixed rate portfolio securities. The Fund may also purchase
futures contracts to gain exposure to changes in interest rates as it
may be more efficient or cost effective than actually buying fixed
income securities.
Upon entering into a futures contract, the Fund is required to
deposit either cash or securities in an amount (initial margin) equal
to a certain percentage of the contract value. Subsequent payments
(variation margin) are made or received by the Fund each day. The
variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains and losses. The
Fund recognizes a realized gain or loss when the contract is closed or
expires.
Securities held in collateralized accounts to cover initial
margin requirements on open futures contracts are noted in the
Statement of Investments. The Statement of Assets and Liabilities
reflects a receivable or payable for the daily mark to market for
variation margin.
Risks of entering into futures contracts (and related options)
include the possibility that there may be an illiquid market and that a
change in the value of the contract or option may not correlate with
changes in the value of the underlying securities.
At September 30, 1996, the Fund had outstanding futures contracts to
purchase and sell debt securities as follows:
<TABLE>
<CAPTION>
NUMBER OF UNREALIZED
EXPIRATION FUTURES VALUATION AS OF APPRECIATION
CONTRACTS TO PURCHASE DATE CONTRACTS SEPT. 30, 1996 (DEPRECIATION)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Nts. 12/96 12 $ 1,267,125 $ 10,500
------------- ----------
CONTRACTS TO SELL
-----------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds 12/96 5 $ 545,937 $ (8,781)
French Government Bonds 12/96 10 1,209,203 (17,686)
------------- ----------
1,755,140 (26,467)
------------- ----------
$ 3,022,265 $ (15,967)
============= ==========
</TABLE>
==============================================================================
7. OPTIONS ACTIVITY
The Fund may buy and sell put and call options, or write put and
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.
22 Oppenheimer Strategic Income & Growth Fund
<PAGE> 23
==============================================================================
7. OPTIONS ACTIVITY
(CONTINUED)
Securities designated to cover outstanding call options are noted in
the Statement of Investments where applicable. 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.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price 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 year ended September 30, 1996 was as
follows:
<TABLE>
<CAPTION>
CALL OPTIONS PUT OPTIONS
----------------------------
- ------------------------
NUMBER OF AMOUNT OF NUMBER OF
AMOUNT OF
OPTIONS PREMIUMS OPTIONS
PREMIUMS
- ----------------------------------------------------------------------------------------------------------------
- --------
<S> <C> <C> <C>
<C>
Options outstanding at September 30, 1995 -- $ -- --
$ --
- ----------------------------------------------------------------------------------------------------------------
- --------
Options written 5,406,361 78,714 123,388
5,330
- ----------------------------------------------------------------------------------------------------------------
- --------
Options canceled in closing transactions (943,840) (43,677) --
--
- ----------------------------------------------------------------------------------------------------------------
- --------
Options expired prior to exercise (1,717,882) (18,500) --
--
- ----------------------------------------------------------------------------------------------------------------
- --------
Options exercised (988,674) (5,959) --
--
----------- ---------- --------
--------
Options outstanding at September 30, 1996 1,755,965 $ 10,578 123,388
$ 5,330
=========== ========== ========
========
</TABLE>
==============================================================================
8. ILLIQUID AND
RESTRICTED SECURITIES
At September 30, 1996, investments in securities included issues that
are illiquid or restricted. Restricted securities are often purchased
in private placement transactions, are not registered under the
Securities Act of 1933, may have contractual restrictions on resale,
and are valued under methods approved by the Board of Trustees as
reflecting fair value. A security may be considered illiquid if it
lacks a readily-available market or if its valuation has not changed
for a certain period of time. The Fund intends to invest no more than
10% of its net assets (determined at the time of purchase and reviewed
from time to time) in illiquid or restricted securities. Certain
restricted securities, eligible for resale to qualified institutional
investors, are not subject to that limit. The aggregate value of
illiquid or restricted securities subject to this limitation at
September 30, 1996 was $2,298,088, which represents 2.99% of the Fund's
net assets. Information concerning restricted securities is as follows:
<TABLE>
<CAPTION>
VALUATION
PER UNIT AS OF
SECURITY ACQUISITION DATE COST PER UNIT
SEPT. 30, 1996
- ----------------------------------------------------------------------------------------------------------------
- ---------
<S> <C> <C>
<C>
Transpower Finance Ltd. Gtd. Unsec. Unsub. Bonds, 8%, 2/15/01 5/17/96 $66.10
$68.80
</TABLE>
<PAGE>
Appendix A
Corporate 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<PAGE>
*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 Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202-4918
<PAGE>
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
(a) Financial Statements:
(1
) Financial Highlights (see Parts A and B): Filed herewith.
(2
) Report of Independent Auditors (see Part B): Filed herewith.
(3
) Statement of Investments (see Part B) (audited): Filed
herewith.
(4
) Statement of Assets and Liabilities (see Part B): Filed
herewith.
(5
) Statement of Operations (see Part B): Filed herewith.
(6
) Statement of Changes in Net Assets (see Part B): Filed
herewith.
(7
) Notes to Financial Statements (see Part B): Filed herewith.
(b) Exhibits:
(1
) Registrant's Amended and Restated Declaration of Trust dated
October 1, 1995: Filed with Post-Effective Amendment No. 7 to
Registrant's Registration Statement, 9/28/95, and incorporated
herein by reference.
(2
) By-Laws dated 5/28/92: Filed with Registrant's Initial
Registration Statement on 4/22/92 and refiled with Registrant's
Post-Effective Amendment No. 4 pursuant to Item 102 of Regulation
S-T.
(3
) Not applicable.
(4) (i) Specimen Class A Share Certificate: Filed
herewith.
(ii) Specimen Class B Share Certificate: Filed
herewith.
(iii) Specimen Class C Share Certificate: Filed
herewith.
(5) Investment Advisory Agreement dated 5/28/92: Filed
with Post-Effective Amendment No. 1, 11/30/92, and refiled with
Registrant's Post-Effective Amendment No. 4 pursuant to Item 102 of
Regulation S-T.
(6) (i) General Distributor's Agreement dated
10/13/92: Filed with Post-Effective Amendment No. 1, 11/30/92, and
refiled with Registrant's Post-Effective Amendment No. 4 pursuant
to Item 102 of Regulation S-T.
(ii) Form of OppenheimerFunds Distributor, Inc.
Dealer Agreement: Filed with Post-Effective Amendment No. 14 of
Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850), 9/30/94,
and incorporated herein by reference.
(iii) Form of OppenheimerFunds Distributor, Inc.
Broker Agreement: Filed with Post-Effective Amendment No. 14 of
Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850), 9/30/94,
and incorporated herein by reference.
(iv) Form of OppenheimerFunds Distributor, Inc.
Agency Agreement: Filed with Post-Effective Amendment No. 14 of
Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850), 9/30/94,
and incorporated herein by reference.
(v) Broker Agreement between OppenheimerFunds,
Inc. and Newbridge Securities, Inc. dated October 1, 1986:
Previously filed with Post-Effective Amendment No. 25 to the
Registration Statement of Oppenheimer Growth Fund (Reg. No. 2-
45272), 11/1/86, and refiled with Post-Effective Amendment No. 45
of Oppenheimer Growth Fund (Reg. No. 2-45272), 8/22/94 pursuant to
Item 102 of Regulation S-T and incorporated herein by reference.
(7) Not applicable.
(8) Custodian Agreement dated 5/28/92: Filed with Post-
Effective Amendment No. 1, 11/30/92, and refiled with Registrant's
Post-Effective Amendment No. 4 pursuant to Item 102 of Regulation
S-T.
(9) Not applicable.
(10) Opinion and Consent of Counsel dated 5/11/92: Filed
with Registrant's Pre-Effective Amendment No. 1, 5/13/92, and
refiled with Registrant's Post-Effective Amendment No. 4 pursuant
to Item 102 of Regulation S-T.
(11) Independent Auditors' Consent: Filed herewith.
(12) Not applicable.
(13) Investment Letter from Oppenheimer Management
Corporation to Registrant dated 4/30/92: Filed with Registrant's
Pre-Effective Amendment No. 1, 5/13/92, and incorporated herein by
reference.
(14) (i) Form of prototype Standardized and Non-
Standardized Profit-Sharing Plans and Money Purchase Plans for
self-employed persons and corporations: Filed with Post-Effective
Amendment No. 15 to the Registration Statement of Oppenheimer
Mortgage Income Fund (Reg. No. 33-6614), 1/19/95, and incorporated
herein by reference.
(ii) Form of Individual Retirement Account Trust
Agreement: Filed with Post-Effective Amendment No. 21 of
Oppenheimer U.S. Government Trust (Reg. No. 2-76645), 8/25/93 and
incorporated herein by reference.
(iii) Form of Tax Sheltered Retirement Plan and
Custody Agreement for employees of public schools and tax-exempt
organizations: Previously filed with Post-Effective Amendment No.
47 of the Registration Statement of Oppenheimer Growth Fund (Reg.
No. 2-45272), 10/21/94, and incorporated herein by reference.
(iv) Form of Simplified Employee Pension IRA:
Previously filed with Post-Effective Amendment No. 15 to the
Registration Statement of Oppenheimer Mortgage Income Fund (Reg.
No. 33-6614), 1/19/95, and incorporated herein by reference.
(v) Form of prototype 401(k) plan: Filed with
Post-Effective Amendment No. 7 to Registrant's Registration
Statement 9/28/95, and incorporated herein by reference.
(15) (i) Service Plan and Agreement for Class A shares
under Rule 12b-1 dated 6/22/93: Filed with Post-Effective Amendment
No. 3, 1/25/94, and incorporated herein by reference.
(ii) Distribution and Service Plan and Agreement
for Class B shares under Rule 12b-1 dated 6/22/93: Filed with
Post-Effective Amendment No. 3, 1/25/94, and incorporated herein by
reference.
(iii) Distribution and Service Plan and Agreement
for Class C shares under Rule 12b-1 of the Investment Company Act
dated 8/1/95: Filed with Post-Effective Amendment No. 6, (7/28/95),
and incorporated herein by reference.
(16) Performance Data Computation Schedule: Filed
herewith.
(17) (i) Financial Data Schedule for Class A shares:
Filed herewith.
(ii) Financial Data Schedule for Class B shares:
Filed herewith.
(iii) Financial Data Schedule for Class C shares:
Filed herewith.
(18) Oppenheimer Funds Multiple Class Plan under Rule
18f-3 dated 10/24/95: Previously filed with Post-Effective
Amendment No. 12 to the Registration Statement of Oppenheimer
California Tax-Exempt Fund (Reg. No. 33-23566), 11/1/95, and
incorporated herein by reference.
-- Powers of Attorney: Filed with Post-Effective
Amendment No. 2, 11/22/93, and incorporated herein by reference.
-- Powers of Attorney for Bridget A. Macaskill:
Previously filed with Registrant's Post-Effective Amendment No. 8,
1/25/96, and incorporated herein by reference.
-- Powers of Attorney for Sam Freedman: Filed herewith.
Item 25. Persons Controlled by or Under Common Control with
Registrant
- -------- ---------------------------------------------------------
None
Item 26. Number of Holders of Securities
- -------- -------------------------------
Number of
Record Holders
Title of Class as of December 31, 1996
-------------- -----------------------
Class A Shares of Beneficial Interest
Class B Shares of Beneficial Interest
Class C Shares of Beneficial Interest
Item 27. Indemnification
- -------- ---------------
Reference is made to the provisions of Article Seventh of
Registrant's Declaration of Trust filed as Exhibit 24(b)(1) to this
Registration Statement.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of Registrant pursuant to the foregoing
provisions or otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by Registrant of expenses incurred or paid
by a trustee, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted
by such trustee, officer or controlling person, Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933
and will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
- -------- ----------------------------------------------------
(a) OppenheimerFunds, Inc. is the investment adviser of the
Registrant; it and certain subsidiaries and affiliates act in the
same capacity to other registered investment companies as described
in Parts A and B hereof and listed in Item 28(b) below.
(b) There is set forth below information as to any other
business, profession, vocation or employment of a substantial
nature in which each officer and director of OppenheimerFunds, Inc.
is, or at any time during the past two fiscal years has been,
engaged for his/her own account or in the capacity of director,
officer, employee, partner or trustee.
<TABLE>
<CAPTION>
Name & Current Position Other Business and Connections with
OppenheimerFunds, nc. During the Past Two Years
- --------------------------- ------------------------------
<S> <C>
Mark J.P. Anson,
Vice President Vice President of Oppenheimer Real Asset
Management, Inc. ("ORAMI"); formerly Vice
President of Equity Derivatives at Salomon
Brothers, Inc.
Peter M. Antos,
Senior Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; a Chartered Financial Analyst;
Senior Vice President of HarbourView; prior to
March, 1996 he was the senior equity portfolio
manager for the Panorama Series Fund, Inc. (the
"Company") and other mutual funds and pension
funds managed by G.R. Phelps & Co. Inc. ("G.R.
Phelps"), the Company's former investment
adviser, which was a subsidiary of Connecticut
Mutual Life Insurance Company; was also
responsible for managing the common stock
department and common stock investments of
Connecticut Mutual Life Insurance Co.
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; formerly a Vice President and
Senior Portfolio Manager at First of America
Investment Corp.
Ellen Batt,
Assistant Vice President None
Kathleen Beichert,
Assistant Vice President Formerly employed by Smith Barney, Inc.
David Bernard,
Vice President Previously a Regional Sales Director for
Retirement Plan Services at Charles Schwab & Co.,
Inc.
Robert J. Bishop,
Vice President Assistant Treasurer of the Oppenheimer Funds
(listed below); previously a Fund Controller for
OppenheimerFunds, Inc. (the "Manager").
George Bowen,
Senior Vice President & Treasurer Treasurer of the New York-based Oppenheimer
Funds; Vice President, Assistant Secretary and
Treasurer of the Denver-based Oppenheimer Funds.
Vice President and Treasurer of OppenheimerFunds
Distributor, Inc. (the "Distributor") and
HarbourView Asset Management Corporation
("HarbourView"), an investment adviser subsidiary
of the Manager; Senior Vice President, Treasurer,
Assistant Secretary and a director of Centennial
Asset Management Corporation ("Centennial"), an
investment adviser subsidiary of the Manager;
Vice President, Treasurer and Secretary of
Shareholder Services, Inc. ("SSI") and
Shareholder Financial Services, Inc. ("SFSI"),
transfer agent subsidiaries of the Manager;
Director, Treasurer and Chief Executive Officer
of MultiSource Services, Inc.; Vice President and
Treasurer of Oppenheimer Real Asset Management,
Inc.; President, Treasurer and Director of
Centennial Capital Corporation; Vice President
and Treasurer of Main Street Advisers.
Scott Brooks,
Assistant Vice President None.
Susan Burton,
Assistant Vice President Previously a Director of Educational Services for
H.D. Vest Investment Securities, Inc.
Michael A. Carbuto,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; Vice President of Centennial.
Ruxandra Chivu,
Assistant Vice President None.
O. Leonard Darling,
Executive Vice President Formerly Co-Director of Fixed Income for State
Street Research & Management Co.
Robert A. Densen,
Senior Vice President None.
Robert Doll, Jr.,
Executive Vice President and
Director An officer and/or portfolio manager of certain
Oppenheimer funds.
John Doney,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Secretary of the New York-based Oppenheimer Funds;
Vice President and Secretary of the Denver-based
Oppenheimer Funds; Secretary of the Oppenheimer
Quest and Oppenheimer Rochester Funds; Executive
Vice President, Director and General Counsel of
the Distributor; President and a Director of
Centennial; Chief Legal Officer and a Director of
MultiSource Services, Inc.; President and a
Director of Oppenheimer Real Asset Management,
Inc.; Executive Vice President, General Counsel
and Director of SFSI and SSI; formerly Senior
Vice President and Associate General Counsel of
the Manager and the Distributor.
George Evans,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds.
Scott Farrar,
Vice President Assistant Treasurer of the New York-based and
Denver-based Oppenheimer funds.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of OppenheimerFunds
Distributor, Inc.; Secretary of HarbourView Asset
Management Corporation, MultiSource Services,
Inc. and Centennial Asset Management Corporation;
Secretary, Vice President and Director of
Centennial Capital Corporation; Vice President
and Secretary of ORAMI.
Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division An officer, Director and/or portfolio manager of
certain Oppenheimer funds. Formerly Chairman of
the Board and Director of Rochester Fund
Distributors, Inc. ("RFD"), President and
Director of Fielding Management Company, Inc.
("FMC"), President and Director of Rochester
Capital Advisors, Inc. ("RCAI"), Managing Partner
of Rochester Capital Advisors, L.P., President
and Director of Rochester Fund Services, Inc.
("RFS"), President and Director of Rochester Tax
Managed Fund, Inc.
John Fortuna,
Vice President None.
Patricia Foster,
Vice President Formerly she held the following positions: An
officer of certain Oppenheimer funds; Secretary
and General Counsel of Rochester Capital
Advisors, L.P. and Secretary of Rochester Tax
Managed Fund, Inc.
Robert G. Galli,
Vice Chairman Trustee of the New York-based Oppenheimer Funds;
Vice President and Counsel of OAC; formerly he
held the following positions: Vice President and
a director of HarbourView and Centennial, a
director of SFSI and SSI, an officer of other
Oppenheimer Funds.
Linda Gardner,
Assistant Vice President None.
Janelle Gellermann,
Assistant Vice President None.
Jill Glazerman, None.
Assistant Vice President
Ginger Gonzalez,
Vice President, Director of
Marketing Communications Formerly 1st Vice President / Director of Graphic
and Print Communications for Shearson Lehman
Brothers.
Mildred Gottlieb,
Assistant Vice President Formerly served as a Strategy Consultant for the
Private Client Division of Merrill Lynch.
Caryn Halbrecht,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; formerly Vice President of
Fixed Income Portfolio Management at Bankers
Trust.
Barbara Hennigar,
Executive Vice President and
President and Chief Executive
Officer of OppenheimerFunds
Services, a division of the Manager President and Director of SFSI; President and
Chief Executive Officer of SSI.
Dorothy Hirshman,
Assistant Vice President None.
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Assistant Vice President None.
Jane Ingalls,
Assistant Vice President Formerly a Senior Associate with Robinson,
Lake/Sawyer Miller.
Ronald Jamison,
Vice President Formerly Vice President and Associate General
Counsel at
Prudential Securities, Inc.
Frank Jennings,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds. Formerly a Managing Director
of Global Equities at Paine Webber's Mitchell
Hutchins division.
Heidi Kagan,
Assistant Vice President None.
Thomas W. Keffer,
Vice President Formerly Senior Managing Director of Van Eck
Global.
Avram Kornberg,
Vice President Formerly a Vice President with Bankers Trust.
Paul LaRocco,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds. Formerly a Securities Analyst
for Columbus Circle Investors.
Michael Levine,
Assistant Vice President None.
Stephen F. Libera,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; a Chartered Financial Analyst;
a Vice President of HarbourView; prior to March,
1996 he was the senior bond portfolio manager for
Panorama Series Fund, Inc., other mutual funds
and pension accounts managed by G.R. Phelps; was
also responsible for managing the public fixed-
income securities department at Connecticut
Mutual Life Insurance Co.
Mitchell J. Lindauer,
Vice President None.
Loretta McCarthy,
Executive Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director President, Director and Trustee of the New York-
based and the Denver-based Oppenheimer funds;
President and a Director of OAC, HarbourView and
Oppenheimer Partnership Holdings, Inc.; Director
of ORAMI; Chairman and Director of SSI; a
Director of Oppenheimer Real Asset Management,
Inc.
Timothy Martin,
Assistant Vice President Formerly Vice President, Mortgage Trading, at
S.N. Phelps & Co., Salomon Brothers, and Kidder
Peabody.
Sally Marzouk,
Vice President None.
Lisa Migan,
Assistant Vice President, None.
Robert J. Milnamow,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds. Formerly a Portfolio Manager
with Phoenix Securities Group.
Denis R. Molleur,
Vice President None.
Kenneth Nadler,
Vice President None.
David Negri,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Robert E. Patterson,
Senior Vice President An officer and/or portfolio manager of certain
Oppenheimer funds.
John Pirie,
Assistant Vice President Formerly a Vice President with Cohane Rafferty
Securities, Inc.
Tilghman G. Pitts III,
Executive Vice President Chairman and Director of the Distributor.
Jane Putnam,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds. Formerly Senior Investment
Officer and Portfolio Manager with Chemical Bank.
Russell Read,
Vice President Vice President of ORAMI; formerly a consultant
for Prudential Insurance on behalf of the General
Motors Pension Plan.
Thomas Reedy,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds. Formerly a Securities Analyst
for the Manager.
David Robertson,
Vice President None.
Adam Rochlin,
Vice President Formerly a Product Manager for Metropolitan Life
Insurance Company.
Michael S. Rosen
Vice President; President:
Rochester Division An officer and/or portfolio manager of certain
Oppenheimer funds. Formerly Vice President of
RFS, President and Director of RFD, Vice
President and Director of FMC, Vice President and
director of RCAI, General Partner of RCA, an
officer and/or portfolio manager of certain
Oppenheimer funds.
David Rosenberg,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds.
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; formerly Vice President and
Portfolio Manager/Security Analyst for
Oppenheimer Capital Corp., an investment adviser.
Lawrence Rudnick,
Assistant Vice President Formerly Vice President of Dollar Dry Dock Bank.
James Ruff,
Executive Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Stephanie Seminara,
Vice President Formerly Vice President of Citicorp Investment
Services.
Diane Sobin,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; formerly a Vice President and
Senior Portfolio Manager for Dean Witter
InterCapital, Inc.
Richard A. Soper, None.
Assistant Vice President
Nancy Sperte,
Executive Vice President
None.
Donald W. Spiro,
Chairman Emeritus Vice Chairman and Trustee of the New York-based
Oppenheimer Funds; formerly Chairman of the
Manager and the Distributor.
Arthur Steinmetz,
Senior Vice President An officer and/or portfolio manager of certain
Oppenheimer funds.
Ralph Stellmacher,
Senior Vice President An officer and/or portfolio manager of certain
Oppenheimer funds.
John Stoma,
Senior Vice President,
Director Retirement Plans Formerly Vice President of U.S. Group Pension
Strategy and Marketing for Manulife Financial.
Michael C. Strathearn,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; a Chartered Financial Analyst;
a Vice President of HarbourView; prior to March,
1996 he was an equity portfolio manager for
Panorama Series Fund, Inc. and other mutual funds
and pension accounts managed by G.R. Phelps.
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee, Director or Managing
Partner of the Denver-based Oppenheimer Funds;
President and a Director
of Centennial; formerly President and Director of
OAMC, and Chairman of the Board of SSI.
James Tobin,
Vice President None.
Jay Tracey,
Vice President Vice President of the Manager; Vice President and
Portfolio Manager of Oppenheimer Discovery Fund,
Oppenheimer Global Emerging Growth Fund and
Oppenheimer Enterprise Fund. Formerly Managing
Director of Buckingham Capital Management.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant Treasurer Assistant Treasurer of the Distributor and SFSI.
Ashwin Vasan,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds.
Valerie Victorson,
Vice President None.
Dorothy Warmack,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds.
Jerry A. Webman,
Senior Vice President Director of New York-based tax-exempt fixed income
Oppenheimer Funds; Formerly Managing Director and Chief
Fixed Income Strategist at Prudential Mutual
Funds.
Christine Wells,
Vice President None.
Kenneth B. White,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; a Chartered Financial Analyst; Vice
President of HarbourView; prior to March, 1996 he was an
equity portfolio manager for Panorama Series Fund, Inc.
and other mutual funds and pension funds managed by G.R.
Phelps.
William L. Wilby,
Senior Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; Vice President of HarbourView.
Carol Wolf,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; Vice President of Centennial; Vice
President, Finance and Accounting and member of the
Board of Directors of the Junior League of Denver, Inc.
Robert G. Zack,
Senior Vice President and
Assistant Secretary Associate General Counsel of the Manager; Assistant
Secretary of the Oppenheimer Funds; Assistant Secretary
of SSI, SFSI; an officer of other Oppenheimer Funds.
Arthur J. Zimmer,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; Vice President of Centennial.
</TABLE>
The Oppenheimer Funds include the New York-based Oppenheimer Funds, the
Denver-based Oppenheimer Funds, and the Rochester-based Oppenheimer Funds,
set forth below:
New York-based Oppenheimer Funds
- --------------------------------
Oppenheimer Asset Allocation Fund
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer International Growth Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust
Oppenheimer New York Municipal Fund
Oppenheimer Fund
Oppenheimer Series Fund, Inc.
Oppenheimer Municipal Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
Denver-based Oppenheimer Funds
- ------------------------------
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Daily Cash Accumulation Fund, Inc.
Oppenheimer Bond Fund for Growth
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Municipal Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
Quest/Rochester Funds
- ---------------------------------
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest for Value Funds
Bond Fund Series - Oppenheimer Bond Fund For Growth
Rochester Fund Municipals
Rochester Portfolio Series - Limited Term
New York Municipal Fund
The address of OppenheimerFunds, Inc., the New York-based Oppenheimer
Funds, Quest funds, OppenheimerFunds Distributor, Inc., HarbourView Asset
Management Corp., Oppenheimer Partnership Holdings, Inc., and Oppenheimer
Acquisition Corp. is Two World Trade Center, New York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder Financial
Services, Inc., Shareholder Services, Inc., OppenheimerFunds Services,
Centennial Asset Management Corporation, Centennial Capital Corp. and
Oppenheimer Real Asset Management, Inc. is 6803 South Tucson Way, Englewood,
Colorado 80012.
The address of MultiSource Services, Inc. is 1700 Lincoln Street,
Denver, Colorado 80203.
The address of is Bond Fund Series - Oppenheimer Bond Fund For Growth,
Rochester Fund Municipals and Rochester Portfolio Series - Limited Term New
York Municipal Fund 350 Linden Oaks, Rochester, New York 14625-2807.
Item 29. Principal Underwriter
- -------- ---------------------
(a) OppenheimerFunds Distributor, Inc. is the Distributor of
Registrant's shares. It is also the Distributor of each of the other
registered open-end investment companies for which OppenheimerFunds, Inc. is
the investment adviser, as described in Part A and B of this Registration
Statement and listed in Item 28(b) above.
(b) The directors and officers of the Registrant's principal
underwriter are:
<TABLE>
<CAPTION>
Positions and
Name & Principal Positions & Offices Offices with
Business Address with Underwriter Registrant
- ---------------- ------------------- -------------
<S> <C> <C>
George Clarence Bowen+ Vice President & Treasurer Vice President and Treasurer of the
NY-based Oppenheimer funds / Vice
President, Secretary and Treasurer
of the Denver-based Oppenheimer
funds
Julie Bowers Vice President None
21 Dreamwold Road
Scituate, MA 02066
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Maryann Bruce* Senior Vice President - None
Director - Financial
Institution Div.
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce DeLeon Ave.
Decatur, GA 30030
Bill Coughlin Vice President None
3425 1/2 Irving Avenue So.
Minneapolis, MN 55408
Mary Crooks+ Senior Vice President None
E. Drew Devereaux ++ Assistant Vice President None
Andrew John Donohue* Executive Vice Secretary of
President, General the New York-
Counsel and Director based Oppenheimer
funds / Vice
President of the
Denver-based
Oppenheimer funds
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
41 Craig Place
Cranford, NJ 07016
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
Katherine P. Feld* Vice President & Secretary None
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding++ Vice President; Chairman:
Rochester Division None
Reed F. Finley Vice President - None
320 E. Maple, Ste. 254 Financial Institution Div.
Birmingham, MI 48009
Wendy Fishler* Vice President - None
Financial Institution Div.
Ronald R. Foster Senior Vice President None
139 Avant Lane
Cincinatti, OH 45249
Patricia Gadecki Vice President None
3906 Americana Drive
Tampa, FL 3334
Luiggino Galletto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Mark Giles Vice President - None
5506 Bryn Mawr Financial Institution Div.
Dallas, TX 75209
Ralph Grant* Vice President/National None
Sales Manager - Financial
Institution Div.
Sharon Hamilton Vice President None
720 N. Juanita Ave. - #1
Redondo Beach, CA 90277
Mark D. Johnson Vice President None
7512 Cromwell Dr. Apt 1
Clayton, MO 63105
Michael Keogh* Vice President None
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Ilene Kutno* Vice President - None
Director - Regional Sales
Wayne A. LeBlang Senior Vice President - None
23 Fox Trail Director Eastern Div.
Lincolnshire, IL 60069
Dawn Lind Vice President - None
7 Maize Court Financial Institution Div.
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
John McDonough Vice President None
P.O. Box 760
50 Riverview Road
New Castle, NH 03854
Laura Mulhall* Senior Vice President - None
Director of Key Accounts
Timothy G. Mulligan ++ Vice President None
Charles Murray Vice President None
50 Deerwood Drive
Littleton, CO 80127
Wendy Murray Vice President None
114-B Larchmont Acres West
Larchmont, NY 10538
Joseph Norton Vice President None
2518 Fillmore Street
Apt. 1
San Francisco, CA 94115
Patrick Palmer Vice President None
958 Blue Mountain Cr.
West Lake Village, CA 91362
Randall Payne Vice President - None
1307 Wandering Way Dr. Financial Institution Div.
Charlotte, NC 28226
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
22 Fall Meadow Dr.
Pittsford, NY 14534
Bill Presutti Vice President None
1777 Larimer St. #807
Denver, CO 80202
Tilghman G. Pitts, III* Chairman & Director None
Elaine Puleo* Vice President - None
Financial Institution Div.,
Director -
Key Accounts
Minnie Ra Vice President - None
0895 Thirty-First Ave. Financial Institution Div.
Apt. 4
San Francisco, CA 94121
Michael Raso Vice President None
30 Hommocks Road
Apt. 30
Larchmont, NY 10538
John C. Reinhardt ++ Vice President None
Ian Robertson Vice President None
4204 Summit Way
Marietta, GA 30066
Michael S. Rosen++ Vice President, President:
Rochester Division None
Kenneth Rosenson Vice President None
3802 Knickerbocker Place
Apt. 3D
Indianapolis, IN 46240
James Ruff* President None
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Wasington, DC 20007
Michael Sciortino Vice President None
3114 Hickory Run
Sugarland, TX 77479
Robert Shore Vice President - None
26 Baroness Lane Financial Institution Div.
Laguna Niguel, CA 92677
Peggy Spilker ++ Vice President None
Michael Stenger Vice President None
8572 Saint Ives Place
Cincinnati, OH 45255
George Sweeney Vice President None
1855 O'Hara Lane
Middletown, PA 17057
Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214
David G. Thomas Vice President - None
111 South Joliet Circle Financial Institution Div.
#304
Aurora, CO 80112
Philip Trimble Vice President None
2213 West Homer
Chicago, IL 60647
Gary Paul Tyc+ Assistant Treasurer None
Mark Stephen Vandehey+ Vice President None
</TABLE>
* Two World Trade Center, New York, NY 10048-0203
+ 6803 South Tucson Way, Englewood, CO 80012
++ 350 Linden Oaks, Rochester, NY 14625-2807 (the "Rochester
Division")
(c) Registrant undertakes to call a meeting of shareholders
for the purpose of voting upon the question of the removal of a
Trustee or Trustees when requested in writing to do so by the
holders of at least 10% of the Registrant's outstanding shares and
in connection with such meeting to comply with the provisions of
section 16(c) of the Investment Company Act of 1940 relating to
shareholder communications.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or
the Investment Company Act of 1940, the Registrant certifies that
it meets all the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the Securities
Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Denver and State of Colorado on the 15th day of
January, 1997.
OPPENHEIMER STRATEGIC INCOME
& GROWTH FUND
By: /s/ James C. Swain
----------------------------
James C. Swain
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities on the dates indicated:
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
/s/ James C. Swain* Chairman of the January 15, 1997
- ---------------------- Board of Trustees
James C. Swain
/s/ Jon S. Fossel* Trustee January 15, 1997
- ----------------------
Jon S. Fossel
/s/ George C. Bowen* Chief Financial January 15, 1997
- ---------------------- and Accounting
George C. Bowen Officer
/s/ Robert G. Avis* Trustee January 15, 1997
- ----------------------
Robert G. Avis
/s/ William A. Baker* Trustee January 15, 1997
- ----------------------
William A. Baker
/s/ Charles Conrad Jr.* Trustee January 15, 1997
- ----------------------
Charles Conrad, Jr.
/s/ Sam Freedman Trustee January 15, 1997
- ----------------------
Sam Freedman
/s/ Raymond J. Kalinowski* Trustee January 15, 1997
- -------------------------
Raymond J. Kalinowski
/s/ Howard Kast* Trustee January 15, 1997
- ------------------------
C. Howard Kast
/s/ Robert M. Kirchner* Trustee January 15, 1997
- ------------------------
Robert M. Kirchner
/s/ Bridget A. Macaskill President & Trustee January 15, 1997
- ------------------------
Bridget A. Macaskill
/s/ Ned M. Steel* Trustee January 15, 1997
- ------------------------
Ned M. Steel
*By: /s/ Robert G. Zack
- --------------------------------
Robert G. Zack, Attorney-in-Fact
</TABLE>
<PAGE>
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
EXHIBIT INDEX
Form N-1A
Item No. Description
- --------- -----------
24(b)(4)(i) Specimen Class A Share Certificate
24(b)(4)(ii) Specimen Class B Share Certificate
24(b)(4)(iii) Specimen Class C Share Certificate
24(b)(11) Independent Auditors' Consent
24(b)(16) Performance Data Computation Schedule
24(b)(17)(i) Financial Data Schedule for Class A shares
24(b)(17)(ii) Financial Data Schedule for Class B Shares
24(b)(17)(iii) Financial Data Schedule for Class C Shares
-- Powers of Attorney for Sam Freedman
Exhibit 24(b)(4)(i)
-------------------
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
Class A Share Certificate (8-1/2" x 12-5/8")
I. FRONT OF CERTIFICATE (All text and other matter lies within
7-1/4" x 11-1/4" decorative border)
(upper left) box with heading: NUMBER (OF SHARES)
(upper right) box with heading: SHARES
(centered
below boxes) OPPENHEIMER STRATEGIC INCOME & GROWTH
FUND
A MASSACHUSETTS BUSINESS TRUST
(at left) THIS IS TO CERTIFY (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
box with CUSIP number
683954 101
(at left) is the owner of
(centered) FULLY PAID CLASS A SHARES OF
BENEFICIAL INTEREST OF
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
------------------------
(hereinafter called the "Fund") transferable only
on the books of the Fund by the holder hereof in
person or by duly authorized attorney, upon
surrender of this certificate properly endorsed.
This certificate and the shares represented hereby
are issued and shall be held subject to all of the
provisions of the Declaration of Trust of the Fund
to all of which the holder by acceptance hereof
assents. This certificate is not valid until
countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the
signatures of its duly authorized officers.
/s/ George C. Bowen /s/ Bridget A. Macaskill
------------------- ------------------------
TREASURER PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
SEAL
1992
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
(A division of OppenheimerFunds,
Inc.)
Englewood (Colo.) Transfer Agent
By___________________________
Authorized Signature
(at lower left corner, outside
ornamental border)
000-000000 [certificate number]
II. BACK OF CERTIFICATE (text reads from top to bottom of 12-5/8"
dimension)
The following abbreviations when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or
regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - ----------------- Custodian ---------
(Cust) (Minor)
UNDER UGMA/UTMA --------------------
(State)
Additional abbreviations may also be used though not on above list.
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
For Value Received ................ hereby sell(s), assign(s) and
transfer(s) unto
- -------------------------------------------------------------------
(Please print or type name and address of assignee)
- -----------------------------------------------------
- ---------------------------------------------- Class A Shares of
beneficial interest represented by the within certificate, and do
hereby irrevocably constitute and appoint -------------------------
- ---- Attorney to transfer the said shares on the books of the
within named Fund with full power of substitution in the premises.
Dated: -----------------------
Signed: -----------------------------
-------------------------------------
(Both must sign if joint owners)
Signature(s) ------------------------
Guaranteed Firm or Bank
By: --------------------------
Officer
(text printed NOTICE: The signature(s) to this
vertically to right assignment must correspond with the
of above paragraph) name(s) as written upon the face of the
certificate in every particular without
alteration or enlargement or any
change whatever.
(text printed in Signatures must be guaranteed by a
box to left of financial institution of the type
signature(s)) described in the current
prospectus of the Fund.
- -------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
EDGAR\275CertA
Exhibit 24(b)(4)(ii)
-------------------
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
Class B Share Certificate (8-1/2" x 12-5/8")
I. FRONT OF CERTIFICATE (All text and other matter lies within
7-1/4" x 11-1/4" decorative border)
(upper left) box with heading: NUMBER (OF SHARES)
(upper right) box with heading: SHARES
(centered
below boxes) OPPENHEIMER STRATEGIC INCOME & GROWTH
FUND
A MASSACHUSETTS BUSINESS TRUST
(at left) THIS IS TO CERTIFY (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
box with CUSIP number
683954 200
(at left) is the owner of
(centered) FULLY PAID CLASS B SHARES OF
BENEFICIAL INTEREST OF
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
------------------------
(hereinafter called the "Fund") transferable only
on the books of the Fund by the holder hereof in
person or by duly authorized attorney, upon
surrender of this certificate properly endorsed.
This certificate and the shares represented hereby
are issued and shall be held subject to all of the
provisions of the Declaration of Trust of the Fund
to all of which the holder by acceptance hereof
assents. This certificate is not valid until
countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the
signatures of its duly authorized officers.
/s/ George C. Bowen /s/ Bridget A. Macaskill
------------------- ------------------------
TREASURER PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
SEAL
1992
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
(A division of OppenheimerFunds,
Inc.)
Englewood (Colo.) Transfer Agent
By___________________________
Authorized Signature
(at lower left corner, outside
ornamental border)
000-000000 [certificate number]
II. BACK OF CERTIFICATE (text reads from top to bottom of 12-5/8"
dimension)
The following abbreviations when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or
regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - ----------------- Custodian ---------
(Cust) (Minor)
UNDER UGMA/UTMA --------------------
(State)
Additional abbreviations may also be used though not on above list.
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
For Value Received ................ hereby sell(s), assign(s) and
transfer(s) unto
- -------------------------------------------------------------------
(Please print or type name and address of assignee)
- -----------------------------------------------------
- ---------------------------------------------- Class B Shares of
beneficial interest represented by the within certificate, and do
hereby irrevocably constitute and appoint -------------------------
- ---- Attorney to transfer the said shares on the books of the
within named Fund with full power of substitution in the premises.
Dated: -----------------------
Signed: -----------------------------
-------------------------------------
(Both must sign if joint owners)
Signature(s) ------------------------
Guaranteed Firm or Bank
By: --------------------------
Officer
(text printed NOTICE: The signature(s) to this
vertically to right assignment must correspond with the
of above paragraph) name(s) as written upon the face of the
certificate in every particular without
alteration or enlargement or any
change whatever.
(text printed in Signatures must be guaranteed by a
box to left of financial institution of the type
signature(s)) described in the current prospectus of the
Fund.
- -------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
EDGAR\275CertB
Exhibit 24(b)(4)(iii)
-------------------
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
Class C Share Certificate (8-1/2" x 12-5/8")
I. FRONT OF CERTIFICATE (All text and other matter lies within
7-1/4" x 11-1/4" decorative border)
(upper left) box with heading: NUMBER (OF SHARES)
(upper right) box with heading: SHARES
(centered
below boxes) OPPENHEIMER STRATEGIC INCOME & GROWTH
FUND
A MASSACHUSETTS BUSINESS TRUST
(at left) THIS IS TO CERTIFY (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
box with CUSIP number
683954 200
(at left) is the owner of
(centered) FULLY PAID CLASS C SHARES OF
BENEFICIAL INTEREST OF
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
------------------------
(hereinafter called the "Fund") transferable only
on the books of the Fund by the holder hereof in
person or by duly authorized attorney, upon
surrender of this certificate properly endorsed.
This certificate and the shares represented hereby
are issued and shall be held subject to all of the
provisions of the Declaration of Trust of the Fund
to all of which the holder by acceptance hereof
assents. This certificate is not valid until
countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the
signatures of its duly authorized officers.
/s/ George C. Bowen /s/ Bridget A. Macaskill
------------------- ------------------------
TREASURER PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER STRATEGIC INCOME & GROWTH FUND
SEAL
1992
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
(A division of OppenheimerFunds,
Inc.)
Englewood (Colo.) Transfer Agent
By___________________________
Authorized Signature
(at lower left corner, outside
ornamental border)
000-000000 [certificate number]
II. BACK OF CERTIFICATE (text reads from top to bottom of 12-5/8"
dimension)
The following abbreviations when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or
regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - ----------------- Custodian ---------
(Cust) (Minor)
UNDER UGMA/UTMA --------------------
(State)
Additional abbreviations may also be used though not on above list.
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
For Value Received ................ hereby sell(s), assign(s) and
transfer(s) unto
- -------------------------------------------------------------------
(Please print or type name and address of assignee)
- -----------------------------------------------------
- ---------------------------------------------- Class C Shares of
beneficial interest represented by the within certificate, and do
hereby irrevocably constitute and appoint -------------------------
- ---- Attorney to transfer the said shares on the books of the
within named Fund with full power of substitution in the premises.
Dated: -----------------------
Signed: -----------------------------
-------------------------------------
(Both must sign if joint owners)
Signature(s) ------------------------
Guaranteed Firm or Bank
By: --------------------------
Officer
(text printed NOTICE: The signature(s) to this
vertically to right assignment must correspond with the
of above paragraph) name(s) as written upon the face of the
certificate in every particular without
alteration or enlargement or any
change whatever.
(text printed in Signatures must be guaranteed by a
box to left of financial institution of the type
signature(s)) described in the current prospectus of the
Fund.
- -------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
EDGAR\275CertC
INDEPENDENT AUDITORS' CONSENT
Oppenheimer Strategic Income & Growth Fund:
We hereby consent to the use in this Post-Effective Amendment No.
10 to Registration Statement No. 33-47378 of our report dated
October 21, 1996 appearing in the Statement of Additional
Information, which is part of such Registration Statement and to
the reference to us under the caption "Financial Highlights"
appearing in the Prospectus, which is also a part of such
Registration Statement.
/s/ Deloitte & Touche LLP
- -------------------------------
DELOITTE & TOUCHE LLP
Denver, Colorado
January 9, 1997
Oppenheimer Stategic Income & Growth Fund
Exhibit 24(b)(16) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are calculated as
described below, on the basis of the Fund's distributions, for the past 10
years which are as follows:
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares
07/17/92 0.0243079 0.0000000 5.000
09/01/92 0.0162176 0.0000000 5.070
10/06/92 0.0201845 0.0000000 4.970
11/03/92 0.0136808 0.0000000 5.010
12/08/92 0.0190534 0.0000000 5.190
12/31/92 0.0087499 0.0053675 5.150
01/05/93 0.0030690 0.0000000 5.120
02/02/93 0.0163632 0.0000000 5.160
03/02/93 0.0155474 0.0000000 5.180
04/06/93 0.0195685 0.0000000 5.110
05/04/93 0.0155848 0.0000000 5.180
06/08/93 0.0191975 0.0000000 5.160
07/06/93 0.0164500 0.0000000 5.220
08/03/93 0.0165928 0.0000000 5.200
09/07/93 0.0207515 0.0000000 5.230
10/05/93 0.0163996 0.0000000 5.300
11/02/93 0.0160692 0.0000000 5.300
12/07/93 0.0212100 0.0000000 5.340
12/31/93 0.0146856 0.0967329 5.250
02/08/94 0.0230696 0.0000000 5.270
03/08/94 0.0164444 0.0000000 5.120
04/05/94 0.0173152 0.0000000 4.910
05/03/94 0.0167412 0.0000000 4.920
06/07/94 0.0228830 0.0000000 5.000
07/05/94 0.0200592 0.0000000 4.860
08/02/94 0.0193872 0.0000000 4.920
09/06/94 0.0255640 0.0000000 5.000
10/04/94 0.0215180 0.0000000 4.890
11/08/94 0.0273175 0.0000000 4.920
12/06/94 0.0229096 0.0000000 4.880
12/30/94 0.0215250 0.0000000 4.730
02/07/95 0.0321943 0.0000000 4.780
03/07/95 0.0249508 0.0000000 4.750
04/04/95 0.0247296 0.0000000 4.850
05/02/95 0.0246540 0.0000000 4.960
06/06/95 0.0316750 0.0000000 5.150
07/03/95 0.0263340 0.0000000 5.200
08/08/95 0.0316015 0.0000000 5.270
09/05/95 0.0259868 0.0000000 5.310
10/03/95 0.0255836 0.0000000 5.370
11/07/95 0.0315595 0.0000000 5.430
12/05/95 0.0263452 0.0000000 5.520
12/29/95 0.0248066 0.0000000 5.520
02/06/96 0.0339383 0.0000000 5.730
03/05/96 0.0263256 0.0000000 5.770
04/02/96 0.0258020 0.0000000 5.710
05/07/96 0.0331205 0.0000000 5.610
Oppenheimer Stategic Income & Growth Fund
Page 2
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares (continued)
06/04/96 0.0258664 0.0000000 5.730
07/02/96 0.0264124 0.0000000 5.740
08/06/96 0.0337435 0.0000000 5.750
09/03/96 0.0273476 0.0000000 5.690
Class B Shares
12/08/92 0.0027823 0.0000000 5.190
12/31/92 0.0053741 0.0053675 5.150
01/05/93 0.0022214 0.0000000 5.120
02/02/93 0.0116379 0.0000000 5.160
03/02/93 0.0117359 0.0000000 5.180
04/06/93 0.0153523 0.0000000 5.100
05/04/93 0.0123223 0.0000000 5.170
06/08/93 0.0152146 0.0000000 5.160
07/06/93 0.0132208 0.0000000 5.210
08/03/93 0.0132613 0.0000000 5.200
09/07/93 0.0161239 0.0000000 5.230
10/05/93 0.0127783 0.0000000 5.290
11/02/93 0.0124677 0.0000000 5.300
12/07/93 0.0168829 0.0000000 5.330
12/31/93 0.0116760 0.0967329 5.240
02/08/94 0.0230696 0.0000000 5.260
03/08/94 0.0164444 0.0000000 5.110
04/05/94 0.0173152 0.0000000 4.900
05/03/94 0.0167412 0.0000000 4.910
06/07/94 0.0228830 0.0000000 4.990
07/05/94 0.0200592 0.0000000 4.860
08/02/94 0.0193872 0.0000000 4.910
09/06/94 0.0255640 0.0000000 4.990
10/04/94 0.0203674 0.0000000 4.880
11/08/94 0.0237576 0.0000000 4.920
12/06/94 0.0200364 0.0000000 4.870
12/30/94 0.0191365 0.0000000 4.720
02/07/95 0.0283990 0.0000000 4.780
03/07/95 0.0221873 0.0000000 4.740
04/04/95 0.0219755 0.0000000 4.840
05/02/95 0.0218316 0.0000000 4.950
06/09/95 0.0280047 0.0000000 5.140
07/03/95 0.0233336 0.0000000 5.190
08/08/95 0.0277691 0.0000000 5.270
09/05/95 0.0229446 0.0000000 5.300
10/03/95 0.0224795 0.0000000 5.370
11/07/95 0.0275771 0.0000000 5.420
12/05/95 0.0231647 0.0000000 5.520
12/29/95 0.0218465 0.0000000 5.510
02/06/96 0.0296714 0.0000000 5.720
03/05/96 0.0229565 0.0000000 5.760
04/02/96 0.0225327 0.0000000 5.700
05/07/96 0.0290274 0.0000000 5.600
06/04/96 0.0225796 0.0000000 5.720
Oppenheimer Stategic Income & Growth Fund
Page 3
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class B Shares (continued)
07/02/96 0.0231305 0.0000000 5.730
08/06/96 0.0296535 0.0000000 5.740
09/03/96 0.0239268 0.0000000 5.690
Class C Shares
10/03/95 0.0008601 0.0000000 5.380
11/07/95 0.0285626 0.0000000 5.420
12/05/95 0.0223703 0.0000000 5.520
12/29/95 0.0215774 0.0000000 5.520
02/06/96 0.0293108 0.0000000 5.720
03/05/96 0.0221329 0.0000000 5.760
04/02/96 0.0223268 0.0000000 5.700
05/07/96 0.0287151 0.0000000 5.600
06/04/96 0.0221485 0.0000000 5.720
07/02/96 0.0223527 0.0000000 5.730
08/06/96 0.0287416 0.0000000 5.730
09/03/96 0.0234633 0.0000000 5.680
1. Average Annual Total Returns for the Periods Ended 09/30/96:
The formula for calculating average annual total return is as follows:
1 ERV n
--------------- = n (---) - 1 = average annual total return
number of years P
Where: ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period
P = hypothetical initial investment of $1,000
Class A Shares
Examples, assuming a maximum sales charge of 4.75%:
One Year Inception
$1,109.95 1 $1,424.18 .2309
(---------) - 1 = 11.00% (---------) - 1 = 8.51%
$1,000 $1,000
Oppenheimer Stategic Income & Growth Fund
Page 4
1. Average Annual Total Returns for the Periods Ended 09/30/96 (continued):
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00% for the
first year, and 2.00% for the inception year:
One Year Inception
$1,106.89 1 $1,375.35 .2609
(---------) - 1 = 10.69% (---------) - 1 = 8.67%
$1,000 $1,000
Examples at NAV:
Class A Shares
One Year Inception
$1,165.31 1 $1,495.24 .2309
(---------) - 1 = 16.53% (---------) - 1 = 9.73%
$1,000 $1,000
Class B Shares
One Year Inception
$1,156.89 1 $1,395.35 .2609
(---------) - 1 = 15.69% (---------) - 1 = 9.08%
$1,000 $1,000
2. Cumlative Total Returns for the Periods Ended 09/30/96:
The formula for calculating cumulative total return is as follows:
(ERV - P) / P = Cumulative Total Return
Class A Shares
Examples, assuming a maximum sales charge of 4.75%:
One Year Inception
$1,109.95 - $1,000 $1,424.18 - $1,000
------------------ = 11.00% ------------------ = 42.42%
$1,000 $1,000
Oppenheimer Strategic Income & Growth Fund
Page 5
2. Cumlative Total Returns for the Periods Ended 09/30/96 (continued):
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00% for the
first year, and 2.00% the inception year:
One Year Inception
$1,106.89 - $1,000 $1,375.35 - $1,000
------------------ = 10.69% ------------------ = 37.54%
$1,000 $1,000
Class C Shares
Examples, assuming a maximum contingent deferred sales charge of 0.00% for the
inception year:
Inception
$1,141.77 - $1,000
------------------ = 14.18%
$1,000
Examples at NAV:
Class A Shares
One Year Inception
$1,165.31 - $1,000 $1,495.24 - $1,000
------------------ = 16.53% ------------------ = 49.52%
$1,000 $1,000
Class B Shares
One Year Inception
$1,156.89 - $1,000 $1,395.35 - $1,000
------------------ = 15.69% ------------------ = 39.54%
$1,000 $1,000
Class C Shares
Inception
$1,151.77 - $1,000
------------------ = 15.18%
$1,000
Oppenheimer Strategic Income & Growth Fund
Page 6
3. Standardized Yield for the 30-Day Period Ended 09/30/96:
The Fund's standardized yields are calculated using the following formula
set
forth in the SEC rules:
a - b 6
Yield = 2 { (-------- + 1 ) - 1 }
cd or ce
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 Fund shares outstanding during
the 30-day period that were entitled to receive dividends.
d = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
e = The Fund's net asset value (excluding contingent deferred
sales charge) per share on the last day of the period.
Class A Shares
Example, assuming a maximum sales charge of 4.75%:
$233,993.31 - $54,991.28 6
2{(------------------------ + 1) - 1} = 4.46%
7,882,264 x $6.17
Class B Shares
Example at NAV:
$143,025.28 - $51,388.31 6
2{(------------------------ + 1) - 1} = 3.91%
4,829,875 x $5.87
Class C Shares
Example at NAV:
$ 5,045.23 - $ 1,789.92 6
2{(------------------------ + 1) - 1} = 3.93%
171,144 x $5.86
Oppenheimer Strategic Income & Growth Fund
Page 7
4. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 09/30/96:
The Fund's dividend yields are calculated using the following formula:
Dividend Yield = { (a / 30) x 365 } / b or c
The symbols above represent the following factors:
a = The accrual dividend earned during the period.
b = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
c = The Fund's net asset value (excluding sales charge) per share
on the last day of the period.
Examples:
Class A Shares
Dividend Yield
at Maximum Offering $.0289851/30 x 365
------------------ = 5.72%
$6.17
Dividend Yield
at Net Asset Value $.0289851/30 x 365
------------------ = 6.00%
$5.88
Class B Shares
Dividend Yield
at Net Asset Value $.0253577/30 x 365
------------------ = 5.26%
$5.87
Class C Shares
Dividend Yield
at Net Asset Value $.0255225/30 x 365
------------------ = 5.30%
$5.86
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 886921
<NAME> OPPENHEIMER STRATEGIC INCOME &GROWTH FUND - A
<S> <C>
<PERIOD-TYPE> 12-MOS
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<CIK> 886921
<NAME> OPPENHEIMER STRATEGIC INCOME &GROWTH FUND - B
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 886921
<NAME> OPPENHEIMER STRATEGIC INCOME &GROWTH FUND - C
<S> <C>
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<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-02-1995
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</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
constitutes and appoints Andrew J. Donohue or Robert G. Zack, and
each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in
his capacity as a trustee of OPPENHEIMER STRATEGIC INCOME & GROWTH
FUND, a Massachusetts business trust (the "Fund"), to sign on his
behalf any and all Registration Statements (including any post-
effective amendments to Registration Statements) under the
Securities Act of 1933, the Investment Company Act of 1940 and any
amendments and supplements thereto, and other documents in
connection thereunder, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-
in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully as to all intents
and purposes as she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, and each
of them, may lawfully do or cause to be done by virtue hereof.
Dated this 27th day of June, 1996.
/s/ Sam Freedman
- ----------------
Sam Freedman
PROSP\275POWER.SF
