As filed with the Securities and Exchange Commission on July 14, 2000
Registration No. 2-11052
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. 1 /X/
POST-EFFECTIVE AMENDMENT NO. / /
OPPENHEIMER TOTAL RETURN FUND, INC.
(Exact Name of Registrant as Specified in Charter)
6803 South Tucson Way, Englewood, Colorado 80112
(Address of Principal Executive Offices)
303-768-3200
(Registrant's Telephone Number)
Andrew J. Donohue, Esq.
Executive Vice President & General Counsel
OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
(212) 323-0256
(Name and Address of Agent for Service)
As soon as practicable after the Registration Statement becomes effective.
(Approximate Date of Proposed Public Offering)
Title of Securities Being Registered: for Class A, Class B and Class C shares of
the Oppenheimer Total Return Fund, Inc.
This registration statement shall hereafter become effective in accordance with
the provisions of Section 8(a) of the Securities Act of 1933.
No filing fee is due because of reliance on Section 24(f) of the Investment
Company Act of 1940.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following pages and documents:
Front Cover
Contents Page
Cross-Reference Sheet
Part A
Proxy Statement for Oppenheimer Series Fund, Inc., on behalf of its series,
Oppenheimer Disciplined Allocation Fund and Prospectus for Oppenheimer Total
Return Fund, Inc.
Part B
Statement of Additional Information
Part C
Other Information
Signatures
Exhibits
FORM N-14
OPPENHEIMER TOTAL RETURN FUND, INC.
Cross Reference Sheet
Part A of Form N-14
Item No. Proxy Statement and Prospectus Heading and/or Title of Document
- -------------------------------------------------------------------------
1. (a) Cross Reference Sheet
(b) Front Cover Page
(c) *
2. (a) *
(b) Table of Contents
3. (a) Comparative Fee Tables
(b) Synopsis
(c) Principal Risk Factors
4. (a) Synopsis; Approval of the Reorganization; Comparison between
Disciplined Allocation Fund and Total Return Fund, Inc.; Method of Carrying Out
the Reorganization; Additional Information
(b) Approval of the Reorganization - Capitalization Table
5. (a) Prospectus of Total Return Fund, Inc. (see Part B); Annual Report of
Total Return Fund, Inc. (see Part B); Statement of Additional Information
of Total Return Fund, Inc. (see Part B); Synopsis; Comparison Between
Disciplined Allocation Fund and Total Return Fund, Inc.
(b) *
(c) *
(d) *
(e) Additional Information
(f) Additional Information
6. (a) Prospectus of Disciplined Allocation Fund (see Part B); Annual Report of
Disciplined Allocation Fund (see Part B); Semi-Annual Report of Disciplined
Allocation Fund (see Part B); Statement of Additional Information of Disciplined
Allocation Fund (see Part B); Comparison Between Disciplined Allocation Fund and
Total Return Fund, Inc.
(b) Additional Information
(c) *
(d) *
7. (a) Introduction; Synopsis
(b) *
(c) Introduction; Synopsis; Comparison Between Disciplined Allocation Fund
and Total Return Fund, Inc.
8. (a) *
(b) *
9. *
Part B of Form N-14
Item No. Statement of Additional Information Heading
10. Cover Page
11. Table of Contents
12. (a) Statement of Additional Information of Total Return Fund, Inc.
(b) *
(c) *
13 (a) Statement of Additional Information of Disciplined Allocation Fund
(b) *
(c) *
14. Statement of Additional Information of Total Return Fund; Inc.,
Statement of Additional Information of Disciplined Allocation Fund;
Annual Report of Disciplined Allocation Fund at 10/31/99; Semi-Annual
Report of Disciplined Allocation Fund at 4/30/00; Annual Report of
Total Return Fund, Inc. at 12/31/99.
Part C of Form N-14
Item No. Other Information Heading
15. Indemnification
16. Exhibits
17. Undertakings
- ---------------
* Not Applicable or negative answer
205_FormN-14_00-Pre#1.doc
Oppenheimer Disciplined Allocation Fund
Proxy For Special Shareholders Meeting To Be Held August 22, 2000
The undersigned shareholder of Oppenheimer Disciplined Allocation Fund
("Disciplined Allocation Fund"), does hereby appoint Andrew J. Donohue, Robert
Bishop, Scott Farrar and Brian W. Wixted, and each of them, as attorneys-in-fact
and proxies of the undersigned, with full power of substitution, to attend the
Special Meeting of Shareholders of Disciplined Allocation Fund to be held on
August 22, 2000 at 6803 South Tucson Way, Englewood, Colorado at 10:00 A.M.,
Denver time, and all adjournments thereof, and to vote the shares held in the
name of the undersigned on the record date for said meeting on the Proposal
specified below. Said attorneys-in-fact shall vote in accordance with their best
judgment as to any other matter.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS, WHO RECOMMENDS A VOTE FOR
THE PROPOSAL BELOW. THE SHARES REPRESENTED HEREBY WILL BE VOTED AS INDICATED
BELOW OR FOR IF NO CHOICE IS INDICATED.
Please mark your proxy, date and sign it below side and return it promptly in
the accompanying envelope, which requires no postage if mailed in the United
States.
The Proposal:
To approve an Agreement and Plan of Reorganization between Oppenheimer Total
Return Fund, Inc. ("Total Return Fund"), and Oppenheimer Series Fund, Inc., on
behalf of its series Oppenheimer Disciplined Allocation Fund ("Disciplined
Allocation Fund") and the transactions contemplated thereby, including: (a) the
transfer of substantially all the assets of Disciplined Allocation Fund to Total
Return Fund in exchange for Class A, Class B and Class C shares of Total Return
Fund, (b) the distribution of such shares of Total Return Fund to the
corresponding Class A, Class B and Class C shareholders of Disciplined
Allocation Fund in complete liquidation of Disciplined Allocation Fund, and (c)
the cancellation of the outstanding shares of Disciplined Allocation Fund.
FOR______ AGAINST______ ABSTAIN_______
Dated: _________________________________, 2000
(Month) (Day)
- ---------------------------------
Signature(s)
- ---------------------------------
Signature(s)
Please read both sides of this ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR HEREON. When signing as
custodian, attorney, executor, administrator, trustee, etc., please give your
full title as such. All joint owners should sign this proxy. If the account is
registered in the name of a corporation, partnership or other entity, a duly
authorized individual must sign on its behalf and give his or her title.
Bridget A. Macaskill
President and OppenheimerFunds Logo
Chief Executive Officer Two World Trade Center, 34th Floor
New York, NY 10048-0203
800.525.7048
www.oppenheimerfunds.com
July 19, 2000
Dear Oppenheimer Disciplined Allocation Fund Shareholder,
One of the things we are proud of at OppenheimerFunds, Inc. is our
commitment to searching for new investment opportunities for shareholders of our
funds. I am writing to you today to let you know about one of those
opportunities--a positive change that has been proposed for Oppenheimer
Disciplined Allocation Fund.
After careful consideration, the Board of Directors has determined that it
would be in the best interest of shareholders of Disciplined Allocation Fund to
reorganize into another Oppenheimer fund, Oppenheimer Total Return Fund, Inc. A
shareholder meeting has been scheduled in August, and all Disciplined Allocation
Fund shareholders of record as of June 22nd are being asked to vote either in
person or by proxy on the proposed reorganization. You will find a notice of the
meeting, a ballot card, a proxy statement detailing the proposal, a Total Return
Fund prospectus and a postage-paid return envelope enclosed for your use.
Why does the Board of Directors recommend this change?
Disciplined Allocation Fund and Total Return Fund have similar objectives
and investments, as discussed in the enclosed proxy statement. We believe that
Total Return Fund's management approach allows that Fund to respond more
effectively to changing market and economic conditions, and may offer
shareholders even better investment opportunities over the long term.
Other benefits for shareholders are that Total Return Fund has lower
management fees and the consolidation of the two funds is expected to result in
greater economies of scale. By merging with Total Return Fund, former
shareholders of Disciplined Allocation Fund may benefit from a lower expense
ratio as costs are spread among a larger asset base.
Among other factors, the Board considered information with respect to the
historical performance of Disciplined Allocation Fund and Total Return Fund. For
example, for the 1-, 5-and 10-year periods ended June 30, 2000, the average
annual total returns for Total Return Fund were significantly better than for
Disciplined Allocation Fund. Although past performance is not predictive of
future results, shareholders of Disciplined Allocation Fund would have an
opportunity to become shareholders of a fund with a better long-term performance
history.
How do you vote?
No matter how large or small your investment, your vote is important, so
please review the proxy statement carefully. To cast your vote, simply mark,
sign and date the enclosed proxy ballot and return it in the postage-paid
envelope today. Remember, it can be expensive for the Fund--and ultimately for
you as a shareholder--to remail ballots if not enough responses are received to
conduct the meeting.
If you have any questions about the proposal, please feel free to contact
your financial advisor, or call us at 1.800.525.7048. As always, we appreciate
your confidence in OppenheimerFunds and look forward to serving you for many
years to come.
Sincerely,
Bridget A. Macaskill
Enclosures
XP0205.003.0700
OPPENHEIMER DISCIPLINED ALLOCATION FUND
Two World Trade Center, New York, New York 10034
1.212.323.0200
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 22, 2000
To the Shareholders of Oppenheimer Disciplined Allocation Fund:
Notice is hereby given that a Special Meeting of the Shareholders of Oppenheimer
Disciplined Allocation Fund ("Disciplined Allocation Fund"), a series of the
Oppenheimer Series Fund, Inc., a registered management investment company, will
be held at 6803 South Tucson Way, Englewood, Colorado 80112 at 10:00 A.M.,
Mountain time, on August 22, 2000, or any adjournments thereof (the "Meeting"),
for the following purposes:
1. To approve an Agreement and Plan of Reorganization between Oppenheimer Series
Fund, Inc. on behalf of its series, Disciplined Allocation Fund, and Oppenheimer
Total Return Fund, Inc. ("Total Return Fund"), and the transactions contemplated
thereby, including (a) the transfer of substantially all the assets of
Disciplined Allocation Fund to Total Return Fund in exchange for Class A, Class
B and Class C shares of the Total Return Fund, (b) the distribution of such
shares of Total Return Fund to the corresponding Class A, Class B and Class C
shareholders of Disciplined Allocation Fund in complete liquidation of
Disciplined Allocation Fund and (c) the cancellation of the outstanding shares
of Disciplined Allocation Fund (the "Proposal").
2. To act upon such other matters as may properly come before the Meeting.
Shareholders of record at the close of business on June 22, 2000 are entitled to
notice of, and to vote at, the Meeting. The Proposal is more fully discussed in
the Proxy Statement and Prospectus. Please read it carefully before telling us,
through your proxy or in person, how you wish your shares to be voted. The Board
of Directors of Disciplined Allocation Fund , a series of Oppenheimer Series
Fund, Inc., recommends a vote in favor of the Proposal. WE URGE YOU TO SIGN,
DATE AND MAIL THE ENCLOSED PROXY PROMPTLY.
By Order of the Board of Directors,
Andrew J. Donohue, Secretary
July 19, 2000
- ----------------------------------------------------------------------
Shareholders who do not expect to attend the Meeting are requested to indicate
voting instructions on the enclosed proxy and to date, sign and return it in the
accompanying postage-paid envelope. To avoid unnecessary duplicate mailings, we
ask your cooperation in promptly mailing your proxy no matter how large or small
your holdings may be.
205
Oppenheimer Disciplined Allocation Fund
a series of Oppenheimer Series Fund, Inc.
Two World Trade Center, New York, New York 10048-0203
1.212.323.0200
PROXY STATEMENT
Oppenheimer Total Return Fund, Inc.
- --------------------------------------------------------------------------------
6803 South Tucson Way, Englewood, Colorado 80112
- --------------------------------------------------------------------------------
1.800.525.7048
PROSPECTUS
This Proxy Statement of Oppenheimer Series Fund, Inc., on behalf of its series
Oppenheimer Disciplined Allocation Fund ("Disciplined Allocation Fund"),
solicits proxies from Disciplined Allocation Fund shareholders ("Shareholders")
to be voted at a special meeting of Shareholders to approve the Agreement and
Plan of Reorganization (the "Reorganization Agreement") and the transactions
contemplated thereby (the "Reorganization") between Disciplined Allocation Fund
and Oppenheimer Total Return Fund, Inc. ("Total Return Fund"). This Proxy
Statement also constitutes a Prospectus of Total Return Fund included in a
registration statement (the "Registration Statement") filed by Total Return Fund
with the Securities and Exchange Commission (the "SEC"). The Registration
Statement registers Class A, Class B and Class C shares of Total Return Fund to
be offered to Shareholders pursuant to the Reorganization Agreement in exchange
for the net assets of Disciplined Allocation Fund. Disciplined Allocation Fund
is located at Two World Trade Center, New York, New York 10048-0203 (telephone
number 1.212.323.0200).
This Proxy Statement and Prospectus sets forth information about Total Return
Fund and the Reorganization that shareholders of Disciplined Allocation Fund
should know before voting on the Reorganization. A copy of the Prospectus for
Total Return Fund, dated April 28, 2000, is enclosed and incorporated herein by
reference. The following documents have been filed with the SEC and are
available without charge upon written request to OppenheimerFunds Services
("Transfer Agent"), the transfer and shareholder servicing agent for Total
Return Fund and Disciplined Allocation Fund, at P.O. Box 5270, Denver, Colorado
80217, or by calling the toll-free number shown above: (i) a Prospectus for
Disciplined Allocation Fund, dated February 28, 2000; (ii) a Statement of
Additional Information for Disciplined Allocation Fund, dated February 28, 2000;
and (iii) a Statement of Additional Information for Total Return Fund, dated
April 28, 2000.
A Statement of Additional Information relating to the Reorganization described
in this Proxy Statement and Prospectus, dated July 19, 2000 (the "Total Return
Fund Additional Statement") has been filed with the SEC as part of the
Registration Statement and is incorporated herein by reference. It is available
by written request to the Transfer Agent at the same address listed above or by
calling the toll-free number shown above. The Total Return Fund Additional
Statement includes the following documents: (i) Annual Report as of December 31,
1999 of Total Return Fund; (ii) Annual Report as of October 31, 1999 of
Disciplined Allocation Fund; (iii) Total Return Fund Statement of Additional
Information dated April 28, 2000; (iv) the Disciplined Allocation Fund Statement
of Additional Information dated February 28, 2000; and (v) Semi-Annual Report as
of April 30, 2000 for Disciplined Allocation Fund.
If Shareholders vote to approve the Reorganization Agreement, they will receive,
as of the Valuation Date (defined in the Proxy Statement and Prospectus), Class
A shares of Total Return Fund equal in value to their investment in Class A
shares of Disciplined Allocation Fund, Class B shares of Total Return Fund equal
in value to their investment in Class B shares of Disciplined Allocation Fund,
or Class C shares of Total Return Fund equal in value to their investment in
Class C shares of Disciplined Allocation Fund. Disciplined Allocation Fund will
then be liquidated.
Investors are advised to read and retain this Proxy Statement and Prospectus for
future reference.
Mutual fund shares are not deposits or obligations of, or guaranteed or endorsed
by, any bank, and are not federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other U.S. government agency.
Mutual fund shares involve investment risks including the possible loss of
principal.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
This Proxy Statement and Prospectus is dated July 19, 2000.
-40-
TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
Page
Introduction.............................................................
General...............................................................
Record Date; Vote Required; Share Information.........................
Proxies...............................................................
Costs of the Solicitation and the Reorganization......................
Comparative Fee Tables...................................................
Synopsis.................................................................
Purpose of the Meeting................................................
Parties to the Reorganization.........................................
Shares to be Issued...................................................
The Reorganization ...................................................
Reasons for the Reorganization........................................
Tax Consequences of the Reorganization................................
Investment Objectives and Strategies; Other Fund Information .........
Investment Advisory and Distribution and Service Plan Fees............
Purchases, Exchanges and Redemptions..................................
Principal Risk Factors...................................................
Approval or Disapproval of the Reorganization (The Proposal).............
Reasons for the Reorganization........................................
The Reorganization....................................................
Tax Aspects of the Reorganization.....................................
Capitalization Table (Unaudited)......................................
Comparison Between Disciplined Allocation Fund and Total Return Fund.....
Investment Objectives and Policies....................................
Principal Investment Policies.......................................
Other Investment Strategies ........................................
Investment Restrictions...............................................
Description of Brokerage Practices....................................
Expense Ratios and Performance........................................
Shareholder Services..................................................
Rights of Shareholders................................................
Organization and History..............................................
Management and Distribution Arrangements..............................
Purchase of Additional Shares.........................................
Dividends and Distributions...........................................
Subsequent Total Return Fund Shareholder Meeting.........................
Method of Carrying Out the Reorganization ...............................
Additional Information...................................................
Financial Information.................................................
Public Information....................................................
Other Business...........................................................
Exhibit A-Agreement and Plan of Reorganization by & between Oppenheimer Series
Fund, Inc., on behalf of its series, Disciplined Allocation Fund, & Oppenheimer
Total Return
Fund, Inc...............................................................A-1
Exhibit B - Average Annual Total Returns for the Funds .................B-1
Exhibit C - Performance Graphs for Total Return Fund....................C-1
Enclosures - Prospectus of Oppenheimer Total Return Fund, Inc., April 28, 2000
Oppenheimer Disciplined Allocation Fund
a series of Oppenheimer Series Fund, Inc.
Two World Trade Center, New York, New York 10048-0203
1.212.323.0200
PROXY STATEMENT
Oppenheimer Total Return Fund, Inc.
6803 South Tucson Way, Englewood, Colorado 80112
1.800.525.7048
PROSPECTUS
Special Meeting of Shareholders to be held August 22, 2000
INTRODUCTION
General
This Proxy Statement and Prospectus is being furnished to the shareholders of
Oppenheimer Disciplined Allocation Fund ("Disciplined Allocation Fund"), a
series of Oppenheimer Series Fund, Inc., a registered management investment
company, in connection with the solicitation by its Board of Directors (the
"Board") of proxies to be voted at the Special Meeting of Shareholders of
Disciplined Allocation Fund to be held at 6803 South Tucson Way, Englewood,
Colorado 80112, at 10:00 A.M., Mountain time, on August 22, 2000, or at any
adjournments thereof (the "Meeting"). It is expected that the mailing of this
Proxy Statement and Prospectus will commence on or about July 19, 2000.
At the Meeting, shareholders of Disciplined Allocation Fund will be asked to
approve an Agreement and Plan of Reorganization (the "Reorganization Agreement")
between Oppenheimer Series Fund, Inc., on behalf of its series, Disciplined
Allocation Fund, and Oppenheimer Total Return Fund, Inc. ("Total Return Fund"),
and the transactions contemplated thereby (the "Reorganization"), including (a)
the transfer of substantially all the assets of Disciplined Allocation Fund to
Total Return Fund in exchange for Class A, Class B and Class C shares of Total
Return Fund, (b) the distribution of such shares of Total Return Fund to the
corresponding Class A, Class B and Class C shares shareholders of Disciplined
Allocation Fund in complete liquidation of Disciplined Allocation Fund and (c)
the cancellation of the outstanding shares of Disciplined Allocation Fund. A
copy of the Reorganization Agreement is attached hereto as Exhibit A and is
incorporated by reference herein.
Total Return Fund currently offers Class A, Class B, Class C and Class Y shares.
Class A shares are generally sold with a sales charge imposed at the time of
purchase. There is no initial sales charge on purchases of Class B or Class C
shares; however, a contingent deferred sales charge may be imposed, depending on
when the shares are sold. Class Y shares are sold only to certain institutional
investors without a sales charge. Because Disciplined Allocation Fund does not
offer Class Y shares, Class Y shares of Total Return Fund are not being offered
pursuant to this prospectus. The Class A, Class B and Class C shares offered in
this Prospectus and issued pursuant to the Reorganization will be issued at net
asset value without a sales charge and no contingent deferred sales charge will
be imposed on any Disciplined Allocation Fund shares exchanged in the
Reorganization. However, any contingent deferred sales charge which applies to
Disciplined Allocation Fund shares at the time of the Reorganization will
continue to apply to Total Return Fund shares received in the Reorganization.
Additional information with respect to the fees and expenses charged by Total
Return Fund is set forth herein, in the Prospectus of Total Return Fund
accompanying this Proxy Statement and Prospectus and in the Total Return Fund
Additional Statement, both of which are incorporated herein by reference.
Record Date; Vote Required; Share Information
The Board has fixed the close of business on June 22, 2000 as the record date
(the "Record Date") for the determination of shareholders entitled to notice of,
and to vote at, the Meeting. The affirmative vote of two-thirds of all the votes
entitled to be cast on the Proposal, represented in person or by proxy at the
Meeting, is required to approve the Reorganization. Each shareholder will be
entitled to one vote for each share and a fractional vote for each fractional
share held of record at the close of business on the Record Date. Only
shareholders of Disciplined Allocation Fund will vote on the Reorganization. The
vote of shareholders of Total Return Fund is not being solicited.
At the close of business on the Record Date, there were 12,693,681.324 shares of
Disciplined Allocation Fund issued and outstanding, consisting of 11,108,295.619
Class A shares, 1,307,347.710 Class B shares and 278,037.995 Class C shares. At
the close of business on the Record Date, there were 323,223,033.907 shares of
Total Return Fund issued and outstanding, with 241,355,602.774 Class A shares,
70,613,901.963 Class B shares, and 7,044,079.662 Class C shares. The presence in
person or by proxy of shareholders entitled to cast a majority of the votes at
the Meeting constitutes a quorum for the transaction of business at the Meeting.
To the knowledge of Disciplined Allocation Fund, as of the Record Date, no
person owned of record or beneficially 5% or more of its outstanding shares
except for:
Merrill Lynch, Pierce, Fenner & Smith, Inc., 4800 Deer Lake Drive East,
Jacksonville, FL 32246, which owned 19,038.303 Class C shares
(representing approximately 6.84% of the outstanding Class C shares) for
the benefit of its clients.
To the knowledge of Total Return Fund, as of the Record Date, no person owned of
record or beneficially 5% or more of its outstanding shares except for:
Mass Mutual Life Insurance Company which owned 4,147,588.23 Class Y shares
(representing 98.53% of the outstanding Class Y shares).
In addition, as of the Record Date, the Directors and officers of Oppenheimer
Series Fund, Inc. and of Total Return Fund, Inc. owned less than 1% of the
outstanding shares of the respective Funds.
Proxies
The enclosed form of proxy, if properly executed and timely returned, will be
voted (or counted as an abstention or withheld from voting) in accordance with
the choices specified thereon, and will be included in determining whether there
is a quorum to conduct the Meeting. The proxy will be voted in favor of the
Proposal unless a choice is indicated to vote against or to abstain from voting
on the Proposal.
Shares owned of record by broker-dealers for the benefit of their customers
("street account shares") will be voted by the broker-dealer based on
instructions received from its customers. If no instructions are received, and
the broker-dealer does not have discretionary power to vote such street account
shares under applicable stock exchange rules, the shares represented thereby
will be considered to be present at the Meeting for purposes of determining the
quorum, but will have the same effect as a vote "against" the Proposal. If a
shareholder executes and returns a proxy but fails to indicate how the votes
should be cast, the proxy will be voted in favor of the Proposal. The proxy may
be revoked at any time prior to the voting thereof by: (i) writing to the
Secretary of Disciplined Allocation Fund at Two World Trade Center, New York,
New York 10048-0203 (if received in time to be acted upon); (ii) attending the
Meeting and voting in person; or (iii) signing and returning a new proxy (if
returned and received in time to be voted).
Costs of the Solicitation and the Reorganization
All expenses of this solicitation, including the cost of printing and mailing
this Proxy Statement and Prospectus, will be borne by Oppenheimer Disciplined
Allocation Fund. Any documents such as existing Prospectuses or annual reports
that are included in that mailing will be a cost of the Fund issuing the
document. In addition to the solicitation of proxies by mail, proxies may be
solicited by officers of Oppenheimer Disciplined Allocation Fund or officers and
employees of OppenheimerFunds Services, personally or by telephone or other
electronic means; any expenses so incurred will be borne by OppenheimerFunds
Services. Proxies may also be solicited by a proxy solicitation firm hired at
Disciplined Allocation Fund's expense for such purpose. Brokerage houses, banks
and other fiduciaries may be requested to forward soliciting material to the
beneficial owners of shares of Disciplined Allocation Fund and to obtain
authorization for the execution of proxies. For those services, if any, they
will be reimbursed by Disciplined Allocation Fund for their reasonable
out-of-pocket expenses.
With respect to the Reorganization, Disciplined Allocation Fund and Total Return
Fund will bear the cost of their respective tax opinions. Any other
out-of-pocket expenses of Disciplined Allocation Fund and Total Return Fund
associated with the Reorganization, including legal, accounting and transfer
agent expenses, will be borne by Disciplined Allocation Fund and Total Return
Fund, respectively, in the amounts so incurred by each.
COMPARATIVE FEE TABLES
Disciplined Allocation Fund and Total Return Fund each pay a variety of expenses
directly for management of their assets, administration, distribution of their
shares and other services. Those expenses are subtracted from each fund's assets
to calculate each 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 and compare the fees and expenses related to owning
shares of Disciplined Allocation Fund with the fees and expenses related to
owning shares of Total Return Fund. The pro forma expenses of the surviving
Total Return Fund show what the fees and expenses are expected to be after
giving effect to the Reorganization.
Shareholder Fees (charges paid directly from a shareholder's investment):
Disciplined Allocation Fund Total Return Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Class B Class C Class A Class B Class C
Shares Shares Shares Shares Shares Shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Maximum Sales Charge
(Load) on Purchases
(as a % of offering 5.75% None None 5.75% None None
price)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as % of
the lower of the
original offering None (1) 5% (2) 1% (3) None (1) 5% (2) 1% (3)
price or redemption
proceeds)
- ------------------------
Note: Shareholder fees for Total Return Fund after giving effect to the
Reorganization will be the same as the shareholder fees set forth above for
Total Return Fund.
1. A contingent deferred sales charge may apply to redemptions of investments of
$1 million or more ($500,000 for retirement plan accounts) of Class A shares.
See "How to Buy Shares" in each fund's Prospectus.
2. Applies to redemptions within six years after purchase. The contingent
deferred sales charge declines to 1% in the sixth year and is eliminated
after that.
3. Applies to shares redeemed within 12 months of purchase.
Fund Operating Expenses (deducted from fund assets):
(% of average daily net assets)
All amounts shown are a percentage of net assets of each class of shares of the
Funds. Shown below are the unaudited expenses for both funds for the
twelve-month period ended March 31, 2000 and pro forma expense information (as
an estimate of operating expenses) for Total Return Fund after giving effect to
the Reorganization. Expenses may vary in future years. "Other Expenses" include
transfer agent fees, custodial expenses, and accounting and legal expenses each
Fund pays.
Class A Operating Expenses
(% of average daily net assets as of 03/31/00)
Pro Forma
Disciplined Total Return Total Return Fund
Allocation Fund Fund (Post-Reorganization)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Management Fees 0.62% 0.52% 0.52%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Distribution and/or 0.25% 0.21%* 0.25%*
Service (12b-1) Fees
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Other expenses 0.18% 0.14% 0.14%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Fund Operating 1.05% 0.87% 0.91%
Expenses
- --------------------------
* The lower 12b-1 service fee for Total Return Fund as of 12/31/99 was due to a
distinction formerly made between so-called "old" assets (assets held in the
Fund prior to 4/1/88) and "new" assets (assets held in the Fund on and after
4/1/88). Prior to 10/1/99, the Board of Directors for Total Return Fund set the
service fee for "old" assets at 0.15% on an annual basis as opposed to 0.25% on
an annual basis for "new" assets. This distinction was recently eliminated.
Therefore, it is expected that the service fee for Class A shares of Total
Return Fund will increase to 0.25% on an annual basis.
Class B Operating Expenses
(% of average daily net assets as of 03/31/00)
- --------------------------
Pro Forma
Disciplined Total Return Total Return Fund
Allocation Fund Fund (Post-Reorganization)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Management Fees 0.62% 0.52% 0.52%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Distribution and/or 1.00% 1.00% 1.00%
Service (12b-1) Fees
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Other expenses 0.18% 0.14% 0.14%
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Fund Operating 1.80% 1.66% 1.66%
Expenses
- --------------------------
Class C Operating Expenses
(% of average daily net assets as of 03/31/00)
- --------------------------
Pro Forma
Disciplined Total Return Total Return Fund
Allocation Fund Fund (Post-Reorganization)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Management Fees 0.62% 0.52% 0.52%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Distribution and/or 1.00% 1.00% 1.00%
Service (12b-1) Fees
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Other expenses 0.18% 0.14% 0.14%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Fund Operating 1.80% 1.66% 1.66%
Expenses
- --------------------------
Examples
These examples below are intended to help you compare the cost of investing in
each fund. These examples assume that you invest $10,000 in a class of shares of
Disciplined Allocation Fund, Total Return Fund or Total Return Fund after giving
effect for the Reorganization for the time periods indicated and reinvest your
dividends and distributions.
The first example assumes that you redeem all shares at the end of those
periods. The second example assumes that you keep your shares. Both examples
also assume that your investment has a 5% return each year and that the class's
operating expenses remain the same as in the table above. Your actual costs may
be higher or lower because expenses will vary over time. Based on these
assumptions, the expenses would be as follows:
12-Month Period Ending 3/31/00
Disciplined Allocation Fund
- -------------------------
If shares are redeemed: 1 year 5 years 10 years (1)
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Class A $676 $1,121 $1,784
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Class B $683 $1,175 $1,738
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Class C $283 $975 $2,116
- -------------------------
Disciplined Allocation Fund
If shares are not 1 year 5 years 10 years (1)
redeemed:
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Class A $676 $1,121 $1,784
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Class B $183 $975 $1,738
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Class C $183 $975 $2,116
- -------------------------
12-Month Period Ending 3/31/00
Total Return Fund
- -------------------------
If shares are redeemed: 1 year 5 years 10 years (1)
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Class A $659 $1,029 $1,586
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Class B $669 $1,102 $1,561
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Class C $269 $902 $1,965
- -------------------------
Total Return Fund
If shares are not 1 year 5 years 10 years (1)
redeemed:
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Class A $659 $1,029 $1,586
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Class B $169 $902 $1,561
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Class C $169 $902 $1,965
- -------------------------
Pro Forma Total Return Fund (Post-Reorganization)
If shares are redeemed: 1 year 5 years 10 years (1)
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Class A $659 $1,029 $1,586
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Class B $669 $1,102 $1,561
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Class C $269 $902 $1,965
- -------------------------
Pro Forma Total Return Fund (Post-Reorganization)
If shares are not 1 year 5 years 10 years (1)
redeemed:
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Class A $659 $1,029 $1,586
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Class B $169 $902 $1,561
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Class C $169 $902 $1,965
- -------------------------
In the examples where shares are redeemed, expenses include the initial sales
charge for Class A and the applicable Class B or Class C contingent deferred
sales charge. In the examples where shares are not redeemed, the Class A
expenses include the sales charge, but Class B and Class C expenses do not
include the contingent deferred sales charges.
1. Class B expenses for years 7 through 10 are based on Class A expenses, since
Class B shares automatically convert to Class A after 6 years.
SYNOPSIS
The following is a synopsis of certain information contained in or incorporated
by reference in this Proxy Statement and Prospectus and presents key
considerations for shareholders of Disciplined Allocation Fund to assist them in
determining whether to approve the Reorganization. This synopsis is only a
summary and is qualified in its entirety by the more detailed information
contained in or incorporated by reference in this Proxy Statement and Prospectus
and by the Reorganization Agreement which is Exhibit A attached hereto.
Shareholders should carefully review this Proxy Statement and Prospectus and the
Reorganization Agreement in their entirety and, in particular, the current
Prospectus of Total Return Fund which accompanies this Proxy Statement and
Prospectus and is incorporated herein by reference.
Purpose of the Meeting
At the Meeting, shareholders of Disciplined Allocation Fund will be asked to
approve the Reorganization.
Parties to the Reorganization
Disciplined Allocation Fund is a series of Oppenheimer Series Fund, Inc., which
was organized in 1981 as a Maryland corporation and was known as Connecticut
Mutual Investment Accounts, Inc. until March 18, 1996 when OppenheimerFunds,
Inc. (the "Manager") became Disciplined Allocation Fund's investment advisor.
Disciplined Allocation Fund is a diversified, open-end mutual fund. Disciplined
Allocation Fund is governed by Articles of Incorporation and By-Laws and is
under the direction of a Board of Directors. Disciplined Allocation Fund is
located at Two World Trade Center, New York, New York 10048-0203.
Total Return Fund also is a diversified, open-end mutual fund that was organized
in 1944 and has been a Maryland corporation since 1979. It is governed by
Articles of Incorporation and By-Laws and is under the direction of a Board of
Directors. Total Return Fund is located at 6803 South Tucson Way, Englewood,
Colorado 80112.
The Manager is located at Two World Trade Center, New York, New York 10048, and
acts as investment advisor to both funds. Alan Gilston and John Kowalik are the
portfolio managers of Disciplined Allocation Fund. Mr. Kowalik is a Vice
President of the Fund and a Senior Vice President of the Manager and Mr. Gilston
is a Vice President of the Fund and of the Manager. Bruce Bartlett and John
Doney are the portfolio managers of Total Return Fund. Mr. Bartlett is a Vice
President of the Fund and a Senior Vice President of the Manager, and Mr. Doney
is a Vice President of the Fund and of the Manager. Additional information about
the Funds and the Manager is set forth below.
Shares to be Issued
Shareholders of Disciplined Allocation Fund who own Class A, Class B or Class C
shares will receive Class A, Class B or Class C shares, respectively, of Total
Return Fund in exchange for their Disciplined Allocation Fund shares. The voting
rights of shares of each fund are discussed below in "Rights of Shareholders."
The Reorganization
The Reorganization Agreement provides for the transfer of substantially all the
assets of Disciplined Allocation Fund to Total Return Fund in exchange for Class
A, Class B or Class C shares of Total Return Fund. The aggregate net asset value
of Total Return Fund shares issued in the Reorganization will equal the value of
the assets of Disciplined Allocation Fund received by Total Return Fund. In
conjunction with the Closing (as defined below) of the Reorganization, presently
scheduled for August 25, 2000, Disciplined Allocation Fund will distribute the
Class A, Class B or Class C shares of Total Return Fund received by Disciplined
Allocation Fund on the Closing Date (as defined below) to holders of Class A,
Class B or Class C shares of Disciplined Allocation Fund, respectively. As a
result of the Reorganization, Class A, Class B or Class C Disciplined Allocation
Fund shareholders will receive the number of full and fractional Class A, Class
B or Class C Total Return Fund shares that equals in value such shareholder's
pro rata interest in the assets transferred to Total Return Fund as of the
Valuation Date (as defined below).
The Board of Disciplined Allocation Fund has determined that participation in
the transaction is in the best interests of Disciplined Allocation Fund and that
the interests of existing Disciplined Allocation Fund shareholders will not be
diluted as a result of the Reorganization. For the reasons set forth below under
"Approval or Disapproval of the Reorganization - Reasons for the
Reorganization," the Board, including the directors who are not "interested
persons" of Disciplined Allocation Fund (the "Independent Directors"), as that
term is defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act"), has concluded that the Reorganization is in the best
interests of Disciplined Allocation Fund and its shareholders and recommends
approval of the Reorganization by Disciplined Allocation Fund shareholders. The
Board of Directors of Total Return Fund has also approved the Reorganization,
finding that participation in the transaction is in the best interests of Total
Return Fund and that the interests of existing Total Return Fund shareholders
will not be diluted as a result of the Reorganization. If the Reorganization is
not approved, Disciplined Allocation Fund will continue in existence and the
Board will determine whether to pursue alternative actions.
Reasons for the Reorganization
The Manager proposed to the Board a reorganization into Total Return Fund so
that shareholders of Disciplined Allocation Fund may become shareholders of a
substantially larger fund advised by the same investment advisor with a
substantially similar investment objective and similar investment policies and
strategies. The Board also considered the fact that the surviving fund has the
potential for lower overall operating expenses. The Board also considered that
the Reorganization would be a tax-free reorganization, and there would be no
sales charge imposed in effecting the Reorganization. In addition, due to the
relatively moderate costs of the reorganization, the Boards of both funds
concluded that neither fund would experience dilution as a result of the
Reorganization.
Tax Consequences of the Reorganization
In the opinion of Deloitte & Touche LLP, tax advisor for Disciplined Allocation
Fund and Total Return Fund, the Reorganization will qualify as a tax-free
reorganization for federal income tax purposes. As a result, it is expected that
no gain or loss will be recognized by either fund, or by the shareholders of
either fund, as a result of the Reorganization for federal income tax purposes.
For further information about the tax consequences of the Reorganization, as
well as, a discussion of the possible payment of a capital gains distribution by
Total Return Fund in December, 2000 , see "Approval of the Reorganization - Tax
Aspects of the Reorganization," below.
Investment Objectives and Strategies; Other Fund Information
Investment Objectives and Strategies. Disciplined Allocation Fund and Total
Return Fund both seek total return as their investment objectives. Disciplined
Allocation Fund seeks to maximize total investment return (including capital
appreciation and income) principally by allocating its assets among stocks,
corporate bonds, U.S. government securities and money market instruments,
according to changing market conditions. Total Return Fund seeks high total
return, which includes capital appreciation and income.
In seeking their respective investment objectives, both funds invest in equity
securities to seek capital appreciation and in debt securities to seek income.
Both funds may allocate their investments among equity and debt securities to
emphasize either capital appreciation or income or in response to market
conditions, and currently invest a substantial portion of their assets in equity
securities. Although both funds may invest in securities of foreign and domestic
issuers, they currently emphasize their investments in securities of U.S.
issuers.
While Disciplined Allocation Fund normally invests at least 25% of its total
assets in fixed-income senior securities, Total Return Fund does not typically
allocate its assets based on any fixed ratio. Disciplined Allocation Fund also
may invest up to 40% of its total assets in money market instruments under
normal market conditions. The portfolio managers for Disciplined Allocation Fund
primarily use a value investment style in selecting portfolio securities whereas
the portfolio managers for Total Return Fund use both value and growth
investment styles to select portfolio securities.
Investment Advisory and Distribution and Service Plan Fees
Investment Advisory Fees. Both funds obtain investment management services from
the Manager pursuant to the terms of investment advisory agreements that are
substantially the same except for fee amounts. The management fee payable to the
Manager is computed on the net asset value of each fund as of the close of
business each day and is payable monthly.
Disciplined Allocation Fund pays a management fee at the following annual rate:
0.625% of the first $300 million of average annual net assets; 0.500% of the
next $100 million; and 0.450% of average annual net assets in excess of $400
million. Disciplined Allocation Fund's management fee for the fiscal year ended
October 31, 1999 was 0.62% of the average annual net assets for each class of
shares.
Total Return Fund pays a management fee at the following annual rate: 0.750% of
the first $100 million of average annual net assets; 0.700% of the next $100
million; 0.650% of the next $100 million; 0.600% of the next $100 million;
0.550% of the next $100 million; and 0.500% of the average annual net assets in
excess of $500 million. Total Return Fund's management fee for the fiscal year
ended December 31, 1999 was 0.52% of the average annual net assets for each
class of shares. Effective upon the Closing of the proposed Reorganization, the
management fee rate for Total Return Fund would be 0.52%.
Under the investment advisory agreement for Total Return Fund, the management
fee for the combined fund would be reduced if the assets of the combined fund
increase in the future. Under certain circumstances, it is possible that the
management fee for Disciplined Allocation Fund might be lower than that of Total
Return Fund. However, the management fee for Total Return Fund currently is
significantly lower than that of Disciplined Allocation Fund, and, as Total
Return Fund's assets have been increasing and Disciplined Allocation Fund's
assets have been decreasing, it is unlikely that Disciplined Allocation Fund's
management fee will be lower than that of Total Return Fund in the foreseeable
future.
Distribution and Service Fees.
Both Funds have adopted a Service Plan and Agreement under Rule 12b-1 of the
Investment Company Act for its Class A shares. The Service Plan provides for the
reimbursement to OppenheimerFunds Distributor, Inc. (the "Distributor"), for a
portion of its costs incurred in connection with the personal service and
maintenance of accounts that hold Class A shares of the respective Funds. Under
the plan, payment 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 respective Funds. The
Distributor currently 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 of the
respective Funds.
Both funds have adopted Distribution and Service Plans and Agreements under Rule
12b-1 of the Investment Company Act for Class B and Class C shares. These plans
compensate the Distributor for its services and costs in connection with the
distribution of Class B shares and Class C shares and the personal service and
maintenance of shareholder accounts. Under each Plan, the Funds pay the
Distributor an asset-based sales charge at an annual rate of 0.75% of Class B
and Class C shares. The Distributor also receives a service fee of 0.25% per
year under each plan with respect to each class of shares. All fee amounts are
computed on the average annual net assets of the class determined as of the
close of each regular business day of each fund. The Distributor uses all of the
service fees to compensate dealers for providing personal services and
maintenance of accounts of their customers that hold shares of the Funds. The
Class B asset-based sales charge is retained by the Distributor. After the first
year, the Class C asset-based sales charge is paid to the broker-dealer as an
ongoing concession for shares that have been outstanding for a year or more. The
terms of the Funds' respective Distribution and Service Plans are substantially
similar.
Purchases, Exchanges and Redemptions
Both funds are part of the OppenheimerFunds complex of mutual funds. The
procedures for purchases, exchanges and redemptions of shares of the Funds are
identical. Shares of either fund may be exchanged for shares of the same class
of other Oppenheimer funds offering such shares.
Both funds have a maximum initial sales charge of 5.75% on Class A shares.
Investors who purchase $1 million or more ($500,000 or more for certain
retirement plan accounts) of Class A shares pay no initial sales charge but may
have to pay a sales charge of up to 1% if the shares are sold within 18 calendar
months from the end of the calendar month during which they were purchased.
Class B shares of the Funds are sold without a front-end sales charge but may be
subject to a contingent deferred sales charge ("CDSC") upon redemption depending
on the length of time the shares are held. The CDSC begins at 5% for shares sold
in the first year and declines to 1% in the sixth year and is eliminated after
the sixth year. Class C shares are sold at net asset value per share without an
initial sales charge. However, if Class C shares are redeemed within a holding
period of 12 months from their purchase, a CDSC of 1.0% will be deducted from
the redemption proceeds.
Class A, Class B and Class C shares of Total Return Fund received in the
Reorganization will be issued at net asset value, without a sales charge and no
CDSC will be imposed on any Disciplined Allocation Fund shares exchanged for
Total Return Fund shares as a result of the Reorganization. However, any CDSC
and associated holding period that applies to Disciplined Allocation Fund shares
will continue to apply to Total Return Fund shares received in the
Reorganization.
Services available to shareholders of both funds include purchase and redemption
of shares through OppenheimerFunds AccountLink and PhoneLink (an automated
telephone system), telephone redemptions, and exchanges by telephone to other
Oppenheimer funds that offer Class A, Class B and Class C shares, and
reinvestment privileges. Please see "Shareholder Services," below and each
fund's Prospectus for further information.
PRINCIPAL RISK FACTORS
In evaluating whether to approve the Reorganization and invest in Total Return
Fund, shareholders should carefully consider the following risk factors, the
other information set forth in this Proxy Statement and Prospectus and the more
complete description of risk factors set forth in the documents incorporated by
reference herein, including the Prospectuses of the Funds and their respective
Statements of Additional Information.
General
The main investment risks of the Funds are substantially similar. All
investments have risks to some degree. Both funds' investments are subject to
changes in their value from a number of factors described below. There is also
the risk that poor security selection by the Manager will cause the Funds to
underperform other funds having a similar objective.
These risks collectively form the risk profiles of the Funds, and can affect the
value of the Funds' investments, investment performance and prices per share.
These risks mean that you can lose money by investing in either fund. When you
redeem your shares, they may be worth more or less than what you paid for them.
There is no assurance that either fund will achieve its investment objective.
Risks of Investing in Stocks. Stocks fluctuate in price, and their short-term
volatility at times may be great. Because both funds typically invest a
substantial portion of their assets in common stocks and other equity
securities, the value of their portfolio will be affected by changes in the
stock markets. Market risk will affect their net asset values per share, which
will fluctuate as the values of their respective portfolio securities change.
A variety of factors can affect the price of a particular stock and the prices
of individual stocks do not all move in the same direction uniformly or at the
same time. Different stock markets may behave differently from each other. In
particular, because the Funds currently focus their stock investments in U.S.
issuers, their performance will be primarily affected by changes in U.S. stock
markets.
Additionally, stocks of issuers in a particular industry may be affected by
changes in economic conditions, or by changes in government regulations,
availability of basic resources or supplies, or other events that affect that
industry more than others. To the extent that the Funds increase the relative
emphasis of their investments in a particular industry, their share values may
fluctuate in response to events affecting that industry. However, neither fund
concentrates 25% or more of its investments in an industry.
Other factors can affect a particular stock's price, such as poor earnings
reports by the issuer, loss of major customers, major litigation against the
issuer, or changes in government regulations affecting the issuer. The Funds can
invest in securities of companies in different capitalization ranges. Smaller
companies may have more volatile stock prices than stocks of larger companies.
Credit Risk. The debt securities the Funds can invest in are subject to credit
risk. Credit risk relates to the ability of the issuer of a security to make
interest and principal payments on the security as they become due. If the
issuer fails to pay interest, the Funds' income might be reduced, and if the
issuer fails to repay principal, the value of that security and of the Funds'
shares might be reduced. Both funds invest in U.S. government securities that
are subject to little credit risk, but they also invest in other debt
securities, such as high-yield, lower-grade debt securities, that are subject to
risks of default.
Special Credit Risks of Lower-Grade Securities. Both funds can invest in
securities that are below investment grade (sometimes referred to as "junk
bonds"). While Disciplined Allocation Fund cannot invest more than 20% of its
total assets in lower-grade securities, Total Return Fund has no limitations on
the amount it can purchase. Lower-grade securities may be subject to greater
market fluctuations and greater risks of loss of income and principal than
higher-grade debt securities. Securities that are (or that have fallen) below
investment grade entail a greater risk that the issuers may not meet their debt
obligations. Because Total Return Fund can invest in lower-grade securities
without limit, it potentially could have greater credit risk than Discipline
Allocation Fund.
Interest Rate Risks. The debt securities the Funds can invest in (including U.S.
government securities) also are subject to changes in value when prevailing
interest rates change. When interest rates fall, the values of outstanding debt
securities generally rise. When interest rates rise, the values of outstanding
debt securities generally fall, and the securities may sell at a discount from
their face amount. The magnitude of these price changes is generally greater for
debt securities with longer-term maturities. When they do invest in debt
securities, both funds currently focus on medium-term securities to seek higher
income. Therefore, the share prices of both funds may fluctuate more when
interest rates change.
APPROVAL OF THE REORGANIZATION
(The Proposal)
Reasons for the Reorganization
At a meeting of the Board of Directors of Disciplined Allocation Fund held April
13, 2000, the Board considered whether to approve the proposed Reorganization
and reviewed and discussed with the Manager and independent legal counsel the
materials provided by the Manager relevant to the proposed Reorganization.
Included in the materials was information with respect to the Funds' respective
investment objectives and policies, management fees, distribution fees and other
operating expenses, historical performance and asset size.
The Board reviewed information demonstrating that Disciplined Allocation Fund is
a smaller fund with approximately $226 million in net assets as of December 31,
1999, and that Disciplined Allocation Fund's assets decreased approximately 34%
in 1999. The Board anticipates that Disciplined Allocation Fund's assets will
not increase substantially in size in the near future. In comparison, Total
Return Fund had approximately $4.4 billion in net assets as of December 31,
1999, and its assets increased approximately 10% in 1999. After the
Reorganization, the shareholders of Disciplined Allocation Fund would become
shareholders of a larger fund that that has lower overall operating expenses
than Disciplined Allocation Fund. Economies of scale may benefit shareholders of
Disciplined Allocation Fund.
The Board noted that Total Return Fund's management fee is substantially lower
than that of Disciplined Allocation Fund. The Board considered that Total Return
Fund's performance is substantially better than Disciplined Allocation Fund's
performance over comparable periods, noting that the Reorganization would permit
shareholders of Disciplined Allocation Fund to own shares of a similar fund that
historically has had significantly better performance.
The Board considered the facts that both funds seek total return by investing in
equity and fixed-income securities. Additionally, the Board considered that both
funds invest a substantial portion of their assets in U.S. equity securities. It
also considered that the procedures for purchases, exchanges and redemptions of
shares of both funds are identical and that both funds offered the same investor
services and options.
The Board also considered the terms and conditions of the Reorganization,
including that there would be no sales charge imposed in effecting the
Reorganization and that the Reorganization is expected to be a tax-free
reorganization. The Board concluded that Disciplined Allocation Fund's
participation in the transaction is in the best interests of the Fund and that
the Reorganization would not result in a dilution of the interests of existing
shareholders of Disciplined Allocation Fund.
After consideration of the above factors, and such other factors and information
as the Board of Disciplined Allocation Fund deemed relevant, the Board,
including the Independent Directors, unanimously approved the Reorganization and
the Reorganization Agreement and voted to recommend its approval to the
shareholders of Disciplined Allocation Fund.
The Board of Directors of Total Return Fund, including the Independent
Directors, also unanimously approved the Reorganization and the Reorganization
Agreement. The Total Return Fund Board determined that participation in the
transaction is in the best interests of Total Return Fund and that the
Reorganization would not result in dilution of Total Return Fund shareholders'
interests.
The Reorganization
The Reorganization Agreement (a copy of which is set forth in full as Exhibit A
to this Proxy Statement and Prospectus) contemplates a reorganization under
which (i) all of the assets of Disciplined Allocation Fund (other than the cash
reserve described below (the "Cash Reserve")) will be transferred to Total
Return Fund in exchange for Class A, Class B or Class C shares of Total Return
Fund, (ii) the Total Return Fund shares will be distributed among the
shareholders of Disciplined Allocation Fund in complete liquidation of
Disciplined Allocation Fund, and (iii) the outstanding shares of Disciplined
Allocation Fund will be canceled. Total Return Fund will not assume any of
Disciplined Allocation Fund's liabilities except for portfolio securities
purchased which have not settled and outstanding shareholder redemption and
dividend checks.
The result of effectuating the Reorganization would be that: (i) Total Return
Fund will add to its gross assets all of the assets (net of any liability for
portfolio securities purchased but not settled and outstanding shareholder
redemption and dividend checks) of Disciplined Allocation Fund other than the
Cash Reserve; and (ii) the shareholders of Disciplined Allocation Fund as of the
close of business on the Closing Date will become holders of Class A, Class B or
Class C shares of Total Return Fund.
Shareholders of Disciplined Allocation Fund who vote their Class A, Class B or
Class C shares in favor of the Reorganization will be electing in effect to
redeem their shares of Disciplined Allocation Fund (at net asset value on the
Valuation Date referred to below under "Method of Carrying Out the
Reorganization Plan," calculated after subtracting the Cash Reserve) and
reinvest the proceeds in Class A, Class B or Class C shares of Total Return Fund
at net asset value without sales charge and without recognition of taxable gain
or loss for federal income tax purposes (see "Tax Aspects of the Reorganization"
below). The Cash Reserve is that amount retained by Disciplined Allocation Fund
which is deemed sufficient in the discretion of the Board of Directors of
Disciplined Allocation Fund for the payment of (a) Disciplined Allocation Fund's
expenses of liquidation, and (b) its liabilities, other than those assumed by
Total Return Fund.
Disciplined Allocation Fund and Total Return Fund will bear all of their
respective expenses associated with the Reorganization, as set forth under
"Costs of the Solicitation and the Reorganization" above. Management estimates
that such expenses associated with the Reorganization to be borne by Disciplined
Allocation Fund should not exceed $41,000. Liabilities as of the date of the
transfer of assets will consist primarily of accrued but unpaid normal operating
expenses of Disciplined Allocation Fund, excluding the cost of any portfolio
securities purchased but not yet settled and outstanding shareholder redemption
and dividend checks. See "Method of Carrying Out the Reorganization Plan,"
below.
The Reorganization Agreement provides for coordination between the Funds as to
their respective portfolios so that, after the closing, Total Return Fund will
be in compliance with all of its investment policies and restrictions.
Disciplined Allocation Fund will recognize a capital gain or loss on any sales
made prior to the Reorganization pursuant to this paragraph. While any such
coordination may increase the taxable distributions to Disciplined Allocation
Fund shareholders described below, any such coordination is intended to be
consistent with a tax-free reorganization for federal income tax purposes.
Tax Aspects of the Reorganization
Immediately prior to the Valuation Date referred to in the Reorganization
Agreement, Disciplined Allocation Fund will pay a dividend or distribution
which, together with all previous dividends or distributions, will have the
effect of distributing to Disciplined Allocation Fund's shareholders all of
Disciplined Allocation Fund's investment company taxable income for tax years
ending on or prior to the Closing Date (computed without regard to any deduction
for dividends paid) and all of its net capital gain, if any, realized in tax
years ending on or prior to the Closing Date (after reduction for any available
capital loss carry-forward). Such dividends and distributions will be included
in the taxable income of Disciplined Allocation Fund's shareholders as ordinary
income and capital gains, respectively.
As of June 30, 2000, Total Return Fund had a realized long-term capital gain of
$0.46 per share. The Fund's net realized capital gain existing at the end of the
year must be paid out to shareholders, typically in December 2000. After a
supplemental distribution the Fund expects to pay on or about August 5, 2000,
the Fund's realized capital gain is expected to be approximately $0.36 per share
on a pro-forma basis. The amount of the Fund's realized capital gain will
fluctuate during the remainder of the calendar year, depending on whether the
Fund realizes gains or losses on the sale of portfolio securities during the
remainder of the year. Therefore, the Fund's net realized capital gain paid out
in December may be more or less than $0.36 per share.
The exchange of the assets of Disciplined Allocation Fund for Class A, Class B
or Class C shares of Total Return Fund and the assumption by Total Return Fund
of certain liabilities of Disciplined Allocation Fund is intended to qualify for
federal income tax purposes as a tax-free reorganization under Section 368(a)(1)
of the Internal Revenue Code of 1986, as amended (the "Code"). Disciplined
Allocation Fund has represented to Deloitte & Touche LLP, tax advisor to
Disciplined Allocation Fund, that there is no plan or intention by any
Disciplined Allocation Fund shareholder who owns 5% or more of Disciplined
Allocation Fund's outstanding shares, and, to Disciplined Allocation Fund's best
knowledge, there is no plan or intention on the part of the remaining
Disciplined Allocation Fund shareholders, to redeem, sell, exchange or otherwise
dispose of a number of Total Return Fund Class A, Class B or Class C shares
received in the transaction that would reduce Disciplined Allocation Fund
shareholders' ownership of Total Return Fund shares to a number of shares having
a value, as of the Closing Date, of less than 50% of the value of all the
formerly outstanding Disciplined Allocation Fund shares as of the same date.
Total Return Fund and Disciplined Allocation Fund have each represented to
Deloitte & Touche LLP, that, as of the Closing Date, it will qualify as a
regulated investment company or will meet the diversification test of Section
368(a)(2)(F)(ii) of the Code.
As a condition to the closing of the Reorganization, Total Return Fund and
Disciplined Allocation Fund will receive the opinion of Deloitte & Touche LLP to
the effect that, based on the Reorganization Agreement, the above
representations, existing provisions of the Code, Treasury Regulations issued
thereunder, current Revenue Rulings, Revenue Procedures and court decisions, for
federal income tax purposes:
1. The transactions contemplated by the Reorganization Agreement will qualify
as a tax-free "reorganization" within the meaning of Section 368(a)(1)(c)
of the Code.
2. No gain or loss will be recognized by the shareholders of Disciplined
Allocation Fund upon the distribution of Class A, Class B or Class C
shares of Total Return Fund to the shareholders of Disciplined Allocation
Fund pursuant to Section 354(a)(1) of the Code.
3. Under Section 361(a) of the Code, no gain or loss will be recognized by
Disciplined Allocation Fund by reason of the transfer of its assets solely
in exchange for Class A, Class B or Class C shares of Total Return Fund.
4. Under Section 1032(a) of the Code, no gain or loss will be recognized by
Total Return Fund by reason of the transfer of Disciplined Allocation
Fund's assets solely in exchange for Class A, Class B or Class C shares of
Total Return Fund.
5. The shareholders of Disciplined Allocation Fund will have the same tax
basis and holding period for the shares of Total Return Fund that they
receive as they had for Disciplined Allocation Fund shares that they
previously held, pursuant to Sections 358(a)(1) and 1223(1) of the Code,
respectively.
6. The securities transferred by Disciplined Allocation Fund to Total Return
Fund will have the same tax basis and holding period in the hands of Total
Return Fund as they had for Disciplined Allocation Fund, pursuant to
Sections 362(b) and 1223(2) of the Code, respectively.
Shareholders of Disciplined Allocation Fund should consult their tax advisors
regarding the effect, if any, of the Reorganization in light of their individual
circumstances. Because the foregoing discussion relates only to the federal
income tax consequences of the Reorganization, shareholders of Disciplined
Allocation Fund should also consult their tax advisors as to state and local tax
consequences, if any, of the Reorganization.
Capitalization Table (Unaudited)
The table below sets forth the capitalization of Disciplined Allocation Fund and
Total Return Fund and indicates the pro forma combined capitalization as of
March 31, 2000 as if the Reorganization had occurred on that date.
This table reflects the issuance of 11,577,729 Class A shares, 1,384,713 Class B
shares, and 286,123 Class C shares of Total Return Fund in a tax-free exchange
for the net assets of Disciplined Allocation Fund, aggregating $188,400,814. The
pro forma ratios of expenses to average net assets of Class A, Class B and Class
C shares of the surviving Total Return Fund are set forth above under
"Comparative Fee Tables."
---------------------
Net Asset
Shares Value
Net Assets Outstanding Per Share
--------------------------------------------------------------------
--------------------------------------------------------------------
Oppenheimer Disciplined Allocation Fund
--------------------------------------------------------------------
--------------------------------------------------------------------
Class A $164,866,867 11,826,567 $13.94
--------------------------------------------------------------------
--------------------------------------------------------------------
Class B $19,496,757 1,379,009 $14.14
--------------------------------------------------------------------
--------------------------------------------------------------------
Class C $4,037,190 292,585 $13.80
--------------------------------------------------------------------
--------------------------------------------------------------------
Oppenheimer Total Return Fund
--------------------------------------------------------------------
--------------------------------------------------------------------
Class A $3,458,010,022 242,808,741 $14.24
--------------------------------------------------------------------
--------------------------------------------------------------------
Class B $1,093,844,553 77,660,951 $14.08
--------------------------------------------------------------------
--------------------------------------------------------------------
Class C $90,735,139 6,430,525 $14.11
--------------------------------------------------------------------
--------------------------------------------------------------------
Oppenheimer Total Return Fund
(Pro Forma after Reorganization)
--------------------------------------------------------------------
--------------------------------------------------------------------
Class A $3,622,876,889 254,386,470 $14.24
--------------------------------------------------------------------
--------------------------------------------------------------------
Class B $1,113,341,310 79,045,663 $14.08
--------------------------------------------------------------------
--------------------------------------------------------------------
Class C $94,772,329 6,716,647 $14.11
---------------------
COMPARISON BETWEEN
DISCIPLINED ALLOCATION FUND AND TOTAL RETURN FUND
Information about Disciplined Allocation Fund and Total Return Fund is presented
below. In considering whether to approve the Reorganization, shareholders of
Disciplined Allocation Fund should consider the differences in investment
objectives, policies and risks of the Funds. Additional information about Total
Return Fund is set forth in its Prospectus, accompanying this Proxy Statement
and Prospectus and incorporated herein by reference, and additional information
about both funds is set forth in documents that may be obtained upon request of
the transfer agent or upon review at the offices of the SEC. See "Additional
Information - Public Information."
Investment Objectives and Policies
Total Return Fund
Total Return Fund seeks high total return. It invests mainly in equity
securities to seek capital appreciation, but also may invest in debt securities
to seek income. At times the Fund may pursue its goal by emphasizing investments
that offer opportunities for capital growth, primarily equity securities such as
common stocks, preferred stocks and securities convertible into common stocks.
At other times the Fund may pursue its goal by increasing its emphasis on
investments that offer income, mainly stocks that pay dividends or debt
securities such as corporate bonds, notes and debentures and U.S. government
securities.
The Fund does not allocate its investments among equity and debt securities in
any fixed ratio, and the relative allocation will vary over time, depending on
where the best opportunities are to pursue total return according to the
judgment of the Manager. While the Fund does not limit its investments to
securities of issuers in a particular capitalization range or ranges, currently
the Fund's equity investments mainly are in mid- and large-capitalization
stocks. The Fund can buy foreign securities without limit, but currently
emphasizes investments in U.S. securities.
When selecting securities for the portfolio, the Fund's portfolio managers use
an investment process that combines both "value" and "growth" investment styles.
They use a value strategy to find issuers whose securities are believed to be
undervalued in the marketplace, in relation to factors such as the ratio of the
stock's price to the issuer's earnings. A lower price/earnings ratio would
suggest an undervalued stock. A growth investing style encompasses a search for
companies whose stock price is expected to increase at a greater rate than the
overall market. These issuers may be entering a growth phase, marked by
increases in earnings, sales, cash flows, or other factors, which suggest that
the stock may increase in value over time. When the Fund's portfolio managers
believe a portfolio security is no longer undervalued or a particular issuer's
continued growth prospects are in doubt, they will consider selling portfolio
positions.
The portfolio managers construct the portfolio using a "bottom up" approach,
focused on the fundamental prospects of individual companies and issuers, rather
than on broad economic trends affecting entire markets and industries. While
this process and the inter-relationship of the factors used may change over time
and its implementation may vary in particular cases, in general the selection
process currently employs the following techniques and considerations: o
Selecting individual stocks for relative attractiveness by analyzing
fundamental stock and company characteristics.
o Looking for growth stocks having high earnings potential and earnings
and sales momentum.
o Selecting dividend-paying common stocks of established companies for income.
o Finding convertible bonds to take advantage of the stock market's growth
potential while providing income as a hedge against market volatility.
o Maintaining a longer time horizon (three to five years) in considering
stocks for investment.
o Monitoring individual issuers for changes in profit margins or slowing
revenues that might affect future cash flows or growth and might
trigger a decision to sell the security.
Because the Fund invests mainly in U.S. equity investments, the Fund's
performance will be affected significantly by changes in the U.S. stock market.
The principal risks of investing in stocks are discussed above, and may be
offset somewhat by the Fund's investments in income-producing debt securities.
However, as discussed above, debt securities are subject to credit and interest
rate risks.
Disciplined Allocation Fund
Disciplined Allocation Fund seeks to maximize total investment return (including
capital appreciation and income) principally by allocating its assets among
stocks, corporate bonds, U.S. government securities and money market
instruments, according to changing market conditions. It invests mainly in
stocks, bonds and money market instruments. The Manager can allocate the Fund's
investments among these different types of securities in different proportions
at different times to seek the Fund's objective. That allocation is based on the
Manager's judgment of where the best opportunities are for total return after
evaluating market and economic conditions.
At least 25% of the Fund's total assets normally will be invested in
fixed-income senior securities. Otherwise, the Fund is not required to allocate
its investments among stocks, bonds and money market instruments in any fixed
proportion and may have none or some of its assets invested in each asset class
in relative proportions that change over time. The Fund can buy a variety of
domestic and foreign equity investments, including common and preferred stocks,
warrants and convertible securities (many of which are debt securities that the
Manager considers to be "equity substitutes" because of their conversion
feature). The Fund can buy securities of companies in different capitalization
ranges. Currently, the Fund's equity investments are mainly in mid- and
large-capitalization stocks.
The Fund can invest in a variety of debt securities (including convertible
securities), such as securities issued or guaranteed by the U.S. government and
its agencies and instrumentalities, including mortgage-related securities and
collateralized mortgage obligations ("CMOs"). It also can buy municipal
securities, foreign government securities, and domestic and foreign corporate
debt obligations. The Fund can buy debt securities rated below investment grade
(these are sometimes called "junk bonds"), but has limits on those investments,
as discussed below.
When selecting securities for the portfolio, the Fund's portfolio managers
follow an investment process that uses quantitative tools to analyze market
dynamics and economic trends, to determine the allocation of the Fund's
portfolio among different asset classes. In selecting stocks for the portfolio,
the portfolio managers use a disciplined value investment style. While this
process and the inter-relationship of the factors used may change over time and
its implementation may vary in particular cases, in general the investment
selection process currently includes the strategies described below:
o The portfolio managers use a quantitative analysis of the equity and
debt securities markets in combination with their individual analysis
and judgment to determine the allocation of the Fund's portfolio among
the asset classes. They analyze market trends, general economic data
and relative performance of the asset classes in which the Fund can
invest. For example, during periods of slowing corporate growth rates,
they might shift more assets to bonds and other fixed-income
securities.
o In selecting stocks, they use value investing techniques to identify a
universe of stocks that are undervalued in the market, focusing on
stocks that have lower price/earnings (P/E) ratios compared, for
example, to the P/E ratio of the S&P 500 Index.
o The portfolio managers use both quantitative tools and fundamental
analysis, including internal research and reports by other market
analysts, to identify stocks within the selected universe that may
provide growth opportunities, for example, by selecting stocks of
issuers that have better earnings than analysts have expected
("positive earnings surprise"). The expectation is that these stocks
will increase in value when the market re-evaluates the issuers and
the price/earnings ratios of their stocks.
o If the P/E ratio of a stock held by the Fund moves significantly above
the P/E ratio of the broad market benchmark the portfolio managers use,
or if the issuer's business fundamentals deteriorate, the portfolio
managers will consider selling the stock.
In selecting bonds, the portfolio managers normally expect that portion of the
Fund's portfolio to have an average maturity (measured on a dollar-weighted
basis) of between 6 and 14 years.
Because the Fund typically invests a substantial portion of its assets in U.S.
equities, the Fund's performance will be affected significantly by changes in
the U.S. stock markets. The Fund's investments in income-producing debt
securities may offset some of the risks of stock investments, which are
discussed above. However, as discussed above, debt securities are subject to
credit and interest rate risks.
An investment in either fund may be worth more or less than an investor
originally paid for it when sold. An investor can lose money by investing in
either fund.
Principal Investment Policies
Stocks and Other Equity Investments. The Funds' equity investments include
common stocks, preferred stocks, debt securities convertible into common stock
and rights and warrants. Neither fund concentrates 25% or more of its assets in
an industry. The equity investments of both funds can include interests in real
estate investment trusts ("REITs"). Those securities may be sensitive to changes
in interest rates, and because the real estate market can be very volatile at
times, the prices of those securities may change substantially. Neither fund
currently invests a substantial portion of its assets in REITs.
While many convertible securities are debt securities, the Manager considers
some of them to be "equity equivalents" because of the conversion feature. In
that case their rating has less impact on the investment decision than in the
case of other debt securities. However, they are subject to credit risks,
discussed below in "Debt Securities," and interest rate risk. These securities
might be selected for the Funds because they offer the ability to participate in
stock market movements while offering some current income. Preferred stocks,
while a form of equity security, typically have a fixed dividend that may cause
their prices to behave more like those of debt securities. The portfolio
managers for Disciplined Allocation Fund primarily use a value investment style
in selecting portfolio securities whereas the portfolio managers for Total
Return Fund use both value and growth investment styles to select portfolio
securities.
o Value Stocks. These are stocks that appear to be temporarily undervalued, by
various measures such as price/earnings ratios. Value investing seeks stocks
with prices that are low relative to their real worth or future prospects. The
hope is that the Fund will realize appreciation in the value of its holdings
when other investors realize the intrinsic value of the stocks. However, there
is the risk that the stock will not appreciate in value as anticipated.
o Growth Stocks. The types of growth companies the Manager focuses on for Total
Return Fund are larger, more established growth companies. Growth companies, for
example, may be developing new products or services, such as companies in the
technology sector, or they may be expanding into new markets for their products,
such as companies in the energy sector. Newer growth companies tend to retain a
large part of their earnings for research, development or investment in capital
assets. Therefore, they do not tend to emphasize paying dividends and may not
pay any dividends for some time. If they are selected for Total Return Fund's
portfolio, it is because the Manager believes the price of the stock will
increase over time. To the extent Total Return Fund focuses on growth stocks, it
potentially could have less income than Disciplined Allocation Fund.
Debt Securities. Both funds' investments in debt securities can include
securities issued or guaranteed by the U.S. government or its agencies and
instrumentalities, and foreign and domestic corporate bonds, notes and
debentures. Debt securities are selected primarily for their income potential
and to help cushion fluctuations in the funds' respective net asset values.
Disciplined Allocation Fund generally invests a greater percentage of its assets
in debt securities than Total Return Fund. As a result, Total Return Fund will
potentially have less income than Disciplined Allocation Fund.
A debt security is essentially a loan by the buyer to the issuer of the debt
security. The issuer promises to pay back the principal amount of the loan and
normally pays interest at a fixed or variable rate while the loan is
outstanding. Both funds may buy debt securities rated by nationally-recognized
rating organizations such as Moody's Investors Services or Standard & Poor's
Ratings Service or they may be unrated securities assigned an equivalent rating
by the Manager, but Disciplined Allocation Fund does not invest more than 10% of
its total assets in unrated debt securities. Both funds' investments in debt
securities may be above investment grade or below investment grade in credit
quality.
o Special Risks of Lower-Grade Securities. All corporate debt securities
(whether foreign or domestic) are subject to some degree of credit risk. Total
Return Fund can invest without limit in "lower-grade" securities, sometimes
referred to as "junk bonds," while Disciplined Allocation Fund cannot invest
more than 20% of total assets in such securities. These are securities rated
below "BBB" by Standard & Poor's or "Baa" by Moody's, or unrated securities
assigned a comparable rating by the Manager.
While neither Fund currently invests a substantial amount of its assets in
lower-grade securities, high-yield, lower-grade bonds, whether rated or unrated,
generally have greater risks than investment-grade securities. There may be less
of a market for them and therefore they may be harder to sell at an acceptable
price. These risks mean that the Funds may not achieve the expected income from
lower-grade securities, and that the Funds' respective net asset values per
share could be affected by declines in the value of these securities.
o U.S. Government Securities. Both funds can invest in securities issued or
guaranteed by the U.S. Treasury or other U.S. government agencies or
federally-chartered corporate entities referred to as "instrumentalities,"
(commonly referred to as "U.S. government securities"). They include Treasury
bills (having maturities of one year or less when issued), Treasury notes
(having maturities of from one to ten years when issued), and Treasury bonds
(having maturities of more than ten years when issued).
Treasury securities are backed by the full faith and credit of the United
States as to timely payments of interest and repayment of principal. The Funds
can buy U. S. Treasury securities that have been "stripped" of their interest
coupons by a Federal Reserve Bank, zero-coupon U.S. Treasury securities and
Treasury Inflation-Protection Securities. Although not rated, Treasury
obligations have little credit risk but, prior to their maturity, are subject to
interest rate risk.
Obligations issued or guaranteed by U.S. government agencies or
instrumentalities include direct obligations and mortgage-related securities
that have different levels of credit support from the U.S. government. Some are
supported by the full faith and credit of the U.S. government, such as
Government National Mortgage Association pass-through mortgage certificates
(called "Ginnie Maes"). Some are supported by the right of the issuer to borrow
from the U.S. Treasury under certain circumstances, such as Federal National
Mortgage Association bonds ("Fannie Maes"). Others are supported only by the
credit of the entity that issued them, such as Federal Home Loan Mortgage
Corporation obligations ("Freddie Macs").
Disciplined Allocation Fund can also invest a substantial portion of its
assets in mortgage-backed securities issued by private issuers, which do not
offer the credit backing of U.S. government securities. Primarily these include
multi-class debt or pass-through certificates secured by mortgage loans. They
may be issued by banks, savings and loans, mortgage bankers and other
non-governmental issuers. Private issuer mortgage-backed securities are subject
to the credit risks of the issuers (as well as the interest rate risks and
prepayment risks), although in some cases they may be supported by insurance or
guarantees.
o Prepayment Risk. Mortgage-related securities are subject to the risks of
unanticipated prepayment. The risk is that when interest rates fall, borrowers
under the mortgages that underlie these securities will prepay their mortgages
more quickly than expected, causing the issuer of the security to prepay the
principal prior to the security's expected maturity. The Funds may be required
to reinvest the proceeds at a lower interest rate, reducing their income.
Mortgage-related securities subject to prepayment risk generally offer less
potential for gains when prevailing interest rates fall and have greater
potential for loss when prevailing interest rates rise. The impact of
prepayments on the price of a security may be difficult to predict and may
increase the volatility of the price. If one of the Funds buys mortgage-related
securities at a premium, accelerated prepayments on those securities could cause
the Fund to lose a portion of its principal investment represented by the
premium.
If interest rates rise rapidly, prepayments of mortgages may occur at a
slower rate than expected, and the expected maturity of long-term or medium-term
mortgage-related securities could lengthen as a result. That could cause their
values to fluctuate more, and the prices of the Funds' shares, to fall.
Money Market Instruments and Short-Term Debt Securities. Under normal market
conditions, Disciplined Allocation Fund can invest up to 40% of its assets in a
variety of short-term debt obligations having a maturity of one year or less.
These include:
o Money market instruments. Generally, these are debt obligations having
ratings in the top two rating categories of national rating organizations
(or equivalent ratings assigned by the Manager). Examples include
commercial paper of domestic or foreign issuers.
o Short-term debt obligations of the U.S. government or corporations.
o Obligations of domestic or foreign banks or savings and loan associations,
such as certificates of deposit and bankers' acceptances.
Under normal market conditions this strategy would be used primarily for cash
management or liquidity purposes. The yields on shorter-term debt obligations
tend to be less than on longer-term debt. Therefore, to the extent that
Disciplined Allocation Fund uses this strategy, it might help preserve principal
but might reduce opportunities to seek growth of capital as part of its
objective of total return.
When market or economic conditions are unstable or adverse, both funds can
invest up to 100% of their assets in defensive securities. Generally, they would
be short-term U.S. government securities, high-grade commercial paper, bank
obligations or repurchase agreements. To the extent the Funds invest defensively
in these securities, they might not achieve their respective investment
objectives.
o Variable Amount Master Demand Notes. Disciplined Allocation Fund can purchase
master demand notes, which are corporate obligations that permit the investment
of fluctuating amounts by varying rates of interest under direct arrangements
between the Fund, as lender, and the borrower. They permit daily changes in the
amounts borrowed. Disciplined Allocation 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. 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 expected that there will be a trading market for them. There
is no secondary market for these notes, although they are redeemable (and thus
are 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.
Disciplined Allocation Fund has no limitations on the type of issuer from
whom these notes will be purchased. However, in connection with such purchases
and on an ongoing basis, the Manager will consider the earning power, cash flow
and other liquidity ratios of the issuer, and its ability to pay principal and
interest on demand, including a situation in which all holders of such notes
made demand simultaneously. Investments in master demand notes are subject to
the limitation on investments by Disciplined Allocation Fund in illiquid
securities, described below. Currently, Disciplined Allocation Fund does not
intend that its investments in variable amount master demand notes will exceed
5% of its total assets.
Other Investment Strategies
To seek their objectives, the Funds can also use the investment techniques and
strategies described below. The Funds might not always use all of them. These
techniques have certain risks although some are designed to help reduce overall
investment or market risks.
Zero-Coupon and "Stripped" Securities. Some of the government and corporate debt
securities the Funds buy are zero-coupon bonds that pay no interest. They are
issued at a substantial discount from their face value. "Stripped" securities
are the separate income or principal components of a debt security. Some CMOs or
other mortgage-related securities may be stripped, with each component having a
different proportion of principal or interest payments. One class might receive
all the interest and the other all the principal payments.
Zero-coupon and stripped securities are subject to greater fluctuations in price
from interest rate changes than interest-bearing securities. The Funds may have
to pay out the imputed income on zero-coupon securities without receiving the
actual cash currently. Interest-only securities are particularly sensitive to
changes in interest rates. Principal-only securities are also sensitive to
changes in interest rates.
The values of interest-only mortgage-related securities are also very sensitive
to prepayments of underlying mortgages. When prepayments tend to fall, the
timing of the cash flows to these securities increases, making them more
sensitive to changes in interest rates. The market for some of these securities
may be limited, making it difficult for the Funds to dispose of their holdings
at an acceptable price. Disciplined Allocation Fund can invest up to 50% of its
total assets in zero-coupon securities issued by either the U.S. government or
U.S. companies. Neither fund invests in zero-coupon bonds to a significant
degree.
Foreign Securities. Both funds can buy equity or debt securities of companies
and debt securities of governments in any country, developed or underdeveloped.
As a fundamental policy, Disciplined Allocation Fund cannot invest more than 10%
of its total assets in foreign securities. As an exception to that restriction
it can invest up to 25% of its total assets in foreign equity or debt securities
that are: o issued, assumed or guaranteed by foreign governments or their
political
subdivisions or instrumentalities,
o assumed or guaranteed by domestic issuers (including Eurodollar
securities), or
o issued, assumed or guaranteed by foreign issuers that have a class of
securities listed for trading on The New York Stock Exchange.
Although there is no limit on the amount of Total Return Fund's assets that may
be invested in foreign securities and it potentially has greater risk than
Disciplined Allocation Fund in this regard, the Manager does not currently
invest a substantial amount of Total Return Fund's assets in foreign securities.
While foreign securities offer special investment opportunities, there are also
special risks, including foreign taxation, risks of delays in settlements of
securities transactions, exchange control regulations and the effects of a
change in value of a foreign currency against the U.S. dollar, which will result
in a change in the U.S. dollar value of securities denominated in that foreign
currency.
Derivatives. Both funds can also invest in derivative investments. In general
terms, a derivative investment is an investment contract whose value depends on
(or is derived from) the value of an underlying asset, interest rate or index.
Examples are hedging instruments, options, futures, mortgage-related securities,
asset-backed securities, "stripped" securities and interest rate swaps.
Derivatives have risks. If the issuer of the derivative investment does not pay
the amount due, the Funds can lose money on the investment. The underlying
security or investment on which a derivative is based, and the derivative
itself, may not perform the way the Manager expected it to. As a result of these
risks, the Funds could realize less principal or income from their derivative
investments than expected or their hedging strategies might be unsuccessful. As
a result, the Funds' share prices could fall. In addition, certain derivative
investments held by the Funds might be illiquid. Using derivatives can cause the
Funds to lose money and increase the volatility of their share prices.
Disciplined Allocation Fund may invest in a variety of derivative investments to
seek income for liquidity needs or for hedging purposes. Total Return Fund can
invest in a variety of derivative investments for income, capital appreciation
or hedging purposes. Because Total Return Fund can invest in derivatives for
capital appreciation, it potentially has greater risk than Disciplined
Allocation Fund. However, neither Fund invests or risks a significant percentage
of its assets in derivatives.
o "Structured" Notes. Both funds can buy "structured" notes, which are
specially-designed derivative debt investments with principal or interest
payments that are linked to the value of an index (such as a currency or
securities index) or commodity. The terms of the instrument may be "structured"
by the purchaser (one of the Funds) and the borrower issuing the note.
The principal and/or interest payments depend on the performance of one or more
other securities or indices, and the values of these notes will therefore fall
or rise in response to the changes in the values of the underlying security or
index. They are subject to both credit and interest rate risks and therefore the
Funds could receive more or less than they originally invested when the notes
mature, or they might receive less interest than the stated coupon payment if
the underlying investment or index does not perform as anticipated. Their values
may be very volatile and they may have a limited trading market, making it
difficult for the Funds to sell this type of investment at an acceptable price.
o "Inverse Floaters." Certain types of variable rate bonds known as "inverse
floaters" pay interest at rates that vary as the yields generally available on
short-term tax-exempt bonds change. However, the yields on inverse floaters move
in the opposite direction of yields on short-term bonds in response to market
changes. As interest rates rise, inverse floaters produce less current income,
and their market value can become volatile. Inverse floaters are a type of
"derivative security" that Disciplined Allocation Fund can purchase. Some have a
"cap," so that if interest rates rise above the "cap," the security pays
additional interest income. If rates do not rise above the "cap," Disciplined
Allocation Fund will have paid an additional amount for a feature that proves
worthless. Disciplined Allocation Fund will not invest more than 5% of its total
assets in inverse floaters. Total Return Fund cannot invest in these types of
investments.
Hedging. Both funds can buy and sell certain kinds of futures contracts, put and
call options, swaps, forward contracts and options on futures and broadly-based
securities indices. These are all referred to as "hedging instruments." Neither
fund currently use hedging extensively or for speculative purposes. Both funds
have limits on their use of hedging instruments and are not required to use them
in seeking their objective.
As a fundamental policy, Disciplined Allocation Fund cannot purchase or sell
puts or calls, except that it can sell covered call options. Up to 20% of
Disciplined Allocation Fund's total assets can be subject to covered call
options sold by the Fund. Up to 25% of Total Return Fund's total assets can be
subject to covered call options sold by the Fund.
Hedging involves risk. If the Manager uses a hedging instrument at the wrong
time or judges market conditions incorrectly, the strategy could reduce the
Funds' respective returns. The Funds could also experience losses if the prices
of their futures and options positions were not correlated with their other
investments or if they cannot close out a position because of an illiquid market
for the future or option.
Interest rate swaps are subject to credit risks (if the other party fails to
meet its obligations) as well as interest rate risks. The Funds could be
obligated to pay more under their swap agreements than they receive under them,
as a result of interest rate changes. Neither fund may enter into swaps with
respect to more than 25% of its total assets.
When-Issued and Delayed-Delivery Transactions. Both funds may purchase
securities on a "when-issued" basis and may purchase or sell such securities on
a "delayed-delivery" basis. Between the purchase and settlement, no payment is
made for the security and no interest accrues to the buyer from the investment.
The Funds earn no income prior to settlement, and there is a risk of loss to the
Funds if the value of the security declines prior to the settlement date.
Illiquid and Restricted Securities. Investments may be illiquid because they do
not have an active trading market, making it difficult to value them or dispose
of them promptly at an acceptable price. As a fundamental policy, Disciplined
Allocation Fund will not invest more than 10% of its total assets in illiquid or
restricted securities. As a non-fundamental policy, Disciplined Allocation Fund
currently applies that limitation to 10% of its net assets. Total Return Fund
will not invest more than 10% of its net assets in illiquid or restricted
securities (the Board can increase that amount to 15%).
Both funds can acquire restricted securities through private placements. A
restricted security is one that has a contractual restriction on its resale or
that cannot be sold publicly until it is registered under the Securities Act of
1933. Certain restricted securities that are eligible for resale to qualified
institutional buyers may not be subject to that limit. The Manager monitors
holdings of illiquid securities on an ongoing basis to determine whether to sell
any holdings to maintain adequate liquidity.
Asset-Backed Securities. Disciplined Allocation Fund can buy asset-backed
securities, which are fractional interests in pools of loans collateralized by
the loans or other assets or receivables. They are issued by trusts and special
purpose corporations that pass the income from the underlying pool to the buyer
of the interest. These securities are subject to the risk of default by the
issuer as well as by the borrowers of the underlying loans in the pool.
Loans of Portfolio Securities. Both funds can lend their portfolio securities to
brokers, dealers and other financial institutions. They might do so to raise
cash for liquidity purposes. As a fundamental policy, these loans are limited to
not more than 331/3% of the value of Disciplined Allocation Fund's total assets.
These loans are limited to not more than 10% of the value of Total Return Fund's
net assets.
Neither fund presently intends to engage in loans of securities that will exceed
5% of the value of that fund's total assets. There are risks in connection with
securities lending. The Funds might experience a delay in receiving additional
collateral to secure a loan, or a delay in recovery of the loaned securities.
Municipal Securities. Disciplined Allocation Fund can buy municipal bonds and
notes, tax-exempt commercial paper, certificates of participation in municipal
leases and other debt obligations. These debt obligations are issued by the
governments of states, as well as their political subdivisions (such as cities,
towns and counties), or by the District of Columbia and their agencies and
authorities. Disciplined Allocation Fund can also buy securities issued by any
commonwealths, territories or possessions of the United States, or their
respective agencies, instrumentalities or authorities. The Fund would invest in
municipal securities because of the income and portfolio diversification they
offer rather than for the tax-exempt nature of the income they pay. The Fund can
buy both long-term municipal securities (those securities having a maturity of
more than one year) and short-term municipal securities (those securities having
a maturity of up to one year).
Floating Rate and Variable Rate Obligations. Some securities Disciplined
Allocation Fund can purchase have variable or floating interest rates. Variable
rates are adjusted at stated periodic intervals. Variable rate obligations can
have a demand feature that requires the Fund to tender the obligation to the
issuer or a third party prior to its maturity.
The interest rate on a floating rate demand note is adjusted automatically
according to a stated prevailing market rate, such as a bank's prime rate, the
91-day U.S. Treasury Bill rate, or some other standard. The instrument's rate is
adjusted automatically each time the base rate is adjusted. The interest rate on
a variable rate note is also based on a stated prevailing market rate but is
adjusted automatically at specified intervals of not less than one year.
Generally, the changes in the interest rate on such securities reduce the
fluctuation in their market value.
Participation Interests. Both funds may invest in participation interests,
subject to each fund's limitation on investments in illiquid investments. A
participation interest is an undivided interest in a loan made by the issuing
financial institution in the proportion that the buyer's participation interest
bears to the total principal amount of the loan. No more than 5% of each fund's
net assets can be invested in participation interests of the same borrower.
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. If a borrower fails to pay scheduled interest or principal
payments, the Funds could experience a reduction in their income. The value of
that participation interest might also decline, which could affect the net asset
value of the Funds' shares. If the issuing financial institution fails to
perform its obligations under the participation agreement, the Funds might incur
costs and delays in realizing payment and suffer a loss of principal and/or
interest.
Forward Rolls. Disciplined Allocation Fund can enter into "forward roll"
transactions with respect to mortgage-related securities, which are limited to
10% of its total assets. In this type of transaction, the Fund sells a
mortgage-related security to a buyer and simultaneously agrees to repurchase a
similar security (the same type of security, and having the same coupon and
maturity) at a later date at a set price. The securities that are repurchased
typically will be collateralized by different pools of mortgages (with different
prepayment histories) than the securities that have been sold. Proceeds from the
sale are invested in short-term instruments, such as repurchase agreements. The
income from those investments, plus the fees from the forward roll transaction,
are expected to generate income to the Fund in excess of the yield on the
securities that have been sold.
Disciplined Allocation Fund will only enter into "covered" rolls. To assure its
future payment of the purchase price, the Fund will identify on its books liquid
assets in an amount equal to the payment obligation under the roll.
These transactions have risks. During the period between the sale and the
repurchase, Disciplined Allocation Fund will not be entitled to receive interest
and principal payments on the securities that have been sold. It is possible
that the market value of the securities Disciplined Allocation Fund sells may
decline below the price at which it is obligated to repurchase securities.
Repurchase Agreements. Both funds can acquire securities subject to repurchase
agreements. In a repurchase transaction, the Fund acquires a security from, and
simultaneously resells it to an approved vendor 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.
Repurchase agreements having a maturity beyond seven days are limited to 10% of
each fund's net assets. That limitation is a fundamental policy for Disciplined
Allocation Fund. There is no limit on the amount of either fund's net assets
that may be subject to repurchase agreements of seven days or less. The Funds
may enter into repurchase agreements for liquidity purposes to meet anticipated
redemptions of fund shares, or pending the investment of the proceeds from sales
of fund shares, or pending the settlement of portfolio securities transactions
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 Funds use them to "lock in" the U.S. dollar prices of a securities
denominated in a foreign currency that they have bought or sold, or to protect
against possible losses from changes in the relative values of the U.S. dollar
and a foreign currency. The Funds limit their exposure in foreign currency
exchange contracts in a particular foreign currency to the amount of its assets
denominated in that currency or a closely-correlated currency.
Borrowing. As a fundamental policy, Disciplined Allocation Fund can borrow up to
10% of the value of its total assets. It can borrow only from banks as a
temporary measure for extraordinary or emergency purposes. As a fundamental
policy, Total Return Fund cannot borrow except for temporary emergency purposes
or under other unusual circumstances.
Portfolio Turnover. Both funds may engage in short-term trading to try to
achieve their objectives. Portfolio turnover affects brokerage costs the Funds
pay, and the Funds' performance. If the Funds realize capital gains when they
sell their portfolio investments, they must generally pay those gains out to
shareholders, increasing their taxable distributions.
Investment Restrictions
As discussed in more detail below under the section entitled "Subsequent Total
Return Fund Shareholder Meeting," some of Total Return Fund's investment
restrictions, subject to shareholder approval, may be changed later this year.
As a non-fundamental policy, Total Return Fund cannot invest in securities of
any corporation which has a record of operations of less than three years,
including operations of any predecessors.
Both Disciplined Allocation Fund and Total Return Fund have certain additional
investment restrictions that are fundamental policies, changeable only by
shareholder approval. In general, the Funds' investment restrictions are similar
and are discussed below.
o Diversification. Neither fund can buy securities issued or guaranteed by any
one issuer if more than 5% of its total assets would be invested in
securities of that issuer or if it would then own more than 10% of that
issuer's voting securities. For Total Return Fund this limitation only
applies to 75% of its total assets. Disciplined Allocation Fund also cannot
purchase or invest more than 15% of its total assets in the obligations of
any one bank. Because Total Return Fund's diversification policy applies to
only 75% of its total assets, Total Return Fund potentially has more risk
than Disciplined Allocation Fund.
o Concentration. Neither fund can concentrate investments. That means they
cannot purchase securities of companies in any one industry if 25% or more of
their respective total assets would consist of securities of companies in
that industry.
o Loans. Neither fund can lend money except that both funds can make loans of
portfolio securities as described above, and enter in repurchase agreements
or when-issued or delayed-delivery transactions (or similar transactions).
o Pledging Assets. Neither fund can pledge, mortgage or otherwise encumber,
transfer or assign any of its assets to secure a debt, except that
Disciplined Allocation Fund may pledge up to 10% of its assets as security
for its permitted borrowing authority. Collateral arrangements for premium
and margin payments in connection with hedging instruments are not deemed to
be a pledge of assets by either fund.
o Margin and Short Sales. Neither fund can purchase securities on margin or
make short sales of securities or maintain a short position. However, both
funds can make margin deposits in connection with any of their investments
and Disciplined Allocation Fund can obtain such short- term credits as may be
necessary for the clearance of purchases and sales of portfolio securities.
o Investment for Control. Neither fund can invest in companies for the purpose
of acquiring control or management of those companies.
o Underwriting. Neither fund can underwrite securities of other companies. A
permitted exception is in the case where the Funds are deemed to be
underwriters under the Securities Act of 1933 when reselling any securities
held in their own portfolios.
o Senior Securities. Neither fund can issue "senior securities," but this
restriction does not prohibit certain investment activities for which assets
of the Funds are designated as segregated, or margin, collateral or escrow
arrangements are established, to cover the related obligations. Examples of
those activities include borrowing money, reverse repurchase agreements,
delayed-delivery and when-issued arrangements for portfolio securities
transactions, and contracts to buy or sell derivatives, hedging instruments,
options or futures.
o Total Return Fund cannot invest in or hold securities of any issuer if
officers and directors of the Fund or the Manager individually beneficially
own more than 1/2 of 1% of the securities of that issuer and together own
more than 5% of the securities of that issuer.
o Total Return Fund cannot invest in real estate or in interests in real
estate. However, the Fund can purchase securities of issuers holding real
estate or interests in real estate (including REITs).
o Total Return Fund cannot invest in physical commodities or physical commodity
contracts or buy securities for speculative short-term purposes. However, the
Fund can buy and sell any of the hedging instruments permitted by any of its
other policies. It can also buy and sell options, futures, securities or
other instruments backed by physical commodities or whose investment return
is linked to changes in the price of physical commodities.
o Total Return Fund cannot accept the purchase price for any of its shares
without immediately issuing an appropriate number of shares.
o Disciplined Allocation Fund cannot purchase or sell interests in oil, gas or
other mineral exploration or development programs, commodities, commodity
contracts or real estate. However, the Fund can purchase securities of
issuers that invest or deal in any of the above interests and can invest for
hedging purposes in futures contracts on securities, financial instruments
and indices, and foreign currency, as are approved for trading on a
registered exchange.
o Disciplined Allocation Fund cannot purchase securities of other investment
companies, except in connection with a merger, consolidation, acquisition or
reorganization. It can purchase, in the open market, securities of closed-end
investment companies if no underwriter or dealer's commission or profit,
other than the customary broker's commission is involved and only if
immediately thereafter not more than 10% of the Fund's total assets, taken at
market value, would be invested in such securities.
o Disciplined Allocation Fund cannot allow its current obligations under
reverse repurchase agreements, together with borrowings, to exceed 1/3 of the
value of its total assets (less all its liabilities other than the
obligations under borrowings and such agreements).
o Disciplined Allocation Fund cannot purchase or sell puts, calls or
combinations thereof, except that it can sell covered call options.
Description of Brokerage Practices
The brokerage practices of the Funds are the same. Brokerage for the Funds is
allocated subject to the provisions of the Funds' respective investment advisory
agreements and the Manager's internal procedures and rules. Generally, the
Manager's portfolio traders allocate brokerage based upon recommendations from
the Funds' portfolio managers. In certain instances, portfolio managers may
directly place trades and allocate brokerage. In either case, the Manager's
executive officers supervise the allocation of brokerage.
Transactions in securities other than those for which an exchange is the primary
market are generally done with principals or market makers. In transactions on
foreign exchanges, the Funds may be required to pay fixed brokerage commissions
and therefore would not have the benefit of negotiated commissions available in
U.S. markets. Brokerage commissions are paid primarily for transactions in
listed securities or for certain fixed-income agency transactions in the
secondary market. Otherwise brokerage commissions are paid only if it appears
likely that a better price or execution can be obtained by doing so. In an
option transaction, the Funds ordinarily use the same broker for the purchase or
sale of the option and any transaction in the securities to which the option
relates.
Most purchases of debt securities made by both funds are principal transactions
at net prices. The Funds usually deal directly with the selling or purchasing
principal or market maker without incurring charges for the services of a broker
on its behalf unless the Manager determines that a better price or execution may
be obtained by using the services of a broker. Therefore, the Funds do not incur
substantial brokerage costs on transactions in debt securities.
Portfolio securities purchased from underwriters include a commission or
concession paid by the issuer to the underwriter in the price of the security.
Portfolio securities purchased from dealers include a spread between the bid and
asked price. The Funds seek to obtain prompt execution of orders at the most
favorable net prices.
Other funds advised by the Manager have investment objectives and policies
similar to those of the Funds. Those other funds may purchase or sell the same
securities as the Funds at the same time as the Funds, which could affect the
supply and price of the securities. If two or more of funds advised by the
Manager purchase the same security on the same day from the same dealer, the
transactions under those combined orders are averaged as to price and allocated
in accordance with the purchase or sale orders actually placed for each account.
The investment advisory agreements of both funds permit the Manager to allocate
brokerage for research services. 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. Investment research received by the Manager for the
commissions paid by those other accounts may be useful both to the Funds and one
or more of the Manager's other accounts. Investment research services may be
supplied to the Manager by a third party at the instance of a broker through
which trades are placed. Investment research services include information and
analyses on particular companies and industries as well as market or economic
trends and portfolio strategy, 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 Boards for both funds have permitted the Manager to use concessions on
fixed-price offerings to obtain research, in the same manner as is permitted for
agency transactions. The Boards have also permitted the Manager to use stated
commissions on secondary fixed-income agency trades to obtain research if the
broker represents 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 broaden the scope and supplement the
research activities of the Manager. That research provides additional views and
comparisons for consideration and helps the Manager to obtain market information
for the valuation of securities that are either held in the Funds' portfolios or
are being considered for purchase. The Manager provides information to the
Boards of the Funds about the commissions paid to brokers furnishing research
services, together with the Manager's representation that the amount of such
commissions was reasonably related to the value or benefit of such services.
Please refer to the Total Return Fund and the Disciplined Allocation Fund
Statements of Additional Information for further information on each fund's
brokerage practices.
Expense Ratios and Performance
The ratio of expenses to average annual net assets for Class A, Class B, and
Class C shares of Disciplined Allocation Fund for the fiscal year ended October
31, 1999 were 1.04%, 1.80% and 1.80%, respectively. The ratio of expenses to
average annual net assets for Class A, Class B and Class C shares of Total
Return Fund for the fiscal year ended December 31, 1999 were 0.87%, 1.67%, and
1.68%, respectively. Additional expense information is set forth in "Comparative
Fee Tables" above and in Disciplined Allocation Fund and Total Return Funds'
Annual Reports, dated as of October 31, 1999 and December 31, 1999,
respectively. The performance of the Funds for the 1-, 5- and 10-year periods,
as applicable, ended June 30, 2000 is set forth in Exhibit B. In addition, Total
Return Fund's performance since inception is compared to the performance of a
broad-based index in Exhibit C.
Set forth in Total Return Fund's prospectus accompanying this Proxy Statement
and Prospectus and incorporated by reference herein, under "The Fund's Past
Performance," is the following past performance information: (i) a bar chart
detailing annual total returns of Class A shares of Total Return Fund as of
December 31 for the last ten calendar years, and (ii) a table detailing how the
average annual total returns of the Fund's Class A, Class B, and Class C shares
compare to those of the S & P 500 Index, an unmanaged index of equity securities
that is a measure of the general domestic stock market. Additional information
with respect to Total Return Fund's performance during the past fiscal year,
including a discussion of factors that materially affected its performance and
relevant market conditions, is set forth in Total Return Fund's Annual Report
dated as of December 31, 1999 that is included in the Total Return Fund
Additional Statement and incorporated herein by reference.
Shareholder Services
The policies of Disciplined Allocation Fund and Total Return Fund with respect
to minimum initial investments and subsequent investments by their shareholders
are the same. Both Disciplined Allocation Fund and Total Return Fund offer the
following privileges: (i) Rights of Accumulation, (ii) Letters of Intent, (iii)
reinvestment of dividends and distributions at net asset value, (iv) net asset
value purchases by certain individuals and entities, (v) Asset Builder
(automatic investment) Plans, (vi) Automatic Withdrawal and Exchange Plans for
shareholders who own shares of the Fund valued at $5,000 or more, (vii)
AccountLink and PhoneLink arrangements, (viii) exchanges of shares for shares of
the same class of certain other funds at net asset value, (ix) telephone
redemption and exchange privileges, and (x) redemptions via Federal Funds wire.
Shareholders may purchase shares through OppenheimerFunds AccountLink, which
links a shareholder account to an account at a bank or financial institution and
enables shareholders to send money electronically between those accounts to
perform a number of types of account transactions. This includes the purchase of
shares through the automated telephone system (PhoneLink) and through the
Internet. Exchanges can also be made by telephone, or automatically through
PhoneLink or through the OppenheimerFunds Internet website. After AccountLink
privileges have been established with a bank account, shares may be purchased by
telephone in an amount up to $100,000. Shares of either fund may be exchanged
for shares of certain OppenheimerFunds at net asset value per share; however,
shares of a particular class may be exchanged only for shares of the same class
of other Oppenheimer funds. Shareholders of the Funds may redeem their shares by
written request, by telephone request or on the OppenheimerFunds Internet
website in an amount up to $100,000 in any seven-day period. Shareholders may
arrange to have share redemption proceeds wired to a pre-designated account at a
U.S. bank or other financial institution that is an ACH member, through
AccountLink. There is no dollar limit on Internet or telephone redemption
proceeds sent to a bank account when AccountLink has been established.
Shareholders may also redeem shares automatically by telephone by using
PhoneLink. Shareholders of the Funds may also have the Transfer Agent send
redemption proceeds of $2,500 or more by Federal Funds wire to a designated
commercial bank which is a member of the Federal Reserve wire system.
Shareholders of the Funds have up to six months to reinvest redemption proceeds
of their Class A shares which they purchase subject to a sales charge or their
Class B shares on which they paid a contingent deferred sales charge, in Class A
shares of the Funds or other Oppenheimer funds without paying a sales charge.
Total Return Fund may redeem accounts valued at less than $500 if the account
has fallen below such stated amount for reasons other than market value
fluctuations and Disciplined Allocation Fund may redeem accounts with less than
100 shares.
Rights of Shareholders
The shares of each fund, including shares of each class, entitle the holder to
one vote per share on the election of Directors, and on all other matters
submitted to shareholders of the Fund. Each share of the Funds represents an
interest in the Funds proportionately equal to the interest of each other share
of the same class and entitles the holder to one vote per share (and a
fractional vote for a fractional share) on matters submitted to their vote at
shareholder meetings. Shareholders of Total Return Fund vote together, and
shareholders of Disciplined Allocation Fund vote together with the shareholders
of other series of Oppenheimer Series Fund, Inc. in the aggregate, on certain
matters at shareholder meetings, such as the election of Directors and
ratification of appointment of auditors. Shareholders of a particular series or
class vote separately on proposals which affect that series or class, and
shareholders of a series or class which are not affected by that matter are not
entitled to vote on the proposal. For example, only shareholders of a series,
such as Disciplined Allocation Fund, vote exclusively on any material amendment
to the investment advisory agreement with respect to the series. Only
shareholders of a class of shares vote on certain amendments to the Distribution
and Service Plans and Agreements if the amendments affect only that class. Both
Boards of Directors of the Oppenheimer Series Fund, Inc. and Total Return Fund,
Inc. are authorized to create new series and classes of series. Both Boards may
reclassify unissued shares of the Funds into additional series or classes of
shares. Both Boards may also divide or combine the shares of a class into a
greater or lesser number of shares without thereby changing the proportionate
beneficial interest of a shareholder in each fund. Shares do not have cumulative
voting rights or preemptive or subscription rights. Shares may be voted in
person or by proxy.
Class A, Class B and Class C shares of Disciplined Allocation Fund and the Class
A, Class B and Class C shares of Total Return Fund that Disciplined Allocation
Fund shareholders will receive in the Reorganization participate equally in the
Funds' dividends and distributions and in the Funds' net assets upon
liquidation, after taking into account the different expenses paid by each
class. Distributions and dividends for each class of shares of the respective
Funds will be different, and Class B and Class C dividends and distributions
will be lower than those of Class A.
It is not contemplated that Oppenheimer Series Fund, Inc. or Total Return Fund,
Inc. will hold regular annual meetings of shareholders. Under Maryland law and
the Investment Company Act, shareholders of Disciplined Allocation Fund do not
have rights of appraisal as a result of the transactions contemplated by the
Reorganization Agreement. However, they have the right at any time prior to the
consummation of such transaction to redeem their shares at net asset value, less
any applicable contingent deferred sales charge. Shareholders of both of the
Funds have the right, under certain circumstances, to remove a Director, as the
case may be, and will be assisted in communicating with other shareholders for
such purpose.
Disciplined Allocation Fund is a series of Oppenheimer Series Fund, Inc. which
is organized as a Maryland corporation as is Total Return Fund. As a general
matter, shareholders of a corporation will not be liable to the corporation or
its creditors with respect to their interests in the corporation as long as
their shares have been paid for and the requisite corporate formalities have
been observed, both in the organization of the corporation and in the conduct of
its business.
Organization and History
Disciplined Allocation Fund is a series of Oppenheimer Series Fund, Inc. which
was organized in 1981 as a Maryland corporation and was called Connecticut
Mutual Investment Accounts, Inc. until March 18, 1996, when the Manager became
the Fund's investment advisor. Disciplined Allocation Fund is a diversified,
open-end mutual fund which, until March 18, 1996, was called Connecticut Mutual
Total Return Account.
Total Return Fund, Inc. is a diversified, open-end mutual fund that was
organized in 1944 and has been a Maryland corporation since 1979.
The Manager acts as investment advisor to both funds and the portfolio managers
for the Funds are employed by the Manager. The Directors and officers of the
Funds oversee the Manager and the portfolio managers.
Management and Distribution Arrangements
The Manager, located at Two World Trade Center, New York, New York 10048-0203,
acts as the investment advisor to both Disciplined Allocation Fund and Total
Return Fund. The terms and conditions of the investment advisory agreement for
each fund are substantially similar, except for the management fee rate. The
monthly management fee payable to the Manager by each fund is set forth under
"Synopsis - Investment Advisory and Distribution and Service Plan Fees." The
12b-1 Distribution and Service Plan fees paid by the Funds with respect to Class
A, Class B and Class C shares are also set forth above under "Synopsis -
Investment Advisory and Distribution and Service Plan Fees."
Pursuant to each investment advisory agreement, the Manager acts as the
investment advisor for the Funds and supervises the investment program of the
Funds. The investment advisory agreements state that the Manager will provide
administrative services for the Funds, including completion and maintenance of
records, preparation and filing of reports required by the SEC, reports to
shareholders, and composition of proxy statements and registration statements
required by federal and state securities laws. Further, the Manager has agreed
to furnish the Funds with office space, facilities and equipment and arrange for
its employees to serve as officers for the Funds. The administrative services to
be provided by the Manager under the investment advisory agreement will be at
its own expense.
Expenses not expressly assumed by the Manager under each fund's advisory
agreement or by the Distributor under the General Distributor's Agreement are
paid by the Funds. The investment advisory agreements list examples of expenses
paid by the Funds, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Directors, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs, certain printing
and registration costs and non-recurring expenses, including litigation costs.
The management fee paid by Disciplined Allocation Fund for the fiscal year ended
October 31, 1999 was $ 1,994,511. The management fee paid by Total Return Fund
for the fiscal year ended December 31, 1999 was $21,073,662.
Both investment advisory agreements state that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties or
reckless disregard of its obligations and duties under the investment advisory
agreement, the Manager is not liable for any loss the Funds sustain for any
investment, adoption of any investment policy, or the purchase, sale or
retention of any security. The agreements permit the Manager to act as
investment advisor for any other person, firm or corporation and to use the name
"Oppenheimer" in connection with other investment companies for which it may act
as investment advisor or general distributor. If the Manager shall no longer act
as investment advisor to the Funds, the Manager may withdraw the right of the
Funds to use the name "Oppenheimer" as part of their names.
The Manager is controlled by Oppenheimer Acquisition Corp., a holding company
owned in part by senior management of the Manager and ultimately controlled by
Massachusetts Mutual Life Insurance Company, a mutual life insurance company
that also advises pension plans and investment companies. The Manager has been
an investment advisor since January 1960. The Manager (including subsidiaries
and an affiliate) managed more than $120 billion in assets as of March 31, 2000,
including other Oppenheimer funds with more than 5 million shareholder accounts.
The Manager is located at Two World Trade Center, 34th Floor, New York, New York
10048-0203. OppenheimerFunds Services, a division of the Manager, acts as
transfer and shareholder servicing agent on an at-cost basis for both
Disciplined Allocation Fund and Total Return Fund and for certain other open-end
funds managed by the Manager and its affiliates.
The Distributor, under a General Distributor's Agreement with each of the Funds,
acts as the principal underwriter in the continuous public offering of shares of
both funds but is not obligated to sell a specific number of shares. The
Distributor pays expenses normally attributable to sales efforts, including
advertising and the cost of printing and mailing prospectuses, other than those
furnished to existing shareholders, and other than payments the Funds make to
the Distributor under their respective Distribution and Service Plans. For the
fiscal year ended October 31, 1999, sales charges on sales of Class A shares
totaled $400,298 for Disciplined Allocation Fund of which $295,333 was retained
by the Distributor or an affiliated broker. For the fiscal year ended December
31, 1999 sales charges on sales of Class A shares totaled $3,586,666, for Total
Return Fund of which $1,235,653 was retained by the Distributor or an affiliated
broker. For the fiscal year ended October 31, 1999, sales charges advanced to
dealers by the Distributor on sales of Disciplined Allocation Fund's Class A,
Class B and Class C shares totaled $46,607, $250,032, and $25,954 respectively.
For the fiscal year ended December 31, 1999, sales charges advanced to dealers
by the Distributor on sales of Total Return Fund's Class A, Class B and Class C
shares totaled $101,858, $4,474,217 and $223,694, respectively. For additional
information about distribution of the Funds' shares and the payments made by the
Funds to the Distributor in connection with such activities, please refer to
"Distribution and Service Plans," in the Total Return Fund and the Disciplined
Allocation Fund Prospectuses and Statements of Additional Information.
Purchase of Additional Shares
Class A shares of both funds generally may be purchased with an initial sales
charge of 5.75% for purchases of less than $25,000. The sales charge of 5.75% is
reduced for purchases of Class A shares of $25,000 or more. For purchases of $1
million or more there is generally no initial sales charge; however, if those
shares are redeemed within 18 calendar months of the end of the calendar month
of their purchase, a contingent sales charge may be deducted from the redemption
proceeds. Class B shares of the Funds are sold at net asset value without an
initial sales charge. If Class B shares are redeemed within six years of the end
of the calendar month of their purchase, a contingent deferred sales charge may
be deducted of up to 5%, depending upon how long such shares had been held.
Class C shares may be purchased without an initial sales charge, but if sold
within 12 months of buying them, a contingent deferred sales charge of 1% may be
deducted.
The initial sales charge and contingent deferred sales charge on Class A, Class
B and Class C shares of Total Return Fund will only affect shareholders of
Disciplined Allocation Fund to the extent that they desire to make additional
purchases of shares of Total Return Fund in addition to the shares which they
will receive as a result of the Reorganization. Class A, Class B and Class C
shares to be issued under the Reorganization Agreement will be issued by Total
Return Fund at net asset value. Future dividends and capital gain distributions
of Total Return Fund, if any, may be reinvested without sales charge. The
contingent deferred sales charge for each class of shares for both funds is the
same. If Class A, Class B and Class C shares of Disciplined Allocation Fund are
currently subject to a contingent deferred sales charge, the Total Return Fund
shares issued in the Reorganization will continue to be subject to the same
contingent deferred sales charge and holding period. Any Disciplined Allocation
Fund shareholder who is entitled to a reduced sales charge on additional
purchases by reason of a Letter of Intent or Right of Accumulation based upon
holdings of shares of Disciplined Allocation Fund will continue to be entitled
to a reduced sales charge on any future purchase of shares of Total Return Fund.
Dividends and Distributions
Both funds intend to declare dividends separately for each class of shares from
net investment income on a quarterly basis. The Funds intend to pay dividends to
shareholders in March, June, September and December on a date selected by the
Boards of Directors.
Disciplined Allocation Fund has no fixed dividend rate and cannot guarantee that
it will pay any dividends or distributions. Total Return Fund attempts to pay
dividends on Class A shares at a constant level. However, there is no assurance
that it will be able to do so. The Board of Directors of Total Return Fund may
change the targeted dividend rate at any time without notice to shareholders.
Dividends and other distributions paid on Class A shares of Total Return Fund
will generally be higher than dividends for Class B and Class C shares, which
normally have higher expenses than Class A. Total Return Fund cannot guarantee
that it will pay any dividends or other distributions.
Both funds may realize capital gains on the sale of portfolio securities. If
they do, they may make distributions out of any net short-term or long-term
capital gains in December of each year. The Funds may make supplemental
distributions of dividends and capital gains following the end of their fiscal
year. There can be no assurance that either Fund will pay any capital gains
distributions in a particular year.
SUBSEQUENT TOTAL RETURN FUND SHAREHOLDER MEETING
Total Return Fund expects to hold a shareholder meeting later this Fall. At that
meeting, shareholders of Total Return Fund will be asked to elect directors and
ratify the selection of independent auditors. In addition, shareholders of Total
Return Fund will be asked to approve amendments to the Fund's fundamental
policies related to borrowing, diversification and lending.
Additionally, shareholders of Total Return Fund will be asked to approve the
elimination of the following fundamental investment policies of the Fund: (1)
the limitation on pledging, mortgaging or hypothecating portfolio securities;
(2) the limitation on purchasing securities of companies in which officers and
directors of the Fund have an interest; (3) the limitation on purchasing
securities on margin; (4) the prohibition on short sales; (5) the prohibition on
investing in other companies for the purpose of exercising control or management
of those companies; (6) the prohibition on purchasing securities for short-term
speculative purposes; and (7) the prohibition on accepting the purchase price of
its shares without immediately issuing an appropriate number of shares.
Although the proposed changes in fundamental policies will allow Total Return
Fund greater investment flexibility to respond to future investment
opportunities, the Fund's Manager does not anticipate that the proposed changes,
individually or in the aggregate, will result in a material change in the
current level of investment risk associated with an investment in the Fund. To
the extent advisable, the Board of Total Return Fund may recommend additional
proposals.
Importantly, the record date for the Total Return Fund shareholders meeting will
be fixed after consummation of the proposed reorganization should it be
approved. Therefore, if the proposed reorganization is approved by shareholders
of Disciplined Allocation Fund, the former shareholders of Disciplined
Allocation Fund will have an opportunity to vote on the proposals related to
Total Return Fund as outlined above.
METHOD OF CARRYING OUT THE REORGANIZATION
The consummation of the transactions contemplated by the Reorganization
Agreement is contingent upon the approval of the Reorganization by the
shareholders of Disciplined Allocation Fund and the receipt of the opinions and
certificates set forth in Sections 10 and 11 of the Reorganization Agreement and
the occurrence of the events described in those Sections. Under the
Reorganization Agreement, all the assets of Disciplined Allocation Fund,
excluding the Cash Reserve, will be delivered to Total Return Fund in exchange
for Class A, Class B and Class C shares of Total Return Fund. The Cash Reserve
to be retained by Disciplined Allocation Fund will be sufficient in the
discretion of the Board for the payment of Disciplined Allocation Fund's
liabilities, and Disciplined Allocation Fund's expenses of liquidation.
Assuming the shareholders of Disciplined Allocation Fund approve the
Reorganization, the actual exchange of assets is expected to take place on
August 25, 2000, or as soon thereafter as is practicable ("Closing Date") on the
basis of net asset values as of the close of business on the business day
preceding the Closing Date ("Valuation Date"). Under the Reorganization
Agreement, all redemptions of shares of Disciplined Allocation Fund shall be
permanently suspended at the close of business on the Valuation Date; only
redemptions received in proper form on or prior to the close of business on that
date shall be fulfilled by it; redemption requests received by Disciplined
Allocation Fund after that date will be treated as request for redemptions of
Class A, Class B and Class C shares of Total Return Fund to be distributed to
the shareholders requesting redemption. The exchange of assets for shares will
be done on the basis of the per share net asset value of the Class A, Class B
and Class C shares of Total Return Fund, and the value of the assets of
Disciplined Allocation Fund to be transferred as of the close of business on the
Valuation Date, valued in the manner used by Total Return Fund in the valuation
of assets. Total Return Fund is not assuming any of the liabilities of
Disciplined Allocation Fund, except for portfolio securities purchased which
have not settled and outstanding shareholder redemption and dividend checks.
The net asset value of the shares transferred by Total Return Fund to
Disciplined Allocation Fund will be the same as the value of the assets received
by Total Return Fund. For example, if, on the Valuation Date, Disciplined
Allocation Fund were to have securities with a market value of $95,000 and cash
in the amount of $10,000 (of which $5,000 was to be retained by it as the Cash
Reserve), the value of the assets which would be transferred to Total Return
Fund would be $100,000. If the net asset value per share of Total Return Fund
were $10 per share at the close of business on the Valuation Date, the number of
shares to be issued would be 10,000 ($100,000 / $10). These 10,000 shares of
Total Return Fund would be distributed to the former shareholders of Disciplined
Allocation Fund. This example is given for illustration purposes only and does
not bear any relationship to the dollar amounts or shares expected to be
involved in the Reorganization.
In conjunction with the Closing Date, Disciplined Allocation Fund will
distribute on a pro rata basis to its shareholders of record on the Valuation
Date the Class A, Class B and Class C shares of Total Return Fund received by
Disciplined Allocation Fund at the closing, in liquidation of the outstanding
shares of Disciplined Allocation Fund, and the outstanding shares of Disciplined
Allocation Fund will be canceled. To assist Disciplined Allocation Fund in this
distribution, Total Return Fund will, in accordance with a shareholder list
supplied by Disciplined Allocation Fund, cause its transfer agent to credit and
confirm an appropriate number of shares of Total Return Fund to each shareholder
of Disciplined Allocation Fund. Certificates for Class A shares of Total Return
Fund will be issued upon written request of a former shareholder of Disciplined
Allocation Fund but only for whole shares with fractional shares credited to the
name of the shareholder on the books of Total Return Fund and only of shares
represented by certificates which are delivered for cancellation. Former Class A
shareholders of Disciplined Allocation Fund who wish certificates representing
their shares of Total Return Fund must, after receipt of their confirmations,
make a written request to OppenheimerFunds Services, P.O. Box 5270, Denver,
Colorado 80217. Shareholders of Disciplined Allocation Fund holding certificates
representing their shares will not be required to surrender their certificates
to anyone in connection with the Reorganization. After the Reorganization,
however, it will be necessary for such shareholders to surrender such
certificates in order to redeem, transfer, pledge or exchange any shares of
Total Return Fund.
Under the Reorganization Agreement, within one year after the Closing Date,
Disciplined Allocation Fund shall: (a) either pay or make provision for all of
its debts and taxes; and (b) either (i) transfer any remaining amount of the
Cash Reserve to Total Return Fund, if such remaining amount is not material (as
defined below) or (ii) distribute such remaining amount to the shareholders of
Disciplined Allocation Fund who were such on the Valuation Date. Such remaining
amount shall be deemed to be material if the amount to be distributed, after
deducting the estimated expenses of the distribution, equals or exceeds one cent
per share of the number of Disciplined Allocation Fund shares outstanding on the
Valuation Date. If the remaining Cash Reserve is distributed to former
Disciplined Allocation Fund shareholders, such distribution would be considered
a return of capital for federal income tax purposes, reducing the tax basis of
the shares received in the reorganization should it be approved. . If the Cash
Reserve is insufficient to satisfy any of Disciplined Allocation Fund's
liabilities, the Manager will assume responsibility to satisfy any such
liability. Within one year after the Closing Date, Disciplined Allocation Fund
will complete its liquidation.
Under the Reorganization Agreement, either Disciplined Allocation Fund or Total
Return Fund generally may abandon and terminate the Reorganization Agreement
without liability to the other party. See Exhibit A attached hereto.
In the event that the Reorganization is not consummated for any reason, the
Board will consider and may submit to the shareholders of Disciplined Allocation
Fund other alternatives.
ADDITIONAL INFORMATION
Financial Information
The Reorganization will be accounted for by the surviving fund in its financial
statements similar to a pooling without restatement. Further financial
information as to Disciplined Allocation Fund is contained in its current
Prospectus, which is available without charge from OppenheimerFunds Services,
the Transfer Agent, P.O. Box 5270, Denver, Colorado 80217, in its Annual Report
as of October 31, 1999, and in its Semi-Annual Report as of April 30, 2000, all
of which are included in the Additional Statement. Financial information for
Total Return Fund is contained in its current Prospectus accompanying this Proxy
Statement and Prospectus and in its Annual Report as of December 31, 1999 which
is included in the Additional Statement.
Public Information
Additional information about Disciplined Allocation Fund and Total Return Fund
is available, as applicable, in the following documents: (i) Total Return Fund's
Prospectus dated April 28, 2000 accompanying this Proxy Statement and Prospectus
and incorporated herein by reference; (ii) Disciplined Allocation Fund's
Prospectus dated February 28, 2000, which may be obtained without charge by
writing to OppenheimerFunds Services, P.O. Box 5270, Denver, Colorado 80217;
(iii) Total Return Fund's Annual Report as of December 31, 1999, which may be
obtained without charge by writing to OppenheimerFunds Services at the address
indicated above; (iv) Disciplined Allocation Fund's Annual Report as of October
31, 1999, which may be obtained without charge by writing to OppenheimerFunds
Services at the address indicated above and (v) Disciplined Allocation Fund's
Semi-Annual Report as of April 30, 2000, which may be obtained without charge by
writing to OppenheimerFunds Services at the address indicated above. The
documents set forth in (ii) and (iv) above are included in the Statement of
Additional Statement and the Additional Statement is incorporated herein by
reference. All of the foregoing documents may be obtained by calling the
toll-free number on the cover of this Proxy Statement and Prospectus.
Additional information about the following matters is contained in the
Additional Statement which includes the Total Return Fund Statement of
Additional Information, Disciplined Allocation Fund's Prospectus and the
Disciplined Allocation Fund Statement of Additional Information: the
organization and operation of Total Return Fund and Disciplined Allocation Fund;
more information on investment policies, practices and risks; information about
the Funds' respective Boards, officers and portfolio managers and their
responsibilities; a further description of the services provided by the Funds'
investment advisor, distributor, and transfer and shareholder servicing agent;
dividend policies; tax matters; an explanation of the method of determining the
offering price of the shares and/or contingent deferred sales charges, as
applicable of shares of Total Return Fund and Disciplined Allocation Fund;
purchase, redemption and exchange programs; the different expenses paid by each
class of shares; and distribution arrangements.
Disciplined Allocation Fund and Total Return Fund, are subject to the
informational requirements of the Securities Exchange Act of 1934, as amended,
and in accordance therewith, file reports and other information with the SEC.
Proxy material, reports and other information about Disciplined Allocation Fund
and Total Return Fund are of public record. You can also obtain copies of the
Statements of Additional Information and other Fund documents and reports by
visiting the SEC's Public Reference Room in Washington, D.C. (Phone
1.202.942.8090) or the EDGAR database on the SEC's Internet web site at
http://www.sec.gov. Copies may be obtained after payment of a duplicating fee by
electronic request at the SEC's e-mail address: publicinfo@sec.gov, or by
writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102.
OTHER BUSINESS
Management of Disciplined Allocation Fund knows of no business other than the
matters specified above which will be presented at the Meeting. Since matters
not known at the time of the solicitation may come before the Meeting, the proxy
as solicited confers discretionary authority with respect to such matters as
properly come before the Meeting, including any adjournment or adjournments
thereof, and it is the intention of the persons named as attorneys-in-fact in
the proxy to vote this proxy in accordance with their judgment on such matters.
By Order of the Board of Directors
Andrew J. Donohue, Secretary
July 19, 2000 205
A-11
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated as of June 1, 2000
by and between Oppenheimer Series Fund, Inc. on behalf of its series,
Oppenheimer Disciplined Allocation Fund, Inc. ("Disciplined Allocation Fund"), a
Maryland Corporation and Oppenheimer Total Return Fund, Inc. ("Total Return
Fund"), also a Maryland Corporation.
W I T N E S S E T H:
WHEREAS, the parties are each open-end investment companies of the management
type; and
WHEREAS, the parties hereto desire to provide for the reorganization pursuant to
Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"),
of Disciplined Allocation Fund through the acquisition by Total Return Fund of
substantially all of the assets of Disciplined Allocation Fund in exchange for
the voting shares of beneficial interest ("shares") of Class A, Class B and
Class C shares of Total Return Fund and the assumption by Total Return Fund of
certain liabilities of Disciplined Allocation Fund, which Class A, Class B and
Class C shares of Total Return Fund are to be distributed by Disciplined
Allocation Fund pro rata to its shareholders in complete liquidation of
Disciplined Allocation Fund and complete cancellation of its shares;
NOW, THEREFORE, in consideration of the mutual promises herein contained, the
parties hereto agree as follows:
1. The parties hereto hereby adopt this Agreement and Plan of
Reorganization (the "Agreement") pursuant to Section 368(a)(1) of the Code as
follows: The reorganization will be comprised of the acquisition by Total Return
Fund of substantially all of the assets of Disciplined Allocation Fund in
exchange for Class A, Class B and Class C shares of Total Return Fund and the
assumption by Total Return Fund of certain liabilities of Disciplined Allocation
Fund, followed by the distribution of such Class A, Class B and Class C shares
of Total Return Fund to the respective Class A, Class B and Class C shareholders
of Disciplined Allocation Fund in exchange for their Class A, Class B and Class
C shares of Disciplined Allocation Fund, all upon and subject to the terms of
the Agreement hereinafter set forth.
The share transfer books of Disciplined Allocation Fund will be
permanently closed at the close of business on the Valuation Date (as
hereinafter defined) and only redemption requests received in proper form on or
prior to the close of business on the Valuation Date shall be fulfilled by
Disciplined Allocation Fund; redemption requests received by Disciplined
Allocation Fund after that date shall be treated as requests for the redemption
of the shares of Total Return Fund to be distributed to the shareholder in
question as provided in Section 5 hereof.
2. On the Closing Date (as hereinafter defined), all of the assets of
Disciplined Allocation Fund on that date, excluding a cash reserve (the "Cash
Reserve") to be retained by Disciplined Allocation Fund, sufficient in its
discretion for the payment of the expenses of Disciplined Allocation Fund's
dissolution and its liabilities, but not in excess of the amount contemplated by
Section 10.E., shall be delivered as provided in Section 8 to Total Return Fund,
in exchange for and against delivery to Disciplined Allocation Fund on the
Closing Date of a number of Class A, Class B and Class C shares of Total Return
Fund, having an aggregate net asset value equal to the value of the assets of
Disciplined Allocation Fund so transferred and delivered.
3. The net asset value of Class A, Class B and Class C shares of Total
Return Fund and the value of the assets of Disciplined Allocation Fund to be
transferred shall in each case be determined as of the close of business of The
New York Stock Exchange on the Valuation Date. The computation of the net asset
value of the Class A, Class B and Class C shares of Total Return Fund and the
Class A, Class B and Class C shares of Disciplined Allocation Fund shall be done
in the manner used by Total Return Fund and Disciplined Allocation Fund,
respectively, in the computation of such net asset value per share as set forth
in their respective prospectuses. The methods used by Total Return Fund in such
computation shall be applied to the valuation of the assets of Disciplined
Allocation Fund to be transferred to Total Return Fund.
Disciplined Allocation Fund shall declare and pay, immediately prior to
the Valuation Date, a dividend or dividends which, together with all previous
such dividends, shall have the effect of distributing to Disciplined Allocation
Fund's shareholders all of Disciplined Allocation Fund's investment company
taxable income for taxable years ending on or prior to the Closing Date
(computed without regard to any dividends paid) and all of its net capital gain,
if any, realized in taxable years ending on or prior to the Closing Date (after
reduction for any capital loss carry-forward).
4. The closing (the "Closing") shall be at the offices of
OppenheimerFunds, Inc. (the "Agent"), 6803 S. Tucson Way, Englewood, CO 80112,
at 4:00 P.M. New York time on August 25, 2000 or at such other time or place as
the parties may designate or as provided below (the "Closing Date"). The
business day preceding the Closing Date is herein referred to as the "Valuation
Date."
In the event that on the Valuation Date either party has, pursuant to the
Investment Company Act of 1940, as amended (the "Act"), or any rule, regulation
or order thereunder, suspended the redemption of its shares or postponed payment
therefore, the Closing Date shall be postponed until the first business day
after the date when both parties have ceased such suspension or postponement;
provided, however, that if such suspension shall continue for a period of 60
days beyond the Valuation Date, then the other party to the Agreement shall be
permitted to terminate the Agreement without liability to either party for such
termination.
5. In conjunction with the Closing, Disciplined Allocation Fund shall
distribute on a pro rata basis to the shareholders of Disciplined Allocation
Fund as of the Valuation Date Class A, Class B and Class C shares of Total
Return Fund received by Disciplined Allocation Fund on the Closing Date in
exchange for the assets of Disciplined Allocation Fund in complete liquidation
of Disciplined Allocation Fund; for the purpose of the distribution by
Disciplined Allocation Fund of Class A, Class B and Class C shares of Total
Return Fund to Disciplined Allocation Fund's shareholders, Total Return Fund
will promptly cause its transfer agent to: (a) credit an appropriate number of
Class A, Class B and Class C shares of Total Return Fund on the books of Total
Return Fund to each Class A, Class B and Class C shareholder of Disciplined
Allocation Fund in accordance with a list (the "Shareholder List") of
Disciplined Allocation Fund shareholders received from Disciplined Allocation
Fund; and (b) confirm an appropriate number of Class A, Class B and Class C
shares of Total Return Fund to each Class A, Class B and Class C shareholder of
Disciplined Allocation Fund; certificates for Class A, Class B and Class C
shares of Total Return Fund will be issued upon written request of a former
shareholder of Disciplined Allocation Fund but only for whole shares, with
fractional shares credited to the name of the shareholder on the books of Total
Return Fund.
The Shareholder List shall indicate, as of the close of business on the
Valuation Date, the name and address of each shareholder of Disciplined
Allocation Fund, indicating his or her share balance. Disciplined Allocation
Fund agrees to supply the Shareholder List to Total Return Fund not later than
the Closing Date. Shareholders of Disciplined Allocation Fund holding
certificates representing their shares shall not be required to surrender their
certificates to anyone in connection with the reorganization. After the Closing
Date, however, it will be necessary for such shareholders to surrender their
certificates in order to redeem, transfer or pledge the shares of Total Return
Fund which they received.
6. Within one year after the Closing Date, Disciplined Allocation Fund
shall (a) either pay or make provision for payment of all of its liabilities and
taxes, and (b) either (i) transfer any remaining amount of the Cash Reserve to
Total Return Fund, if such remaining amount (as reduced by the estimated cost of
distributing it to shareholders) is not material (as defined below) or (ii)
distribute such remaining amount to the shareholders of Disciplined Allocation
Fund on the Valuation Date. Such remaining amount shall be deemed to be material
if the amount to be distributed, after deduction of the estimated expenses of
the distribution, equals or exceeds one cent per share of Disciplined Allocation
Fund outstanding on the Valuation Date.
7. Prior to the Closing Date, there shall be coordination between the
parties as to their respective portfolios so that, after the Closing, Total
Return Fund will be in compliance with all of its investment policies and
restrictions. At the Closing, Disciplined Allocation Fund shall deliver to Total
Return Fund two copies of a list setting forth the securities then owned by
Disciplined Allocation Fund. Promptly after the Closing, Disciplined Allocation
Fund shall provide Total Return Fund a list setting forth the respective federal
income tax bases thereof.
8. Portfolio securities or written evidence acceptable to Total Return
Fund of record ownership thereof by The Depository Trust Company or through the
Federal Reserve Book Entry System or any other depository approved by
Disciplined Allocation Fund pursuant to Rule 17f-4 and Rule 17f-5 under the Act
shall be endorsed and delivered, or transferred by appropriate transfer or
assignment documents, by Disciplined Allocation Fund on the Closing Date to
Total Return Fund, or at its direction, to its custodian bank, in proper form
for transfer in such condition as to constitute good delivery thereof in
accordance with the custom of brokers and shall be accompanied by all necessary
state transfer stamps, if any. The cash delivered shall be in the form of
certified or bank cashiers' checks or by bank wire or intra-bank transfer
payable to the order of Total Return Fund for the account of Total Return Fund.
Class A, Class B and Class C shares of Total Return Fund representing the number
of Class A, Class B and Class C shares of Total Return Fund being delivered
against the assets of Disciplined Allocation Fund, registered in the name of
Disciplined Allocation Fund, shall be transferred to Disciplined Allocation Fund
on the Closing Date. Such shares shall thereupon be assigned by Disciplined
Allocation Fund to its shareholders so that the shares of Total Return Fund may
be distributed as provided in Section 5.
If, at the Closing Date, Disciplined Allocation Fund is unable to make
delivery under this Section 8 to Total Return Fund of any of its portfolio
securities or cash for the reason that any of such securities purchased by
Disciplined Allocation Fund, or the cash proceeds of a sale of portfolio
securities, prior to the Closing Date have not yet been delivered to it or
Disciplined Allocation Fund's custodian, then the delivery requirements of this
Section 8 with respect to said undelivered securities or cash will be waived and
Disciplined Allocation Fund will deliver to Total Return Fund by or on the
Closing Date with respect to said undelivered securities or cash executed copies
of an agreement or agreements of assignment in a form reasonably satisfactory to
Total Return Fund, together with such other documents, including a due bill or
due bills and brokers' confirmation slips as may reasonably be required by Total
Return Fund.
9. Total Return Fund shall not assume the liabilities (except for
portfolio securities purchased which have not settled and for shareholder
redemption and dividend checks outstanding) of Disciplined Allocation Fund, but
Disciplined Allocation Fund will, nevertheless, use its best efforts to
discharge all known liabilities, so far as may be possible, prior to the Closing
Date. The cost of printing and mailing the proxies and proxy statements will be
borne by Disciplined Allocation Fund. Disciplined Allocation Fund and Total
Return Fund will bear the cost of their respective tax opinion. Any documents
such as existing prospectuses or annual reports that are included in that
mailing will be a cost of the Fund issuing the document. Any other out-of-pocket
expenses of Total Return Fund and Disciplined Allocation Fund associated with
this reorganization, including legal, accounting and transfer agent expenses,
will be borne by Disciplined Allocation Fund and Total Return Fund,
respectively, in the amounts so incurred by each.
10. The obligations of Total Return Fund hereunder shall be subject to the
following conditions:
A. The Board of Directors of Disciplined Allocation Fund shall have
authorized the execution of the Agreement, and the shareholders of Disciplined
Allocation Fund shall have approved the Agreement and the transactions
contemplated hereby, and Disciplined Allocation Fund shall have furnished to
Total Return Fund copies of resolutions to that effect certified by the
Secretary or the Assistant Secretary of Disciplined Allocation Fund; such
shareholder approval shall have been by the affirmative vote required by the
Maryland General Corporation Law and its charter documents at a meeting for
which proxies have been solicited by the Proxy Statement and Prospectus (as
hereinafter defined).
B. Total Return Fund shall have received an opinion dated the
Closing Date of counsel to Disciplined Allocation Fund, to the effect that (i)
Disciplined Allocation Fund is a corporation duly organized, validly existing
and in good standing under the laws of the State of Maryland with full corporate
powers to carry on its business as then being conducted and to enter into and
perform the Agreement; and (ii) that all action necessary to make the Agreement,
according to its terms, valid, binding and enforceable on Disciplined Allocation
Fund and to authorize effectively the transactions contemplated by the Agreement
have been taken by Disciplined Allocation Fund (Maryland counsel may be relied
upon for this opinion).
C. The representations and warranties of Disciplined Allocation Fund
contained herein shall be true and correct at and as of the Closing Date, and
Total Return Fund shall have been furnished with a certificate of the President,
or a Vice President, or the Secretary or the Assistant Secretary or the
Treasurer of Disciplined Allocation Fund, dated the Closing Date, to that
effect.
D. On the Closing Date, Disciplined Allocation Fund shall have
furnished to Total Return Fund a certificate of the Treasurer or Assistant
Treasurer of Disciplined Allocation Fund as to the amount of the capital loss
carry-over and net unrealized appreciation or depreciation, if any, with respect
to Disciplined Allocation Fund as of the Closing Date.
E. The Cash Reserve shall not exceed 10% of the value of the net
assets, nor 30% in value of the gross assets, of Disciplined Allocation Fund at
the close of business on the Valuation Date.
F. A Registration Statement on Form N-14 filed by Total Return Fund
under the Securities Act of 1933, as amended (the "1933 Act"), containing a
preliminary form of the Proxy Statement and Prospectus, shall have become
effective under the 1933 Act not later than July 19, 2000.
G. On the Closing Date, Total Return Fund shall have received a
letter of Andrew J. Donohue or other senior executive officer of
OppenheimerFunds, Inc. acceptable to Total Return Fund, stating that nothing has
come to his or her attention which in his or her judgment would indicate that as
of the Closing Date there were any material, actual or contingent liabilities of
Disciplined Allocation Fund arising out of litigation brought against
Disciplined Allocation Fund or claims asserted against it, or pending or to the
best of his or her knowledge threatened claims or litigation not reflected in or
apparent from the most recent audited financial statements and footnotes thereto
of Disciplined Allocation Fund delivered to Total Return Fund. Such letter may
also include such additional statements relating to the scope of the review
conducted by such person and his or her responsibilities and liabilities as are
not unreasonable under the circumstances.
H. Total Return Fund shall have received an opinion, dated the Closing
Date, of Deloitte & Touche LLP, to the same effect as the opinion contemplated
by Section 11.E. of the Agreement.
I. Total Return Fund shall have received at the Closing all of the
assets of Disciplined Allocation Fund to be conveyed hereunder, which assets
shall be free and clear of all liens, encumbrances, security interests,
restrictions and limitations whatsoever.
11. The obligations of Disciplined Allocation Fund hereunder shall be
subject to the following conditions:
A. The Board of Directors of Total Return Fund shall have authorized
the execution of the Agreement, and the transactions contemplated thereby, and
Total Return Fund shall have furnished to Disciplined Allocation Fund copies of
resolutions to that effect certified by the Secretary or the Assistant Secretary
of Total Return Fund.
B. Disciplined Allocation Fund's shareholders shall have approved
the Agreement and the transactions contemplated hereby, by an affirmative vote
required by the Maryland General Corporation Law and its charter documents and
Disciplined Allocation Fund shall have furnished Total Return Fund copies of
resolutions to that effect certified by the Secretary or an Assistant Secretary
of Disciplined Allocation Fund.
C. Disciplined Allocation Fund shall have received an opinion dated
the Closing Date of counsel to Total Return Fund, to the effect that (i) Total
Return Fund is a corporation organized, validly existing and in good standing
under the laws of the State of Maryland with full powers to carry on its
business as then being conducted and to enter into and perform the Agreement;
(ii) all action necessary to make the Agreement, according to its terms, valid,
binding and enforceable upon Total Return Fund and to authorize effectively the
transactions contemplated by the Agreement have been taken by Total Return Fund,
and (iii) the shares of Total Return Fund to be issued hereunder are duly
authorized and when issued will be validly issued, fully-paid and non-assessable
(Maryland counsel may be relied upon for this opinion).
D. The representations and warranties of Total Return Fund contained
herein shall be true and correct at and as of the Closing Date, and Disciplined
Allocation Fund shall have been furnished with a certificate of the President, a
Vice President or the Secretary or the Assistant Secretary or the Treasurer of
Total Return Fund to that effect dated the Closing Date.
E. Disciplined Allocation Fund shall have received an opinion of
Deloitte & Touche LLP to the effect that the federal tax consequences of the
transaction, if carried out in the manner outlined in the Agreement and in
accordance with (i) Disciplined Allocation Fund's representation that there is
no plan or intention by any Disciplined Allocation Fund shareholder who owns 5%
or more of Disciplined Allocation Fund's outstanding shares, and, to Disciplined
Allocation Fund's best knowledge, there is no plan or intention on the part of
the remaining Disciplined Allocation Fund shareholders, to redeem, sell,
exchange or otherwise dispose of a number of Total Return Fund shares received
in the transaction that would reduce Disciplined Allocation Fund shareholders'
ownership of Total Return Fund shares to a number of shares having a value, as
of the Closing Date, of less than 50% of the value of all of the formerly
outstanding Disciplined Allocation Fund shares as of the same date, and (ii) the
representation by each of Disciplined Allocation Fund and Total Return Fund
that, as of the Closing Date, Disciplined Allocation Fund and Total Return Fund
will qualify as regulated investment companies or will meet the diversification
test of Section 368(a)(2)(F)(ii) of the Code, will be as follows:
1. The transactions contemplated by the Agreement will qualify as
a tax-free "reorganization" within the meaning of Section 368(a)(1) of the Code,
and under the regulations promulgated thereunder.
2. Disciplined Allocation Fund and Total Return Fund will each
qualify as a "party to a reorganization" within the meaning of Section 368(b)(2)
of the Code.
3. No gain or loss will be recognized by the shareholders of
Disciplined Allocation Fund upon the distribution of Class A, Class B and Class
C shares of beneficial interest in Total Return Fund to the shareholders of
Disciplined Allocation Fund pursuant to Section 354 of the Code.
4. Under Section 361(a) of the Code no gain or loss will be
recognized by Disciplined Allocation Fund by reason of the transfer of
substantially all its assets in exchange for Class A, Class B and Class C shares
of Total Return Fund.
5. Under Section 1032 of the Code, no gain or loss will be
recognized by Total Return Fund by reason of the transfer of substantially all
of Disciplined Allocation Fund's assets in exchange for Class A, Class B and
Class C shares of Total Return Fund and Total Return Fund's assumption of
certain liabilities of Disciplined Allocation Fund.
6. The shareholders of Disciplined Allocation Fund will have the
same tax basis and holding period for the Class A, Class B and Class C shares of
beneficial interest in Total Return Fund that they receive as they had for
Disciplined Allocation Fund shares that they previously held, pursuant to
Section 358(a) and 1223(1), respectively, of the Code.
7. The securities transferred by Disciplined Allocation Fund to
Total Return Fund will have the same tax basis and holding period in the hands
of Total Return Fund as they had for Disciplined Allocation Fund, pursuant to
Section 362(b) and 1223(1), respectively, of the Code.
F. The Cash Reserve shall not exceed 10% of the value of the net
assets, nor 30% in value of the gross assets, of Disciplined Allocation Fund at
the close of business on the Valuation Date.
G. A Registration Statement on Form N-14 filed by Total Return Fund
under the 1933 Act, containing a preliminary form of the Proxy Statement and
Prospectus, shall have become effective under the 1933 Act not later than July
19, 2000.
H. On the Closing Date, Disciplined Allocation Fund shall have
received a letter of Andrew J. Donohue or other senior executive officer of
OppenheimerFunds, Inc. acceptable to Disciplined Allocation Fund, stating that
nothing has come to his or her attention which in his or her judgment would
indicate that as of the Closing Date there were any material, actual or
contingent liabilities of Total Return Fund arising out of litigation brought
against Total Return Fund or claims asserted against it, or pending or, to the
best of his or her knowledge, threatened claims or litigation not reflected in
or apparent by the most recent audited financial statements and footnotes
thereto of Total Return Fund delivered to Disciplined Allocation Fund. Such
letter may also include such additional statements relating to the scope of the
review conducted by such person and his or her responsibilities and liabilities
as are not unreasonable under the circumstances.
I. Disciplined Allocation Fund shall acknowledge receipt of the Class A,
Class B and Class C shares of Total Return Fund.
12. Disciplined Allocation Fund hereby represents and warrants that:
A. The financial statements of Disciplined Allocation Fund as of
October 31, 1999 (audited) heretofore furnished to Total Return Fund, present
fairly the financial position, results of operations, and changes in net assets
of Disciplined Allocation Fund as of that date, in conformity with generally
accepted accounting principles applied on a basis consistent with the preceding
year; and that from October 31, 1999 through the date hereof there have not
been, and through the Closing Date there will not be, any material adverse
change in the business or financial condition of Disciplined Allocation Fund, it
being agreed that a decrease in the size of Disciplined Allocation Fund due to a
diminution in the value of its portfolio and/or redemption of its shares shall
not be considered a material adverse change;
B. Contingent upon approval of the Agreement and the transactions
contemplated thereby by Disciplined Allocation Fund's shareholders, Disciplined
Allocation Fund has authority to transfer all of the assets of Disciplined
Allocation Fund to be conveyed hereunder free and clear of all liens,
encumbrances, security interests, restrictions and limitations whatsoever;
C. The Prospectus, as amended and supplemented, contained in
Disciplined Allocation Fund's Registration Statement under the 1933 Act, as
amended, is true, correct and complete, conforms to the requirements of the 1933
Act and does not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading. The Registration Statement, as amended, was,
as of the date of the filing of the last Post-Effective Amendment, true, correct
and complete, conformed to the requirements of the 1933 Act and did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading;
D. There is no material contingent liability of Disciplined
Allocation Fund and no material claim and no material legal, administrative or
other proceedings pending or, to the knowledge of Disciplined Allocation Fund,
threatened against Disciplined Allocation Fund, not reflected in such
Prospectus;
E. Except for the Agreement, there are no material contracts outstanding to
which Disciplined Allocation Fund is a party other than those ordinary in the
conduct of its business;
F. Disciplined Allocation Fund is a Maryland corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland; and has all necessary and material federal and state authorizations to
own all of its assets and to carry on its business as now being conducted; and
Disciplined Allocation Fund is duly registered under the Act and such
registration has not been rescinded or revoked and is in full force and effect;
G. All federal and other tax returns and reports of Disciplined
Allocation Fund required by law to be filed have been filed, and all federal and
other taxes shown due on said returns and reports have been paid or provision
shall have been made for the payment thereof and to the best of the knowledge of
Disciplined Allocation Fund no such return is currently under audit and no
assessment has been asserted with respect to such returns and to the extent such
tax returns with respect to the taxable year of Disciplined Allocation Fund
ended October 31, 1999 have not been filed, such returns will be filed when
required and the amount of tax shown as due thereon shall be paid when due; and
H. Disciplined Allocation Fund has elected to be treated as a
regulated investment company and, for each fiscal year of its operations,
Disciplined Allocation Fund has met the requirements of Subchapter M of the Code
for qualification and treatment as a regulated investment company and
Disciplined Allocation Fund intends to meet such requirements with respect to
its current taxable year.
13. Total Return Fund hereby represents and warrants that:
A. The financial statements of Total Return Fund as at December 31,
1999 (audited) heretofore furnished to Disciplined Allocation Fund, present
fairly the financial position, results of operations, and changes in net assets
of Total Return Fund, as of that date, in conformity with generally accepted
accounting principles applied on a basis consistent with the preceding year; and
that from December 31, 1999 through the date hereof there have not been, and
through the Closing Date there will not be, any material adverse changes in the
business or financial condition of Total Return Fund, it being understood that a
decrease in the size of Total Return Fund due to a diminution in the value of
its portfolio and/or redemption of its shares shall not be considered a material
or adverse change;
B. The Prospectus, as amended and supplemented, contained in Total
Return Fund's Registration Statement under the 1933 Act, is true, correct and
complete, conforms to the requirements of the 1933 Act and does not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.
The Registration Statement, as amended, was, as of the date of the filing of the
last Post-Effective Amendment, true, correct and complete, conformed to the
requirements of the 1933 Act and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
C. There is no material contingent liability of Total Return Fund
and no material claim and no material legal, administrative or other proceedings
pending or, to the knowledge of Total Return Fund, threatened against Total
Return Fund, not reflected in such Prospectus;
D. Except for this Agreement, there are no material contracts outstanding
to which Total Return Fund is a party other than those ordinary in the conduct
of its business;
E. Total Return Fund is a Corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland; Total
Return Fund has all necessary and material federal and state authorizations to
own all its properties and assets and to carry on its business as now being
conducted; the Class A, Class B and Class C shares of Total Return Fund which it
issues to Disciplined Allocation Fund pursuant to the Agreement will be duly
authorized, validly issued, fully-paid and non-assessable, will conform to the
description thereof contained in Total Return Fund's Registration Statement and
will be duly registered under the 1933 Act and in the states where registration
is required; and Total Return Fund is duly registered under the Act and such
registration has not been revoked or rescinded and is in full force and effect;
F. All federal and other tax returns and reports of Total Return
Fund required by law to be filed have been filed, and all federal and other
taxes shown due on said returns and reports have been paid or provision shall
have been made for the payment thereof and to the best of the knowledge of Total
Return Fund no such return is currently under audit and no assessment has been
asserted with respect to such returns and to the extent such tax returns with
respect to the taxable year of Total Return Fund ended December 31, 1999 have
not been filed, such returns will be filed when required and the amount of tax
shown as due thereon shall be paid when due;
G. Total Return Fund has elected to be treated as a regulated
investment company and, for each fiscal year of its operations, Total Return
Fund has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and Total Return Fund intends to
meet such requirements with respect to its current taxable year;
H. Total Return Fund has no plan or intention (i) to dispose of any
of the assets transferred by Disciplined Allocation Fund, other than in the
ordinary course of business, or (ii) to redeem or reacquire any of the Class A,
Class B and Class C shares issued by it in the reorganization other than
pursuant to valid requests of shareholders; and
I. After consummation of the transactions contemplated by the Agreement,
Total Return Fund intends to operate its business in a substantially unchanged
manner.
14. Each party hereby represents to the other that no broker or finder has
been employed by it with respect to the Agreement or the transactions
contemplated hereby. Each party also represents and warrants to the other that
the information concerning it in the Proxy Statement and Prospectus will not as
of its date contain any untrue statement of a material fact or omit to state a
fact necessary to make the statements concerning it therein not misleading and
that the financial statements concerning it will present the information shown
fairly in accordance with generally accepted accounting principles applied on a
basis consistent with the preceding year. Each party also represents and
warrants to the other that the Agreement is valid, binding and enforceable in
accordance with its terms and that the execution, delivery and performance of
the Agreement will not result in any violation of, or be in conflict with, any
provision of any charter, by-laws, contract, agreement, judgment, decree or
order to which it is subject or to which it is a party. Total Return Fund hereby
represents to and covenants with Disciplined Allocation Fund that, if the
reorganization becomes effective, Total Return Fund will treat each shareholder
of Disciplined Allocation Fund who received any of Total Return Fund's shares as
a result of the reorganization as having made the minimum initial purchase of
shares of Total Return Fund received by such shareholder for the purpose of
making additional investments in shares of Total Return Fund, regardless of the
value of the shares of Total Return Fund received.
15. Total Return Fund agrees that it will prepare and file a Registration
Statement on Form N-14 under the 1933 Act which shall contain a preliminary form
of proxy statement and prospectus contemplated by Rule 145 under the 1933 Act.
The final form of such proxy statement and prospectus is referred to in the
Agreement as the "Proxy Statement and Prospectus." Each party agrees that it
will use its best efforts to have such Registration Statement declared effective
and to supply such information concerning itself for inclusion in the Proxy
Statement and Prospectus as may be necessary or desirable in this connection.
Disciplined Allocation Fund covenants and agrees to deregister as an investment
company under the Act as soon as practicable to the extent required, and, upon
Closing, to cause the cancellation of its outstanding shares.
16. The obligations of the parties shall be subject to the right of either
party to abandon and terminate the Agreement for any reason and there shall be
no liability for damages or other recourse available to a party not so
terminating this Agreement, provided, however, that in the event that a party
shall terminate this Agreement without reasonable cause, the party so
terminating shall, upon demand, reimburse the party not so terminating for all
expenses, including reasonable out-of-pocket expenses and fees incurred in
connection with this Agreement.
17. The Agreement may be executed in several counterparts, each of which
shall be deemed an original, but all taken together shall constitute one
Agreement. The rights and obligations of each party pursuant to the Agreement
shall not be assignable.
18. All prior or contemporaneous agreements and representations are merged
into the Agreement, which constitutes the entire contract between the parties
hereto. No amendment or modification hereof shall be of any force and effect
unless in writing and signed by the parties and no party shall be deemed to have
waived any provision herein for its benefit unless it executes a written
acknowledgment of such waiver.
19. Total Return Fund understands that the obligations of Disciplined
Allocation Fund under the Agreement are not binding upon any Director or
shareholder of Disciplined Allocation Fund personally, but bind only Disciplined
Allocation Fund and Disciplined Allocation Fund's property. Total Return Fund
represents that it has notice of the provisions of the Articles of Incorporation
with respect to Disciplined Allocation Fund disclaiming shareholder and Director
liability for acts or obligations of Disciplined Allocation Fund.
20. Disciplined Allocation Fund understands that the obligations of Total
Return Fund under the Agreement are not binding upon any Director or shareholder
of Total Return Fund personally, but bind only Total Return Fund and Total
Return Fund's property. Disciplined Allocation Fund represents that it has
notice of the provisions of the Articles of Incorporation with respect to Total
Return Fund disclaiming shareholder and Director liability for acts or
obligations of Total Return Fund.
21. Wherever in this Agreement the Directors or officers of Disciplined
Allocation Fund are referred to, such references shall mean the Directors or
officers of Oppenheimer Series fund, Inc. acting for and on behalf of
Disciplined Allocation Fund.
IN WITNESS WHEREOF, each of the parties has caused the Agreement to be executed
and attested by its officers thereunto duly authorized on the date first set
forth above.
OPPENHEIMER SERIES FUND, INC.
on behalf of its series
OPPENHEIMER DISCIPLINED ALLOCATION FUND
By: /s/ Andrew J. Donohue
Andrew Donohue
Secretary
OPPENHEIMER TOTAL RETURN FUND, INC.
By: /s/ Andrew J. Donohue
Andrew Donohue
Secretary
B-1
EXHIBIT B
Average Annual Total Returns for 5 Years 10 Years
the periods ended June 30, 2000 (or life (or life of
(unaudited) 1 Year of class) class)
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
Disciplined Allocation Fund
Class A Shares (inception -8.28% 7.85% 9.83%
09/16/85)
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
Total Return Fund
Class A Shares (inception 6.23% 19.55% 16.15%
09/30/75)
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
Disciplined Allocation Fund
Class B Shares (inception -7.71% 7.55% N/A
10/02/95)
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
Total Return Fund
Class B Shares (inception 6.78% 19.82% 16.39%
05/03/93)
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
Disciplined Allocation Fund
Class C Shares (inception -4.30% 7.36% N/A
05/01/96)
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
Total Return Fund 10.76% 19.79% N/A
Class C Shares (inception 08/2/95)
- -----------------------------------
Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
An explanation of the different performance calculations is set forth in each
fund's Prospectus.
Each fund's average annual total return includes the applicable sales charge for
Class A, Class B and Class C shares: for Class A, the current maximum initial
sales charge of 5.75%; for Class B, the contingent deferred sales charges of 5%
(1 year), 2% (5 year) and 1% (life of the class); for Class C, the contingent
deferred sales charge of 1% (1 year). Because Class B shares of Total Return
Fund convert to Class A shares 72 months after purchase, Class B "life-of-class"
performance does not include any contingent deferred sales charge on redemption
and uses Class A performance for the period after conversion.
EXHIBIT C
Class A Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Total Return Fund, Inc. (Class A) and S&P 500 Index
[line chart]
Oppenheimer Total Return Fund, Inc. Class A S&P 500 Index
12.31.89 9,425 10,000
12.31.90 9,062 9,690
12.31.91 12,346 12,635
12.31.92 13,931 13,597
12.31.93 16,889 14,966
12.31.94 15,562 15,162
12.31.95 20,250 20,851
12.31.96 24,245 25,630
12.31.97 30,884 34,176
12.31.98 37,419 43,944
12.31.99 44,282 53,181
[end line chart]
Average Annual Total Return of Class A Shares of the Fund at 12/31/99(1)
1-Year 11.53% 5-Year 21.81% 10-Year 16.04%
Class B Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Total Return Fund, Inc. (Class B) and S&P 500 Index
[line chart]
Oppenheimer Total Return Fund, Inc. Class B S&P 500 Index
5.3.93 10,000 10,000
12.31.93 11,309 10,808
12.31.94 10,332 10,949
12.31.95 13,330 15,057
12.31.96 15,835 18,509
12.31.97 19,978 24,680
12.31.98 24,025 31,734
12.31.99 28,197 38,405
[end line chart]
Average Annual Total Return of Class B Shares of the Fund at 12/31/99(2)
1-Year 12.37% 5-Year 22.06% Life 16.93%
Class C Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Total Return Fund, Inc. (Class C) and S&P 500 Index
[line chart]
Oppenheimer Total Return Fund, Inc. Class C S&P 500 Index
8.29.95 10,000 10,000
12.31.95 10,882 11,049
12.31.96 12,915 13,581
12.31.97 16,302 18,109
12.31.98 19,596 23,285
12.31.99 22,999 28,180
[end line chart]
Average Annual Total Return of Class C Shares of the Fund at 12/31/99(3)
1-Year 16.37% Life 21.16%
The performance information for the S&P 500 index begins on 12/31/89 for Class
A, 4/30/93 for Class B, and 8/31/95 for Class C.
Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown. An explanation of the different
performance calculations is in the Fund's prospectus.
Past performance is not predictive of future performance. Graphs are not drawn
to the same scale.
(1) Class A shares were first publicly offered on 10/2/47. The Fund's maximum
sales charge for Class A shares was higher prior to 4/1/91, so actual
performance may have been lower. Class A returns include the current maximum
initial sales charge of 5.75%.
(2) Class B shares of the Fund were first publicly offered on 5/3/93. Class B
returns include the applicable contingent deferred sales charge of 5% (1-year)
and 1% (5-year). Because Class B shares convert to Class A shares 72 months
after purchase, the "life of class" return for Class B uses Class A performance
for the period after conversion. Class B shares are subject to an annual 0.75%
asset-based sales charge.
(3) Class C shares of the Fund were first publicly offered on 8/29/95. Class C
returns include the contingent deferred sales charge of 1% for the 1-year
period. Class C shares are subject to an annual 0.75% asset-based sales charge.
- --------------------------------------------------------------------------------
Oppenheimer Total Return Fund, Inc.
- --------------------------------------------------------------------------------
6803 South Tucson Way, Englewood, Colorado 80112
1.800.525.7048
Statement of Additional Information dated July 19, 2000
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Proxy Statement and Prospectus dated July 19, 2000. It should
be read together with the Proxy Statement and 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.
This Statement of Additional Information of Oppenheimer Total Return Fund,
Inc. consists of this cover page and the following documents:
1. Statement of Additional Information of Oppenheimer Total Return Fund, Inc.
dated April 28, 2000.
2. Prospectus of Oppenheimer Disciplined Allocation Fund dated February 28,
2000.
3. Statement of Additional Information of Disciplined Allocation Fund dated
February 28, 2000.
4. Annual Report of Oppenheimer Total Return Fund, Inc. as of December 31, 1999.
5. Annual Report of Oppenheimer Disciplined Allocation Fund as of October 31,
1999.
6. Semi-Annual Report of Oppenheimer Disciplined Allocation Fund as of April 30,
2000.
205cover_SAI_Pre#1.doc
Oppenheimer
Total Return Fund, Inc.
Prospectus dated April 28, 2000
Oppenheimer Total Return Fund is a
mutual fund that seeks high total
return, which includes capital
appreciation in the value of its
shares as well as income. It
emphasizes investment in common stocks
of medium and large capitalization
companies.
This Prospectus contains important
information about the Fund's
objective, its investment policies,
strategies and risks. It also contains
important information about how to buy
and sell shares of the Fund and other
account features. Please read this
Prospectus carefully before you invest
and keep it for future reference about
your account.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Fund's securities nor has it determined that this
Prospectus is accurate or complete. It is a criminal offense to represent
otherwise.
1234
CONTENTS
ABOUT THE FUND
The Fund's Investment Objective and Strategies
Main Risks of Investing in the Fund
The Fund's Past Performance
Fees and Expenses of the Fund
About the Fund's Investments
How the Fund is Managed
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Class Y Shares
Special Investor Services
AccountLink
PhoneLink
OppenheimerFunds Internet Website
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Financial Highlights
106
A B O U T T H E F U N D
The Fund's Investment Objective and Strategies
WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks high total return.
WHAT DOES THE FUND MAINLY INVEST IN? The Fund invests mainly in equity
securities for the purpose of seeking capital appreciation, but may also invest
in debt securities to seek income when economic conditions are appropriate to
achieve the investment objective. At times, the Fund may pursue its investment
objective by emphasizing investments that offer opportunities for capital growth
and/or income, depending on market conditions. Equity securities such as common
stocks, preferred stocks and securities convertible into common stocks are held
by the Fund for capital growth, while stocks that pay dividends or debt
securities such as corporate bonds, notes and debentures and U.S. government
securities are held for income purposes. Most of the Fund's equity investments
are common stocks.
The Fund does not allocate its investments among equity and debt
securities in any fixed ratio, and the relative allocation will vary over time,
depending on where the best opportunities are to pursue total return according
to the judgment of the Fund's investment Manager, OppenheimerFunds, Inc. While
the Fund does not limit its investments to securities of issuers in a particular
capitalization range or ranges, the Fund's equity investments primarily are in
medium and large capitalization issuers, defined as $2.5 billion or more.
HOW DO THE PORTFOLIO MANAGERS DECIDE WHAT SECURITIES TO BUY OR SELL? In
selecting securities for purchase or sale by the Fund, the Fund's portfolio
managers use an investment process that combines both "value" and "growth"
investment styles. They use a value strategy to find issuers whose securities
are believed to be undervalued in the marketplace, in relation to factors such
as the ratio of the stock's price to the issuer's earnings. A lower
price/earnings ratio would suggest an undervalued stock. A growth investing
style encompasses a search for companies whose stock price is expected to
increase at a greater rate than the overall market. These issuers may be
entering a growth phase, marked by increases in earnings, sales, cash flows, or
other factors, which suggest that the stock may increase in value over time.
The portfolio managers construct the portfolio using a "bottom up"
approach, focused on the fundamental prospects of individual companies and
issuers, rather than on broad economic trends affecting entire markets and
industries. The portfolio managers focus on factors that may vary over time and
in particular cases. Currently they look for:
o Individual stocks that are attractive based on fundamental stock analysis
and company characteristics;
o Growth stocks having high earnings potential and earnings and sales momentum;
o Dividend-paying common stocks of established companies for income; o
Convertible bonds to take advantage of the stock market's growth potential
while providing income as a hedge against market volatility; and o
Stocks with a longer time horizon of investment between 3 to 5 years.
The portfolio managers monitor individual issuers for changes in profit
margins or slowing revenues that might affect future cash flows or growth.
The existence of these changes in a particular case may trigger a decision
to sell the security. This approach may change over time.
WHO IS THE FUND DESIGNED FOR? The Fund is designed primarily for investors
seeking total investment return from capital appreciation and income over the
long term. Those investors should be willing to assume the risks of short-term
share price fluctuations that are typical for a moderately aggressive fund
having substantial investments in stocks. Since the Fund's income level will
fluctuate, it is not designed for investors needing an assured level of current
income. Because of its focus on long-term growth, the Fund may be appropriate
for retirement plans. However, the Fund is not a complete investment program.
Main Risks of Investing in the Fund
All investments have some degree of risk. The Fund's investments are
subject to changes in their value from a number of factors,
described below. There is also the risk that poor security selection
by the Manager will cause the Fund to underperform other funds
having similar objectives.
Changes in the overall market prices of securities and the income they pay
can occur at any time. The share price of the Fund will change daily based on
changes in market prices of securities and market conditions, and in response to
other economic events. There is no assurance that the Fund will achieve its
investment objective.
RISKS OF INVESTING IN STOCKS. Stocks fluctuate in price, and their
short-term volatility at times may be great. Because the Fund typically invests
a substantial portion of its assets in common stocks and other equity
securities, the value of the Fund's portfolio will be affected by changes in the
stock markets. 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.
A variety of factors can affect the price of a particular stock and
the prices of individual stocks do not all move in the same
direction uniformly or at the same time. Different stock markets may
behave differently from each other. In particular, because the Fund
currently focuses its stock investments in U.S. issuers, it will be
primarily affected by changes in U.S. stock markets.
Additionally, stocks of issuers in a particular industry may be affected
by changes in economic conditions, or by changes in government regulations,
availability of basic resources or supplies, or other events that affect that
industry more than others. To the extent that the Fund increases the relative
emphasis of its investments in a particular industry, its share values may
fluctuate in response to events affecting that industry.
Other factors can affect a particular stock's price, such as poor earnings
reports by the issuer, loss of major customers, major litigation against the
issuer, or changes in government regulations affecting the issuer. The Fund can
invest in securities of large- and medium-size companies but it can also buy
stocks of small companies, which may have more volatile stock prices than stocks
of larger companies.
CREDIT RISK. Debt securities are subject to credit risk. Credit risk
relates to the ability of the issuer of a security to make interest and
principal payments on the security as they become due. If the issuer fails to
pay interest, the Fund's income might be reduced, and if the issuer fails to
repay principal, the value of that security and of the Fund's shares might be
reduced. While the Fund's investments in U.S. government securities are subject
to little credit risk, the Fund's other investments in debt securities,
particularly high-yield lower-grade debt securities, are subject to risks of
default.
o Special Risks of Lower-Grade Securities. Because the Fund can invest in
securities below investment-grade to seek high income, the Fund's credit risks
are greater than those of funds that buy only investment-grade bonds. Securities
that are below investment grade (these are sometimes called "junk bonds") may be
subject to greater price fluctuations and greater risks of loss of income and
principal than investment-grade debt securities. Securities that are (or that
have fallen) below investment grade are exposed to a greater risk that the
issuers might not meet their debt obligations. These risks can reduce the Fund's
share prices and the income it earns.
o Interest Rate Risks. The values of debt securities are subject to change when
prevailing interest rates change. When interest rates fall, the values of
already-issued debt securities generally rise. When interest rates rise, the
values of already-issued debt securities generally fall. The magnitude of these
fluctuations will often be greater for longer-term debt securities than
shorter-term debt securities. The Fund's share prices can go up or down when
interest rates change because of the effect of the changes on the value of the
Fund's investments in debt securities.
o Special Risks in Using Derivative Investments. The Fund can use derivatives to
seek increased returns or to try to hedge investment risks. In general terms, a
derivative investment is an investment contract whose value depends on (or is
derived from) the value of an underlying asset, interest rate or index. Options,
futures, forwards, interest rate swaps and structured notes are examples of
derivatives the Fund can use.
If the issuer of the derivative does not pay the amount due, the Fund can
lose money on the investment. Also, the underlying security or investment on
which the derivative is based, and the derivative itself, might not perform the
way the Manager expected it to perform. If that happens, the Fund's share prices
could decline or the Fund could get less income than expected. The Fund has
limits on the amount of particular types of derivatives it can hold. However,
using derivatives can cause the Fund to lose money on its investment and/or
increase the volatility of its share prices.
HOW RISKY IS THE FUND OVERALL? The risks described above collectively form
the overall risk profile of the Fund and can affect the value of the Fund's
investments, its investment performance and its price per share. Particular
investments and investment strategies also have risks. These risks mean that you
can lose money by investing in the Fund. When you redeem your shares, they may
be worth more or less than what you paid for them.
In the short term, the stock markets can be volatile, and the price of the
Fund's shares will go up and down. The Fund's income-oriented investments may
help cushion the Fund's total return from changes in stock prices, but
fixed-income securities have their own risks and can change in value when
interest rates change. In the OppenheimerFunds spectrum, the Fund may be less
volatile than funds that invest only in stocks, but may be more volatile than
funds that focus on government securities and investment-grade bond funds.
- -------------------------------------------------------------------------------
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
- --------------------------------------------------------------------------------
The Fund's Past Performance
The bar chart and table below show one measure of the risks of investing
in the Fund, by showing changes in the Fund's performance (for its Class A
shares) from year to year for the last ten calendar years and by showing how the
average annual total returns of the Fund's shares compare to those of a
broad-based market index. The Fund's past investment performance is not
necessarily an indication of how the Fund will perform in the future.
Annual Total Returns (Class A) (as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing annual total returns]
For the period from 1/1/00 through 3/31/00, the cumulative return (not
annualized) for Class A shares was 8.09%. Sales charges are not included in the
calculations of return in this bar chart, and if those charges were included,
the returns would be less than those shown.
During the period shown in the bar chart, the highest return (not annualized)
for a calendar quarter was 18.30% (4Q'98) and the lowest return (not annualized)
for a calendar quarter was -11.43% (3Q'90).
- -------------------------------------------------------------------------------
Average Annual Total Returns 5 Years 10 Years
for the periods ended (or life of (or life of
December 31, 1999 1 Year class, if less) class, if less)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class A Shares (inception: 11.53% 21.81% 16.04%
10/2/47)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
S&P 500 Index 21.03% 28.54% 18.19%1
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- -------------------------------------------------------------------------------
Class B Shares (inception: 12.37% 22.06% 16.93%
5/3/93)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class C Shares (inception: 16.37% 21.16% N/A
8/29/95)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class Y Shares (inception: 18.53% 23.41% 20.04%
6/1/94)
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1. From 12/31/89
The Fund's average annual total returns include the applicable sales charge: for
Class A, the current maximum initial sales charge of 5.75%; for Class B, the
contingent deferred sales charges of 5% (1-year), 2% (5 years) and 1% (life of
class); and for Class C, the 1% contingent deferred sales charge for the 1-year
period. There is no sales charge for Class Y shares.
The returns measure the performance of a hypothetical account and assume that
all dividends and capital gains distributions have been reinvested in additional
shares. Because the Fund invests primarily in stocks, the Fund's performance of
the Fund's Class A shares is compared to the S&P 500 Index, an unmanaged index
of equity securities that is a measure of the general domestic stock market. The
index performance reflects the reinvestment of income but does not consider the
effects of transaction costs, and the Fund's investments may vary form the
securities in the index.
Fees and Expenses of the Fund
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services. Those expenses
are subtracted from the Fund's assets to calculate the Fund's net asset values
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 meant to help you understand the
fees and expenses you may pay if you buy and hold shares of the Fund. The
numbers below are based on the Fund's expenses during its fiscal year ended
December 31, 1999.
Shareholder Fees (charges paid directly from your investment):
------------------------------------------------------------------------------
Class A Class C Class Y
Shares Class B Shares Shares Shares
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Maximum Sales Charge
(Load) on purchases
(as % of offering 5.75% None None None
price)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Maximum Deferred
Sales Charge (Load)
(as % of the lower of
the original offering None1 5%2 1%3 None
price or redemption
proceeds)
------------------------------------------------------------------------------
1. A contingent deferred sales charge may apply to redemptions of investments of
$1 million or more ($500,000 for retirement plan accounts) of Class A shares.
See "How to Buy Shares" for details.
2. Applies to redemptions in first year after purchase. The contingent deferred
sales charge declines to 1% in the sixth year and is eliminated after that.
3. Applies to shares redeemed within 12 months of purchase.
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
------------------------------------------------------------------------------
Class A Class B Class C Class Y
Shares Shares Shares Shares
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Management Fees 0.52% 0.52% 0.52% 0.52%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Distribution and/or 0.19% 1.00% 1.00% None
Service (12b-1) Fees
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Other Expenses 0.16% 0.15% 0.16% 0.15%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Total Annual Operating 0.87% 1.67% 1.68% 0.67%
Expenses
------------------------------------------------------------------------------
Expenses may vary in future years. "Other expenses" include transfer agent fees,
custodial expenses, and accounting and legal expenses the Fund pays.
EXAMPLES. The following examples are intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds. The
examples assume that you invest $10,000 in a class of shares of the Fund for the
time periods indicated and reinvest your dividends and distributions.
The first example assumes that you redeem all of your shares at the end of
those periods. The second example assumes that you keep your shares. Both
examples also assume that your investment has a 5% return each year and that the
class's operating expenses remain the same. Your actual costs may be higher or
lower because expenses will vary over time. Based on these assumptions your
expenses would be as follows:
- ------------------------------------------------------------------------------
If shares are redeemed: 1 Year 3 Years 5 Years 10 Years1
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class A Shares $659 $837 $1,029 $1,586
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class B Shares $670 $826 $1,107 $1,567
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class C Shares $271 $530 $913 $1,987
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class Y Shares $68 $214 $373 $835
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
If shares are not
redeemed: 1 Year 3 Years 5 Years 10 Years1
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class A Shares $659 $837 $1,029 $1,586
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class B Shares $170 $526 $907 $1,567
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class C Shares $171 $530 $913 $1,987
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class Y Shares $68 $214 $373 $835
- ------------------------------------------------------------------------------
In the first example, expenses include the initial sales charge for Class A and
the applicable Class B or Class C contingent deferred sales charges. In the
second example, the Class A expenses include the sales charge, but Class B and
Class C expenses do not include the contingent deferred sales charges. 1. Class
B expenses for years 7 through 10 are based on Class A expenses, since
Class B shares automatically convert to Class A after 6 years.
About the Fund's Investments
THE FUND'S PRINCIPAL INVESTMENT POLICIES. The composition of the Fund's
portfolio among different types of investments will vary over time based on the
Manager's evaluation of economic and market trends. The Fund's portfolio might
not always include all of the different types of investments described below.
The Statement of Additional Information contains more detailed information about
the Fund's investment policies and risks.
The Manager tries to reduce risks by carefully researching securities
before they are purchased. The Fund attempts to reduce its exposure to market
risks by diversifying its investments, that is, by not holding a substantial
percentage of the stock of any one company and by not investing too great a
percentage of the Fund's assets in any one company. Also, the Fund does not
concentrate 25% or more of its investments in any one industry.
Stocksand Other Equity Investments. Equity securities include common stocks,
preferred stocks and debt securities convertible into common stock. The
Fund's equity investments can include interests in real estate investment
trusts. Those securities may be sensitive to changes in interest rates,
and because the real estate market can be very volatile at times, the
prices of those securities may change substantially. Because total return
has two components, capital appreciation and income, the Manager might
select stocks that offer the potential for either or both of those
elements.
While many convertible securities are debt securities, the Manager
considers some of them to be "equity equivalents" because of the
conversion feature. In that case their rating has less impact on the
investment decision than in the case of other debt securities. However,
they are subject to credit risks, discussed below in "Debt Securities,"
and interest rate risk. These securities might be selected for the Fund
because they offer the ability to participate in stock market movements
while offering some current income. Preferred stocks, while a form of
equity security, typically have a fixed dividend that may cause their
prices to behave more like those of debt securities.
o Growth Stocks. The types of growth companies the Manager focuses on are
larger, more established growth companies. Growth companies, for example,
may be developing new products or services, such as companies in the
technology sector, or they may be expanding into new markets for their
products, such as companies in the energy sector. Newer growth companies
tend to retain a large part of their earnings for research, development or
investment in capital assets. Therefore, they do not tend to emphasize
paying dividends and may not pay any dividends for some time. If they are
selected for the Fund's portfolio, it is because the Manager believes the
price of the stock will increase over time.
o Value Stocks. These are stocks that appear to be temporarily undervalued,
by various measures such as price/earnings ratios. Value investing seeks
stocks with prices that are low relative to their real worth or future
prospects. The hope is that the Fund will realize appreciation in the
value of its holdings when other investors realize the intrinsic value of
the stock. However, there is the risk that the stock will not appreciate
in value as anticipated.
Debt Securities. The Fund's investments in debt securities include securities
issued or guaranteed by the U.S. government or its agencies and
instrumentalities, and foreign and domestic corporate bonds, notes and
debentures. These are selected primarily for their income possibilities
and to help cushion fluctuations in the Fund's net asset value.
A debt security is essentially a loan by the buyer to the issuer of the
debt security. The issuer promises to pay back the principal amount of the
loan and normally pays interest at a fixed or variable rate while the loan
is outstanding. The debt securities the Fund buys may be rated by
nationally-recognized rating organizations such as Moody's Investors
Services or Standard & Poor's Ratings Service or they may be unrated
securities assigned an equivalent rating by the Manager. The Fund's
investments may be above or below investment grade in credit quality.
o Special Risks of Lower-Grade Securities. All corporate debt securities
(whether foreign or domestic) are subject to some degree of credit risk.
The Fund can invest without limit in "lower-grade" securities, commonly
known as "junk bonds." These are securities rated below "BBB" by Standard
& Poor's or "Baa" by Moody's, or unrated securities assigned a comparable
rating by the Manager. However, the Fund currently does not invest a
substantial amount of its assets in lower-grade securities, including
convertible debt securities.
While investment-grade securities are subject to risks of non-payment of
interest and principal, in general high-yield, lower-grade bonds, whether
rated or unrated, have greater risks than investment-grade securities.
There may be less of a market for them and therefore they may be harder to
sell at an acceptable price. 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 could be affected by declines in the
value of these securities.
o U.S. Government Securities. The Fund can invest in securities issued or
guaranteed by the U.S. Treasury or other U.S. Government agencies or
federally-chartered corporate entities referred to as "instrumentalities."
These are referred to as "U.S. Government securities" in this Prospectus.
They include Treasury bills (having maturities of one year or less when
issued), Treasury notes (having maturities of from one to ten years when
issued), and Treasury bonds (having maturities of more than ten years when
issued).
Treasury securities are backed by the full faith and credit of the United
States as to timely payments of interest and repayment of principal. The
Fund can buy U. S. Treasury securities that have been "stripped" of their
interest coupons by a Federal Reserve Bank, zero-coupon U.S. Treasury
securities described below, and Treasury Inflation-Protection Securities
("TIPS"). Although not rated, Treasury obligations have little credit risk
but prior to their maturity are subject to interest rate risk.
Portfolio Turnover. The Fund may engage in short-term trading to try to achieve
its objective and will likely have a high portfolio turnover rate.
Portfolio turnover affects brokerage costs the Fund pays. If the Fund
realizes capital gains when it sells its portfolio investments, it must
generally pay those gains out to shareholders, increasing their taxable
distributions. The Financial Highlights table at the end of this
Prospectus shows the Fund's portfolio turnover rates during prior fiscal
years.
CAN THE FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE? The Fund's Board of
Directors can change non-fundamental investment policies without shareholder
approval, although significant changes will be described in amendments to this
Prospectus. Fundamental policies cannot be changed without the approval of a
majority of the Fund's outstanding voting shares. The Fund's investment
objective is a fundamental policy. Investment restrictions that are fundamental
policies are listed in the Statement of Additional Information. An investment
policy is not fundamental unless this Prospectus or the Statement of Additional
Information says that it is.
OTHER INVESTMENT STRATEGIES. To seek its objective, the Fund can also use the
investment techniques and strategies described below. The Fund might not always
use all of them. These techniques have certain risks, although some are designed
to help reduce overall investment or market risks.
Zero-Coupon and "Stripped" Securities. Some of the U.S. government debt
securities the Fund buys are zero-coupon bonds that pay no interest. They
are issued at a substantial discount from their face value. "Stripped"
securities are the separate income or principal components of a debt
security. Zero-coupon and stripped securities are subject to greater
fluctuations in price from interest rate changes than interest-bearing
securities. The Fund may have to pay out the imputed income on zero-coupon
securities without receiving the actual cash currently. Interest-only
securities are particularly sensitive to changes in interest rates.
Foreign Investing. The Fund can buy securities of companies or governments in
any country, developed or underdeveloped. However, the Fund does not
expect to invest significant amounts of its assets in emerging markets.
While there is no limit on the amount of the Fund's assets that may be
invested in foreign securities, the Manager does not currently plan to
invest a substantial amount of the Fund's assets in foreign securities.
o Special Risks of Foreign Investing. While foreign securities offer
special investment opportunities, there are also special risks, such as the
effects of a change in value of a foreign currency against the U.S. dollar,
which will result in a change in the U.S. dollar value of securities
denominated in that foreign currency. Foreign issuers are not subject to
the same accounting and disclosure requirements that U.S. companies are
subject to. The value of foreign investments may be affected by exchange
control regulations, expropriation or nationalization of a company's
assets, foreign taxes, delays in settlement of transactions, changes in
governmental economic or monetary policy in the U.S. or abroad, or other
political and economic factors.
Illiquid and Restricted Securities. Investments may be illiquid because they do
not have 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 can increase that limit to 15%). Certain
restricted securities that are eligible for resale to qualified
institutional purchasers may not be subject to that limit. The Manager
monitors holdings of illiquid securities on an ongoing basis to determine
whether to sell any holdings to maintain adequate liquidity.
Derivative Investments. The Fund can invest in a number of different kinds of
"derivative" investments. In general terms, a derivative instrument is an
investment contract whose value depends on (or is derived from) the value
of an underlying asset, interest rate or index. In the broadest sense,
exchange-traded options, futures contracts, and other hedging instruments
the Fund might use may be considered to be "derivative investments.
Derivatives may increase the volatility of the Fund's share price or cause
investment losses.
o Hedging. The Fund can buy and sell futures contracts, put and call
options, swaps, and forward contracts. These are all referred to as
"hedging instruments." The Fund does not use hedging instruments for
speculative purposes. The Fund has limits on its use of hedging
instruments and is not required to use them in seeking its investment
objective.
The Fund could buy and sell options, futures and forward contracts for a
number of purposes. Some of these strategies would hedge the Fund's
portfolio against price fluctuations. Other hedging strategies, such as
buying futures and call options, would tend to increase the Fund's
exposure to the securities market. The Fund may also try to manage its
exposure to changing interest rates.
There are also special risks in particular hedging strategies. Options
trading involves the payment of premiums and can increase portfolio
turnover. For example, if a covered call written by the Fund is exercised
on an investment that has increased in value, the Fund will be required to
sell the investment at the call price and will not be able to realize any
profit if the investment has increased in value above the call price.
If the Manager used a hedging instrument at the wrong time or judged
market conditions incorrectly, the strategy could 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.
Temporary Defensive Investments. In times of unstable or adverse market or
economic conditions, the Fund can invest up to 100% of its assets in
temporary defense investments. Generally they would be cash equivalents
(such as commercial paper), money market instruments, short-term debt
securities, U.S. government securities, or repurchase agreements and may
include other investment-grade debt securities. The Fund could also hold
these types of securities pending the investment of proceeds from the sale
of Fund shares or portfolio securities or to meet anticipated redemptions
of Fund shares. To the extent the Fund invests defensively in these
securities, it might not achieve its investment objective.
How the Fund Is Managed
THE MANAGER. The Manager chooses the Fund's investments and handles its
day-to-day business. The Manager carries out its duties, subject to the policies
established by the Fund's Board of Directors, under an investment advisory
agreement that states the Manager's responsibilities. The agreement sets the
fees the Fund pays 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 January 1960. The
Manager (including subsidiaries and afflilates) managed more than $120 billion
in assets as of March 31, 2000, including other Oppenheimer funds with more than
5 million shareholder accounts. The Manager is located at Two World Trade
Center, 34th Floor, New York, New York 10048-0203.
Portfolio Managers. The portfolio managers of the Fund are Bruce Bartlett and
John Doney. They are the persons primarily responsible for selecting the
securities for the Fund's portfolio. Each is also a portfolio manager and
officer of other Oppenheimer funds. Mr. Bartlett, who is a Senior Vice
President of the Manager, has been a Vice President and portfolio manager
of the Fund since June 1995. Mr. Doney, who is a Vice President of the
Manager, has been a Vice President and portfolio manager of the Fund since
July 1997. Prior to joining the Manager in April 1995, Mr. Bartlett was a
Vice President and Senior Portfolio Manager of First of America Investment
Corp. Mr. Doney has been a Vice President of the Manager since June 1992.
Advisory Fees. Under the investment advisory agreement, the Fund pays the
Manager an advisory fee at an annual rate that declines on additional
assets as the Fund grows: 0.75% of the first $100 million of average
annual net assets of the Fund, 0.70% of the next $100 million, 0.65% of
the next $100 million. 0.60% of the next $100 million, 0.55% of the next
$100 million and 0.50% of average annual net assets in excess of $500
million. The Fund's management fee for its last fiscal year ended December
31, 1999 was 0.52% of average annual net assets for each class of shares.
A B O U T Y O U R A C C O U N T
How to Buy Shares
How Do You Buy Shares? You can buy shares several ways, as described below. The
Fund's Distributor, OppenheimerFunds Distributor, Inc. may appoint certain
servicing agents to accept purchase (and redemption) orders. The Distributor, in
its sole discretion, may reject any purchase order for the Fund's shares.
BuyingShares Through Your Dealer. You can buy shares through any dealer, broker
or financial institution that has a sales agreement with the Distributor.
Your dealer will place your order with the Distributor on your behalf.
BuyingShares Through Your 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, we recommend that you discuss
your investment with a financial advisor before you make a purchase to be
sure that the Fund is appropriate for you.
o Paying by Federal Funds Wire. Shares purchased through the Distributor may
be paid for by Federal Funds wire. The minimum investment is $2,500.
Before sending a wire, call the Distributor's Wire Department at
1-800-525-7048 to notify the Distributor of the wire, and to receive
further instructions.
o Buying Shares Through OppenheimerFunds AccountLink. With AccountLink, you
pay for shares by electronic funds transfers from your bank account.
Shares are purchased for your account through the Automated Clearing House
(ACH) system. You can provide those instructions automatically, under an
Asset Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. Please refer to
"AccountLink," below for more details.
o Buying Shares Through 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 in the Asset Builder
Application and the Statement of Additional Information.
HOW MUCH MUST YOU INVEST? You can buy Fund shares account with a minimum initial
investment of $1,000 and make additional investments at any time with as little
as $25. There are reduced minimum investments under special investment plans.
o With Asset Builder Plans, 403(b) plans, Automatic Exchange Plans and
military allotment plans, you can make initial and subsequent
investments for as little as $25. You can make additional purchases of
at least $25 through AccountLink.
o Under retirement plans, such as IRAs, pension and profit-sharing plans
and 401(k) plans, you can start your account with as little as $250. If
your IRA is started under an Asset Builder Plan, the $25 minimum
applies. Additional purchases may be as little as $25.
o The minimum investment requirement does not apply to 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 reinvesting distributions from
unit investment trusts that have made arrangements with the
Distributor.
AT WHAT PRICE ARE SHARES SOLD? Shares are sold at their offering price, which is
the net asset value per share plus any initial sales charge that applies. The
offering price that applies to a purchase order is based on the next calculation
of the net asset value per share that is made after the Distributor receives the
purchase order at its offices in Denver, Colorado, or after any agent appointed
by the Distributor receives the order and sends it to the Distributor.
Net asset value. The Fund calculates the net asset value of each class of
shares as of the close of The New York Stock Exchange, on each day the
Exchange is open for trading (referred to in this Prospectus as a "regular
business day"). The Exchange normally closes at 4:00 P.M., New York time,
but may close earlier on some days. All references to time in this
Prospectus mean "New York time."
The net asset value per share is determined 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. To determine net asset value, the Fund's Board
of Directors has established procedures to value the Fund's securities, in
general based on market value. The Board has adopted special procedures
for valuing illiquid and restricted securities and obligations for which
market values cannot be readily obtained. Because some foreign securities
trade in markets and on exchanges that operate on weekends and U.S.
holidays, the values of some of the Fund's foreign investments might
change significantly on days when investors cannot buy or redeem shares.
The offering price. To receive the offering price for a particular day, in
most cases the Distributor or its designated agent must receive your order
by the time of day The New York Stock Exchange closes that day. If your
order is received on a day when the Exchange is closed or after it has
closed, the order will receive the next offering price that is determined
after your order is received.
Buying shares through a dealer. If you buy shares through a dealer, your dealer
must receive the order by the close of The New York Stock Exchange and transmit
it to the Distributor so that it is received before the Distributor's close of
business on a regular business day (normally 5:00 P.M.) to receive that day's
offering price. Otherwise, the order will receive the next offering price that
is determined.
- --------------------------------------------------------------------------------
WHAT CLASSES OF SHARES DOES THE FUND OFFER? The Fund offers investors four
different classes of shares. The different classes of shares represent
investments in the same portfolio of securities, but the classes are subject to
different expenses and will likely have different share prices. When you buy
shares, be sure to specify the class of shares. If you do not choose a class,
your investment will be made in Class A shares.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares. If you buy Class A shares, you pay an initial sales charge (on
investments up to $1 million for regular accounts or $500,000 for certain
retirement plans). The amount of that sales charge will vary depending on the
amount you invest. The sales charge rates are listed in "How Can I Buy Class A
Shares?" below.
Class B Shares. If you buy Class B shares, you pay no sales charge at the time
of purchase, but you will pay an annual asset-based sales charge. If you sell
your shares within six years of buying them, you will normally pay a contingent
deferred sales charge. That contingent deferred sales charge varies depending on
how long you own your shares, as described in "How Can I Buy Class B Shares?"
below.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares. If you buy Class C shares, you pay no sales charge at the time
of purchase, but you will pay an annual asset-based sales charge. 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 "How Can I Buy Class C Shares?"
below.
Class Y Shares. Class Y shares are offered only to certain institutional
investors that have special agreements with the Distributor.
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 best
suited to your needs depends on a number of factors that you should discuss with
your financial advisor. Some 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.
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 discussion below is not intended to be investment advice or a
recommendation, because each investor's financial considerations are different.
Of course, these examples are based on approximations of the effect of current
sales charges and expenses projected over time, and do not detail all of the
considerations in selecting a class of shares. You should analyze your options
carefully with your financial advisor before making that choice. The discussion
below 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,
compared to the effect over time of higher class-based expenses on shares
of Class B or Class C.
o Investing for the Shorter Term. While the Fund is meant to be a long-term
investment, if you have a relatively 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. That
is because of the effect of the Class B contingent deferred sales charge if you
redeem within six 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 as
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.
And for investors who invest $1 million or more, in most cases Class A shares
will be the most advantageous choice, no matter how long you intend to hold your
shares. For that reason, the Distributor normally will not accept purchase
orders of $500,000 or more of Class B shares or $1 million or more of Class C
shares from a single investor.
o Investing for the Longer Term. If you are investing less than $100,000 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 appropriate.
Are There Differences in Account Features That Matter to You? Some account
features may not be available to Class B or Class C shareholders. Other
features may not be advisable (because of the effect of the contingent
deferred sales charge) for Class B or Class C shareholders. Therefore, you
should carefully review how you plan to use your investment account before
deciding which class of shares to buy.
Additionally, the dividends payable to Class B and Class C shareholders
will be reduced by the additional expenses borne by those classes that are
not borne by Class A shares, such as the Class B and Class C asset-based
sales charge described below and in the Statement of Additional
Information. Share certificates are not available for Class B and Class C
shares, and if you are considering using your shares as collateral for a
loan, that may be a factor to consider.
How Do Share Classes Affect Payments to My Broker? A financial advisor, may
receive different compensation for selling one class of shares than for
selling another class. It is important to remember that Class B and Class
C contingent deferred sales charges and asset-based sales charges have the
same purpose as the front-end sales charge on sales of Class A shares: to
compensate the Distributor for concessions and expenses it pays to dealers
and financial institutions for selling shares. The Distributor may pay
additional compensation from its own resources to securities dealers or
financial institutions based upon the value of shares of the Fund owned by
the dealer or financial institution for its own account or for its
customers.
SPECIAL SALES CHARGE ARRANGEMENTS AND WAIVERS. Appendix C to the Statement of
Additional Information details the conditions for the waiver of sales charges
that apply in certain cases, and the special sales charge rates that apply to
purchases of shares of the Fund by certain groups, or under specified retirement
plan arrangements or in other special types of transactions. To receive a waiver
or special sales change rate, you must advise the Distributor when purchasing
shares or the Transfer Agent when redeeming shares that the special conditions
apply.
HOW CAN YOU BUY CLASS A SHARES? Class A shares are sold at their offering price,
which is normally net asset value plus an initial sales charge. However, in some
cases, described below, purchases are not subject to an initial sales charge,
and the offering price will be the net asset value. In other cases, reduced
sales charges may be available, as described below or in the Statement of
Additional Information. 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 or allocated to
your dealer as commission. The Distributor reserves the right to reallow the
entire commission to dealers. The current sales charge rates and commissions
paid to dealers and brokers are as follows:
- --------------------------------------------------------------------------------
Front-End Sales Front-End Sales
Charge As a Charge As a Commission As
Percentage of Percentage of Net Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Less than $25,000 5.75% 6.10% 4.75%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$25,000 or more but 5.50% 5.82% 4.75%
less than $50,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$50,000 or more but 4.75% 4.99% 4.00%
less than $100,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$100,000 or more
but less than 3.75% 3.90% 3.00%
$250,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$250,000 or more
but less than 2.50% 2.56% 2.00%
$500,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$500,000 or more
but less than $1 2.00% 2.04% 1.60%
million
- --------------------------------------------------------------------------------
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
aggregating $1 million or more or for certain purchases by particular
types of retirement plans described in Appendix C to the Statement of
Additional Information. The Distributor pays dealers of record commissions
in an amount equal to 1.0% of purchases of $1 million or more other than
by those retirement accounts. For those retirement plan accounts, the
commission is 1.0% of the first $2.5 million, plus 0.50% of the next $2.5
million, plus 0.25% of purchases over $5 million, calculated on a calendar
year basis. In either case, the commission will be paid only on purchases
that were not previously subject to a front-end sales charge and dealer
commission. That commission will not be paid on purchases of shares of $1
million or more (including any right of accumulation) by a retirement plan
that pays for the purchase with the redemption proceeds of Class C shares
of one or more Oppenheimer funds held by the plan for more than one year.
If you redeem any of those shares within an 18- month "holding period"
measured from the end of the calendar month of their purchase, a
contingent deferred sales charge (called the "Class A contingent deferred
sales charge") may be deducted from the redemption proceeds. That sales
charge will be equal to 1.0% of the lesser of (1) the aggregate net asset
value of the redeemed shares at the time of redemption (excluding shares
purchased by reinvestment of dividends or capital gain distributions) or
(2) 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 concessions the Distributor paid to your dealer on all
purchases of Class A shares of all Oppenheimer funds you made that were
subject to the Class A contingent deferred sales charge.
Can You Reduce Class A Sales Charges? You may be eligible to buy Class A
shares at reduced sales charge rates under the Fund's "Right of
Accumulation" or a Letter of Intent, as described in "Reduced Sales
Charges" in the Statement of Additional Information. The Class A initial
and contingent deferred sales charges are not imposed in the circumstances
described in Appendix C to the Statement of Additional Information.
HOW CAN YOU BUY 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 the end of the calendar month of their purchase, a contingent
deferred sales charge will be deducted from the redemption proceeds. The Class B
contingent deferred sales charge is paid to compensate the Distributor for its
expenses of providing distribution-related services to the Fund in connection
with the sale of Class B shares.
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 for the Class B contingent deferred sales
charge holding period:
- -------------------------------------------------------------------------------
Contingent Deferred Sales Charge on
Years Since Beginning of Month in Redemptions in That Year
Which (As % of Amount Subject to Charge)
Purchase Order was Accepted
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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. In applying the sales
charge, 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. Class B shares automatically convert to
Class A shares 72 months after you purchase them. 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 any
Class B shares you hold convert, a prorated portion of your Class B shares
that were acquired by reinvesting 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 the Statement of Additional Information. For further information on the
conversion feature and its tax implications, see "Class B Conversion" in
the Statement of Additional Information.
HOW CAN YOU BUY 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 a holding period of 12 months from the end of the calendar month of their
purchase, a contingent deferred sales charge of 1.0% will be deducted from the
redemption proceeds. The Class C contingent deferred sales charge is paid to
compensate the Distributor for its expenses of providing distribution-related
services to the Fund in connection with the sale of Class C shares.
WHO CAN BUY CLASS Y SHARES? Class Y shares are sold at net asset value per share
without sales charge directly to certain institutional investors that have
special agreements with the Distributor for this purpose. They may include
insurance companies, registered investment companies and employee benefit plans,
for example. Massachusetts Mutual Life Insurance Company, an affiliate of the
Manager, may purchase Class Y shares of the Fund and other Oppenheimer funds (as
well as Class Y shares of funds advised by MassMutual) for asset allocation
programs, investment companies or separate investment accounts it sponsors and
offers to its customers. Individual investors cannot buy Class Y shares
directly.
An institutional investor that buys Class Y shares for its customers'
accounts may impose charges on those accounts. The procedures for buying,
selling, exchanging and transferring the Fund's other classes of shares and the
special account features available to investors buying those other classes of
shares do not apply to Class Y shares. An exception is that the time those
orders must be received by the Distributor or its agents or by the Transfer
Agent is the same for Class Y as for other share classes. However, those
instructions must be submitted by the institutional investor, not by its
customers for whose benefit the shares are held.
DISTRIBUTION AND SERVICE (12B-1) PLANS.
Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class A
shares. It reimburses the Distributor for a portion of its costs incurred
for services provided to accounts that hold Class A shares. Reimbursement
is made quarterly at an annual rate of up to 0.25% of the average annual
net assets presented by Class A shares of the Fund. The Distributor
currently uses all of those fees to pay dealers, brokers, banks and other
financial institutions quarterly for providing personal service and
maintenance of accounts of their customers that hold Class A shares.
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
pay the Distributor for its services in distributing Class B and Class C
shares and servicing accounts. Under the plans, the Fund pays the
Distributor an annual asset-based sales charge of 0.75% per year on Class
B shares and on Class C shares. The Distributor also receives a service
fee of 0.25% per year under each plan.
The asset-based sales charge and service fees increase Class B and Class C
expenses by 1.00% of the net assets per year of the respective class.
Because these fees are paid out of the Fund's assets on an on going basis,
over time these fees will increase the cost of your investment and may
cost you more than other types of sales charges.
The Distributor uses the service fees to compensate dealers for providing
personal services for accounts that hold Class B or Class C shares. The
Distributor pays the 0.25% service fees to dealers in advance for the
first year after the shares are sold by the dealer. 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 concessions of 3.75% of the purchase
price of Class B shares to dealers from its own resources at the time of
sale. Including the advance of the service fee, the total amount paid by
the Distributor to the dealer at the time of sale of Class B shares is
therefore 4.00% of the purchase price. The Distributor retains the Class B
asset-based sales charge.
The Distributor currently pays sales concessions of 0.75% of the purchase
price of Class C shares to dealers from its own resources at the time of
sale. Including the advance of the service fee, the total amount paid by
the Distributor to the dealer at the time of sale of Class C shares is
therefore 1.00% of the purchase price. The Distributor pays 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.
Special Investor Services
AccountLink. You can use our AccountLink feature to link your Fund account with
an account at a U.S. bank or other financial institution. It must be an
Automated Clearing House (ACH) member. AccountLink lets you:
o transmit funds electronically to purchase shares by telephone
(through a service representative or by PhoneLink) or automatically
under Asset Builder Plans, or
o have the Transfer Agent send redemption proceeds or transmit
dividends and distributions directly to your bank account. Please
call the Transfer Agent for more information.
You may purchase shares 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.
AccountLink privileges should be requested on your Application or your
dealer's settlement instructions if you buy your shares through a 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.
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.
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.
CAN YOU SUBMIT TRANSACTION REQUESTS BY FAX? You may send requests for certain
types of account transactions to the Transfer Agent by fax (telecopier). Please
call 1.800.525.7048 for information about which transactions may be handled this
way. Transaction requests submitted by fax are subject to the same rules and
restrictions as written and telephone requests described in this Prospectus.
OPPENHEIMERFUNDS INTERNET WEBSITE. You can obtain information about the Fund, as
well as your account balance, on the OppenheimerFunds Internet website, at
http://www.oppenheimerfunds.com. Additionally, shareholders listed in the
account registration (and the dealer of record) may request certain account
transactions through a special section of that web site. To perform account
transactions, you must first obtain a personal identification number (PIN) by
calling the Transfer Agent at 1.800.533.3310. If you do not want to have
Internet account transaction capability for your account, please call the
Transfer Agent at 1.800.525.7048. At times, the website may be inaccessible or
its transaction features may be unavailable.
AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The Fund has several plans that enable
you to sell shares automatically or exchange them to another OppenheimerFunds
account on a regular basis. Please call the Transfer Agent or consult the
Statement of Additional Information for details.
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 only 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 or Class Y shares. You must be
sure to ask the Distributor for this privilege when you send your payment.
RETIREMENT PLANS. You may buy shares of the Fund for your retirement plan
account. If you participate in a plan sponsored by your employer, the plan
trustee or administrator must buy the shares for your plan account. The
Distributor also offers a number of different retirement plans that individuals
and employers can use:
Individual Retirement Accounts (IRAs), These include regular IRAs, Roth IRAs,
SIMPLE IRAs, rollover IRAs and Education IRAs.
SEP-IRA. These are Simplified Employee Pensions Plan IRAs for small business
owners or self-employed individuals.
403(b)(7) Custodial Plans. These are tax deferred plans for employees of
eligible tax-exempt organizations, such as schools, hospitals and
charitable organizations. 401(k) Plans. These are special retirement plans
for businesses. Pension and Profit-Sharing Plans. These plans are designed
for businesses and self-employed individuals. Please call the Distributor
for OppenheimerFunds retirement plan documents, which include applications
and important plan information.
How to Sell Shares
You can sell (redeem) 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 in proper form (which means that it must comply with the procedures
described below) and is accepted by the Transfer Agent. The Fund lets you sell
your shares by writing a letter or by telephone. You can also set up Automatic
Withdrawal Plans to redeem shares on a regular basis. 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 account, please call the Transfer Agent first, at 1.800.525.7048, for
assistance.
Certain Requests Require a Signature Guarantee. To protect you and the Fund
from fraud, the following redemption requests must be in writing and must
include a signature guarantee (although there may be other situations that also
require a signature guarantee):
o You wish to redeem $100,000 or more and receive a check
o The redemption check is not payable to all shareholders listed on the
account statement
o The redemption check is not sent to the address of record on your account
statement
o Shares are being transferred to a Fund account with a different owner or name
o Shares are being redeemed by someone (such as an Executor) other than the
owners
Where Can You Have Your Signature Guaranteed? The Transfer Agent will accept a
guarantee of your signature by a number of financial institutions, including:
o a U.S. bank, trust company, credit union or savings association,
o a foreign bank that has a U.S. correspondent bank,
o a U.S. registered dealer or broker in securities, municipal securities or
government securities,
o 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.
Retirement Plan Accounts. There are special procedures to sell shares in an
OppenheimerFunds retirement plan account. Call the Transfer Agent for a
distribution request form. Special income tax withholding requirements apply to
distributions from retirement plans. You must submit a withholding form with
your redemption request to avoid delay in getting your money and if you do not
want tax withheld. If your employer holds your retirement plan account for you
in the name of the plan, you must ask the plan trustee or administrator to
request the sale of the Fund shares in your plan account.
Sending Redemption Proceeds by Wire. While the Fund normally sends your money by
check, you can arrange to have the proceeds of the shares you sell sent by
Federal Funds wire to a bank account you designate. It must be a commercial bank
that is a member of the Federal Reserve wire system. The minimum redemption you
can have sent by wire is $2,500. There is a $10 fee for each wire. To find out
how to set up this feature on your account or to arrange a wire, call the
Transfer Agent at 1.800.852.8457.
HOW DO YOU SELL SHARES BY MAIL? Write a letter of instructions that includes: o
Your name o The Fund's name o Your Fund account number (from your account
statement) o The dollar amount or number of shares to be redeemed o Any special
payment instructions o Any share certificates for the shares you are selling o
The signatures of all registered owners exactly as the account is registered,
and
o Any special documents requested by the Transfer Agent to assure proper
authorization of the person asking to sell the shares.
Use the following address for requests by mail: Send courier or express mail
requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue, Building D
Denver, Colorado 80217-5270 Denver, Colorado 80231
HOW DO YOU SELL SHARES BY TELEPHONE? You and your dealer representative of
record may also sell your shares by telephone. To receive the redemption price
calculated on a particular regular business day, your call must be received by
the Transfer Agent by the close of The New York Stock Exchange that day, which
is normally 4:00 P.M., but may be earlier on some days. You may not redeem
shares held in an OppenheimerFunds retirement plan account or under a share
certificate by telephone. o To redeem shares through a service representative,
call 1.800.852.8457 o To redeem shares automatically on PhoneLink, call
1.800.533.3310
Whichever method you use, you may have a check sent to the address on the
account statement, or, if you have linked your Fund account to your bank account
on AccountLink, you may have the proceeds sent to that bank account.
ARE THERE LIMITS ON AMOUNTS REDEEMED BY TELEPHONE?
o Telephone Redemptions Paid by Check. Up to $100,000 may be redeemed by
telephone in any 7-day period. The check must be payable to all owners of
record of the shares and must be sent to the address on the account
statement. This service is not available within 30 days of changing the
address on an account.
o Telephone Redemptions Through AccountLink. There are no dollar limits on
telephone redemption proceeds sent to a bank account designated when you
establish AccountLink. Normally the ACH transfer to your bank is initiated
on the business day after the redemption. You do not receive dividends on
the proceeds of the shares you redeemed while they are waiting to be
transferred.
CAN YOU SELL 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. If your shares are held in the
name of your dealer, you must redeem them through your dealer.
HOW CONTINGENT DEFERRED SALES CHARGES AFFECT REDEMPTIONS. If you purchase shares
subject to Class A, Class B or Class C contingent deferred sales charge and
redeem any of those shares during the applicable holding period for the class of
shares, the contingent deferred sales charge will be deducted from the
redemption proceeds (unless you are eligible for a waiver of that sales charge
based on the categories listed in Appendix C to the Statement of Additional
Information) and you advise the Transfer Agent of your eligibility for the
waiver when you place your redemption request.
A contingent deferred sales charge will be based on the lesser of the net
asset value of the redeemed shares at the time of redemption or the original net
asset value. A contingent deferred sales charge is not imposed on: o the amount
of your account value represented by an increase in net asset
value over the initial purchase price,
o shares purchased by the reinvestment of dividends or capital gains
distributions, or
o shares redeemed in the special circumstances described in Appendix C to the
Statement of Additional Information.
To determine whether a 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 the holding period that applies to the class, (3) shares held the longest
during the holding period.
Contingent deferred sales charges are not charged when you exchange shares
of the Fund for shares of other Oppenheimer funds. However, if you exchange them
within the applicable contingent deferred sales charge holding period, the
holding period will carry over to the fund whose shares you acquire. Similarly,
if you acquire shares of this Fund by exchanging shares of another Oppenheimer
fund that are still subject to a contingent deferred sales charge holding
period, that holding period will carry over to this Fund.
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. Shares of the Fund can be purchased by exchange of shares of other
Oppenheimer funds on the same basis. To exchange shares, you must meet several
conditions: o Shares of the fund selected for exchange must be available for
sale in your
state of residence.
o The prospectuses of both funds must offer the exchange privilege.
o You must hold the shares you buy when you establish your account for
at least 7 days before you can exchange them. After the account is
open 7 days, you can exchange shares every regular business day.
o You must meet the minimum purchase requirements for the fund whose
shares you purchase by exchange.
o Before exchanging into a fund, you must 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. In some
cases, sales charges may be imposed on exchange transactions. For tax purposes,
exchanges of shares involve a sale 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. Please refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
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.
HOW DO YOU SUBMIT EXCHANGE REQUESTS? 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
address on the back cover. Exchanges of shares held under certificates cannot be
processed unless the Transfer Agent receives the certificates with the request.
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.
ARE THERE LIMITATIONS ON EXCHANGES? There are certain exchange policies you
should be aware of:
o Shares are normally redeemed from one fund and purchased from the other fund
in the exchange transaction on the same regular business day on which the
Transfer Agent receives an exchange request that conforms to the policies
described above. It must be received 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 seven days if it determines it would be
disadvantaged by a same-day exchange. For example, the receipt of multiple
exchange requests from a "market timer" might require the Fund to sell
securities at a disadvantageous time or price.
o Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange
request that it believes will disadvantage it, or to refuse multiple
exchange requests submitted by a shareholder or dealer.
o The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund will attempt to provide you notice whenever it
is required to do so by applicable law, it may impose these changes at
any time for emergency purposes.
o If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
Shareholder Account Rules and Policies
More information about the Fund's policies and procedures for buying, selling,
and exchanging shares is contained 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 Directors 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
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. The Transfer Agent and the Fund
will not be liable for losses or expenses arising out of telephone
instructions reasonably believed to be genuine.
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. The redemption price,
which is the net asset value per share, will normally differ for each
class of shares. The redemption value of your shares may be more or less
than their original cost.
Payment for redeemed shares ordinarily is made in cash. It is forwarded by check
or through AccountLink or by Federal Funds wire (as elected by the
shareholder) within seven days after the Transfer Agent receives
redemption instructions in proper form. However, under unusual
circumstances determined by the Securities and Exchange Commission,
payment may be delayed or suspended. For accounts registered in the name
of a broker-dealer, payment will normally be forwarded within three
business days after redemption.
The Transfer Agent may delay forwarding a check or processing a payment via
AccountLink for recently purchased shares, but only until the purchase
payment has cleared. That delay may be as much as 10 days from the date
the shares were purchased. That delay may be avoided if you purchase
shares by Federal Funds wire or certified check, or arrange with your bank
to provide telephone or written assurance to the Transfer Agent that your
purchase payment has cleared.
Involuntary redemptions of small accounts may be made by the Fund if the account
value has fallen below $500 for reasons other than the fact that the
market value of shares has dropped. In some cases involuntary redemptions
may be made to repay the Distributor for losses from the cancellation of
share purchase orders.
Sharesmay be "redeemed in kind" under unusual circumstances (such as a lack of
liquidity in the Fund's portfolio to meet redemptions). This means that
the redemption proceeds will be paid with liquid securities from the
Fund's portfolio.
"Backup Withholding" of federal income tax may be applied against taxable
dividends, distributions and redemption proceeds (including exchanges) if
you fail to furnish the Fund your correct, certified Social Security or
Employer Identification Number when you sign your application, or if you
under-report your income to the Internal Revenue Service.
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 intends to declare dividends separately for each class of
shares from net investment income on a quarterly basis. The Fund intends to pay
dividends to shareholders in March, June, September and December on a date
selected by the Board of Directors.
The Fund attempts to pay dividends on Class A shares at a constant level.
There is no assurance that it will be able to do so. The Board of Directors may
change the targeted dividend rate at any time without notice to shareholders.
Dividends and other distributions paid on Class A and Class Y shares will
generally be higher than dividends for Class B and Class C shares, which
normally have higher expenses than Class A and Class Y. The Fund cannot
guarantee that it will pay any dividends or other distributions.
CAPITAL GAINS. The Fund may realize capital gains on the sale of portfolio
securities. If it does, it may make distributions out of any net short-term or
long-term capital gains in December of each year. The Fund may make supplemental
distributions of dividends and capital gains following the end of its fiscal
year. There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
WHAT ARE YOUR CHOICES FOR RECEIVING DISTRIBUTIONS? When you open your account,
specify on your application how you want to receive your dividends and
distributions. You have four options:
Reinvest All Distributions in the Fund. You can elect to reinvest all dividends
and capital gains distributions in additional shares of the Fund.
Reinvest Dividends or Capital Gains. You can elect to reinvest some distribution
(dividends, short-term capital gains or long-term capital gains distributions)
in the Fund while receiving the other types of distribution by check or having
them sent to your bank account through AccountLink.
Receive All Distributions in Cash. You can elect to receive a check for all
dividends and capital gains distributions or have them sent to your bank through
AccountLink.
Reinvest Your Distributions in Another OppenheimerFunds Account. You can
reinvest all distributions in the same class of shares of another
OppenheimerFunds account you have established.
TAXES. If your shares are not held in a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the Fund.
Distributions are subject to federal income tax and may be subject to state or
local taxes. Dividends paid from short-term capital gains and net investment
income are taxable as ordinary income. Long-term capital gains are taxable as
long-term capital gains when distributed to shareholders. It does not matter how
long you have held your shares. Whether you reinvest your distributions in
additional shares or take them in cash, the tax treatment is the same.
Every year the Fund will send you and the IRS a statement showing the
amount of any taxable distribution you received in the previous year. Any
long-term capital gains will be separately identified in the tax information the
Fund sends you after the end of the calendar year.
Avoid "Buying a Dividend". If you buy shares on or just before the ex-dividend
date or just before the Fund declares a capital gain distribution, you will pay
the full price for the shares and then receive a portion of the price back as a
taxable dividend or capital gain.
Remember, There May be Taxes on Transactions. Because the Fund's share prices
fluctuate, you may have a capital gain or loss when you sell or exchange your
shares. 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. Any capital gain is
subject to capital gains tax.
Returns of Capital Can Occur. 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.
This information is only a summary of certain federal income tax
information about your investment. You should consult with your tax adviser
about the effect of an investment in the Fund on your particular tax situation.
Financial Highlights
The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the past 5 fiscal years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Deloitte & Touche LLP, the Fund's independent
auditors, whose report, along with the Fund's financial statements, is included
in the Statement of Additional Information, which is available on request.
FINANCIAL HIGHLIGHTS
Class A Year Ended December 31, 1999 1998
1997 1996 1995
=============================================================================================================
Per Share Operating Data
Net asset value, beginning of period $12.23 $11.00
$9.77 $9.35 $7.80
- -------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .14 .16
.16 .20 .23
Net realized and unrealized gain 2.01 2.09
2.49 1.63 2.09
- ----------------------------------------------------------
Total income from investment operations 2.15 2.25
2.65 1.83 2.32
- -------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.12) (.15)
(.14) (.20) (.22)
Distributions from net realized gain (1.01) (.87)
(1.28) (1.21) (.55)
- ----------------------------------------------------------
Total dividends and/or distributions
to shareholders (1.13) (1.02)
(1.42) (1.41) (.77)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.25 $12.23
$11.00 $9.77 $9.35
==========================================================
=============================================================================================================
Total Return, at Net Asset Value(1) 18.34% 21.16%
27.39% 19.73% 30.12%
=============================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $3,157 $2,594
$2,238 $1,827 $1,551
- -------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $2,757 $2,388
$2,045 $1,685 $1,394
- -------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 1.12% 1.31%
1.43% 1.96% 2.53%
Expenses 0.87% 0.86%(3)
0.89%(3) 0.90%(3) 0.92%(3)
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 34% 38%
92% 118% 85%
1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of operations), 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 less than one full year. 2.
Annualized for periods of less than one full year.
3. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly. 4. 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 December 31, 1999, were $1,189,628,921 and
$1,455,549,024, respectively.
OPPENHEIMER TOTAL RETURN FUND, INC.
FINANCIAL HIGHLIGHTS Continued
Class B Year Ended December 31, 1999
1998 1997 1996 1995
============================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $12.10
$10.89 $9.70 $9.29 $7.76
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .04
.06 .07 .12 .15
Net realized and unrealized gain 1.98
2.08 2.45 1.62 2.08
- -----------------------------------------------------------------------
Total income from investment operations 2.02
2.14 2.52 1.74 2.23
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.01)
(.06) (.05) (.12) (.15)
Distributions from net realized gain (1.01)
(.87) (1.28) (1.21) (.55)
- -----------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (1.02)
(.93) (1.33) (1.33) (.70)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.10 $12.10
$10.89 $9.70 $9.29
=======================================================================
============================================================================================================================
Total Return, at Net Asset Value(1) 17.37%
20.25% 26.17% 18.78% 29.03%
============================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $1,152
$1,202 $987 $755 $590
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $1,196
$1,080 $878 $672 $511
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 0.32%
0.50% 0.62% 1.15% 1.70%
Expenses 1.67%
1.67%(3) 1.71%(3) 1.71%(3) 1.75%(3)
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 34%
38% 92% 118% 85%
1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of operations), 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 less than one full year. 2.
Annualized for periods of less than one full year.
3. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly. 4. 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 December 31, 1999, were $1,189,628,921 and
$1,455,549,024, respectively.
OPPENHEIMER TOTAL RETURN FUND, INC.
Class C Year Ended December 31, 1999
1998 1997 1996 1995(5)
============================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $12.13
$10.92 $9.72 $9.33 $9.19
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .04
.06 .07 .16 .07
Net realized and unrealized gain 1.98
2.08 2.46 1.57 .73
- -----------------------------------------------------------------------
Total income from investment operations 2.02
2.14 2.53 1.73 .80
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.02)
(.06) (.05) (.13) (.11)
Distributions from net realized gain (1.00)
(.87) (1.28) (1.21) (.55)
- -----------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (1.02)
(.93) (1.33) (1.34) (.66)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.13 $12.13
$10.92 $9.72 $9.33
=======================================================================
============================================================================================================================
Total Return, at Net Asset Value(1) 17.37%
20.20% 26.23% 18.67% 8.82%
============================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $76
$58 $37 $18 $2
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $66
$47 $27 $8 $1
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 0.31%
0.50% 0.63% 1.05% 1.42%
Expenses 1.68%
1.67%(3) 1.72%(3) 1.76%(3) 1.77%(3)
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 34%
38% 92% 118% 84%
1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of operations), 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 less than one full year. 2.
Annualized for periods of less than one full year.
3. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly. 4. 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 December 31, 1999, were $1,189,628,921 and
$1,455,549,024, respectively. 5. For the period from August 29, 1995 (inception
of offering) to December 31, 1995.
OPPENHEIMER TOTAL RETURN FUND, INC.
FINANCIAL HIGHLIGHTS Continued
Class Y Year Ended December 31, 1999
1998 1997 1996 1995
============================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $12.24
$11.00 $9.77 $9.35 $7.80
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .17
.17 .18 .23 .20
Net realized and unrealized gain 2.00
2.10 2.48 1.61 2.13
- -----------------------------------------------------------------------
Total income from investment operations 2.17
2.27 2.66 1.84 2.33
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.14)
(.16) (.15) (.21) (.23)
Distributions from net realized gain (1.01)
(.87) (1.28) (1.21) (.55)
- -----------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (1.15)
(1.03) (1.43) (1.42) (.78)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.26 $12.24
$11.00 $9.77 $9.35
=======================================================================
============================================================================================================================
Total Return, at Net Asset Value(1) 18.53%
21.33% 27.53% 19.88% 30.23%
============================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $52
$39 $27 $18 $7
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $47
$34 $22 $13 $4
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 1.32%
1.39% 1.60% 2.08% 2.51%
Expenses 0.67%
0.80%(3) 0.74%(3) 0.77%(3) 0.87%(3)
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 34%
38% 92% 118% 85%
1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of operations), 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 less than one full year. 2.
Annualized for periods of less than one full year.
3. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly. 4. 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 December 31, 1999, were $1,189,628,921 and
$1,455,549,024, respectively. 5. For the period from August 29, 1995 (inception
of offering) to December 31, 1995.
OPPENHEIMER TOTAL RETURN FUND, INC.
INFORMATION AND SERVICES
For More Information About Oppenheimer Total Return Fund, Inc. The following
additional information about the Fund is available without charge upon request:
STATEMENT OF ADDITIONAL INFORMATION
This document includes additional information about the Fund's investment
policies, risks, and operations. It is incorporated by reference into this
Prospectus (which means it is legally part of this Prospectus).
ANNUAL AND SEMI-ANNUAL REPORTS
Additional information about the Fund's investments and performance is available
in the Fund's Annual and Semi-Annual Reports to shareholders. The Annual Report
includes a discussion of market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
By Telephone:
Call OppenheimerFunds Services toll-free: 1.800.525.7048
By Mail:
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
On the Internet: You can send us a request by e-mail or read or down-load
documents on the OppenheimerFunds web site: http://www.oppenheimerfunds.com
-------------------------------
You can also obtain copies of the Statement of Additional Information and other
Fund documents and reports by visiting the SEC's Public Reference Room in
Washington, D.C. (Phone 202.942.8090) or the EDGAR database on the SEC's
Internet web site at http://www.sec.gov. Copies may be obtained after payment of
a duplicating fee by electronic request the SEC's e-mail address:
publicinfo@sec.gov or writing to the SEC's Public Reference Section, Washington,
D.C. 20549-0102.
No one has been authorized to provide any information about the Fund or to make
any representations about the Fund other than what is contained in this
Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a
solicitation of an offer to buy shares of the Fund, to any person in any state
or other jurisdiction where it is unlawful to make such an offer.
The Fund's shares are distributed by:
OppenheimerFunds Distributor, Inc.
SEC File No. 811-490
PR0420.001.0400 Printed on recycled paper.
Appendix to Prospectus of
Oppenheimer Total Return Fund, Inc.
Graphic material included in the Prospectus of Oppenheimer Total Return
Fund, Inc. (the "Fund") under the heading: "Annual Total Returns (Class A)(as of
12/31 each year)":
A bar chart will be included in the Prospectus of the Fund depicting the
annual total returns of a hypothetical investment in Class A shares of the Fund
for each of the ten most recent calendar years, without deducting sales charges.
Set forth below are the relevant data points that will appear in the bar chart:
- --------------------------------------------------------------------------------
Year Ended: Annual Total Return
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12/31/90 -3.86%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12/31/91 36.26%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12/31/92 12.83%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12/31/93 21.24%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12/31/94 -7.86%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12/31/95 30.12%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12/31/96 19.73%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12/31/97 27.39%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12/31/98 21.16%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12/31/99 18.34%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Oppenheimer Total Return Fund, Inc.
- --------------------------------------------------------------------------------
6803 South Tucson Way, Englewood, Colorado 80112
1.800.525.7048
Statement of Additional Information dated April 28, 2000
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated April 28, 2000. 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, or by
downloading it from the OppenheimerFunds Internet web site at
www.oppenheimerfunds.com.
Contents
Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks..
The Fund's Investment Policies.....................................
Other Investment Techniques and Strategies.........................
Investment Restrictions............................................
How the Fund is Managed ...............................................
Organization and History...........................................
Directors and Officers.............................................
The Manager........................................................
Brokerage Policies of the Fund.........................................
Distribution and Service Plans.........................................
Performance of the Fund................................................
About Your Account
How To Buy Shares......................................................
How To Sell Shares.....................................................
How To Exchange Shares.................................................
Dividends, Capital Gains and Taxes.....................................
Additional Information About the Fund..................................
Financial Information About the Fund
Independent Auditors' Report...........................................
Financial Statements...................................................
Appendix A: Ratings Definitions........................................
Appendix B: Industry Classifications...................................
Appendix C: Special Sales Charge Arrangements and Waivers..............
- --------------------------------------------------------------------------------
A B O U T T H E F U N D
- --------------------------------------------------------------------------------
Additional Information About the Fund's Investment Policies and Risks
The investment objective, the principal investment policies and the main
risks of the Fund are described in the Prospectus. This Statement of Additional
Information contains supplemental information about those policies and risks and
the types of securities that the Fund's investment Manager, OppenheimerFunds,
Inc., can select for the Fund. Additional information is also provided about the
strategies that the Fund may use to try to achieve its objective.
The Fund's Investment Policies. The composition of the Fund's portfolio and the
techniques and strategies that the Fund's Manager may use in selecting portfolio
securities will vary over time. The Fund is not required to use all of the
investment techniques and strategies described below at all times in seeking its
goal. It may use some of the special investment techniques and strategies at
some times or not at all.
In selecting securities for the Fund's portfolio, the Manager evaluates
the merits of securities primarily through the exercise of its own investment
analysis. That analysis includes a number of factors, some of which are
discussed in the Prospectus. Additionally, the Manager may evaluate
|_| the strength of an issuer's management and the history of its
operations,
|_| the soundness of its financial and accounting policies and its
financial condition,
|_| the issuer's pending product developments and developments by
competitors,
|_| the effect of general market conditions on the issuer's business and
the prospects for the industry of which the issuer is a part, and
|_| legislative proposals that might affect the issuer.
|X| Investments in Equity Securities. The Fund does not limit its
investments in equity securities to issuers having a market capitalization of a
specified size or range, and therefore may invest in securities of small-, mid-
and large-capitalization issuers. At times, the Fund may focus its equity
investments in securities of one or more capitalization ranges, based upon the
Manager's judgment of where the best market opportunities are to seek the Fund's
objective. At times, the market may favor or disfavor securities of issuers of a
particular capitalization range. Securities of small capitalization issuers may
be subject to greater price volatility in general than securities of larger
companies. Therefore, if the Fund is focusing on, or has substantial investments
in, smaller capitalization companies at times of market volatility, the Fund's
share price may fluctuate more than that of funds focusing on larger
capitalization issuers.
|_| Growth Companies. Growth companies are those companies that the
Manager believes are entering into a growth cycle in their business, with the
expectation that their stock will increase in value. They may be established
companies as well as newer companies in the development stage.
Growth companies may have a variety of characteristics that in the
Manager's view define them as "growth" issuers. They may be generating or
applying new technologies, new or improved distribution techniques or new
services. They may own or develop natural resources. They may be companies that
can benefit from changing consumer demands or lifestyles, or companies that have
projected earnings in excess of the average for their sector or industry. In
each case, they have prospects that the Manager believes are favorable for the
long term. The portfolio managers of the Fund look for growth companies with
strong, capable management, sound financial and accounting policies, successful
product development and marketing and other factors.
|_| Value Investing. In using a value approach, the portfolio managers
look for stock and other equity securities that appear to be temporarily
undervalued, by various measures, such as price/earnings ratios. This approach
is subject to change and may not necessarily be used in all cases. Value
investing seeks stocks having prices that are low in relation to their real
worth or future prospects, in the hope that the Fund will realize appreciation
in the value of its holdings when other investors realize the intrinsic value of
the stock.
Using value investing requires research as to the issuer's underlying
financial condition and prospects. Some of the measures used to identify these
securities include, among others:
|_|Price/Earnings Ratio, which is the stock's price divided by its
earnings per share. A stock having a price/earnings ratio lower than
its historical range, or lower than the market as a whole or that of
similar companies may offer attractive investment opportunities.
|_|Price/Book Value Ratio, which is the stock price divided by the book
value of the company per share. It measures the company's stock price
in relation to its asset value.
|_|Dividend Yield, which is measured by dividing the annual dividend by
the stock price per share.
|_|Valuation of Assets which compares the stock price to the value of the
company's underlying assets, including their projected value in the
marketplace and liquidation value.
|_| Convertible Securities. Convertible securities are debt securities
that are convertible into an issuer's common stock. Convertible securities rank
senior to common stock in a corporation's capital structure and therefore are
subject to less risk than common stock in case of the issuer's bankruptcy or
liquidation.
The value of a convertible security is a function of its "investment
value" and its "conversion value." If the investment value exceeds the
conversion value, the security will behave more like a debt security, and the
security's price will likely increase when interest rates fall and decrease when
interest rates rise. If the conversion value exceeds the investment value, the
security will behave more like an equity security. In that case, it will likely
sell at a premium over its conversion value, and its price will tend to
fluctuate directly with the price of the underlying security.
While some convertible securities are a form of debt security, in certain
cases the Manager regards them more as "equity equivalents" or "equity
substitutes" because of their conversion feature (allowing conversion into
common stock or other equity securities). In those cases, the rating assigned to
the security has less impact on the Manager's investment decision than in the
case of non-convertible debt securities. Convertible debt securities are subject
to credit risks and interest rate risks described below in "Investments in Debt
Securities."
To determine whether convertible securities should be regarded as "equity
equivalents," the Manager examines the following factors:
o 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,
o 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 conversion of the convertible securities), and
o 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.
|_| Preferred Stock. Preferred stock, unlike common stock, has a stated
dividend rate payable from the corporation's earnings. Preferred stock dividends
may be cumulative or non-cumulative, participating, or auction rate.
"Cumulative" dividend provisions require all or a portion of prior unpaid
dividends to be paid before dividends can be paid to the issuer's common stock.
"Participating" preferred stock may be entitled to a dividend exceeding the
stated dividend in certain cases.
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 provisions allowing the
stock to be called or redeemed prior to its maturity, which can have a negative
impact on the stock's price when interest rates decline. Preferred stock
generally has a preference over common stock on the distribution of a
corporation's assets in the event of liquidation of the corporation. The rights
of preferred stock 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.
|X| Investments in Debt Securities. The Fund can invest in bonds,
debentures and other debt securities to seek income as part of its investment
objective. When the Fund emphasizes investments for growth, it focuses on equity
securities, such as stocks, and it is not anticipated that significant amounts
of the Fund's assets will be invested in debt securities in that case. However,
if market conditions suggest that debt securities may offer better total return
opportunities than stocks, or if the Manager determines to seek a higher amount
of current income to distribute to shareholders, the Manager may shift more of
the Fund's investments into debt securities.
|_| Interest Rate Risk. Interest rate risk refers to the fluctuations in
value of debt securities resulting from the inverse relationship between price
and yield. For example, an increase in general interest rates will tend to
reduce the market value of already-issued debt securities, and a decline in
general interest rates will tend to increase their value. In addition, debt
securities with longer maturities, which tend to have higher yields, are subject
to potentially greater fluctuations in value from changes in interest rates than
obligations with shorter maturities.
Fluctuations in the market value of debt securities after the Fund buys
them will not affect the interest income payable on those securities (unless the
coupon rate is a floating rate pegged to an index or other measure) . However,
those price fluctuations will be reflected in the valuations of the securities,
and therefore the Fund's net asset values will be affected by those
fluctuations.
|_| Credit Risk. Credit risk relates to the ability of the issuer of a
debt security to meet interest or principal payments, or both, as they become
due. In general, lower-grade, high-yield bonds are subject to greater credit
risk than lower-yielding, higher-quality bonds. The Fund's debt investments can
include investment-grade and non-investment-grade bonds (commonly referred to as
"junk bonds"). In making investments in debt securities, the Manager may rely to
some extent on the ratings of ratings organizations or it may use its own
research to evaluate a security's credit-worthiness. Investment-grade bonds are
bonds rated at least "Baa" by Moody's Investors Service, Inc., or at least "BBB"
by Standard & Poor's Ratings Service or Duff & Phelps, Inc., or that have
comparable ratings by another nationally-recognized rating organization. If the
securities that the Fund buys are unrated, to be considered part of the Fund's
holdings of investment-grade securities, they must be judged by the Manager to
be of comparable quality to bonds rated as investment grade by a rating
organization.
|_| Special Risks of Lower-Grade Securities. While it is not anticipated
that the Fund will invest a substantial portion of its assets in debt
securities, the Fund can do so to seek current income. Because lower-rated
securities tend to offer higher yields than investment-grade securities, the
Fund may invest in lower-grade securities to try to achieve higher income (and,
in some cases, the appreciation possibilities of lower-grade securities may be a
reason they are selected for the Fund's portfolio).
The Fund can invest without limit in "lower-grade" debt securities.
However, the Fund does not currently intend to invest a substantial amount of
its assets in lower-grade debt securities. "Lower-grade" debt securities are
those rated below "investment grade." The Fund can invest in securities rated as
low as "C" or "D" or which are in default at the time the Fund buys them.
Some of the special credit risks of lower-grade securities are discussed
in the Prospectus. There is a greater risk that the issuer may default on its
obligation to pay interest or to repay principal than in the case of
investment-grade securities. The issuer's low creditworthiness may increase the
potential for its insolvency. An overall decline in values in the high yield
bond market is also more likely during a period of a general economic downturn.
An economic downturn or an increase in interest rates could severely disrupt the
market for high yield bonds, adversely affecting the values of outstanding bonds
as well as the ability of issuers to pay interest or repay principal. In the
case of foreign high yield bonds, these risks are in addition to the special
risks of foreign investing discussed in the Prospectus and in this Statement of
Additional Information.
However, the Fund's current limitations on buying these investments may
reduce the effect of those risks to the Fund, as will the Fund's policy of
diversifying its investments. Additionally, to the extent they can be converted
into stock, convertible securities may be less subject to some of these risks
than non-convertible high yield bonds, since stock may be more liquid and less
affected by some of these risk factors.
While securities rated "Baa" by Moody's or "BBB" by Standard & Poor's or
Duff & Phelps are investment grade and are not regarded as junk bonds, those
securities may be subject to special risks and have some speculative
characteristics. Definitions of the debt security ratings categories of Moody's,
Standard & Poors, Fitch IBCA and Duff & Phelps are included in Appendix A to
this Statement of Additional Information.
|_| U.S. Government Securities. The Fund can buy securities issued or
guaranteed by the U.S. Government or its agencies and instrumentalities.
Securities issued by the U.S. Treasury are backed by the full faith and credit
of the U.S. Government and are subject to very little credit risk. Obligations
of U.S. Government agencies or instrumentalities (including mortgage-backed
securities) may or may not be guaranteed or supported by the "full faith and
credit" of the United States. Some are backed by the right of the issuer to
borrow from the U.S. Treasury; others, by discretionary authority of the U.S.
government to purchase the agencies' obligations; while others are supported
only by the credit of the instrumentality. If a security is not backed by the
full faith and credit of the United States, the owner of the security must look
principally to the agency issuing the obligation for repayment and might not be
able to assert a claim against the United States in the event that the agency or
instrumentality does not meet its commitment.
|_| U.S. Treasury Obligations. These include Treasury bills (having
maturities of one year or less when issued), Treasury notes (having maturities
of from one to ten years), and Treasury bonds (having maturities of more than
ten years). Treasury securities are backed by the full faith and credit of the
United States as to timely payments of interest and repayments of principal.
Other U.S. Treasury securities the Fund can buy include U. S. Treasury
securities that have been "stripped" by a Federal Reserve Bank, zero-coupon U.S.
Treasury securities described below, and Treasury Inflation-Protection
Securities ("TIPS").
|_| Treasury Inflation-Protection Securities. The Fund can buy these U.S.
Treasury securities, called "TIPS," that are designed to provide an investment
vehicle that is not vulnerable to inflation. The interest rate paid by TIPS is
fixed. The principal value rises or falls semi-annually based on changes in the
published Consumer Price Index. If inflation occurs, the principal and interest
payments on TIPS are adjusted to protect investors from inflationary loss. If
deflation occurs, the principal and interest payments will be adjusted downward,
although the principal will not fall below its face amount at maturity.
|_| Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities. These include direct obligations and mortgage related
securities that have different levels of credit support from the government.
Some are supported by the full faith and credit of the U.S. government, such as
Government National Mortgage Association pass-through mortgage certificates
(called "Ginnie Maes"). Some are supported by the right of the issuer to borrow
from the U.S. Treasury under certain circumstances, such as Federal National
Mortgage Association bonds ("Fannie Maes"). Others are supported only by the
credit of the entity that issued them, such as Federal Home Loan Mortgage
Corporation obligations ("Freddie Macs").
|_| Real Estate Investment Trust (REITs). The Fund may invest in real
estate investment trusts, as well as real estate development companies and
operating companies. It may also buy shares of companies engaged in other real
estate businesses. REITs are trusts that sell shares to investors and use the
proceeds to invest in real estate. A REIT may focus on a particular project,
such as a shopping center or apartment complex, or may buy many properties or
properties located in a particular geographic region.
|X| Portfolio Turnover. "Portfolio turnover" describes the rate at which the
Fund traded its portfolio securities during its last fiscal year. For example,
if a fund sold all of its securities during the year, its portfolio turnover
rate would have been 100%. The Fund's portfolio turnover rate will fluctuate
from year to year, and the Fund may have a portfolio turnover rate of 100% or
more.
Increased portfolio turnover may result in higher brokerage and
transaction costs for the Fund, which may reduce its overall performance.
Additionally, the realization of capital gains from selling portfolio securities
may result in distributions of taxable long-term capital gains to shareholders,
since the Fund will normally distribute all of its capital gains realized each
year, to avoid excise taxes under the Internal Revenue Code.
Other Investment Techniques and Strategies. In seeking its objective, the Fund
may from time to time use the types of investment strategies and investments
described below. It is not required to use all of these strategies at all times
and at times may not use them.
|X| Foreign Securities. The Fund may purchase equity and debt securities
issued or guaranteed by foreign companies or foreign governments or their
agencies. "Foreign securities" include equity and debt securities of companies
organized under the laws of countries other than the United States and debt
securities of foreign governments. They may be traded on foreign securities
exchanges or in the foreign over-the-counter markets. The debt obligations of a
foreign government and its agencies and instrumentalities may or may not be
supported by the full faith and credit of the foreign government.
Securities of foreign issuers that are represented by American Depository
Receipts or that are listed on a U.S. securities exchange or traded in the U.S.
over-the-counter markets are not considered "foreign securities" for the purpose
of the Fund's investment allocations. That is because they are not subject to
many of the special considerations and risks, discussed below, that apply to
foreign securities traded and held abroad.
Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers. They include the
opportunity to invest in foreign issuers that appear to offer growth or income
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 securities markets that do not move in a manner
parallel to U.S. markets. The Fund will hold foreign currency only in connection
with the purchase or sale of foreign securities.
|_| Risks of Foreign Investing. Investments in foreign securities may
offer special opportunities for investing but also present special additional
risks and considerations not typically associated with investments in domestic
securities. Some of these additional risks are:
o reduction of income by foreign taxes;
o fluctuation in value of foreign investments due to changes in currency
rates or currency control regulations (for example, currency blockage);
o transaction charges for currency exchange;
o lack of public information about foreign issuers;
o lack of uniform accounting, auditing and financial reporting standards in
foreign countries comparable to those applicable to domestic issuers;
o less volume on foreign exchanges than on U.S. exchanges;
o greater volatility and less liquidity on foreign markets than in the U.S.;
o less governmental regulation of foreign issuers, securities exchanges and
brokers than in the U.S.;
o greater difficulties in commencing lawsuits;
o higher brokerage commission rates than in the U.S.;
o increased risks of delays in settlement of portfolio transactions or loss
of certificates for portfolio securities;
o possibilities in some countries of expropriation, confiscatory taxation,
political, financial or social instability or adverse diplomatic
developments; and
o unfavorable differences between the U.S. economy and foreign economies.
In the past, 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 re-imposed.
|X| Zero-Coupon Securities. The Fund may buy zero-coupon and delayed-interest
securities and "stripped" securities. Stripped securities are debt securities
whose interest coupons are separated from the security and sold separately. The
Fund can buy the following types of zero-coupon or stripped securities, among
others: U.S. Treasury notes or bonds that have been stripped of their interest
coupons, U.S. Treasury bills issued without interest coupons, and certificates
representing interests in stripped securities.
Zero-coupon securities do not make periodic interest payments and are sold
at a deep discount from their face value. The buyer recognizes a rate of return
determined by the gradual appreciation of the security, which is redeemed at
face value on a specified maturity date. This discount depends on the time
remaining until maturity, as well as prevailing interest rates, the liquidity of
the security and the credit quality of the issuer. In the absence of threats to
the issuer's credit quality, the discount typically decreases as the maturity
date approaches. Some zero-coupon securities are convertible, in that they are
zero-coupon securities until a predetermined date, at which time they convert to
a security with a specified coupon rate.
Because zero-coupon securities pay no interest and compound semi-annually
at the rate fixed at the time of their issuance, their prices are generally more
volatile than the prices of other debt securities. Their value may fall more
dramatically than the value of interest-bearing securities when interest rates
rise. When prevailing interest rates fall, zero-coupon securities tend to rise
more rapidly in value because they have a fixed rate of return.
The Fund's investment in zero-coupon securities may cause the Fund to
recognize income and make distributions to shareholders before it receives any
cash payments on the zero-coupon investment. To generate cash to satisfy those
distribution requirements, the Fund may have to sell portfolio securities that
it otherwise might have continued to hold or to use cash flows from other
sources such as the sale of Fund shares.
|X| When-Issued and Delayed-Delivery Transactions. The Fund can invest in
securities on a "when-issued" basis and may purchase or sell securities on a
"delayed-delivery" basis. When-issued and delayed-delivery are terms that refer
to securities whose terms and indenture have been created, but the securities
are not available for immediate delivery even though the market for them exists.
When such transactions are negotiated, the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made. Delivery
and payment for the securities take place at a later date (generally within 120
days of the date the offer is accepted). The securities are subject to change in
value from market fluctuations during the period until settlement. The value at
delivery may be less than the purchase price. For example, changes in interest
rates in a direction other than that expected by the Manager before settlement
will affect the value of such securities and may cause a loss to the Fund.
During the period between purchase and settlement, no payment is made by the
Fund to the issuer, and no interest accrues to the Fund from the investment
until it receives the security at settlement.
The Fund may engage in when-issued transactions to secure what the Manager
considers to be an advantageous price and yield at the time the Fund enters into
the obligation. When the Fund enters into a when-issued or delayed-delivery
transaction, it relies on the other party to complete the transaction. Its
failure to do so may cause the Fund to lose the opportunity to obtain the
security at a price and yield the Manager considers to be advantageous.
When the Fund engages in when-issued and delayed-delivery transactions, it
does so for the purpose of acquiring or selling securities consistent with its
investment objective and policies or for delivery pursuant to options contracts
it has entered into, and not for the purpose of investment leverage. Although
the Fund will enter into delayed-delivery or when-issued purchase transactions
to acquire securities, it may dispose of a commitment prior to settlement. If
the Fund chooses to dispose of the right to acquire a when-issued security prior
to its acquisition or to dispose of its right to delivery or receive against a
forward commitment, it may incur a gain or loss.
At the time the Fund makes the commitment to purchase or sell a security
on a when-issued or delayed-delivery basis, it records the transaction on its
books and reflects the value of the security purchased in determining the Fund's
net asset value. In a sale transaction, it records the proceeds to be received.
The Fund will identify on its books liquid assets at least equal in value to the
value of the Fund's purchase commitments until the Fund pays for the investment.
When issued and delayed-delivery transactions can be used by the Fund as a
defensive technique to hedge 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
delayed-delivery basis to obtain the benefit of currently higher cash yields.
|X| Participation Interests. The Fund may invest in participation
interests, subject to the Fund's limitation on investments in illiquid
investments. A participation interest is an undivided interest in a loan made by
the issuing financial institution in the proportion that the buyer'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. There is a risk that a borrower may have difficulty
making payments. If a borrower fails to pay scheduled interest or principal
payments, the Fund could experience a reduction in its income. The value of that
participation interest might also decline, which could affect the net asset
value of the Fund's shares. If the issuing financial institution fails to
perform its obligations under the participation agreement, the Fund might incur
costs and delays in realizing payment and suffer a loss of principal and/or
interest.
|X| Repurchase Agreements. The Fund can acquire securities subject to
repurchase agreements. It might do so for liquidity purposes to meet anticipated
redemptions of Fund shares, or pending the investment of the proceeds from sales
of Fund shares, or pending the settlement of portfolio securities transactions.
In a repurchase transaction, the Fund buys a security from, and
simultaneously resells it to, an approved vendor 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. Approved vendors include U.S. commercial
banks, U.S. branches of foreign banks, or broker-dealers that have been
designated as primary dealers in government securities. They must meet credit
requirements set by the Fund's Manager from time to time.
The majority of these transactions run from day to day, and delivery
pursuant to the resale typically occurs within one to five days of the purchase.
Repurchase agreements having a maturity beyond seven days are subject to the
Fund's limits on holding illiquid investments. The Fund will not enter into a
repurchase agreement that causes more than 10% of its net assets to be subject
to repurchase agreements having a maturity beyond seven days. There is no limit
on the amount of the Fund's net assets that may be subject to repurchase
agreements having maturities of seven days or less.
Repurchase agreements, considered "loans" under the Investment Company
Act, are collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in
effect, the value of the collateral must equal or exceed the repurchase price to
fully collateralize the repayment obligation. 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 Manager will monitor the vendor's creditworthiness to confirm that
the vendor is financially sound and will continuously monitor the collateral's
value.
|X| Illiquid and Restricted Securities. Under the policies and procedures
established by the Fund's Board of Directors, the Manager determines the
liquidity of certain of the Fund's illiquid or restricted investments. To enable
the Fund to sell its holdings of a restricted security not registered under the
Securities Act of 1933, the Fund may have to cause those securities to be
registered. The expenses of registering restricted securities may be negotiated
by the Fund with the issuer at the time the Fund buys the securities. When the
Fund must arrange registration because the Fund wishes to sell the security, a
considerable period may elapse between the time the decision is made to sell the
security and the time the security is registered so that the Fund could sell it.
The Fund would bear the risks of any downward price fluctuation during that
period.
The Fund can acquire restricted securities through private placements.
Those securities have contractual restrictions on their public resale. Those
restrictions might limit the Fund's ability to dispose of the securities and
might lower the amount the Fund could realize upon the sale.
The Fund has 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 under Rule 144A of the Securities Act of 1933, if those
securities have been determined to be liquid by the Manager under Board-approved
guidelines. Those guidelines take into account the trading activity for such
securities and the availability of reliable pricing information, among other
factors. If there is a lack of trading interest in a particular Rule 144A
security, the Fund's holdings of that security may be considered to be illiquid.
Illiquid securities include repurchase agreements maturing in more than
seven days and participation interests that do not have puts exercisable within
seven days.
|X| Loans of Portfolio Securities. The Fund can lend its portfolio
securities to certain types of eligible borrowers approved by the Board of
Directors. It might do so to try to provide income or to raise cash for
liquidity purposes. These loans are limited to not more than 10% of the value of
the Fund's net assets. There are some risks in connection with securities
lending. The Fund might experience a delay in receiving additional collateral to
secure a loan, or a delay in recovery of the loaned securities. The Fund
presently does not intend to lend its securities, but if it does so, it is not
anticipated that loans will exceed 5% of the Fund's total assets.
The Fund must receive collateral for a loan. Under current applicable
regulatory requirements (which are subject to change), on each business day the
loan collateral must be at least equal to the value of the loaned securities. It
must consist of cash, bank letters of credit, securities of the U.S. government
or its agencies or instrumentalities, 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. The terms of the letter of credit and the issuing bank both
must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the dividends
or interest on loaned securities. It also receives one or more of (a) negotiated
loan fees, (b) interest on securities used as collateral, and (c) interest on
any short-term debt securities purchased with such loan collateral. Either type
of interest may be shared with the borrower. The Fund may also pay reasonable
finder's, custodian and administrative fees in connection with these loans. The
terms of the Fund's loans must meet applicable tests under the Internal Revenue
Code and must permit the Fund to reacquire loaned securities on five days'
notice or in time to vote on any important matter.
|X| Derivatives. The Fund can invest in a variety of derivative
investments for income, for capital appreciation or for hedging purposes. Some
derivative investments the Fund can use are the hedging instruments described
below in this Statement of Additional Information.
The Fund can invest in "index-linked" notes. Principal and/or interest
payments on these notes depend on the performance of an underlying index.
Currency-indexed securities are another derivative the Fund may use. Typically
these are short-term or intermediate-term debt securities. Their value at
maturity or the rates at which they pay income are determined by the change in
value of the U.S. dollar against one or more foreign currencies or an index. In
some cases, these securities may pay an amount at maturity based on a multiple
of the amount of the relative currency movements. This type of index security
offers the potential for increased income or principal payments but at a greater
risk of loss than a typical debt security of the same maturity and credit
quality.
Other derivative investments the Fund can use include "debt exchangeable
for common stock" of an issuer or "equity-linked debt securities" of an issuer.
At maturity, the debt security is exchanged for common stock of the issuer or it
is payable in an amount based on the price of the issuer's common stock at the
time of maturity. Both alternatives present a risk that the amount payable at
maturity will be less than the principal amount of the debt because the price of
the issuer's common stock might not be as high as the Manager expected.
|X| Hedging. The Fund can use 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. To do
so, the Fund could:
|_| sell futures contracts,
|_| buy puts on futures or on securities, or
|_| write covered calls on securities or futures. Covered calls can also
be used to increase the Fund's income, but the Manager does not
expect to engage extensively in that practice.
The Fund might use hedging to establish a position in the securities
market as a temporary substitute for purchasing particular securities. In that
case, the Fund would normally seek to purchase the securities and then terminate
that hedging position. The Fund might also use this type of hedge to attempt to
protect against the possibility that its portfolio securities would not be fully
included in a rise in value of the market. To do so the Fund could:
|_| buy futures, or
|_| buy calls on such futures or on securities.
The Fund is not obligated to use hedging instruments, even though it is
permitted to use them in the Manager's discretion, as described below. 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. The
particular hedging instruments the Fund can use are described below. The Fund
may employ new hedging instruments and strategies when they are developed, if
those investment methods are consistent with the Fund's investment objective and
are permissible under applicable regulations governing the Fund.
|_| Futures. The Fund can buy and sell futures contracts that relate
to (1) broadly-based stock indices (these are called "stock index futures") (2)
debt securities (these are referred to as "interest rate futures"), (3) other
broadly-based securities indices (these are referred to as "financial futures"),
(4) foreign currencies (these are referred to as "forward contracts"), or (5)
commodities (these are referred to as "commodity futures").
A broadly-based stock index is used as the basis for trading stock index
futures. In some cases an index may be based on stocks of issuers in a
particular industry or group of industries. A stock index assigns relative
values to the common stocks included in the index and its value fluctuates in
response to the changes in value of the underlying stocks. A stock index cannot
be purchased or sold directly. Financial futures are similar contracts based on
the future value of the basket of securities that comprise the index. These
contracts obligate the seller to deliver, and the purchaser to take, cash to
settle the futures transaction. There is no delivery made of the underlying
securities to settle the futures obligation. Either party may also settle the
transaction by entering into an offsetting contract.
An interest rate future obligates the seller to deliver (and the purchaser
to take) cash or a specified type of debt security to settle the futures
transaction. Either party could also enter into an offsetting contract to close
out the position.
The Fund can invest a portion of its assets in commodity futures
contracts. Commodity futures may be based upon commodities within five main
commodity groups: (1) energy, which includes crude oil, natural gas, gasoline
and heating oil; (2) livestock, which includes cattle and hogs; (3) agriculture,
which includes wheat, corn, soybeans, cotton, coffee, sugar and cocoa; (4)
industrial metals, which includes aluminum, copper, lead, nickel, tin and zinc;
and (5) precious metals, which includes gold, platinum and silver. The Fund may
purchase and sell commodity futures contracts, options on futures contracts and
options and futures on commodity indices with respect to these five main
commodity groups and the individual commodities within each group, as well as
other types of commodities.
No money is paid or received by the Fund on the purchase or sale of a
future. Upon entering into a futures transaction, the Fund will be required to
deposit an initial margin payment with the futures commission merchant (the
"futures broker"). Initial margin payments will be deposited with the Fund's
custodian bank 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 (that is, its value on the Fund's
books is changed) to reflect changes in its market value, subsequent margin
payments, called variation margin, will be paid to or by the futures broker
daily.
At any time prior to expiration of the future, the Fund may elect to close
out its position by taking an opposite position, at which time a final
determination of variation margin is made and any additional cash must be paid
by or released to the Fund. Any loss or gain on the future is then realized by
the Fund for tax purposes. All futures transactions, except forward contracts,
are effected through a clearinghouse associated with the exchange on which the
contracts are traded.
|_| Put and Call Options. The Fund can buy and sell certain kinds of put
options ("puts") and call options ("calls"). The Fund can buy and sell
exchange-traded and over-the-counter put and call options, including index
options, securities options, currency options, commodities options, and options
on the other types of futures described above.
|_| Writing Covered Call Options. The Fund can write (that is, sell)
calls. If the Fund sells a call option, it must be covered. That means the Fund
must own the security subject to the call while the call is outstanding, or, for
certain types of calls, the call may be covered by segregating liquid assets to
enable the Fund to satisfy its obligations if the call is exercised. Up to 25%
of the Fund's total assets may be subject to calls the Fund writes.
When the Fund writes a call, it receives cash (a premium). In writing
calls on a security, the Fund agrees to sell the underlying security to a
purchaser of a corresponding call on the same security during the call period at
a fixed exercise price regardless of market price changes during the call
period. The call period is usually not more than nine months. The exercise price
may differ from the market price of the underlying security. The Fund has the
risk of loss that the price of the underlying security may decline during the
call period. That risk may be offset to some extent by the premium the Fund
receives. If the value of the investment does not rise above the call price, it
is likely that the call will lapse without being exercised. In that case the
Fund would keep the cash premium and the investment.
When the Fund writes a call on an index, it also receives a premium. If
the buyer of the call exercises it, the Fund will pay an amount of cash equal to
the difference between the closing price of the call and the exercise price,
multiplied by a specified multiple that determines the total value of the call
for each point of difference. If the value of the underlying investment does not
rise above the call price, it is likely that the call will lapse without being
exercised. In that case the Fund would keep the cash premium.
The Fund's custodian bank, or a securities depository acting for the
custodian bank, 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 calls traded on exchanges or as to other acceptable escrow
securities. In that way, no margin will be required for such transactions. OCC
will release the securities on the expiration of the option or when the Fund
enters into a closing transaction.
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 will
establish a formula price at which the Fund will have the absolute right to
repurchase that OTC option. The formula price will 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 option is "in the money"). When the Fund writes an OTC option, it will
treat as illiquid (for purposes of its restriction on holding illiquid
securities) the mark-to-market value of any OTC option it holds, unless the
option is subject to a buy-back agreement by the executing broker.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." The Fund will
then realize a profit or loss, depending upon whether the net of the amount of
the option transaction costs and the premium received on the call the Fund wrote
is more or less than the price of the call the Fund purchases to close out the
transaction. The Fund may realize a profit if the call expires unexercised,
because the Fund will retain the underlying security and the premium it received
when it wrote the call. Any such profits are considered short-term capital gains
for federal income tax purposes, as are the premiums on lapsed calls. When
distributed by the Fund they are taxable as ordinary income. If the Fund cannot
effect a closing purchase transaction due to the lack of a market, it will have
to hold the callable securities until the call expires or is exercised.
The Fund may also write calls on a futures contract without owning the
futures contract or securities deliverable under the contract. To do so, at the
time the call is written, the Fund must cover the call by segregating an
equivalent dollar amount of liquid assets on its books. The Fund will identify
additional liquid assets on its books to cover the call if the value of the
identified assets drops below 100% of the current value of the future. Because
of this segregation requirement, in no circumstances would the Fund's receipt of
an exercise notice as to that future 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. The Fund can sell 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. The Fund will not write puts if, as a result, more than 50% of the
Fund's net assets would be required to be segregated to cover such put options.
If the Fund writes a put, the put must be covered by segregated liquid
assets. The premium the Fund receives from writing a put represents a profit, as
long as the price of the underlying investment remains equal to or above the
exercise price of the put. However, the Fund also assumes the obligation during
the option period to buy the underlying investment from the buyer of the put at
the exercise price, even if the value of the investment falls below the exercise
price. If a put the Fund has written expires unexercised, the Fund realizes a
gain in the amount of the premium less the transaction costs incurred. If the
put is exercised, the Fund must fulfill its obligation to purchase the
underlying investment at the exercise price. That price will usually exceed the
market value of the investment at that time. In that case, the Fund may incur a
loss if it sells the underlying investment. That loss will be equal to the sum
of the sale price of the underlying investment and the premium received minus
the sum of the exercise price and any transaction costs the Fund incurred.
When writing a put option on a security, to secure its obligation to pay
for the underlying security the Fund will identify on its books liquid assets
with a value equal to or greater than the exercise price of the underlying
securities. The Fund therefore forgoes the opportunity of investing the
identified assets or writing calls against those assets.
As long as the Fund's obligation as the put writer continues, it may be
assigned an exercise notice by the broker-dealer through which the put was sold.
That notice will require the Fund to take delivery of the underlying security
and pay 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.
That obligation terminates upon expiration of the put. It may also terminate if,
before it receives an exercise notice, the Fund effects a closing purchase
transaction by purchasing a put of the same series as it sold. Once the Fund has
been assigned an exercise notice, it cannot effect a closing purchase
transaction.
The Fund may decide to effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent the underlying
security from being put. Effecting a closing purchase transaction will also
permit the Fund to write another put option on the security, or to sell the
security and use the proceeds from the sale for other investments. The Fund will
realize a profit or loss from a closing purchase transaction depending on
whether the cost of the transaction is less or more than the premium received
from writing the put option. Any profits from writing puts are considered
short-term capital gains for federal tax purposes, and when distributed by the
Fund, are taxable as ordinary income.
|_| Purchasing Calls and Puts. The Fund can purchase calls to protect
against the possibility that the Fund's portfolio will not participate in an
anticipated rise in the securities market. When the Fund buys a call (other than
in a closing purchase transaction), it pays a premium. The Fund then has the
right to buy the underlying investment from a seller of a corresponding call on
the same investment during the call period at a fixed exercise price. The Fund
benefits only if it sells the call at a profit or if, during the call period,
the market price of the underlying investment is above the sum of the call price
plus the transaction costs and the premium paid for the call and the Fund
exercises the call. If the Fund does not exercise the call or sell it (whether
or not at a profit), the call will become worthless at its expiration date. In
that case the Fund will have paid the premium but lost the right to purchase the
underlying investment.
The Fund can buy puts whether or not it holds the underlying investment in
its portfolio. 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 put on a corresponding investment during the put period at a fixed exercise
price. Buying a put on securities or futures the Fund owns enables the Fund to
attempt to protect itself during the put period against a decline in the value
of the underlying investment below the exercise price by selling the underlying
investment at the exercise price to a seller of a corresponding put. If the
market price of the underlying investment is equal to or above the exercise
price and, as a result, the put is not exercised or resold, the put will become
worthless at its expiration date. In that case the Fund will have paid the
premium but lost the right to sell the underlying investment. However, the Fund
may sell the put prior to its expiration. That sale may or may not be at a
profit.
When the Fund purchases a call or put 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. Gain or loss depends on changes in the index in question
(and thus on price movements in the securities market generally) rather than on
price movements in individual securities or futures contracts.
The Fund may buy a call or put 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.
|_| Buying and Selling Options on Foreign Currencies. The Fund can buy and
sell calls and puts on foreign currencies. They include puts and calls that
trade on a securities or commodities exchange or in the over-the-counter markets
or are quoted by major recognized dealers in such options. The Fund could use
these calls and puts to try to protect against declines in the dollar value of
foreign securities and increases in the dollar cost of foreign securities the
Fund wants to acquire.
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 those securities may be partially offset by purchasing calls or writing puts
on that foreign currency. If the Manager anticipates a decline in the dollar
value of a foreign currency, the decline in the dollar value of portfolio
securities denominated in that currency might be partially offset by writing
calls or purchasing puts on that foreign currency. However, the currency rates
could fluctuate in a direction adverse to the Fund's position. The Fund will
then have incurred option premium payments and transaction costs without a
corresponding benefit.
A call the Fund writes on a foreign currency 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 it can do so for additional cash consideration held in a
segregated account by its custodian bank) upon conversion or exchange of other
foreign currency held in its portfolio.
The Fund could write a call 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. That decline might be one that occurs due to an expected adverse change
in the exchange rate. This is known as a "cross-hedging" strategy. In those
circumstances, the Fund covers the option by identifying on its books liquid
assets in an amount equal to the exercise price of the option.
|_| Risks of Hedging with Options and Futures. The use of hedging
instruments requires special skills and knowledge of investment techniques that
are different than what is required for normal portfolio management. If the
Manager uses a hedging instrument at the wrong time or judges market conditions
incorrectly, hedging strategies may reduce the Fund's return. The Fund could
also experience losses if the prices of its futures and options positions were
not correlated with its other investments.
The Fund's option activities could affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund might cause the
Fund to sell related portfolio securities, thus increasing its turnover rate.
The exercise by the Fund of puts on securities will cause the sale of underlying
investments, increasing portfolio turnover. Although the decision whether to
exercise a put it holds is within the Fund's control, holding a put might cause
the Fund to sell the related investments for reasons that would not exist in the
absence of the put.
The Fund could pay a brokerage commission each time it buys a call or put,
sells a call or put, or buys or sells an underlying investment in connection
with the exercise of a call or put. Those commissions could be higher on a
relative basis than the commissions for direct purchases or sales of the
underlying investments. Premiums paid for options are small in relation to the
market value of the underlying investments. 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 investment.
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. It will not be able to realize any profit if the investment has
increased in value above the call price.
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. The Fund might
experience losses if it could not close out a position because of an illiquid
market for the future or option.
There is a risk in using short hedging by selling futures or purchasing
puts on broadly-based indices or futures to attempt to protect against declines
in the value of the Fund's portfolio securities. The risk is that the prices of
the futures or the applicable index will correlate imperfectly with the behavior
of the cash prices of the Fund's securities. For example, it is possible that
while the Fund has used hedging instruments in a short hedge, the market might
advance and the value of the securities held in the Fund's portfolio might
decline. If that occurred, the Fund would lose money on the hedging instruments
and also experience a decline in the value of its portfolio securities. However,
while this could occur for a very brief period or to a very small degree, over
time the value of a diversified portfolio of securities will tend to move in the
same direction as the indices upon which the hedging instruments are based.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable index.
To compensate for the imperfect correlation of movements in the price of the
portfolio securities being hedged and movements in the price of the hedging
instruments, the Fund might use hedging instruments in a greater dollar amount
than the dollar amount of portfolio securities being hedged. It might do so if
the historical volatility of the prices of the portfolio securities being hedged
is more than the historical volatility of the applicable index.
The ordinary spreads between prices in the cash and futures markets are
subject to distortions, due to differences in the nature of those markets.
First, all participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities markets. Therefore,
increased participation by speculators in the futures market may cause temporary
price distortions.
The Fund can use hedging instruments to establish a position in the
securities markets as a temporary substitute for the purchase of individual
securities (long hedging) by buying futures and/or calls on such futures,
broadly-based indices or on securities. It is possible that when the Fund does
so the market might decline. If the Fund then concludes not to invest in
securities because of concerns that the market might decline further or for
other reasons, the Fund will realize a loss on the hedging instruments that is
not offset by a reduction in the price of the securities purchased.
|_| 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 "lock in" the U.S. dollar price of a
security denominated in a foreign currency that the Fund has bought or sold, or
to protect against possible losses from changes in the relative values of the
U.S. dollar and a foreign currency. The Fund 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.
Under a forward contract, one party agrees to purchase, and another party
agrees to sell, a specific currency at a future date. That date may be any fixed
number of days from the date of the contract agreed upon by the parties. The
transaction price is set at the time the contract is entered into. These
contracts are traded in the inter-bank market conducted directly among 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
the risk of 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.
Although forward contracts may reduce the risk of loss from a decline in the
value of the hedged currency, at the same time they limit any potential gain if
the value of the hedged currency increases.
When the Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when it anticipates receiving
dividend payments in a foreign currency, the Fund might desire to "lock-in" the
U.S. dollar price of the security or the U.S. dollar equivalent of the dividend
payments. To do so, the Fund might enter into a forward contract for the
purchase or sale of the amount of foreign currency involved in the underlying
transaction, in a fixed amount of U.S. dollars per unit of the foreign currency.
This is called a "transaction hedge." The transaction hedge will protect the
Fund against a loss from an adverse change in 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 the payments are made or
received.
The Fund could also use forward contracts to lock in the U.S. dollar value
of portfolio positions. This is called a "position hedge." When the Fund
believes that foreign currency might suffer a substantial decline against the
U.S. dollar, it could enter into a forward contract to sell an amount of that
foreign currency approximating the value of some or all of the Fund's portfolio
securities denominated in that foreign currency. When the Fund believes that the
U.S. dollar might suffer a substantial decline against a foreign currency, it
could enter into a forward contract to buy that foreign currency for a fixed
dollar amount.
Alternatively, the Fund could enter into a forward contract to sell a
different foreign currency for a fixed U.S. dollar amount if the Fund believes
that the U.S. dollar value of the foreign currency to be sold pursuant to its
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. That
is referred to as a "cross hedge."
The Fund will cover its short positions in these cases by identifying on
its books liquid assets having a value equal to the aggregate amount of the
Fund's commitment under forward contracts. The Fund will not enter into forward
contracts or maintain a net exposure to such contracts if 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 or another currency that is the subject of the
hedge.
However, to avoid excess transactions and transaction costs, the Fund may
maintain a net exposure to forward contracts in excess of the value of the
Fund's portfolio securities or other assets denominated in foreign currencies if
the excess amount is "covered" by liquid securities denominated in any currency.
The cover must be at least equal at all times to the amount of that excess. As
one 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. As another alternative,
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 contact price.
The precise matching of the amounts under forward contracts and the value
of the securities involved generally will not be possible because the future
value of securities denominated in foreign currencies will change as a
consequence of market movements between the date the forward contract is entered
into and the date it is sold. In some cases the Manager might decide to sell the
security and deliver foreign currency to settle the original purchase
obligation. If the market value of the security is less than the amount of
foreign currency the Fund is obligated to deliver, the Fund might have to
purchase additional foreign currency on the "spot" (that is, cash) market to
settle the security trade. If the market value of the security instead exceeds
the amount of foreign currency the Fund is obligated to deliver to settle the
trade, the Fund might have to sell on the spot market some of the foreign
currency received upon the sale of the security. There will be additional
transaction costs on the spot market in those cases.
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 to pay additional transactions costs. The use of forward
contracts in this manner might reduce the Fund's performance if there are
unanticipated changes in currency prices to a greater degree than if the Fund
had not entered into such contracts.
At or before the maturity of a forward contract requiring the Fund to sell
a currency, the Fund might sell a portfolio security and use the sale proceeds
to make delivery of the currency. In the alternative the Fund might retain the
security and offset its contractual obligation to deliver the currency by
purchasing a second contract. Under that contract the Fund will obtain, on the
same maturity date, the same amount of the currency that it is obligated to
deliver. Similarly, the Fund might 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. The gain or loss
will depend on the extent to which the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
offsetting contract.
The costs 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 brokerage fees or commissions are involved.
Because these contracts are not traded on an exchange, the Fund must evaluate
the credit and performance risk of the counterparty under each 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
will incur costs in doing so. 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 might
offer to sell a foreign currency to the Fund at one rate, while offering a
lesser rate of exchange if the Fund desires to resell that currency to the
dealer.
|_| Interest Rate Swap Transactions. The Fund can enter into interest rate
swap agreements. 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 might swap the right to receive floating rate payments for fixed
rate payments. The Fund can enter into swaps only on securities that it owns.
Also, the Fund will segregate liquid assets (such as cash or U.S. government
securities) to cover any amounts it could owe under swaps that exceed the
amounts it is entitled to receive, and it will adjust that amount daily, as
needed.
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 be greater than the payments it
received. Credit risk arises from the possibility that the counterparty will
default. If the counterparty 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 can enter into swap transactions with certain counterparties
pursuant to master netting agreements. A master netting agreement provides that
all swaps done between the Fund and that counterparty shall be regarded as parts
of an integral agreement. If amounts are payable on a particular date in the
same currency in respect of one or more swap transactions, the amount payable on
that date in that currency shall be the net amount. In addition, the master
netting agreement may provide that if one party defaults generally or on one
swap, the counterparty can terminate all of the swaps with that party. Under
these agreements, if a default results 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 for each swap. It is measured by 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."
|_| Regulatory Aspects of Hedging Instruments. When using futures and
options on futures, the Fund is required to operate within certain guidelines
and restrictions with respect to the use of futures as established by the
Commodities Futures Trading Commission (the "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 Rule 4.5 adopted by the CFTC. The Rule
does not limit the percentage of the Fund's assets that may be used for futures
margin and related options premiums for a bona fide hedging position. However,
under the Rule, the Fund must limit its aggregate initial futures margin and
related options premiums to not more than 5% of the Fund's net assets for
hedging strategies that are not considered bona fide hedging strategies under
the Rule. Under the Rule, the Fund must also use short futures and options on
futures solely for bona fide hedging purposes within the meaning and intent of
the applicable provisions of the Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations established
by the option exchanges. The exchanges limit the maximum number of options that
may be written or held by a single investor or group of investors acting in
concert. Those limits apply 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 that the Fund may write or hold may be affected by options
written or held by other entities, including other investment companies having
the same advisor as the Fund (or an advisor that is an affiliate of the Fund's
advisor). The exchanges also impose position limits on futures transactions. An
exchange may order the liquidation of positions found to be in violation of
those limits and may impose certain other sanctions.
Under the Investment Company Act, when the Fund purchases a future, it
must maintain cash or readily marketable short-term debt instruments in an
amount equal to the market value of the securities underlying the future, less
the margin deposit applicable to it.
|_| Tax Aspects of Certain Hedging Instruments. Certain foreign currency
exchange contracts in which the Fund may invest are treated as "Section 1256
contracts" under the Internal Revenue Code. In general, gains or losses relating
to Section 1256 contracts are characterized as 60% long-term and 40% short-term
capital gains or losses under the Code. However, foreign currency gains or
losses arising from Section 1256 contracts that are 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," and
unrealized gains or losses are treated as though they were realized. These
contracts also may be marked-to-market for purposes of determining 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 those transactions from this marked-to-market treatment.
Certain forward contracts the Fund enters into 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 that the 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, the following gains or losses are treated
as ordinary income or loss: (1) 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, and
(2) gains or losses attributable to fluctuations in the value of a foreign
currency between the date of acquisition of a debt security denominated
in a foreign currency or foreign currency forward contracts and the
date of disposition.
Currency gains and losses are offset against market gains and losses on
each trade before determining a net "Section 988" gain or loss under the
Internal Revenue Code for that trade, which may increase or decrease the amount
of the Fund's investment income available for distribution to its shareholders.
|X| Temporary Defensive Investments. The Fund's temporary defensive
investments can include (i) obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities; (ii) commercial paper rated in
the highest category by an established rating organization; (iii) certificates
of deposit or bankers' acceptances of domestic banks with assets of $1 billion
or more; (iv) any of the foregoing securities that mature in one year or less
(generally known as "cash equivalents"); (v) other short-term corporate debt
obligations; and (vi) repurchase agreements.
As a non-fundamental policy, the Fund cannot invest in securities of any
corporation which has a record of operations of less than three years, including
operations of any predecessors.
Investment Restrictions
|X| What Are "Fundamental Policies?" Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be changed
only by the vote of a "majority" of the Fund's outstanding voting securities.
Under the Investment Company Act, a "majority" vote is defined as the vote of
the holders of the lesser of:
|_| 67% or more of the shares present or represented by proxy at a
shareholder meeting, if the holders of more than 50% of the outstanding
shares are present or represented by proxy, or |_| more than 50% of the
outstanding shares.
The Fund's investment objective is a fundamental policy. Other policies
described in the Prospectus or this Statement of Additional Information are
"fundamental" only if they are identified as such. The Fund's Board of Directors
can change non-fundamental policies without shareholder approval. However,
significant changes to investment policies will be described in supplements or
updates to the Prospectus or this Statement of Additional Information, as
appropriate. The Fund's most significant investment policies are described in
the Prospectus.
|X| Does the Fund Have Additional Fundamental Policies? The following
investment restrictions are fundamental policies of the Fund.
|_| The Fund cannot buy securities issued or guaranteed by any one issuer
if more than 5% of its total assets would be invested in securities of that
issuer or if it would then own more than 10% of that issuer's voting securities.
This limitation applies to 75% of the Fund's total assets. The limit does not
apply to securities issued by the U.S. government or any of its agencies or
instrumentalities.
|_| The Fund cannot concentrate investments in any industry or group of
industries. That means it cannot purchase securities of companies in any one
industry if more than 25% of its total assets would consist of securities of
companies in that industry. As a non-fundamental operating policy, the Fund
interprets this restriction to apply to 25% or more of its total assets.
|_| The Fund cannot make loans except that it can buy debt securities. The
Fund may also make loans of portfolio securities, enter into repurchase
agreements or when-issued or delayed-delivery transactions (or similar
securities transactions).
|_| The Fund cannot pledge, mortgage or hypothecate securities. However,
the Fund can enter into escrow arrangements contemplated by writing covered call
options or other collateral or margin arrangements in connection with any of its
investments.
|_| The Fund cannot invest in or hold securities of any issuer if officers
and directors of the Fund or the Manager beneficially own more than 1/2 of 1% of
the securities of that issuer and together own more than 5% of the securities of
that issuer.
|_| The Fund cannot borrow money except for temporary emergency purposes
or under other unusual circumstances.
|_| The Fund cannot purchase securities on margin or sell securities
short. However, the Fund can make margin deposits in connection with any of its
investments.
|_| The Fund cannot invest in other companies for the purpose of
exercising control or management of those companies.
|_| The Fund cannot invest in real estate or in interests in real estate.
However, the Fund can purchase securities of issuers holding real estate or
interests in real estate.
|_| The Fund cannot invest in physical commodities or physical commodity
contracts or buy securities for speculative short-term purposes. However, the
Fund can buy and sell any of the hedging instruments permitted by any of its
other policies. It can also buy and sell options, futures, securities or other
instruments backed by physical commodities or whose investment return is linked
to changes in the price of physical commodities.
|_| The Fund cannot accept the purchase price for any of its shares
without immediately issuing an appropriate number of shares.
|_| The Fund cannot underwrite securities of other companies. A permitted
exception is in case it is deemed to be an underwriter under the Securities Act
of 1933 when reselling any securities held in its own portfolio.
|_| The Fund cannot issue "senior securities." This restriction does not
prohibit the Fund from borrowing money as described in the Prospectus or this
Statement of Additional Information. It does not prohibit the Fund from entering
into margin, collateral, segregation or escrow arrangements, or options,
futures, hedging transactions or from buying and selling other investments
permitted by its other investment policies.
Unless the Prospectus or this 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. 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.
For purposes of the Fund's policy not to concentrate its investments as
described above, the Fund has adopted the industry classifications set forth in
Appendix B to this Statement of Additional Information. This is not a
fundamental policy.
How the Fund is Managed
Organization and History. The Fund is an open-end, diversified management
investment company that was organized in 1944. Since 1979 the Fund has been a
Maryland corporation.
The Fund is governed by a Board of Directors, which is responsible for
protecting the interests of shareholders under Maryland law. The Directors meet
periodically throughout the year to oversee the Fund's activities, review its
performance, and review the actions of the Manager.
|X| Classes of Shares. The Board of Directors has the power, without
shareholder approval, to divide unissued shares of the Fund into two or more
classes. The Board has done so, and the Fund currently has four classes of
shares: Class A, Class B, Class C and Class Y. All classes invest in the same
investment portfolio. Each class of shares:
o has its own dividends and distributions,
o pays certain expenses which may be different for the different classes,
o may have a different net asset value,
o may have separate voting rights on matters in which interests of one
class are different from interests of another class, and o votes as a class
on matters that affect that class alone.
Shares are freely transferable, and each share of each class has one vote
at shareholder meetings, with fractional shares voting proportionally on matters
submitted to the vote of shareholders. Each share of the Fund represents an
interest in the Fund proportionately equal to the interest of each other share
of the same class.
The Directors are authorized to create new series and classes of shares.
The Directors may reclassify unissued shares of the Fund's series or classes
into additional series or classes of shares. The Directors also may divide or
combine the shares of a class into a greater or lesser number of shares without
changing the proportionate beneficial interest of a shareholder in the Fund.
Shares do not have cumulative voting rights or preemptive or subscription
rights. Shares may be voted in person or by proxy at shareholder meetings.
|X| Meetings of Shareholders. Although the Fund is not required by
Maryland law to hold annual meetings, it may hold shareholder meetings from time
to time on important matters. The shareholders of the Fund have the right to
call a meeting to remove a Director or to take certain other action described in
the Fund's Articles of Incorporation or under Maryland law.
The Fund will hold meetings when required to do so by the Investment
Company Act or other applicable law. The Fund will hold a meeting when the
Directors call a meeting or upon proper request of shareholders. If the Fund
receives a written request of the record holders of at least 25% of the
outstanding shares eligible to be voted at a meeting to call a meeting for a
specified purpose (which might include the removal of a Director), the Directors
will call a meeting of shareholders for that specified purpose. The Fund has
undertaken that it will then either give the applicants access to the Fund's
shareholder list or mail the applicants' communication to all other shareholders
at the applicants' expense.
Shareholders of the Fund vote together in the aggregate on certain matters
at shareholders' meetings. Those matters include the election of Directors and
ratification of appointment of the independent auditors. Shareholders of a
particular class vote separately on proposals that affect that class.
Shareholders of a class that is not affected by a proposal are not entitled to
vote on the proposal. Only shareholders of a particular class vote on certain
amendments to the Distribution and/or Service Plans if the amendments affect
only that class.
Directors and Officers of the Fund. The Directors and officers of the Fund and
their principal occupations and business affiliations during the past five years
are listed below. Directors denoted with an asterisk (*) below are deemed to be
"interested persons" of the Fund under the Investment Company Act. All of the
Directors are also trustees, directors or managing general partners of the
following Denver-based Oppenheimer funds1:
Oppenheimer Cash Reserves Oppenheimer Senior Floating Rate Fund
Oppenheimer Champion Income Fund Oppenheimer Strategic Income Fund
Oppenheimer Capital Income Fund Oppenheimer Total Return Fund, Inc.
Oppenheimer High Yield Fund Oppenheimer Variable Account Funds
Oppenheimer International Bond Fund Panorama Series Fund, Inc.
Oppenheimer Integrity Funds Centennial America Fund, L. P.
Oppenheimer Limited-Term Government
Fund Centennial California Tax Exempt Trust
Oppenheimer Main Street Funds, Inc. Centennial Government Trust
Oppenheimer Main Street Small Cap Fund Centennial Money Market Trust
Oppenheimer Municipal Fund Centennial New York Tax Exempt Trust
Oppenheimer Real Asset Fund Centennial Tax Exempt Trust
Ms. Macaskill and Messrs. Swain, Bishop, Wixted, Donohue, Farrar and Zack,
who are officers of the Fund, respectively hold the same offices with the other
Denver-based Oppenheimer funds. As of March 31, 2000, the Directors and officers
of the Fund as a group owned less than 1% of the outstanding shares of the Fund.
The foregoing statement does not reflect shares held of record by an employee
benefit plan for employees of the Manager other than shares beneficially owned
under that plan by the officers of the Fund listed below. Ms. Macaskill and Mr.
Donohue, are trustees of that plan.
William L. Armstrong, Director, Age: 63.
11 Carriage Lane, Littleton, Colorado 80121
Chairman of the following private mortgage banking companies: Cherry Creek
Mortgage Company (since 1991), Centennial State Mortgage Company (since 1994),
The El Paso Mortgage Company (since 1993), Transland Financial Services, Inc.
(since 1997), and Ambassador Media Corporation (since 1984); Chairman of the
following private companies: Frontier Real Estate, Inc. (residential real estate
brokerage) (since 1994), Frontier Title (title insurance agency) (since 1995)
and Great Frontier Insurance (insurance agency) (since 1995); Director of the
following public companies: Storage Technology Corporation (computer equipment
company) (since 1991), Helmerich & Payne, Inc. (oil and gas drilling/production
company) (since 1992), UNUMProvident (insurance company) (since 1991); formerly
Director of the following public companies: International Family Entertainment
(television channel) (1991 - 1997) and Natec Resources, Inc. (air pollution
control equipment and services company) (1991 - 1995); formerly U.S. Senator
(January 1979 - January 1991).
Robert G. Avis*, Director, Age: 68.
One North Jefferson Ave., St. Louis, Missouri 63103
Chairman, President and Chief Executive Officer of A.G. Edwards Capital, Inc.
(general partnership of private equity funds), Director of A.G. Edwards & Sons,
Inc. (a broker-dealer) and Director of A.G. Edwards Trust Companies (trust
companies), formerly, Vice Chairman of A.G. Edwards & Sons, Inc. and A.G.
Edwards, Inc. (its parent holding company) and Chairman of A.G.E. Asset
Management (an investment advisor).
William A. Baker, Director, Age: 85.
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
George C. Bowen, Director, Age: 63.
6803 South Tucson Way, Englewood, Colorado 80112
Formerly (until April 1999) Mr. Bowen held the following positions: Senior Vice
President (since September 1987) and Treasurer (since March 1985) of the
Manager; Vice President (since June 1983) and Treasurer (since March 1985) of
the Distributor; Vice President (since October 1989) and Treasurer (since April
1986) of HarbourView Asset Management Corporation; Senior Vice President (since
February 1992), Treasurer (since July 1991) Assistant Secretary and a director
(since December 1991) of Centennial Asset Management Corporation; President,
Treasurer and a director of Centennial Capital Corporation (since June 1989);
Vice President and Treasurer (since August 1978) and Secretary (since April
1981) of Shareholder Services, Inc.; Vice President, Treasurer and Secretary of
Shareholder Financial Services, Inc. (since November 1989); Assistant Treasurer
of Oppenheimer Acquisition Corp. (since March 1998); Treasurer of Oppenheimer
Partnership Holdings, Inc. (since November 1989); Vice President and Treasurer
of Oppenheimer Real Asset Management, Inc. (since July 1996); Treasurer of
OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc (since
October 1997).
Edward L. Cameron, Director, Age: 61
Spring Valley Road, Morristown, New Jersey 07960
Formerly (from 1974-1999) a partner with PricewaterhouseCoopers LLC (an
accounting firm) and Chairman, Price Waterhouse LLP Global Investment management
Industry Services Group (from 1994-1998).
Jon S. Fossel, Director, Age: 58.
P.O. Box 44, Mead Street, Waccabuc, New York 10597
Formerly Chairman and a director of the Manager, President and a director of
Oppenheimer Acquisition Corp., the Manager's parent holding company, and
Shareholder Services, Inc. and Shareholder Financial Services, Inc., transfer
agent subsidiaries of the Manager.
Sam Freedman, Director, Age: 59.
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 Officer and director of Shareholder Financial
Services, Inc., Vice President and director of Oppenheimer Acquisition Corp. and
a director of OppenheimerFunds, Inc.
Raymond J. Kalinowski, Director, Age: 70.
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc. (a computer products training
company), self-employed consultant (securities matters).
C. Howard Kast, Director, Age: 78.
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting firm).
Robert M. Kirchner, Director, Age: 78.
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Bridget A. Macaskill*, President and Director, Age: 51.
Two World Trade Center, New York, New York 10048-0203
President (since June 1991), Chief Executive Officer (since September 1995) and
a Director (since December 1994) of the Manager; President and director (since
June 1991) of HarbourView Asset Management Corporation, an investment adviser
subsidiary of the Manager; Chairman and a director of Shareholder Services, Inc.
(since August 1994) and Shareholder Financial Services, Inc. (since September
1995), transfer agent subsidiaries of the Manager; President (since September
1995) and a director (since October 1990) of Oppenheimer Acquisition Corp., the
Manager's parent holding company; President (since September 1995) and a
director (since November 1989) of Oppenheimer Partnership Holdings, Inc., a
holding company subsidiary of the Manager; a director of Oppenheimer Real Asset
Management, Inc. (since July 1996); President and a director (since October
1997) of OppenheimerFunds International Ltd., an offshore fund management
subsidiary of the Manager and of Oppenheimer Millennium Funds plc; President and
a director of other Oppenheimer funds; a director of Prudential Corporation plc
(a U.K. financial service company).
Ned M. Steel, Director, Age: 84.
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; a director of Visiting Nurse
Corporation of Colorado.
James C. Swain*, Chairman, Chief Executive Officer and Director, Age: 66. 6803
South Tucson Way, Englewood, Colorado 80112 Vice Chairman of the Manager (since
September 1988); formerly President and a director of Centennial Asset
Management Corporation, an investment adviser subsidiary of the Manager and
Chairman of the Board of Shareholder Services, Inc.
Andrew J. Donohue, Vice President and Secretary, Age: 49.
Two World Trade Center, New York, New York 10048-0203
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President and General Counsel (since September 1993) and a director (since
January 1992) of the Distributor; Executive Vice President, General Counsel and
a director of HarbourView Asset Management Corporation, Shareholder Services,
Inc., Shareholder Financial Services, Inc. and (since September 1995)
Oppenheimer Partnership Holdings, Inc.; President and a director of Centennial
Asset Management Corporation (since September 1995); President, General Counsel
and a director of Oppenheimer Real Asset Management, Inc. (since July 1996);
General Counsel (since May 1996) and Secretary (since April 1997) of Oppenheimer
Acquisition Corp.; Vice President and a director of OppenheimerFunds
International Ltd. and Oppenheimer Millennium Funds plc (since October 1997); an
officer of other Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer, Age: 41.
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994 - May 1996), and a Fund Controller
for the Manager.
Scott T. Farrar, Assistant Treasurer, Age: 34.
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994 - May 1996), and a Fund Controller
for the Manager.
Brian W. Wixted, Treasurer, Principal Financial and Accounting Officer, Age: 40.
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer (since April 1999) of the Manager; Treasurer
of HarbourView Asset Management Corporation, Shareholder Services, Inc.,
Shareholder Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc.
(since April 1999); Assistant Treasurer of Oppenheimer Acquisition Corp. (since
April 1999); Assistant Secretary of Centennial Asset Management Corporation
(since April 1999); formerly Principal and Chief Operating Officer, Bankers
Trust Company - Mutual Fund Services Division (March 1995 - March 1999); Vice
President and Chief Financial Officer of CS First Boston Investment Management
Corp. (September 1991 - March 1995); and Vice President and Accounting Manager,
Merrill Lynch Asset Management (November 1987 - September 1991).
Robert G. Zack, Assistant Secretary, Age: 51.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President (since May 1985) and Associate General Counsel (since May
1981) of the Manager, Assistant Secretary of Shareholder Services, Inc. (since
May 1985), and Shareholder Financial Services, Inc. (since November 1989);
Assistant Secretary of OppenheimerFunds International Ltd. and Oppenheimer
Millennium Funds plc (since October 1997); an officer of other Oppenheimer
funds.
|X| Remuneration of Directors. The officers of the Fund and two Directors of
the Fund (Ms. Macaskill and Mr. Swain) are affiliated with the Manager and
receive no salary or fee from the Fund. The remaining Directors of the Fund
received the compensation shown below. The compensation from the Fund was paid
during its fiscal year ended December 31, 1999. The compensation from all of the
Denver-based Oppenheimer funds includes the compensation from the Fund and
represents compensation received as a director, trustee, managing general
partner or member of a committee of the Board during the calendar year 1999.
- ------------------------------------------------------------------------------
Total Compensation
from Denver-Based
Director's Name and Aggregate Compensation Oppenheimer Funds (38
Other Positions from Fund funds)1
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
William H. Armstrong $1,810 $14,542
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Robert G. Avis $8,463 $67,998
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
William A. Baker $8,463 $67,998
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
George C. Bowen $2,972 $23,879
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Edward L. Cameron $302 $2,430
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Jon. S. Fossel
Review Committee Member $8,287 $66,586
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Sam Freedman
Review Committee Member $9,209 $73,998
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Raymond J. Kalinowski
Audit Committee Member $9,116 $73,248
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
C. Howard Kast
Audit and Review
Committee Chairman $9,816 $78,873
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Robert M. Kirchner
Audit Committee Member $8,618 $69,248
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Ned M. Steel $8,463 $67,998
- ------------------------------------------------------------------------------
1. For the 1999 calendar year. Compensation is only from funds on whose Board a
Director served, as described above.
|X| Deferred Compensation Plan. The Board of Directors has adopted a
Deferred Compensation Plan for disinterested directors that enables them to
elect to defer receipt of all or a portion of the annual fees they are entitled
to receive from the Fund. Under the plan, the compensation deferred by a
Director is periodically adjusted as though an equivalent amount had been
invested in shares of one or more Oppenheimer funds selected by the Director.
The amount paid to the Director under the plan will be determined based upon the
performance of the selected funds.
Deferral of Director's fees under the plan will not materially affect the
Fund's assets, liabilities and net income per share. The plan will not obligate
the Fund to retain the services of any Director or to pay any particular level
of compensation to any Director. Pursuant to an Order issued by the Securities
and Exchange Commission, the Fund may invest in the funds selected by the
Director under the plan without shareholder approval for the limited purpose of
determining the value of the Director's deferred fee account.
|X| Major Shareholders. As of April 14, 2000 the only person who owned of
record or were known by the Fund to own beneficially 5% or more of any class of
the Fund's outstanding shares was:
Massachussetts Mutual Life Insurance Company, 1295 State Street,
Springfield, MA 01111-0001 which owned for the benefit of its clients
4,013,941.898 Class Y shares (representing 98.56% of the Class Y shares
then outstanding).
The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company. 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 enforced by the
Manager.
|X| Code of Ethics. The Fund, the Manager and the Distributor 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. Covered persons include persons
with knowledge of the investments and investment intentions of the Fund and
other funds advised by the Manager. The Code of Ethics does permit personnel
subject to the Code to invest in securities, including securities that may be
purchased or held by the Fund, subject to a number of restrictions and controls.
Compliance with the Code of Ethics is carefully monitored and enforced by the
Manager.
The Code of Ethics is an exhibit to the Fund's registration statement filed
with the Securities and Exchange Commission and can be reviewed and copied at
the SEC's public Reference Room in Washington D.C. You can obtain information
about the hours of operation of the Public Reference Room by calling the SEC at
1-202-942-8090. The Code of Ethics can also be viewed as part of the Fund's
registration statement on the SEC's EDGAR database at the SEC's Internet website
at http:// www.sec.gov. Copies may be obtained, after paying a duplicating fee,
by electronic request at the following E-mail address: publicinfo@sec.gov., or
by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102.
|X| The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and the Fund. The Manager selects securities for
the Fund's portfolio and handles its day-to-day business. The portfolio managers
of the Fund are employed by the Manager and are the persons who are principally
responsible for the day-to-day management of the Fund's portfolio. Other members
of the Manager's Equity Portfolio Department provide the portfolio managers with
counsel and support in managing the Fund's portfolio.
The agreement requires the Manager, at its expense, to provide the Fund
with adequate office space, facilities and equipment. It also requires the
Manager to provide and supervise the activities of all administrative and
clerical personnel required to provide effective administration for the Fund.
Those responsibilities include 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.
The Fund pays expenses not expressly assumed by the Manager under the
advisory agreement. The advisory agreement lists examples of expenses paid by
the Fund. The major categories relate to interest, taxes, brokerage commissions,
fees to certain Directors, legal and audit expenses, custodian and transfer
agent expenses, share issuance costs, certain printing and registration costs
and non-recurring expenses, including litigation costs. The management fees paid
by the Fund to the Manager are calculated at the rates described in the
Prospectus, which are applied to the assets of the Fund as a whole. The fees are
allocated to each class of shares based upon the relative proportion of the
Fund's net assets represented by that class.
- -------------------------------------------------------------------------------
Fiscal Year ended 12/31: Management Fees Paid to OppenheimerFunds, Inc.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1997 $15,602,793
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1998 $18,483,834
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1999 $21,073,662
- -------------------------------------------------------------------------------
The investment advisory agreement states that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties or
reckless disregard of its obligations and duties under the investment advisory
agreement, the Manager is not liable for any loss the Fund sustains for any
investment, adoption of any investment policy, or the purchase, sale or
retention of any security.
The agreement permits the Manager to act as investment advisor for any
other person, firm or corporation and to use the name "Oppenheimer" in
connection with other investment companies for which it may act as investment
advisor or general distributor. If the Manager shall no longer act as investment
advisor to the Fund, the Manager may withdraw the right of the Fund to use the
name "Oppenheimer" as part of its name.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the duties of
the Manager under the investment advisory agreement is to arrange the portfolio
transactions for the Fund. The advisory agreement contains provisions relating
to the employment of broker-dealers to effect the Fund's portfolio transactions.
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. The Manager may employ broker-dealers that the Manager thinks, in
its best judgment based on all relevant factors, will implement the policy of
the Fund to obtain, at reasonable expense, the "best execution" of the Fund's
portfolio transactions. "Best execution" means prompt and reliable execution at
the most favorable price obtainable. The Manager need not seek competitive
commission bidding. However, it is expected to be aware of the current rates of
eligible brokers and to minimize the commissions paid to the extent consistent
with the interests and policies of the Fund as established by its Board of
Directors.
Under the investment advisory agreement, the Manager may select brokers
(other than affiliates) 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 charge, if the Manager makes a good faith
determination that the commission is fair and reasonable in relation to the
services provided. Subject to those considerations, as a factor in selecting
brokers for the Fund's portfolio transactions, the Manager may also consider
sales of shares of the Fund and other investment companies for which the Manager
or an affiliate serves as investment advisor.
Brokerage Practices Followed by the Manager. The Manager allocates brokerage for
the Fund subject to the provisions of the investment advisory agreement and the
procedures and rules described above. Generally, the Manager's portfolio traders
allocate brokerage based upon recommendations from the Manager's portfolio
managers. In certain instances, portfolio managers may directly place trades and
allocate brokerage. In either case, the Manager's executive officers supervise
the allocation of brokerage.
Transactions in securities other than those for which an exchange is the
primary market are generally done with principals or market makers. In
transactions on foreign exchanges, the Fund may be required to pay fixed
brokerage commissions and therefore would not have the benefit of negotiated
commissions available in U.S. markets. Brokerage commissions are paid primarily
for transactions in listed securities or for certain fixed-income agency
transactions in the secondary market. Otherwise brokerage commissions are paid
only if it appears likely that a better price or execution can be obtained by
doing so. In an option transaction, the Fund ordinarily uses the same broker for
the purchase or sale of the option and any transaction in the securities to
which the option relates.
Other funds advised by the Manager have investment policies similar to
those of the Fund. Those other funds may purchase or sell the same securities as
the Fund at the same time as the Fund, which could affect the supply and price
of the securities. If two or more funds advised by the Manager purchase the same
security on the same day from the same dealer, the transactions under those
combined orders are averaged as to price and allocated in accordance with the
purchase or sale orders actually placed for each account.
Most purchases of 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
the Manager determines that a better price or execution can be obtained by using
the services of a broker. Purchases of portfolio 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 investment advisory agreement permits the Manager to allocate
brokerage for research services. 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. The investment research received for the commissions of
those other accounts may be useful both to the Fund and one or more of the
Manager's other accounts. Investment research may be supplied to the Manager by
a third party at the instance of a broker through which trades are placed.
Investment research services include information and analysis on
particular companies and industries as well as market or economic trends and
portfolio strategy, 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 Directors permits the Manager to use stated commissions on
secondary fixed-income agency trades to obtain research if the broker represents
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 Board of Directors permits the Manager to use concessions on fixed-price
offerings to obtain research, in the same manner as is permitted for agency
transactions.
The research services provided by brokers broaden the scope and supplement
the research activities of the Manager. That research provides additional views
and comparisons for consideration, and helps the Manager to obtain market
information for the valuation of securities that are either held in the Fund's
portfolio or are being considered for purchase. The Manager provides information
to the Board about 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.
- -------------------------------------------------------------------------------
Fiscal Year Ended 12/31: Total Brokerage Commissions Paid by the Fund1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1997 $4,298,092
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1998 $2,842,3122
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1999 $2,635,816
- -------------------------------------------------------------------------------
1. Amounts do not include spreads or concessions on principal transactions on a
net trade basis.
2. In the fiscal year ended 12/31/99, the amount of transactions directed to
brokers for research services was $690,943,863 and the amount of the
commissions paid to broker-dealers for those services was $808,378.
Distribution and Service Plans
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 different classes of shares of the Fund. The Distributor is not
obligated to sell a specific number of shares. Expenses normally attributable to
sales are borne by the Distributor other than those paid by the Fund under the
Distribution and Service Plans.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares during the Fund's three most recent fiscal
years is shown in the table below.
- -------------------------------------------------------------------------------
Aggregate Class A Commissions Commissions Commissions
Front-End Front-End on Class A on Class B on Class C
Fiscal Sales Sales Shares Shares Shares
Year Charges on Charges Advanced by Advanced by Advanced by
Ended Class A Retained by Distributor1 Distributor1 Distributor1
12/31: Shares Distributor
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1997 $4,143,424 $1,483,220 $36,045 $4,481,926 $158,724
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1998 $3,975,257 $1,342,124 $75,535 $4,675,603 $187,049
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1999 $3,586,666 $1,235,653 $101,858 $4,474,217 $223,694
- -------------------------------------------------------------------------------
1. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
- -------------------------------------------------------------------------------
Fiscal Class A Contingent Class B Contingent
Year Deferred Sales Deferred Sales Class C Contingent
Ended Charges Retained by Charges Retained by Deferred Sales Charges
12/31 Distributor Distributor Retained by Distributor
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1999 10,798 $1,286,143 $27,758
- -------------------------------------------------------------------------------
Distribution and Service Plans. The Fund has adopted a Service Plan for Class A
shares and Distribution and Service Plans for Class B and Class C shares under
Rule 12b-1 of the Investment Company Act. Under those plans the Fund pays the
Distributor for all or a portion of its costs incurred in connection with the
distribution and/or servicing of the shares of the particular class.
Under the plans, the Manager and the Distributor may make payments to
affiliates and, in their sole discretion, from time to time, may use their own
resources (at no direct cost to the Fund) to make payments to brokers, dealers
or other financial institutions for distribution and administrative services
they perform. The Manager may use its profits from the advisory fee it receives
from the Fund. In their sole discretion, the Distributor and the Manager may
increase or decrease the amount of payments they make from their own resources
to plan recipients.
Unless a plan is terminated as described below, the plan continues in
effect from year to year but only if the Fund's Board of Directors and its
Independent Directors specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting called for the purpose of
voting on continuing the plan. A plan may be terminated at any time by the vote
of a majority of the Independent Directors or by the vote of the holders of a
"majority" (as defined in the Investment Company Act) of the outstanding shares
of that class.
The Board of Directors and the Independent Directors must approve all
material amendments to a plan. An amendment to increase materially the amount of
payments to be made under a plan must be approved by shareholders of the class
affected by the amendment. Because Class B shares of the Fund automatically
convert into Class A shares after six years, the Fund must obtain the approval
of both Class A and Class B shareholders for a proposed material amendment to
the Class A plan that would materially increase payments under the plan. That
approval must be by a "majority" (as defined in the Investment Company Act) of
the shares of each class, voting separately by class.
While the plans are in effect, the Treasurer of the Fund shall provide
separate written reports on the plans to the Board of Directors at least
quarterly for its review. The Reports shall detail the amount of all payments
made under a plan and the purpose for which the payments were made. Those
reports are subject to the review and approval of the Independent Directors.
Each plan states that while it is in effect, the selection and nomination
of those Directors of the Fund who are not "interested persons" of the Fund is
committed to the discretion of the Independent Directors. This does not prevent
the involvement of others in the selection and nomination process as long as the
final decision as to selection or nomination is approved by a majority of the
Independent Directors.
Under the plans for a class, no payment will be made to any recipient in
any quarter in which the aggregate net asset value of all Fund shares of that
class held by the recipient for itself and its customers does not exceed a
minimum amount, if any, that may be set from time to time by a majority of the
Independent Directors. The Board of Directors has set no minimum amount of
assets to qualify for payments under the plans.
|X| Class A Service Plan Fees. Under the Class A service plan, the
Distributor currently uses the fees it receives from the Fund to pay brokers,
dealers and other financial institutions, persons or entities (they are referred
to as "recipients") for personal services and account maintenance services they
provide for their customers who hold Class A shares. The services 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. The Class A service plan permits reimbursements to the Distributor
at a rate of up to 0.25% of average annual net assets of Class A shares
purchased on or after April 1, 1988. The rate is 0.15% for shares purchased
before that date. While the plan permits the Board to authorize payments to the
Distributor to reimburse itself for services under the plan, the Board has not
yet done so. The Distributor makes payments to plan recipients quarterly at an
annual rate not to exceed 0.25% of the average annual net assets consisting of
Class A shares held in the accounts of the recipients or their customers
purchased on or after April 1, 1988, and 0.15% on shares purchased before that
date.
For the fiscal year ended December 31, 1999 payments under the Class A
Plan totaled $5,331,807, all of which was paid by the Distributor to recipients.
That included $433,314 paid to an affiliate of the Distributor's parent company.
Any unreimbursed expenses the Distributor incurs with respect to Class A shares
in any fiscal year cannot be recovered in subsequent years. The Distributor may
not use payments received under the Class A Plan to pay any of its interest
expenses, carrying charges, or other financial costs, or allocation of overhead.
|X| Class B and Class C Service and Distribution Plan Fees. Under each
plan, service fees and distribution 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 Class B and Class C plans
provide for the Distributor to be compensated at a flat rate for its services,
whether its costs in distributing Class B and Class C shares and servicing
accounts are more or less than the amounts paid by the Fund under the plan for
the period for which the fee is paid. The types of services that recipients
provide for payment of the service fee are similar to the services provided
under the Class A service plan, described above.
The Class B and the Class C Plans permit the Distributor to retain both
the asset-based sales charges and the service fees or to pay recipients the
service fee on a quarterly basis, without payment in advance. However, the
Distributor currently intends to pay the service fee to recipients in advance
for the first year after the shares are purchased. After the first year shares
are outstanding, the Distributor makes service fee payments quarterly on those
shares. The advance payment is based on the net asset value of shares sold.
Shares purchased by exchange do not qualify for the advance service fee payment.
If Class B or Class C shares are redeemed during the first year after their
purchase, the recipient of the service fees on those shares will be obligated to
repay on demand the Distributor a pro rata portion of the advance payment of the
service fee made on those shares.
The Distributor retains the asset-based sales charge on Class B shares.
The Distributor retains the asset-based sales charge on Class C shares during
the first year the shares are outstanding. It pays the asset-based sales charge
as an ongoing commission for distribution services to the recipient on Class C
shares outstanding for a year or more. If a dealer has a special agreement with
the Distributor, the Distributor will pay the Class B and/or Class C service fee
and the asset-based sales charge to the dealer quarterly in lieu of paying the
sales commissions and service fee in advance at the time of purchase.
The asset-based sales charges on Class B and Class C shares allow
investors to buy shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell those shares. The Fund pays the
asset-based sales charges to the Distributor for its services rendered in
distributing Class B and Class C shares. The payments are made to the
Distributor in recognition that the Distributor:
o pays sales commissions to authorized brokers and dealers at the time of
sale and pays service fees as described above,
o may finance payment of sales commissions and/or the advance of the service
fee payment to recipients under the plans, or may provide such financing
from its own resources or from the resources of an affiliate,
o employs personnel to support distribution of Class B and Class C shares,
and
o bears the costs of sales literature, advertising and prospectuses (other
than those furnished to current shareholders) and state "blue sky"
registration fees and certain other distribution expenses.
The Distributor's actual expenses in selling Class B and Class C shares
may be more than the payments it receives from the contingent deferred sales
charges collected on redeemed shares and from the Fund under the plans. If
either the Class B or the Class C plan is terminated by the Fund, the Board of
Directors may allow the Fund to continue payments of the asset-based sales
charge to the Distributor for distributing shares before the plan was
terminated. All payments under the Class B and the 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.
- --------------------------------------------------------------------------------
Distribution Fees Paid to the Distributor for the Year Ended 12/31/99
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Distributor's
Distributor's Unreimbursed
Total Amount Aggregate Expenses as %
Payments Retained by Unreimbursed of Net Assets
Class: Under Plan Distributor Expenses Under Plan of Class
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Plan $11,962,493 $9,316,0151 $8,634,201 0.75%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Plan $661,360 $248,4872 $707,054 0.93%
- --------------------------------------------------------------------------------
1. Includes $190,974 paid to and affiliate of the Distributor's parent company.
2. Includes $15,676 paid to and affiliate of the Distributor's parent company.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its investment performance. Those terms include "cumulative total
return," "average annual total return," "average annual total return at net
asset value" and "total return at net asset value." An explanation of how total
returns are calculated is set forth below. The charts below show the Fund's
performance as of the Fund's most recent fiscal year end. You can obtain current
performance information by calling the Fund's Transfer Agent at 1-800-525-7048
or by visiting the OppenheimerFunds Internet web site at
http://www.oppenheimerfunds.com.
The Fund's illustrations of its performance data in advertisements must
comply with rules of the Securities and Exchange Commission. Those rules
describe the types of performance data that may be used and how it is to be
calculated. In general, any advertisement by the Fund of its performance data
must include the average annual total returns for the advertised class of shares
of the Fund. Those returns must be shown 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 (or its submission for
publication).
Use of standardized performance calculations 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 the
Fund's performance information as a basis for comparison with other investments:
|_|Total 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. Your account's performance will vary from the
model performance data if your dividends are received in cash, or you
buy or sell shares during the period, or you bought your shares at a
different time and price than the shares used in the model.
|_| An investment in the Fund is not insured by the FDIC or any other
government agency.
|_| The Fund's performance returns do not reflect the effect of taxes on
dividends and capital gains distributions.
|_| The principal value of the Fund's shares and total returns are not
guaranteed and normally will fluctuate on a daily basis.
|_| When an investor's shares are redeemed, they may be worth more or less
than their original cost.
|_| Total returns for any given past period represent historical
performance information and are not, and should not be considered, a
prediction of future returns.
The performance of each class of shares is shown separately, because the
performance of each class of shares will usually be different. That is because
of the different kinds of expenses each class bears. The total returns of each
class of shares of the Fund are affected by market conditions, the quality of
the Fund's investments, the maturity of debt investments, the types of
investments the Fund holds, and its operating expenses that are allocated to the
particular class.
|X| Total Return Information. There are different types of "total returns"
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
and that the investment is redeemed at the end of the period. Because of
differences in expenses for each class of shares, the total returns for each
class are separately measured. 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 actual year-by-year performance. The
Fund uses standardized calculations for its total returns as prescribed by the
SEC. The methodology is discussed below.
In calculating total returns for Class A shares, the current maximum sales
charge of 5.75% (as a percentage of the offering price) is deducted from the
initial investment ("P") (unless the return is shown without sales charge, as
described below). For Class B shares, payment of the applicable contingent
deferred sales charge is applied, depending on the period for which the return
is shown: 5.0% in the first year, 4.0% in the second year, 3.0% in the third and
fourth years, 2.0% in the fifth year, 1.0% in the sixth year and none
thereafter. For Class C shares, the 1% contingent deferred sales charge is
deducted for returns for the 1-year period. There is no sales charge on Class Y
shares.
|_| Average Annual Total Return. 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" in the formula) to achieve an Ending Redeemable Value
("ERV" in the formula) of that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
|_| Cumulative Total Return. 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
|_| Total Returns at Net Asset Value. From time to time the Fund may
also quote a cumulative or an average annual total return "at net asset value"
(without deducting sales charges) 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 Fund's Total Returns for the Periods Ended 12/31/99
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cumulative
Total Returns
Class of (10 years or
Shares Life of Class) Average Annual Total Returns
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5-Year 10-Year
(or (or
1-Year life-of-class) life-of-class)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
After Without After Without After Without After Without
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A 342.81% 369.82% 11.53% 18.34% 21.81% 23.26% 16.04%1 16.73%1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B 183.47%2 183.47%212.37% 17.37% 22.06% 22.24% 16.93%2 16.93%2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C 129.99%3 129.99%316.37% 17.37% 21.16%3 21.16%3 N/A N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y 177.31%4 177.31%418.53% 18.53% 23.41% 23.41%4 20.04%4 20.04%4
- --------------------------------------------------------------------------------
1. Inception of Class A: 9/30/75.
2. Inception of Class B: 5/3/93.
3. Inception of Class C: 8/29/95.
4. Inception of Class Y: 6/1/94.
Other Performance Comparisons. The Fund compares its performance annually to
that of an appropriate broadly-based market index in its Annual Report to
shareholders. You can obtain that information by contacting the Transfer Agent
at the addresses or telephone numbers shown on the cover of this Statement of
Additional Information. The Fund may also compare its performance to that of
other investments, including other mutual funds, or use rankings of its
performance by independent ranking entities. Examples of these performance
comparisons are set forth below.
|X| Lipper Rankings. From time to time the Fund may publish the ranking of
the performance of its classes of shares by Lipper, Inc. Lipper is 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
styles. The Lipper performance rankings are based on total returns that include
the reinvestment of capital gain distributions and income dividends but do not
take sales charges or taxes into consideration. Lipper also publishes
"peer-group" indices of the performance of all mutual funds in a category that
it monitors and averages of the performance of the funds in particular
categories.
|X| Morningstar Ratings and Rankings. From time to time the Fund may
publish the ranking and/or star rating of the performance of its classes of
shares by Morningstar, Inc., an independent mutual fund monitoring service.
Morningstar rates and ranks mutual funds in broad investment categories:
domestic stock funds, international stock funds, taxable bond funds and
municipal bond funds. The Fund is included in the domestic stock funds category.
Morningstar proprietary star ratings reflect historical risk-adjusted
total investment return. Investment return measures a fund's (or class's) 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 is measured by a
fund's (or class's) performance below 90-day U.S. Treasury bill returns. Risk
and investment return are combined to produce star ratings reflecting
performance relative to the other funds in the fund's category. Five stars is
the "highest" ranking (top 10% of funds in a category), 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
rating is the fund's (or class's) overall rating, which is the fund's 3-year
rating or its combined 3- and 5-year ranking (weighted 60%/40% respectively), or
its combined 3-, 5-, and 10-year rating (weighted 40%/30%/30%, respectively),
depending on the inception date of the fund (or class). Ratings are subject to
change monthly.
The Fund may also compare its total return ranking to that of other funds
in its Morningstar category, in addition to its star rating. Those total return
rankings are percentages from one percent to one hundred percent and are not
risk-adjusted. For example, if a fund is in the 94th percentile, that means that
94% of the funds in the same category performed better than it did.
|X| Performance Rankings and Comparisons by Other Entities and
Publications. From time to time the Fund may include in its advertisements and
sales literature performance information about the Fund cited in newspapers and
other periodicals such as The New York Times, The Wall Street Journal, Barron's,
or similar publications. That information may include performance quotations
from other sources, including Lipper and Morningstar. The performance of the
Fund's classes of shares may be compared in publications to the performance of
various market indices or other investments, and averages, performance rankings
or other benchmarks prepared by recognized mutual fund statistical services.
Investors may also wish to compare the returns on the Fund's share classes
to the return on fixed-income investments available from banks and thrift
institutions. Those include 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 or insured 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. Repayment of
principal and payment of interest on Treasury securities is backed by the full
faith and credit of the U.S. government.
From time to time, the Fund may publish rankings or ratings of the Manager
or Transfer Agent, and of 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 and investor services
by third parties may include comparisons of their services to those provided by
other mutual fund families selected by the rating or ranking services. They may
be based upon the opinions of the rating or ranking service itself, using its
research or judgment, or based upon surveys of investors, brokers, shareholders
or others.
- --------------------------------------------------------------------------------
A B O U T Y O U R A C C O U N T
- --------------------------------------------------------------------------------
How to Buy Shares
Additional information is presented below about the methods that can be
used to buy shares of the Fund. Appendix C contains more information about the
special sales charge arrangements offered by the Fund, and the circumstances in
which sales charges may be reduced or waived for certain classes of investors.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy the shares. Dividends will begin to accrue on shares purchased
with 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 Appendix C to this
Statement of Additional Information because the Distributor or dealer or broker
incurs little or no selling expenses.
|X| 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 for your joint accounts, or for trust or custodial
accounts on behalf of your children who are minors, and
|_|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, and
|_|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.
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. The Distributor will add the value, at
current offering price, of the shares you previously purchased and currently own
to the value of current purchases to determine the sales charge rate that
applies. The reduced sales charge will apply only to current purchases. You must
request it when you buy shares.
|X| The Oppenheimer Funds. The Oppenheimer funds are those mutual funds
for which the Distributor acts as the distributor or the sub-distributor and
currently include the following:
Oppenheimer Main Street California
Oppenheimer Bond Fund Municipal Fund
Oppenheimer Main Street Growth & Income
Oppenheimer Capital Appreciation Fund Fund
Oppenheimer Capital Preservation Fund Oppenheimer Main Street Small Cap Fund
Oppenheimer California Municipal Fund Oppenheimer MidCap Fund
Oppenheimer Champion Income Fund Oppenheimer Multiple Strategies Fund
Oppenheimer Convertible Securities Fund Oppenheimer Municipal Bond Fund
Oppenheimer Developing Markets Fund Oppenheimer New York Municipal Fund
Oppenheimer Disciplined Allocation Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Disciplined Value Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Discovery Fund Oppenheimer Quest Balanced Value Fund
Oppenheimer Quest Capital Value Fund,
Oppenheimer Enterprise Fund Inc.
Oppenheimer Quest Global Value Fund,
Oppenheimer Capital Income Fund Inc.
Oppenheimer Europe Fund Oppenheimer Quest Opportunity Value Fund Oppenheimer
Florida Municipal Fund Oppenheimer Quest Small Cap Value Fund Oppenheimer Global
Fund Oppenheimer Quest Value Fund, Inc. Oppenheimer Global Growth & Income Fund
Oppenheimer Real Asset Fund Oppenheimer Gold & Special Minerals Fund Oppenheimer
Senior Floating Rate Fund Oppenheimer Growth Fund Oppenheimer Strategic Income
Fund Oppenheimer High Yield Fund Oppenheimer Total Return Fund, Inc. Oppenheimer
Insured Municipal Fund Oppenheimer Trinity Core Fund Oppenheimer Intermediate
Municipal Fund Oppenheimer Trinity Growth Fund Oppenheimer International Bond
Fund Oppenheimer Trinity Value Fund Oppenheimer International Growth Fund
Oppenheimer U.S. Government Trust Oppenheimer International Small Company Fund
Oppenheimer World Bond Fund Oppenheimer Large Cap Growth Fund Limited-Term New
York Municipal Fund Oppenheimer Limited-Term Government Fund Rochester Fund
Municipals
and the following money market funds:
Centennial America Fund, L. P. Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust Centennial Tax Exempt Trust
Centennial Government Trust Oppenheimer Cash Reserves
Centennial Money Market Trust Oppenheimer Money Market Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of each
of the Oppenheimer funds except the money market funds. Under certain
circumstances described in this Statement of Additional Information, redemption
proceeds of certain money market fund shares may be subject to a contingent
deferred sales charge.
|X| Letters of Intent. Under a Letter of Intent, if you purchase Class A
shares or Class A and Class B shares of the Fund and other Oppenheimer funds
during a 13-month period, you can reduce the sales charge rate that applies to
your purchases of Class A shares. The total amount of your intended purchases of
both Class A and Class B shares will determine the reduced sales charge rate for
the Class A shares purchased during that period. You can include purchases made
up to 90 days before the date of the Letter.
A Letter of Intent is an investor's statement in writing to the
Distributor of the intention to purchase Class A shares or Class A and Class B
shares of the Fund (and other Oppenheimer funds) during a 13-month period (the
"Letter of Intent period"). At the investor's request, this may include
purchases made up to 90 days prior to the date of the Letter. The Letter states
the investor's intention to make the aggregate amount of purchases of shares
which, when added to the investor's holdings of shares of those funds, will
equal or exceed the amount specified in the Letter. Purchases made by
reinvestment of dividends or distributions of capital gains and purchases made
at net asset value without sales charge do not count toward satisfying the
amount of the Letter.
A Letter enables an investor to count the Class A and Class B shares
purchased under the Letter to obtain the reduced sales charge rate on purchases
of Class A shares of the Fund (and other Oppenheimer funds) that applies under
the Right of Accumulation to current purchases of Class A shares. Each purchase
of Class A shares under the Letter will be made at the 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. However, 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. That amount is described in "Terms of
Escrow," below (those terms may be amended by the Distributor 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 a Letter of Intent. If those terms are amended, as they may be from time to
time by the Fund, the investor agrees to be bound by the amended terms and that
those amendments will apply automatically to existing Letters of Intent.
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
total 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 Prospectus, the sales
charges paid will be adjusted to the lower rate. That adjustment will be made
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.
The Transfer Agent will not hold shares in escrow for purchases of shares
of the Fund and other Oppenheimer funds by OppenheimerFunds prototype 401(k)
plans under a Letter of Intent. If the intended purchase amount under a Letter
of Intent 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.
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 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 total minimum investment 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. That sales charge adjustment will
apply to any shares redeemed prior to the completion of the Letter. If the
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 of other Oppenheimer funds acquired subject to a
contingent deferred sales charge, and
(c) Class A or Class B shares acquired by exchange of either (1) 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
(2) 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 to buy shares directly
from a bank account, you must enclose a check (the minimum is $25) for the
initial purchase with your application. Shares purchased by Asset Builder Plan
payments from bank accounts are subject to the redemption restrictions for
recent purchases described in the Prospectus. Asset Builder Plans are available
only if your bank is an ACH member. Asset Builder Plans may not be used to buy
shares for OppenheimerFunds employer-sponsored qualified retirement accounts.
Asset Builder Plans also enable shareholders of Oppenheimer Cash Reserves to use
their fund account to make monthly automatic purchases of shares of up to four
other Oppenheimer funds.
If you make payments from your bank account to purchase shares of the
Fund, your bank account will be debited automatically. Normally the debit will
be made two business days prior to the investment dates you selected in your
Application. Neither the Distributor, the Transfer Agent nor the Fund shall be
responsible for any delays in purchasing shares that result from delays in ACH
transmissions.
Before you establish Asset Builder payments, you should obtain a
prospectus of the selected fund(s) from your financial advisor (or the
Distributor) and request an application from the Distributor. Complete the
application and return it. You may change the amount of your Asset Builder
payment or you can terminate these automatic investments at any time by writing
to the Transfer Agent. The Transfer Agent requires a reasonable period
(approximately 10 days) after receipt of your instructions to implement them.
The Fund reserves the right to amend, suspend, or discontinue offering Asset
Builder plans at any time without prior notice.
Retirement Plans. Certain types of Retirement Plans are entitled to purchase
shares of the Fund without sales charge or at reduced sales charge rates, as
described in Appendix C to this Statement of Additional Information. Certain
special sales charge arrangements described in that Appendix apply to retirement
plans whose records are maintained on a daily valuation basis by Merrill Lynch
Pierce Fenner & Smith, Inc. or an independent record keeper that has a contract
or special arrangement with Merrill Lynch. If on the date the plan sponsor
signed the Merrill Lynch record keeping service agreement the plan has less than
$3 million in assets (other than assets invested in money market funds) invested
in applicable investments, then the retirement plan may purchase only Class B
shares of the Oppenheimer funds. Any retirement plans in that category that
currently invest in Class B shares of the Fund will have their Class B shares
converted to Class A shares of the Fund when the Plan's applicable investments
reach $5 million.
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.
Classes of Shares. Each class of shares of the Fund represents an interest in
the same portfolio of investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class B or
Class C shares and the dividends payable on Class B or Class C shares will be
reduced by incremental expenses borne solely by that class. Those expenses
include the asset-based sales charges to which Class B and Class C are subject.
The availability of different classes of shares permits an investor to
choose the method of purchasing shares that is more appropriate for the
investor. That may depend on the amount of the purchase, the length of time the
investor expects to hold shares, and other relevant circumstances. Class A
shares normally are sold subject to an initial sales charge. While Class B and
Class C shares have no initial sales charge, the purpose of the deferred sales
charge and asset-based sales charge on Class B and Class C shares is the same as
that of the initial sales charge on Class A shares - to compensate the
Distributor and brokers, dealers and financial institutions that sell shares of
the Fund. A salesperson who is entitled to receive compensation from his or her
firm for selling Fund shares may receive different levels of compensation for
selling one class of shares rather than another.
The Distributor will not accept any order in the amount of $500,000 or
more for Class B shares or $1 million or more for Class C shares on behalf of a
single investor (not including dealer "street name" or omnibus accounts). That
is because generally it will be more advantageous for that investor to purchase
Class A shares of the Fund.
|X| Class B Conversion. Under current interpretations of applicable
federal income tax law by the Internal Revenue Service, the conversion of Class
B shares to Class A shares after six years is not treated as a taxable event for
the shareholder. If those laws or the IRS interpretation of those laws should
change, the automatic conversion feature may be suspended. In that event, no
further conversions of Class B shares would occur while that 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
shareholder, and absent such exchange, Class B shares might continue to be
subject to the asset-based sales charge for longer than six years.
|X| Allocation of Expenses. The Fund pays expenses related to its daily
operations, such as custodian bank fees, Directors' fees, transfer agency fees,
legal fees and auditing costs. Those expenses are paid out of the Fund's assets
and are not paid directly by shareholders. However, those expenses reduce the
net asset value of shares, and therefore are indirectly borne by shareholders
through their investment.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's share classes recognizes two types of expenses.
General expenses that do not pertain specifically to any one class are allocated
pro rata to the shares of all classes. The allocation is based on the percentage
of the Fund's total assets that is represented by the assets of each class, and
then equally to each outstanding share within a given class. Such general
expenses include management fees, legal, bookkeeping and audit fees, printing
and mailing costs of shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current shareholders, fees to unaffiliated
Directors, custodian bank expenses, share issuance costs, organization and
start-up costs, interest, taxes and brokerage commissions, and non-recurring
expenses, such as litigation costs.
Other expenses that are directly attributable to a particular class are
allocated equally to each outstanding share within that class. Examples of such
expenses include distribution and service plan (12b-1) fees, transfer and
shareholder servicing agent fees and expenses and shareholder meeting expenses
(to the extent that such expenses pertain only to a specific class).
Determination of Net Asset Values Per Share. The net asset values per share of
each class of shares of the Fund are determined as of the close of business of
The New York Stock Exchange on each day that the Exchange is open. The
calculation is done by dividing the value of the Fund's net assets attributable
to a class by the number of shares of that class that are outstanding. The
Exchange normally closes at 4:00 P.M., New York time, but may close earlier on
some other days (for example, in case of weather emergencies or on days falling
before a U.S. holiday). The Exchange's most recent annual announcement (which is
subject to change) states that it will close on New Year's Day, Presidents' Day,
Martin Luther King, Jr. Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. It may also close on other days.
Dealers other than Exchange members may conduct trading in certain
securities on days on which the Exchange is closed (including weekends and U.S.
holidays) or after 4:00 P.M. on a regular business day. The Fund's net asset
values will not be calculated on those days and the values of some of the Fund's
portfolio securities may change significantly on these days, when shareholders
may not purchase or redeem shares. Additionally, trading on European and Asian
stock exchanges and over-the-counter markets normally is completed before the
close of The New York Stock Exchange.
Changes in the values of securities traded on foreign exchanges or markets
as a result of events that occur after the prices of those securities are
determined, but before the close of The New York Stock Exchange, will not be
reflected in the Fund's calculation of its net asset values that day unless the
Manager determines that the event is likely to effect a material change in the
value of the security. The Manager may make that determination, under procedures
established by the Board.
|X| Securities Valuation. The Fund's Board of Directors has established
procedures for the valuation of the Fund's securities. In general those
procedures are as follows:
|_| Equity securities traded on a U.S. securities exchange or on Nasdaq are
valued as follows:
(1) if last sale information is regularly reported, they are valued at
the last reported sale price on the principal exchange on which they
are traded or on Nasdaq, as applicable, on that day, or
(2) if last sale information is not available on a valuation date, they
are valued at the last reported sale price preceding the valuation
date if it is within the spread of the closing "bid" and "asked"
prices on the valuation date or, if not, at the closing "bid" price
on the valuation date.
|_| Equity securities traded on a foreign securities exchange generally
are valued in one of the following ways: (1) at the last sale price available to
the pricing service approved by the Board
of Directors, or
(2) at the last sale price obtained by the Manager from the report of
the principal exchange on which the security is traded at its last
trading session on or immediately before the valuation date, or
(3) at the mean between the "bid" and "asked" prices obtained from the
principal exchange on which the security is traded or, on the basis
of reasonable inquiry, from two market makers in the security.
|_| 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
Directors or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry.
|_| The following securities are valued at the mean between the "bid" and
"asked" prices determined by a pricing service approved by the Fund's Board of
Directors or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry:
(1) debt instruments that have a maturity of more than 397 days when issued, (2)
debt instruments that had a maturity of 397 days or less when issued and have
a remaining maturity of more than 60 days, and
(3) non-money market debt instruments that had a maturity of 397 days or
less when issued and which have a remaining maturity of 60 days or
less.
|_| The following securities are valued at cost, adjusted for amortization
of premiums and accretion of discounts: (1) money market debt securities held by
a non-money market fund that had a
maturity of less than 397 days when issued that have a remaining
maturity of 60 days or less, and
(2) debt instruments held by a money market fund that have a remaining
maturity of 397 days or less.
|_| 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, a security may be priced at the mean between the "bid"
and "asked" prices provided by a single active market maker (which in certain
cases may be the "bid" price if no "asked" price is available).
In the case of U.S. government securities, mortgage-backed securities,
corporate bonds and foreign government securities, when last sale information is
not generally available, the Manager may use pricing services approved by the
Board of Directors. The pricing service may use "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield and maturity.
Other special factors may be involved (such as the tax-exempt status of the
interest paid by municipal securities). The Manager will monitor the accuracy of
the pricing services. That monitoring may include comparing prices used for
portfolio valuation to actual sales prices of selected securities.
The closing prices in the London foreign exchange market on a particular
business day that are provided to the Manager by a bank, dealer or pricing
service that the Manager has determined to be reliable are used to value foreign
currency, including forward contracts, and to convert to U.S. dollars securities
that are denominated in foreign currency.
Puts, calls, and futures are valued at the last sale price on the
principal exchange on which they are traded or on Nasdaq, as applicable, as
determined by a pricing service approved by the Board of Directors or by the
Manager. If there were no sales that day, they shall be valued at 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. If not, the 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 by the mean between "bid" and
"asked" prices obtained by the Manager from two active market makers. In certain
cases that may be at the "bid" price if no "asked" price is available.
When the Fund writes an option, an amount equal to the premium received is
included in the Fund's Statement of Assets and Liabilities as an asset. An
equivalent credit is included in the liability section. The credit is adjusted
("marked-to-market") to reflect the current market value of the option. In
determining the Fund's gain on investments, if a call or put written by the Fund
is exercised, the proceeds are increased by the premium received. If a call or
put written by the Fund expires, the Fund has a gain in the amount of the
premium. If the Fund enters into a closing purchase transaction, it will have a
gain or loss, depending on whether the premium received was more or less than
the cost of the closing transaction. If the Fund exercises a put it holds, the
amount the Fund receives on its sale of the underlying investment is reduced by
the amount of premium paid by the Fund.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the Prospectus.
The information below provides additional information about the procedures and
conditions for redeeming shares.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of:
|_| Class A shares purchased subject to an initial sales charge or Class A
shares on which a contingent deferred sales charge was paid, or
|_| Class B shares that were subject to the Class B contingent deferred
sales charge when redeemed.
The reinvestment may be made without sales charge only in Class A shares
of the Fund or any of the other Oppenheimer funds into which shares of the Fund
are exchangeable as described in "How to Exchange Shares" below. Reinvestment
will be at the net asset value next computed after the Transfer Agent receives
the reinvestment order. The shareholder must ask the Transfer Agent for that
privilege at the time of reinvestment. This privilege does not apply to Class C
or Class Y shares. 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.
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.
Payments "In Kind". The Prospectus states that payment for shares tendered for
redemption is ordinarily made in cash. However, the Board of Directors 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 liquid securities from the
portfolio of the Fund, in lieu of cash.
The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act. Under that rule, 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 Fund will value securities used to pay redemptions in
kind using the same method the Fund uses to value its portfolio securities
described above under "Determination of Net Asset Values Per Share." That
valuation will be made as of the time the redemption price is determined.
Involuntary Redemptions. The Fund's Board of Directors 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 $500 or such lesser amount as the
Board may fix. The Board will not cause the involuntary redemption of shares in
an account if the aggregate net asset value of such shares has fallen below the
stated minimum solely as a result of market fluctuations. If the Board exercises
this right, it may also fix the requirements for any notice to be given to the
shareholders in question (not less than 30 days). The Board may alternatively
set requirements for the shareholder to increase the investment, or set other
terms and conditions so that the shares would not be involuntarily redeemed.
Transfers of Shares. A transfer of shares to a different registration is not an
event that triggers the payment of sales charges. Therefore, 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. It does not matter
whether the transfer occurs by absolute assignment, gift or bequest, as long as
it does not involve, directly or indirectly, a public sale of the shares. When
shares subject to a contingent deferred sales charge are transferred, the
transferred shares will remain subject to the contingent deferred sales charge.
It will be 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 or Class
C contingent deferred sales charge will be followed in determining the order in
which shares are transferred.
Sending Redemption Proceeds by Wire. The wire of redemption proceeds may be
delayed if the Fund's custodian bank is not open for business on a day when the
Fund would normally authorize the wire to be made, which is usually the Fund's
next regular business day following the redemption. In those circumstances, the
wire will not be transmitted until the next bank business day on which the Fund
is open for business. No dividends will be paid on the proceeds of redeemed
shares awaiting transfer by wire.
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 (1) state the reason for the
distribution; (2) state the owner's awareness of tax penalties if the
distribution is
premature; and
(3) conform to the requirements of the plan and the Fund's other redemption
requirements.
Participants (other than self-employed persons) in
OppenheimerFunds-sponsored pension or profit-sharing plans with shares of the
Fund held in the name of the plan or its fiduciary may not directly request
redemption of their accounts. The plan administrator or fiduciary 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 and submitted to the Transfer Agent
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, 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. Shareholders should contact their
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
an order placed by the dealer or broker. However, 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 or authorized agent
(i.e. Schwab and TPAs) from its customers prior to the time the Exchange closes.
Normally, the Exchange closes at 4:00 P.M., but may do so earlier on some days.
Additionally, the order must have been 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. The signature(s) of the registered owners on the redemption
documents must be guaranteed 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
(having a value of at least $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. Payments must also be sent to the address of record for
the account and the address must not have 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 Account
Application or by signature-guaranteed instructions sent to the Transfer Agent.
Shares are normally redeemed pursuant to an Automatic Withdrawal Plan three
business days before the payment transmittal date you select in the Account
Application. If a contingent deferred sales charge applies to the redemption,
the amount of the check or payment will be reduced accordingly.
The Fund cannot guarantee receipt of a payment on the date requested. The
Fund reserves the right to amend, suspend or discontinue offering these 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
contingent deferred sales charge is waived as described in Appendix C to this
Statement of Additional Information.
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions that apply to such plans, as stated below.
These provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, any amendments will automatically apply to existing
Plans.
|X| Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent 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.
Instructions should be provided on the OppenheimerFunds Application or
signature-guaranteed instructions. 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.
|X| Automatic Withdrawal Plans. Fund shares will be redeemed as necessary
to meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first. 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
these plans should not be considered as a yield or income on your investment.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan as agent for the shareholder(s) (the "Planholder") who executed the Plan
authorization and application submitted to the Transfer Agent. Neither the Fund
nor the Transfer Agent shall incur any liability to the Planholder for any
action taken or not taken by the Transfer Agent in good faith to administer the
Plan. Share 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.
Shares will be redeemed to make withdrawal payments at the net asset value
per share determined on the redemption date. Checks or AccountLink payments
representing the proceeds of Plan withdrawals will normally be transmitted three
business days prior to the date selected for receipt of the payment, according
to the choice specified in writing by the Planholder. Receipt of payment on the
date selected cannot be guaranteed.
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 after 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 to redeem all, or any part of, the
shares held under the Plan. That notice must be in proper form in accordance
with the requirements of the then-current Prospectus of the Fund. In that case,
the Transfer Agent will redeem the number of shares requested at the net asset
value per share in effect and will mail a check for the proceeds to the
Planholder.
The Planholder may terminate a Plan at any time by writing to the Transfer
Agent. The Fund may also give directions to the Transfer Agent to terminate a
Plan. The Transfer Agent will also terminate a Plan upon its receipt of evidence
satisfactory to it that the Planholder has died or is legally incapacitated.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that have
not been redeemed will be held in uncertificated form in the name of the
Planholder. The account will continue as a dividend-reinvestment, uncertificated
account unless and until proper instructions are received from the Planholder,
his or her executor or guardian, or another authorized person.
To use shares held under the Plan as collateral for a debt, the Planholder
may request issuance of a portion of the shares in certificated form. Upon
written request from the Planholder, the Transfer Agent will determine the
number of shares for which a certificate may be issued without causing the
withdrawal checks to stop. 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. You can obtain a current list showing which funds offer which classes
by calling the Distributor at 1.800.525.7048.
o All of the Oppenheimer funds currently offer Class A, B and 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, and Centennial
America Fund, L.P., which only offer Class A shares. Oppenheimer Main Street
California Municipal Fund currently offers only Class A and Class B shares.
o 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.
o Only certain Oppenheimer Funds currently offer Class Y shares. Class Y shares
of Oppenheimer Real Asset Fund may not be exchanged for shares of any other
Fund.
o Class M Shares of Oppenheimer Convertible Securities Fund may be exchanged
only for Class A shares of other Oppenheimer funds. They may not be acquired
by exchange of shares of any class of any other Oppenheimer funds except
Class A shares of Oppenheimer Money Market Fund or Oppenheimer Cash Reserves
acquired by exchange of Class M shares.
o Class A shares of Oppenheimer Senior Floating Rate Fund are not available by
exchange of shares of Oppenheimer Money Market Fund or Class A shares of
Oppenheimer Cash Reserves. If any Class A shares of another Oppenheimer fund
that are exchanged for Class A shares of Oppenheimer Senior Floating Rate
Fund are subject to the Class A contingent deferred sales charge of the other
Oppenheimer fund at the time of exchange, the holding period for that Class A
contingent deferred sales charge will carry over to the Class A shares of
Oppenheimer Senior Floating Rate Fund acquired in the exchange. The Class A
shares of Oppenheimer Senior Flating Rate Fund acquired in that exchange will
be subject to the Class A Early Withdrawal Charge of Oppenheimer Senior
Floating Rate Fund if they are repurchased before the expiration of the
holding period.
o Class X shares of Limited Term New York Municipal Fund can be exchanged only
for Class B shares of other Oppenheimer funds and no exchanges may be made to
Class X shares.
o Shares of Oppenheimer Capital Preservation Fund may not be exchanged for
shares of Oppenheimer Money Market Fund, Inc., Oppenheimer Cash Reserves or
Oppenheimer Limited-Term Government Fund. Only participants in certain
retirement plans may purchase shares of Oppenheimer Capital Preservation
Fund, and only those participants may exchange shares of other Oppenheimer
funds for shares of Oppenheimer Capital Preservation Fund.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any money market fund offered by the Distributor. Shares of any
money market fund purchased without a sales charge may be exchanged for shares
of Oppenheimer funds offered with a sale charge upon payment of the sales
charge. They may also be used to purchase shares of Oppenheimer funds subject to
an early withdrawal charge or contingent deferred sales charge.
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 30 days prior to that
purchase may subsequently be exchanged for shares of other Oppenheimer funds
without being subject to an initial sales charge or contingent deferred sales
charge. 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. If requested, they
must supply proof of entitlement to this privilege.
Shares of the Fund acquired by reinvestment of dividends or distributions
from any of the other Oppenheimer funds or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor may be
exchanged at net asset value for shares of any of the Oppenheimer funds.
The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund may impose these changes at any time, it will provide
you with notice of those changes whenever it is required to do so by applicable
law. It may be required to provide 60 days notice prior to materially amending
or terminating the exchange privilege. That 60 day notice is not required in
extraordinary circumstances.
|X| How Exchanges Affect Contingent Deferred Sales Charges. 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. Before exchanging
shares, shareholders should take into account how the exchange may affect 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 which class of shares they wish to exchange.
|X| Limits on Multiple Exchange Orders. 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.
|X| Telephone Exchange Requests. When exchanging shares by telephone, a
shareholder must have an existing account in the fund to which the exchange is
to be made. Otherwise, the investors must obtain a Prospectus of that fund
before the exchange request may be submitted. 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.
|X| Processing 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 Fund may refuse the
request. For full or partial exchanges of an account made by telephone, any
special account features such as Asset Builder Plans and Automatic Withdrawal
Plans will be switched to the new account unless the Transfer Agent is
instructed otherwise. When you exchange some or all of your shares from one fund
to another, any special account feature such as an Asset Builder Plan or
Automatic Withdrawal Plan, will be switched to the new fund account unless you
tell the Transfer Agent not to do so.
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.
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks. 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
Dividends and Distributions. The Fund's practice of attempting to pay dividends
on Class A shares at a constant level requires the Manager to monitor the Fund's
portfolio and, if necessary, to select higher-yielding securities when it is
deemed appropriate to seek income at the level needed to meet the target. Those
securities must be within the Fund's investment parameters, however. The Fund
expects to pay dividends at a targeted level from its net investment income and
other distributable income without any impact on the net asset value per share.
The Fund has no fixed dividend rate for Class B, Class C and Class Y, and
the rate can change for Class A shares. There can be no assurance as to the
payment of any dividends or the realization of any capital gains. The dividends
and distributions paid by a class of shares will 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. Dividends are
calculated in the same manner, at the same time, and on the same day for each
class of shares. However, dividends on Class B and Class C shares are expected
to be lower than dividends on Class A and Class Y shares. That is because of the
effect of the asset-based sales charge on Class B and Class C shares. Those
dividends will also differ in amount as a consequence of any difference in the
net asset values of the different classes of shares.
Dividends, distributions and 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.
Reinvestment will be made as promptly as possible after the return of such
checks to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds. Unclaimed accounts may be subject to state escheatment
laws, and the Fund and the Transfer Agent will not be liable to shareholders or
their representatives for compliance with those laws in good faith.
Tax Status of the Fund's Dividends and Distributions. The Federal tax treatment
of the Fund's dividends and capital gains distributions is briefly highlighted
in the Prospectus.
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. The amount of dividends paid by the Fund that may qualify for the
deduction is limited to the aggregate amount of qualifying dividends that the
Fund derives from portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not be eligible for the
deduction on dividends paid on Fund shares held for 45 days or less. To the
extent the Fund's dividends are derived from gross income from option premiums,
interest income or short-term gains from the sale of securities or dividends
from foreign corporations, those dividends will not qualify for the deduction.
Under the Internal Revenue Code, by December 31 each year, the Fund must
distribute 98% of its taxable investment income earned from January 1 through
December 31 of that year and 98% of its capital gains realized in the period
from November 1 of the prior year through October 31 of the current year. If it
does not, the Fund must pay an excise tax on the amounts not distributed. It is
presently anticipated that the Fund will meet those requirements. However, the
Board of Directors and the Manager might determine in a particular year that it
would be in the best interests of shareholders for the Fund not to make such
distributions at the required levels and to pay the excise tax on the
undistributed amounts. That would reduce the amount of income or capital gains
available for distribution to shareholders.
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). If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on amounts
paid by it as dividends and distributions. The Fund qualified as a regulated
investment company in its last fiscal year. The Internal Revenue Code contains a
number of complex tests relating to qualification which the Fund might not meet
in any particular year. If it did not so qualify, the Fund would be treated for
tax purposes as an ordinary corporation and receive no tax deduction for
payments made to shareholders.
If prior distributions made by the Fund must be re-characterized as a
non-taxable return of capital at the end of the fiscal year as a result of the
effect of the Fund's investment policies, they will be identified as such in
notices sent to shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the same
class of any of the other Oppenheimer funds listed above. Reinvestment will be
made without sales charge at the net asset value per share in effect at the
close of business on the payable date of the dividend or distribution. To elect
this option, the shareholder must notify the Transfer Agent in writing and must
have an existing account in the fund selected for reinvestment. Otherwise the
shareholder first must obtain a prospectus for that fund and an application from
the Distributor to establish an account. Dividends and/or distributions from
shares of certain other Oppenheimer funds (other than Oppenheimer Cash Reserves)
may be invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Distributor. The Fund's shares are sold through dealers, brokers and other
financial institutions that have a sales agreement with OppenheimerFunds
Distributor, Inc., a subsidiary of the Manager that acts as the Fund's
Distributor. The Distributor also distributes shares of the other Oppenheimer
funds and is sub-distributor for funds managed by a subsidiary of the Manager.
The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is a
division of the Manager. It is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for paying
dividends and distributions to shareholders. It also handles shareholder
servicing and administrative functions. It acts on an "at-cost" basis. It also
acts as shareholder servicing agent for the other Oppenheimer funds.
Shareholders should direct inquiries about their accounts to the Transfer Agent
at the address and toll-free numbers shown on the back cover.
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. It will be the practice of the Fund to deal with the custodian bank in
a manner uninfluenced by any banking relationship the custodian bank may have
with the Manager and its affiliates. The Fund's cash balances with the custodian
in excess of $100,000 are not protected by Federal deposit insurance. Those
uninsured balances at times may be substantial.
Independent Auditors. Deloitte & Touche LLP are the independent auditors of the
Fund. They 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.
A-48
INDEPENDENT AUDITORS' REPORT
================================================================================
To the Board of Directors and Shareholders of Oppenheimer Total Return Fund,
Inc.:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Total Return Fund, Inc. as of
December 31, 1999, the related statement of operations for the year then ended,
the statements of changes in net assets for the years ended December 31, 1999
and 1998 and the financial highlights for the period January 1, 1995, to
December 31, 1999. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, 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, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Oppenheimer Total
Return Fund, Inc. as of December 31, 1999, 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.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Denver, Colorado
January 24, 2000
35 OPPENHEIMER TOTAL RETURN FUND, INC.
STATEMENT OF INVESTMENTS December 31, 1999
Market Value
Shares See Note 1
=================================================================================================================
Common Stocks--77.8%
- -----------------------------------------------------------------------------------------------------------------
Basic Materials--1.5%
- -----------------------------------------------------------------------------------------------------------------
Chemicals--0.2%
International Flavors & Fragrances,
Inc. 260,000 $ 9,815,000
- -----------------------------------------------------------------------------------------------------------------
Paper--1.3%
International Paper
Co. 460,412
25,984,502
- -----------------------------------------------------------------------------------------------------------------
Pactiv
Corp.(1)
300,000 3,187,500
- -----------------------------------------------------------------------------------------------------------------
Smurfit-Stone Container
Corp.(1) 300,000
7,350,000
- -----------------------------------------------------------------------------------------------------------------
Sonoco Products
Co.
330,000 7,507,500
- -----------------------------------------------------------------------------------------------------------------
Weyerhaeuser
Co.
200,000 14,362,500
- ------------
58,392,002
- -----------------------------------------------------------------------------------------------------------------
Capital Goods--3.7%
- -----------------------------------------------------------------------------------------------------------------
Aerospace/Defense--0.1%
Goodrich (B.F.)
Co.
200,000 5,500,000
- -----------------------------------------------------------------------------------------------------------------
Raytheon Co., Cl.
A
12,754 316,459
- ------------
5,816,459
- -----------------------------------------------------------------------------------------------------------------
Industrial Services--0.3%
Republic Services,
Inc.(1) 1,000,000
14,375,000
- -----------------------------------------------------------------------------------------------------------------
Manufacturing--3.3%
American Standard Cos.,
Inc.(1) 285,300
13,088,137
- -----------------------------------------------------------------------------------------------------------------
Honeywell International,
Inc. 337,500
19,469,531
- -----------------------------------------------------------------------------------------------------------------
Tenneco Automotive
Inc.(1)
60,000 558,750
- -----------------------------------------------------------------------------------------------------------------
Tyco International
Ltd. 2,956,576
114,936,892
- ------------
148,053,310
- -----------------------------------------------------------------------------------------------------------------
Communication Services--4.3%
- -----------------------------------------------------------------------------------------------------------------
Telecommunications: Long Distance--1.8%
AT&T
Corp.
246,554 12,512,615
- -----------------------------------------------------------------------------------------------------------------
MCI WorldCom,
Inc.(1)
373,650 19,826,803
- -----------------------------------------------------------------------------------------------------------------
Nortel Networks
Corp.
478,200 48,298,200
- ------------
80,637,618
- -----------------------------------------------------------------------------------------------------------------
Telephone Utilities--2.5%
Bell Atlantic
Corp.
758,400 46,689,000
- -----------------------------------------------------------------------------------------------------------------
BellSouth
Corp.
360,000 16,852,500
- -----------------------------------------------------------------------------------------------------------------
GTE
Corp.
400,000 28,225,000
- -----------------------------------------------------------------------------------------------------------------
SBC Communications,
Inc. 400,000
19,500,000
- ------------
111,266,500
12 OPPENHEIMER TOTAL RETURN FUND, INC.
Market Value
Shares See Note 1
- -----------------------------------------------------------------------------------------------------------------
Consumer Cyclicals--17.3%
- -----------------------------------------------------------------------------------------------------------------
Autos & Housing--0.3%
Delphi Automotive Systems
Corp. 293,500 $
4,622,625
- -----------------------------------------------------------------------------------------------------------------
Lear
Corp.(1)
271,800 8,697,600
- ------------
13,320,225
- -----------------------------------------------------------------------------------------------------------------
Consumer Services--1.3%
Dun & Bradstreet
Corp.
600,000 17,700,000
- -----------------------------------------------------------------------------------------------------------------
Young & Rubicam,
Inc.
557,000 39,407,750
- ------------
57,107,750
- -----------------------------------------------------------------------------------------------------------------
Leisure & Entertainment--0.6%
Carnival
Corp.
400,000 19,125,000
- -----------------------------------------------------------------------------------------------------------------
Hasbro,
Inc.
300,000 5,718,750
- ------------
24,843,750
- -----------------------------------------------------------------------------------------------------------------
Media--0.0%
R.H. Donnelley
Corp.(1)
100,000 1,887,500
- -----------------------------------------------------------------------------------------------------------------
Retail: General--4.3%
Kohl's
Corp.(1)
820,000 59,193,750
- -----------------------------------------------------------------------------------------------------------------
Wal-Mart Stores,
Inc.
1,900,000 131,337,500
- ------------
190,531,250
- -----------------------------------------------------------------------------------------------------------------
Retail: Specialty--10.8%
Abercrombie & Fitch Co., Cl.
A(1) 720,024 19,215,640
- -----------------------------------------------------------------------------------------------------------------
AutoNation,
Inc.(1)
1,900,000 17,575,000
- -----------------------------------------------------------------------------------------------------------------
AutoZone,
Inc.(1)
500,000 16,156,250
- -----------------------------------------------------------------------------------------------------------------
Best Buy Co.,
Inc.(1)
1,120,000 56,210,000
- -----------------------------------------------------------------------------------------------------------------
Circuit City Stores-Circuit City
Group 600,000 27,037,500
- -----------------------------------------------------------------------------------------------------------------
Home Depot,
Inc.
3,341,691 229,114,689
- -----------------------------------------------------------------------------------------------------------------
Intimate Brands, Inc., Cl.
A 100,000
4,312,500
- -----------------------------------------------------------------------------------------------------------------
Linens 'N Things,
Inc.(1)
555,800 16,465,575
- -----------------------------------------------------------------------------------------------------------------
OfficeMax,
Inc.(1)
1,900,000 10,450,000
- -----------------------------------------------------------------------------------------------------------------
Sherwin-Williams
Co.
302,200 6,346,200
- -----------------------------------------------------------------------------------------------------------------
Tandy
Corp.
1,515,000 74,519,062
- ------------
477,402,416
- -----------------------------------------------------------------------------------------------------------------
Consumer Staples--4.3%
- -----------------------------------------------------------------------------------------------------------------
Beverages--0.4%
Anheuser-Busch Cos.,
Inc. 250,000
17,718,750
13 OPPENHEIMER TOTAL RETURN FUND, INC.
STATEMENT OF INVESTMENTS Continued
Market Value
Shares See Note 1
- -----------------------------------------------------------------------------------------------------------------
Broadcasting--0.5%
Fox Entertainment Group, Inc., A
Shares(1) 200,000 $ 4,987,500
- -----------------------------------------------------------------------------------------------------------------
Infinity Broadcasting Corp., Cl.
A(1) 500,100 18,097,369
- ------------
23,084,869
- -----------------------------------------------------------------------------------------------------------------
Entertainment--1.1%
Brinker International,
Inc.(1) 500,000
12,000,000
- -----------------------------------------------------------------------------------------------------------------
Royal Caribbean Cruises
Ltd. 700,000
34,518,750
- ------------
46,518,750
- -----------------------------------------------------------------------------------------------------------------
Food--0.5%
General Mills,
Inc.
200,000 7,150,000
- -----------------------------------------------------------------------------------------------------------------
Heinz (H.J.)
Co.
200,000 7,962,500
- -----------------------------------------------------------------------------------------------------------------
Nabisco Group Holdings
Corp. 700,000
7,437,500
- ------------
22,550,000
- -----------------------------------------------------------------------------------------------------------------
Food & Drug Retailers--0.9%
CVS
Corp.
943,000 37,661,062
- -----------------------------------------------------------------------------------------------------------------
Kroger
Co.(1)
100,000 1,887,500
- ------------
39,548,562
- -----------------------------------------------------------------------------------------------------------------
Household Goods--0.8%
Dial Corp.
(The)
950,000 23,096,875
- -----------------------------------------------------------------------------------------------------------------
Newell Rubbermaid,
Inc. 400,000
11,600,000
- ------------
34,696,875
- -----------------------------------------------------------------------------------------------------------------
Tobacco--0.1%
Philip Morris Cos.,
Inc. 200,000
4,637,500
- -----------------------------------------------------------------------------------------------------------------
Energy--3.3%
- -----------------------------------------------------------------------------------------------------------------
Energy Services--0.7%
Coastal
Corp.
400,000 14,175,000
- -----------------------------------------------------------------------------------------------------------------
Schlumberger
Ltd.
253,600 14,265,000
- -----------------------------------------------------------------------------------------------------------------
Transocean Sedco Forex,
Inc. 49,096
1,653,921
- ------------
30,093,921
- -----------------------------------------------------------------------------------------------------------------
Oil: Domestic--2.5%
Atlantic Richfield
Co. 150,000
12,975,000
- -----------------------------------------------------------------------------------------------------------------
Conoco, Inc., Cl.
B
624,600 15,536,925
- -----------------------------------------------------------------------------------------------------------------
Exxon Mobil
Corp.
564,030 45,439,667
- -----------------------------------------------------------------------------------------------------------------
Tosco
Corp.
400,000 10,875,000
- -----------------------------------------------------------------------------------------------------------------
Unocal
Corp.
300,000 10,068,750
- -----------------------------------------------------------------------------------------------------------------
USX-Marathon
Group
600,000 14,812,500
- ------------
109,707,842
14 OPPENHEIMER TOTAL RETURN FUND, INC.
Market Value
Shares See Note 1
- -----------------------------------------------------------------------------------------------------------------
Oil: International--0.1%
Royal Dutch Petroleum Co., NY
Shares 100,000 $ 6,043,750
- -----------------------------------------------------------------------------------------------------------------
Financial--9.8%
- -----------------------------------------------------------------------------------------------------------------
Banks--4.0%
Bank of America
Corp.
582,900 29,254,294
- -----------------------------------------------------------------------------------------------------------------
Bank One
Corp.
330,000 10,580,625
- -----------------------------------------------------------------------------------------------------------------
Chase Manhattan
Corp.
300,000 23,306,250
- -----------------------------------------------------------------------------------------------------------------
East West Bancorp,
Inc.(2) 1,000,000
11,437,500
- -----------------------------------------------------------------------------------------------------------------
Fifth Third
Bancorp
310,000 22,746,250
- -----------------------------------------------------------------------------------------------------------------
First Union
Corp.
400,000 13,125,000
- -----------------------------------------------------------------------------------------------------------------
Firstar
Corp.
625,000 13,203,125
- -----------------------------------------------------------------------------------------------------------------
FleetBoston Financial
Corp. 200,600
6,983,387
- -----------------------------------------------------------------------------------------------------------------
KeyCorp
400,000 8,850,000
- -----------------------------------------------------------------------------------------------------------------
National City
Corp.
620,000 14,686,250
- -----------------------------------------------------------------------------------------------------------------
PNC Bank
Corp.
270,000 12,015,000
- -----------------------------------------------------------------------------------------------------------------
Summit
Bancorp
360,000 11,025,000
- ------------
177,212,681
- -----------------------------------------------------------------------------------------------------------------
Diversified Financial--3.9%
American Express
Co.
50,000 8,312,500
- -----------------------------------------------------------------------------------------------------------------
Anthracite Capital,
Inc. 400,000
2,550,000
- -----------------------------------------------------------------------------------------------------------------
Citigroup,
Inc.
1,250,700 69,492,019
- -----------------------------------------------------------------------------------------------------------------
Freddie
Mac
200,000 9,412,500
- -----------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc.
(The) 108,200
10,191,087
- -----------------------------------------------------------------------------------------------------------------
Household International,
Inc. 759,990
28,309,628
- -----------------------------------------------------------------------------------------------------------------
Imperial Credit Commercial Mortgage Investment
Corp. 500,000 5,687,500
- -----------------------------------------------------------------------------------------------------------------
Schwab (Charles)
Corp.
981,400 37,661,225
- ------------
171,616,459
- -----------------------------------------------------------------------------------------------------------------
Insurance--1.6%
Aetna,
Inc.
225,000 12,557,813
- -----------------------------------------------------------------------------------------------------------------
AFLAC,
Inc.
275,000 12,976,563
- -----------------------------------------------------------------------------------------------------------------
American General
Corp.
300,000 22,762,500
- -----------------------------------------------------------------------------------------------------------------
Enhance Financial Services Group,
Inc. 600,000 9,750,000
- -----------------------------------------------------------------------------------------------------------------
St. Paul Cos.,
Inc.
400,000 13,475,000
- ------------
71,521,876
- -----------------------------------------------------------------------------------------------------------------
Savings & Loans--0.3%
Local Financial
Corp.(1)
400,000 4,150,000
- -----------------------------------------------------------------------------------------------------------------
Washington Mutual,
Inc.
300,000 7,800,000
- ------------
11,950,000
15 OPPENHEIMER TOTAL RETURN FUND, INC.
STATEMENT OF INVESTMENTS Continued
Market Value
Shares See Note 1
- -----------------------------------------------------------------------------------------------------------------
Healthcare--5.9%
- -----------------------------------------------------------------------------------------------------------------
Healthcare/Drugs--4.9%
American Home Products
Corp. 300,000 $
11,831,250
- -----------------------------------------------------------------------------------------------------------------
Amgen,
Inc.(1)
1,900,000 114,118,750
- -----------------------------------------------------------------------------------------------------------------
Biogen,
Inc.(1)
827,800 69,949,100
- -----------------------------------------------------------------------------------------------------------------
Bristol-Myers Squibb
Co. 300,000
19,256,250
- ------------
215,155,350
- -----------------------------------------------------------------------------------------------------------------
Healthcare/Supplies & Services--1.0%
Bausch & Lomb,
Inc.
150,000 10,265,625
- -----------------------------------------------------------------------------------------------------------------
Cardinal Health,
Inc.
495,300 23,712,488
- -----------------------------------------------------------------------------------------------------------------
HEALTHSOUTH
Corp.(1)
430,000 2,311,250
- -----------------------------------------------------------------------------------------------------------------
Medtronic,
Inc.
229,000 8,344,188
- ------------
44,633,551
- -----------------------------------------------------------------------------------------------------------------
Technology--24.0%
- -----------------------------------------------------------------------------------------------------------------
Computer Hardware--4.7%
Dell Computer
Corp.(1)
790,000 40,290,000
- -----------------------------------------------------------------------------------------------------------------
EMC
Corp.(1)
833,300 91,038,025
- -----------------------------------------------------------------------------------------------------------------
Gateway,
Inc.(1)
400,700 28,875,444
- -----------------------------------------------------------------------------------------------------------------
Lexmark International Group, Inc., Cl.
A(1) 552,500 50,001,250
- ------------
210,204,719
- -----------------------------------------------------------------------------------------------------------------
Computer Software--5.2%
Compuware
Corp.(1)
1,335,000 49,728,750
- -----------------------------------------------------------------------------------------------------------------
Microsoft
Corp.(1)
1,545,861 180,479,272
- ------------
230,208,022
- -----------------------------------------------------------------------------------------------------------------
Communications Equipment--2.6%
Cisco Systems,
Inc.(1)
1,094,000 117,194,750
- -----------------------------------------------------------------------------------------------------------------
Electronics--11.2%
Intel
Corp.
290,000 23,870,625
- -----------------------------------------------------------------------------------------------------------------
JDS Uniphase
Corp.(1)
2,359,416 380,603,294
- -----------------------------------------------------------------------------------------------------------------
Motorola,
Inc.
225,000 33,131,250
- -----------------------------------------------------------------------------------------------------------------
Solectron
Corp.(1)
350,000 33,293,750
- -----------------------------------------------------------------------------------------------------------------
Waters
Corp.(1)
500,000 26,500,000
- ------------
497,398,919
- -----------------------------------------------------------------------------------------------------------------
Photography--0.3%
Eastman Kodak
Co.
200,000 13,250,000
16 OPPENHEIMER TOTAL RETURN FUND, INC.
Market Value
Shares See Note 1
- -----------------------------------------------------------------------------------------------------------------
Utilities--3.7%
- -----------------------------------------------------------------------------------------------------------------
Electric Utilities--2.2%
AES Corp.
(The)(1)
561,000 $ 41,934,750
- -----------------------------------------------------------------------------------------------------------------
Allegheny Energy,
Inc.
210,000 5,656,875
- -----------------------------------------------------------------------------------------------------------------
Carolina Power & Light
Co. 110,000
3,348,125
- -----------------------------------------------------------------------------------------------------------------
DQE,
Inc.
144,100 4,989,462
- -----------------------------------------------------------------------------------------------------------------
Illinova
Corp.
300,000 10,425,000
- -----------------------------------------------------------------------------------------------------------------
New Century Energies,
Inc. 200,000
6,075,000
- -----------------------------------------------------------------------------------------------------------------
Southern
Co.
298,500 7,014,750
- -----------------------------------------------------------------------------------------------------------------
Texas Utilities
Co.
200,000 7,112,500
- -----------------------------------------------------------------------------------------------------------------
Unicom
Corp.
300,000 10,050,000
- --------------
96,606,462
- -----------------------------------------------------------------------------------------------------------------
Gas Utilities--1.5%
Enron
Corp.
1,500,000 66,562,500
- --------------
Total Common Stocks (Cost
$2,041,966,331)
3,451,564,888
=================================================================================================================
Preferred Stocks--0.3%
TCI Pacific Communications, Inc., 5% Cum. Cv. Sr., Cl. A (Cost
$4,851,250) 50,000 15,414,300
=================================================================================================================
Other Securities--2.1%
Coastal Corp., 6.625% Cv. Preferred Redeemable Increased
Dividend Equity
Securities
300,000 6,993,750
- -----------------------------------------------------------------------------------------------------------------
Dollar General Corp., 8.50% Cv. Structured Yield Product
Exchangeable for
Stock
271,100 9,793,487
- -----------------------------------------------------------------------------------------------------------------
MediaOne Group, Inc., 6.25% Cv. Premium Income Exchangeable Securities
for Airtouch Communications, Inc. Common
Stock 258,000 27,864,000
- -----------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 6.25% Structured Yield Product
Exchangeable for Stock of IMC Global,
Inc. 90,900 1,624,838
- -----------------------------------------------------------------------------------------------------------------
Newell Financial Trust I, 5.25% Cum. Cv. Quarterly Income
Preferred Securities,
Non-Vtg.(2) 163,000
6,214,375
- -----------------------------------------------------------------------------------------------------------------
Premier Parks, Inc., 7.50% Cum. Cv. Premium Income
Equity Securities,
Non-Vtg. 232,000
12,528,000
- -----------------------------------------------------------------------------------------------------------------
Reliant Energy, Inc., 7% Automatic Common Exchange Securities
for Time Warner, Inc. Common
Stock 80,000 9,640,000
- -----------------------------------------------------------------------------------------------------------------
Sovereign Capital Trust II, 7.50% Cv. Preferred Income Equity Redeemable
Stock(1) 87,900 4,285,125
- -----------------------------------------------------------------------------------------------------------------
St. George Bank, ADR 9% Cv. Structured Yield Product
Exchangeable for Common Stock of St. George
Bank(2) 90,000 4,820,625
- -----------------------------------------------------------------------------------------------------------------
Texas Utilities Co., 9.25% Cv. Preferred Redeemable Increased
Dividend Equity Securities,
Non-Vtg. 117,600
5,130,300
- -----------------------------------------------------------------------------------------------------------------
Union Pacific Capital Trust, 6.25% Cum. Term Income
Deferrable Equity Securities,
Non-Vtg. 87,600 3,646,350
- --------------
Total Other Securities (Cost
$80,110,206) 92,540,850
17 OPPENHEIMER TOTAL RETURN FUND, INC.
STATEMENT OF INVESTMENTS Continued
Face Market Value
Amount(3) See Note 1
=================================================================================================================
U.S. Government Obligations--3.5%
U.S. Treasury Bonds:
6.625%,
2/15/27 $
25,675,000 $ 25,434,297
STRIPS, 6.17%,
2/15/20(4)
100,000,000 25,646,800
STRIPS, 6.51%,
8/15/19(4)
100,000,000 26,478,100
STRIPS, 6.92%,
11/15/18(4)
54,000,000 15,044,778
- -----------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
6.25%,
2/15/07
31,200,000 30,712,500
6.625%,
3/31/02
30,050,000 30,265,999
- ------------
Total U.S. Government Obligations (Cost
$158,147,522) 153,582,474
=================================================================================================================
Non-Convertible Corporate Bonds and Notes--0.0%
Dresdner Finance BV, 5.50% Gtd. Nts., 4/30/04 DEM (Cost
$279,377) 417,000 425,928
=================================================================================================================
Convertible Corporate Bonds and Notes--1.4%
EMC Corp., 3.25% Cv. Sub. Nts.,
3/15/02(2) 4,500,000 43,458,750
- -----------------------------------------------------------------------------------------------------------------
Level One Communications, Inc., 4% Cv. Sub. Nts.,
9/1/04(2) 3,500,000 9,480,625
- -----------------------------------------------------------------------------------------------------------------
Offshore Logistics, Inc., 6% Cv. Sub. Nts.,
12/15/03(2) 5,000,000 4,118,750
- -----------------------------------------------------------------------------------------------------------------
Sunrise Assisted Living, Inc., 5.50% Cv. Nts.,
6/15/02(2) 3,409,000 2,684,588
- ------------
Total Convertible Corporate Bonds and Notes (Cost
$16,490,250) 59,742,713
=================================================================================================================
Short-Term Notes--14.3%
CIT Group Holdings, Inc., 6.27%,
1/26/00(5) 50,000,000 49,782,292
- -----------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank:
5.60%,
1/7/00(5)
25,000,000 24,976,667
5.78%,
1/21/00(5)
25,000,000 24,919,722
- -----------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
5.60%,
1/13/00(5)
33,110,000 33,048,084
5.61%,
1/11/00(5)
44,728,000 44,658,299
5.65%,
1/10/00(5)
50,000,000 49,929,375
5.76%,
1/28/00(5)
40,000,000 39,827,200
- -----------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
5.61%,
1/18/00(5)
50,000,000 49,867,542
5.64%,
1/16/00(5)
50,000,000 49,960,833
- -----------------------------------------------------------------------------------------------------------------
General Electric Capital Services, 5.87%,
1/14/00(5) 50,000,000 49,894,014
- -----------------------------------------------------------------------------------------------------------------
Hertz Corp., 5.93%,
1/10/00(5) 50,000,000
49,925,875
- -----------------------------------------------------------------------------------------------------------------
IBM Credit Corp., 6.02%,
2/9/00(5) 50,000,000
49,673,916
- -----------------------------------------------------------------------------------------------------------------
Koch Industries, Inc.:
3.50%,
1/5/00(5)
20,000,000 19,991,111
4.50%,
1/3/00(5)
50,000,000 49,987,500
- -----------------------------------------------------------------------------------------------------------------
Wells Fargo Co., 5.94%,
1/12/00(5) 50,000,000
49,909,250
- ------------
Total Short-Term Notes (Cost
$636,351,680) 636,351,680
18 OPPENHEIMER TOTAL RETURN FUND, INC.
Face Market Value
Amount(3) See Note 1
=================================================================================================================
Repurchase Agreements--0.2%
Repurchase agreement with Banc One Capital Markets, Inc., 2.75%, dated
12/31/99, to be repurchased at $11,402,613 on 1/3/00, collateralized
by U.S. Treasury Bonds, 5.25%-12%, 2/15/01-11/15/28, with a value
of $4,474,383 and U.S. Treasury Nts., 5%-7.50%, 12/31/00-2/15/07,
with a value of $7,160,234 (Cost
$11,400,000) $11,400,000 $ 11,400,000
- -----------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost
$2,949,596,616) 99.6% 4,421,022,833
- -----------------------------------------------------------------------------------------------------------------
Other Assets Net of
Liabilities 0.4
16,744,002
- ----------------------------
Net
Assets
100.0% $4,437,766,835
============================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income-producing security.
2. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Directors. These securities amount to $82,215,213 or 1.85% of the Fund's net
assets as of December 31, 1999.
3. Face amount is reported in U.S. Dollars, except for those denoted in the
following currency: DEM German Mark 4. For zero coupon bonds, the interest rate
shown is the effective yield on the date of purchase.
5. Short-term notes are generally traded on a discount basis; the interest rate
is the discount rate received by the Fund at the time of purchase.
See accompanying Notes to Financial Statements.
19 OPPENHEIMER TOTAL RETURN FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES December 31, 1999
========================================================================================================
Assets
Investments, at value (cost $2,949,596,616)--see accompanying
statement $4,421,022,833
- --------------------------------------------------------------------------------------------------------
Cash
1,154,274
- --------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments
sold
15,263,576
Interest and
dividends
4,893,650
Shares of capital stock
sold 2,537,231
Other
72,116
- --------------
Total
assets
4,444,943,680
========================================================================================================
Liabilities
Payables and other liabilities:
Shares of capital stock
redeemed 3,897,881
Distribution and service plan
fees 2,140,769
Transfer and shareholder servicing agent
fees 514,069
Shareholder
reports
444,246
Directors'
compensation
7,053
Other
172,827
- --------------
Total
liabilities
7,176,845
========================================================================================================
Net
Assets
$4,437,766,835
==============
========================================================================================================
Composition of Net Assets
Par value of shares of capital
stock $ 33,599,079
- --------------------------------------------------------------------------------------------------------
Additional paid-in
capital
2,890,533,792
- --------------------------------------------------------------------------------------------------------
Undistributed net investment
income 6,412,023
- --------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency
transactions 35,796,031
- --------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign
currencies 1,471,425,910
- --------------
Net
assets
$4,437,766,835
==============
========================================================================================================
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$3,157,204,313 and 238,298,222 shares of capital stock outstanding) $13.25
Maximum offering price per share (net asset value plus sales charge of 5.75% of
offering
price)
$14.06
- --------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of
$1,152,234,676 and 87,955,473 shares of capital stock
outstanding) $13.10
- --------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $75,885,558 and
5,780,856 shares of capital stock outstanding) $13.13
- --------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $52,442,288 and 3,956,243 shares of capital stock outstanding) $13.26
See accompanying Notes to Financial Statements.
20 OPPENHEIMER TOTAL RETURN FUND, INC.
STATEMENT OF OPERATIONS For the Year Ended December 31, 1999
========================================================================================================
Investment Income
Interest
$ 42,046,242
- --------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of
$25,688) 38,890,786
- ------------
Total
income
80,937,028
========================================================================================================
Expenses
Management
fees
21,073,662
- --------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class
A
5,331,807
Class
B
11,962,493
Class
C
661,360
- --------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class
A
3,235,481
Class
B
1,411,254
Class
C
77,447
Class
Y
53,917
- --------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class
A
169,062
Class
B
20,025
Class
C
4,932
Class
Y
3,673
- --------------------------------------------------------------------------------------------------------
Custodian fees and
expenses
81,921
- --------------------------------------------------------------------------------------------------------
Directors'
compensation
80,666
- --------------------------------------------------------------------------------------------------------
Other
1,239,971
- ------------
Total
expenses
45,407,671
Less expenses paid
indirectly
(23,971)
- ------------
Net
expenses
45,383,700
========================================================================================================
Net Investment
Income
35,553,328
========================================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments (including premiums on options
exercised) 346,131,891
Closing and expiration of option contracts
written 1,736,517
Foreign currency
transactions
(2,806)
- ------------
Net realized
gain
347,865,602
- --------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments
302,086,494
Translation of assets and liabilities denominated in foreign
currencies (41,816)
- ------------
Net
change
302,044,678
- ------------
Net realized and unrealized
gain 649,910,280
========================================================================================================
Net Increase in Net Assets Resulting from
Operations $685,463,608
============
See accompanying Notes to Financial Statements.
21 OPPENHEIMER TOTAL RETURN FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended December 31,
1999 1998
=======================================================================================================
Operations
Net investment income $
35,553,328 $ 37,480,042
- -------------------------------------------------------------------------------------------------------
Net realized gain
347,865,602 243,431,853
- -------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation
302,044,678 397,047,043
- ---------------------------------
Net increase in net assets resulting from operations
685,463,608 677,958,938
=======================================================================================================
Dividends and/or Distributions to Shareholders Dividends from net investment
income:
Class A
(25,530,440) (30,566,836)
Class B
(1,169,315) (5,719,175)
Class C
(87,933) (263,905)
Class Y
(526,019) (455,751)
- -------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A
(223,029,885) (172,164,137)
Class B
(82,260,938) (80,057,166)
Class C
(5,385,579) (3,815,686)
Class Y
(3,747,230) (2,532,986)
=======================================================================================================
Capital Stock Transactions
Net increase (decrease) in net assets resulting from capital stock transactions:
Class A
329,538,222 96,918,666
Class B
(150,785,101) 100,622,566
Class C
12,461,790 16,796,414
Class Y
9,804,068 8,780,891
=======================================================================================================
Net Assets
Total increase
544,745,248 605,501,833
- -------------------------------------------------------------------------------------------------------
Beginning of period
3,893,021,587 3,287,519,754
- ---------------------------------
End of period (including undistributed net investment
income of $6,412,023 and $846,860, respectively)
$4,437,766,835 $3,893,021,587
=================================
See accompanying Notes to Financial Statements.
22 OPPENHEIMER TOTAL RETURN FUND, INC.
FINANCIAL HIGHLIGHTS
Class A Year Ended December 31, 1999 1998
1997 1996 1995
=============================================================================================================
Per Share Operating Data
Net asset value, beginning of period $12.23 $11.00
$9.77 $9.35 $7.80
- -------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .14 .16
.16 .20 .23
Net realized and unrealized gain 2.01 2.09
2.49 1.63 2.09
- ----------------------------------------------------------
Total income from investment operations 2.15 2.25
2.65 1.83 2.32
- -------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.12) (.15)
(.14) (.20) (.22)
Distributions from net realized gain (1.01) (.87)
(1.28) (1.21) (.55)
- ----------------------------------------------------------
Total dividends and/or distributions
to shareholders (1.13) (1.02)
(1.42) (1.41) (.77)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.25 $12.23
$11.00 $9.77 $9.35
==========================================================
=============================================================================================================
Total Return, at Net Asset Value(1) 18.34% 21.16%
27.39% 19.73% 30.12%
=============================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $3,157 $2,594
$2,238 $1,827 $1,551
- -------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $2,757 $2,388
$2,045 $1,685 $1,394
- -------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 1.12% 1.31%
1.43% 1.96% 2.53%
Expenses 0.87% 0.86%(3)
0.89%(3) 0.90%(3) 0.92%(3)
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 34% 38%
92% 118% 85%
1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of operations), 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 less than one full year. 2.
Annualized for periods of less than one full year.
3. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly. 4. 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 December 31, 1999, were $1,189,628,921 and
$1,455,549,024, respectively.
See accompanying Notes to Financial Statements.
23 OPPENHEIMER TOTAL RETURN FUND, INC.
FINANCIAL HIGHLIGHTS Continued
Class B Year Ended December 31, 1999
1998 1997 1996 1995
============================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $12.10
$10.89 $9.70 $9.29 $7.76
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .04
.06 .07 .12 .15
Net realized and unrealized gain 1.98
2.08 2.45 1.62 2.08
- -----------------------------------------------------------------------
Total income from investment operations 2.02
2.14 2.52 1.74 2.23
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.01)
(.06) (.05) (.12) (.15)
Distributions from net realized gain (1.01)
(.87) (1.28) (1.21) (.55)
- -----------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (1.02)
(.93) (1.33) (1.33) (.70)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.10 $12.10
$10.89 $9.70 $9.29
=======================================================================
============================================================================================================================
Total Return, at Net Asset Value(1) 17.37%
20.25% 26.17% 18.78% 29.03%
============================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $1,152
$1,202 $987 $755 $590
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $1,196
$1,080 $878 $672 $511
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 0.32%
0.50% 0.62% 1.15% 1.70%
Expenses 1.67%
1.67%(3) 1.71%(3) 1.71%(3) 1.75%(3)
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 34%
38% 92% 118% 85%
1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of operations), 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 less than one full year. 2.
Annualized for periods of less than one full year.
3. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly. 4. 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 December 31, 1999, were $1,189,628,921 and
$1,455,549,024, respectively.
See accompanying Notes to Financial Statements.
24 OPPENHEIMER TOTAL RETURN FUND, INC.
Class C Year Ended December 31, 1999
1998 1997 1996 1995(5)
============================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $12.13
$10.92 $9.72 $9.33 $9.19
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .04
.06 .07 .16 .07
Net realized and unrealized gain 1.98
2.08 2.46 1.57 .73
- -----------------------------------------------------------------------
Total income from investment operations 2.02
2.14 2.53 1.73 .80
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.02)
(.06) (.05) (.13) (.11)
Distributions from net realized gain (1.00)
(.87) (1.28) (1.21) (.55)
- -----------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (1.02)
(.93) (1.33) (1.34) (.66)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.13 $12.13
$10.92 $9.72 $9.33
=======================================================================
============================================================================================================================
Total Return, at Net Asset Value(1) 17.37%
20.20% 26.23% 18.67% 8.82%
============================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $76
$58 $37 $18 $2
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $66
$47 $27 $8 $1
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 0.31%
0.50% 0.63% 1.05% 1.42%
Expenses 1.68%
1.67%(3) 1.72%(3) 1.76%(3) 1.77%(3)
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 34%
38% 92% 118% 84%
1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of operations), 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 less than one full year. 2.
Annualized for periods of less than one full year.
3. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly. 4. 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 December 31, 1999, were $1,189,628,921 and
$1,455,549,024, respectively. 5. For the period from August 29, 1995 (inception
of offering) to December 31, 1995.
See accompanying Notes to Financial Statements.
25 OPPENHEIMER TOTAL RETURN FUND, INC.
FINANCIAL HIGHLIGHTS Continued
Class Y Year Ended December 31, 1999
1998 1997 1996 1995
============================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $12.24
$11.00 $9.77 $9.35 $7.80
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .17
.17 .18 .23 .20
Net realized and unrealized gain 2.00
2.10 2.48 1.61 2.13
- -----------------------------------------------------------------------
Total income from investment operations 2.17
2.27 2.66 1.84 2.33
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.14)
(.16) (.15) (.21) (.23)
Distributions from net realized gain (1.01)
(.87) (1.28) (1.21) (.55)
- -----------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (1.15)
(1.03) (1.43) (1.42) (.78)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.26 $12.24
$11.00 $9.77 $9.35
=======================================================================
============================================================================================================================
Total Return, at Net Asset Value(1) 18.53%
21.33% 27.53% 19.88% 30.23%
============================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $52
$39 $27 $18 $7
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $47
$34 $22 $13 $4
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 1.32%
1.39% 1.60% 2.08% 2.51%
Expenses 0.67%
0.80%(3) 0.74%(3) 0.77%(3) 0.87%(3)
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 34%
38% 92% 118% 85%
1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of operations), 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 less than one full year. 2.
Annualized for periods of less than one full year.
3. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly. 4. 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 December 31, 1999, were $1,189,628,921 and
$1,455,549,024, respectively. 5. For the period from August 29, 1995 (inception
of offering) to December 31, 1995.
See accompanying Notes to Financial Statements.
26 OPPENHEIMER TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. Significant Accounting Policies
Oppenheimer Total Return Fund, Inc. (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment objective is to seek high
total return. The Fund's investment advisor is OppenheimerFunds, Inc. (the
Manager).
The Fund offers Class A, Class B, Class C and Class Y shares. Class A
shares are sold at their offering price, which is normally net asset value plus
an initial sales charge. Class B and Class C shares are sold without an initial
sales charge but may be subject to a contingent deferred sales charge (CDSC).
Class Y shares are sold to certain institutional investors without either a
front-end sales charge or a CDSC. All classes of shares have identical rights to
earnings, assets and voting privileges, except that each class has its own
expenses directly attributable to that class and exclusive voting rights with
respect to matters affecting that class. Classes A, B and C shares have separate
distribution and/or service plans. No such plan has been adopted for Class Y
shares. 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.
- --------------------------------------------------------------------------------
Securities 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 Directors. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Directors 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. Foreign currency exchange contracts are valued based on the
closing prices of the foreign 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.
27 OPPENHEIMER TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
1. Significant Accounting Policies Continued
Foreign Currency Translation. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than
those attributable to a specific class), 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.
- --------------------------------------------------------------------------------
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
28 OPPENHEIMER TOTAL RETURN FUND, INC.
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of the recognition of certain foreign currency gains (losses)
as ordinary income (loss) for tax purposes. The character of distributions made
during the year from net investment income or net realized gains may differ from
its ultimate characterization for federal income tax purposes. Also, due to
timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or realized gain
was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations.
Accordingly, during the year ended December 31, 1999, amounts have been
reclassified to reflect an increase in additional paid-in capital of $3,466, a
decrease in undistributed net investment income of $2,674,458, and an increase
in accumulated net realized gain on investments of $2,670,992.
- --------------------------------------------------------------------------------
Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Certain dividends from foreign
securities will be recorded as soon as the Fund is informed of the dividend if
such information is obtained subsequent to the ex-dividend date. Realized gains
and losses on investments and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used for federal
income tax purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
29 OPPENHEIMER TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
2. Capital Stock
The Fund has authorized 450 million, 200 million, 200 million and 10 million
shares of $0.10 par value Class A, Class B, Class C and Class Y capital stock,
respectively. Transactions in shares of capital stock were as follows:
Year Ended December 31, 1999 Year Ended December 31,
1998
Shares Amount Shares
Amount
- -------------------------------------------------------------------------------------
Class A
Sold 38,779,624 $ 500,033,094 20,090,100
$238,366,108
Dividends and/or
distributions reinvested 19,101,991 234,710,226 16,639,080
191,036,172
Redeemed (31,642,249) (405,205,098) (28,120,324)
(332,483,614)
- ---------------------------------------------------------
Net increase 26,239,366 $ 329,538,222 8,608,856 $
96,918,666
=========================================================
- -------------------------------------------------------------------------------------
Class B
Sold 13,846,247 $ 175,056,306 13,699,912
$160,764,683
Dividends and/or
distributions reinvested 6,611,034 80,167,708 7,233,729
82,019,204
Redeemed (31,792,050) (406,009,115) (12,211,618)
(142,161,321)
- ---------------------------------------------------------
Net increase (decrease) (11,334,769) $(150,785,101) 8,722,023
$100,622,566
=========================================================
- -------------------------------------------------------------------------------------
Class C
Sold 2,517,651 $ 31,966,080 2,117,847 $
24,988,182
Dividends and/or
distributions reinvested 431,425 5,244,298 344,352
3,914,027
Redeemed (1,956,338) (24,748,588) (1,031,386)
(12,105,795)
- ---------------------------------------------------------
Net increase 992,738 $ 12,461,790 1,430,813 $
16,796,414
=========================================================
- -------------------------------------------------------------------------------------
Class Y
Sold 2,101,137 $ 26,918,940 1,821,738 $
21,338,887
Dividends and/or
distributions reinvested 347,285 4,273,249 260,255
2,988,737
Redeemed (1,668,891) (21,388,121) (1,318,484)
(15,546,733)
- ---------------------------------------------------------
Net increase 779,531 $ 9,804,068 763,509 $
8,780,891
=========================================================
================================================================================
3. Unrealized Gains and Losses on Securities
As of December 31, 1999, net unrealized appreciation on securities of
$1,471,426,217 was composed of gross appreciation of $1,646,998,173, and gross
depreciation of $175,571,956.
30 OPPENHEIMER TOTAL RETURN FUND, INC.
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management Fees. 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% of
the first $100 million of average annual net assets of the Fund, 0.70% of the
next $100 million, 0.65% of the next $100 million, 0.60% of the next $100
million, 0.55% of the next $100 million and 0.50% of average annual net assets
in excess of $500 million. The Fund's management fee for the year ended December
31, 1999, was 0.52% of the average annual net assets for each class of shares.
- --------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer and shareholder servicing agent for the Fund and for other
Oppenheimer funds. OFS's total costs of providing such services are allocated
ratably to these funds.
- --------------------------------------------------------------------------------
Distribution and Service Plan Fees. Under its General Distributor's Agreement
with the Manager, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of the different classes of shares of the Fund.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares is shown in the table below for the period
indicated.
Aggregate Class A Commissions
Commissions Commissions
Front-End Front-End on Class A on Class
B on Class C
Sales Charges Sales Charges Shares
Shares Shares
on Class A Retained by Advanced by Advanced
by Advanced by
Year Ended Shares Distributor Distributor(1)
Distributor(1) Distributor(1)
- -------------------------------------------------------------------------------------------------
December 31, 1999 $3,586,666 $1,235,653 $101,858
$4,474,217 $223,694
1. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
Class A Class
B Class C
Contingent Deferred Contingent Deferred
Contingent Deferred
Sales Charges Sales Charges
Sales Charges
Year Ended Retained by Distributor Retained by Distributor Retained by
Distributor
- -----------------------------------------------------------------------------------------------
December 31, 1999 $10,798
$1,286,143 $27,758
The Fund has adopted a Service Plan for Class A shares and Distribution
and Service Plans for Class B and Class C shares under Rule 12b-1 of the
Investment Company Act. Under those plans the Fund pays the Distributor for all
or a portion of its costs incurred in connection with the distribution and/or
servicing of the shares of the particular class.
31 OPPENHEIMER TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
4. Management Fees and Other Transactions with Affiliates Continued
Class A Service Plan Fees. Under the Class A service plan, the Distributor
currently uses the fees it receives from the Fund to pay brokers, dealers and
other financial institutions. The Class A service plan permits reimbursements to
the Distributor at a rate of up to 0.25% of average annual net assets of Class A
shares purchased. The Distributor makes payments to plan recipients quarterly at
an annual rate not to exceed 0.25% of the average annual net assets consisting
of Class A shares of the Fund. For the fiscal year ended December 31, 1999,
payments under the Class A Plan totaled $5,331,807, all of which was paid by the
Distributor to recipients. That included $433,314 paid to an affiliate of the
Manager. Any unreimbursed expenses the Distributor incurs with respect to Class
A shares in any fiscal year cannot be recovered in subsequent years.
- --------------------------------------------------------------------------------
Class B and Class C Distribution and Service Plan Fees. Under each plan, service
fees and distribution 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 Class B and Class C plans provide for the
Distributor to be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts paid by the Fund under
the plan during the period for which the fee is paid.
The Distributor retains the asset-based sales charge on Class B shares.
The Distributor retains the asset-based sales charge on Class C shares during
the first year the shares are outstanding. The asset-based sales charges on
Class B and Class C shares allow investors to buy shares without a front-end
sales charge while allowing the Distributor to compensate dealers that sell
those shares.
The Distributor's actual expenses in selling Class B and Class C shares
may be more than the payments it receives from the contingent deferred sales
charges collected on redeemed shares and asset-based sales charges from the Fund
under the plans. If any plan is terminated by the Fund, the Board of Directors
may allow the Fund to continue payments of the asset-based sales charge to the
Distributor for distributing shares before the plan was terminated. The plans
allow for the carry-forward of distribution expenses, to be recovered from
asset-based sales charges in subsequent fiscal periods.
Distribution fees paid to the Distributor for the year ended December 31, 1999,
were as follows:
Distributor's Distributor's
Aggregate Unreimbursed
Unreimbursed Expenses as %
Total Payments Amount Retained Expenses of Net Assets
Under Plan by Distributor Under Plan of Class
- -------------------------------------------------------------------------------
Class B Plan $11,962,493 $9,316,015 $8,634,201 0.75%
Class C Plan 661,360 248,487 707,054 0.93
32 OPPENHEIMER TOTAL RETURN FUND, INC.
================================================================================
5. Foreign Currency Contracts
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts for operational purposes and to seek to protect against
adverse exchange rate fluctuation. Risks to the Fund include the potential
inability of the counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates as provided by
a reliable bank, dealer or pricing service. Unrealized appreciation and
depreciation on foreign currency contracts are reported in the Statement of
Assets and Liabilities.
The Fund may realize a gain or loss upon the closing or settlement of the
forward transaction. Realized gains and losses are reported with all other
foreign currency gains and losses in the Statement of Operations.
Securities denominated in foreign currency to cover net exposure on
outstanding foreign currency contracts are noted in the Statement of Investments
where applicable.
================================================================================
6. Option 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.
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 note
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.
33 OPPENHEIMER TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
6. Option Activity Continued
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 December 31, 1999, was as follows:
Call Options
------------------------
Number of Amount of
Options Premiums
- -----------------------------------------------------------------------
Options outstanding as of
December 31, 1998 3,412 $ 671,969
Options written 9,512 2,334,239
Options closed or expired (12,512) (2,902,469)
Options exercised (412) (103,739)
------------------------
Options outstanding as of
December 31, 1999 -- $ --
========================
================================================================================
7. Bank Borrowings
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.45%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of 0.08%
per annum.
The Fund had no borrowings outstanding during the year ended December 31,
1999.
Appendix A
- --------------------------------------------------------------------------------
MUNICIPAL BOND RATINGS DEFINITIONS
- --------------------------------------------------------------------------------
Below are summaries of the rating definitions used by the nationally-recognized
rating agencies listed below for municipal securities. Those ratings represent
the opinion of the agency as to the credit quality of issues that they rate. The
summaries below are based upon publicly-available information provided by the
rating organizations.
Moody's Investors Service, Inc.
- --------------------------------------------------------------------------------
Long-Term Bond Ratings
Aaa: Bonds rated Aaa are judged to be the best quality. They 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 are the lowest class of rated bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Con. (...): Bonds for which the security depends on the completion of some act
or the fulfillment of some condition are rated conditionally. These bonds are
secured by (a) earnings of projects under construction, (b) earnings of projects
unseasoned in operating experience, (c) rentals that begin when facilities are
completed, or (d) payments to which some other limitation attaches.
Parenthetical rating denotes probable credit stature upon completion of
construction or elimination of basis of condition.
Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through Caa. The modifier "1" indicates that the
obligation ranks in the higher end of its category; the modifier "2" indicates a
mid-range ranking and the modifier "3" indicates a ranking in the lower end of
the category. Advanced refunded issues that are secured by certain assets are
identified with a # symbol.
Short-Term Ratings - U.S. Tax-Exempt Municipals
There are four ratings below for short-term obligations that are investment
grade. Short-term speculative obligations are designated SG. For variable rate
demand obligations, a two-component rating is assigned. The first (MIG) element
represents an evaluation by Moody's of the degree of risk associated with
scheduled principal and interest payments, and the other (VMIG) represents an
evaluation of the degree of risk associated with the demand feature.
MIG 1/VMIG 1: Denotes best quality. There is strong protection by established
cash flows, superior liquidity support or demonstrated broad-based access to the
market for refinancing..
MIG 2/VMIG 2: Denotes high quality. Margins of protection are ample although not
as large as in the preceding group.
MIG 3/VMIG 3: Denotes favorable quality. All security elements are accounted for
but there is lacking the undeniable strength of the preceding grades. Liquidity
and cash flow protection may be narrow and market access for refinancing is
likely to be less well established.
MIG 4/VMIG 4: Denotes adequate quality. Protection commonly regarded as required
of an investment security is present and although not distinctly or
predominantly speculative, there is specific risk.
SG: Denotes speculative quality. Debt instruments in this category lack margins
of protection.
Standard & Poor's Rating Services
- --------------------------------------------------------------------------------
Long-Term Credit Ratings
AAA: Bonds rated "AAA" have the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA: Bonds rated "AA" differ from the highest rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A: Bonds rated "A" are somewhat more susceptible to adverse effects of changes
in circumstances and economic conditions than obligations in higher-rated
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is still strong.
BBB: Bonds rated BBB exhibit adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
Bonds rated BB, B, CCC, CC and C are regarded as having significant speculative
characteristics. BB indicates the least degree of speculation and C the highest.
While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB: Bonds rated BB are less vulnerable to nonpayment than other speculative
issues. However, these face major uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B: A bond rated B is more vulnerable to nonpayment than an obligation rated BB,
but the obligor currently has the capacity to meet its financial commitment on
the obligation.
CCC: A bond rated CCC is currently vulnerable to nonpayment, and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: The C rating may used where a bankruptcy petition has been filed or similar
action has been taken, but payments on this obligation are being continued.
D: Bonds rated D are in default. Payments on the obligation are not being made
on the date due.
The ratings from AA to CCC may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories. The
"r" symbol is attached to the ratings of instruments with significant noncredit
risks.
Short-Term Issue Credit Ratings
A-1: Rated in the highest category. The obligor's capacity to meet its financial
commitment on the obligation is strong. Within this category, a plus (+) sign
designation indicates the issuer's capacity to meet its financial obligation is
very strong.
A-2: Obligation is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than obligations in higher rating
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.
A-3: Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial commitment on the obligation.
B: Regarded as having significant speculative characteristics. The obligor
currently has the capacity to meet its financial commitment on the obligation.
However, it faces major ongoing uncertainties which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
C: Currently vulnerable to nonpayment and is dependent upon favorable business,
financial, and economic conditions for the obligor to meet its financial
commitment on the obligation.
D: In payment default. Payments on the obligation have not been made on the due
date. The rating may also be used if a bankruptcy petition has been filed or
similar actions jeopardize payments on the obligation.
Fitch IBCA, Inc.
- --------------------------------------------------------------------------------
International Long-Term Credit Ratings
Investment Grade:
AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong capacity
for timely payment of financial commitments. This capacity is highly unlikely to
be adversely affected by foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very low expectation of
credit risk. They indicate a very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
A: High Credit Quality. "A" ratings denote a low expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB: Good Credit Quality. "BBB" ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
Speculative Grade:
BB: Speculative. "BB" ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time. However, business or financial alternatives may be available to allow
financial commitments to be met.
B: Highly Speculative. "B" ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met. However, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.
CCC, CC C: High Default Risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A "CC" rating indicates that default of some
kind appears probable. "C" ratings signal imminent default.
DDD, DD, and D: Default. Securities are not meeting current obligations and are
extremely speculative. "DDD" designates the highest potential for recovery of
amounts outstanding on any securities involved.
Plus (+) and minus (-) signs may be appended to a rating symbol to denote
relative status within the rating category. Plus and minus signs are not added
to the "AAA" category or to categories below "CCC."
International Short-Term Credit Ratings
F1: Highest credit quality. Strongest capacity for timely payment. May have an
added "+" to denote exceptionally strong credit feature.
F2: Good credit quality. A satisfactory capacity for timely payment, but the
margin of safety is not as great as in higher ratings.
F3: Fair credit quality. Capacity for timely payment is adequate. However,
near-term adverse changes could result in a reduction to non-investment grade.
B: Speculative. Minimal capacity for timely payment, plus vulnerability to
near-term adverse changes in financial and economic conditions.
C: High default risk. Default is a real possibility, Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
D: Default. Denotes actual or imminent payment default
Duff & Phelps Credit Rating Co. Ratings
Long-Term Debt and Preferred Stock
AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA-: High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A+, A & A-: Protection factors are average but adequate. However, risk factors
are more variable in periods of greater economic stress.
BBB+, BBB & BBB-: Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB & BB-: Below investment grade but deemed likely to meet obligations when
due. Present or prospective financial protection factors fluctuate according to
industry conditions. Overall quality may move up or down frequently within the
category.
B+, B & B-: Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher of
lower rating grade.
CCC: Well below investment-grade securities. Considerable uncertainty exists as
to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD: Defaulted debt obligations. Issuer failed to meet scheduled principal and/or
interest payments.
DP: Preferred stock with dividend arrearages.
Short-Term Debt:
High Grade:
D-1+: Highest certainty of timely payment. Safety is just below risk-free U.S.
Treasury short-term debt.
D-1: Very high certainty of timely payment. Risk factors are minor.
D-1-: High certainty of timely payment. Risk factors are very small.
Good Grade:
D-2: Good certainty of timely payment. Risk factors are small.
Satisfactory Grade:
D-3: Satisfactory liquidity and other protection factors qualify issues as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
Non-Investment Grade:
D-4: Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service.
Default:
D-5: Issuer failed to meet scheduled principal and/or interest payments.
B-1
Appendix B
- --------------------------------------------------------------------------------
Industry Classifications
- --------------------------------------------------------------------------------
Aerospace/Defense Food and Drug Retailers
Air Transportation Gas Utilities
Asset-Backed Health Care/Drugs
Auto Parts and Equipment Health Care/Supplies & Services
Automotive Homebuilders/Real Estate
Bank Holding Companies Hotel/Gaming
Banks Industrial Services
Beverages Information Technology
Broadcasting Insurance
Broker-Dealers Leasing & Factoring
Building Materials Leisure
Cable Television Manufacturing
Chemicals Metals/Mining
Commercial Finance Nondurable Household Goods
Communication Equipment Office Equipment
Computer Hardware Oil - Domestic
Computer Software Oil - International
Conglomerates Paper
Consumer Finance Photography
Consumer Services Publishing
Containers Railroads & Truckers
Convenience Stores Restaurants
Department Stores Savings & Loans
Diversified Financial Shipping
Diversified Media Special Purpose Financial
Drug Wholesalers Specialty Printing
Durable Household Goods Specialty Retailing
Education Steel
Electric Utilities Telecommunications - Long Distance
Electrical Equipment Telephone - Utility
Electronics Textile, Apparel & Home Furnishings
Energy Services Tobacco
Entertainment/Film Trucks and Parts
Environmental Wireless Services
Food
C-12
Appendix C
OppenheimerFunds Special Sales Charge Arrangements and Waivers
In certain cases, the initial sales charge that applies to purchases of Class A
shares1 of the Oppenheimer funds or the contingent deferred sales charge that
may apply to Class A, Class B or Class C shares may be waived.2 That is because
of the economies of sales efforts realized by OppenheimerFunds Distributor,
Inc., (referred to in this document as the "Distributor"), or by dealers or
other financial institutions that offer those shares to certain classes of
investors.
Not all waivers apply to all funds. For example, waivers relating to Retirement
Plans do not apply to Oppenheimer municipal funds, because shares of those funds
are not available for purchase by or on behalf of retirement plans. Other
waivers apply only to shareholders of certain funds.
For the purposes of some of the waivers described below and in the Prospectus
and Statement of Additional Information of the applicable Oppenheimer funds, the
term "Retirement Plan" refers to the following types of plans: (1) plans
qualified under Sections 401(a) or 401(k) of the Internal Revenue Code, (2)
non-qualified deferred compensation plans, (3) employee benefit plans3 (4) Group
Retirement Plans4 (5) 403(b)(7) custodial plan accounts (6) Individual
Retirement Accounts ("IRAs"), including traditional IRAs, Roth
IRAs, SEP-IRAs, SARSEPs or SIMPLE plans
The interpretation of these provisions as to the applicability of a special
arrangement or waiver in a particular case is in the sole discretion of the
Distributor or the transfer agent (referred to in this document as the "Transfer
Agent") of the particular Oppenheimer fund. These waivers and special
arrangements may be amended or terminated at any time by a particular fund, the
Distributor, and/or OppenheimerFunds, Inc. (referred to in this document as the
"Manager"). Waivers that apply at the time shares are redeemed must be requested
by the shareholder and/or dealer in the redemption request.
- --------------
1. Certain waivers also apply to Class M shares of Oppenheimer Convertible
Securities Fund.
2. In the case of Oppenheimer Senior Floating Rate Fund, a continuously-offered
closed-end fund, references to contingent deferred sales charges mean the
Fund's Early Withdrawal Charges and references to "redemptions" mean
"repurchases" of shares.
3. An "employee benefit plan" means any plan or arrangement, whether or not it
is "qualified" under the Internal Revenue Code, under which Class A shares of
an Oppenheimer fund or funds are purchased by a fiduciary or other
administrator for the account of participants who are employees of a single
employer or of affiliated employers. These may include, for example, medical
savings accounts, payroll deduction plans or similar plans. The fund accounts
must be registered in the name of the fiduciary or administrator purchasing
the shares for the benefit of participants in the plan.
4. The term "Group Retirement Plan" means any qualified or non-qualified
retirement plan for employees of a corporation or 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 (or who are eligible to participate in) the plan
purchase Class A shares of an Oppenheimer fund or funds through a single
investment dealer, broker or other financial institution designated by the
group. Such plans include 457 plans, SEP-IRAs, SARSEPs, SIMPLE plans and
403(b) plans other than plans for public school employees. The term "Group
Retirement Plan" also includes qualified retirement plans and non-qualified
deferred compensation plans and IRAs that purchase Class A shares of an
Oppenheimer fund or funds through a single investment dealer, broker or other
financial institution that has made special arrangements with the Distributor
enabling those plans to purchase Class A shares at net asset value but
subject to the Class A contingent deferred sales charge.
I. Applicability of Class A Contingent Deferred Sales Charges in Certain Cases
Purchases of Class A Shares of Oppenheimer Funds That Are Not Subject to Initial
Sales Charge but May Be Subject to the Class A Contingent Deferred Sales Charge
(unless a waiver applies).
There is no initial sales charge on purchases of Class A shares of any of
the Oppenheimer funds in the cases listed below. However, these purchases may be
subject to the Class A contingent deferred sales charge if redeemed within 18
months of the end of the calendar month of their purchase, as described in the
Prospectus (unless a waiver described elsewhere in this Appendix applies to the
redemption). Additionally, on shares purchased under these waivers that are
subject to the Class A contingent deferred sales charge, the Distributor will
pay the applicable commission described in the Prospectus under "Class A
Contingent Deferred Sales Charge."2 This waiver provision applies to:
|_| Purchases of Class A shares aggregating $1 million or more. |_| Purchases by
a Retirement Plan (other than an IRA or 403(b)(7) custodial
plan) that:
(1) buys shares costing $500,000 or more, or
(2) has, at the time of purchase, 100 or more eligible employees or total plan
assets of $500,000 or more, or
(3) certifies to the Distributor that it projects to have annual plan
purchases of $200,000 or more.
|_| Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the
purchases are made:
(1) through a broker, dealer, bank or registered investment adviser
that has made special arrangements with the Distributor for those
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.
|_| Purchases of Class A shares by Retirement Plans that have any of the
following record-keeping arrangements:
(1) The record keeping is performed by Merrill Lynch Pierce Fenner & Smith, Inc.
("Merrill Lynch") on a daily valuation basis for the Retirement Plan.
On the date the plan sponsor signs the record-keeping service
agreement with Merrill Lynch, the Plan must have $3 million or more of
its assets invested in (a) mutual funds, other than those advised or
managed by Merrill Lynch Asset Management, L.P. ("MLAM"), that are
made available under a Service Agreement between Merrill Lynch and the
mutual fund's principal underwriter or distributor, and (b) funds
advised or managed by MLAM (the funds described in (a) and (b) are
referred to as "Applicable Investments").
(2) The record keeping for the Retirement Plan is performed on a daily valuation
basis by a record keeper whose services are provided under a contract
or arrangement between the Retirement Plan and Merrill Lynch. On the
date the plan sponsor signs the record keeping service agreement with
Merrill Lynch, the Plan must have $3 million or more of its assets
(excluding assets invested in money market funds) invested in
Applicable Investments.
(3) The record keeping for a Retirement Plan is handled under a service
agreement with Merrill Lynch and on the date the plan sponsor signs
that agreement, the Plan has 500 or more eligible employees (as
determined by the Merrill Lynch plan conversion manager).
|_| Purchases by a Retirement Plan whose record keeper had a
cost-allocation agreement with the Transfer Agent on or before May 1,
1999.
II. Waivers of Class A Sales Charges of Oppenheimer Funds
A. 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 (and no commissions are paid by the Distributor on such
purchases): |_| The Manager or its affiliates.
|_| Present or former officers, directors, trustees and employees (and
their "immediate families") of the Fund, the Manager and its
affiliates, and retirement plans established by them for their
employees. The term "immediate family" refers to one's spouse,
children, grandchildren, grandparents, parents, parents-in-law,
brothers and sisters, sons- and daughters-in-law, a sibling's spouse,
a spouse's siblings, aunts, uncles, nieces and nephews; relatives by
virtue of a remarriage (step-children, step-parents, etc.) are
included.
|_| Registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the
Distributor for that purpose.
|_| Dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for
their employees.
|_| Employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and which are
identified as such to the Distributor) or with the Distributor. The
purchaser must certify to the Distributor at the time of purchase that
the purchase is for the purchaser's own account (or for the benefit of
such employee's spouse or minor children).
|_| Dealers, brokers, banks or registered investment advisors that have
entered into an agreement with the Distributor providing specifically
for the use of shares of the Fund in particular investment products
made available to their clients. Those clients may be charged a
transaction fee by their dealer, broker, bank or advisor for the
purchase or sale of Fund shares.
|_| Investment advisors and financial planners who have entered into an
agreement for this purpose with the Distributor and who charge an
advisory, consulting or other fee for their services and buy shares for
their own accounts or the accounts of their clients.
|_| "Rabbi trusts" that buy shares for their own accounts, if the purchases
are made through a broker or agent or other financial intermediary that
has made special arrangements with the Distributor for those purchases.
|_| Clients of investment advisors or financial planners (that have
entered into an agreement for this purpose with the Distributor) who
buy shares for their own accounts may also purchase shares without
sales charge but only if their accounts are linked to a master account
of their investment advisor or financial planner on the books and
records of the broker, agent or financial intermediary with which the
Distributor has made such special arrangements . Each of these
investors may be charged a fee by the broker, agent or financial
intermediary for purchasing shares.
|_| 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 (or its successor) 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.
|_| A unit investment trust that has entered into an appropriate agreement
with the Distributor.
|_| Dealers, brokers, banks, or registered investment advisers that have
entered into an agreement with the Distributor to sell shares to
defined contribution employee retirement plans for which the dealer,
broker or investment adviser provides administration services.
|-|
Retirement Plans and deferred compensation plans and trusts used to fund
those plans (including, for example, plans qualified or created under
sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue Code),
in each case if those purchases are made through a broker, agent or
other financial intermediary that has made special arrangements with
the Distributor for those purchases.
|_| 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 Class C TRAC-2000 program on November
24, 1995.
|_| A qualified Retirement Plan 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, if that
arrangement was consummated and share purchases commenced by December
31, 1996.
B. 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 sales charges (and no commissions are paid by the Distributor on such
purchases): |_| 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 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 through a broker-dealer that has entered into a
special agreement with the Distributor to allow the broker's customers
to purchase and pay for shares of Oppenheimer funds using the proceeds
of shares redeemed in the prior 30 days from a mutual fund (other than
a fund managed by the Manager or any of its subsidiaries) on which an
initial sales charge or contingent 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 shares of the Fund, and the Distributor may require
evidence of qualification for this waiver.
|_| Shares purchased with the proceeds of maturing principal units of any
Qualified Unit Investment Liquid Trust Series.
|_| Shares purchased by the reinvestment of loan repayments by a
participant in a Retirement Plan for which the Manager or an affiliate
acts as sponsor.
C. 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 account value adjusted annually.
|_| Involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (please refer to "Shareholder Account
Rules and Policies," in the applicable fund Prospectus).
|_| 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.3 (5) Under a Qualified Domestic Relations
Order, as defined in the Internal
Revenue Code, or, in the case of an IRA, a divorce or separation
agreement described in Section 71(b) of the Internal Revenue Code.
(6) To meet the minimum distribution requirements of the Internal Revenue Code.
(7) To make "substantially equal periodic payments" as described in Section
72(t) of the Internal Revenue Code.
(8) For loans to participants or beneficiaries.
(9) Separation from service.4
(10) Participant-directed redemptions to purchase shares of a mutual
fund (other than a fund managed by the Manager or a subsidiary of
the Manager) if the plan has made special arrangements with the
Distributor.
(11) Plan termination or "in-service distributions," if the redemption
proceeds are rolled over directly to an OppenheimerFunds-sponsored
IRA.
|_| For distributions from Retirement Plans having 500 or more eligible
employees, except distributions due to termination of all of the
Oppenheimer funds as an investment option under the Plan.
|_| For distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing
this waiver.
III. Waivers of Class B and Class C Sales Charges of Oppenheimer Funds
The Class B and Class C contingent deferred sales charges will not be applied to
shares purchased in certain types of transactions or redeemed in certain
circumstances described below.
A. Waivers for Redemptions in Certain Cases.
The Class B and Class C contingent deferred sales charges will be waived for
redemptions of shares in the following cases: |_| Shares redeemed involuntarily,
as described in "Shareholder Account Rules and
Policies," in the applicable Prospectus.
|_| 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.
|_| Distributions from accounts for which the broker-dealer of record has
entered into a special agreement with the Distributor allowing this
waiver.
|_| Redemptions of Class B shares held by Retirement Plans whose records
are maintained on a daily valuation basis by Merrill Lynch or an
independent record keeper under a contract with Merrill Lynch.
|_| Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
accounts of clients of financial institutions that have entered into a
special arrangement with the Distributor for this purpose.
|_| Redemptions requested in writing by a Retirement Plan sponsor of Class
C shares of an Oppenheimer fund in amounts of $1 million or more held
by the Retirement Plan for more than one year, if the redemption
proceeds are invested in Class A shares of one or more Oppenheimer
funds.
|_| Distributions from Retirement 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 in an Oppenheimer fund.
(2) To return excess contributions made to a participant's account.
(3) To return contributions made due to a mistake of fact.
(4) To make hardship withdrawals, as defined in the plan.5
(5) To make distributions required under a Qualified Domestic Relations Order
or, in the case of an IRA, a divorce or separation agreement described in
Section 71(b) of the Internal Revenue Code.
(6) To meet the minimum distribution requirements of the Internal Revenue Code.
(7) To make "substantially equal periodic payments" as described in Section
72(t) of the Internal Revenue Code.
(8) For loans to participants or beneficiaries.6
(9) On account of the participant's separation from service.7
(10) Participant-directed redemptions to purchase shares of a mutual
fund (other than a fund managed by the Manager or a subsidiary of
the Manager) offered as an investment option in a Retirement Plan
if the plan has made special arrangements with the Distributor.
(11) Distributions made on account of a plan termination or
"in-service" distributions, if the redemption proceeds are rolled
over directly to an OppenheimerFunds-sponsored IRA.
(12) Distributions from Retirement Plans having 500 or more eligible
employees, but excluding distributions made because of the Plan's
elimination as investment options under the Plan of all of the
Oppenheimer funds that had been offered.
(13) For distributions from a participant's account under an Automatic
Withdrawal Plan after the participant reaches age 59 1/2, as long
as the aggregate value of the distributions does not exceed 10% of
the account's value, adjusted annually.
(14) Redemptions of Class B shares under an Automatic Withdrawal Plan
for an account other than a Retirement Plan, if the aggregate
value of the redeemed shares does not exceed 10% of the account's
value, adjusted annually.
|_|Redemptions of Class B shares or Class C shares under an Automatic
Withdrawal Plan from an account other than a Retirement Plan if the
aggregate value of the redeemed shares does not exceed 10% of the
account's value annually.
B. Waivers for Shares Sold or Issued in Certain Transactions.
The contingent deferred sales charge is also waived on Class B and Class C
shares sold or issued in the following cases: |_| Shares sold to the
Manager or its affiliates. |_| Shares sold to registered management
investment companies or separate accounts of insurance companies having an
agreement with the Manager or the Distributor for that purpose. |_| Shares
issued in plans of reorganization to which the Fund is a party. |_| Shares
sold to present or former officers, directors, trustees or employees (and
their "immediate families" as defined above in Section I.A.) of the Fund,
the Manager and its affiliates and retirement plans established by them for
their employees.
IV. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
Funds Who Were Shareholders of Former Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers for Class A,
Class B and Class C shares described in the Prospectus or Statement of
Additional Information of the Oppenheimer funds are modified as described below
for certain persons who were shareholders of the former Quest for Value Funds.
To be eligible, those persons must have been shareholders on November 24, 1995,
when OppenheimerFunds, Inc. became the investment advisor to those former Quest
for Value Funds. Those funds include:
Oppenheimer Quest Value Fund, Inc. Oppenheimer Quest Small Cap
Value Fund
Oppenheimer Quest Balanced Value Fund Oppenheimer Quest Global Value
Fund
Oppenheimer Quest Opportunity Value
Fund
These arrangements also apply to shareholders of the following funds when
they merged (were reorganized) into various Oppenheimer funds on November 24,
1995:
Quest for Value U.S. Government Quest for Value New York Tax-Exempt
Income Fund Fund
Quest for Value Investment Quality Quest for Value National Tax-Exempt
Income Fund Fund
Quest for Value Global Income Fund Quest for Value California Tax-Exempt
Fund
All of the funds listed above are referred to in this Appendix as the
"Former Quest for Value Funds." The waivers of initial and contingent deferred
sales charges described in this Appendix apply to shares of an Oppenheimer fund
that are either:
|_| acquired by such shareholder pursuant to an exchange of shares of an
Oppenheimer fund that was one of the Former Quest for Value Funds, or
|_| purchased by such shareholder by exchange of shares of another
Oppenheimer fund that were acquired pursuant to the merger of any of
the Former Quest for Value Funds into that other Oppenheimer fund on
November 24, 1995.
A. Reductions or Waivers of Class A Sales Charges.
|X| Reduced Class A Initial Sales Charge Rates for Certain Former
Quest for Value Funds Shareholders.
Purchases by Groups and Associations. The following table sets forth the initial
sales charge rates for Class A shares purchased by members of "Associations"
formed for any purpose other than the purchase of securities. The rates in the
table apply if 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.
- --------------------------------------------------------------------------------
Initial Sales Initial Sales
Number of Eligible Charge as a % of Charge as a % of Commission as %
Employees or Members Offering Price Net Amount Invested of Offering Price
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9 or Fewer 2.50% 2.56% 2.00%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At least 10 but not 2.00% 2.04% 1.60%
more than 49
- --------------------------------------------------------------------------------
For purchases by 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 in the applicable fund's Prospectus.
Purchases made under this arrangement qualify for the lower of either the
sales charge rate in the table based on the number of members of an Association,
or the sales charge rate that applies under the Right of Accumulation described
in the applicable fund's Prospectus and Statement of Additional Information.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations also may purchase shares for their individual or
custodial accounts at these reduced sales charge rates, upon request to the
Distributor.
|X| Waiver of Class A Sales Charges for Certain Shareholders. Class A
shares purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
|_| Shareholders 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 who acquired shares of any Former Quest for Value Fund
by merger of any of the portfolios of the Unified Funds.
|X| 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 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.
B. Class A, Class B and Class C Contingent Deferred Sales Charge Waivers.
|X| 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, Class B or Class C shares of an Oppenheimer fund. The
shares must have been acquired by the 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. Those shares must have been
purchased prior to March 6, 1995 in connection with:
|_| withdrawals under an automatic withdrawal plan holding only either
Class B or Class C shares if the annual withdrawal does not exceed
10% of the initial value of the account value, adjusted annually,
and
|_| 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.
|X| 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, Class B or Class C
shares of an Oppenheimer fund. The shares must have been acquired by the 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
Former Quest for Value Fund merged. Those shares must have been purchased on or
after March 6, 1995, but prior to November 24, 1995:
|_| redemptions following the death or disability of the shareholder(s) (as
evidenced by a determination of total disability by the U.S. Social
Security Administration);
|_| withdrawals under an automatic withdrawal plan (but only for Class B
or Class C shares) where the annual withdrawals do not exceed 10% of
the initial value of the account value; adjusted annually, and
|_| 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, Class B or Class C
shares of the Oppenheimer fund described in this section if the proceeds are
invested in the same Class of shares in that fund or another Oppenheimer fund
within 90 days after redemption.
V. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
Funds Who Were Shareholders of Connecticut Mutual Investment Accounts, Inc.
The initial and contingent deferred sale charge rates and waivers for Class A
and Class B shares described in the respective Prospectus (or this Appendix) of
the following Oppenheimer funds (each is referred to as a "Fund" in this
section):
o Oppenheimer U. S. Government Trust,
o Oppenheimer Bond Fund,
o Oppenheimer Disciplined Value Fund and
o Oppenheimer Disciplined Allocation Fund
are modified as described below for those Fund shareholders who were
shareholders of the following funds (referred to as the "Former Connecticut
Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the
investment adviser to the Former Connecticut Mutual Funds:
Connecticut Mutual Liquid Account Connecticut Mutual Total Return
Account
Connecticut Mutual Government Securities CMIA LifeSpan Capital Appreciation
Account Account
Connecticut Mutual Income Account CMIA LifeSpan Balanced Account
Connecticut Mutual Growth Account CMIA Diversified Income Account
A. Prior Class A CDSC and Class A Sales Charge Waivers.
|_| Class A Contingent Deferred Sales Charge. Certain shareholders of a
Fund and the other Former Connecticut Mutual Funds are entitled to continue to
make additional purchases of Class A shares at net asset value without a Class A
initial sales charge, but subject to the Class A contingent deferred sales
charge that was in effect prior to March 18, 1996 (the "prior Class A CDSC").
Under the prior Class A CDSC, if any of those shares are redeemed within one
year of purchase, they will be assessed a 1% contingent deferred sales charge on
an amount equal to the current market value or the original purchase price of
the shares sold, whichever is smaller (in such redemptions, any shares not
subject to the prior Class A CDSC will be redeemed first).
Those shareholders who are eligible for the prior Class A CDSC are: (1)
persons whose purchases of Class A shares of a Fund and other Former
Connecticut Mutual Funds were $500,000 prior to March 18, 1996, as a
result of direct purchases or purchases pursuant to the Fund's
policies on Combined Purchases or Rights of Accumulation, who still
hold those shares in that Fund or other Former Connecticut Mutual
Funds, and
(2) persons whose intended purchases under a Statement of Intention
entered into prior to March 18, 1996, with the former general
distributor of the Former Connecticut Mutual Funds to purchase shares
valued at $500,000 or more over a 13-month period entitled those
persons to purchase shares at net asset value without being subject
to the Class A initial sales charge.
Any of the Class A shares of a Fund and the other Former Connecticut
Mutual Funds that were purchased at net asset value prior to March 18, 1996,
remain subject to the prior Class A CDSC, or if any additional shares are
purchased by those shareholders at net asset value pursuant to this arrangement
they will be subject to the prior Class A CDSC.
|_| Class A Sales Charge Waivers. Additional Class A shares of a Fund may
be purchased without a sales charge, by a person who was in one (or more) of the
categories below and acquired Class A shares prior to March 18, 1996, and still
holds Class A shares:
(1) any purchaser, provided the total initial amount invested in the Fund
or any one or more of the Former Connecticut Mutual Funds totaled $500,000
or more, including investments made pursuant to the Combined Purchases,
Statement of Intention and Rights of Accumulation features available at the
time of the initial purchase and such investment is still held in one or
more of the Former Connecticut Mutual Funds or a Fund into which such Fund
merged;
(2) any participant in a qualified plan, provided that the total
initial amount invested by the plan in the Fund or any one or more
of the Former Connecticut Mutual Funds totaled $500,000 or more;
(3) Directors of the Fund or any one or more of the Former Connecticut Mutual
Funds and members of their immediate families;
(4) employee benefit plans sponsored by Connecticut Mutual Financial Services,
L.L.C. ("CMFS"), the prior distributor of the Former Connecticut
Mutual Funds, and its affiliated companies;
(5) one or more members of a group of at least 1,000 persons (and
persons who are retirees from such group) engaged in a common
business, profession, civic or charitable endeavor or other
activity, and the spouses and minor dependent children of such
persons, pursuant to a marketing program between CMFS and such
group; and
(6) an institution acting as a fiduciary on behalf of an individual or
individuals, if such institution was directly compensated by the
individual(s) for recommending the purchase of the shares of the
Fund or any one or more of the Former Connecticut Mutual Funds,
provided the institution had an agreement with CMFS.
Purchases of Class A shares made pursuant to (1) and (2) above may be
subject to the Class A CDSC of the Former Connecticut Mutual Funds described
above.
Additionally, Class A shares of a Fund may be purchased without a sales
charge by any holder of a variable annuity contract issued in New York State by
Connecticut Mutual Life Insurance Company through the Panorama Separate Account
which is beyond the applicable surrender charge period and which was used to
fund a qualified plan, if that holder exchanges the variable annuity contract
proceeds to buy Class A shares of the Fund.
B. Class A and Class B Contingent Deferred Sales Charge Waivers.
In addition to the waivers set forth in the Prospectus and in this Appendix,
above, the contingent deferred sales charge will be waived for redemptions of
Class A and Class B shares of a Fund and exchanges of Class A or Class B shares
of a Fund into Class A or Class B shares of a Former Connecticut Mutual Fund
provided that the Class A or Class B shares of the Fund to be redeemed or
exchanged were (i) acquired prior to March 18, 1996 or (ii) were acquired by
exchange from an Oppenheimer fund that was a Former Connecticut Mutual Fund.
Additionally, the shares of such Former Connecticut Mutual Fund must have been
purchased prior to March 18, 1996: (1) by the estate of a deceased shareholder;
(2) upon the disability of a shareholder, as defined in Section 72(m)(7) of the
Internal Revenue Code;
(3) for retirement distributions (or loans) to participants or
beneficiaries from retirement plans qualified under Sections 401(a)
or 403(b)(7)of the Code, or from IRAs, deferred compensation plans
created under Section 457 of the Code, or other employee benefit
plans;
(4) as tax-free returns of excess contributions to such retirement or employee
benefit plans;
(5) in whole or in part, in connection with shares sold to any state,
county, or city, or any instrumentality, department, authority, or
agency thereof, that is prohibited by applicable investment laws from
paying a sales charge or commission in connection with the purchase
of shares of any registered investment management company;
(6) in connection with the redemption of shares of the Fund due to a
combination with another investment company by virtue of a merger,
acquisition or similar reorganization transaction;
(7) in connection with the Fund's right to involuntarily redeem or
liquidate the Fund;
(8) in connection with automatic redemptions of Class A shares and Class
B shares in certain retirement plan accounts pursuant to an Automatic
Withdrawal Plan but limited to no more than 12% of the original value
annually; or
(9) as involuntary redemptions of shares by operation of law, or under
procedures set forth in the Fund's Articles of Incorporation, or as
adopted by the Board of Directors of the Fund.
VI. Special Reduced Sales Charge for Former Shareholders of
Advance America Funds, Inc.
Shareholders of Oppenheimer Municipal Bond Fund, Oppenheimer U.S. Government
Trust, Oppenheimer Strategic Income Fund and Oppenheimer Equity Income Fund who
acquired (and still hold) shares of those funds as a result of the
reorganization of series of Advance America Funds, Inc. into those Oppenheimer
funds on October 18, 1991, and who held shares of Advance America Funds, Inc. on
March 30, 1990, may purchase Class A shares of those four Oppenheimer funds at a
maximum sales charge rate of 4.50%.
VII. Sales Charge Waivers on Purchases of Class M Shares of
Oppenheimer Convertible Securities Fund
Oppenheimer Convertible Securities Fund (referred to as the "Fund" in this
section) may sell Class M shares at net asset value without any initial sales
charge to the classes of investors listed below who, prior to March 11, 1996,
owned shares of the Fund's then-existing Class A and were permitted to purchase
those shares at net asset value without sales charge:
|_| the Manager and its affiliates,
|_| present or former officers, directors, trustees and employees (and
their "immediate families" as defined in the Fund's Statement of
Additional Information) of the Fund, the Manager and its affiliates,
and retirement plans established by them or the prior investment
advisor of the Fund for their employees,
|_| registered management investment companies or separate accounts of
insurance companies that had an agreement with the Fund's prior
investment advisor or distributor for that purpose,
|_| dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for
their employees,
|_| employees and registered representatives (and their spouses) of dealers
or brokers described in the preceding section or financial institutions
that have entered into sales arrangements with those dealers or brokers
(and whose identity is made known to the Distributor) or with the
Distributor, but only if the purchaser certifies to the Distributor at
the time of purchase that the purchaser meets these qualifications,
|_| dealers, brokers, or registered investment advisors that had entered
into an agreement with the Distributor or the prior distributor of the
Fund specifically providing for the use of Class M shares of the Fund
in specific investment products made available to their clients, and
|_| dealers, brokers or registered investment advisors that had entered
into an agreement with the Distributor or prior distributor of the
Fund's shares to sell shares to defined contribution employee
retirement plans for which the dealer, broker, or investment advisor
provides administrative services.
- --------------------------------------------------------------------------------
Oppenheimer Total Return Fund, Inc.
- --------------------------------------------------------------------------------
Internet Web Site:
www.oppenheimerfunds.com
Investment Adviser
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 Bank
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street, Suite 3600
Denver, Colorado 80202-3942
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
890
Oppenheimer
Disciplined Allocation Fund
Prospectus dated February 28, 2000
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Fund's securities nor has it determined that this
Prospectus is accurate or complete. It is a criminal offense to represent
otherwise.
Oppenheimer Disciplined Allocation Fund is a mutual fund. It seeks to maximize
total investment return by allocating its assets among investments in stocks,
corporate bonds, U.S. government securities and money market instruments.
This Prospectus contains important information about the Fund's objective,
its investment policies, strategies and risks. It also contains important
information about how to buy and sell shares of the Fund and other account
features. Please read this Prospectus carefully before you invest and keep it
for future reference about your account.
[logo] OppenheimerFunds Distributor, Inc.
Contents
About the Fund
The Fund's Investment Objective and Strategies
Main Risks of Investing in the Fund
The Fund's Past Performance
Fees and Expenses of the Fund
About the Fund's Investments
How the Fund is Managed
About Your Account
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
PhoneLink
OppenheimerFunds Internet Web Site
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Financial Highlights
ABOUT THE FUND
The Fund's Investment Objective and Strategies
WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks to maximize total
investment return (including capital appreciation and income) principally by
allocating its assets among stocks, corporate bonds, U.S. government securities
and money market instruments, according to changing market conditions.
WHAT DOES THE FUND MAINLY INVEST IN? The Fund invests mainly in stocks, bonds
and money market instruments. The Fund's investment Manager, OppenheimerFunds,
Inc., can allocate the Fund's investments among these different types of
securities in different proportions at different times to seek the Fund's
objective. That allocation is based on the Manager's judgment of where the best
opportunities are for total return after evaluating market and economic
conditions.
At least 25% of the Fund's total assets normally will be invested in
fixed-income senior securities. Otherwise, the Fund is not required to allocate
its investments among stocks, bonds and money market instruments in any fixed
proportion but may have none or some of its assets invested in each asset class
in relative proportions that change over time.
EquitySecurities. The Fund can buy a variety of domestic and foreign equity
investments, including common and preferred stocks, warrants and
convertible securities (many of which are debt securities that the Manager
considers to be "equity substitutes" because of their conversion feature).
The Fund can buy securities of companies in different capitalization
ranges.
Debt Securities. The Fund can invest in a variety of debt securities (including
convertible securities), such as securities issued or guaranteed by the
U.S. government and its agencies and instrumentalities, including
mortgage-related securities and collateralized mortgage obligations
("CMOs"). It also can buy municipal securities, foreign government
securities, and domestic and foreign corporate debt obligations. The Fund
can buy debt securities rated below investment grade (these are commonly
called "junk bonds"), but has limits on those investments, as discussed
below.
Money Market Instruments. Under normal market conditions (when the equity and
debt securities markets are not unstable, in the Manager's view), the Fund
can hold up to 40% of its total assets in money market instruments, such
as short-term U.S. government securities and commercial paper.
HOW DO THE PORTFOLIO MANAGERS DECIDE WHAT SECURITIES TO BUY OR SELL? In
selecting securities for purchase or sale by the Fund, the Fund's portfolio
managers follow an investment process that uses quantitative tools to analyze
market dynamics and economic trends, to determine the allocation of the Fund's
portfolio among different asset classes. In selecting stocks for the portfolio,
the portfolio managers use a disciplined value investment style. While this
process and the inter-relationship of the factors used may change over time and
its implementation may vary in particular cases, in general the investment
selection process currently includes the strategies described below:
o The portfolio managers use a quantitative analysis of the equity and debt
securities markets in combination with their individual analysis and
judgment to determine the allocation of the Fund's portfolio among the
asset classes. They analyze market trends, general economic data and
relative performance of the asset classes in which the Fund can invest.
For example, during periods of slowing corporate growth rates, they might
shift more assets to bonds and other fixed-income securities.
o In selecting stocks, they use value investing techniques to identify a
universe of stocks that are undervalued in the market, focusing on stocks
that have lower price/earnings (P/E) ratios compared, for example, to the
P/E ratio of the S&P 500 Index.
o The portfolio managers use both quantitative tools and fundamental
analysis, including internal research and reports by other market
analysts, to identify stocks within the selected universe that may provide
growth opportunities, for example, by selecting stocks of issuers that
have better earnings than analysts have expected ("positive earnings
surprise"). The expectation is that these stocks will increase in value
when the market re-evaluates the issuers and the price/earnings ratios of
their stocks.
o If the P/E ratio of a stock held by the Fund moves significantly above the
P/E ratio of the broad market benchmark the portfolio managers use, or if
the issuer's business fundamentals deteriorate, the portfolio managers
will consider selling the stock.
In selecting bonds, the portfolio managers normally expect that portion of
the Fund's portfolio to have an average maturity (measured on a dollar-weighted
basis) of between 6 and 14 years.
WHO IS THE FUND DESIGNED FOR? The Fund is designed primarily for investors
seeking total investment return over the long term from a flexible portfolio
investing in different asset classes, including stocks and bonds. Because the
Fund generally invests a substantial portion of its assets in stocks, those
investors should be willing to assume the risks of short-term share price
fluctuations that are typical for a fund that can have substantial stock
investments. Since the Fund's income level will fluctuate and generally will not
be significant, it is not designed for investors needing an assured level of
current income. Because of its focus on long-term total return, the Fund may be
appropriate for a portion of a retirement plan investment. However, the Fund is
not a complete investment program.
Main Risks of Investing in the Fund
All investments have risks to some degree. The Fund's investments are subject to
changes in value from a number of factors described below. There is also the
risk that poor security selection by the Manager will cause the Fund to under
perform other funds having similar objectives. The share price of the Fund will
change daily based on changes in market prices of securities and market
conditions, and in response to other economic events.
Risks of Investing in Stocks. Stocks fluctuate in price, and their short-term
volatility at times may be great. Because the Fund currently has substantial
investments in stocks, the value of the Fund's portfolio will be affected by
changes in the stock markets. Market risk will affect the Fund's per share
prices, which will fluctuate as the values of the Fund's portfolio securities
change.
A variety of factors can affect the price of a particular stock and the
prices of individual stocks do not all move in the same direction uniformly or
at the same time. Different stock markets may behave differently from each
other. In particular, because the Fund currently emphasizes investments in
stocks of U.S. issuers, it will be affected primarily by changes in U.S. stock
markets.
Additionally, stocks of issuers in a particular industry may be affected
by changes in economic conditions that affect that industry more than others, or
by changes in government regulations, availability of basic resources or
supplies, or other events. To the extent that the Fund emphasizes investments in
a particular industry, its share values may fluctuate in response to events
affecting that industry.
Other factors can affect a particular stock's price, such as poor earnings
reports by the issuer, loss of major customers, major litigation against the
issuer, or changes in government regulations affecting the issuer. The Fund can
invest in securities of large companies but it can also buy stocks of small- and
medium-size companies, which may have more volatile stock prices than stocks of
large companies.
CREDIT RISK. Debt securities are subject to credit risk. Credit risk relates to
the ability of the issuer of a security to make interest and principal payments
on the security as they become due. If the issuer fails to pay interest, the
Fund's income might be reduced, and if the issuer fails to repay principal, the
value of that security and of the Fund's shares might be reduced. While the
Fund's investments in U.S. government securities are subject to little credit
risk, the Fund's other investments in debt securities, particularly high-yield,
lower-grade debt securities, are subject to risks of default.
INTEREST RATE RISKS. Debt securities are subject to changes in value when
prevailing interest rates change. When interest rates fall, the values of
outstanding debt securities generally rise. When interest rates rise, the values
of outstanding debt securities generally fall, and the securities may sell at a
discount from their face amount. The magnitude of these price changes is
generally greater for debt securities with longer-term maturities. However,
interest rate changes may have different effects on the values of
mortgage-related securities because of prepayment risks, discussed below.
HOW RISKY IS THE FUND OVERALL? The risks described above collectively form the
overall risk profile of the Fund, and can affect the value of the Fund's
investments, its investment performance and the prices of its shares. Particular
investments and investment strategies also have risks. These risks mean that you
can lose money by investing in the Fund. When you redeem your shares, they may
be worth more or less than what you paid for them. There is no assurance that
the Fund will achieve its investment objective.
The stock markets can be volatile, and the price of the Fund's shares will
go up and down as a result. The Fund's income-oriented investments may help
cushion the Fund's total return from changes in stock prices, but fixed-income
securities have their own risks. The Fund seeks to reduce the effects of these
risks by diversifying its investments over different asset classes. In the
OppenheimerFunds spectrum, the Fund is generally more conservative than funds
that invest only in stocks, but more aggressive than funds that invest solely in
investment-grade bonds.
The Fund's Past Performance
The bar chart and table below show one measure of the risks of investing in the
Fund, by showing changes in the Fund's performance (for its Class A shares) from
year to year for the last ten calendar years and by showing how the average
annual total returns of the Fund's Class A shares compare to those of a
broad-based market index and a secondary index. The Fund's past investment
performance is not necessarily an indication of how the Fund will perform in the
future.
Annual Total Returns (Class A) (as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing annual total returns]
Sales charges are not included in the calculations of return in this bar chart,
and if those charges were included, the returns would be less than those shown.
During the period shown in the bar chart, the highest return (not annualized)
for a calendar quarter was 12.09% (4Q'98) and the lowest return (not annualized)
for a calendar quarter was -8.60% (3Q'90).
- --------------------------------------------------------------------------------
Average Annual Total 5 Years
Returns for the periods 1 Year (or life of
ended December 31, 1999 class, if less) 10 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares (inception -7.43% 10.45% 10.12%
9/16/85)
- --------------------------------------------------------------------------------
S & P 500 Index 21.03% 28.54% 18.19%1
- --------------------------------------------------------------------------------
Merrill Lynch Gov't/Corp. -2.05% 7.61% 7.70%1
Master Index
- --------------------------------------------------------------------------------
Class B Shares (inception -6.83% 8.48% N/A
10/02/95)
- --------------------------------------------------------------------------------
Class C Shares (inception -3.34% 8.42% N/A
5/01/96)
- --------------------------------------------------------------------------------
1. From 12/31/89.
The Fund's average annual total returns include the applicable sales charge: for
Class A, the current maximum initial sales charge of 5.75%; for Class B, the
contingent deferred sales charges of 5% (1-year) and 2% (life of class); and for
Class C, the 1% contingent deferred sales charge for the 1-year period. The
Fund's returns measure the performance of a hypothetical account and assume that
all dividends and capital gains distributions have been reinvested in additional
shares. The performance of the Fund's Class A shares is compared to the S & P
500 Index, an unmanaged index of common stocks, and the Merrill Lynch Government
and Corporate Master Index, a broad-based index of U.S. Treasury and government
agency securities, corporate and Yankee bonds. Index performance reflects the
reinvestment of income but does not reflect transaction costs. The Fund's
investments vary from the securities in the indices.
Fees and Expenses of the Fund
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services. Those expenses
are subtracted from the Fund's assets to calculate the Fund's net asset values
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
the fees and expenses you may pay if you buy and hold shares of the Fund. The
numbers below are based on the Fund's expenses during its fiscal year ended
October 31, 1999.
Shareholder Fees (charges paid directly from your investment):
- -----------------------------------------------------------------
Class A Class B Class C
Shares Shares Shares
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Maximum Sales Charge
(Load) on purchases 5.75% None None
(as % of offering price)
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as % of
the lower of the None1 5%2 1%3
original offering price
or redemption proceeds)
- -----------------------------------------------------------------
1. A contingent deferred sales charge may apply to redemptions of investments of
$1 million or more ($500,000 for retirement plan accounts) of Class A shares.
See "How to Buy Shares" for details.
2. Applies to redemptions in first year after purchase. The contingent deferred
sales charge declines to 1% in the sixth year and is eliminated after that.
3. Applies to shares redeemed within 12 months of purchase.
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
- ------------------------------------------------------------------
Class A Class B Class C
Shares Shares Shares
- ------------------------------------------------------------------
- ------------------------------------------------------------------
Management Fees 0.62% 0.62% 0.62%
- ------------------------------------------------------------------
- ------------------------------------------------------------------
Distribution and/or 0.24% 1.00% 1.00%
Service (12b-1) Fees
- ------------------------------------------------------------------
- ------------------------------------------------------------------
Other Expenses 0.18% 0.18% 0.18%
- ------------------------------------------------------------------
- ------------------------------------------------------------------
Total Annual Operating 1.04% 1.80% 1.80%
Expenses
- ------------------------------------------------------------------
Expenses may vary in future years. "Other expenses" include transfer agent fees,
custodial expenses, and accounting and legal expenses the Fund pays.
Examples. The following examples are intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds. The
examples assume that you invest $10,000 in a class of shares of the Fund for the
time periods indicated and reinvest your dividends and distributions.
The first example assumes that you redeem all of your shares at the end of
those periods. The second example assumes that you keep your shares. Both
examples also assume that your investment has a 5% return each year and that the
class's operating expenses remain the same. Your actual costs may be higher or
lower because expenses will vary over time. Based on these assumptions your
expenses would be as follows:
- --------------------------------------------------------------------------------
If shares are redeemed: 1 Year 3 Years 5 Years 10 Years1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares $675 $887 $1,116 $1,773
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares $683 $866 $1,175 $1,733
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares $283 $566 $975 $2,116
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If shares are not 1 Year 3 Years 5 Years 10 Years1
redeemed:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares $675 $887 $1,116 $1,773
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares $183 $566 $975 $1,733
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares $183 $566 $975 $2,116
- --------------------------------------------------------------------------------
In the first example, expenses include the initial sales charge for Class A and
the applicable Class B or Class C contingent deferred sales charges. In the
second example, the Class A expenses include the sales charge, but Class B and
Class C expenses do not include the contingent deferred sales charges. 1. Class
B expenses for years 7 through 10 are based on Class A expenses, since Class B
shares automatically convert to Class A after 6 years.
About the Fund's Investments
THE FUND'S PRINCIPAL INVESTMENT POLICIES. The allocation of the Fund's portfolio
among the different types of investments will vary over time based upon the
evaluation of economic and market trends by the Manager. The Fund's portfolio
might not always include all of the different types of investments described
below. The Statement of Additional Information contains more detailed
information about the Fund's investment policies and risks.
The Manager tries to reduce risks by carefully researching securities
before they are purchased, and in some cases by using hedging techniques. The
Fund attempts to reduce its exposure to market risks by diversifying its
investments, that is, by not holding a substantial amount of securities of any
one issuer and by not investing too great a percentage of the Fund's assets in
any one company. Also, the Fund does not concentrate 25% or more of its
investments in any one industry or the securities of any one foreign government.
However, changes in the overall market prices of securities and any income
they may pay can occur at any time. The share price and yield of the Fund will
change daily based on changes in market prices of securities and market
conditions, and in response to other economic events.
Stock and Other Equity Investments. The Fund can invest in equity securities of
issuers that may be of small, medium or large capitalization, to seek
total investment return. The Fund can invest in common stock as well as
other equity securities, including preferred stocks, rights and warrants,
and securities convertible into common stock. The Fund can buy securities
issued by domestic or foreign companies. However, the Fund's investments
in stocks are currently focused on those of U.S. issuers.
Debt Securities. The Fund can invest in a variety of debt securities to seek
its objective. The debt securities the Fund buys may be rated by
nationally recognized rating organizations or they may be unrated
securities assigned an equivalent rating by the Manager. The Fund's debt
investments may be "investment grade" (that is, in the four highest rating
categories of a national rating organization) or may be lower-grade
securities (sometimes called "junk bonds") rated as low as "B." The Fund
does not invest more than 10% of its total assets in unrated debt
securities. A description of the ratings definitions of national rating
organizations is included in Appendix A to the Statement of Additional
Information.
While the Fund can invest as much as 20% of its total assets in
lower-grade securities, currently it does not intend to invest more than
10% of its total assets in these investments. Lower-grade debt securities
may be subject to greater market fluctuations and greater risks of loss of
income and principal than investment-grade debt securities. Securities
that are (or that have fallen) below investment grade are exposed to a
greater risk that the issuers of those securities might not meet their
debt obligations. These risks can reduce the Fund's share prices and the
income it earns.
U.S. Government Securities. The Fund can invest in securities issued or
guaranteed by the U.S. Treasury or other government agencies or
federally-chartered corporate entities referred to as "instrumentalities."
These are referred to as "U.S. government securities" in this Prospectus.
o U.S. Treasury Obligations. These include Treasury bills (having
maturities of one year or less when issued), Treasury notes (having
maturities of more than one year and up to ten years when issued), and
Treasury bonds (having maturities of more than ten years when issued).
Treasury securities are backed by the full faith and credit of the United
States as to timely payments of interest and repayments of principal. The
Fund also can buy U. S. Treasury securities that have been "stripped" of
their coupons by a Federal Reserve Bank, zero-coupon U.S. Treasury
securities, and Treasury Inflation-Protection Securities.
o Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities. These include direct obligations and mortgage-related
securities that have different levels of credit support from the U.S.
government. Some are supported by the full faith and credit of the U.S.
government, such as Government National Mortgage Association pass-through
mortgage certificates (called "Ginnie Maes"). Some are supported by the
right of the issuer to borrow from the U.S. Treasury under certain
circumstances, such as Federal National Mortgage Association bonds ("Fannie
Maes"). Others are supported only by the credit of the entity that issued
them, such as Federal Home Loan Mortgage Corporation obligations ("Freddie
Macs").
o Mortgage-Related U.S. Government Securities. The Fund can buy interests
in pools of residential or commercial mortgages, in the form of CMO and
other "pass-through" mortgage securities. CMOs that are U.S. government
securities have collateral to secure payment of interest and principal.
They may be issued in different series, each having different interest
rates and maturities. The collateral is either in the form of mortgage
pass-through certificates issued or guaranteed by a U.S. agency or
instrumentality or mortgage loans insured by a U.S. government agency. The
Fund can have substantial amounts of its assets invested in
mortgage-related U.S. government securities.
The prices and yields of CMOs are determined, in part, by
assumptions about the cash flows from the rate of payments of the
underlying mortgages. Changes in interest rates may cause the rate of
expected prepayments of those mortgages to change. In general, prepayments
increase when general interest rates fall and decrease when general
interest rates rise.
o Private-Issuer Mortgage-Backed Securities. The Fund can invest a
substantial portion of its assets in mortgage-backed securities issued by
private issuers, which do not offer the credit backing of U.S. government
securities. Primarily these include multi-class debt or pass-through
certificates secured by mortgage loans. They may be issued by banks,
savings and loans, mortgage bankers and other non-governmental issuers.
Private issuer mortgage-backed securities are subject to the credit risks
of the issuers (as well as the interest rate risks and prepayment risks of
CMOs), although in some cases they may be supported by insurance or
guarantees.
Prepayment Risk. Mortgage-related securities are subject to the risks of
unanticipated prepayment. The risk is that when interest rates fall,
borrowers under the mortgages that underlie these securities will prepay
their mortgages more quickly than expected, causing the issuer of the
security to prepay the principal to the Fund prior to the security's
expected maturity. The Fund may be required to reinvest the proceeds at a
lower interest rate, reducing its income. Mortgage-related securities
subject to prepayment risk generally offer less potential for gains when
prevailing interest rates fall and have greater potential for loss when
prevailing interest rates rise. The impact of prepayments on the price of
a security may be difficult to predict and may increase the volatility of
the price. If the Fund buys mortgage-related securities at a premium,
accelerated prepayments on those securities could cause the Fund to lose a
portion of its principal investment represented by the premium.
If interest rates rise rapidly, prepayments of mortgages may occur at a
slower rate than expected, and the expected maturity of long-term or
medium-term mortgage-related securities could lengthen as a result. That
could cause their values to fluctuate more, and the prices of the Fund's
shares, to fall.
Money Market Instruments and Short-Term Debt Securities. Under normal market
conditions the Fund can invest in a variety of short-term debt obligations
having a maturity of one year or less. These include:
o Money market instruments. Generally, these are debt obligations having
ratings in the top two rating categories of national rating organizations
(or equivalent ratings assigned by the Manager). Examples include
commercial paper of domestic issuers or foreign companies (foreign issuers
must have assets of $1 billion or more).
o Short-term debt obligations of the U.S. government or corporations.
o Obligations of domestic or foreign banks or savings and loan associations,
such as certificates of deposit and bankers' acceptances. Under normal
market conditions this strategy would be used primarily for cash
management or liquidity purposes. The yields on shorter-term debt
obligations tend to be less than on longer-term debt. Therefore, to the
extent that the Fund uses this strategy, it might help preserve principal
but might reduce opportunities to seek growth of capital as part of its
objective of total return.
Can the Fund's Investment Objective and Policies Change? The Fund's Board
of Directors can change non-fundamental investment policies without
shareholder approval, although significant changes will be described in
amendments to this Prospectus. Fundamental policies cannot be changed
without the approval of a majority of the Fund's outstanding voting shares.
The Fund's investment objective is not a fundamental policy. Investment
restrictions that are fundamental policies are listed in the Statement of
Additional
Information. An investment policy is not fundamental unless this Prospectus
or the
Statement of Additional Information says that it is.
OTHER INVESTMENT STRATEGIES. To seek its objective, the Fund can use the
investment techniques and strategies described below. The Manager might not
always use all of them. These techniques have risks, although some are designed
to help reduce overall investment or market risks.
Zero-Coupon and "Stripped" Securities. Some of the government and corporate debt
securities the Fund buys are zero-coupon bonds that pay no interest. They
are issued at a substantial discount from their face value. "Stripped"
securities are the separate income or principal components of a debt
security. Some CMOs or other mortgage-related securities may be stripped,
with each component having a different proportion of principal or interest
payments. One class might receive all the interest and the other all the
principal payments.
Zero-coupon and stripped securities are subject to greater fluctuations in
price from interest rate changes than interest-bearing securities. The
Fund may have to pay out the imputed income on zero-coupon securities
without receiving the actual cash currently. Interest-only securities are
particularly sensitive to changes in interest rates.
The values of interest-only mortgage-related securities are also very
sensitive to prepayments of underlying mortgages. Principal-only
securities are also sensitive to changes in interest rates. When
prepayments tend to fall, the timing of the cash flows to these securities
increases, making them more sensitive to changes in interest rates. The
market for some of these securities may be limited, making it difficult
for the Fund to dispose of its holdings at an acceptable price. The Fund
can invest up to 50% of its total assets in zero-coupon securities issued
by either the U.S. government or U.S. companies.
Foreign Securities. The Fund can buy equity or debt securities of companies and
debt securities of governments in any country, developed or
underdeveloped. As a fundamental policy, the Fund cannot invest more than
10% of its total assets in foreign securities. As an exception to that
restriction the Fund can invest up to 25% of its total assets in foreign
equity or debt securities that are:
o issued, assumed or guaranteed by foreign governments or their political
subdivisions or instrumentalities,
o assumed or guaranteed by domestic issuers (including Eurodollar securities),
or
o issued, assumed or guaranteed by foreign issuers that have a class of
securities listed for trading on The New York Stock Exchange.
While foreign securities offer special investment opportunities, there are
also special risks, such as foreign taxation, risks of delays in
settlements of securities transactions, and the effects of a change in
value of a foreign currency against the U.S. dollar, which will result in
a change in the U.S. dollar value of securities denominated in that
foreign currency.
Derivative Investments. In general terms, a derivative investment is an
investment contract whose value depends on (or is derived from) the value
of an underlying asset, interest rate or index. Options, futures,
mortgage-related securities, asset-backed securities and "stripped"
securities are examples of derivatives the Fund can use. Currently the
Fund does not use derivative investments to a significant degree.
o There are Special Risks in Using Derivative Investments. If the issuer of
the derivative does not pay the amount due, the Fund can lose money on the
investment. Also, the underlying security or investment on which the
derivative is based, and the derivative itself, might not perform the way
the Manager expected it to perform. If that happens, the Fund's share
prices could decline or the Fund could get less income than expected.
Interest rate and stock market changes in the U.S. and abroad may also
influence the performance of derivatives. Some derivative investments held
by the Fund may be illiquid. The Fund has limits on the amount of
particular types of derivatives it can hold. However, using derivatives can
cause the Fund to lose money on its investment and/or increase the
volatility of its share prices.
o Hedging. The Fund can buy and sell certain kinds of futures contracts, put
and call options, forward contracts and options on futures and
broadly-based securities indices. These are all referred to as "hedging
instruments." The Fund is not required to use hedging instruments to seek
its objective. The Fund does not use hedging instruments for speculative
purposes.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. For example, if a covered call written by the Fund is
exercised on an investment that has increased in value, the Fund will be
required to sell the investment at the call price and will not be able to
realize any profit if the investment has increased in value above the call
price. In writing a put, there is a risk that the Fund may be required to
buy the underlying security at a disadvantageous price.
If the Manager used a hedging instrument at the wrong time or judged
market conditions incorrectly, the strategy could 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.
Temporary Defensive Investments. When market or economic conditions are unstable
or adverse, the Fund can invest up to 100% of its assets in defensive
securities. Generally, they would be short-term U.S. government
securities, high-grade commercial paper, bank obligations or repurchase
agreements. To the extent the Fund invests defensively in these
securities, it might not achieve its investment objective.
Convertible Securities. Many convertible securities are a form of debt security,
but the Manager regards some of them as "equity substitutes" because of
their feature allowing them to be converted into common stock. Therefore,
their ratings have less impact on the Manager's investment decision than
in the case of other debt securities. The Fund's investments in
convertible securities may include securities rated as low as "B" by
Moody's Investor Services, Inc. or Standard & Poor's Rating Service or
having comparable ratings by other national rating organizations (or, if
they are unrated, having comparable ratings assigned by the Manager).
Those ratings are below "investment grade" and the securities are subject
to greater risk of default by the issuer than investment-grade securities.
Asset-Backed Securities. The Fund can buy asset-backed securities, which are
fractional interests in pools of loans collateralized by the loans or
other assets or receivables. They are issued by trusts and special purpose
corporations that pass the income from the underlying pool to the buyer of
the interest. These securities are subject to the risk of default by the
issuer as well as by the borrowers of the underlying loans in the pool.
Portfolio Turnover. The Fund may engage in short-term trading to try to achieve
its objective. Portfolio turnover affects brokerage costs the Fund pays,
and the Fund's performance. If the Fund realizes capital gains when it
sells its portfolio investments, it must generally pay those gains out to
shareholders, increasing their taxable distributions. The Financial
Highlights table at the end of this Prospectus shows the Fund's portfolio
turnover rates during prior fiscal years.
How the Fund Is Managed
THE MANAGER. The Manager chooses the Fund's investments and handles its
day-to-day business. The Manager carries out its duties, subject to the policies
established by the Fund's Board of Directors, under an investment advisory
agreement that states the Manager's responsibilities. The agreement sets the
fees the Fund pays to the Manager and describes the expenses that the Fund is
responsible to pay to conduct its business.
The Manager has been as an investment advisor since January 1960. The
Manager (including subsidiaries and an affiliate) managed more than $120 billion
in assets as of December 31, 1999, including other Oppenheimer funds, with more
than 5 million shareholder accounts. The Manager is located at Two World Trade
Center, 34th Floor, New York, New York 10048-0203.
Portfolio Managers. The Fund has a portfolio management team consisting of five
portfolio managers. The principal portfolio manager, Peter M. Antos, is a
Vice President of the Fund and a Senior Vice President of the Manager. He
has been the Fund's senior portfolio manager since 1989 and is an officer
and portfolio manager of other Oppenheimer funds. Prior to joining the
Manager in 1996, he was employed by the G.R. Phelps & Co., Inc., the Fund's
prior investment adviser, and its parent, Connecticut Mutual Life Insurance
Company.
Portfolio managers Stephen F. Libera, Michael C. Strathearn, Kenneth B.
White and Arthur J. Zimmer are also Vice Presidents of the Fund. Mr. Zimmer
is a Senior Vice President of the Manager. Messrs. Libera, Strathearn and
White are Vice Presidents of the Manager. Each serves as an officer and
portfolio manager of other Oppenheimer funds. Before joining the Manager in
1996, Messrs. Libera, Strathearn and White were
employed as portfolio managers by Connecticut Mutual Life Insurance
Company. Mr. Libera has been a portfolio manager of the Fund since 1985,
Mr. Strathearn since 1988, Mr. White since 1992, and Mr. Zimmer since 1996.
Advisory Fees. Under the Investment Advisory Agreement, the Fund pays the
Manager an advisory fee at an annual rate that declines as the Fund's
assets grow: 0.625% of the first $300 million of average annual net assets
of the Fund, 0.500% of the next $100 million, and 0.450% of average annual
net assets in excess of $400 million. The Fund's management fee for its
last fiscal year ended October 31, 1999, was 0.62% of average annual net
assets for each class of shares.
ABOUT YOUR ACCOUNT
How to Buy Shares
HOW DO you buy SHARES? You can buy shares several ways, as described below. The
Fund's Distributor, OppenheimerFunds Distributor, Inc., may appoint servicing
agents to accept purchase (and redemption) orders. The Distributor, in its sole
discretion, may reject any purchase order for the Fund's shares.
BuyingShares Through Your Dealer. You can buy shares through any dealer,
broker, or financial institution that has a sales agreement with the
Distributor. Your dealer will place your order with the Distributor on
your behalf.
BuyingShares 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, we recommend that you discuss
your investment with a financial advisor before you make a purchase to be
sure that the Fund is appropriate for you.
o Paying by Federal Funds Wire. Shares purchased through the Distributor may
be paid for by Federal Funds wire. The minimum investment is $2,500.
Before sending a wire, call the Distributor's Wire Department at
1.800.525.7048 to notify the Distributor of the wire and to receive
further instructions.
o Buying Shares Through OppenheimerFunds AccountLink. With AccountLink, you
pay for shares by electronic funds transfers from your bank account.
Shares are purchased for your account by a transfer of money from your
bank account through the Automated Clearing House (ACH) system. You can
provide those instructions automatically, under an Asset Builder Plan,
described below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. Please refer to "AccountLink," below for
more details.
o Buying Shares Through 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 in the Asset Builder
Application and the Statement of Additional Information.
How Much Must You Invest? You can buy Fund shares with a minimum initial
investment of $1,000 and make additional investments at any time with as little
as $25. There are reduced minimum investments under special investment plans.
o With Asset Builder Plans, 403(b) plans, Automatic Exchange Plans and
military allotment plans, you can make initial and subsequent investments
for as little as $25. You can make additional purchases of at least $25
through AccountLink.
o Under retirement plans, such as IRAs, pension and profit-sharing plans and
401(k) plans, you can start your account with as little as $250. If your
IRA is started as an Asset Builder Plan, the $25 minimum applies.
Additional purchases may be for as little as $25.
o The minimum investment requirement does not apply to 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 reinvesting distributions from unit investment
trusts that have made arrangements with the Distributor.
At What Price Are Shares Sold? Shares are sold at their offering price, which is
the net asset value per share plus any initial sales charge that applies. The
offering price that applies to a purchase order is based on the next calculation
of the net asset value per share that is made after the Distributor receives the
purchase order at its offices in Colorado, or after any agent appointed by the
Distributor receives the order and sends it to the Distributor.
Net Asset Value. The Fund calculates the net asset value of each class of
shares as of the close of The New York Stock Exchange, on each day the
Exchange is open for trading (referred to in this Prospectus as a "regular
business day"). The Exchange normally closes at 4:00 P.M., New York time,
but may close earlier on some days. All references to time in this
Prospectus mean "New York time."
The net asset value per share is determined 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. To determine net asset value, the Fund's Board
of Directors has established procedures to value the Fund's securities, in
general, based on market value. The Board has adopted special procedures
for valuing illiquid securities and obligations for which market values
cannot be readily obtained.
The Offering Price. To receive the offering price for a particular day, in
most cases the Distributor or its designated agent must receive your order
by the time of day The New York Stock Exchange closes that day. If your
order is received on a day when the Exchange is closed or after it has
closed, the order will receive the next offering price that is determined
after your order is received.
BuyingThrough a Dealer. If you buy shares through a dealer, your dealer must
receive the order by the close of The New York Stock Exchange and transmit
it to the Distributor so that it is received before the Distributor's
close of business on a regular business day (normally 5:00 P.M.) to
receive that day's offering price. Otherwise, the order will receive the
next offering price that is determined.
WHAT CLASSES OF SHARES DOES THE FUND OFFER? The Fund offers investors four
different classes of shares. The different classes of shares represent
investments in the same portfolio of securities, but the classes are
subject to different expenses and will likely have different share prices.
When you buy shares, be sure to specify the class of shares. If you do not
choose a class, your investment will be made in Class A shares.
Class A Shares. If you buy Class A shares, you pay an initial sales charge (on
investments up to $1 million for regular accounts or $500,000 for certain
retirement plans). The amount of that sales charge will vary depending on
the amount you invest. The sales charge rates are listed in "How Can You
Buy Class A Shares?" below.
Class B Shares. If you buy Class B shares, you pay no sales charge at the time
of purchase, but you will pay an annual asset-based sales charge. If you
sell your shares within six years of buying them, you will normally pay a
contingent deferred sales charge. That contingent deferred sales charge
varies depending on how long you own your shares, as described in "How Can
You Buy Class B Shares?" below.
Class C Shares. If you buy Class C shares, you pay no sales charge at the time
of purchase, but you will pay an annual asset-based sales charge. 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 "How Can You Buy
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 best
suited to your needs depends on a number of factors that you should discuss with
your financial advisor. Some 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.
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 discussion below is not intended to be investment advice or a
recommendation, because each investor's financial considerations are different.
The discussion below assumes that you will purchase only one class of shares,
and not a combination of shares of different classes. Of course, these examples
are based on approximations of the effects of current sales charges and expenses
projected over time, and do not detail all of the considerations in selecting a
class of shares. You should analyze your options carefully with your financial
advisor before making that choice.
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,
compared to the effect over time of higher class-based expenses on shares
of Class B or Class C .
o Investing for the Shorter Term. While the Fund is meant to be a long-term
investment, if you have a relatively 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. That is because of the effect of the Class B contingent deferred
sales charge if you redeem within six 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 as 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.
And for investors who invest $1 million or more, in most cases Class A
shares will be the most advantageous choice, no matter how long you intend
to hold your shares. For that reason, the Distributor normally will not
accept purchase orders of $500,000 or more of Class B shares or $1 million
or more of Class C shares from a single investor.
o Investing for the Longer Term. If you are investing less than $100,000 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
appropriate.
Are There Differences in Account Features That Matter to You? Some account
features may not be available to Class B or Class C shareholders. Other
features may not be advisable (because of the effect of the contingent
deferred sales charge) for Class B or Class C shareholders. Therefore, you
should carefully review how you plan to use your investment account before
deciding which class of shares to buy.
Additionally, the dividends payable to Class B and Class C shareholders
will be reduced by the additional expenses borne by those classes that are
not borne by Class A shares, such as the Class B and Class C asset-based
sales charge described below and in the Statement of Additional
Information. Share certificates are not available for Class B and Class C
shares, and if you are considering using your shares as collateral for a
loan, that may be a factor to consider.
How Do Share Classes Affect Payments to My Broker? A financial advisor may
receive different compensation for selling one class of shares than for
selling another class. It is important to remember that Class B and Class
C contingent deferred sales charges and asset-based sales charges have the
same purpose as the front-end sales charge on sales of Class A shares: to
compensate the Distributor for commissions and expenses it pays to dealers
and financial institutions for selling shares. The Distributor may pay
additional compensation from its own resources to securities dealers or
financial institutions based upon the value of shares of the Fund owned by
the dealer or financial institution for its own account or for its
customers.
Special Sales Charge Arrangements and Waivers. Appendix C to the Statement of
Additional Information details the conditions for the waiver of sales charges
that apply in certain cases, and the special sales charge rates that apply to
purchases of shares of the Fund by certain groups or under specified retirement
plan arrangements or in other special types of transactions. To receive a waiver
or special sales charge rate, you must advise the Distributor when purchasing
shares or the Transfer Agent when redeeming shares that the special condition
applies.
HOW CAN you BUY CLASS A SHARES? Class A shares are sold at their offering price,
which is normally net asset value plus an initial sales charge. However, in some
cases, described below, purchases are not subject to an initial sales charge,
and the offering price will be the net asset value. In other cases, reduced
sales charges may be available, as described below or in the Statement of
Additional Information. 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 or allocated to
your dealer as commission. The Distributor reserves the right to reallow the
entire commission to dealers. The current sales charge rates and commissions
paid to dealers and brokers are as follows:
------------------------------------------------------------------------------
Front-End Sales
Front-End Sales Charge As a
Charge As a Percentage of Commission As
Percentage of Net Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Less than $25,000 5.75% 6.10% 4.75%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
$25,000 or more but 5.50% 5.82% 4.75%
less than $50,000
------------------------------------------------------------------------------
------------------------------------------------------------------------------
$50,000 or more but 4.75% 4.99% 4.00%
less than $100,000
------------------------------------------------------------------------------
------------------------------------------------------------------------------
$100,000 or more but 3.75% 3.90% 3.00%
less than $250,000
------------------------------------------------------------------------------
------------------------------------------------------------------------------
$250,000 or more but 2.50% 2.56% 2.00%
less than $500,000
------------------------------------------------------------------------------
------------------------------------------------------------------------------
$500,000 or more but 2.00% 2.04% 1.60%
less than $1 million
------------------------------------------------------------------------------
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
aggregating $1 million or more or for certain purchases by particular
types of retirement plans described in Appendix C to the Statement of
Additional Information. The Distributor pays dealers of record commissions
in an amount equal to 1.0% of purchases of $1 million or more (other than
purchases by those retirement accounts). For those retirement plan
accounts, the commission is 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, based on
the cumulative purchases during the prior 12 months ending with the
current purchase. In either case, the commission will be paid only on
purchases that were not previously subject to a front-end sales charge and
dealer commission.8 That commission will not be paid on purchases of
shares in amounts of $1 million or more (including any right of
accumulation) by a retirement plan that pays for the purchase with the
redemption of Class C shares of one or more Oppenheimer funds held by the
plan for more than one year.
If you redeem any of those shares within an 18-month "holding period"
measured from the end of the calendar month of their purchase, a
contingent deferred sales charge (called the "Class A contingent deferred
sales charge") may be deducted from the redemption proceeds. That sales
charge will be equal to 1.0% of the lesser of (1) the aggregate net asset
value of the redeemed shares at the time of redemption (excluding shares
purchased by reinvestment of dividends or capital gain distributions) or
(2) the original net asset value of the redeemed shares. The Class A
contingent deferred sales charge will not exceed the aggregate amount of
the commissions the Distributor paid to your dealer on all purchases of
Class A shares of all Oppenheimer funds you made that were subject to the
Class A contingent deferred sales charge.
Can You Reduce Class A Sales Charges? You may be eligible to buy Class A
shares at reduced sales charge rates under the Fund's "Right of
Accumulation" or a Letter of Intent, as described in "Reduced Sales
Charges" in the Statement of Additional Information.
HOW CAN you BUY 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 the end of the calendar month of their purchase, a contingent
deferred sales charge will be deducted from the redemption proceeds. The Class B
contingent deferred sales charge is paid to compensate the Distributor for its
expenses of providing distribution-related services to the Fund in connection
with the sale of Class B shares.
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 for the Class B contingent deferred sales
charge holding period:
Years Since Beginning of Month in Contingent Deferred Sales Charge on
Which Redemptions in That Year
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 In applying the sales charge, 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. Class B shares automatically
convert to Class A shares 72 months after you purchase them. 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 any Class B shares that
you hold convert, any other Class B shares that were acquired by
reinvesting dividends and distributions on the converted shares will
also convert to Class A shares. For further information on the
conversion feature and its tax implications, see "Class B
Conversion" in the Statement of Additional Information.
How Can you Buy 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 a holding period of 12 months from the end of the calendar month of their
purchase, a contingent deferred sales charge of 1.0% will be deducted from the
redemption proceeds. The Class C contingent deferred sales charge is paid to
compensate the Distributor for its expenses of providing distribution-related
services to the Fund in connection with the sale of Class C shares.
Distribution and Service (12b-1) Plans.
Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class A
shares. It reimburses the Distributor for a portion of its costs incurred
for services provided to accounts that hold Class A shares. Reimbursement
is made quarterly at an annual rate of up to 0.25% of the average annual
net assets of Class A shares of the Fund. The Distributor currently uses
all of those fees to pay dealers, brokers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares.
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
pay the Distributor for its services and costs in distributing Class B and
Class C shares and servicing accounts. Under the plans, the Fund pays the
Distributor an annual asset-based sales charge of 0.75% per year on Class
B shares and on Class C shares. The Distributor also receives a service
fee of 0.25% per year under each plan.
The asset-based sales charge and service fees increase Class B and Class C
expenses by 1.00% of the net assets per year of the respective class.
Because these fees are paid out of the Fund's assets on an ongoing basis,
over time these fees will increase the cost of your investment and may
cost you more than other types of sales charges.
The Distributor uses the service fees to compensate dealers for providing
personal services for accounts that hold Class B or Class C shares. The
Distributor pays the 0.25% service fees to dealers in advance for the
first year after the shares are sold by the dealer. 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 a sales concessions 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 sales of Class B
shares is therefore 4.00% of the purchase price. The Distributor retains
the Class B asset-based sales charge.
The Distributor currently pays a sales concessions of 0.75% of the
purchase price of Class C shares to dealers from its own resources at the
time of sale. Including the advance of the service fee, the total amount
paid by the Distributor to the dealer at the time of sale of Class C
shares is therefore 1.00% of the purchase price. The Distributor pays 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.
Special Investor Services
ACCOUNTLINK. You can use our AccountLink feature to link your Fund account with
an account at a U.S. bank or other financial institution. It must be an
Automated Clearing House (ACH) member. AccountLink lets you:
o transmit funds electronically to purchase shares by telephone (through a
service representative or by PhoneLink) or automatically under Asset
Builder Plans, or
o have the Transfer Agent send redemption proceeds or transmit dividends and
distributions directly to your bank account. Please call the Transfer
Agent for more information.
You may purchase shares 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.
AccountLink privileges should be requested on your Application or your
dealer's settlement instructions if you buy your shares through a 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.
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.
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.
CAN YOU SUBMIT TRANSACTION REQUESTS BY FAX? You may send requests for certain
types of account transactions to the Transfer Agent by fax (telecopier). Please
call 1.800.525.7048 for information about which transactions may be handled this
way. Transaction requests submitted by fax are subject to the same rules and
restrictions as written and telephone requests described in this Prospectus.
OPPENHEIMERFUNDS INTERNET WEB SITE. You can obtain information about the Fund,
as well as your account balance, on the OppenheimerFunds Internet web site, at
http://www.oppenheimerfunds.com. Additionally, shareholders listed in the
account registration (and the dealer of record) may request certain account
transactions through a special section of that web site. To perform account
transactions, you must first obtain a personal identification number (PIN) by
calling the Transfer Agent at 1.800.533.3310. If you do not want to have
Internet account transaction capability for your account, please call the
Transfer Agent at 1.800.525.7048.
AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The Fund has several plans that enable
you to sell shares automatically or exchange them to another OppenheimerFunds
account on a regular basis. Please call the Transfer Agent or consult the
Statement of Additional Information for details.
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 only 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.
RETIREMENT PLANS. You may buy shares of the Fund for your retirement plan
account. If you participate in a plan sponsored by your employer, the plan
trustee or administrator must buy the shares for your plan account. The
Distributor also offers a number of different retirement plans that individuals
and employers can use:
Individual Retirement Accounts (IRAs). These include regular IRAs, Roth IRAs,
SIMPLE IRAs, rollover IRAs and Education IRAs.
SEP-IRAs. These are Simplified Employee Pension Plan IRAs for small business
owners or self-employed individuals.
403(b)(7) Custodial Plans. These are tax-deferred plans for employees of
eligible tax-exempt organizations, such as schools, hospitals and charitable
organizations.
401(k) Plans. These are special retirement plans for businesses.
Pension and Profit-Sharing Plans. These plans are designed for businesses and
self-employed individuals.
Please call the Distributor for OppenheimerFunds retirement plan
documents, which include applications and important plan information.
How to Sell Shares
You can sell (redeem) 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 in proper form (which means that it must comply with the procedures
described below) and is accepted by the Transfer Agent. The Fund lets you sell
your shares by writing a letter or by telephone. You can also set up Automatic
Withdrawal Plans to redeem shares on a regular basis. 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 account, please call the Transfer Agent first, at 1.800.525.7048, for
assistance.
Certain Requests Require a Signature Guarantee. To protect you and the Fund from
fraud, the following redemption requests must be in writing and must
include a signature guarantee (although there may be other situations that
also require a signature guarantee):
o You wish to redeem $100,000 or more and receive a check
o The redemption check is not payable to all shareholders listed on the
account statement
o The redemption check is not sent to the address of record on your account
statement
o Shares are being transferred to a Fund account with a different owner or
name o Shares are being redeemed by someone (such as an Executor) other than
the
owners.
Where Can You Have Your Signature Guaranteed? The Transfer Agent will accept a
guarantee of your signature by a number of financial institutions,
including:
o a U.S. bank, trust company, credit union or savings association,
o a foreign bank that has a U.S. correspondent bank,
o a U.S. registered dealer or broker in securities, municipal securities or
government securities, or
o 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.
Retirement Plan Accounts. There are special procedures to sell shares in an
OppenheimerFunds retirement plan account. Call the Transfer Agent for a
distribution request form. Special income tax withholding requirements
apply to distributions from retirement plans. You must submit a
withholding form with your redemption request to avoid delay in getting
your money and if you do not want tax withheld. If your employer holds
your retirement plan account for you in the name of the plan, you must ask
the plan trustee or administrator to request the sale of the Fund shares
in your plan account.
Sending Redemption Proceeds by Wire. While the Fund normally sends your money by
check, you can arrange to have the proceeds of the shares you sell sent by
Federal Funds wire to a bank account you designate. It must be a
commercial bank that is a member of the Federal Reserve wire system. The
minimum redemption you can have sent by wire is $2,500. There is a $10 fee
for each wire. To find out how to set up this feature on your account or
to arrange a wire, call the Transfer Agent at 1.800.852.8457.
HOWDO you SELL SHARES BY MAIL? Write a letter of instruction that includes: o
Your name o The Fund's name o Your Fund account number (from your account
statement) o The dollar amount or number of shares to be redeemed o Any
special payment instructions o Any share certificates for the shares you are
selling o The signatures of all registered owners exactly as the account is
registered,
and
o Any special documents requested by the Transfer Agent to assure proper
authorization of the person asking to sell the shares.
Use the following address for Send courier or express mail
Requests by mail: requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue, Building D
Denver Colorado 80217 Denver, Colorado 80231
HOW DO you SELL SHARES BY TELEPHONE? You and your dealer representative of
record may also sell your shares by telephone. To receive the redemption price
calculated on a particular regular business day, your call must be received by
the Transfer Agent by the close of The New York Stock Exchange that day, which
is normally 4:00 P.M., but may be earlier on some days. You may not redeem
shares held in an OppenheimerFunds retirement plan account or under a share
certificate by telephone.
o To redeem shares through a service representative, call 1.800.852.8457 o To
redeem shares automatically on PhoneLink, call 1.800.533.3310
Whichever method you use, you may have a check sent to the address on the
account statement, or, if you have linked your Fund account to your bank account
on AccountLink, you may have the proceeds sent to that bank account.
Are There Limits on Amounts Redeemed by Telephone?
Telephone Redemptions Paid by Check. Up to $100,000 may be redeemed by telephone
in any 7-day period. The check must be payable to all owners of record of
the shares and must be sent to the address on the account statement. This
service is not available within 30 days of changing the address on an
account.
Telephone Redemptions Through AccountLink or by Wire. 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. If you have requested Federal Funds wire
privileges for your account, the wire of the redemption proceeds will
normally be transmitted on the next bank business day after the shares are
redeemed. There is a possibility that the wire may be delayed up to seven
days to enable the Fund to sell securities to pay the redemption proceeds.
No dividends are accrued or paid on the proceeds of shares that have been
redeemed and are awaiting transmittal by wire.
CAN YOU SELL 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. If your shares are held in the
name of your dealer, you must redeem them through your dealer.
how contingent deferred sales charges affect redemptions. If you purchase shares
subject to a Class A, Class B or Class C contingent deferred sales charge and
redeem any of those shares during the applicable holding period for the class of
shares, the contingent deferred sales charge will be deducted from the
redemption proceeds (unless you are eligible for a waiver of that sales charge
based on the categories listed in Appendix C to the Statement of Additional
Information) and you advise the Transfer Agent of your eligibility for the
waiver.
A contingent deferred sales charge will be based on the lesser of the net
asset value of the redeemed shares at the time of redemption or the original net
asset value. A contingent deferred sales charge is not imposed on:
o the amount of your account value represented by an increase in net asset
value over the initial purchase price,
o shares purchased by the reinvestment of dividends or capital gains
distributions, or
o shares redeemed in the special circumstances described in Appendix C to
the Statement of Additional Information.
To determine whether a 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 the holding period that applies to the class, and
3. shares held the longest during the holding period.
Contingent deferred sales charges are not charged when you exchange shares
of the Fund for shares of other Oppenheimer funds. However, if you exchange them
within the applicable contingent deferred sales charge holding period, the
holding period will carry over to the fund whose shares you acquire. Similarly,
if you acquire shares of this Fund by exchanging shares of another Oppenheimer
fund that are still subject to a contingent deferred sales charge holding
period, that holding period will carry over to this Fund.
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. Shares
of the Fund can be purchased by exchange of shares of other Oppenheimer funds on
the same basis. To exchange shares, you must meet several conditions:
o Shares of the fund selected for exchange must be available for sale in
your state of residence.
o The prospectuses of both funds must offer the exchange privilege. o You
must hold the shares you buy when you establish your account for at least
7 days before you can exchange them. After the account is open 7 days, you
can exchange shares every regular business day.
o You must meet the minimum purchase requirements for the fund whose shares
you purchase by exchange.
o Before exchanging into a fund, you must 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. In some cases, sales charges may be imposed on exchange
transactions. For tax purposes, exchanges of shares involve a sale 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. Please refer to "How to
Exchange Shares" in the Statement of Additional Information for more
details.
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.
HOW DO you SUBMIT EXCHANGE REQUESTS? 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
address on the back cover. Exchanges of shares held under certificates
cannot be processed unless the Transfer Agent receives the certificates
with the request.
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.
ARE THERE LIMITATIONS ON EXCHANGES? There are certain exchange policies you
should be aware of:
o Shares are normally redeemed from one fund and purchased from the other
fund in the exchange transaction on the same regular business day on which
the Transfer Agent receives an exchange request that conforms to the
policies described above. It must be received 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 seven days if it determines it would be
disadvantaged by a same-day exchange. For example, the receipt of multiple
exchange requests from a "market timer" might require the Fund to sell
securities at a
disadvantageous time or price.
o Because excessive trading can hurt fund performance and harm shareholders,
the Fund reserves the right to refuse any exchange request that it
believes will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
o The Fund may amend, suspend or terminate the exchange privilege at any
time. The Fund will provide you notice whenever it is required to do so by
applicable law, but it may impose changes at any time for emergency
purposes.
o If the Transfer Agent cannot exchange all the shares you request because
of a restriction cited above, only the shares eligible for exchange will
be exchanged.
Shareholder Account Rules and Policies
More information about the Fund's policies and procedures for buying, selling,
and exchanging shares is contained 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 Directors 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
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. The Transfer Agent and the Fund
will not be liable for losses or expenses arising out of telephone
instructions reasonably believed to be genuine.
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. The redemption price,
which is the net asset value per share, will normally differ for each
class of shares. The redemption value of your shares may be more or less
than their original cost.
Payment for redeemed shares ordinarily is made in cash. It is forwarded by check
or through AccountLink or by Federal Funds wire (as elected by the
shareholder) within seven days after the Transfer Agent receives
redemption instructions in proper form. However, under unusual
circumstances determined by the Securities and Exchange Commission,
payment may be delayed or suspended. For accounts registered in the name
of a broker-dealer, payment will normally be forwarded within three
business days after redemption.
The Transfer Agent may delay forwarding a check or processing a payment via
AccountLink for recently purchased shares, but only until the purchase
payment has cleared. That delay may be as much as 10 days from the date
the shares were purchased. That delay may be avoided if you purchase
shares by Federal Funds wire or certified check, or arrange with your bank
to provide telephone or written assurance to the Transfer Agent that your
purchase payment has cleared.
Involuntary redemptions of small accounts may be made by the Fund if the account
has fewer than 100 shares. In some cases involuntary redemptions may be
made to repay the Distributor for losses from the cancellation of share
purchase orders.
Sharesmay be "redeemed in kind" under unusual circumstances (such as a lack of
liquidity in the Fund's portfolio to meet redemptions). This means that
the redemption proceeds will be paid with liquid securities from the
Fund's portfolio.
"Backup withholding" of federal income tax may be applied against taxable
dividends, distributions and redemption proceeds (including exchanges) if
you fail to furnish the Fund your correct, certified Social Security or
Employer Identification Number when you sign your application, or if you
under-report your income to the Internal Revenue Service.
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 intends to declare dividends separately for each class of
shares from net investment income on a quarterly basis in March, June, September
and December on a date selected by the Board of Directors. Dividends and
distributions paid on Class A shares will generally be higher than dividends for
Class B and Class C shares, which normally have higher expenses than Class A.
The Fund has no fixed dividend rate and cannot guarantee that it will pay any
dividends or distributions.
Capital Gains. The Fund may realize capital gains on the sale of portfolio
securities. If it does, it may make distributions out of any net short-term or
long-term capital gains in December of each year. The Fund may make supplemental
distributions of dividends and capital gains following the end of its fiscal
year. There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
WHAT CHOICES DO YOU HAVE FOR RECEIVING DISTRIBUTIONS? When you open your
account, specify on your application how you want to receive your dividends and
distributions. You have four options:
Reinvest All Distributions in the Fund. You can elect to reinvest all dividends
and capital gains distributions in additional shares of the Fund.
Reinvest Dividends or Capital Gains. You can elect to reinvest some
distributions (dividends, short-term capital gains or long-term capital
gains distributions) in the Fund while receiving the other types of
distributions by check or having them sent to your bank account through
AccountLink.
Receive All Distributions in Cash. You can elect to receive a check for all
dividends and capital gains distributions or have them sent to your bank
through AccountLink.
Reinvest Your Distributions in Another OppenheimerFunds Account. You can
reinvest all distributions in the same class of shares of another
OppenheimerFunds account you have established.
Taxes. If your shares are not held in a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the Fund.
Distributions are subject to federal income tax and may be subject to state or
local taxes. Dividends paid from short-term capital gains and net investment
income are taxable as ordinary income. Long-term capital gains are taxable as
long-term capital gains when distributed to shareholders. It does not matter how
long you have held your shares. Whether you reinvest your distributions in
additional shares or take them in cash, the tax treatment is the same.
Every year the Fund will send you and the IRS a statement showing the
amount of any taxable distribution you received in the previous year. Any
long-term capital gains will be separately identified in the tax information the
Fund sends you after the end of the calendar year.
Avoid "Buying a Dividend." 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 taxable dividend or
capital gain.
Remember, There May be Taxes on Transactions. Because the Fund's share price
fluctuates, you may have a capital gain or loss when you sell or exchange
your shares. 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. Any
capital gain is subject to capital gains tax.
Returns of Capital Can Occur. 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.
This information is only a summary of certain federal income tax
information about your investment. You should consult with your tax advisor
about the effect of an investment in the Fund on your particular tax situation.
Financial Highlights
The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the past 5 fiscal years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by KPMG LLP, the Fund's independent auditors, whose
report, along with the Fund's financial statements, is included in the Statement
of Additional Information, which is available on request.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
YEAR YEAR
ENDED ENDED
OCT. 31, DEC. 31,
CLASS A 1999 1998
1997 1996(1) 1995 1994
===============================================================================================================================
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.45 $ 16.81 $
16.00 $ 15.46 $ 13.44 $ 14.54
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .44 .45
.51(2) .46 .60 .55
Net realized and unrealized gain (loss) (.01) .45
2.25(2) .49 2.59 (.86)
- -------------------------------------------------------------------------------
Total income (loss) from
investment operations .43 .90
2.76 .95 3.19 (.31)
- -------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.44) (.45)
(.56) (.36) (.60) (.55)
Distributions from net realized gain (.41) (1.81)
(1.39) (.05) (.57) (.24)
- -------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.85) (2.26)
(1.95) (.41) (1.17) (.79)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.03 $15.45
$16.81 $16.00 $15.46 $13.44
===============================================================================
===============================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 2.62% 5.93%
18.82% 6.27% 23.95% (2.11)%
===============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $258,159 $298,558
$243,267 $233,289 $218,099 $177,904
- -------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $293,677 $268,715
$238,821 $228,203 $200,172 $187,655
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income 2.72% 2.96%
3.17% 3.52% 4.00% 3.80%
Expenses 1.04% 1.04%(5)
1.11%(5) 1.11%(5) 1.17%(5) 0.96%
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 122% 97%
98% 85% 55% 115%
1. For the ten months ended October 31, 1996. The Fund changed its fiscal year
end from December 31 to October 31. On March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the Fund.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
4. Annualized for periods of less than one full year.
5. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended October 31, 1999, were $323,956,198 and $354,552,584, respectively.
OPPENHEIMER DISCIPLINED ALLOCATION FUND
YEAR PERIOD
ENDED ENDED
OCT. 31, DEC. 31,
CLASS B 1999 1998
1997 1996(1) 1995(7)
======================================================================================================================
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.62 $16.99
$16.16 $15.66 $15.48
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .31 .36
.40(2) .31 .07
Net realized and unrealized gain (loss) -- .43
2.27(2) .54 .70
- -------------------------------------------------------------------
Total income (loss) from
investment operations .31 .79
2.67 .85 .77
- ----------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.32) (.35)
(.45) (.30) (.07)
Distributions from net realized gain (.41) (1.81)
(1.39) (.05) (.52)
- -------------------------------------------------------------------
Total dividends and distributions
to shareholders (.73) (2.16)
(1.84) (.35) (.59)
Net asset value, end of period $15.20 $15.62
$16.99 $16.16 $15.66
===================================================================
======================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 1.84% 5.10%
17.96% 5.51% 4.93%
======================================================================================================================
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $23,522 $21,754
$8,720 $3,919 $650
- ----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $24,648 $14,235
$6,183 $2,324 $375
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income 1.97% 2.19%
2.32% 2.86% 0.73%
Expenses 1.80% 1.80%(5)
1.89%(5) 1.85%(5) 1.92%(5)
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 122% 97%
98% 85% 55%
1. For the ten months ended October 31, 1996. The Fund changed its fiscal year
end from December 31 to October 31. On March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the Fund.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
4. Annualized for periods of less than one full year.
5. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended October 31, 1999, were $323,956,198 and $354,552,584, respectively.
7. For the period from October 2, 1995, (inception of offering) to December 31,
1995.
OPPENHEIMER DISCIPLINED ALLOCATION FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS C YEAR ENDED OCTOBER 31, 1999
1998 1997 1996(8)
====================================================================================================================
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.31 $
16.70 $ 15.93 $ 15.71
- --------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .32
.37 .44(2) .30
Net realized and unrealized gain (loss) (.01)
.40 2.19(2) .32
- ---------------------------------------------------
Total income (loss) from investment operations .31
.77 2.63 .62
- --------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.33)
(.35) (.47) (.35)
Distributions from net realized gain (.41)
(1.81) (1.39) (.05)
- ---------------------------------------------------
Total dividends and distributions to shareholders (.74)
(2.16) (1.86) (.40)
Net asset value, end of period $14.88
$15.31 $16.70 $15.93
===================================================
====================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 1.84%
5.10% 17.93% 4.08%
====================================================================================================================
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $5,719
$4,824 $1,473 $188
- --------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $5,876
$2,861 $ 805 $ 57
- --------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income 1.97%
2.18% 2.18% 2.90%
Expenses 1.80%
1.80%(5) 1.92%(5) 1.87%(5)
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 122%
97% 98% 85%
1. For the ten months ended October 31, 1996. The Fund changed its fiscal year
end from December 31 to October 31. On March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the Fund.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
4. Annualized for periods of less than one full year.
5. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended October 31, 1999, were $323,956,198 and $354,552,584, respectively.
7. For the period from October 2, 1995 (inception of offering) to December 31,
1995.
8. For the period from May 1, 1996 (inception of offering) to October 31, 1996.
OPPENHEIMER DISCIPLINED ALLOCATION FUND
INFORMATION AND SERVICES
For More Information on Oppenheimer Disciplined Allocation Fund The following
additional information about the Fund is available without charge upon request:
STATEMENT OF ADDITIONAL INFORMATION This document includes additional
information about the Fund's investment policies, risks, and operations. It is
incorporated by reference into this Prospectus (which means it is legally part
of this Prospectus).
ANNUAL AND SEMI-ANNUAL REPORTS Additional information about the Fund's
investments and performance is available in the Fund's Annual and Semi-Annual
Reports to shareholders. The Annual Report includes a discussion of market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year.
How to Get More Information:
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, and other information about the Fund or your account:
- ----------------------------------------------------------------------------
By Telephone: Call OppenheimerFunds Services toll-free:
1.800.525.7048
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
By Mail: Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
On the Internet: You can send us a request by e-mail or
read or down-load documents on the
OppenheimerFunds website:
http://www.oppenheimerfunds.com
- ----------------------------------------------------------------------------
You can also obtain copies of the Statement of Additional Information and other
Fund documents and reports by visiting the SEC's Public Reference Room in
Washington, D.C. (Phone 1.202.942.8090) or the EDGAR database on the SEC's
Internet web site at http://www.sec.gov. Copies may be obtained after payment of
a duplicating fee by electronic request at the SEC's e-mail address:
publicinfo@sec.gov, or by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
No one has been authorized to provide any information about the Fund or to make
any representations about the Fund other than what is contained in this
Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a
solicitation of an offer to buy shares of the Fund, to any person in any state
or other jurisdiction where it is unlawful to make such an offer.
The Fund's shares are distributed by:
SEC File No. 811-3346
PR0205.001.0200 Printed on recycled paper. [logo] OppenheimerFunds
Distributor, Inc.
Appendix to Prospectus of
Oppenheimer Disciplined Allocation Fund
Graphic material included in the Prospectus of Oppenheimer Disciplined
Allocation Fund (the "Fund") under the heading "Annual Total Returns (Class A)(
as of 12/31 each year)":
A bar chart will be included in the Prospectus of the Fund depicting the
annual total returns of a hypothetical investment in Class A shares of the Fund
for each of the ten most recent calendar years, without deducting sales charges.
Set forth below are the relevant data points that will appear in the bar chart:
Calendar Annual
Year Total
Ended Returns
1990 -0.21%
1991 28.21%
1992 9.90%
1993 15.89%
1994 -2.11%
1995 23.95%
1996 9.59%
1997 17.90%
1998 10.85%
1999 -1.78%
Oppenheimer Disciplined Allocation Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated February 28, 2000
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated February 28, 2000. 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, or
by downloading it from the OppenheimerFunds Internet web site at
www.oppenheimerfunds.com.
Contents
Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks.. 2
The Fund's Investment Policies..................................... 2
Other Investment Techniques and Strategies......................... 12
Investment Restrictions............................................ 29
How the Fund is Managed ............................................... 31
Organization and History........................................... 31
Directors and Officers............................................. 33
The Manager........................................................ 38
Brokerage Policies of the Fund......................................... 39
Distribution and Service Plans......................................... 41
Performance of the Fund................................................ 45
About Your Account
How To Buy Shares...................................................... 49
How To Sell Shares..................................................... 57
How To Exchange Shares................................................. 62
Dividends, Capital Gains and Taxes..................................... 64
Additional Information About the Fund.................................. 66
Financial Information About the Fund
Independent Auditors' Report........................................... 67
Financial Statements................................................... 78
Appendix A: Ratings Definitions........................................ A-1
Appendix B: Corporate Industry Classifications......................... B-1
Appendix C: Special Sales Charge Arrangements and Waivers.............. C-1
67
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A B O U T T H E F U N D
- --------------------------------------------------------------------------------
Additional Information About the Fund's Investment Policies and Risks
The investment objective, the principal investment policies and the main
risks of the Fund are described in the Prospectus. This Statement of Additional
Information contains supplemental information about those policies and risks and
the types of securities that the Fund's investment Manager, OppenheimerFunds,
Inc., can select for the Fund. Additional information is also provided about the
strategies that the Fund may use to try to achieve its objective.
The Fund's Investment Policies. The composition of the Fund's portfolio and the
techniques and strategies that the Fund's Manger may use in selecting portfolio
securities will vary over time. The Fund is not required to use all of the
investment techniques and strategies described below at all times in seeking its
goal. It may use some of the special investment techniques and strategies at
some times or not at all.
|X| Value Investing. In selecting equity investments for the Fund's
portfolio, the portfolio managers currently use a value investing style coupled
with fundamental analysis of issuers. In using a value approach, the managers
look for stocks and other equity securities that appear to be temporarily
undervalued, by various measures, such as price/earnings ratios. Value investing
seeks stocks having prices that are low in relation to their real worth or
future prospects, with the expectation that the Fund will realize appreciation
in the value of its holdings when other investors realize the intrinsic value of
the stock.
Using value investing requires research as to the issuer's underlying
financial condition and prospects. Some of the measures used to identify these
securities include, among others:
o Price/Earnings ratio, which is the stock's price divided by its earnings per
share. A stock having a price/earnings ratio lower than its historical range, or
lower than the market as a whole or that of similar companies may offer
attractive investment opportunities.
o Price/book value ratio, which is the stock price divided by the book value of
the company per share. It measures the company's stock price in relation to its
asset value.
o Dividend Yield, which is measured by dividing the annual dividend by the stock
price per share. o Valuation of Assets which compares the stock price to the
value of the company's underlying assets, including their projected value in the
marketplace and liquidation value.
|X| Portfolio Turnover. "Portfolio turnover" describes the rate at which
the Fund traded its portfolio securities during its last fiscal year. For
example, if a fund sold all of its securities during the year, its portfolio
turnover rate would have been 100%. The Fund's portfolio turnover rate will
fluctuate from year to year. Increased portfolio turnover creates higher
brokerage and transaction costs for the Fund, which may reduce its overall
performance. Additionally, the realization of capital gains from selling
portfolio securities may result in distributions of taxable long-term capital
gains to shareholders, since the Fund will normally distribute all of its
capital gains realized each year, to avoid excise taxes under the Internal
Revenue Code.
|X| Investments in Stocks and Other Equity Securities. The Fund does not
limit its investments in equity securities to issuers having a market
capitalization of a specified size or range, and therefore may invest in
securities of small-, mid- and large-capitalization issuers. At times, the Fund
may have substantial amounts of its assets invested in securities of issuers in
one or more capitalization ranges, based upon the Manager's use of its
investment strategies and its judgment of where the best market opportunities
are to seek the Fund's objective.
At times, the market may favor or disfavor securities of issuers of a
particular capitalization range. Securities of small capitalization issuers may
be subject to greater price volatility in general than securities of larger
companies. Therefore, if the Fund has substantial investments in smaller
capitalization companies at times of market volatility, the Fund's share price
may fluctuate more than that of funds focusing on larger capitalization issuers.
At times, the Fund may increase the emphasis of its investments in a
particular industry. Therefore, it may be subject to the risks that economic,
political or other events can have a negative effect on the values of issuers in
that particular industry (this is referred to as "industry risk"). Stocks of
issuers in a particular industry may be affected by changes in economic
conditions that affect that industry more than others, or changes in government
regulations, availability of basic resources or supplies, or other events. To
the extent that the Fund is emphasizing investments in a particular industry,
its share values may fluctuate in response to events affecting that industry.
o Rights and Warrants. The Fund can invest up to 5% of its total assets in
warrants or rights. That limit does not apply to warrants and rights that the
Fund has acquired as part of units of securities or that are attached to other
securities. Warrants basically are options to purchase equity securities at
specific prices valid for a specific period of time. Their prices do not
necessarily move parallel to the prices of the underlying securities. Rights are
similar to warrants, but normally have a short duration and are distributed
directly by the issuer to its shareholders. Rights and warrants have no voting
rights, receive no dividends and have no rights with respect to the assets of
the issuer.
o Convertible Securities. While some convertible securities are a form of debt
security, in many cases their conversion feature (allowing conversion into
equity securities) causes them to be regarded by the Manager 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 fixed-income securities. Convertible
securities are subject to the credit risks and interest rate risks described
above.
The value of a convertible security is a function of its "investment
value" and its "conversion value." If the investment value exceeds the
conversion value, the security will behave more like a debt security and the
security's price will likely increase when interest rates fall and decrease when
interest rates rise. If the conversion value exceeds the investment value, the
security will behave more like an equity security. In that case, it will likely
sell at a premium over its conversion value and its price will tend to fluctuate
directly with the price of the underlying security.
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 conversion of the convertible securities), and
(3) the extent to which the convertible security may be a defensive
"equity substitute," providing the ability to participate in any
appreciation in the price of the issuer's common stock.
o Preferred Stocks. Preferred stocks are equity securities but have certain
attributes of debt securities. Preferred stock, unlike common stock, has a
stated dividend rate payable from the corporation's earnings. Preferred stock
dividends may be cumulative or non-cumulative, participating, or auction rate.
"Cumulative" dividend provisions require all or a portion of prior unpaid
dividends to be paid before the issuer can pay dividends on common shares.
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 provisions for their call
or redemption prior to maturity which can have a negative effect on their prices
when interest prior to maturity rates decline. Preferred stock may be
"participating" stock, which means that it may be entitled to a dividend
exceeding the stated dividend in certain cases.
Preferred stocks are equity securities because they do not constitute a
liability of the issuer and therefore do not offer the same degree of protection
of capital as debt securities and may not offer the same degree of assurance of
continued income as debt securities. The rights of preferred stock on
distribution of a corporation's assets in the event of its liquidation are
generally subordinate to the rights associated with a corporation's debt
securities. Preferred stock generally has a preference over common stock on the
distribution of a corporation's assets in the event of its liquidation.
|X| Investments in Bonds and Other Debt Securities. The Fund can invest in
a variety of bonds, debentures and other debt securities to seek its objective.
It will invest at least 25% of its assets in fixed-income senior securities and
could have a larger portion of its assets in debt investments.
The Fund's debt investments can include investment-grade and
non-investment-grade bonds (commonly referred to as "junk bonds").
Investment-grade bonds are bonds rated at least "Baa" by Moody's Investors
Service, Inc., or at least "BBB" by Standard & Poor's Rating Service or Duff &
Phelps, Inc., or that have comparable ratings by another nationally-recognized
rating organization. In making investments in debt securities, the Manager may
rely to some extent on the ratings of ratings organizations or it may use its
own research to evaluate a security's credit-worthiness. If the securities that
the Fund buys are unrated, to be considered part of the Fund's holdings of
investment-grade securities, they must be judged by the Manager to be of
comparable quality to bonds rated as investment grade by a rating organization.
|X| Special Risks of Lower-Grade Securities. It is not anticipated that
the Fund will normally invest a substantial portion of its assets in lower-grade
debt securities. Because lower-grade securities tend to offer higher yields than
investment-grade securities, the Fund may invest in lower grade securities if
the Manager is trying to achieve greater income (and, in some cases, the
appreciation possibilities of lower-grade securities might be a reason they are
selected for the Fund's portfolio). High-yield convertible debt securities might
be selected as "equity substitutes," as described above.
"Lower-grade" debt securities are those rated below "investment grade,"
which means they have a rating lower than "Baa" by Moody's or lower than "BBB"
by Standard & Poor's or Duff & Phelps, or similar ratings by other rating
organizations. If they are unrated, and are determined by the Manager to be of
comparable quality to debt securities rated below investment grade, they are
included in the limitation on the percentage of the Fund's assets that can be
invested in lower-grade securities. The Fund can invest in securities rated as
low as "B" at the time the Fund buys them.
Some of the special credit risks of lower-grade securities are discussed
in the Prospectus. There is a greater risk that the issuer may default on its
obligation to pay interest or to repay principal than in the case of investment
grade securities. The issuer's low creditworthiness may increase the potential
for its insolvency. An overall decline in values in the high yield bond market
is also more likely during a period of a general economic downturn. An economic
downturn or an increase in interest rates could severely disrupt the market for
high yield bonds, adversely affecting the values of outstanding bonds as well as
the ability of issuers to pay interest or repay principal. In the case of
foreign high yield bonds, these risks are in addition to the special risks of
foreign investing discussed in the Prospectus and in this Statement of
Additional Information.
However, the Fund's limitations on buying these investments may reduce the
risks to the Fund, as will the Fund's policy of diversifying its investments.
Additionally, to the extent they can be converted into stock, convertible
securities may be less subject to some of these risks than non-convertible high
yield bonds, since stock may be more liquid and less affected by some of these
risk factors.
While securities rated "Baa" by Moody's or "BBB" by Standard & Poor's or
Duff & Phelps are investment grade and are not regarded as junk bonds, those
securities may be subject to greater risks than other investment-grade
securities, and have some speculative characteristics. Definitions of the debt
security ratings categories of Moody's, S&P, Fitch IBCA and Duff & Phelps are
included in Appendix A to this Statement of Additional Information.
o Interest Rate Risk. Interest rate risk refers to the fluctuations in value of
fixed-income securities resulting from the inverse relationship between price
and yield. For example, an increase in general interest rates will tend to
reduce the market value of already-issued fixed-income investments, and a
decline in general interest rates will tend to increase their value. In
addition, debt securities with longer maturities, which tend to have higher
yields, are subject to potentially greater fluctuations in value from changes in
interest rates than obligations with shorter maturities.
Fluctuations in the market value of fixed-income securities after the Fund
buys them will not affect the interest income payable on those securities
(unless the security pays interest at a variable rate pegged to interest rate
changes). However, those price fluctuations will be reflected in the valuations
of the securities, and therefore the Fund's net asset values will be affected by
those fluctuations.
|X| Mortgage-Related Securities. Mortgage-related securities are a form of
derivative investment collateralized by pools of commercial or residential
mortgages. Pools of mortgage loans are assembled as securities for sale to
investors by government agencies or instrumentalities or by private issuers.
These securities include collateralized mortgage obligations ("CMOs"), mortgage
pass-through securities, stripped mortgage pass-through securities, interests in
real estate mortgage investment conduits ("REMICs") and other real
estate-related securities.
Mortgage-related securities that are issued or guaranteed by agencies or
instrumentalities of the U.S. government have relatively little credit risk
(depending on the nature of the issuer) but are subject to interest rate risks
and prepayment risks, as described in the Prospectus. Mortgage-related
securities issued by private issuers have greater credit risk.
As with other debt securities, the prices of mortgage-related securities
tend to move inversely to changes in interest rates. The Fund can buy
mortgage-related securities that have interest rates that move inversely to
changes in general interest rates, based on a multiple of a specific index.
Although the value of a mortgage-related security may decline when interest
rates rise, the converse is not always the case.
In periods of declining interest rates, mortgages are more likely to be
prepaid. Therefore, a mortgage-related security's maturity can be shortened by
unscheduled prepayments on the underlying mortgages, and it is not possible to
predict accurately the security's yield. The principal that is returned earlier
than expected may have to be reinvested in other investments having a lower
yield than the prepaid security. As a result, these securities may be less
effective as a means of "locking in" attractive long-term interest rates, and
they may have less potential for appreciation during periods of declining
interest rates, than conventional bonds with comparable stated maturities.
Prepayment risks can lead to substantial fluctuations in the value of a
mortgage-related security. In turn, this can affect the value of the Fund's
shares. If a mortgage-related security has been purchased at a premium, all or
part of the premium the Fund paid may be lost if there is a decline in the
market value of the security, whether that results from interest rate changes or
prepayments on the underlying mortgages. In the case of stripped
mortgage-related securities, if they experience greater rates of prepayment than
were anticipated, the Fund may fail to recoup its initial investment on the
security.
During periods of rapidly rising interest rates, prepayments of
mortgage-related securities may occur at slower than expected rates. Slower
prepayments effectively may lengthen a mortgage-related security's expected
maturity. Generally, that would cause the value of the security to fluctuate
more widely in response to changes in interest rates. If the prepayments on the
Fund's mortgage-related securities were to decrease broadly, the Fund's
effective duration, and therefore its sensitivity to interest rate changes,
would increase.
As with other debt securities, the values of mortgage-related securities
may be affected by changes in the market's perception of the creditworthiness of
the entity issuing the securities or guaranteeing them. Their values may also be
affected by changes in government regulations and tax policies.
o Collateralized Mortgage Obligations. CMOs are multi-class bonds that are
backed by pools of mortgage loans or mortgage pass-through certificates. They
may be collateralized by:
(1) pass-through certificates issued or guaranteed by Ginnie Mae, Fannie Mae, or
Freddie Mac,
(2) unsecuritized mortgage loans insured by the Federal Housing Administration
or guaranteed by the Department of Veterans' Affairs,
(3) unsecuritized conventional mortgages, (4) other mortgage-related securities,
or (5) any combination of these.
Each class of CMO, referred to as a "tranche," is issued at a specific
coupon rate and has a stated maturity or final distribution date. Principal
prepayments on the underlying mortgages may cause the CMO to be retired much
earlier than the stated maturity or final distribution date. The principal and
interest on the underlying mortgages may be allocated among the several classes
of a series of a CMO in different ways. One or more tranches may have coupon
rates that reset periodically at a specified increase over an index. These are
floating rate CMOs, and typically have a cap on the coupon rate. Inverse
floating rate CMOs have a coupon rate that moves in the opposite direction of an
applicable index. The coupon rate on these CMOs will increase as general
interest rates decrease. These are usually much more volatile than fixed rate
CMOs or floating rate CMOs.
|X| U.S. Government Securities. These are securities issued or guaranteed
by the U.S. Treasury or other government agencies or federally-chartered
corporate entities referred to as "instrumentalities." The obligations of U.S.
government agencies or instrumentalities in which the Fund may invest may or may
not be guaranteed or supported by the "full faith and credit" of the United
States. "Full faith and credit" means generally that the taxing power of the
U.S. government is pledged to the payment of interest and repayment of principal
on a security. If a security is not backed by the full faith and credit of the
United States, the owner of the security must look principally to the agency
issuing the obligation for repayment. The owner might not be able to assert a
claim against the United States if the issuing agency or instrumentality does
not meet its commitment. The Fund will invest in securities of U.S. government
agencies and instrumentalities only if the Manager is satisfied that the credit
risk with respect to the agency or instrumentality is minimal.
o U.S. Treasury Obligations. These include Treasury bills (maturities of one
year or less when issued), Treasury notes (maturities of one to ten years), and
Treasury bonds (maturities of more than ten years). Treasury securities are
backed by the full faith and credit of the United States as to timely payments
of interest and repayments of principal. They also can include U. S. Treasury
securities that have been "stripped" by a Federal Reserve Bank, zero-coupon U.S.
Treasury securities described below, and Treasury Inflation-Protection
Securities ("TIPS").
o
Treasury Inflation-Protection Securities. The Fund can buy these
TIPS, which are designed to provide an investment vehicle that is not vulnerable
to inflation. The interest rate paid by TIPS is fixed. The principal value rises
or falls semi-annually based on changes in the published Consumer Price Index.
If inflation occurs, the principal and interest payments on TIPS are adjusted to
protect investors from inflationary loss. If deflation occurs, the principal and
interest payments will be adjusted downward, although the principal will not
fall below its face amount at maturity.
o Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities. These include direct obligations and mortgage-related
securities that have different levels of credit support from the government.
Some are supported by the full faith and credit of the U.S. government, such as
Government National Mortgage Association ("GNMA") pass-through mortgage
certificates (called "Ginnie Maes"). Some are supported by the right of the
issuer to borrow from the U.S. Treasury under certain circumstances, such as
Federal National Mortgage Association bonds ("Fannie Maes"). Others are
supported only by the credit of the entity that issued them, such as Federal
Home Loan Mortgage Corporation obligations ("Freddie Macs").
|X| U.S. Government Mortgage-Related Securities. The Fund can invest in a
variety of mortgage-related securities that are issued by U.S. government
agencies or instrumentalities, some of which are described below.
o GNMA Certificates. The Government National Mortgage Association is a
wholly-owned corporate instrumentality of the United States within the U.S.
Department of Housing and Urban Development. GNMA's principal programs involve
its guarantees of privately-issued securities backed by pools of mortgages.
Ginnie Maes are debt securities representing an interest in one mortgage or a
pool of mortgages that are insured by the Federal Housing Administration or the
Farmers Home Administration or guaranteed by the Veterans Administration.
The Ginnie Maes in which the Fund invests are of the "fully modified
pass-through" type. They provide that the registered holders of the Ginnie Maes
will receive timely monthly payments of the pro-rata share of the scheduled
principal payments on the underlying mortgages, whether or not those amounts are
collected by the issuers. Amounts paid include, on a pro rata basis, any
prepayment of principal of such mortgages and interest (net of servicing and
other charges) on the aggregate unpaid principal balance of the Ginnie Maes,
whether or not the interest on the underlying mortgages has been collected by
the issuers.
The Ginnie Maes purchased by the Fund are guaranteed as to timely payment
of principal and interest by GNMA. In giving that guaranty, GNMA expects that
payments received by the issuers of Ginnie Maes on account of the mortgages
backing the Ginnie Maes will be sufficient to make the required payments of
principal of and interest on those Ginnie Maes. However, if those payments are
insufficient, the guaranty agreements between the issuers of the Ginnie Maes and
GNMA require the issuers to make advances sufficient for the payments. If the
issuers fail to make those payments, GNMA will do so.
Under Federal law, the full faith and credit of the United States is
pledged to the payment of all amounts that may be required to be paid under any
guaranty issued by GNMA as to such mortgage pools. An opinion of an Assistant
Attorney General of the United States, dated December 9, 1969, states that such
guaranties "constitute general obligations of the United States backed by its
full faith and credit." GNMA is empowered to borrow from the United States
Treasury to the extent necessary to make any payments of principal and interest
required under those guaranties.
Ginnie Maes are backed by the aggregate indebtedness secured by the
underlying FHA-insured, FMHA-insured or VA-guaranteed mortgages. Except to the
extent of payments received by the issuers on account of such mortgages, Ginnie
Maes do not constitute a liability of those issuers, nor do they evidence any
recourse against those issuers. Recourse is solely against GNMA. Holders of
Ginnie Maes (such as the Fund) have no security interest in or lien on the
underlying mortgages.
Monthly payments of principal will be made, and additional prepayments of
principal may be made, to the Fund with respect to the mortgages underlying the
Ginnie Maes owned by the Fund. All of the mortgages in the pools relating to the
Ginnie Maes in the Fund are subject to prepayment without any significant
premium or penalty, at the option of the mortgagors. While the mortgages on
1-to-4-family dwellings underlying certain Ginnie Maes have a stated maturity of
up to 30 years, it has been the experience of the mortgage industry that the
average life of comparable mortgages, as a result of prepayments, refinancing
and payments from foreclosures, is considerably less.
o Federal Home Loan Mortgage Corporation ("FHLMC") Certificates. FHLMC, a
corporate instrumentality of the United States, issues FHLMC Certificates
representing interests in mortgage loans. FHLMC guarantees to each registered
holder of a FHLMC Certificate timely payment of the amounts representing a
holder's proportionate share in:
(i) interest payments less servicing and guarantee fees,
(ii) principal prepayments, and
(iii) the ultimate collection of amounts representing the holder's
proportionate interest in principal payments on the mortgage
loans in the pool represented by the FHLMC Certificate, in
each case whether or not such amounts are actually received.
The obligations of FHLMC under its guarantees are obligations solely of
FHLMC and are not backed by the full faith and credit of the United States.
o Federal National Mortgage Association (Fannie Mae) Certificates. Fannie Mae, a
federally-chartered and privately-owned corporation, issues Fannie Mae
Certificates which are backed by a pool of mortgage loans. Fannie Mae guarantees
to each registered holder of a Fannie Mae Certificate that the holder will
receive amounts representing the holder's proportionate interest in scheduled
principal and interest payments, and any principal prepayments, on the mortgage
loans in the pool represented by such Certificate, less servicing
and guarantee fees, and the holder's proportionate interest in the full
principal amount of any foreclosed or other liquidated mortgage loan. In each
case the guarantee applies whether or not those amounts are actually received.
The obligations of Fannie Mae under its guarantees are obligations solely of
Fannie Mae and are not backed by the full faith and credit of the United States
or any of its agencies or instrumentalities other than Fannie Mae.
|X| Zero-Coupon U.S. Government Securities. The Fund may buy zero-coupon U.S.
government securities. These will typically be U.S. Treasury Notes and Bonds
that have been stripped of their unmatured interest coupons, the coupons
themselves, or certificates representing interests in those stripped debt
obligations and coupons.
Zero-coupon securities do not make periodic interest payments and are sold
at a deep discount from their face value at maturity. The buyer recognizes a
rate of return determined by the gradual appreciation of the security, which is
redeemed at face value on a specified maturity date. This discount depends on
the time remaining until maturity, as well as prevailing interest rates, the
liquidity of the security and the credit quality of the issuer. The discount
typically decreases as the maturity date approaches.
Because zero-coupon securities pay no interest and compound semi-annually
at the rate fixed at the time of their issuance, their value is generally more
volatile than the value of other debt securities that pay interest. Their value
may fall more dramatically than the value of interest-bearing securities when
interest rates rise. When prevailing interest rates fall, zero-coupon securities
tend to rise more rapidly in value because they have a fixed rate of return.
The Fund's investment in zero-coupon securities may cause the Fund to
recognize income and make distributions to shareholders before it receives any
cash payments on the zero-coupon investment. To generate cash to satisfy those
distribution requirements, the Fund may have to sell portfolio securities that
it otherwise might have continued to hold or to use cash flows from other
sources such as the sale of Fund shares.
|X| Commercial (Privately-Issued) Mortgage Related Securities. The Fund
can invest in commercial mortgage related securities issued by private entities.
Generally these are multi-class debt or pass through certificates secured by
mortgage loans on commercial properties. They are subject to the credit risk of
the issuer. These securities typically are structured to provide protection to
investors in senior classes from possible losses on the underlying loans. They
do so by having holders of subordinated classes take the first loss if there are
defaults on the underlying loans. They may also be protected to some extent by
guarantees, reserve funds or additional collateralization mechanisms.
|X| Asset-Backed Securities. Asset-backed securities are fractional
interests in pools of assets, typically accounts receivable or consumer loans.
They are issued by trusts or special-purpose corporations. They are similar to
mortgage-backed securities, described above, and are backed by a pool of assets
that consist of obligations of individual borrowers. The income from the pool is
passed through to the holders of participation interest in the pools. The pools
may offer a credit enhancement, such as a bank letter of credit, to try to
reduce the risks that the
underlying debtors will not pay their obligations when due. However, the
enhancement, if any, might not be for the full par value of the security. If the
enhancement is exhausted and any required payments of interest or repayments of
principal are not made, the Fund could suffer losses on its investment or delays
in receiving payment.
The value of an asset-backed security is affected by changes in the
market's perception of the asset backing the security, the creditworthiness of
the servicing agent for the loan pool, the originator of the loans, or the
financial institution providing any credit enhancement, and is also affected if
any credit enhancement has been exhausted. The risks of investing in
asset-backed securities are ultimately related to payment of consumer loans by
the individual borrowers. As a purchaser of an asset-backed security, the Fund
would generally have no recourse to the entity that originated the loans in the
event of default by a borrower. The underlying loans are subject to prepayments,
which may shorten the weighted average life of asset-backed securities and may
lower their return, in the same manner as in the case of mortgage-backed
securities and CMOs, described above. Unlike mortgage-backed securities,
asset-backed securities typically do not have the benefit of a security interest
in the underlying collateral.
|X| Municipal Securities. The Fund can buy municipal bonds and notes,
tax-exempt commercial paper, certificates of participation in municipal leases
and other debt obligations. These debt obligations are issued by the governments
of states, as well as their political subdivisions (such as cities, towns and
counties), or by the District of Columbia and their agencies and authorities.
The Fund can also buy securities issued by any commonwealths, territories or
possessions of the United States, or their respective agencies,
instrumentalities or authorities. The Fund would invest in municipal securities
because of the income and portfolio diversification they offer rather than for
the tax-exempt nature of the income they pay.
The Fund can buy both long-term and short-term municipal securities.
Long-term securities have a maturity of more than one year. In selecting
municipal securities the Fund would normally focus on longer-term securities, to
seek higher income. In general, the values of longer-term bonds are more
affected by changes in interest rates than are short-term bonds.
Municipal securities are issued to raise money for a variety of public or
private purposes, including financing state or local governments, financing
specific projects or public facilities. The Fund can invest in municipal
securities that are "general obligations," secured by the issuer's pledge of its
full faith, credit and taxing power for the payment of principal and interest.
The Fund can also buy "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. Some of these revenue obligations
are private activity bonds that pay interest that may be a tax preference for
investors subject to alternative minimum tax.
o Municipal Lease Obligations. Municipal leases are used by state and local
government authorities to obtain funds to acquire land, equipment or facilities.
The Fund may invest in certificates of participation that represent a
proportionate interest in payments made under municipal lease obligations. If
the government stops making payments or transfers its payment obligations to a
private entity, the obligation could lose value or become taxable.
|X| Money Market Instruments and Short-Term Debt Obligations. The Fund can
invest in a variety of high quality money market instruments and short-term debt
obligations, both under normal market conditions and for defensive purposes. The
following is a brief description of the types of money market securities and
short-term debt obligations the Fund can invest in. Those money market
securities are high-quality, short-term debt instruments that are issued by the
U.S. government, corporations, banks or other entities. They may have fixed,
variable or floating interest rates. The Fund's investments in foreign money
market instruments and short-term debt obligations are subject to its limits on
investing in foreign securities and the risks of foreign investing, described
above.
o U.S. Government Securities. These include obligations issued or guaranteed by
the U.S. government or any of its agencies or instrumentalities.
o Bank Obligations. The Fund can buy time deposits, certificates of deposit and
bankers' acceptances. They must be :
o obligations issued or guaranteed by a domestic or foreign bank (including a
foreign branch of a domestic bank) having total assets of at least U.S. $1
billion,
o banker's acceptances (which may or may not be supported by letters of credit)
only if guaranteed by a U.S. commercial bank with total assets of at least U.S.
$1 billion.
The Fund can make time deposits. These are non-negotiable deposits in a
bank for a specified period of time. They may be subject to early withdrawal
penalties. Time deposits that are subject to early withdrawal penalties are
subject to the Fund's limits on illiquid investments, unless the time deposit
matures in seven days or less. "Banks" include commercial banks, savings banks
and savings and loan associations.
o Commercial Paper. The Fund can invest in commercial paper if it is rated
within the top two rating categories of Standard & Poor's and Moody's. If the
paper is not rated, it may be purchased if issued by a company having a credit
rating of at least "AA" by Standard & Poor's or "Aa" by Moody's.
The Fund can buy commercial paper, including U.S. dollar-denominated
securities of foreign branches of U.S. banks, issued by other entities if the
commercial paper is guaranteed as to principal and interest by a bank,
government or corporation whose certificates of deposit or commercial paper may
otherwise be purchased by the Fund.
o Variable Amount Master Demand Notes. Master demand notes are corporate
obligations that permit the investment of fluctuating amounts by the Fund at
varying rates of interest under 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. 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 expected that there will be a trading market for them. There
is no secondary market for these notes, although they are redeemable (and thus
are immediately repayable by the borrower) at principal amount, plus accrued
interest, at any time. Accordingly, the Fund's right to redeem such notes is
dependent upon the ability of the borrower to pay principal and interest on
demand.
The Fund has no limitations on the type of issuer from whom these notes
will be purchased. However, in connection with such purchases and on an ongoing
basis, the Manager will consider the earning power, cash flow and other
liquidity ratios of the issuer, and its ability to pay principal and interest on
demand, including a situation in which all holders of such notes made demand
simultaneously. Investments in master demand notes are subject to the limitation
on investments by the Fund in illiquid securities, described in the Prospectus.
Currently, the Fund does not intend that its investments in variable amount
master demand notes will exceed 5% of its total assets.
Other Investment Techniques and Strategies. In seeking its objective, the Fund
may from time to time use the types of investment strategies and investments
described below. It is not required to use all of these strategies at all times
and at times may not use them.
|X| Foreign Securities. The Fund can purchase equity and debt securities
issued or guaranteed by foreign companies or debt securities of foreign
governments or their agencies. "Foreign securities" include equity and debt
securities of companies organized under the laws of countries other than the
United States and debt securities of foreign governments and their agencies and
instrumentalities. Those securities may be traded on foreign securities
exchanges or in the foreign over-the-counter markets.
Securities of foreign issuers that are represented by American Depository
Receipts or that are listed on a U.S. securities exchange or traded in the U.S.
over-the-counter markets are not considered "foreign securities" for the purpose
of the Fund's investment allocations. That is because they are not subject to
many of the special considerations and risks, discussed below, that apply to
foreign securities traded and held abroad.
Because the Fund can purchase securities denominated in foreign
currencies, a change in the value of a foreign currency against the U.S. dollar
could result in a change in the amount of income the Fund has available for
distribution. Because a portion of the Fund's investment income may be received
in foreign currencies, the Fund will be required to compute its income in U.S.
dollars for distribution to shareholders, and therefore the Fund will absorb the
cost of currency fluctuations. After the Fund has distributed income, subsequent
foreign currency losses may result in the Fund's having distributed more income
in a particular fiscal period than was available from investment income, which
could result in a return of capital to shareholders.
Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers. They include 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 stock markets that do not move in a manner parallel to U.S.
markets. The Fund will hold foreign currency only in connection with the
purchase or sale of foreign securities.
o Risks of Foreign Investing. Investments in foreign securities may offer
special opportunities for investing but also present special additional risks
and considerations not typically associated with investments in domestic
securities. Some of these additional risks are:
o reduction of income by foreign taxes;
o fluctuation in value of foreign investments due to changes in currency rates
or currency control regulations (for example, currency blockage);
o transaction charges for currency exchange;
o lack of public information about foreign issuers;
o lack of uniform accounting, auditing and financial reporting standards in
foreign countries comparable to those applicable to domestic
issuers;
o less volume on foreign exchanges than on U.S. exchanges;
o greater volatility and less liquidity on foreign markets than in the U.S.;
o less governmental regulation of foreign issuers, stock exchanges and brokers
than in the U.S.;
o foreign exchange contracts;
o greater difficulties in commencing lawsuits;
o higher brokerage commission rates than in the U.S.;
o increased risks of delays in settlement of portfolio transactions or loss of
certificates for portfolio securities;
o foreign withholding taxes on interest and dividends;
o possibilities in some countries of expropriation, nationalization,
confiscatory taxation, political, financial or social instability or adverse
diplomatic developments; and
o unfavorable differences between the U.S. economy and foreign economies.
In the past, 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 re-imposed.
o Special Risks of Emerging Markets. Emerging and developing markets abroad may
also offer special opportunities for investing but have greater risks than more
developed foreign markets, such as those in Europe, Canada, Australia, New
Zealand and Japan. There may be even less liquidity in their securities markets,
and settlements of purchases and sales of securities may be subject to
additional delays. They are subject to greater risks of limitations on the
repatriation of income and profits because of currency restrictions imposed by
local governments. Those countries may also be subject to the risk of greater
political and economic instability, which can greatly affect the volatility of
prices of securities in those countries. The Manager will consider these factors
when evaluating securities in these markets, because the selection of those
securities must be consistent with the Fund's investment objective.
o Risks of Conversion to Euro. There may be transaction costs and risks relating
to the conversion of certain European currencies to the Euro that commenced in
January 1, 1999. However, their current currencies (for example, the franc, the
mark, and the lira) will also continue in use until January 1, 2002. After that
date, it is expected that only the euro will be used in those countries. A
common currency is expected to confer some benefits in those markets, by
consolidating the government debt market for those countries and reducing some
currency risks and costs. But the conversion to the new currency will affect the
Fund operationally and also has potential risks, some of which are listed below.
Among other things, the conversion will affect:
o issuers in which the Fund invests, because of changes in the
competitive environment from a consolidated currency market
and greater operational costs from converting to the new
currency. This might depress stock values.
o vendors the Fund depends on to carry out its business, such as
its custodian (which holds the foreign securities the Fund
buys), the Manager (which must price the Fund's investments to
deal with the conversion to the euro) and brokers, foreign
markets and securities depositories. If they are not prepared,
there could be delays in settlements and additional costs to
the Fund.
o exchange contracts and derivatives that are outstanding during
the transition to the euro. The lack of currency rate
calculations between the affected currencies and the need to
update the Fund's contracts could pose extra costs to the
Fund.
The lack of currency rate calculations between the affected currencies and
the need to update the Fund's contracts could pose extra costs to the Fund.
The Manager has upgraded (at its expense) its computer and bookkeeping
systems to deal with the conversion. The Fund's custodian has advised the
Manager of its plans to deal with the conversion, including how it will update
its record keeping systems and handle the redenomination of outstanding foreign
debt. The Fund's portfolio managers will also monitor the effects of the
conversion on the issuers in which the Fund invests. The possible effect of
these factors on the Fund's investments cannot be determined with certainty at
this time, but they may reduce the value of some of the Fund's holdings and
increase its operational costs.
o Foreign Debt Obligations. The debt obligations of foreign governments and
entities may or may not be supported by the full faith and credit of the foreign
government. The Fund may buy securities issued by certain supra-national
entities, which include entities designated or supported by governments to
promote economic reconstruction or development, international banking
organizations and related government agencies. Examples are the International
Bank for Reconstruction and Development (commonly called the "World Bank"), the
Asian Development bank and the Inter-American Development Bank.
The governmental members of these supra-national entities are
"stockholders" that typically make capital contributions and may be committed to
make additional capital contributions if the entity is unable to repay its
borrowings. A supra-national entity's lending activities may be limited to a
percentage of its total capital, reserves and net income. There can be no
assurance that the constituent foreign governments will continue to be able or
willing to honor their capitalization commitments for those entities.
|X| Floating Rate and Variable Rate Obligations. Some securities the Fund
can purchase have variable or floating interest rates. Variable rates are
adjusted at stated periodic intervals. Variable rate obligations can have a
demand feature that allows the Fund to tender the obligation to the issuer or a
third party prior to its maturity. The tender may be at par value plus accrued
interest, according to the terms of the obligations.
The interest rate on a floating rate demand note is adjusted automatically
according to a stated prevailing market rate, such as a bank's prime rate, the
91-day U.S. Treasury Bill rate, or some other standard. The instrument's rate is
adjusted automatically each time the base rate is adjusted. The interest rate on
a variable rate note is also based on a stated prevailing market rate but is
adjusted automatically at specified intervals of not less than one year.
Generally, the changes in the interest rate on such securities reduce the
fluctuation in their market value. As interest rates decrease or increase, the
potential for capital appreciation or depreciation is less than that for
fixed-rate obligations of the same maturity. The Manager may determine that an
unrated floating rate or variable rate demand obligation meets the Fund's
quality standards by reason of being backed by a letter of credit or guarantee
issued by a bank that meets those quality standards.
Floating rate and variable rate demand notes that have a stated maturity
in excess of one year may have features that permit the holder to recover the
principal amount of the underlying security at specified intervals not exceeding
one year and upon no more than 30 days' notice. The issuer of that type of note
normally has a corresponding right in its discretion, after a given period, to
prepay the outstanding principal amount of the note plus accrued interest.
Generally, the issuer must provide a specified number of days' notice to the
holder.
|X| "Stripped" Mortgage-Related Securities. The Fund may invest in
stripped mortgage-related securities that are created by segregating the cash
flows from underlying mortgage loans or mortgage securities to create two or
more new securities. Each has a specified percentage of the underlying
security's principal or interest payments. These are a form of derivative
investment.
Mortgage securities may be partially stripped so that each class receives
some interest and some principal. However, they may be completely stripped. In
that case all of the interest is distributed to holders of one type of security,
known as an "interest-only" security, or "I/O," and all of the principal is
distributed to holders of another type of security, known as a "principal-only"
security or "P/O." Strips can be created for pass-through certificates or CMOs.
The yields to maturity of I/Os and P/Os are very sensitive to principal
repayments (including prepayments) on the underlying mortgages. If the
underlying mortgages experience greater than anticipated prepayments of
principal, the Fund might not fully recoup its investment in an I/O based on
those assets. If underlying mortgages experience less than anticipated
prepayments of principal, the yield on the P/Os based on them could decline
substantially.
|X| Participation Interests. The Fund may invest in participation
interests, subject to the Fund's limitation on investments in illiquid
investments. A participation interest is an undivided interest in a loan made by
the issuing financial institution in the proportion that the buyers
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. There is a risk that a borrower may have difficulty
making payments. If a borrower fails to pay scheduled interest or principal
payments, the Fund could experience a reduction in its income. The value of that
participation interest might also decline, which could affect the net asset
value of the Fund's shares. If the issuing financial institution fails to
perform its obligations under the participation agreement, the Fund might incur
costs and delays in realizing payment and suffer a loss of principal and/or
interest.
|X| Forward Rolls. The Fund can enter into "forward roll" transactions with
respect to mortgage-related securities. These are limited to 10% of the Fund's
total assets. In this type of transaction, the Fund sells a mortgage-related
security to a buyer and simultaneously agrees to repurchase a similar security
(the same type of security, and having the same coupon and maturity) at a later
date at a set price. The securities that are repurchased will have the same
interest rate as the securities that are sold, but typically will be
collateralized by different pools of mortgages (with different prepayment
histories) than the securities that have been sold. Proceeds from the sale are
invested in short-term instruments, such as repurchase agreements. The income
from those investments, plus the fees from the forward roll transaction, are
expected to generate income to the Fund in excess of the yield on the securities
that have been sold.
The Fund will only enter into "covered" rolls. To assure its future
payment of the purchase price, the Fund will identify on its books liquid assets
in an amount equal to the payment obligation under the roll.
These transactions have risks. During the period between the sale and the
repurchase, the Fund will not be entitled to receive interest and principal
payments on the securities that have been sold. It is possible that the market
value of the securities the Fund sells may decline below the price at which the
Fund is obligated to repurchase securities.
|X| "When-Issued" and "Delayed-Delivery" Transactions. The Fund can purchase
securities on a "when-issued" basis, and may purchase or sell securities on a
"delayed-delivery" basis. "When-issued" or "delayed-delivery" refers to
securities whose terms and indenture are available and for which a market
exists, but which are not available for immediate delivery.
When such transactions are negotiated, the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made. Delivery
and payment for the securities take place at a later date. The securities are
subject to change in value from market fluctuations during the period until
settlement. The value at delivery may be less than the purchase price. For
example, changes in interest rates in a direction other than that expected by
the Manager before settlement will affect the value of such securities and may
cause a loss to the Fund. During the period between purchase and settlement, the
Fund makes no payment to the issuer and no interest accrues to the Fund from the
investment until it receives the security at settlement. There is a risk of loss
to the Fund if the value of the security changes prior to the settlement date,
and there is the risk that the other party may not perform.
The Fund may engage in when-issued transactions to secure what the Manager
considers to be an advantageous price and yield at the time the obligation is
entered into. When the Fund enters into a when-issued or delayed-delivery
transaction, it relies on the other party to complete the transaction. Its
failure to do so may cause the Fund to lose the opportunity to obtain the
security at a price and yield the Manager considers to be advantageous.
When the Fund engages in when-issued and delayed-delivery transactions, it
does so for the purpose of acquiring or selling securities consistent with its
investment objective and policies for its portfolio or for delivery pursuant to
options contracts it has entered into, and not for the purposes of investment
leverage. Although the Fund will enter into when-issued or delayed-delivery
purchase transactions to acquire securities, the Fund may dispose of a
commitment prior to settlement. If the Fund chooses to dispose of the right to
acquire a when-issued security prior to its acquisition or to dispose of its
right to deliver or receive against a forward commitment, it may incur a gain or
loss.
At the time the Fund makes the commitment to purchase or sell a security
on a when-issued or delayed-delivery basis, it records the transaction on its
books and reflects the value of the security purchased in determining the Fund's
net asset value. In a sale transaction, it records the proceeds to be received.
The Fund will identify on its books liquid assets at least equal in value to the
value of the Fund's purchase commitments until the Fund pays for the investment.
When-issued and delayed-delivery transactions can be used by the Fund as a
defensive technique to hedge 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
delayed-delivery basis to obtain the benefit of currently higher cash yields.
|X| Repurchase Agreements. The Fund can acquire securities subject to
repurchase agreements. It might do so for liquidity purposes to meet anticipated
redemptions of Fund shares, or pending the investment of the proceeds from sales
of Fund shares, or pending the settlement of portfolio securities transactions,
or for defensive purposes.
In a repurchase transaction, the Fund buys a security from, and
simultaneously resells it to, an approved vendor 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. Approved vendors include U.S. commercial
banks, U.S. branches of foreign banks, or broker-dealers that have been
designated as primary dealers in government securities. They must meet credit
requirements set by the Fund's Board of Directors from time to time.
The majority of these transactions run from day to day, and delivery
pursuant to the resale typically occurs within one to five days of the purchase.
Repurchase agreements having a maturity beyond seven days are subject to the
Fund's fundamental policy limits on holding illiquid investments. The Fund
cannot enter into a repurchase agreement that causes more than
10% of its net assets to be subject to repurchase agreements having a maturity
beyond seven days. There is no limit on the amount of the Fund's net assets that
may be subject to repurchase agreements having maturities of seven days or less.
Repurchase agreements, considered "loans" under the Investment Company
Act, are collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in
effect, the value of the collateral must equal or exceed the repurchase price to
fully collateralize the repayment obligation. 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 Manager will monitor the vendor's creditworthiness to confirm that
the vendor is financially sound and will continuously monitor the collateral's
value.
|X| Illiquid and Restricted Securities. Under the policies and procedures
established by the Fund's Board of Directors, the Manager determines the
liquidity of certain of the Fund's investments. To enable the Fund to sell its
holdings of a restricted security not registered under the Securities Act of
1933, the Fund may have to cause those securities to be registered. The expenses
of registering restricted securities may be negotiated by the Fund with the
issuer at the time the Fund buys the securities. When the Fund must arrange
registration because the Fund wishes to sell the security, a considerable period
may elapse between the time the decision is made to sell the security and the
time the security is registered so that the Fund could sell it. The Fund would
bear the risks of any downward price fluctuation during that period.
As a fundamental policy, the Fund will not invest more than 10% of its
total assets in illiquid or restricted securities, including repurchase
agreements having a maturity beyond seven days, portfolio securities for which
market quotations are not readily available and time deposits that mature in
more than 2 days. Certain restricted securities that are eligible for resale to
qualified institutional purchasers, as described below, may not be subject to
that limit. The Fund currently applies that limitation to 10% of its net assets,
as a non-fundamental policy. The Manager monitors holdings of illiquid
securities on an ongoing basis to determine whether to sell any holdings to
maintain adequate liquidity.
The Fund may also acquire restricted securities through private
placements. Those securities have contractual restrictions on their public
resale. Those restrictions might limit the Fund's ability to dispose of the
securities and might lower the amount the Fund could realize upon the sale.
The Fund has 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 under Rule 144A of the Securities Act of 1933, if those
securities have been determined to be liquid by the Manager under Board-approved
guidelines. Those guidelines take into account the trading activity for such
securities and the availability of reliable pricing information, among other
factors. If there is a lack of trading interest in a particular Rule 144A
security, the Fund's holdings of that security may be considered to be illiquid.
Illiquid securities include repurchase agreements maturing in more than
seven days and participation interests that do not have puts exercisable within
seven days.
|X| Loans of Portfolio Securities. The Fund can lend its portfolio
securities to certain types of eligible borrowers approved by the Board of
Directors. It may do so to try to provide income or to raise cash for liquidity
purposes. As a fundamental policy, these loans are limited to not more than 33
1/3% of the value of the Fund's total assets. The Fund presently does not intend
to engage in loans of securities but may do so in the future.
There are some risks in connection with securities lending. The Fund might
experience a delay in receiving additional collateral to secure a loan, or a
delay in recovery of the loaned securities if the borrower defaults. The Fund
must receive collateral for a loan. Under current applicable regulatory
requirements (which are subject to change), on each business day the loan
collateral must be at least equal to the value of the loaned securities. It must
consist of cash, bank letters of credit, securities of the U.S. government or
its agencies or instrumentalities, 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. The terms of the letter of credit and the issuing bank both
must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the dividends
or interest on loaned securities. It also receives one or more of (a) negotiated
loan fees, (b) interest on securities used as collateral, and (c) interest on
any short-term debt securities purchased with such loan collateral. Either type
of interest may be shared with the borrower. The Fund may also pay reasonable
finders', custodian and administrative fees in connection with these loans. The
terms of the Fund's loans must meet applicable tests under the Internal Revenue
Code and must permit the Fund to reacquire loaned securities on five days'
notice or in time to vote on any important matter.
|X| Derivatives. The Fund may invest in a variety of derivative
investments to seek income for liquidity needs or for hedging purposes. Some
derivative investments the Fund may use are the hedging instruments described
below in this Statement of Additional Information.
Some of the derivative investments the Fund can use include debt
exchangeable for common stock of an issuer or "equity-linked debt securities" of
an issuer. At maturity, the debt security is exchanged for common stock of the
issuer or it is payable in an amount based on the price of the issuer's common
stock at the time of maturity. Both alternatives present a risk that the amount
payable at maturity will be less than the principal amount of the debt because
the price of the issuer's common stock may not be as high as the Manager
expected.
Other derivative investments the Fund may invest in include "index-linked"
notes. Principal and/or interest payments on these notes depend on the
performance of an underlying index. Currency-indexed securities are another
derivative the Fund may use. Typically these are short-term or intermediate-term
debt securities. Their value at maturity or the rates at which they pay income
are determined by the change in value of the U.S. dollar against one or more
foreign currencies or an index. In some cases, these securities may pay an
amount at maturity based on a multiple of the amount of the relative currency
movements. This type of index security offers the potential for increased income
or principal payments but at a greater risk of loss than a typical debt security
of the same maturity and credit quality.
o
"Structured" Notes. The Fund can buy "structured" notes, which are
specially-designed derivative debt investments with principal payments or
interest payments that are linked to the value of an index (such as a currency
or securities index) or commodity. The terms of the instrument may be
"structured" by the purchaser (the Fund) and the borrower issuing the note.
The principal and/or interest payments depend on the performance of one or
more other securities or indices, and the values of these notes will therefore
fall or rise in response to the changes in the values of the underlying security
or index. They are subject to both credit and interest rate risks and therefore
the Fund could receive more or less than it originally invested when the notes
mature, or it might receive less interest than the stated coupon payment if the
underlying investment or index does not perform as anticipated. There values may
be very volatile and they may have a limited trading market, making it difficult
for the Fund to sell its investment at an acceptable price.
o "Inverse Floaters." Certain types of variable rate bonds known as "inverse
floaters" pay interest at rates that vary as the yields generally available on
short-term tax-exempt bonds change. However, the yields on inverse floaters move
in the opposite direction of yields on short-term bonds in response to market
changes. As interest rates rise, inverse floaters produce less current income,
and their market value can become volatile. Inverse floaters are a type of
"derivative security." Some have a "cap," so that if interest rates rise above
the "cap," the security pays additional interest income. If rates do not rise
above the "cap," the Fund will have paid an additional amount for a feature that
proves worthless. The Fund will not invest more than 5% of its total assets in
inverse floaters.
|X| Hedging. The Fund can use hedging instruments. It is not obligated to
use them in seeking its objective although it can write covered calls to seek
high current income if the Manager believes that it is appropriate to do so. 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 that have appreciated, or to facilitate selling securities for
investment reasons, the Fund could:
o sell futures contracts, or
o write covered calls on securities or futures. Covered calls may also
be used to increase the Fund's income, but the Manager does not
expect to engage extensively in that practice.
The Fund can use hedging to establish a position in the securities market
as a temporary substitute for purchasing particular securities. In that case,
the Fund would normally seek to purchase the securities and then terminate that
hedging position. The Fund might also use this type of hedge to attempt to
protect against the possibility that its portfolio securities would not be fully
included in a rise in value of the market. To do so the Fund could buy futures.
The Fund is not obligated to use hedging instruments, even though it is
permitted to use them in the Manager's discretion, as described below. 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. The
particular hedging instruments the Fund can use are described below. The Fund
may employ new hedging instruments and strategies when they are developed, if
those investment methods are consistent with the Fund's investment objective and
are permissible under applicable regulations governing the Fund.
o Futures. The Fund can buy and sell exchange-traded futures contracts that
relate to (1) broadly-based stock indices ("stock index futures") (2) debt
securities (these are referred to as "interest rate futures"), (3) other
broadly-based securities indices (these are referred to as "financial futures"),
(4) foreign currencies (these are referred to as "forward contracts"), or (5)
securities.
A broadly-based stock index is used as the basis for trading stock index
futures. An index may in some cases be based on stocks of issuers in a
particular industry or group of industries. A stock index assigns relative
values to the common stocks included in the index and its value fluctuates in
response to the changes in value of the underlying stocks. A stock index cannot
be purchased or sold directly. Financial futures are similar contracts based on
the future value of the basket of securities that comprise the index. These
contracts obligate the seller to deliver, and the purchaser to take, cash to
settle the futures transaction. There is no delivery made of the underlying
securities to settle the futures obligation. Either party may also settle the
transaction by entering into an offsetting contract.
An interest rate future obligates the seller to deliver (and the purchaser
to take) cash or a specified type of debt security to settle the futures
transaction. Either party could also enter into an offsetting contract to close
out the position.
No money is paid or received by the Fund on the purchase or sale of a
future. Upon entering into a futures transaction, the Fund will be required to
deposit an initial margin payment with the futures commission merchant (the
"futures broker"). Initial margin payments will be deposited with the Fund's
Custodian bank 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 (that is, its value on the Fund's
books is changed) to reflect changes in its market value, subsequent margin
payments, called variation margin, will be paid to or by the futures broker
daily.
At any time prior to expiration of the future, the Fund may elect to close
out its position by taking an opposite position, at which time a final
determination of variation margin is made and any additional cash must be paid
by or released to the Fund. Any loss or gain on the future is then realized by
the Fund for tax purposes. All futures transactions, except forward contracts,
are effected through a clearinghouse associated with the exchange on which the
contracts are traded.
o Writing Covered Call Options. Under its fundamental policies, the Fund is
permitted to write (that is, sell) covered calls on securities, indices, futures
and forward contracts. If the Fund sells a call option, it must be covered. That
means the Fund must own the security subject to the call while the call is
outstanding, or, for certain types of calls, the call may be covered by
segregating liquid assets to enable the Fund to satisfy its obligations if the
call is exercised. Up to 20% of the Fund's total assets may be subject to calls
the Fund writes.
When the Fund writes a call on a security, it receives cash (a premium).
The Fund agrees to sell the underlying security to a purchaser of a
corresponding call on the same security during the call period at a fixed
exercise price regardless of market price changes during the call period. The
call period is usually not more than nine months. The exercise price may differ
from the market price of the underlying security. The Fund has the risk of loss
that the price of the underlying security may decline during the call period.
That risk may be offset to some extent by the premium the Fund receives. If the
value of the investment does not rise above the call price, it is likely that
the call will lapse without being exercised. In that case the Fund would keep
the cash premium and the investment.
When the Fund writes a call on an index, it receives cash (a premium). If
the buyer of the call exercises it, the Fund will pay an amount of cash equal to
the difference between the closing price of the call and the exercise price,
multiplied by the specified multiple that determines the total value of the call
for each point of difference. If the value of the underlying investment does not
rise above the call price, it is likely that the call will lapse without being
exercised. In that case the Fund would keep the cash premium.
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 calls traded on exchanges or as to other acceptable escrow securities.
In that way, no margin will be required for such transactions. OCC will release
the securities on the expiration of the option or when the Fund enters into a
closing transaction.
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 will
establish a formula price at which the Fund will have the absolute right to
repurchase that OTC option. The formula price will 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 option is "in the money"). When the Fund writes an OTC option, it will
treat as illiquid (for purposes of its restriction on holding illiquid
securities) the mark-to-market value of any OTC option it holds, unless the
option is subject to a buy-back agreement by the executing broker.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." The Fund will
then realize a profit or loss, depending upon whether the net of the amount of
the option transaction costs and the premium received on the call the Fund wrote
is more or less than the price of the call the Fund purchases to close out the
transaction. The Fund may realize a profit if the call expires unexercised,
because the Fund will retain the underlying security and the premium it received
when it wrote the call. Any such profits are considered short-term capital gains
for federal income tax purposes, as are the premiums on lapsed calls. When
distributed by the Fund they are taxable as ordinary income. If the Fund cannot
effect a closing purchase transaction due to the lack of a market, it will have
to hold the callable securities until the call expires or is exercised.
The Fund may also write calls on a futures contract without owning the
futures contract or securities deliverable under the contract. To do so, at the
time the call is written, the Fund must cover the call by identifying on its
books an equivalent dollar amount of liquid assets. The Fund will segregate
additional liquid assets if the value of the segregated assets drops below 100%
of the current value of the future. Because of this segregation requirement, in
no circumstances would the Fund's receipt of an exercise notice as to that
future require the Fund to deliver a futures contract. It would simply put the
Fund in a short futures position, which is permitted by the Fund's hedging
policies.
o Selling Call Options on Foreign Currencies. The Fund can sell calls on foreign
currencies. They include calls that trade on a securities or commodities
exchange or in the over-the-counter markets or are quoted by major recognized
dealers in such options. The Fund could use these calls to try to protect
against declines in the dollar value of foreign securities and increases in the
dollar cost of foreign securities the Fund wants to acquire.
If the Manager anticipates a decline in the dollar value of a foreign
currency, the decline in the dollar value of portfolio securities denominated in
that currency might be partially offset by writing calls on that foreign
currency. However, the currency rates could fluctuate in a direction adverse to
the Fund's position.
A call the Fund writes on a foreign currency 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 it can do so for additional cash consideration held in a
segregated account by its custodian bank) upon conversion or exchange of other
foreign currency held in its portfolio.
The Fund could write a call 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. That decline might be one that occurs due to an expected adverse change
in the exchange rate. This is known as a "cross-hedging" strategy. In those
circumstances, the Fund covers the option by identifying on its books liquid
assets in an amount equal to the exercise price of the option, in a segregated
account with the Fund's Custodian bank.
o Risks of Hedging with Options and Futures. The Fund could pay a brokerage
commission each time it sells a call, or sells an underlying investment in
connection with the exercise of a call. Those commissions could be higher on a
relative basis than the commissions for direct purchases or sales of the
underlying investments. Premiums paid for options are small in relation to the
market value of the underlying investments. Consequently, 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 investment.
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. It will not be able to realize any profit if the investment has
increased in value above the call price.
There is a risk in using short hedging by selling futures to attempt to
protect against declines in the value of the Fund's portfolio securities. The
risk is that the prices of the futures will correlate imperfectly with the
behavior of the cash prices of the Fund's securities. For example, it is
possible that while the Fund has used hedging instruments in a short hedge, the
market might advance and the value of the securities held in the Fund's
portfolio might decline. If that occurred, the Fund would lose money on the
hedging instruments and also experience a decline in the value of its portfolio
securities. However, while this could occur for a very brief period or to a very
small degree, over time the value of a diversified portfolio of securities will
tend to move in the same direction as the indices upon which the hedging
instruments are based.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable index.
To compensate for the imperfect correlation of movements in the price of the
portfolio securities being hedged and movements in the price of the hedging
instruments, the Fund might use hedging instruments in a greater dollar amount
than the dollar amount of portfolio securities being hedged. It might do so if
the historical volatility of the prices of the portfolio securities being hedged
is more than the historical volatility of the applicable index.
The ordinary spreads between prices in the cash and futures markets are
subject to distortions, due to differences in the nature of those markets.
First, all participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities markets. Therefore,
increased participation by speculators in the futures market may cause temporary
price distortions.
The Fund can use hedging instruments to establish a position in the
securities markets as a temporary substitute for the purchase of individual
securities (long hedging) by buying futures. It is possible that when the Fund
does so the market might decline. If the Fund then concludes not to invest in
securities because of concerns that the market might decline further or for
other reasons, the Fund will realize a loss on the hedging instruments that is
not offset by a reduction in the price of the securities purchased.
o Forward Contracts. Forward contracts are foreign currency exchange contracts.
They are used to buy or sell foreign currency for future delivery at a fixed
price. The Fund uses them to "lock in" the U.S. dollar price of a security
denominated in a foreign currency that the Fund has bought or sold, or to
protect against possible losses from changes in the relative values of the U.S.
dollar and a foreign currency. The Fund limits its exposure in foreign currency
exchange contracts in a particular foreign currency to the amount of its assets
denominated in that currency or a closely-correlated currency. The Fund may also
use "cross-hedging" where the Fund hedges against changes in currencies other
than the currency in which a security it holds is denominated.
Under a forward contract, one party agrees to purchase, and another party
agrees to sell, a specific currency at a future date. That date may be any fixed
number of days from the date of the contract agreed upon by the parties. The
transaction price is set at the time the contract is entered into. These
contracts are traded in the inter-bank market conducted directly among 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
the risk of 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.
Although forward contracts may reduce the risk of loss from a decline in the
value of the hedged currency, at the same time they limit any potential gain if
the value of the hedged currency increases.
When the Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when it anticipates receiving
dividend payments in a foreign currency, the Fund might desire to "lock-in" the
U.S. dollar price of the security or the U.S. dollar equivalent of the dividend
payments. To do so, the Fund could enter into a forward contract for the
purchase or sale of the amount of foreign currency involved in the underlying
transaction, in a fixed amount of U.S. dollars per unit of the foreign currency.
This is called a "transaction hedge." The transaction hedge will protect the
Fund against a loss from an adverse change in 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 the payments are made or
received.
The Fund could also use forward contracts to lock in the U.S. dollar value
of portfolio positions. This is called a "position hedge." When the Fund
believes that foreign currency might suffer a substantial decline against the
U.S. dollar, it could enter into a forward contract to sell an amount of that
foreign currency approximating the value of some or all of the Fund's portfolio
securities denominated in that foreign currency. When the Fund believes that the
U.S. dollar might suffer a substantial decline against a foreign currency, it
could enter into a forward contract to buy that foreign currency for a fixed
dollar amount. Alternatively, the Fund could enter into a forward contract to
sell a different foreign currency for a fixed U.S. dollar amount if the Fund
believes that the U.S. dollar value of the foreign currency to be sold pursuant
to its 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.
That is referred to as a "cross hedge." Normally, the Fund will not use
cross-hedging.
The Fund will cover its short positions in these cases by identifying to
its Custodian bank assets having a value equal to the aggregate amount of the
Fund's commitment under forward contracts. The Fund will not enter into forward
contracts or maintain a net exposure to such contracts if 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 or another currency that is the subject of the
hedge.
However, to avoid excess transactions and transaction costs, the Fund may
maintain a net exposure to forward contracts in excess of the value of the
Fund's portfolio securities or other assets denominated in foreign currencies if
the excess amount is "covered" by liquid securities denominated in any currency.
The cover must be at least equal at all times to the amount of that excess. As
one 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. As another alternative,
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.
The precise matching of the amounts under forward contracts and the value
of the securities involved generally will not be possible because the future
value of securities denominated in foreign currencies will change as a
consequence of market movements between the date the forward contract is entered
into and the date it is sold. In some cases the Manager might decide to sell the
security and deliver foreign currency to settle the original purchase
obligation. If the market value of the security is less than the amount of
foreign currency the Fund is obligated to deliver, the Fund might have to
purchase additional foreign currency on the "spot" (that is, cash) market to
settle the security trade. If the market value of the security instead exceeds
the amount of foreign currency the Fund is obligated to deliver to settle the
trade, the Fund might have to sell on the spot market some of the foreign
currency received upon the sale of the security. There will be additional
transaction costs on the spot market in those cases.
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 to pay additional transactions costs. The use of forward
contracts in this manner might reduce the Fund's performance if there are
unanticipated changes in currency prices to a greater degree than if the Fund
had not entered into such contracts.
At or before the maturity of a forward contract requiring the Fund to sell
a currency, the Fund might sell a portfolio security and use the sale proceeds
to make delivery of the currency. In the alternative the Fund might retain the
security and offset its contractual obligation to deliver the currency by
purchasing a second contract. Under that contract the Fund will obtain, on the
same maturity date, the same amount of the currency that it is obligated to
deliver. Similarly, the Fund might 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. The gain or loss
will depend on the extent to which the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
offsetting contract.
The costs 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 brokerage fees or commissions are involved.
Because these contracts are not traded on an exchange, the Fund must evaluate
the credit and performance risk of the counterparty under each 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
will incur costs in doing so. 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 might
offer to sell a foreign currency to the Fund at one rate, while offering a
lesser rate of exchange if the Fund desires to resell that currency to the
dealer.
o
Interest Rate Swap Transactions. The Fund can enter into interest
rate swap agreements. 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 might swap the right to receive floating rate
payments for fixed rate payments. The Fund can enter into swaps only on
securities that it owns. The Fund will not enter into swaps with respect to more
than 25% of its total assets. Also, the Fund will identify on its books liquid
assets (such as cash or U.S. government securities) to cover any amounts it
could owe under swaps that exceed the amounts it is entitled to receive, and it
will adjust that amount daily, as needed.
Swap agreements entail both interest rate risk and credit risk. There is a
risk that, based on movements of interest rates in the future, the payments made
by the Fund under a swap agreement will be greater than the payments it
received. Credit risk arises from the possibility that the counterparty will
default. If the counterparty 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 can enter into swap transactions with certain counterparties
pursuant to master netting agreements. A master netting agreement provides that
all swaps done between the Fund and that counterparty shall be regarded as parts
of an integral agreement. If amounts are payable on a particular date in the
same currency in respect of one or more swap transactions, the amount payable on
that date in that currency shall be the net amount. In addition, the master
netting agreement may provide that if one party defaults generally or on one
swap, the counterparty can terminate all of the swaps with that party. Under
these agreements, if a default results 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 for each swap. It is measured by 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."
o Regulatory Aspects of Hedging Instruments. When using futures and options on
futures, the Fund is required to operate within certain guidelines and
restrictions with respect to the use of futures as established by the
Commodities Futures Trading Commission (the "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 Rule 4.5 adopted by the CFTC. The Rule
does not limit the percentage of the Fund's assets that may be used for futures
margin and related options premiums for a bona fide hedging position. However,
under the Rule, the Fund must limit its aggregate initial futures margin and
related options premiums to not more than 5% of the Fund's net assets for
hedging strategies that are not considered bona fide hedging strategies under
the Rule. Under the Rule, the Fund must also use short futures and options on
futures solely for bona fide hedging purposes within the meaning and intent of
the applicable provisions of the Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations established
by the option exchanges. The exchanges limit the maximum number of options that
may be written or held by a single investor or group of investors acting in
concert. Those limits apply 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 that 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. An
exchange may order the liquidation of positions found to be in violation of
those limits and may impose certain other sanctions.
o Tax Aspects of Certain Hedging Instruments. Certain foreign currency exchange
contracts in which the Fund may invest are treated as "Section 1256 contracts"
under the Internal Revenue Code. In general, gains or losses relating to Section
1256 contracts are characterized as 60% long-term and 40% short-term capital
gains or losses under the Code. However, foreign currency gains or losses
arising from Section 1256 contracts that are 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," and unrealized
gains or losses are treated as though they were realized. These contracts also
may be marked-to-market for purposes of determining 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 those transactions from this marked-to-market treatment.
Certain forward contracts the Fund enters into 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 that the 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, the following gains or losses are treated
as ordinary income or loss: (1) 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, and
(2) gains or losses attributable to fluctuations in the value of a foreign
currency between the date of acquisition of a debt security denominated in a
foreign currency or foreign currency forward contracts and the date of
disposition.
Currency gains and losses are offset against market gains and losses on
each trade before determining a net "Section 988" gain or loss under the
Internal Revenue Code for that trade, which may increase or decrease the amount
of the Fund's investment income available for distribution to its shareholders.
Investment Restrictions
|X| What Are "Fundamental Policies?" Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be changed
only by the vote of a "majority" of the Fund's outstanding voting securities.
Under the Investment Company Act, a "majority" vote is defined as the vote of
the holders of the lesser of:
o 67% or more of the shares present or represented by proxy at a shareholder
meeting, if the holders of more than 50% of the outstanding shares are
present or represented by proxy, or
o more than 50% of the outstanding shares.
Policies described in the Prospectus or this Statement of Additional
Information are "fundamental" only if they are identified as such. The Fund's
Board of Directors can change non-fundamental policies without shareholder
approval. However, significant changes to investment policies will be described
in supplements or updates to the Prospectus or this Statement of Additional
Information, as appropriate. The Fund's principal investment policies are
described in the Prospectus.
|X| Does the Fund Have Additional Fundamental Policies? The following
investment restrictions are fundamental policies of the Fund.
o The Fund cannot issue senior securities. However, it can make payments or
deposits of margin in connection with options or futures transactions, lend its
portfolio securities, enter into repurchase agreements, borrow money and pledge
its assets as permitted by its other fundamental policies. For purposes of this
restriction, the issuance of shares of common stock in multiple classes or
series, the purchase or sale of options, futures contracts and options on
futures contracts, forward commitments, and repurchase agreements entered into
in accordance with the Fund's investment policies, and the pledge, mortgage or
hypothecation of the Fund's assets are not deemed to be senior securities.
o The Fund cannot invest more than 5% of its total assets (taken at market value
at the time of each investment) in the securities (other than securities of the
U.S. government or its agencies) of any one issuer or invest more than 15% of
its total assets in the obligations of any one bank. This restriction applies to
repurchase agreements with any one bank or dealer. Additionally, the Fund cannot
purchase more than either 10% of the principal amount of the outstanding debt
securities of an issuer, or 10% of the outstanding voting securities of an
issuer. This restriction shall not apply to securities issued or guaranteed by
the U.S. government or its agencies, bank money market instruments or bank
repurchase agreements.
o The Fund cannot invest more than 25% of the value of its total assets in the
securities of issuers in any single industry. However, this limitation shall not
apply to the purchase of obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities. For the purpose of this
restriction, each utility that provides a separate service (for example, gas,
gas transmission, electric or telephone) shall be considered to be a separate
industry. This test shall be applied on a pro forma basis using the market value
of all assets immediately prior to making any investment. The Fund has
undertaken as a matter of non-fundamental policy to apply this restriction to
25% or more of its total assets.
o The Fund cannot, by itself or together with any other fund, portfolio or
portfolios, make investments for the purpose of exercising control over, or
management of, any issuer.
o The Fund cannot purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization. It can
also purchase in the open market securities of closed-end investment companies
if no underwriter or dealer's commission or profit, other than the customary
broker's commission is involved and only if immediately thereafter not more than
10% of the Fund's total assets, taken at market value, would be invested in such
securities.
o The Fund cannot purchase or sell interests in oil, gas or other mineral
exploration or development programs, commodities, commodity contracts or real
estate. However, the Fund can purchase securities of issuers that invest or deal
an any of the above interests and can invest for hedging purposes in futures
contracts on securities, financial instruments and indices, and foreign
currency, as are approved for trading on a registered exchange.
o The Fund cannot purchase any securities on margin or make short sales of
securities or maintain a short position. However, the Fund can obtain such
short- term credits as may be necessary for the clearance of purchases and sales
of portfolio securities. The deposit or payment by the Fund of initial or
maintenance margin in connection with futures contracts or related options
transactions is not considered to be the purchase of a security on margin.
o The Fund cannot make loans. However, the Fund may lend portfolio securities in
accordance with the Fund's investment policies up to 33 1/3% of the Fund's total
assets taken at market value. The Fund can also enter into repurchase
agreements, and purchase all or a portion of an issue of publicly distributed
debt securities, bank loan participation interests, bank certificates of
deposit, bankers' acceptances, debentures or other securities, whether or not
the purchase is made upon the original issuance of the securities.
o The Fund cannot borrow amounts in excess of 10% of its total assets, taken at
market value at the time of the borrowing. It can borrow only from banks as a
temporary measure for extraordinary or emergency purposes. It cannot make
investments in portfolio securities while such outstanding borrowings exceed 5%
of its total assets.
o The Fund cannot allow its current obligations under reverse repurchase
agreements, together with borrowings, to exceed 1/3 of the value of its total
assets (less all its liabilities other than the obligations under borrowings and
such agreements).
o The Fund cannot mortgage, pledge, hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held by the Fund except as
may be necessary in connection with borrowings as mentioned in its restriction
on borrowing, above. In that case such mortgaging, pledging or hypothecating may
not exceed 10% of the Fund's total assets, taken at market value at the time of
the borrowing. The deposit of cash, cash equivalents and liquid debt securities
in a segregated account with the Fund's custodian bank and/or with a broker in
connection with futures contracts or related options transactions and the
purchase of securities on a "when-issued" basis are not deemed to be pledges.
o
The Fund cannot underwrite securities of other issuers. A permitted
exception is in case it is deemed to be an underwriter under the Securities Act
of 1933 in reselling its portfolio securities.
o The Fund cannot write, purchase or sell puts, calls or combinations thereof,
except that it can write covered call options.
o The Fund cannot invest in securities of foreign issuers if at the time of
acquisition more than 10% of its total assets, taken at market value at the time
of the investment, would be invested in such securities. However, up to 25% of
the total assets of the Fund may be invested in the aggregate in such securities
that are (i) issued, assumed or guaranteed by foreign governments, or political
subdivisions or instrumentalities thereof, (ii) assumed or guaranteed by
domestic issuers (including Eurodollar securities), or (iii) issued, assumed or
guaranteed by foreign issuers having a class of securities listed for trading on
The New York Stock Exchange.
o The Fund cannot invest more than 10% in the aggregate of the value of its
total assets in repurchase agreements maturing in more than seven days, time
deposits maturing in more than two days, portfolio securities that do not have
readily available market quotations and all other illiquid assets.
For purposes of the fundamental investment restrictions, the term "borrow"
does not include mortgage dollar rolls, reverse repurchase agreements or lending
portfolio securities. The terms "illiquid securities" and "portfolio securities
that do not have readily available market quotations" include restricted
securities. However, reverse repurchase agreements are treated as borrowings,
master demand notes may be deemed to be illiquid securities and mortgage dollar
rolls are sales transactions and not financings.
Unless the Prospectus or this 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. 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.
For purposes of the Fund's policy not to concentrate its investments as
described above, the Fund has adopted the industry classifications set forth in
Appendix B to this Statement of Additional Information. This is not a
fundamental policy.
How the Fund is Managed
Organization and History. The Fund is one of two investment portfolios, or
"series," of Oppenheimer Series Fund, Inc. That corporation is an open-end,
management investment company organized as a Maryland corporation in 1981, and
was called Connecticut Mutual Investment Accounts, Inc. until March 18, 1996,
when the Manager became the Fund's investment adviser. The Fund is a diversified
mutual fund, and until March 18, 1996 was called Connecticut Mutual Total Return
Account.
The Fund's parent corporation is governed by a Board of Directors, which
is responsible for protecting the interests of shareholders under Maryland law.
The Directors meet periodically throughout the year to oversee the Fund's
activities, review its performance, and review the actions of the Manager.
|X| Classes of Shares. The Board of Directors has the power, without
shareholder approval, to divide unissued shares of the Fund into two or more
classes. The Board has done so, and the Fund currently has three classes of
shares: Class A, Class B, and Class C. All classes invest in the same investment
portfolio. Each class of shares:
o has its own dividends and distributions,
o pays certain expenses which may be different for the different classes,
o may have a different net asset value,
o may have separate voting rights on matters in which interests of one class
are different from interests of another class, and o votes as a
class on matters that affect that class alone.
Shares are freely transferable, and each share of each class has one vote
at shareholder meetings, with fractional shares voting proportionally on matters
submitted to the vote of shareholders. Each share of the Fund represents an
interest in the Fund proportionately equal to the interest of each other share
of the same class.
The Directors are authorized to create new series and classes of shares.
The Directors may reclassify unissued shares of the Fund's parent corporation or
its series or classes into additional series or classes of shares. The Directors
also may divide or combine the shares of a class into a greater or lesser number
of shares without changing the proportionate beneficial interest of a
shareholder in the Fund. Shares do not have cumulative voting rights or
preemptive or subscription rights. Shares may be voted in person or by proxy at
shareholder meetings.
|X| Meetings of Shareholders. Although the Fund is not required by
Maryland law to hold annual meetings, it may hold shareholder meetings from time
to time on important matters. The shareholders of the Fund's parent corporation
have the right to call a meeting to remove a Director or to take certain other
action described in the Articles of Incorporation or under Maryland law.
The Fund will hold meetings when required to do so by the Investment
Company Act or other applicable law. The Fund will hold a meeting when the
Directors call a meeting or upon proper request of shareholders. If the Fund's
parent corporation receives a written request of the record holders of at least
25% of the outstanding shares eligible to be voted at a meeting to call a
meeting for a specified purpose (which might include the removal of a Director),
the Directors will call a meeting of shareholders for that specified purpose.
The Fund's parent corporation has undertaken that it will then either give the
applicants access to the Fund's shareholder list or mail the applicants'
communication to all other shareholders at the applicants' expense.
Shareholders of the Fund and of its parent corporation's other series vote
together in the aggregate on certain matters at shareholders' meetings. Those
matters include the election of Directors and ratification of appointment of the
independent auditors. Shareholders of a particular series or class vote
separately on proposals that affect that series or class. Shareholders of a
series or class that is not affected by a proposal are not entitled to vote on
the proposal. For example, only shareholders of a particular series vote on any
material amendment to the investment advisory agreement for that series. Only
shareholders of a particular class of a series vote on certain amendments to the
Distribution and/or Service Plans if the amendments affect only that class.
Directors and Officers of the Fund. The Directors of the Fund's parent
corporation and the Fund's officers and their principal occupations and business
affiliations during the past five years are listed below. Directors denoted with
an asterisk (*) below are deemed to be "interested persons" of the Fund's parent
corporation and the Fund under the Investment Company Act. All of the Directors
are also trustees, directors or managing general partners of the following New
York-based Oppenheimer funds9:
Oppenheimer California Municipal Fund Oppenheimer Large Cap Growth Fund
Oppenheimer Capital Appreciation Fund Oppenheimer Money Market Fund, Inc.
Oppenheimer Capital Preservation Fund Oppenheimer Multiple Strategies Fund
Oppenheimer Developing Markets Fund Oppenheimer Multi-Sector Income Trust
Oppenheimer Discovery Fund Oppenheimer Multi-State Municipal Trust Oppenheimer
Enterprise Fund Oppenheimer Municipal Bond Fund Oppenheimer Europe Fund
Oppenheimer New York Municipal Fund Oppenheimer Global Fund Oppenheimer Series
Fund, Inc. Oppenheimer Global Growth & Income Fund Oppenheimer U.S. Government
Trust Oppenheimer Gold & Special Minerals Fund Oppenheimer Trinity Core Fund
Oppenheimer Growth Fund Oppenheimer Trinity Growth Fund Oppenheimer
International Growth Fund Oppenheimer Trinity Value Fund Oppenheimer
International Small Company Fund Oppenheimer World Bond Fund
Ms. Macaskill and Messrs. Spiro, Donohue, Wixted, Zack, Bishop and Farrar
respectively hold the same offices with the other New York-based Oppenheimer
funds as with the Fund. As of February 15, 2000 the Directors and officers of
the Fund as a group owned of record or beneficially less than 1% of each class
of shares of the Fund. The foregoing statement does not reflect ownership of
shares of the Fund held of record by an employee benefit plan for employees of
the Manager, other than the shares beneficially owned under the plan by the
officers of the Fund listed above. Ms. Macaskill and Mr. Donohue are trustees of
that plan.
Leon Levy, Chairman of the Board of Directors, Age 74
280 Park Avenue, New York, New York 10017
General Partner of Odyssey Partners, L.P. (investment partnership) (since 1982)
and Chairman of Avatar Holdings, Inc. (real estate development).
Robert G. Galli, Director, Age 66
19750 Beach Road, Jupiter Island, Florida 33469
A Trustee or Director of other Oppenheimer funds. Formerly he held the following
positions: Vice Chairman of the Manager, OppenheimerFunds, Inc. (October 1995 -
December 1997); Executive Vice President of the Manager (December 1977 - October
1995); Executive Vice President and a director (April 1986 - October 1995) of
HarbourView Asset Management Corporation, an investment advisor subsidiary of
the Manager.
Phillip A. Griffiths, Director, Age 61
97 Olden Lane, Princeton, New Jersey 08540
The Director of the Institute for Advanced Study, Princeton, NJ (since 1991) and
a member of the National Academy of Sciences (since 1979); formerly a director
of Bankers Trust Corporation (1994 through June 1999), Provost and Professor of
Mathematics at Duke University (1983 - 1991), a director of Research Triangle
Institute, Raleigh, N.C. (1983 - 1991), and a Professor of Mathematics at
Harvard University (1972 - 1983).
Benjamin Lipstein, Director, Age 76
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University.
Bridget A. Macaskill,* President and Director, Age 51 Two World Trade Center,
34th Floor, New York, New York 10048-0203 President (since June 1991), Chief
Executive Officer (since September 1995) and a Director (since December 1994) of
the Manager; President and director (since June 1991) of HarbourView Asset
Management Corporation; Chairman and a director of Shareholder Services, Inc.
(since August 1994) and Shareholder Financial Services, Inc. (since September
1995), (both are transfer agent subsidiaries of the Manager); President (since
September 1995) and a director (since October 1990) of Oppenheimer Acquisition
Corp., the Manager's parent holding company; President (since September 1995)
and a director (since November 1989) of Oppenheimer Partnership Holdings, Inc.,
a holding company subsidiary of the Manager; a director of Oppenheimer Real
Asset Management, Inc., an investment advisory subsidiary of the Manager (since
July 1996); President and a director (since October 1997) of OppenheimerFunds
International Ltd. and of Oppenheimer Millennium Funds plc, off-shore investment
companies managed by the Manager; President and a director of other Oppenheimer
funds; a director of Prudential Corporation plc (a U.K. financial service
company).
Elizabeth B. Moynihan, Director, Age 70
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the Freer Gallery of Art
(Smithsonian Institute), Executive Committee of Board of Trustees of the
National Building Museum; a member of the Trustees Council, Preservation League
of New York State.
Kenneth A. Randall, Director, Age 72
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding company),
Dominion Energy, Inc. (electric power and oil & gas producer), and Prime Retail,
Inc. (real estate investment trust); formerly President and Chief Executive
Officer of The Conference Board, Inc. (international economic and business
research) and a director of Lumbermens Mutual Casualty Company, American
Motorists Insurance Company and American Manufacturers Mutual Insurance Company.
Edward V. Regan, Director, Age 69
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New York; Senior
Fellow of Jerome Levy Economics Institute, Bard College; a director of RBAsset
(real estate manager); a director of OffitBank; Trustee, Financial Accounting
Foundation (FASB and GASB); formerly New York State Comptroller and trustee, New
York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Director, Age 68
8 Sound Shore Drive, Greenwich, Connecticut 06830
Chairman of The Directorship Group, Inc. (corporate governance consulting and
executive recruiting); a director of Professional Staff Limited (a U.K.
temporary staffing company); a life trustee of International House (non-profit
educational organization), and a trustee of the Greenwich Historical Society.
Donald W. Spiro, Vice Chairman and Director, Age 74 Two World Trade Center, 34th
Floor, New York, New York 10048-0203 Formerly he held the following positions:
Chairman Emeritus (August 1991 - August 1999), Chairman (November 1987 - January
1991) and a director (January 1969 - August 1999) of the Manager; President and
Director of OppenheimerFunds Distributor, Inc., the Fund's Distributor (July
1978 - January 1992).
Clayton K. Yeutter, Director, Age 69
10475 E. Laurel Lane, Scottsdale, Arizona 85259
Of Counsel, Hogan & Hartson (a law firm); a director of Zurich Financial
Services (financial services), Zurich Allied AG and Allied Zurich p.l.c.
(insurance investment management); Caterpillar, Inc. (machinery), ConAgra, Inc.
(food and agricultural products), Farmers Insurance Company (insurance), FMC
Corp. (chemicals and machinery) and Texas Instruments, Inc. (electronics);
formerly (in descending chronological order), Counselor to the President (Bush)
for Domestic Policy, Chairman of the Republican National Committee, Secretary of
the U.S. Department of Agriculture and U.S. Trade Representative.
Peter M. Antos, Vice President and Portfolio Manager, Age 54 One Financial
Plaza, 755 Main Street, Hartford, Connecticut 06103 Chartered Financial Analyst;
Principal Portfolio Manager, Vice President of the Fund, Senior Vice President
of the Manager and HarbourView Asset Management Corp. (since March 1996); an
officer and portfolio manager of other Oppenheimer funds; previously Vice
President and Senior Portfolio Manager, Equities of Connecticut Mutual Life
Insurance Company and its subsidiary, G.R. Phelps & Co. (1989-1996).
Stephen F. Libera, Vice President and Portfolio Manager, Age 49 One Financial
Plaza, 755 Main Street, Hartford, Connecticut 06103-2603 Chartered Financial
Analyst; Vice President of the Fund, the Manager and HarbourView Asset
Management Corporation (since March 1996); portfolio manager of other
Oppenheimer funds; previously a Vice President and Senior Portfolio Manager,
Fixed Income - Connecticut Mutual Life Insurance Company and its subsidiary -
G.R. Phelps (1985 - 1996).
Michael C. Strathearn, Vice President and Portfolio Manager, Age 47 One
Financial Plaza, 755 Main Street, Hartford, Connecticut 06103 Chartered
Financial Analyst; Vice President of the Fund, the Manager and HarbourView Asset
Management Corp (since March 1996); an officer of other Oppenheimer funds;
previously a Portfolio Manager, Equities, of Connecticut Mutual Life Insurance
Company (1988-1996).
Kenneth B. White, Vice President and Portfolio Manager, Age 48 One Financial
Plaza, 755 Main Street, Hartford, Connecticut 06103 Chartered Financial Analyst;
Vice President of the Fund, the Manager and HarbourView Asset Management Corp.
(since March 1996); an officer of other Oppenheimer funds; previously a
Portfolio Manager, Equities, of Connecticut Mutual Life Insurance Company
(1992-1996).
Arthur J. Zimmer, Vice President and Portfolio Manager, Age 52
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President of the Manager (since June 1997); Vice President of
Centennial Asset Management Corporation, an investment advisory subsidiary of
the Manager (since September 1991); an officer of other Oppenheimer funds;
formerly Vice President of the Manager (October 1990 - June 1997).
Andrew J. Donohue, Secretary, Age 49
Two World Trade Center, 34th Floor, New York, New York 10048-0203 Executive Vice
President (since January 1993), General Counsel (since October 1991) and a
Director (since September 1995) of the Manager; Executive Vice President and
General Counsel (since September 1993) and a director (since January 1992) of
the Distributor; Executive Vice President, General Counsel and a director of
HarbourView Asset Management Corporation, Shareholder Services, Inc.,
Shareholder Financial Services, Inc. and (since September 1995) Oppenheimer
Partnership Holdings, Inc.; President and a director of Centennial Asset
Management Corporation (since September 1995); President, General Counsel and a
director of Oppenheimer Real Asset Management, Inc. (since July 1996); General
Counsel (since May 1996) and Secretary (since April 1997) of Oppenheimer
Acquisition Corp.; Vice President and a director of OppenheimerFunds
International Ltd. and Oppenheimer Millennium Funds plc (since October 1997); an
officer of other Oppenheimer funds.
Brian W. Wixted, Treasurer, Age 40
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer (since April 1999) of the Manager; Treasurer
of HarbourView Asset Management Corporation, Shareholder Services, Inc.,
Shareholder Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc.
(since April 1999); Assistant Treasurer of Oppenheimer Acquisition Corp. (since
April 1999); Assistant Secretary of Centennial Asset Management Corporation
(since April 1999); formerly Principal and Chief Operating Officer, Bankers
Trust Company - Mutual Fund Services Division (March 1995 - March 1999); Vice
President and Chief Financial Officer of CS First Boston Investment Management
Corp. (September 1991 - March 1995); and Vice President and Accounting Manager,
Merrill Lynch Asset Management (November 1987 - September 1991).
Robert G. Zack, Assistant Secretary, Age 51
Two World Trade Center, 34th Floor, New York, New York 10048-0203 Senior Vice
President (since May 1985) and Associate General Counsel (since May 1981) of the
Manager, Assistant Secretary of Shareholder Services, Inc. (since May 1985), and
Shareholder Financial Services, Inc. (since November 1989); Assistant Secretary
of OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc
(since October 1997); an officer of other Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer, Age 41
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
Scott T. Farrar, Assistant Treasurer, Age 34
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
|X| Remuneration of Directors. The officers of the Fund and Ms. Macaskill,
who is affiliated with the Manager receive no salary or fee from the Fund. The
remaining Directors of the Fund received the compensation shown below. The
compensation from the Fund was paid during its fiscal year ended October 31,
1999. The compensation from all of the New York-based Oppenheimer funds
(including the Fund) was received as a director, trustee or member of a
committee of the boards of those funds during the calendar year 1999.
- --------------------------------------------------------------------------------
Total
Retirement Compensation
Benefits from all
Aggregate Accrued as Part New York-based
Director's Name Compensation of Fund Oppenheimer
And Position From Fund 1 Expenses Funds (24 Funds)2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Leon Levy $0 $0 $166,700
Chairman
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Robert G. Galli $0 $0 $176,2153
Study Committee Member
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Phillip Griffiths4 $0 $0 $17,835
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Benjamin Lipstein
Study Committee Chairman, $0 $0 $144,100
Audit Committee Member
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Elizabeth B. Moynihan $0 $0 $101,500
Study Committee Member
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Kenneth A. Randall $0 $0 $93,100
Audit Committee Chairman
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Edward V. Regan
Proxy Committee Chairman, $0 $0 $92,100
Audit Committee Member
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Russell S. Reynolds, Jr. $0 $0 $68,900
Proxy Committee Member
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Donald W. Spiro4 $0 $0 $10,250
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Clayton K. Yeutter $0 $0 $68,900
Proxy Committee Member
- --------------------------------------------------------------------------------
1. Aggregate compensation includes fees, deferred compensation, if any, and
retirement plan benefits accrued for a Trustee or Director. No compensation
or retirement benefit expenses were allocated to the Fund for fiscal year
1999 because the Fund received an expense credit in excess of its
compensation and retirement benefit expenses due to a reallocation of such
expenses among the New York-based Oppenheimer funds.
2. For the 1999 calendar year.
3. Total Compensation for the 1999 calendar year includes compensation received
for serving as a Trustee or Director of 10 other Oppenheimer funds.
4. Prior to August 1, 1999, Mr. Spiro was not an Independent Director.
|X| Retirement Plan for Directors. The Fund and its parent corporation have
adopted a retirement plan that provides for payments to retired Directors.
Payments are up to 80% of the average compensation paid during a Director's five
years of service in which the highest compensation was received. A Director must
serve as director or trustee for any of the New York-based Oppenheimer funds for
at least 15 years to be eligible for the maximum payment. Each Director's
retirement benefits will depend on the amount of the Director's future
compensation and length of service. Therefore the amount of those benefits
cannot be determined at this time, nor can we estimate the number of years of
credited service that will be used to determine those benefits.
|X| Deferred Compensation Plan. The Board of Directors has adopted a
Deferred Compensation Plan for disinterested directors that enables them to
elect to defer receipt of all or a portion of the annual fees they are entitled
to receive from the Fund. Under the plan, the compensation deferred by a
Director is periodically adjusted as though an equivalent amount had been
invested in shares of one or more Oppenheimer funds selected by the Director.
The amount paid to the Director under the plan will be determined based upon the
performance of the selected funds.
Deferral of Directors' fees under the plan will not materially affect the
Fund's assets, liabilities and net income per share. The plan will not obligate
the Fund to retain the services of any Director or to pay any particular level
of compensation to any Director. Pursuant to an Order issued by the Securities
and Exchange Commission, the Fund may invest in the funds selected by the
Director under the plan without shareholder approval for the limited purpose of
determining the value of the Director's deferred fee account.
|X| Major Shareholders. As of February 15, 2000, the only persons who
owned of record or were known by the Fund to own beneficially 5% or more of any
class of the Fund's outstanding shares were:
Merrill Lynch, Pierce, Fenner & Smith, Inc., 4800 Deer Lake Drive East,
Jacksonville, FL 32246, which owned 28,954.695 Class C shares (representing
approximately 8.43% of the outstanding Class C shares) for the benefit of
its clients.
The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company. 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 enforced by the
Manager.
|X| The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and the Fund. The Manager selects securities for
the Fund's portfolio and handles its day-to-day business. The portfolio managers
of the Fund are employed by the Manager and are the persons who are principally
responsible for the day-to-day management of the Fund's portfolio. Other members
of the Manager's Equity Portfolio Department provide the portfolio managers with
counsel and support in managing the Fund's portfolio.
The agreement requires the Manager, at its expense, to provide the Fund
with adequate office space, facilities and equipment. It also requires the
Manager to provide and supervise the activities of all administrative and
clerical personnel required to provide effective administration for the Fund.
Those responsibilities include 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.
The Fund pays expenses not expressly assumed by the Manager under the
advisory agreement. The advisory agreement lists examples of expenses paid by
the Fund. The major categories relate to interest, taxes, brokerage commissions,
fees to certain Directors, legal and audit expenses, custodian and transfer
agent expenses, share issuance costs, certain printing and registration costs
and non-recurring expenses, including litigation costs. The management fees paid
by the Fund to the Manager are calculated at the rates described in the
Prospectus, which are applied to the assets of the Fund as a whole. The fees are
allocated to each class of shares based upon the relative proportion of the
Fund's net assets represented by that class.
------------------------------------------------------------------------------
Fiscal Year ended 10/31: Management Fees Paid to OppenheimerFunds, Inc.
------------------------------------------------------------------------------
------------------------------------------------------------------------------
1997 $1,535,343
------------------------------------------------------------------------------
------------------------------------------------------------------------------
1998 $1,774,240
------------------------------------------------------------------------------
------------------------------------------------------------------------------
1999 $1,994,511
------------------------------------------------------------------------------
The investment advisory agreement states that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties or
reckless disregard of its obligations and duties under the investment advisory
agreement, the Manager is not liable for any loss resulting from a good faith
error or omission on its part with respect to any of its duties under the
agreement.
The 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 Manager may withdraw the right of the Fund's parent
corporation to use the name "Oppenheimer" as part of its name and the name of
the Fund.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the duties of
the Manager under the investment advisory agreement is to arrange the portfolio
transactions for the Fund. The advisory agreement contains provisions relating
to the employment of broker-dealers to effect the Fund's portfolio transactions.
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. The Manager may employ broker-dealers that the Manager thinks, in
its best judgment based on all relevant factors, will implement the policy of
the Fund to obtain, at reasonable expense, the "best execution" of the Fund's
portfolio transactions. "Best execution" means prompt and reliable execution at
the most favorable price obtainable. The Manager need not seek competitive
commission bidding. However, it is expected to be aware of the current rates of
eligible brokers and to minimize the commissions paid to the extent consistent
with the interests and policies of the Fund as established by its Board of
Directors.
Under the investment advisory agreement, the Manager may select brokers
(other than affiliates) 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 charge, if the Manager makes a good faith
determination that the commission is fair and reasonable in relation to the
services provided. Subject to those considerations, as a factor in selecting
brokers for the Fund's portfolio transactions, the Manager may also consider
sales of shares of the Fund and other investment companies for which the Manager
or an affiliate serves as investment adviser.
Brokerage Practices Followed by the Manager. The Manager allocates brokerage for
the Fund subject to the provisions of the investment advisory agreement and the
procedures and rules described above. Generally, the Manager's portfolio traders
allocate brokerage based upon recommendations from the Manager's portfolio
managers. In certain instances, portfolio managers may directly place trades and
allocate brokerage. In either case, the Manager's executive officers supervise
the allocation of brokerage.
Transactions in securities other than those for which an exchange is the
primary market are generally done with principals or market makers. In
transactions on foreign exchanges, the Fund may be required to pay fixed
brokerage commissions and therefore would not have the benefit of negotiated
commissions available in U.S. markets. Brokerage commissions are paid primarily
for transactions in listed securities or for certain fixed-income agency
transactions in the secondary market. Otherwise brokerage commissions are paid
only if it appears likely that a better price or execution can be obtained by
doing so. In an option transaction, the Fund ordinarily uses the same broker for
the purchase or sale of the option and any transaction in the securities to
which the option relates.
Other funds advised by the Manager have investment policies similar to
those of the Fund. Those other funds may purchase or sell the same securities as
the Fund at the same time as the Fund, which could affect the supply and price
of the securities. If two or more funds advised by the Manager purchase the same
security on the same day from the same dealer, the transactions under those
combined orders are averaged as to price and allocated in accordance with the
purchase or sale orders actually placed for each account.
Most purchases of 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
the Manager determines that a better price or execution can be obtained by using
the services of a broker. Purchases of portfolio 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 investment advisory agreement permits the Manager to allocate
brokerage for research services. The investment 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. The investment research received for the
commissions of those other accounts may be useful both to the Fund and one or
more of the Manager's other accounts. Investment research may be supplied to the
Manager by a third party at the instance of a broker through which trades are
placed.
Investment research services include information and analysis on
particular companies and industries as well as market or economic trends and
portfolio strategy, 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 Directors permits the Manager to use stated commissions on
secondary fixed-income agency trades to obtain research if the broker represents
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 Board of Directors permits the Manager to use concessions on fixed-price
offerings to obtain research, in the same manner as is permitted for agency
transactions.
The research services provided by brokers broadens the scope and
supplements the research activities of the Manager. That research provides
additional views and comparisons for consideration, and helps the Manager to
obtain market information for the valuation of securities that are either held
in the Fund's portfolio or are being considered for purchase. The Manager
provides information to the Board about 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.
- -------------------------------------------------------------------------------
Fiscal Year Ended 10/31: Total Brokerage Commissions Paid by the Fund1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1997 $385,963
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1998 $457,263
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1999 $717,6422
- -------------------------------------------------------------------------------
3. Amounts do not include spreads or concessions on principal transactions on a
net trade basis.
4. In the fiscal year ended 10/31/99, the amount of transactions directed to
brokers for research services was $421,993,246 and the amount of the
commissions paid to broker-dealers for those services was $511,633.
Distribution and Service Plans
The Distributor. Under its General Distributor's Agreement with the Fund's
parent corporation, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of the different classes of shares of the Fund.
The Distributor is not obligated to sell a specific number of shares. Expenses
normally attributable to sales are borne by the Distributor.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares during the Fund's three most recent fiscal
years is shown in the table below.
- -------------------------------------------------------------------------------
Aggregate Class A
Front-End Front-End Commissions Commissions Commissions
Fiscal Sales Sales on Class A on Class B on Class C
Year Charges on Charges Shares Shares Shares
Ended Class A Retained by Advanced by Advanced by Advanced by
10/31: Shares Distributor Distributor1 Distributor1 Distributor1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1997 $468,073 $456,768 $10,843 $175,997 $10,881
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1998 $481,886 $397,054 $27,571 $316,680 $21,560
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1999 $400,298 $295,333 $46,607 $250,032 $25,954
- -------------------------------------------------------------------------------
2. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
- -------------------------------------------------------------------------------
Fiscal Class A Contingent Class B Contingent
Year Deferred Sales Deferred Sales Class C Contingent
Ended Charges Retained by Charges Retained by Deferred Sales Charges
10/31 Distributor Distributor Retained by Distributor
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1999 $2,000 $57,857 $3,487
- -------------------------------------------------------------------------------
Distribution and Service Plans. The Fund has adopted a Service Plan for Class A
shares and Distribution and Service Plans for Class B and Class C shares under
Rule 12b-1 of the Investment Company Act. Under those plans the Fund pays the
Distributor for all or a portion of its costs incurred in connection with the
distribution and/or servicing of the shares of the particular class.
Each plan has been approved by a vote of the Board of Directors, including
a majority of the Independent Directors10, cast in person at a meeting called
for the purpose of voting on that plan. Each plan has also been approved by the
holders of a "majority" (as defined in the Investment Company Act) of the shares
of the applicable class. The shareholder vote for the Distribution and Service
Plan for Class C shares was cast by the Manager as the sole initial holder of
Class C shares of the Fund.
Under the plans, the Manager and the Distributor, in their sole
discretion, from time to time, may use their own resources (at no direct cost to
the Fund) to make payments to brokers, dealers or other financial institutions
for distribution and administrative services they perform. The Manager may use
its profits from the advisory fee it receives from the Fund. In their sole
discretion, the Distributor and the Manager may increase or decrease the amount
of payments they make from their own resources to plan recipients.
Unless a plan is terminated as described below, the plan continues in
effect from year to year but only if the Fund's Board of Directors and its
Independent Directors specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting called for the purpose of
voting on continuing the plan. A plan may be terminated at any time by the vote
of a majority of the Independent Directors or by the vote of the holders of a
"majority" (as defined in the Investment Company Act) of the outstanding shares
of that class.
The Board of Directors and the Independent Directors must approve all
material amendments to a plan. An amendment to increase materially the amount of
payments to be made under a plan must be approved by shareholders of the class
affected by the amendment. Because Class B shares of the Fund automatically
convert into Class A shares after six years, the Fund must obtain the approval
of both Class A and Class B shareholders for a proposed material amendment to
the Class A Plan that would materially increase payments under the Plan. That
approval must be by a "majority" (as defined in the Investment Company Act) of
the shares of each class, voting separately by class.
While the plans are in effect, the Treasurer of the Fund shall provide
separate written reports on the plans to the Board of Directors at least
quarterly for its review. The Reports shall detail the amount of all payments
made under a plan and the purpose for which the payments were made. Those
reports are subject to the review and approval of the Independent Directors.
Each plan states that while it is in effect, the selection and nomination
of those Directors of the Fund's parent corporation who are not "interested
persons" of the corporation (or the Fund) is committed to the discretion of the
Independent Directors. This does not prevent the involvement of others in the
selection and nomination process as long as the final decision as to selection
or nomination is approved by a majority of the Independent Directors.
Under the plan for a class, no payment will be made to any recipient in
any quarter in which the aggregate net asset value of all Fund shares of that
class held by the recipient for itself and its customers does not exceed a
minimum amount, if any, that may be set from time to time by a majority of the
Independent Directors. The Board of Directors has set no minimum amount of
assets to qualify for payments under the plans.
|X| Class A Service Plan Fees. Under the Class A service plan, the
Distributor currently uses the fees it receives from the Fund to pay brokers,
dealers and other financial institutions (they are referred to as "recipients")
for personal services and account maintenance services they provide for their
customers who hold Class A shares. The services 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. The Class A
service plan permits reimbursements to the Distributor at a rate of up to 0.25%
of average annual net assets of Class A shares. The Board has set the rate at
that level. While the plan permits the Board to authorize payments to the
Distributor to reimburse itself for services under the plan, the Board has not
yet done so. The Distributor makes payments to plan recipients quarterly at an
annual rate not to exceed 0.25% of the average annual net assets consisting of
Class A shares held in the accounts of the recipients or their customers.
For the fiscal year ended October 31, 1999 payments under the Class A plan
totaled $732,222, all of which was paid by the Distributor to recipients. That
included $587,717 paid to an affiliate of the Distributor's parent company. Any
unreimbursed expenses the Distributor incurs with respect to Class A shares in
any fiscal year cannot be recovered in subsequent years. The Distributor may not
use payments received under the Class A plan to pay any of its interest
expenses, carrying charges, or other financial costs, or allocation of overhead.
|X| Class B and Class C Service and Distribution Plan Fees. Under each
plan, service fees and distribution 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 Class B and Class C plans
provide for the Distributor to be compensated for its services at a flat rate,
whether the Distributor's costs in distributing Class B and Class C shares and
servicing accounts are more or less than the amounts paid by the Fund under the
plan during the period for which the fee is paid. The types of services that
recipients provide are similar to the services provided under the Class A
service plan, described above.
The Class B and the Class C plans permit the Distributor to retain both
the asset-based sales charges and the service fees or to pay recipients the
service fee on a quarterly basis, without payment in advance. However, the
Distributor currently intends to pay the service fee to recipients in advance
for the first year after the shares are purchased. After the first year shares
are outstanding, the Distributor makes service fee payments quarterly on those
shares. The advance payment is based on the net asset value of shares sold.
Shares purchased by exchange do not qualify for the advance service fee payment.
If Class B or Class C shares are redeemed during the first year after their
purchase, the recipient of the service fees on those shares will be obligated to
repay the Distributor a pro rata portion of the advance payment of the service
fee made on those shares.
The Distributor retains the asset-based sales charge on Class B shares.
The Distributor retains the asset-based sales charge on Class C shares during
the first year the shares are outstanding. It pays the asset-based sales charge
as an ongoing commission to the recipient on Class C shares outstanding for a
year or more. If a dealer has a special agreement with the Distributor, the
Distributor will pay the Class B and/or Class C service fee and the asset-based
sales charge to the dealer quarterly in lieu of paying the sales commissions and
service fee in advance at the time of purchase.
The asset-based sales charges on Class B and Class C shares allow
investors to buy shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell those shares. The Fund pays the
asset-based sales charges to the Distributor for its services rendered in
distributing Class B and Class C shares. The payments are made to the
Distributor in recognition that the Distributor:
o pays sales commissions to authorized brokers and dealers at the time of sale
and pays service fees as described above,
o may finance payment of sales commissions and/or the advance of the service fee
payment to recipients under the plans, or may provide such financing from its
own resources or from the resources of an affiliate,
o employs personnel to support distribution of Class B and Class C shares, and
o bears the costs of sales literature, advertising and prospectuses (other than
those furnished to current shareholders) and state "blue sky" registration fees
and certain other distribution expenses.
The Distributor's actual expenses in selling Class B and Class C shares
may be more than the payments it receives from the contingent deferred sales
charges collected on redeemed shares and from the Fund under the plans. If
either the Class B or the Class C plan is terminated by the Fund, the Board of
Directors may allow the Fund to continue payments of the asset-based sales
charge to the Distributor for distributing shares before the plan was
terminated.
- --------------------------------------------------------------------------------
Distribution Fees Paid to the Distributor for the Year Ended 10/31/99
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Distributor's Distributor's
Aggregate Unreimbursed
Amount Unreimbursed Expenses as %
Total Payments Retained by Expenses Under of Net Assets
Class: Under Plan Distributor Plan of Class
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Plan $246,431 $206,2531 $689,149 2.93%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Plan $58,740 $33,2272 $67,663 1.18%
- --------------------------------------------------------------------------------
4. Includes $20,874 paid to an affiliate of the Distributor's parent company.
5. Includes $7,586 paid to an affiliate of the Distributor's parent company.
All payments under the Class B and the 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.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its investment performance. Those terms include "cumulative total
return," "average annual total return," "average annual total return at net
asset value" and "total return at net asset value." An explanation of how total
returns are calculated is set forth below. The charts below show the Fund's
performance as of the Fund's most recent fiscal year end. You can obtain current
performance information by calling the Fund's Transfer Agent at 1-800-525-7048
or by visiting the OppenheimerFunds Internet web site at
http://www.oppenheimerfunds.com.
The Fund's illustrations of its performance data in advertisements must
comply with rules of the Securities and Exchange Commission. Those rules
describe the types of performance data that may be used and how it is to be
calculated. In general, any advertisement by the Fund of its performance data
must include the average annual total returns for the advertised class of shares
of the Fund. Those returns must be shown 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 (or its submission for
publication).
Use of standardized performance calculations 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 the
Fund's performance information as a basis for comparison with other investments:
o Total 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. Your account's performance will vary from the model performance data if
your dividends are received in cash, or you buy or sell shares during the
period, or you bought your shares at a different time and price than the shares
used in the model. o The Fund's performance returns do not reflect the effect of
taxes on dividends and capital gains distributions.
o An investment in the Fund is not insured by the FDIC or any other government
agency. o The principal value of the Fund's shares, and total returns are not
guaranteed and normally will fluctuate on a daily basis.
o When an investor's shares are redeemed, they may be worth more or less than
their original cost. o Total returns for any given past period represent
historical performance information and are not, and should not be considered, a
prediction of future returns.
The performance of each class of shares is shown separately, because the
performance of each class of shares will usually be different. That is because
of the different kinds of expenses each class bears. The total returns of each
class of shares of the Fund are affected by market conditions, the quality of
the Fund's investments, the maturity of those investments, the types of
investments the Fund holds, and its operating expenses that are allocated to the
particular class.
|X| Total Return Information. There are different types of "total returns"
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
and that the investment is redeemed at the end of the period. Because of
differences in expenses for each class of shares, the total returns for each
class are separately measured. 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 actual year-by-year performance. The
Fund uses standardized calculations for its total returns as prescribed by the
SEC. The methodology is discussed below.
In calculating total returns for Class A shares, the current maximum sales
charge of 5.75% (as a percentage of the offering price) is deducted from the
initial investment ("P") (unless the return is shown without sales charge, as
described below). For Class B shares, payment of the applicable contingent
deferred sales charge is applied, depending on the period for which the return
is shown: 5.0% in the first year, 4.0% in the second year, 3.0% in the third and
fourth years, 2.0% in the fifth year, 1.0% in the sixth year and none
thereafter. For Class C shares, the 1% contingent deferred sales charge is
deducted for returns for the 1-year period.
o Average Annual Total Return. 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" in the formula) to achieve an Ending Redeemable Value
("ERV" in the formula) of that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
o Cumulative Total Return. 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
o Total Returns at Net Asset Value. From time to time the Fund may also quote a
cumulative or an average annual total return "at net asset value" (without
deducting sales charges) 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 Fund's Total Returns for the Periods Ended 10/31/99
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Cumulative Total
Returns (10
years
Class of or Life of
Shares Class) Average Annual Total Returns
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
5-Year
(or
1-Year life-of-class) 10-Year
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
After Without After Without After Without After Without
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class A1 163.14% 179.19% -3.28% 2.62% 9.65% 10.96% 10.16% 10.81%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class B 37.81%2 39.78%2 -3.03% 1.84% 8.18%2 8.55%2 N/A N/A
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class C 31.38%3 31.38%3 0.87% 1.84% 8.11%3 8.11%3 N/A N/A
- -------------------------------------------------------------------------------
1. Inception of Class A: 9/16/85
2. Inception of Class B: 10/2/95
3. Inception of Class C: 5/1/96
Other Performance Comparisons. The Fund compares its performance annually to
that of an appropriate broadly-based market index in its Annual Report to
shareholders. You can obtain that information by contacting the Transfer Agent
at the addresses or telephone numbers shown on the cover of this Statement of
Additional Information. The Fund may also compare its performance to that of
other investments, including other mutual funds, or use rankings of its
performance by independent ranking entities. Examples of these performance
comparisons are set forth below.
|X| Lipper Rankings. From time to time the Fund may publish the ranking of
the performance of its classes of shares by Lipper Analytical Services, Inc.
Lipper is 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 by Lipper against
all other general U.S. government funds. The Lipper performance rankings are
based on total returns that include the reinvestment of capital gain
distributions and income dividends but do not take sales charges or taxes into
consideration. Lipper also publishes "peer-group" indices of the performance of
all mutual funds in a category that it monitors and averages of the performance
of the funds in particular categories.
o
Morningstar Rankings. From time to time the Fund may publish the
ranking and/or star rating of the performance of its classes of shares by
Morningstar, Inc., an independent mutual fund monitoring service. Morningstar
rates and ranks mutual funds in broad investment categories: domestic stock
funds, international stock funds, taxable bond funds and municipal bond funds.
The Fund is included in the intermediate government fund category.
Morningstar proprietary star ratings reflect historical risk-adjusted
total investment return. Investment return measures a fund's (or class's) 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 is measured by a
fund's (or class's) performance below 90-day U.S. Treasury bill returns. Risk
and investment return are combined to produce star ratings reflecting
performance relative to the other funds in the Fund's category. Five stars is
the "highest" ranking (top 10% of funds in a category), 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
rating is the Fund's (or class's) overall rating, which is the Fund's 3-year
rating or its combined 3- and 5-year ranking (weighted 60%/40% respectively), or
its combined 3-, 5-, and 10-year rating (weighted 40%/30%/30%, respectively),
depending on the inception date of the Fund (or class). Ratings are subject to
change monthly.
The Fund may also compare its total return ranking to that of other funds
in its Morningstar category, in addition to its star rating. Those total return
rankings are percentages from one percent to one hundred percent and are not
risk-adjusted. For example, if a fund is in the 94th percentile, that means that
94% of the Funds in the same category performed better than it did.
|X| Performance Rankings and Comparisons by Other Entities and
Publications. From time to time the Fund may include in its advertisements and
sales literature performance information about the Fund cited in newspapers and
other periodicals such as The New York Times, The Wall Street Journal, Barron's,
or similar publications. That information may include performance quotations
from other sources, including Lipper and Morningstar. The performance of the
Fund's classes of shares may be compared in publications to the performance of
various market indices or other investments, and averages, performance rankings
or other benchmarks prepared by recognized mutual fund statistical services.
Investors may also wish to compare the returns on the Fund's share classes
to the return on fixed-income investments available from banks and thrift
institutions. Those include 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 or insured 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. Repayment of
principal and payment of interest on Treasury securities is backed by the full
faith and credit of the U.S. government.
From time to time, the Fund may publish rankings or ratings of the Manager
or Transfer Agent, and of 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 and investor services
by third parties may include comparisons of their services to those provided by
other mutual fund families selected by the rating or ranking services. They may
be based upon the opinions of the rating or ranking service itself, using its
research or judgment, or based upon surveys of investors, brokers, shareholders
or others.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Additional information is presented below about the methods that can be
used to buy shares of the Fund. Appendix C contains more information about the
special sales charge arrangements offered by the Fund, and the circumstances in
which sales charges may be reduced or waived for certain classes of investors.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy the shares. Dividends will begin to accrue on shares purchased
with 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 Appendix C to this
Statement of Additional Information because the Distributor or dealer or broker
incurs little or no selling expenses.
|X| 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:
o Class A and Class B shares you purchase for your individual
accounts, or for your joint accounts, or for trust or custodial
accounts on behalf of your children who are minors, and
o 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, and
o 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.
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. The Distributor will add the value, at
current offering price, of the shares you previously
purchased and currently own to the value of current purchases to determine the
sales charge rate that applies. The reduced sales charge will apply only to
current purchases. You must request it when you buy shares.
|X| The Oppenheimer Funds. The Oppenheimer funds are those mutual funds for
which the Distributor acts as the distributor or the sub-distributor and
currently include the following:
Oppenheimer Main Street California
Oppenheimer Bond Fund Municipal Fund
Oppenheimer Main Street Growth & Income
Oppenheimer California Municipal Fund Fund
Oppenheimer Capital Appreciation Fund Oppenheimer Main Street Small Cap Fund
Oppenheimer Capital Preservation Fund Oppenheimer MidCap Fund
Oppenheimer Capital Income Fund Oppenheimer Multiple Strategies Fund
Oppenheimer Champion Income Fund Oppenheimer Municipal Bond Fund
Oppenheimer Convertible Securities Fund Oppenheimer New York Municipal Fund
Oppenheimer Developing Markets Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Disciplined Value Fund Oppenheimer Quest Balanced Value Fund
Oppenheimer Quest Capital Value Fund,
Oppenheimer Discovery Fund Inc.
Oppenheimer Quest Global Value Fund,
Oppenheimer Enterprise Fund Inc.
Oppenheimer Europe Fund Oppenheimer Quest Opportunity Value Fund Oppenheimer
Florida Municipal Fund Oppenheimer Quest Small Cap Value Fund Oppenheimer Global
Fund Oppenheimer Quest Value Fund, Inc. Oppenheimer Global Growth & Income Fund
Oppenheimer Real Asset Fund Oppenheimer Gold & Special Minerals Fund Oppenheimer
Senior Floating Rate Fund Oppenheimer Growth Fund Oppenheimer Strategic Income
Fund Oppenheimer High Yield Fund Oppenheimer Total Return Fund, Inc. Oppenheimer
Insured Municipal Fund Oppenheimer Trinity Core Fund Oppenheimer Intermediate
Municipal Fund Oppenheimer Trinity Growth Fund Oppenheimer International Bond
Fund Oppenheimer Trinity Value Fund Oppenheimer International Growth Fund
Oppenheimer U.S. Government Trust Oppenheimer International Small Company Fund
Oppenheimer World Bond Fund Oppenheimer Large Cap Growth Fund Limited-Term New
York Municipal Fund Oppenheimer Limited-Term Government Fund Rochester Fund
Municipals
And the following money market funds:
Centennial America Fund, L. P. Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust Centennial Tax Exempt Trust
Centennial Government Trust Oppenheimer Cash Reserves
Centennial Money Market Trust Oppenheimer Money Market Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of each
of the Oppenheimer funds except the money market funds. Under certain
circumstances described in this Statement of Additional Information, redemption
proceeds of certain money market fund shares may be subject to a contingent
deferred sales charge.
Letters of Intent. Under a Letter of Intent, if you purchase Class A shares or
Class A and Class B shares of the Fund and other Oppenheimer funds during a
13-month period, you can reduce the sales charge rate that applies to your
purchases of Class A shares. The total amount of your intended purchases of both
Class A and Class B shares will determine the reduced sales charge rate for the
Class A shares purchased during that period. You can include purchases made up
to 90 days before the date of the Letter.
A Letter of Intent is an investor's statement in writing to the
Distributor of the intention to purchase Class A shares or Class A and Class B
shares of the Fund (and other Oppenheimer funds) during a 13-month period (the
"Letter of Intent period"). At the investor's request, this may include
purchases made up to 90 days prior to the date of the Letter. The Letter states
the investor's intention to make the aggregate amount of purchases of shares
which, when added to the investor's holdings of shares of those funds, will
equal or exceed the amount specified in the Letter. Purchases made by
reinvestment of dividends or distributions of capital gains and purchases made
at net asset value without sales charge do not count toward satisfying the
amount of the Letter.
A Letter enables an investor to count the Class A and Class B shares
purchased under the Letter to obtain the reduced sales charge rate on purchases
of Class A shares of the Fund (and other Oppenheimer funds) that applies under
the Right of Accumulation to current purchases of Class A shares. Each purchase
of Class A shares under the Letter will be made at the 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. However, 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. That amount is described in "Terms of
Escrow," below (those terms may be amended by the Distributor 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 a Letter of Intent. If those terms are amended, as they may be from time to
time by the Fund, the investor agrees to be bound by the amended terms and that
those amendments will apply automatically to existing Letters of Intent.
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
total 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 Prospectus, the sales
charges paid will be adjusted to the lower rate. That adjustment will be made
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.
The Transfer Agent will not hold shares in escrow for purchases of shares
of the Fund and other Oppenheimer funds by OppenheimerFunds prototype 401(k)
plans under a Letter of Intent. If the intended purchase amount under a Letter
of Intent 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.
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.
|X| 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 total minimum investment 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. That sales charge
adjustment will apply to any shares redeemed prior to the completion of the
Letter. If the 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 of other Oppenheimer funds acquired subject to a contingent
deferred sales charge, and
(c) Class A or Class B shares acquired by exchange of either (1)
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 (2) 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 to buy shares directly
from a bank account, you must enclose a check (the minimum is $25) for the
initial purchase with your application. Shares purchased by Asset Builder Plan
payments from bank accounts are subject to the redemption restrictions for
recent purchases described in the Prospectus. Asset Builder Plans are available
only if your bank is an ACH member. Asset Builder Plans may not be used to buy
shares for OppenheimerFunds employer-sponsored qualified retirement accounts.
Asset Builder Plans also enable shareholders of Oppenheimer Cash Reserves to use
their fund account to make monthly automatic purchases of shares of up to four
other Oppenheimer funds.
If you make payments from your bank account to purchase shares of the
Fund, your bank account will be debited automatically. Normally the debit will
be made two business days prior to the investment dates you selected on your
Application. Neither the Distributor, the Transfer Agent nor the Fund shall be
responsible for any delays in purchasing shares that result from delays in ACH
transmissions.
Before you establish Asset Builder payments, you should obtain a
prospectus of the selected fund(s) from your financial advisor (or the
Distributor ) and request an application from the Distributor. Complete the
application and return it. You may change the amount of your Asset Builder
payment or you can terminate these automatic investments at any time by writing
to the Transfer Agent. The Transfer Agent requires a reasonable period
(approximately 10 days) after receipt of your instructions to implement them.
The Fund reserves the right to amend, suspend, or discontinue offering Asset
Builder plans at any time without prior notice.
Retirement Plans. Certain types of Retirement Plans are entitled to purchase
shares of the Fund without sales charge or at reduced sales charge rates, as
described in Appendix C to this Statement of Additional Information. Certain
special sales charge arrangements described in that Appendix apply to retirement
plans whose records are maintained on a daily valuation basis by Merrill Lynch
Pierce Fenner & Smith, Inc. or an independent record keeper that has a contract
or special arrangement with Merrill Lynch. If on the date the plan sponsor
signed the Merrill Lynch record keeping service agreement the plan has less than
$3 million in assets (other than assets invested in money market funds) invested
in applicable investments, then the retirement plan may purchase only Class B
shares of the Oppenheimer funds. Any retirement plans in that category that
currently invest in Class B shares of the Fund will have their Class B shares
converted to Class A shares of the Fund when the plan's applicable investments
reach $5 million.
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.
Classes of Shares. Each class of shares of the Fund represents an interest in
the same portfolio of investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class B or
Class C shares and the dividends payable on Class B or Class C shares will be
reduced by incremental expenses borne solely by that class. Those expenses
include the asset-based sales charges to which Class B and Class C are subject.
The availability of different classes of shares permits an investor to
choose the method of purchasing shares that is more appropriate for the
investor. That may depend on the amount of the purchase, the length of time the
investor expects to hold shares, and other relevant circumstances. Class A
shares normally are sold subject to an initial sales charge. While Class B and
Class C shares have no initial sales charge, the purpose of the deferred sales
charge and asset-based sales charge on Class B and Class C shares is the same as
that of the initial sales charge on Class A shares - to compensate the
Distributor and brokers, dealers and financial institutions that sell shares of
the Fund. A salesperson who is entitled to receive compensation from his or her
firm for selling Fund shares may receive different levels of compensation for
selling one class of shares rather than another.
The Distributor will not accept any order in the amount of $500,000 or
more for Class B shares or $1 million or more for Class C shares on behalf of a
single investor (not including dealer "street name" or omnibus accounts). That
is because generally it will be more advantageous for that investor to purchase
Class A shares of the Fund.
|X| Class B Conversion. Under current interpretations of applicable
federal income tax law by the Internal Revenue Service, the conversion of Class
B shares to Class A shares after six years is not treated as a taxable event for
the shareholder. If those laws or the IRS interpretation of those laws should
change, the automatic conversion feature may be suspended. In that event, no
further conversions of Class B shares would occur while that 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
shareholder, and absent such exchange, Class B shares might continue to be
subject to the asset-based sales charge for longer than six years.
|X| Allocation of Expenses. The Fund pays expenses related to its daily
operations, such as custodian fees, Directors' fees, transfer agency fees, legal
fees and auditing costs. Those expenses are paid out of the Fund's assets and
are not paid directly by shareholders. However, those expenses reduce the net
asset value of shares, and therefore are indirectly borne by shareholders
through their investment.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's share classes recognizes two types of expenses.
General expenses that do not pertain specifically to any one class are allocated
pro rata to the shares of all classes. The allocation is based on the percentage
of the Fund's total assets that is represented by the assets of each class, and
then equally to each outstanding share within a given class. Such general
expenses include management fees, legal, bookkeeping and audit fees, printing
and mailing costs of shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current shareholders, fees to unaffiliated
Directors, custodian expenses, share issuance costs, organization and start-up
costs, interest, taxes and brokerage commissions, and non-recurring expenses,
such as litigation costs.
Other expenses that are directly attributable to a particular class are
allocated equally to each outstanding share within that class. Examples of such
expenses include distribution and service plan (12b-1) fees, transfer and
shareholder servicing agent fees and expenses and shareholder meeting expenses
(to the extent that such expenses pertain only to a specific class).
Determination of Net Asset Values Per Share. The net asset values per share of
each class of shares of the Fund are determined as of the close of business of
The New York Stock Exchange on each day that the Exchange is open. The
calculation is done by dividing the value of the Fund's net assets attributable
to a class by the number of shares of that class that are outstanding. The
Exchange normally closes at 4:00 P.M., New York time, but may close earlier on
some other days (for example, in case of weather emergencies or on days falling
before a holiday). The Exchange's most recent annual announcement (which is
subject to change) states that it will close on New Year's Day, Presidents' Day,
Martin Luther King, Jr. Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. It may also close on other days.
Dealers other than Exchange members may conduct trading in certain
securities on days on which the Exchange is closed (including weekends and U.S.
holidays) or after 4:00 P.M. on a regular business day. The Fund's net asset
values will not be calculated on those days and the values of some of the Fund's
portfolio securities may change significantly on those days, when shareholders
may not purchase or redeem shares. Additionally, trading on European and Asian
stock exchanges and over-the-counter markets normally is completed before the
close of The New York Stock Exchange.
Changes in the values of securities traded on foreign exchanges or markets
as a result of events that occur after the prices of those securities are
determined, but before the close of The New York Stock Exchange, will not be
reflected in the Fund's calculation of its net asset values that day unless the
Manager determines that the event is likely to effect a material change in the
value of the security. The Manager may make that determination, under procedures
established by the Board.
|X| Securities Valuation. The Fund's Board of Directors has established
procedures for the valuation of the Fund's securities. In general those
procedures are as follows:
o Equity securities traded on a U.S. securities exchange or on NASDAQ are
valued as follows:
(1) if last sale information is regularly reported, they are valued at the
last reported sale price on the principal exchange on which they are traded
or on NASDAQ, as applicable, on that day, or
(2) if last sale information is not available on a valuation date,
they are valued at the last reported sale price preceding the
valuation date if it is within the spread of the closing "bid"
and "asked" prices on the valuation date or, if not, at the
closing "bid" price on the valuation date.
o Equity securities traded on a foreign securities exchange generally are
valued in one of the following ways:
(1) at the last sale price available to the pricing service approved by the
Board of Directors, or
(2) at the last sale price obtained by the Manager from the report of
the principal exchange on which the security is traded at its
last trading session on or immediately before the valuation date,
or
(3) at the mean between the "bid" and "asked" prices obtained from
the principal exchange on which the security is traded or, on
the basis of reasonable inquiry, from two market makers in the
security.
o 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 Directors or obtained
by the Manager from two active market makers in the security on the basis of
reasonable inquiry.
o The following securities are valued at the mean between the "bid" and "asked"
prices determined by a pricing service approved by the Fund's Board of Directors
or obtained by the Manager from two active market makers in the security on the
basis of reasonable inquiry:
(1) debt instruments that have a maturity of more than 397 days when issued, (2)
debt instruments that had a maturity of 397 days or less when issued and have
a remaining maturity of more than 60 days, and (3) non-money
market debt instruments that had a maturity of 397 days or less
when issued and which have a remaining maturity of 60 days or
less. o The following securities are valued at cost, adjusted for amortization
of premiums and accretion of discounts:
(1) money market debt securities held by a non-money market fund that
had a maturity of less than 397 days when issued that have a
remaining maturity of 60 days or less, and
(2) debt instruments held by a money market fund that have a
remaining maturity of 397 days or less.
o 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, a security may be priced at the mean between the "bid" and "asked"
prices provided by a single active market maker (which in certain cases may be
the "bid" price if no "asked" price is available).
In the case of U.S. government securities, mortgage-backed securities,
corporate bonds and foreign government securities, when last sale information is
not generally available, the Manager may use pricing services approved by the
Board of Directors. The pricing service may use "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield and maturity.
Other special factors may be involved (such as the tax-exempt status of the
interest paid by municipal securities). The Manager will monitor the accuracy of
the pricing services. That monitoring may include comparing prices used for
portfolio valuation to actual sales prices of selected securities.
The closing prices in the London foreign exchange market on a particular
business day that are provided to the Manager by a bank, dealer or pricing
service that the Manager has determined to be reliable are used to value foreign
currency, including forward contracts, and to convert to U.S. dollars securities
that are denominated in foreign currency.
Puts, calls, and futures are valued at the last sale price on the
principal exchange on which they are traded or on NASDAQ, as applicable, as
determined by a pricing service approved by the Board of Directors or by the
Manager. If there were no sales that day, they shall be valued at 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. If not, the 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 by the mean between "bid" and
"asked" prices obtained by the Manager from two active market makers. In certain
cases that may be at the "bid" price if no "asked" price is available.
When the Fund writes an option, an amount equal to the premium received is
included in the Fund's Statement of Assets and Liabilities as an asset. An
equivalent credit is included in the liability section. The credit is adjusted
("marked-to-market") to reflect the current market value of the option. In
determining the Fund's gain on investments, if a call or put written by the Fund
is exercised, the proceeds are increased by the premium received. If a call or
put written by the Fund expires, the Fund has a gain in the amount of the
premium. If the Fund enters into a closing purchase transaction, it will have a
gain or loss, depending on whether the premium received was more or less than
the cost of the closing transaction. If the Fund exercises a put it holds, the
amount the Fund receives on its sale of the underlying investment is reduced by
the amount of premium paid by the Fund.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the Prospectus. The
information below provides additional information about the procedures and
conditions for redeeming shares.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of:
o Class A shares purchased subject to an initial sales charge or Class A
shares on which a contingent deferred sales charge was paid, or o Class B
shares that were subject to the Class B contingent deferred sales charge
when redeemed.
The reinvestment may be made without sales charge only in Class A shares
of the Fund or any of the other Oppenheimer funds into which shares of the Fund
are exchangeable as described in "How to Exchange Shares" below. Reinvestment
will be at the net asset value next computed after the Transfer Agent receives
the reinvestment order. The shareholder must ask the Transfer Agent for that
privilege at the time of reinvestment. This privilege does not apply to Class C
shares. 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.
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.
Payments "In Kind". The Prospectus states that payment for shares tendered for
redemption is ordinarily made in cash. However, the Board of Directors 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 liquid securities from the
portfolio of the Fund, in lieu of cash.
The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act. Under that rule, 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 Fund will value securities used to pay redemptions in
kind using the same method the Fund uses to value its portfolio securities
described above under "Determination of Net Asset Values Per Share." That
valuation will be made as of the time the redemption price is determined.
Involuntary Redemptions. The Fund's Board of Directors has the right to cause
the involuntary redemption of the shares held in any account if the account
holds fewer than 100 shares. If the Board exercises this right, it may also fix
the requirements for any notice to be given to the shareholders in question (not
less than 30 days). The Board may alternatively set requirements for the
shareholder to increase the investment, or set other terms and conditions so
that the shares would not be involuntarily redeemed.
Transfers of Shares. A transfer of shares to a different registration is not an
event that triggers the payment of sales charges. Therefore, 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. It does not matter
whether the transfer occurs by absolute assignment, gift or bequest, as long as
it does not involve, directly or indirectly, a public sale of the shares. When
shares subject to a contingent deferred sales charge are transferred, the
transferred shares will remain subject to the contingent deferred sales charge.
It will be 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 or Class
C contingent deferred sales charge will be followed in determining the order in
which shares are transferred.
Sending Redemption Proceeds by Wire. The wire of redemption proceeds may be
delayed if the Fund's custodian bank is not open for business on a day when the
Fund would normally authorize the wire to be made, which is usually the Fund's
next regular business day following the redemption. In those circumstances, the
wire will not be transmitted until the next bank business day on which the Fund
is open for business. No dividends will be paid on the proceeds of redeemed
shares awaiting transfer by wire.
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 (1) state the reason for the
distribution; (2) state the owner's awareness of tax penalties if the
distribution is
premature; and
(3) conform to the requirements of the plan and the Fund's other redemption
requirements.
Participants (other than self-employed persons) in
OppenheimerFunds-sponsored pension or profit-sharing plans with shares of the
Fund held in the name of the plan or its fiduciary may not directly request
redemption of their accounts. The plan administrator or fiduciary 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 and submitted to the Transfer Agent
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, 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. Shareholders should contact their
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
an order placed by the dealer or broker. However, 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, the Exchange closes at 4:00 P.M., but
may do so earlier on some days. Additionally, the order must have been
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. The signature(s) of the registered owners on the redemption
documents must be guaranteed 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
(having a value of at least $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. Payments must also be sent to the address of record for
the account and the address must not have 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 Account
Application or by signature-guaranteed instructions sent to the Transfer Agent.
Shares are normally redeemed pursuant to an Automatic Withdrawal Plan three
business days before the payment transmittal date you select in the Account
Application. If a contingent deferred sales charge applies to the redemption,
the amount of the check or payment will be reduced accordingly.
The Fund cannot guarantee receipt of a payment on the date requested. The
Fund reserves the right to amend, suspend or discontinue offering these 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
contingent deferred sales charge is waived as described in Appendix C to this
Statement of Additional Information.
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions that apply to such plans, as stated below.
These provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, any amendments will automatically apply to existing
Plans.
|X| Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent 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.
Instructions should be provided on the OppenheimerFunds Application or
signature-guaranteed instructions. 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.
|X| Automatic Withdrawal Plans. Fund shares will be redeemed as necessary
to meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first. 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
these plans should not be considered as a income on your investment.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan as agent for the shareholder(s) (the "Planholder") who executed the Plan
authorization and application submitted to the Transfer Agent. Neither the Fund
nor the Transfer Agent shall incur any liability to the Planholder for any
action taken or not taken by the Transfer Agent in good faith to administer the
Plan. Share 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.
Shares will be redeemed to make withdrawal payments at the net asset value
per share determined on the redemption date. Checks or AccountLink payments
representing the proceeds of Plan withdrawals will normally be transmitted three
business days prior to the date selected for receipt of the payment, according
to the choice specified in writing by the Planholder. Receipt of payment on the
date selected cannot be guaranteed.
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 after 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 to redeem all, or any part of, the
shares held under the Plan. That notice must be in proper form in accordance
with the requirements of the then-current Prospectus of the Fund. In that case,
the Transfer Agent will redeem the number of shares requested at the net asset
value per share in effect and will mail a check for the proceeds to the
Planholder.
The Planholder may terminate a Plan at any time by writing to the Transfer
Agent. The Fund may also give directions to the Transfer Agent to terminate a
Plan. The Transfer Agent will also terminate a Plan upon its receipt of evidence
satisfactory to it that the Planholder has died or is legally incapacitated.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that have
not been redeemed will be held in uncertificated form in the name of the
Planholder. The account will continue as a dividend-reinvestment, uncertificated
account unless and until proper instructions are received from the Planholder,
his or her executor or guardian, or another authorized person.
To use shares held under the Plan as collateral for a debt, the Planholder
may request issuance of a portion of the shares in certificated form. Upon
written request from the Planholder, the Transfer Agent will determine the
number of shares for which a certificate may be issued without causing the
withdrawal checks to stop. 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. You can obtain a current list showing which funds offer which classes
by calling the Distributor at 1-800-525-7048.
o All of the Oppenheimer funds currently offer Class A, B and 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, and Centennial America Fund, L.P., which only offer Class A
shares.
o Oppenheimer Main Street California Municipal Fund currently offers only
Class A and Class B shares.
o 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.
o Only certain Oppenheimer funds currently offer Class Y shares. Class Y
shares of Oppenheimer Real Asset Fund(sm) may not be exchanged for
shares of any other fund.
o Class M shares of Oppenheimer Convertible Securities Fund may be
exchanged only for Class A shares of other Oppenheimer funds. They may
not be acquired by exchange of shares of any class of any other
Oppenheimer funds except Class A shares of Oppenheimer Money Market
Fund or Oppenheimer Cash Reserves acquired by exchange of Class M
shares.
o Class A shares of Senior Floating Rate Fund are not available by
exchange of Class A shares of other Oppenheimer funds. Class A shares
of Senior Floating Rate Fund that are exchanged for shares of the other
Oppenheimer funds may not be exchanged back for Class A shares of
Senior Floating Rate Fund.
o Class X shares of Limited Term New York Municipal Fund can be exchanged
only for Class B shares of other Oppenheimer funds and no exchanges may
be made to Class X shares.
o Shares of Oppenheimer Capital Preservation Fund may not be exchanged
for shares of Oppenheimer Money Market Fund, Inc., Oppenheimer Cash
Reserves or Oppenheimer Limited-Term Government Fund. Only participants
in certain retirement plans may purchase shares of Oppenheimer Capital
Preservation Fund, and only those participants may exchange shares of
other Oppenheimer funds for shares of Oppenheimer Capital Preservation
Fund.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any money market fund offered by the Distributor. 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. They may also be used to purchase shares of Oppenheimer funds subject to
an early withdrawal charge or contingent deferred sales charge.
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 30 days prior to that
purchase may subsequently be exchanged for shares of other Oppenheimer funds
without being subject to an initial sales charge or contingent deferred sales
charge. 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. If requested, they
must supply proof of entitlement to this privilege.
Shares of the Fund acquired by reinvestment of dividends or distributions
from any of the other Oppenheimer funds or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor may be
exchanged at net asset value for shares of any of the Oppenheimer funds.
The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund may impose these changes at any time, it will provide
you with notice of those change whenever it is required to do so by applicable
law. It may be required to provide 60 days' notice prior to materially amending
or terminating the exchange privilege. That 60 day notice is not required in
extraordinary circumstances.
|X| How Exchanges Affect Contingent Deferred Sales Charges. 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. Before exchanging
shares, shareholders should take into account how the exchange may affect 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 which class
of shares they wish to exchange.
|X| Limits on Multiple Exchange Orders. 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.
|X| Telephone Exchange Requests. When exchanging shares by telephone, a
shareholder must have an existing account in the fund to which the exchange is
to be made. Otherwise, the investors must obtain a prospectus of that fund
before the exchange request may be submitted. 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.
|X| Processing 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 Fund may refuse the
request.
When you exchange some or all of your shares from one fund to another, any
special account feature such as an Asset Builder Plan or Automatic Withdrawal
Plan, will be switched to the new fund account unless you tell the Transfer
Agent not to do so. However, special redemption and exchange features such as
Automatic Exchange Plans and Automatic Withdrawal Plans cannot be switched to an
account in Oppenheimer Senior Floating Rate Fund.
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.
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks. 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
Dividends and Distributions. The Fund has no fixed dividend rate and there can
be no assurance as to the payment of any dividends or the realization of any
capital gains. The dividends and distributions paid by a class of shares will
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.
Dividends are calculated in the same manner, at the same time, and on the same
day for each class of shares. However, dividends on Class B and Class C shares
are
expected to be lower than dividends on Class A shares. That is because of the
effect of the asset-based sales charge on Class B and Class C shares. Those
dividends will also differ in amount as a consequence of any difference in the
net asset values of the different classes of shares.
Dividends, distributions and 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.
Reinvestment will be made as promptly as possible after the return of such
checks to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds. Unclaimed accounts may be subject to state escheatment
laws, and the Fund and the Transfer Agent will not be liable to shareholders or
their representatives for compliance with those laws in good faith.
Tax Status of the Fund's Dividends and Distributions. The Federal tax treatment
of the Fund's dividends and capital gains distributions is briefly highlighted
in the Prospectus.
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. The amount of dividends paid by the Fund that may qualify for the
deduction is limited to the aggregate amount of qualifying dividends that the
Fund derives from portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not be eligible for the
deduction on dividends paid on Fund shares held for 45 days or less. To the
extent the Fund's dividends are derived from gross income from option premiums,
interest income or short-term gains from the sale of securities or dividends
from foreign corporations, those dividends will not qualify for the deduction.
Under the Internal Revenue Code, by December 31 each year, the Fund must
distribute 98% of its taxable investment income earned from January 1 through
December 31 of that year and 98% of its capital gains realized in the period
from November 1 of the prior year through October 31 of the current year. If it
does not, the Fund must pay an excise tax on the amounts not distributed. It is
presently anticipated that the Fund will meet those requirements. However, the
Board of Directors and the Manager might determine in a particular year that it
would be in the best interests of shareholders for the Fund not to make such
distributions at the required levels and to pay the excise tax on the
undistributed amounts. That would reduce the amount of income or capital gains
available for distribution to shareholders.
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). If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for federal income taxes on amounts
paid by it as dividends and distributions. The Fund qualified as a regulated
investment company in its last fiscal year. The Internal Revenue Code contains a
number of complex tests relating to qualification which the Fund might not meet
in any particular year. If it did not so qualify, the Fund would be treated for
tax purposes as an ordinary corporation and receive no tax deduction for
payments made to shareholders.
If prior distributions made by the Fund must be re-characterized as a
non-taxable return of capital at the end of the fiscal year as a result of the
effect of the Fund's investment policies, they will be identified as such in
notices sent to shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the same
class of any of the other Oppenheimer funds listed above. Reinvestment will be
made without sales charge at the net asset value per share in effect at the
close of business on the payable date of the dividend or distribution. To elect
this option, the shareholder must notify the Transfer Agent in writing and must
have an existing account in the fund selected for reinvestment. Otherwise the
shareholder first must obtain a prospectus for that fund and an application from
the Distributor to establish an account. Dividends and/or distributions from
shares of certain other Oppenheimer funds (other than Oppenheimer Cash Reserves)
may be invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Distributor. The Fund's shares are sold through dealers, brokers and other
financial institutions that have a sales agreement with OppenheimerFunds
Distributor, Inc., a subsidiary of the Manager that acts as the Fund's
Distributor. The Distributor also distributes shares of the other Oppenheimer
funds and is sub-distributor for funds managed by a subsidiary of the Manager.
The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is a
division of the Manager. It is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for paying
dividends and distributions to shareholders. It also handles shareholder
servicing and administrative functions. It acts on an "at-cost" basis. It also
acts as shareholder servicing agent for the other Oppenheimer funds.
Shareholders should direct inquiries about their accounts to the Transfer Agent
at the address and toll-free numbers shown on the back cover.
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. It will be the practice of the Fund to deal with the Custodian in a
manner uninfluenced by any banking relationship the Custodian may have with the
Manager and its affiliates. The Fund's cash balances with the custodian in
excess of $100,000 are not protected by Federal deposit insurance. Those
uninsured balances at times may be substantial.
Independent Auditors. KPMG LLP are the independent auditors of the Fund. They
audit the Fund's financial statements and perform other related audit services.
They also act as auditors for certain other funds advised by the Manager and its
affiliates.
A-61
THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
OPPENHEIMER DISCIPLINED ALLOCATION FUND:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Disciplined Allocation Fund as of
October 31, 1999, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended and the financial highlights for each of the years in
the three-year period then ended, and the ten months ended October 31, 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. The financial
highlights for each of the years in the two-year period ended December 31, 1995,
were audited by other auditors whose report dated February 9, 1996, expressed an
unqualified opinion on this information.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1999, by correspondence with the custodian and brokers; and where
confirmations were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Disciplined Allocation Fund as of October 31, 1999, the results of
its operations for the year then ended, the changes in its net assets for each
of the years in the two-year period then ended, and the financial highlights for
each of the years in the three-year period then ended, and the ten months ended
October 31, 1996, in conformity with generally accepted accounting principles.
KPMG LLP
Denver, Colorado
November 19, 1999
STATEMENT OF INVESTMENTS October 31, 1999
- --------------------------------------------------------------------------------
MARKET VALUE
SHARES SEE NOTE 1
=======================================================================================================================
COMMON STOCKS--54.1%
- -----------------------------------------------------------------------------------------------------------------------
BASIC MATERIALS--2.2%
- -----------------------------------------------------------------------------------------------------------------------
CHEMICALS--1.1%
Dow Chemical
Co.
13,200 $ 1,560,900
- -----------------------------------------------------------------------------------------------------------------------
International Flavors & Fragrances,
Inc. 12,300 470,475
- -----------------------------------------------------------------------------------------------------------------------
Rohm & Haas
Co.
26,100 998,325
- -------------
3,029,700
- -----------------------------------------------------------------------------------------------------------------------
PAPER--1.1%
Georgia-Pacific
Group
21,700 861,219
- -----------------------------------------------------------------------------------------------------------------------
Georgia-Pacific Group/Timber
Group 16,000
382,000
- -----------------------------------------------------------------------------------------------------------------------
Louisiana-Pacific
Corp.
43,700 554,444
- -----------------------------------------------------------------------------------------------------------------------
Rayonier,
Inc.
7,900 323,900
- -----------------------------------------------------------------------------------------------------------------------
Weyerhaeuser
Co.
18,100 1,080,344
- -------------
3,201,907
- -----------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--7.2%
- -----------------------------------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE--1.2%
Cordant Technologies,
Inc.
8,200 255,737
- -----------------------------------------------------------------------------------------------------------------------
General Dynamics
Corp.
43,900 2,433,706
- -----------------------------------------------------------------------------------------------------------------------
Northrop Grumman
Corp.
13,100 718,862
- -------------
3,408,305
- -----------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--1.1%
Rockwell International
Corp.
9,900 479,531
- -----------------------------------------------------------------------------------------------------------------------
SPX
Corp.(1)
31,400 2,661,150
- -------------
3,140,681
- -----------------------------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES--0.3%
Valassis Communications,
Inc.(1) 17,400
748,200
- -----------------------------------------------------------------------------------------------------------------------
MANUFACTURING--4.6%
Avery-Dennison
Corp.
9,700 606,250
- -----------------------------------------------------------------------------------------------------------------------
Ball
Corp.
14,300 576,469
- -----------------------------------------------------------------------------------------------------------------------
Briggs & Stratton
Corp.
12,600 736,312
- -----------------------------------------------------------------------------------------------------------------------
Cooper Industries,
Inc.
20,100 865,556
- -----------------------------------------------------------------------------------------------------------------------
Dover
Corp.
38,100 1,621,631
- -----------------------------------------------------------------------------------------------------------------------
Eaton
Corp.
11,300 850,325
- -----------------------------------------------------------------------------------------------------------------------
ITT Industries,
Inc.
23,100 789,731
- -----------------------------------------------------------------------------------------------------------------------
Miller (Herman),
Inc.
23,000 498,812
- -----------------------------------------------------------------------------------------------------------------------
Minnesota Mining & Manufacturing
Co. 30,200 2,870,887
12 OPPENHEIMER DISCIPLINED ALLOCATION FUND
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
MANUFACTURING Continued
Parker-Hannifin
Corp.
17,300 $ 792,556
- -----------------------------------------------------------------------------------------------------------------------
Textron,
Inc.
10,800 833,625
- -----------------------------------------------------------------------------------------------------------------------
United Technologies
Corp.
38,000 2,299,000
- -------------
13,341,154
- -----------------------------------------------------------------------------------------------------------------------
COMMUNICATION SERVICES--4.0%
- -----------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-LONG DISTANCE--2.4%
ADC Telecommunications,
Inc.(1) 15,000
715,312
- -----------------------------------------------------------------------------------------------------------------------
ALLTELL
Corp.
47,500 3,954,375
- -----------------------------------------------------------------------------------------------------------------------
AT&T
Corp.
35,250 1,647,937
- -----------------------------------------------------------------------------------------------------------------------
L-3 Communications Holdings,
Inc.(1) 16,100
679,219
- -------------
6,996,843
- -----------------------------------------------------------------------------------------------------------------------
TELEPHONE UTILITIES--1.6%
BellSouth
Corp.
40,400 1,818,000
- -----------------------------------------------------------------------------------------------------------------------
SBC Communications,
Inc.
56,456 2,875,727
- -------------
4,693,727
- -----------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--7.2%
- -----------------------------------------------------------------------------------------------------------------------
AUTOS & HOUSING--2.2%
Cooper Tire & Rubber
Co.
23,200 390,050
- -----------------------------------------------------------------------------------------------------------------------
Ethan Allen Interiors,
Inc.
21,800 775,262
- -----------------------------------------------------------------------------------------------------------------------
Fortune Brands,
Inc.
13,800 489,037
- -----------------------------------------------------------------------------------------------------------------------
Genuine Parts
Co.
58,900 1,535,081
- -----------------------------------------------------------------------------------------------------------------------
Southdown,
Inc.
11,100 536,269
- -----------------------------------------------------------------------------------------------------------------------
Stanley Works
(The)
21,600 599,400
- -----------------------------------------------------------------------------------------------------------------------
USG
Corp.
19,500 966,469
- -----------------------------------------------------------------------------------------------------------------------
Vulcan Materials
Co.
18,100 747,756
- -----------------------------------------------------------------------------------------------------------------------
York International
Corp.
15,400 362,862
- -------------
6,402,186
- -----------------------------------------------------------------------------------------------------------------------
CONSUMER SERVICES--0.3%
Harte-Hanks,
Inc.
15,500 307,094
- -----------------------------------------------------------------------------------------------------------------------
Hertz Corp., Cl.
A
10,500 455,437
- -------------
762,531
- -----------------------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT--0.6%
Hasbro,
Inc.
22,600 466,125
- -----------------------------------------------------------------------------------------------------------------------
MGM Grand,
Inc.(1)
12,100 617,100
- -----------------------------------------------------------------------------------------------------------------------
Mirage Resorts,
Inc.(1)
44,000 640,750
- -------------
1,723,975
13 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
MEDIA--1.5%
Central Newspapers, Inc., Cl.
A 12,900 $
553,894
- -----------------------------------------------------------------------------------------------------------------------
Deluxe
Corp.
15,700 443,525
- -----------------------------------------------------------------------------------------------------------------------
Gannett Co.,
Inc.
28,700 2,213,487
- -----------------------------------------------------------------------------------------------------------------------
Knight-Ridder,
Inc.
17,500 1,111,250
- -------------
4,322,156
- -----------------------------------------------------------------------------------------------------------------------
RETAIL: GENERAL--0.8%
Federated Department Stores,
Inc.(1) 22,500
960,469
- -----------------------------------------------------------------------------------------------------------------------
May Department Stores
Co.
18,700 648,656
- -----------------------------------------------------------------------------------------------------------------------
Nordstrom,
Inc.
22,600 563,587
- -------------
2,172,712
- -----------------------------------------------------------------------------------------------------------------------
RETAIL: SPECIALTY--0.8%
Ross Stores,
Inc.
44,000 907,500
- -----------------------------------------------------------------------------------------------------------------------
Sherwin-Williams
Co.
23,600 528,050
- -----------------------------------------------------------------------------------------------------------------------
TJX Cos.,
Inc.
35,000 949,375
- -------------
2,384,925
- -----------------------------------------------------------------------------------------------------------------------
TEXTILE/APPAREL & HOME FURNISHINGS--1.0%
Jones Apparel Group,
Inc.(1)
43,400 1,372,525
- -----------------------------------------------------------------------------------------------------------------------
Liz Claiborne,
Inc.
13,900 556,000
- -----------------------------------------------------------------------------------------------------------------------
Shaw Industries,
Inc.
35,300 544,944
- -----------------------------------------------------------------------------------------------------------------------
WestPoint Stevens,
Inc.
21,600 409,050
- -------------
2,882,519
- -----------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--5.0%
- -----------------------------------------------------------------------------------------------------------------------
BEVERAGES--0.8%
Adolph Coors Co., Cl.
B
5,600 310,800
- -----------------------------------------------------------------------------------------------------------------------
Anheuser-Busch Cos.,
Inc.
27,300 1,960,481
- -------------
2,271,281
- -----------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT--0.4%
Brinker International,
Inc.(1)
17,700 412,631
- -----------------------------------------------------------------------------------------------------------------------
Darden Restaurants,
Inc.
18,400 350,750
- -----------------------------------------------------------------------------------------------------------------------
Wendy's International,
Inc.
18,300 436,912
- -------------
1,200,293
14 OPPENHEIMER DISCIPLINED ALLOCATION FUND
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
FOOD--1.8%
Flowers Industries,
Inc.
22,200 $ 374,625
- -----------------------------------------------------------------------------------------------------------------------
Heinz (H.J.)
Co.
22,300 1,064,825
- -----------------------------------------------------------------------------------------------------------------------
Hormel Foods
Corp.
18,100 780,562
- -----------------------------------------------------------------------------------------------------------------------
IBP,
Inc.
58,400 1,397,951
- -----------------------------------------------------------------------------------------------------------------------
Keebler Foods
Co.(1)
18,800 600,425
- -----------------------------------------------------------------------------------------------------------------------
Sara Lee
Corp.
33,500 906,594
- -------------
5,124,982
- -----------------------------------------------------------------------------------------------------------------------
FOOD & DRUG RETAILERS--0.3%
Albertson's,
Inc.
18,200 660,888
- -----------------------------------------------------------------------------------------------------------------------
SUPERVALU,
Inc.
10,800 226,800
- -------------
887,688
- -----------------------------------------------------------------------------------------------------------------------
HOUSEHOLD GOODS--1.4%
Kimberly-Clark
Corp.
37,400 2,360,875
- -----------------------------------------------------------------------------------------------------------------------
Premark International,
Inc. 30,500
1,669,875
- -------------
4,030,750
- -----------------------------------------------------------------------------------------------------------------------
TOBACCO--0.3%
UST,
Inc.
35,200 974,600
- -----------------------------------------------------------------------------------------------------------------------
ENERGY--4.4%
- -----------------------------------------------------------------------------------------------------------------------
ENERGY SERVICES--0.5%
Anadarko Petroleum
Corp.
12,000 369,750
- -----------------------------------------------------------------------------------------------------------------------
ENSCO International,
Inc.
29,300 567,688
- -----------------------------------------------------------------------------------------------------------------------
Global Marine,
Inc.(1)
36,700 557,381
- -------------
1,494,819
- -----------------------------------------------------------------------------------------------------------------------
OIL: DOMESTIC--2.4%
Apache
Corp.
15,200 592,800
- -----------------------------------------------------------------------------------------------------------------------
Burlington Resources,
Inc.
12,100 421,988
- -----------------------------------------------------------------------------------------------------------------------
Conoco, Inc., Cl.
A
29,200 801,175
- -----------------------------------------------------------------------------------------------------------------------
Exxon
Corp.
26,700 1,977,469
- -----------------------------------------------------------------------------------------------------------------------
Mobil
Corp.
16,800 1,621,200
- -----------------------------------------------------------------------------------------------------------------------
Murphy Oil
Corp.
9,900 555,019
- -----------------------------------------------------------------------------------------------------------------------
Texaco,
Inc.
15,000 920,625
- -------------
6,890,276
15 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
OIL: INTERNATIONAL--1.5%
BP Amoco plc,
ADR
29,600 $ 1,709,400
- -----------------------------------------------------------------------------------------------------------------------
Royal Dutch Petroleum Co., NY
Shares 30,600
1,834,088
- -----------------------------------------------------------------------------------------------------------------------
Total Fina SA, Sponsored
ADR 13,300
886,944
- -------------
4,430,432
- -----------------------------------------------------------------------------------------------------------------------
FINANCIAL--13.6%
- -----------------------------------------------------------------------------------------------------------------------
BANKS--2.8%
Bank United Corp., Cl.
A
5,900 230,100
- -----------------------------------------------------------------------------------------------------------------------
Chase Manhattan
Corp.
10,600 926,175
- -----------------------------------------------------------------------------------------------------------------------
J.P. Morgan & Co.,
Inc.
6,200 811,425
- -----------------------------------------------------------------------------------------------------------------------
National City
Corp.
28,400 837,800
- -----------------------------------------------------------------------------------------------------------------------
Old Kent Financial
Corp.
18,845 767,934
- -----------------------------------------------------------------------------------------------------------------------
Roslyn Bancorp,
Inc.
11,800 228,625
- -----------------------------------------------------------------------------------------------------------------------
UnionBanCal
Corp.
26,100 1,133,719
- -----------------------------------------------------------------------------------------------------------------------
Wachovia
Corp.
19,100 1,647,375
- -----------------------------------------------------------------------------------------------------------------------
Wells Fargo
Co.
31,300 1,498,488
- -------------
8,081,641
- -----------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL--3.4%
AMBAC Financial Group,
Inc.
16,200 967,950
- -----------------------------------------------------------------------------------------------------------------------
Citigroup,
Inc.
76,900 4,162,213
- -----------------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc.
(The) 14,000
994,000
- -----------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter &
Co. 18,500
2,040,781
- -----------------------------------------------------------------------------------------------------------------------
Nationwide Financial Services, Inc., Cl.
A 21,300 806,738
- -----------------------------------------------------------------------------------------------------------------------
PMI Group, Inc.
(The)
7,000 363,125
- -----------------------------------------------------------------------------------------------------------------------
Radian Group,
Inc.
7,000 369,688
- -------------
9,704,495
- -----------------------------------------------------------------------------------------------------------------------
INSURANCE--7.3%
ACE
Ltd.
38,300 744,456
- -----------------------------------------------------------------------------------------------------------------------
Allstate
Corp.
31,700 911,375
- -----------------------------------------------------------------------------------------------------------------------
American General
Corp.
14,000 1,038,625
- -----------------------------------------------------------------------------------------------------------------------
American International Group,
Inc. 18,375
1,891,477
- -----------------------------------------------------------------------------------------------------------------------
AXA Financial,
Inc.
64,500 2,068,031
- -----------------------------------------------------------------------------------------------------------------------
Chubb
Corp.
24,600 1,349,925
- -----------------------------------------------------------------------------------------------------------------------
Cigna
Corp.
20,900 1,562,275
- -----------------------------------------------------------------------------------------------------------------------
Conseco,
Inc.
41,200 1,001,675
- -----------------------------------------------------------------------------------------------------------------------
Hartford Life, Inc., Cl.
A 21,600
1,128,600
- -----------------------------------------------------------------------------------------------------------------------
Jefferson-Pilot
Corp.
34,900 2,619,681
16 OPPENHEIMER DISCIPLINED ALLOCATION FUND
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
INSURANCE Continued
Lincoln National
Corp.
46,200 $ 2,130,975
- -----------------------------------------------------------------------------------------------------------------------
Manulife Financial
Corp.(1)
37,600 453,550
- -----------------------------------------------------------------------------------------------------------------------
Marsh & McLennan Cos.,
Inc. 17,800
1,407,313
- -----------------------------------------------------------------------------------------------------------------------
Safeco
Corp.
10,100 277,750
- -----------------------------------------------------------------------------------------------------------------------
St. Paul Cos.,
Inc.
26,800 857,600
- -----------------------------------------------------------------------------------------------------------------------
Torchmark
Corp.
13,200 411,675
- -----------------------------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., Cl.
A 28,200 1,015,200
- -------------
20,870,183
- -----------------------------------------------------------------------------------------------------------------------
SAVINGS & LOANS--0.1%
Greenpoint Financial
Corp.
9,000 256,500
- -----------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--5.9%
- -----------------------------------------------------------------------------------------------------------------------
COMPUTER HARDWARE--3.3%
Apple Computer,
Inc.(1)
24,500 1,963,063S
- -----------------------------------------------------------------------------------------------------------------------
Hewlett-Packard
Co.
14,000 1,036,875
- -----------------------------------------------------------------------------------------------------------------------
International Business Machines
Corp. 38,400 3,777,600
- -----------------------------------------------------------------------------------------------------------------------
Lexmark International Group, Inc., Cl.
A(1) 34,100 2,661,931
- -------------
9,439,469
- -----------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES--0.6%
First Data
Corp.
35,800 1,635,613
- -----------------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE--0.5%
BISYS Group, Inc.
(The)(1)
13,400 683,400
- -----------------------------------------------------------------------------------------------------------------------
Synopsys,
Inc.(1)
12,200 760,213
- -------------
1,443,613
- -----------------------------------------------------------------------------------------------------------------------
ELECTRONICS--1.5%
Cypress Semiconductor
Corp.(1)
27,800 710,638
- -----------------------------------------------------------------------------------------------------------------------
Dallas Semiconductor
Corp.
8,000 471,000
- -----------------------------------------------------------------------------------------------------------------------
Intel
Corp.
13,100 1,014,431
- -----------------------------------------------------------------------------------------------------------------------
National Semiconductor
Corp.(1)
18,800 562,825
- -----------------------------------------------------------------------------------------------------------------------
Teradyne,
Inc.(1)
37,600 1,447,600
- -------------
4,206,494
- -----------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--0.8%
- -----------------------------------------------------------------------------------------------------------------------
AIR TRANSPORTATION--0.5%
Delta Air Lines,
Inc.
24,000 1,306,500
- -----------------------------------------------------------------------------------------------------------------------
RAILROADS & TRUCKERS--0.3%
Union Pacific
Corp.
16,900 942,175
17 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
UTILITIES--3.8%
- -----------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--3.4%
Carolina Power & Light
Co. 13,600
$ 469,200
- -----------------------------------------------------------------------------------------------------------------------
Conectiv,
Inc.
23,300 454,350
- -----------------------------------------------------------------------------------------------------------------------
Duke Energy
Corp.
33,500 1,892,750
- -----------------------------------------------------------------------------------------------------------------------
Entergy
Corp.
7,600 227,525
- -----------------------------------------------------------------------------------------------------------------------
FPL Group,
Inc.
18,700 940,844
- -----------------------------------------------------------------------------------------------------------------------
Montana Power
Co.
42,900 1,219,969
- -----------------------------------------------------------------------------------------------------------------------
Peco Energy
Co.
14,200 542,263
- -----------------------------------------------------------------------------------------------------------------------
Potomac Electric Power
Co.
18,900 518,569
- -----------------------------------------------------------------------------------------------------------------------
Public Service Enterprise Group,
Inc. 20,000 791,250
- -----------------------------------------------------------------------------------------------------------------------
Reliant Energy,
Inc.
48,400 1,318,900
- -----------------------------------------------------------------------------------------------------------------------
Texas Utilities
Co.
17,100 662,625
- -----------------------------------------------------------------------------------------------------------------------
Unicom
Corp.
22,400 858,200
- -------------
9,896,445
- -----------------------------------------------------------------------------------------------------------------------
GAS UTILITIES--0.4%
El Paso Energy
Corp.
24,600 1,008,600
- -----------------------------------------------------------------------------------------------------------------------
NICOR,
Inc.
7,600 294,500
- -------------
1,303,100
- -------------
Total Common Stocks (Cost
$157,899,001)
155,602,870
- -----------------------------------------------------------------------------------------------------------------------
OTHER SECURITIES--0.3%
Ingersoll-Rand International Finance Corp. I, 6.22% Preferred Redeemable
Increased Dividend Equity Securities, 5/16/01(1)(Cost
$750,000) 30,000 748,125
UNITS
- -----------------------------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
Concentric Network Corp. Wts., Exp.
12/15/07(2) 100 25,012
- -----------------------------------------------------------------------------------------------------------------------
Dairy Mart Convenience Stores, Inc. Wts., Exp.
12/12/01(2) 666 233
- -----------------------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc. Wts., Exp.
6/1/00 100 8,715
- -----------------------------------------------------------------------------------------------------------------------
Microcell Telecommunications, Inc. Wts., Exp.
6/1/06(2) 500 21,375
- -----------------------------------------------------------------------------------------------------------------------
Nextel International Ltd. Wts., Exp.
4/15/07(2) 100 413
- -----------------------------------------------------------------------------------------------------------------------
Price Communications Corp. Wts., Exp.
8/1/07(2) 516 79,980
- -----------------------------------------------------------------------------------------------------------------------
Signature Brands, Inc.
Wts.(2)
100 2,013
- -------------
Total Rights, Warrants and Certificates (Cost
$8,004) 137,741
18 OPPENHEIMER DISCIPLINED ALLOCATION FUND
FACE MARKET VALUE
AMOUNT SEE NOTE 1
=======================================================================================================================
ASSET-BACKED SECURITIES--0.8%
Dayton Hudson Credit Card Master Trust, Asset-Backed Certificates,
Series 1997-1, Cl. A, 6.25%,
8/25/05 $ 125,000 $
122,969
- -----------------------------------------------------------------------------------------------------------------------
IROQUOIS Trust, Asset-Backed Amortizing Nts., Series 1997-2, Cl. A,
6.752%,
6/25/07(2)
920,591 909,299
- -----------------------------------------------------------------------------------------------------------------------
Olympic Automobile Receivables Trust, Automobile Receivables-Backed Nts.,
Series 1997-A, Cl. A-5, 6.80%,
2/15/05 1,150,000
1,142,094
- -------------
Total Asset-Backed Securities (Cost
$2,194,029) 2,174,362
=======================================================================================================================
MORTGAGE-BACKED OBLIGATIONS--4.0%
- -----------------------------------------------------------------------------------------------------------------------
Chase Commercial Mortgage Securities Corp., Commercial Mtg. Obligations,
Series 1996-1, Cl. A2, 7.60%,
3/18/06 1,500,000
1,525,195
- -----------------------------------------------------------------------------------------------------------------------
Countrywide Funding Corp., Mtg. Pass-Through Certificates, Series 1994-10,
Cl. A3, 6%,
5/25/09
250,000 245,390
- -----------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg. Participation Certificates, Series 1711, Cl. EA, 7%,
3/15/24
200,000 196,186
- -----------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Gtd. Multiclass Mtg. Participation
Certificates:
6%,
3/1/09
642,304 626,247
Series 1843, Cl. VB, 7%,
4/15/03
65,000 65,508
Series 1849, Cl. VA, 6%,
12/15/10 643,403
639,383
- -----------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Interest-Only Stripped Mtg.-Backed
Security:
Series 1542, Cl. QC, 9.411%,
10/15/20(3) 400,000
42,124
Series 1583, Cl. IC, 11.65%-12.752%,
1/15/20(3) 1,739,930 151,148
Series 1661, Cl. PK, 25.774%,
11/15/06(3) 261,995
9,825
- -----------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
6%,
12/1/03
474,525 468,494
6.50%,
3/1/26-4/1/26
633,275 610,415
7%,
4/1/00
11,155 11,163
7.50%,
1/1/08-6/1/08
466,950 473,221
Collateralized Mtg. Obligations, Gtd. Multiclass Mtg. Participation
Certificates, Trust 1992-15, Cl. KZ, 7%,
2/25/22 853,815 808,990
Collateralized Mtg. Obligations, Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, Trust 1993-190, Cl. Z, 5.85%,
7/25/08 219,938 218,907
Interest-Only Stripped Mtg.-Backed Security, Trust 1993-223, Cl. PM,
9.526%,
10/25/23(3)
1,215,494 157,625
- -----------------------------------------------------------------------------------------------------------------------
GE Capital Mortgage Services, Inc., Collateralized Mtg. Obligations,
Series 1998-12, Cl. A3, 6.50%,
4/25/29 500,000
455,469
19 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
FACE MARKET VALUE
AMOUNTS SEE NOTE 1
=======================================================================================================================
MORTGAGE-BACKED OBLIGATIONS Continued
GE Capital Mortgage Services, Inc., Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates, Series 1994-7, Cl. A18, 6%,
2/25/09 $1,143,592 $ 1,035,306
- -----------------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn.:
7%,
4/15/09-2/15/24
981,372 975,492
7.50%,
3/15/09
419,635 426,912
8%,
5/15/17
305,464 314,601
- -----------------------------------------------------------------------------------------------------------------------
IMC Home Equity Trust, Asset-Backed Home Equity Securities,
Series 1998-3, Cl. A5, 6.36%,
8/20/22(4) 700,000
687,312
- -----------------------------------------------------------------------------------------------------------------------
Northwest Asset Securities Corp., Gtd. Multiclass Mtg. Participation
Certificates:
Series 1999-16, Cl. A3, 6%,
6/25/29 500,000
479,375
Series 1999-18, Cl. A2, 6%,
7/25/29 1,000,000
943,750
- -----------
Total Mortgage-Backed Obligations (Cost
$11,684,578) 11,568,038
=======================================================================================================================
U.S. GOVERNMENT OBLIGATIONS--8.1%
U.S. Treasury Bonds:
6%,
2/15/26
6,800,000 6,453,628
7.50%,
11/15/16(5)
2,000,000 2,207,500
8.75%,
5/15/17(5)
8,250,000 10,173,281
STRIPS, 5.88%,
11/15/18(6)
6,000,000 1,736,472
- -----------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
5.625%,
5/15/08
2,500,000 2,412,500
6.125%,
8/15/07
250,000 249,141
- -----------
Total U.S. Government Obligations (Cost
$22,863,832) 23,232,522
=======================================================================================================================
FOREIGN GOVERNMENT OBLIGATIONS--0.1%
United Mexican States Bonds, 6.97%, 8/12/00 (Cost
$248,358) 250,000 250,485
=======================================================================================================================
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--18.2%
BASIC MATERIALS--0.7%
- -----------------------------------------------------------------------------------------------------------------------
CHEMICALS--0.4%
PPG Industries, Inc., 9% Debs.,
5/1/21 315,000 361,786
- -----------------------------------------------------------------------------------------------------------------------
Rohm & Haas Co., 7.85% Debs.,
7/15/29(7) 650,000
666,229
- -----------
1,028,015
- -----------------------------------------------------------------------------------------------------------------------
METALS--0.0%
Alcan Aluminum Ltd., 9.625% Debs.,
7/15/19(2) 105,000 110,397
- -----------------------------------------------------------------------------------------------------------------------
PAPER--0.3%
Aracruz Celulose SA, 10.375% Debs.,
1/31/02(7) 750,000 746,250
20 OPPENHEIMER DISCIPLINED ALLOCATION FUND
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--2.5%
- -----------------------------------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE--0.2%
Raytheon Co., 6.45% Nts.,
8/15/02 $ 500,000 $
492,060
- -----------------------------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES--1.8%
Fred Meyer, Inc., 7.375% Sr. Nts.,
3/1/05 1,250,000 1,251,990
- -----------------------------------------------------------------------------------------------------------------------
Norse CBO Ltd., 6.515% Collateralized Bond Obligations, Series 1A,
Cl. A3,
8/13/10(2)
1,000,000 935,000
- -----------------------------------------------------------------------------------------------------------------------
Owens-Illinois, Inc., 7.15% Sr. Nts.,
5/15/05 1,000,000 941,152
- -----------------------------------------------------------------------------------------------------------------------
Sun Co., Inc., 7.95% Debs.,
12/15/01 1,175,000
1,196,374
- -----------------------------------------------------------------------------------------------------------------------
USI American Holdings, Inc., 7.25% Sr. Nts., Series B,
12/1/06 830,000 793,683
- -----------
5,118,199
- -----------------------------------------------------------------------------------------------------------------------
MANUFACTURING--0.5%
Federal-Mogul Corp., 7.50% Nts.,
7/1/04 500,000 477,303
- -----------------------------------------------------------------------------------------------------------------------
Norsk Hydro AS, 8.75% Bonds,
10/23/01 500,000
516,375
- -----------------------------------------------------------------------------------------------------------------------
U.S. Industries, Inc./USI American Holdings, Inc./USI Global Corp., 7.125%
Sr. Unsec. Nts.,
10/15/03
500,000 492,237
- -----------
1,485,915
- -----------------------------------------------------------------------------------------------------------------------
COMMUNICATION SERVICES--0.6%
- -----------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS: LONG DISTANCE--0.4%
AT&T Capital Corp., 6.25% Medium-Term Nts., Series F,
5/15/01 725,000 720,326
- -----------------------------------------------------------------------------------------------------------------------
US West Capital Funding, Inc., 6.125% Nts.,
7/15/02 500,000 490,006
- -----------
1,210,332
- -----------------------------------------------------------------------------------------------------------------------
TELEPHONE UTILITIES--0.2%
Liberty Media Group, 8.50% Nts.,
7/15/29(7) 500,000 501,823
- -----------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--1.2%
- -----------------------------------------------------------------------------------------------------------------------
AUTOS & HOUSING--0.7%
Black & Decker Corp., 6.625% Nts.,
11/15/00 810,000 811,602
- -----------------------------------------------------------------------------------------------------------------------
Ford Motor Co., 6.375% Sr. Unsec. Unsub. Nts.,
2/1/29 1,000,000 864,853
- -----------------------------------------------------------------------------------------------------------------------
Lear Corp., 7.96% Sr. Nts.,
5/15/05(7) 500,000
486,507
- -----------
2,162,962
- -----------------------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT--0.0%
Hilton Hotels Corp., 7.375% Nts.,
6/1/02 50,000 49,104
- -----------------------------------------------------------------------------------------------------------------------
MEDIA--0.1%
Reed Elsevier, Inc., 6.625% Nts.,
10/15/23(7) 400,000 341,516
21 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------
RETAIL: GENERAL--0.4%
Federated Department Stores, Inc., 6.125% Cv. Sub. Nts., 9/1/01(4) $
750,000 $ 737,779
- ----------------------------------------------------------------------------------------------------
Price/Costco Cos., Inc., 7.125% Sr. Nts., 6/15/05
550,000 553,699
- ------------
1,291,478
- ----------------------------------------------------------------------------------------------------
CONSUMER STAPLES--3.6%
- ----------------------------------------------------------------------------------------------------
BROADCASTING--0.5%
British Sky Broadcasting Group plc, 8.20% Nts., 7/15/09(7)
400,000 389,891
- ----------------------------------------------------------------------------------------------------
CSC Holdings, Inc., 7.625% Sr. Unsec. Debs., 7/15/18
1,000,000 911,250
- ------------
1,301,141
- ----------------------------------------------------------------------------------------------------
ENTERTAINMENT--0.8%
Tricon Global Restaurants, Inc., 7.45% Sr. Unsec. Nts., 5/15/05
1,000,000 961,591
- ----------------------------------------------------------------------------------------------------
Viacom, Inc.:
6.75% Sr. Unsec. Nts., 1/15/03
530,000 524,973
7.50% Sr. Nts., 1/15/02
750,000 761,791
- ------------
2,248,355
- ----------------------------------------------------------------------------------------------------
FOOD--1.2%
CPC International, Inc., 6.15% Unsec. Nts., Series C, 1/15/06
500,000 480,176
- ----------------------------------------------------------------------------------------------------
Dole Food Co., 6.75% Nts., 7/15/00
650,000 650,539
- ----------------------------------------------------------------------------------------------------
Grand Metro Inventory Corp., 7.125% Nts., 9/15/04
1,250,000 1,265,001
- ----------------------------------------------------------------------------------------------------
RACERS-Kellogg-98-1, 5.75% Nts., 2/2/017
1,000,000 994,108
- ------------
3,389,824
- ----------------------------------------------------------------------------------------------------
FOOD & DRUG RETAILERS--0.3%
Albertson's, Inc., 7.45% Unsec. Debs., 8/1/29
1,000,000 992,105
- ----------------------------------------------------------------------------------------------------
HOUSEHOLD GOODS--0.8%
Dial Corp. (The), 5.89% Medium-Term Nts., Series A, 10/22/01
750,000 731,795
- ----------------------------------------------------------------------------------------------------
Fort James Corp.:
6.234% Nts., 3/15/01
250,000 249,219
6.875% Sr. Nts., 9/15/07
1,000,000 965,299
- ----------------------------------------------------------------------------------------------------
Kimberly-Clark Corp., 7.875% Debs., 2/1/23
355,000 354,032
- ------------
2,300,345
22 OPPENHEIMER DISCIPLINED ALLOCATION FUND
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------
ENERGY--2.1%
- ----------------------------------------------------------------------------------------------------
ENERGY SERVICES--1.8%
Coastal Corp., 8.125% Sr. Nts., 9/15/02 $
565,000 $ 582,310
- ----------------------------------------------------------------------------------------------------
Columbia Gas System, Inc., 6.80% Nts., Series C, 11/28/05
500,000 490,830
- ----------------------------------------------------------------------------------------------------
Gulf Canada Resources Ltd., 8.25% Sr. Nts., 3/15/17
575,000 509,444
- ----------------------------------------------------------------------------------------------------
Louisiana Land & Exploration Co., 7.65% Debs., 12/1/23
990,000 967,491
- ----------------------------------------------------------------------------------------------------
Petroleum Geo-Services ASA, 7.50% Nts., 3/31/07
825,000 821,869
- ----------------------------------------------------------------------------------------------------
Petroliam Nasional Berhad, 6.875% Nts., 7/1/03(7)
500,000 479,332
- ----------------------------------------------------------------------------------------------------
TransCanada PipeLines Ltd., 9.875% Debs., 1/1/21
500,000 595,215
- ----------------------------------------------------------------------------------------------------
Williams Holdings of Delaware, Inc., 6.25% Sr. Unsec. Debs., 2/1/06
750,000 705,497
- ------------
5,151,988
- ----------------------------------------------------------------------------------------------------
OIL: DOMESTIC--0.3%
Norcen Energy Resources Ltd., 6.80% Debs., 7/2/02
1,000,000 978,830
- ----------------------------------------------------------------------------------------------------
FINANCIAL--4.3%
- ----------------------------------------------------------------------------------------------------
BANKS--0.9%
Chase Manhattan Corp., 10.125% Sub. Nts., 11/1/00
250,000 258,906
- ----------------------------------------------------------------------------------------------------
Fleet Mtg./Norstar Group, Inc., 9.90% Sub. Nts., 6/15/01
360,000 377,653
- ----------------------------------------------------------------------------------------------------
Greenpoint Bank (Brooklyn, New York), 6.70% Sr. Medium-Term
Bank Nts., 7/15/02
1,000,000 984,799
- ----------------------------------------------------------------------------------------------------
Integra Financial Corp., 6.50% Sub. Nts., 4/15/00
110,000 110,136
- ----------------------------------------------------------------------------------------------------
People's Bank of Bridgeport (Connecticut), 7.20% Sub. Nts., 12/1/06
1,000,000 950,438
- ------------
2,681,932
- ----------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL--1.6%
American General Institutional Capital B, 8.125% Bonds,
Series B, 3/15/46(7)
575,000 582,170
- ----------------------------------------------------------------------------------------------------
Capital One Financial Corp., 7.25% Nts., 12/1/03
1,000,000 979,835
- ----------------------------------------------------------------------------------------------------
Conseco Financing Trust III, 8.796% Bonds, 4/1/27
850,000 752,371
- ----------------------------------------------------------------------------------------------------
Finova Capital Corp., 7.625% Sr. Nts., 9/21/09
750,000 753,363
- ----------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 5.625% Nts., 2/15/01
162,000 160,293
- ----------------------------------------------------------------------------------------------------
GS Escrow Corp., 6.75% Sr. Unsec. Nts., 8/1/01
1,000,000 974,567
- ----------------------------------------------------------------------------------------------------
PHH Corp., 6.50% Nts., 2/1/00
350,000 350,641
- ------------
4,553,240
- ----------------------------------------------------------------------------------------------------
INSURANCE--1.1%
Conseco, Inc., 6.40% Nts., 6/15/01
500,000 483,415
- ----------------------------------------------------------------------------------------------------
Equitable Life Assurance Society (U.S.A.), 6.95% Surplus Nts.,
12/1/05(7)
500,000 491,637
- ----------------------------------------------------------------------------------------------------
GenAmerica Capital I, 8.525% Nts., 6/30/27(2)
750,000 632,684
- ----------------------------------------------------------------------------------------------------
Life Re Capital Trust I, 8.72% Nts., 6/15/27(7)
500,000 507,222
- ----------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., 6.75% Sr. Unsec. Nts., 11/15/06
1,000,000 969,218
- ------------
3,084,176
23 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS--0.7%
Chelsea GCA Realty Partner, Inc., 7.75% Unsec. Nts., 1/26/01
$1,050,000 $ 1,056,030
- ----------------------------------------------------------------------------------------------------
First Industrial LP, 7.15% Bonds, 5/15/27
560,000 551,653
- ----------------------------------------------------------------------------------------------------
Simon DeBartolo Group LP, 6.625% Unsec. Nts., 6/15/03
500,000 480,955
- -------------
2,088,638
- ----------------------------------------------------------------------------------------------------
HEALTHCARE--0.3%
- ----------------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES--0.3%
Columbia/HCA Healthcare Corp., 6.875% Nts., 7/15/01
120,000 116,730
- ----------------------------------------------------------------------------------------------------
Tenet Healthcare Corp.:
8% Sr. Nts., 1/15/05
325,000 307,938
8.625% Sr. Unsec. Nts., 12/1/03
500,000 491,641
- -------------
916,309
- ----------------------------------------------------------------------------------------------------
TRANSPORTATION--0.8%
- ----------------------------------------------------------------------------------------------------
AIR TRANSPORTATION--0.3%
Northwest Airlines Corp., 8.375% Unsec. Nts., 3/15/04
750,000 730,790
- ----------------------------------------------------------------------------------------------------
RAILROADS & TRUCKERS--0.5%
CSX Corp., 7.05% Debs., 5/1/02
145,000 145,798
- ----------------------------------------------------------------------------------------------------
Norfolk Southern Corp., 7.35% Nts., 5/15/07
125,000 124,108
- ----------------------------------------------------------------------------------------------------
Union Pacific Corp.:
7% Nts., 6/15/00
605,000 607,871
7.60% Nts., 5/1/05
500,000 507,943
- -------------
1,385,720
- ----------------------------------------------------------------------------------------------------
UTILITIES--2.1%
- ----------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--1.0%
Cleveland Electric Illumination, Inc., 6.86% First Mtg. Nts.,
10/1/08
1,500,000 1,411,833
- ----------------------------------------------------------------------------------------------------
El Paso Electric Co., 8.25% First Mtg. Bonds, Series C, 2/1/03
500,000 512,896
- ----------------------------------------------------------------------------------------------------
Hawaiian Electric Industries, Inc., 6.31% Medium-Term Nts.,
Series B, 2/19/02
1,000,000 980,894
- -------------
2,905,623
- ----------------------------------------------------------------------------------------------------
GAS UTILITIES--1.1%
Northern Illinois Gas Co., 6.45% First Mtg. Bonds, 8/1/01
680,000 676,483
- ----------------------------------------------------------------------------------------------------
Southern California Gas Co., 6.38% Medium-Term Nts., 10/29/01
500,000 496,824
- ----------------------------------------------------------------------------------------------------
Tennessee Gas Pipeline Co., 7.50% Bonds, 4/1/17
825,000 810,228
- ----------------------------------------------------------------------------------------------------
Williams Cos., Inc. (The), 6.20% Nts., 8/1/02
1,250,000 1,226,760
- -------------
3,210,295
- -------------
Total Non-Convertible Corporate Bonds and Notes (Cost
$54,233,858) 52,457,362
24 OPPENHEIMER DISCIPLINED ALLOCATION FUND
FACE MARKET VALUE
AMOUNT SEE NOTE 1
====================================================================================================
CONVERTIBLE CORPORATE BONDS AND NOTES--0.0%
- ----------------------------------------------------------------------------------------------------
Geotek Communications, Inc., 12% Cv. Sr. Sub. Nts., 2/15/01(8)
(Cost $92,540) $
100,000 $ 625
====================================================================================================
SHORT-TERM NOTES--13.1%(9)
- ----------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 5.16%, 11/1/99
14,500,000 14,500,000
- ----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
5.14%, 11/4/99
7,700,000 7,696,676
5.20%, 12/10/99
5,000,000 4,971,833
5.23%, 11/8/99
5,395,000 5,389,514
- ----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.22%, 11/3/99
5,000,000 4,998,550
- --------------
Total Short-Term Notes (Cost
$37,556,573) 37,556,573
====================================================================================================
REPURCHASE AGREEMENTS--4.3%
- ----------------------------------------------------------------------------------------------------
Repurchase agreement with Zion First National Bank, 5.20%,
dated 10/29/99, to be repurchased at $12,405,373 on 11/1/99,
collateralized by U.S. Treasury Nts., 5.50%-7.875%,
12/31/99-11/15/04, with a value of $12,546,079 and U.S.
Treasury Bonds, 5.625%, 9/30/01, with a value of $109,610
(Cost $12,400,000)
12,400,000 12,400,000
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $299,930,773)
103.0% 296,128,703
- ----------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS
(3.0) (8,728,838)
- ----------------------------
NET ASSETS
100.0% $287,399,865
============================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income-producing security.
2. Identifies issues considered to be illiquid or restricted--See Note 6 of
Notes to Financial Statements.
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. Securities with an aggregate market value of $12,380,781 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 5 of Notes to Financial Statements.
6. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
7. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Directors. These securities amount to $6,186,685 or 2.15% of the Fund's net
assets as of October 31, 1999.
8. Issuer is in default.
9. Short-term notes are generally traded on a discount basis; the interest rate
is the discount rate received by the Fund at the time of purchase.
See accompanying Notes to Financial Statements.
25 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES October 31, 1999
- --------------------------------------------------------------------------------
================================================================================================================
ASSETS
- ----------------------------------------------------------------------------------------------------------------
Investments, at value (cost $299,930,773)--see accompanying
statement $ 296,128,703
- ----------------------------------------------------------------------------------------------------------------
Cash
682,120
- ----------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal
paydowns 1,841,161
Investments
sold
1,066,292
Daily variation on futures
contracts 554,400
Shares of capital stock
sold
53,917
Other
3,402
- ---------------
Total
assets
300,329,995
================================================================================================================
LIABILITIES
- ----------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments
purchased
12,046,692
Shares of capital stock
redeemed
564,526
Directors'
compensation
93,162
Distribution and service plan
fees 62,763
Transfer and shareholder servicing agent
fees 36,928
Other
126,059
- ---------------
Total
liabilities
12,930,130
================================================================================================================
NET
ASSETS
$287,399,865
==============
================================================================================================================
COMPOSITION OF NET ASSETS
- ----------------------------------------------------------------------------------------------------------------
Par value of shares of capital
stock $ 19,109
- ----------------------------------------------------------------------------------------------------------------
Additional paid-in
capital
263,940,677
- ----------------------------------------------------------------------------------------------------------------
Undistributed net investment
income 779,391
- ----------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency
transactions
25,841,491
- ----------------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments and translation of
assets and liabilities denominated in foreign
currencies (3,180,803)
- ---------------
Net
assets
$287,399,865
===============
26 OPPENHEIMER DISCIPLINED ALLOCATION FUND
================================================================================================================
NET ASSET VALUE PER SHARE
- ----------------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$258,159,251 and 17,176,755 shares of capital stock
outstanding) $15.03
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering
price)
$15.95
- ----------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $23,521,762
and 1,547,260 shares of capital stock
outstanding) $15.20
- ----------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $5,718,852
and 384,445 shares of capital stock
outstanding) $14.88
See accompanying Notes to Financial Statements.
27 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENT OF OPERATIONS For the Year Ended October 31, 1999
- --------------------------------------------------------------------------------
================================================================================================================
INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------------------
Interest
$ 9,464,177
- ----------------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of
$2,439) 2,722,741
- --------------
Total
income
12,186,918
================================================================================================================
EXPENSES
- ----------------------------------------------------------------------------------------------------------------
Management
fees
1,994,511
- ----------------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class
A
732,222
Class
B
246,431
Class
C
58,740
- ----------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent
fees 345,571
- ----------------------------------------------------------------------------------------------------------------
Shareholder
reports
148,022
- ----------------------------------------------------------------------------------------------------------------
Custodian fees and
expenses
20,104
- ----------------------------------------------------------------------------------------------------------------
Accounting service
fees
15,000
- ----------------------------------------------------------------------------------------------------------------
Other
56,993
- -------------
Total
expenses
3,617,594
Less expenses paid
indirectly
(9,729)
- -------------
Net
expenses
3,607,865
================================================================================================================
NET INVESTMENT
INCOME
8,579,053
================================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments
23,229,928
Closing of futures
contracts
6,180,223
Foreign currency
transactions
(380)
- -------------
Net realized
gain
29,409,771
- ----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments
(28,349,571)
Translation of assets and liabilities denominated in foreign
currencies (892)
- -------------
Net
change
(28,350,463)
- -------------
Net realized and unrealized
gain 1,059,308
================================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 9,638,361
=============
See accompanying Notes to Financial Statements.
28 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998
====================================================================================================
OPERATIONS
- ----------------------------------------------------------------------------------------------------
Net investment income $
8,579,053 $ 8,315,523
- ----------------------------------------------------------------------------------------------------
Net realized gain
29,409,771 5,047,223
- ----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation
(28,350,463) 234,047
- ----------------------------
Net increase in net assets resulting from operations
9,638,361 13,596,793
====================================================================================================
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A
(8,122,829) (7,782,493)
Class B
(502,951) (326,896)
Class C
(124,914) (68,904)
- ----------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A
(7,782,789) (26,053,041)
Class B
(594,276) (1,001,059)
Class C
(139,060) (171,534)
====================================================================================================
CAPITAL STOCK TRANSACTIONS
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from capital stock
transactions:
Class A
(33,744,712) 75,962,031
Class B
2,509,874 13,987,615
Class C
1,126,929 3,532,579
====================================================================================================
NET ASSETS
- ----------------------------------------------------------------------------------------------------
Total increase (decrease)
(37,736,367) 71,675,091
- ----------------------------------------------------------------------------------------------------
Beginning of period
325,136,232 253,461,141
- -----------------------------
End of period (including undistributed net investment
income of $779,391 and $986,365, respectively)
$287,399,865 $325,136,232
- -----------------------------
See accompanying Notes to Financial Statements.
29 OPPENHEIMER DISCIPLINED ALLOCATION FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
YEAR YEAR
ENDED ENDED
OCT. 31, DEC. 31,
CLASS A 1999 1998
1997 1996(1) 1995 1994
===============================================================================================================================
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.45 $ 16.81 $
16.00 $ 15.46 $ 13.44 $ 14.54
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .44 .45
.51(2) .46 .60 .55
Net realized and unrealized gain (loss) (.01) .45
2.25(2) .49 2.59 (.86)
- -------------------------------------------------------------------------------
Total income (loss) from
investment operations .43 .90
2.76 .95 3.19 (.31)
- -------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.44) (.45)
(.56) (.36) (.60) (.55)
Distributions from net realized gain (.41) (1.81)
(1.39) (.05) (.57) (.24)
- -------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.85) (2.26)
(1.95) (.41) (1.17) (.79)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.03 $15.45
$16.81 $16.00 $15.46 $13.44
===============================================================================
===============================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 2.62% 5.93%
18.82% 6.27% 23.95% (2.11)%
===============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $258,159 $298,558
$243,267 $233,289 $218,099 $177,904
- -------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $293,677 $268,715
$238,821 $228,203 $200,172 $187,655
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income 2.72% 2.96%
3.17% 3.52% 4.00% 3.80%
Expenses 1.04% 1.04%(5)
1.11%(5) 1.11%(5) 1.17%(5) 0.96%
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 122% 97%
98% 85% 55% 115%
1. For the ten months ended October 31, 1996. The Fund changed its fiscal year
end from December 31 to October 31. On March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the Fund.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
4. Annualized for periods of less than one full year.
5. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended October 31, 1999, were $323,956,198 and $354,552,584, respectively.
See accompanying Notes to Financial Statements.
30 OPPENHEIMER DISCIPLINED ALLOCATION FUND
YEAR PERIOD
ENDED ENDED
OCT. 31, DEC. 31,
CLASS B 1999 1998
1997 1996(1) 1995(7)
======================================================================================================================
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.62 $16.99
$16.16 $15.66 $15.48
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .31 .36
.40(2) .31 .07
Net realized and unrealized gain (loss) -- .43
2.27(2) .54 .70
- -------------------------------------------------------------------
Total income (loss) from
investment operations .31 .79
2.67 .85 .77
- ----------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.32) (.35)
(.45) (.30) (.07)
Distributions from net realized gain (.41) (1.81)
(1.39) (.05) (.52)
- -------------------------------------------------------------------
Total dividends and distributions
to shareholders (.73) (2.16)
(1.84) (.35) (.59)
Net asset value, end of period $15.20 $15.62
$16.99 $16.16 $15.66
===================================================================
======================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 1.84% 5.10%
17.96% 5.51% 4.93%
======================================================================================================================
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $23,522 $21,754
$8,720 $3,919 $650
- ----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $24,648 $14,235
$6,183 $2,324 $375
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income 1.97% 2.19%
2.32% 2.86% 0.73%
Expenses 1.80% 1.80%(5)
1.89%(5) 1.85%(5) 1.92%(5)
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 122% 97%
98% 85% 55%
1. For the ten months ended October 31, 1996. The Fund changed its fiscal year
end from December 31 to October 31. On March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the Fund.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
4. Annualized for periods of less than one full year.
5. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended October 31, 1999, were $323,956,198 and $354,552,584, respectively.
7. For the period from October 2, 1995, (inception of offering) to December 31,
1995.
See accompanying Notes to Financial Statements.
31 OPPENHEIMER DISCIPLINED ALLOCATION FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS C YEAR ENDED OCTOBER 31, 1999
1998 1997 1996(8)
====================================================================================================================
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.31 $
16.70 $ 15.93 $ 15.71
- --------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .32
.37 .44(2) .30
Net realized and unrealized gain (loss) (.01)
.40 2.19(2) .32
- ---------------------------------------------------
Total income (loss) from investment operations .31
.77 2.63 .62
- --------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.33)
(.35) (.47) (.35)
Distributions from net realized gain (.41)
(1.81) (1.39) (.05)
- ---------------------------------------------------
Total dividends and distributions to shareholders (.74)
(2.16) (1.86) (.40)
Net asset value, end of period $14.88
$15.31 $16.70 $15.93
===================================================
====================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 1.84%
5.10% 17.93% 4.08%
====================================================================================================================
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $5,719
$4,824 $1,473 $188
- --------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $5,876
$2,861 $ 805 $ 57
- --------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income 1.97%
2.18% 2.18% 2.90%
Expenses 1.80%
1.80%(5) 1.92%(5) 1.87%(5)
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 122%
97% 98% 85%
1. For the ten months ended October 31, 1996. The Fund changed its fiscal year
end from December 31 to October 31. On March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the Fund.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
4. Annualized for periods of less than one full year.
5. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended October 31, 1999, were $323,956,198 and $354,552,584, respectively.
7. For the period from October 2, 1995 (inception of offering) to December 31,
1995.
8. For the period from May 1, 1996 (inception of offering) to October 31, 1996.
See accompanying Notes to Financial Statements.
32 OPPENHEIMER DISCIPLINED ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Disciplined Allocation Fund (the Fund), a series of Oppenheimer
Series Fund, Inc. (the Company), is registered under the Investment Company Act
of 1940, as amended, as a diversified, open-end management investment company.
The Fund's investment objective is to maximize total investment return
(including both capital appreciation and income) principally by allocating its
assets among stocks, corporate bonds, U.S. government securities and money
market instruments, according to changing market conditions. The Fund's
investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund offers
Class A, Class B and Class C shares. Class A shares are sold with a front-end
sales charge on investments up to $1 million. Class B and Class C shares may be
subject to a contingent deferred sales charge (CDSC). All classes of shares have
identical rights to earnings, assets and voting privileges, except that each
class has its own expenses directly attributable to that class and exclusive
voting rights with respect to matters affecting that class. Classes A, B and C
have separate distribution and/or service plans. 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.
- --------------------------------------------------------------------------------
SECURITIES 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 Directors. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Directors 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. Foreign currency exchange contracts are valued based on the
closing prices of the foreign 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.
33 OPPENHEIMER DISCIPLINED ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES Continued
FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), 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.
- --------------------------------------------------------------------------------
DIRECTORS' COMPENSATION. The Fund has adopted a nonfunded retirement plan for
the Fund's independent Directors. Benefits are based on years of service and
fees paid to each Director during the years of service. During the year ended
October 31, 1999, a credit of $28,674 was made for the Fund's projected benefit
obligations and payments of $2,820 were made to retired Directors, resulting in
an accumulated liability of $93,143 as of October 31, 1999.
The Board of Directors has adopted a deferred compensation plan for
independent Directors that enables Directors to elect to defer receipt of all or
a portion of annual compensation they are entitled to receive from the Fund.
Under the plan, the compensation deferred is periodically adjusted as though an
equivalent amount had been invested for the Directors in shares of one or more
Oppenheimer funds selected by the Director. The amount paid to the Director
under the plan will be determined based upon the performance of the selected
funds. Deferral of Directors' fees under the plan will not affect the net assets
of the Fund, and will not materially affect the Fund's assets, liabilities or
net income per share.
34 OPPENHEIMER DISCIPLINED ALLOCATION FUND
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes. The character of distributions made during the year from net
investment income or net realized gains may differ from its ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the fiscal year in which the income or realized gain was recorded by
the Fund.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended October 31, 1999, amounts have been reclassified to reflect an
increase in additional paid-in capital of $32,040, a decrease in undistributed
net investment income of $35,333, and an increase in accumulated net realized
gain on investments of $3,293.
- --------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENTS. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
OTHER. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Foreign dividend income is often
recorded on the payable date. Realized gains and losses on investments and
unrealized appreciation and depreciation are determined on an identified cost
basis, which is the same basis used for federal income tax purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and lia-bilities 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.
35 OPPENHEIMER DISCIPLINED ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
2. SHARES OF CAPITAL STOCK
The Fund has authorized 450 million of $0.001 par value shares of capital stock.
Transactions in shares of capital stock were as follows:
YEAR ENDED OCTOBER 31,
1999 YEAR ENDED OCTOBER 31, 1998
SHARES
AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------
CLASS A
Sold 1,351,571 $ 21,353,382
1,454,634 $ 22,895,924
Dividends and/or
distributions reinvested 965,998 15,250,027
2,193,655 33,253,817
Acquisition--Note 7 -- --
4,023,572 64,135,741
Redeemed (4,463,822) (70,348,121)
(2,818,335) (44,323,451)
- --------------------------------------------------------------------------
Net increase (decrease) (2,146,253) $ (33,744,712)
4,853,526 $ 75,962,031
==========================================================================
- --------------------------------------------------------------------------------------------------------------------
CLASS B
Sold 547,606 $
8,732,198 589,123 $ 9,351,049
Dividends and/or
distributions reinvested 66,056
1,054,288 84,350 1,293,844
Acquisition--Note 7 --
- -- 328,973 5,299,757
Redeemed (458,993)
(7,276,612) (123,259) (1,957,035)
- --------------------------------------------------------------------------
Net increase 154,669 $
2,509,874 879,187 $ 13,987,615
==========================================================================
- --------------------------------------------------------------------------------------------------------------------
CLASS C
Sold 202,792 $
3,181,342 193,669 $ 2,998,346
Dividends and/or
distributions reinvested 16,189
252,900 15,173 228,310
Acquisition--Note 7 --
- -- 70,016 1,105,546
Redeemed (149,699)
(2,307,313) (51,932) (799,623)
- --------------------------------------------------------------------------
Net increase 69,282 $
1,126,929 226,926 $ 3,532,579
==========================================================================
================================================================================
3. UNREALIZED GAINS AND LOSSES ON SECURITIES
As of October 31, 1999, net unrealized depreciation on securities of $3,802,070
was composed of gross appreciation of $10,453,650, and gross depreciation of
$14,255,720.
36 OPPENHEIMER DISCIPLINED ALLOCATION FUND
===============================================================================
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager are in accordance with the
investment advisory agreement with the Fund which provides for a fee of 0.625%
of the first $300 million of average annual net assets of the Fund, 0.50% of the
next $100 million and 0.45% of average annual net assets in excess of $400
million. The Fund's management fee for the year ended October 31, 1999 was 0.62%
of the average annual net assets for each class of shares.
- --------------------------------------------------------------------------------
ACCOUNTING FEES. The Manager acts as the accounting agent for the Fund at an
annual fee of $15,000, plus out-of-pocket costs and expenses reasonably
incurred.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer and shareholder servicing agent for the Fund and other
Oppenheimer funds. OFS's total costs of providing such services are allocated
ratably to these funds.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FEES. Under its General Distributor's Agreement
with the Manager, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of the different classes of shares of the Fund.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares is shown in the table below for the period
indicated.
AGGREGATE CLASS A
COMMISSIONS COMMISSIONS COMMISSIONS
FRONT-END FRONT-END ON CLASS
A ON CLASS B ON CLASS C
SALES CHARGES SALES CHARGES
SHARES SHARES SHARES
ON CLASS A RETAINED BY ADVANCED
BY ADVANCED BY ADVANCED BY
YEAR ENDED SHARES DISTRIBUTOR
DISTRIBUTOR(1) DISTRIBUTOR(1) DISTRIBUTOR(1)
- -----------------------------------------------------------------------------------------------------------------------
October 31, 1999 $400,298 $295,333
$46,607 $250,032 $25,954
1. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
CLASS A CLASS
B CLASS C
CONTINGENT DEFERRED CONTINGENT
DEFERRED CONTINGENT DEFERRED
SALES CHARGES SALES
CHARGES SALES CHARGES
YEAR ENDED RETAINED BY DISTRIBUTOR RETAINED BY
DISTRIBUTOR RETAINED BY DISTRIBUTOR
- ------------------------------------------------------------------------------------------------------------------
October 31, 1999 $2,000
$57,857 $3,487
The Fund has adopted a Service Plan for Class A shares and Distribution and
Service Plans for Class B and Class C shares under Rule 12b-1 of the Investment
Company Act. Under those plans the Fund pays the Distributor for all or a
portion of its costs incurred in connection with the distribution and/or
servicing of the shares of the particular class.
37 OPPENHEIMER DISCIPLINED ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
CLASS A SERVICE PLAN FEES. Under the Class A service plan, the Distributor
currently uses the fees it receives from the Fund to pay brokers, dealers and
other financial institutions. The Class A service plan permits reimbursements to
the Distributor at a rate of up to 0.25% of average annual net assets of Class A
shares. The Distributor makes payments to plan recipients quarterly at an annual
rate not to exceed 0.25% of the average annual net assets consisting of Class A
shares of the Fund. For the fiscal year ended October 31, 1999, payments under
the Class A Plan totaled $732,222, all of which was paid by the Distributor to
recipients. That included $587,717 paid to an affiliate of the Distributor's
parent company. Any unreimbursed expenses the Distributor incurs with respect to
Class A shares in any fiscal year cannot be recovered in subsequent years.
- --------------------------------------------------------------------------------
CLASS B AND CLASS C DISTRIBUTION AND SERVICE PLAN FEES. Under each plan, service
fees and distribution 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 Class B and Class C plans provide for the
Distributor to be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts paid by the Fund under
the plan during the period for which the fee is paid.
The Distributor retains the asset-based sales charge on Class B shares. The
Distributor retains the asset-based sales charge on Class C shares during the
first year the shares are outstanding. The asset-based sales charges on Class B
and Class C shares allow investors to buy shares without a front-end sales
charge while allowing the Distributor to compensate dealers that sell those
shares.
The Distributor's actual expenses in selling Class B and Class C shares may
be more than the payments it receives from the contingent deferred sales charges
collected on redeemed shares and from the Fund under the plans. If either the
Class B or the Class C plan is terminated by the Fund, the Board of Directors
may allow the Fund to continue payments of the asset-based sales charge to the
Distributor for distributing shares before the plan was terminated. The plans
allow for the carry-forward of distribution expenses, to be recovered from
asset-based sales charges in subsequent fiscal periods.
Distribution fees paid to the Distributor for the year ended October 31,
1999, were as follows:
DISTRIBUTOR'S DISTRIBUTOR'S
AGGREGATE UNREIMBURSED
UNREIMBURSED EXPENSES AS %
TOTAL PAYMENTS AMOUNT
RETAINED EXPENSES OF NET ASSETS
UNDER PLAN BY DISTRIBUTOR
UNDER PLAN OF CLASS
- ------------------------------------------------------------------------------------------------------------------
Class B Plan $246,431
$206,253 $689,149 2.93%
Class C Plan 58,740
33,227 67,663 1.18
38 OPPENHEIMER DISCIPLINED ALLOCATION FUND
================================================================================
5. FUTURES CONTRACTS
The Fund may buy and sell futures contracts in order to gain exposure to or to
seek to 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 (initial margin) in an amount 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 may recognize 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
and/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.
As of October 31, 1999, the Fund had outstanding futures contracts as follows:
EXPIRATION NUMBER OF
VALUATION AS OF UNREALIZED
CONTRACT DESCRIPTION DATE CONTRACTS
OCTOBER 31, 1999 APPRECIATION
- ---------------------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
NASDAQ 100 Index 12/16/99 44
$11,677,600 $ 495,077
Standard & Poor's 500 Index 12/16/99 22
7,569,100 126,503
- -----------------
$621,580
=================
================================================================================
6. ILLIQUID OR RESTRICTED SECURITIES
As of October 31, 1999, 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 Directors as reflecting fair value. A security may also 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
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limitation. The aggregate value of illiquid or restricted
securities subject to this limitation as of October 31, 1999, was $2,716,406,
which represents 0.95% of the Fund's net assets.
39 OPPENHEIMER DISCIPLINED ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
7. ACQUISITION OF OPPENHEIMER LIFESPAN BALANCED FUND
On June 12, 1998, the Fund acquired all of the net assets of Oppenheimer
LifeSpan Balanced Fund, pursuant to an agreement and plan of reorganization
approved by the Oppenheimer LifeSpan Balanced Fund shareholders on June 9, 1998.
The Fund issued (at an exchange ratio of 0.711330 for Class A, 0.789560 for
Class B, and 0.716167 for Class C of the Fund to one share of Oppenheimer
LifeSpan Balanced Fund) 4,023,572, 328,973 and 70,016 shares of capital stock
for Class A, Class B and Class C, respectively, valued at $64,135,741,
$5,299,757 and $1,105,546 in exchange for the net assets, resulting in combined
Class A net assets of $313,743,282, Class B net assets of $18,371,573 and Class
C net assets of $3,985,465 on June 12, 1998. The net assets acquired included
net unrealized appreciation of $3,969,222. The exchange qualified as a tax-free
reorganization for federal income tax purposes.
================================================================================
8. BANK BORROWINGS
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.45%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of 0.08%
per annum.
The Fund had no borrowings outstanding during the year ended October 31,
1999.
40 OPPENHEIMER DISCIPLINED ALLOCATION FUND
Appendix A
- --------------------------------------------------------------------------------
RATINGS DEFINITIONS
- --------------------------------------------------------------------------------
Below are summaries of the rating definitions used by the nationally-recognized
rating agencies listed below. Those ratings represent the opinion of the agency
as to the credit quality of issues that they rate. The summaries below are based
upon publicly-available information provided by the rating organizations.
Moody's Investors Service, Inc.
- --------------------------------------------------------------------------------
Long-Term (Taxable) Bond Ratings
Aaa: Bonds rated Aaa are judged to be the best quality. They 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 are the lowest class of rated bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through Caa. The modifier "1" indicates that the
obligation ranks in the higher end of its category; the modifier "2" indicates a
mid-range ranking and the modifier "3" indicates a ranking in the lower end of
the category. Short-Term Ratings - Taxable Debt
These ratings apply to the ability of issuers to repay punctually senior debt
obligations having an original maturity not exceeding one year:
Prime-1: Issuer has a superior ability for repayment of senior short-term debt
obligations.
Prime-2: Issuer has a strong ability for repayment of senior short-term debt
obligations. Earnings trends and coverage, while sound, may be subject to
variation. Capitalization characteristics, while appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3: Issuer has an acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market compositions may
be more pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require relatively
high financial leverage. Adequate alternate liquidity is maintained.
Not Prime: Issuer does not fall within any Prime rating category.
Standard & Poor's Rating Services
- --------------------------------------------------------------------------------
Long-Term Credit Ratings
AAA: Bonds rated "AAA" have the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA: Bonds rated "AA" differ from the highest rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A: Bonds rated "A" are somewhat more susceptible to adverse effects of changes
in circumstances and economic conditions than obligations in higher-rated
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is still strong.
BBB: Bonds rated BBB exhibit adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
Bonds rated BB, B, CCC, CC and C are regarded as having significant speculative
characteristics. BB indicates the least degree of speculation and C the highest.
While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB: Bonds rated BB are less vulnerable to nonpayment than other speculative
issues. However, these face major uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B: A bond rated B is more vulnerable to nonpayment than an obligation rated BB,
but the obligor currently has the capacity to meet its financial commitment on
the obligation.
CCC: A bond rated CCC is currently vulnerable to nonpayment, and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: The C rating may used where a bankruptcy petition has been filed or similar
action has been taken, but payments on this obligation are being continued.
D: Bonds rated D are in default. Payments on the obligation are not being made
on the date due.
The ratings from AA to CCC may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories. The
"r" symbol is attached to the ratings of instruments with significant noncredit
risks.
Short-Term Issue Credit Ratings
A-1: Rated in the highest category. The obligor's capacity to meet its financial
commitment on the obligation is strong. Within this category, a plus (+) sign
designation indicates the issuer's capacity to meet its financial obligation is
very strong.
A-2: Obligation is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than obligations in higher rating
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.
A-3: Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial commitment on the obligation.
B: Regarded as having significant speculative characteristics. The obligor
currently has the capacity to meet its financial commitment on the obligation.
However, it faces major ongoing uncertainties which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
C: Currently vulnerable to nonpayment and is dependent upon favorable business,
financial, and economic conditions for the obligor to meet its financial
commitment on the obligation.
D: In payment default. Payments on the obligation have not been made on the due
date. The rating may also be used if a bankruptcy petition has been filed or
similar actions jeopardize payments on the obligation.
Fitch IBCA, Inc.
- -------------------------------------------------------------------------------
International Long-Term Credit Ratings
Investment Grade:
AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong capacity
for timely payment of financial commitments. This capacity is highly unlikely to
be adversely affected by foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very low expectation of
credit risk. They indicate a very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events. A: High Credit Quality. "A" ratings denote a low expectation
of credit risk. The capacity for timely payment of financial commitments is
considered strong. This capacity may, nevertheless, be more vulnerable to
changes in circumstances or in economic conditions than is the case for higher
ratings.
BBB: Good Credit Quality. "BBB" ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
Speculative Grade:
BB: Speculative. "BB" ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time. However, business or financial alternatives may be available to allow
financial commitments to be met.
B: Highly Speculative. "B" ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met. However, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.
CCC, CC C: High Default Risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A "CC" rating indicates that default of some
kind appears probable. "C" ratings signal imminent default.
DDD, DD, and D: Default. Securities are not meeting current obligations and are
extremely speculative. "DDD" designates the highest potential for recovery of
amounts outstanding on any securities involved.
Plus (+) and minus (-) signs may be appended to a rating symbol to denote
relative status within the rating category. Plus and minus signs are not added
to the "AAA" category or to categories below "CCC."
International Short-Term Credit Ratings
F1: Highest credit quality. Strongest capacity for timely payment. May have an
added "+" to denote exceptionally strong credit feature.
F2: Good credit quality. A satisfactory capacity for timely payment, but the
margin of safety is not as great as in higher ratings.
F3: Fair credit quality. Capacity for timely payment is adequate. However,
near-term adverse changes could result in a reduction to non-investment grade.
B: Speculative. Minimal capacity for timely payment, plus vulnerability to
near-term adverse changes in financial and economic conditions.
C: High default risk. Default is a real possibility, Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
D: Default. Denotes actual or imminent payment default.
Duff & Phelps Credit Rating Co. Ratings
Long-Term Debt and Preferred Stock
AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA-: High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A+, A & A-: Protection factors are average but adequate. However, risk factors
are more variable in periods of greater economic stress.
BBB+, BBB & BBB-: Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB & BB-: Below investment grade but deemed likely to meet obligations when
due. Present or prospective financial protection factors fluctuate according to
industry conditions. Overall quality may move up or down frequently within the
category.
B+, B & B-: Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher of
lower rating grade.
CCC: Well below investment-grade securities. Considerable uncertainty exists as
to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD: Defaulted debt obligations. Issuer failed to meet scheduled principal and/or
interest payments.
DP: Preferred stock with dividend arrearages.
Short-Term Debt:
High Grade:
D-1+: Highest certainty of timely payment. Safety is just below risk-free U.S.
Treasury short-term debt.
D-1: Very high certainty of timely payment. Risk factors are minor.
D-1-: High certainty of timely payment. Risk factors are very small.
Good Grade:
D-2: Good certainty of timely payment. Risk factors are small.
Satisfactory Grade:
D-3: Satisfactory liquidity and other protection factors qualify issues as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
Non-Investment Grade:
D-4: Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service.
Default:
D-5: Issuer failed to meet scheduled principal and/or interest payments.
B-1
Appendix B
- --------------------------------------------------------------------------------
Industry Classifications
- --------------------------------------------------------------------------------
Aerospace/Defense Food and Drug Retailers
Air Transportation Gas Utilities
Asset-Backed Health Care/Drugs
Auto Parts and Equipment Health Care/Supplies & Services
Automotive Homebuilders/Real Estate
Bank Holding Companies Hotel/Gaming
Banks Industrial Services
Beverages Information Technology
Broadcasting Insurance
Broker-Dealers Leasing & Factoring
Building Materials Leisure
Cable Television Manufacturing
Chemicals Metals/Mining
Commercial Finance Nondurable Household Goods
Communication Equipment Office Equipment
Computer Hardware Oil - Domestic
Computer Software Oil - International
Conglomerates Paper
Consumer Finance Photography
Consumer Services Publishing
Containers Railroads & Truckers
Convenience Stores Restaurants
Department Stores Savings & Loans
Diversified Financial Shipping
Diversified Media Special Purpose Financial
Drug Wholesalers Specialty Printing
Durable Household Goods Specialty Retailing
Education Steel
Electric Utilities Telecommunications - Long Distance
Electrical Equipment Telephone - Utility
Electronics Textile, Apparel & Home Furnishings
Energy Services Tobacco
Entertainment/Film Trucks and Parts
Environmental Wireless Services
Food
C-11
Appendix C
OppenheimerFunds Special Sales Charge Arrangements and Waivers
In certain cases, the initial sales charge that applies to purchases of Class A
shares1 of the Oppenheimer funds or the contingent deferred sales charge that
may apply to Class A, Class B or Class C shares may be waived.2 That is because
of the economies of sales efforts realized by OppenheimerFunds Distributor,
Inc., (referred to in this document as the "Distributor"), or by dealers or
other financial institutions that offer those shares to certain classes of
investors.
Not all waivers apply to all funds. For example, waivers relating to Retirement
Plans do not apply to Oppenheimer municipal funds, because shares of those funds
are not available for purchase by or on behalf of retirement plans. Other
waivers apply only to shareholders of certain funds.
For the purposes of some of the waivers described below and in the Prospectus
and Statement of Additional Information of the applicable Oppenheimer funds, the
term "Retirement Plan" refers to the following types of plans: (7) plans
qualified under Sections 401(a) or 401(k) of the Internal Revenue
Code,
(8) non-qualified deferred compensation plans, (9) employee benefit plans3 (10)
Group Retirement Plans4 (11) 403(b)(7) custodial plan accounts (12) Individual
Retirement Accounts ("IRAs"), including traditional IRAs, Roth
IRAs, SEP-IRAs, SARSEPs or SIMPLE plans
The interpretation of these provisions as to the applicability of a special
arrangement or waiver in a particular case is in the sole discretion of the
Distributor or the transfer agent (referred to in this document as the "Transfer
Agent") of the particular Oppenheimer fund. These waivers and special
arrangements may be amended or terminated at any time by a particular fund, the
Distributor, and/or OppenheimerFunds, Inc. (referred to in this document as the
"Manager"). Waivers that apply at the time shares are redeemed must be requested
by the shareholder and/or dealer in the redemption request.
- --------------
5. Certain waivers also apply to Class M shares of Oppenheimer Convertible
Securities Fund.
6. In the case of Oppenheimer Senior Floating Rate Fund, a continuously-offered
closed-end fund, references to contingent deferred sales charges mean the
Fund's Early Withdrawal Charges and references to "redemptions" mean
"repurchases" of shares.
7. An "employee benefit plan" means any plan or arrangement, whether or not it
is "qualified" under the Internal Revenue Code, under which Class A shares of
an Oppenheimer fund or funds are purchased by a fiduciary or other
administrator for the account of participants who are employees of a single
employer or of affiliated employers. These may include, for example, medical
savings accounts, payroll deduction plans or similar plans. The fund accounts
must be registered in the name of the fiduciary or administrator purchasing
the shares for the benefit of participants in the plan.
8. The term "Group Retirement Plan" means any qualified or non-qualified
retirement plan for employees of a corporation or 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 (or who are eligible to participate in) the plan
purchase Class A shares of an Oppenheimer fund or funds through a single
investment dealer, broker or other financial institution designated by the
group. Such plans include 457 plans, SEP-IRAs, SARSEPs, SIMPLE plans and
403(b) plans other than plans for public school employees. The term "Group
Retirement Plan" also includes qualified retirement plans and non-qualified
deferred compensation plans and IRAs that purchase Class A shares of an
Oppenheimer fund or funds through a single investment dealer, broker or other
financial institution that has made special arrangements with the Distributor
enabling those plans to purchase Class A shares at net asset value but
subject to the Class A contingent deferred sales charge.
I. Applicability of Class A Contingent Deferred Sales Charges in Certain Cases
Purchases of Class A Shares of Oppenheimer Funds That Are Not Subject to Initial
Sales Charge but May Be Subject to the Class A Contingent Deferred Sales Charge
(unless a waiver applies).
There is no initial sales charge on purchases of Class A shares of any of
the Oppenheimer funds in the cases listed below. However, these purchases may be
subject to the Class A contingent deferred sales charge if redeemed within 18
months of the end of the calendar month of their purchase, as described in the
Prospectus (unless a waiver described elsewhere in this Appendix applies to the
redemption). Additionally, on shares purchased under these waivers that are
subject to the Class A contingent deferred sales charge, the Distributor will
pay the applicable commission described in the Prospectus under "Class A
Contingent Deferred Sales Charge."11 This waiver provision applies to: |_|
Purchases of Class A shares aggregating $1 million or more. |_| Purchases by a
Retirement Plan (other than an IRA or 403(b)(7) custodial
plan) that:
(4) buys shares costing $500,000 or more, or
(5) has, at the time of purchase, 100 or more eligible employees or total plan
assets of $500,000 or more, or
(6) certifies to the Distributor that it projects to have annual plan
purchases of $200,000 or more.
|_| Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the
purchases are made:
(3) through a broker, dealer, bank or registered investment adviser that
has made special arrangements with the Distributor for those
purchases, or
(4) 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.
|_| Purchases of Class A shares by Retirement Plans that have any of the
following record-keeping arrangements:
(4) The record keeping is performed by Merrill Lynch Pierce Fenner & Smith,
Inc. ("Merrill Lynch") on a daily valuation basis for the Retirement Plan.
On the date the plan sponsor signs the record-keeping service agreement
with Merrill Lynch, the Plan must have $3 million or more of its assets
invested in (a) mutual funds, other than those advised or managed by
Merrill Lynch Asset Management, L.P. ("MLAM"), that are made available
under a Service Agreement between Merrill Lynch and the mutual fund's
principal underwriter or distributor, and (b) funds advised or managed by
MLAM (the funds described in (a) and (b) are referred to as "Applicable
Investments").
(5) The record keeping for the Retirement Plan is performed on a daily
valuation basis by a record keeper whose services are provided under a
contract or arrangement between the Retirement Plan and Merrill Lynch. On
the date the plan sponsor signs the record keeping service agreement with
Merrill Lynch, the Plan must have $3 million or more of its assets
(excluding assets invested in money market funds) invested in Applicable
Investments.
(6) The record keeping for a Retirement Plan is handled under a service
agreement with Merrill Lynch and on the date the plan sponsor signs
that agreement, the Plan has 500 or more eligible employees (as
determined by the Merrill Lynch plan conversion manager).
|_| Purchases by a Retirement Plan whose record keeper had a
cost-allocation agreement with the Transfer Agent on or before May 1,
1999.
II. Waivers of Class A Sales Charges of Oppenheimer Funds
A. 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 (and no commissions are paid by the Distributor on such
purchases): |_| The Manager or its affiliates.
|_| Present or former officers, directors, trustees and employees (and
their "immediate families") of the Fund, the Manager and its affiliates,
and retirement plans established by them for their employees. The term
"immediate family" refers to one's spouse, children, grandchildren,
grandparents, parents, parents-in-law, brothers and sisters, sons- and
daughters-in-law, a sibling's spouse, a spouse's siblings, aunts, uncles,
nieces and nephews; relatives by virtue of a remarriage (step-children,
step-parents, etc.) are included.
|_| Registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the
Distributor for that purpose.
|_| Dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for
their employees.
|_| Employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and which are
identified as such to the Distributor) or with the Distributor. The
purchaser must certify to the Distributor at the time of purchase that
the purchase is for the purchaser's own account (or for the benefit of
such employee's spouse or minor children).
|_| Dealers, brokers, banks or registered investment advisors that have
entered into an agreement with the Distributor providing specifically
for the use of shares of the Fund in particular investment products
made available to their clients. Those clients may be charged a
transaction fee by their dealer, broker, bank or advisor for the
purchase or sale of Fund shares.
|_| Investment advisors and financial planners who have entered into an
agreement for this purpose with the Distributor and who charge an
advisory, consulting or other fee for their services and buy shares for
their own accounts or the accounts of their clients.
|_| "Rabbi trusts" that buy shares for their own accounts, if the purchases
are made through a broker or agent or other financial intermediary that
has made special arrangements with the Distributor for those purchases.
|_| Clients of investment advisors or financial planners (that have entered
into an agreement for this purpose with the Distributor) who buy shares for
their own accounts may also purchase shares without sales charge but only
if their accounts are linked to a master account of their investment
advisor or financial planner on the books and records of the broker, agent
or financial intermediary with which the Distributor has made such special
arrangements . Each of these investors may be charged a fee by the broker,
agent or financial intermediary for purchasing shares.
|_| 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 (or its successor) 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.
|_| A unit investment trust that has entered into an appropriate agreement
with the Distributor.
|_| Dealers, brokers, banks, or registered investment advisers that have
entered into an agreement with the Distributor to sell shares to
defined contribution employee retirement plans for which the dealer,
broker or investment adviser provides administration services.
|-|
Retirement Plans and deferred compensation plans and trusts used to fund
those plans (including, for example, plans qualified or created under
sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue Code),
in each case if those purchases are made through a broker, agent or
other financial intermediary that has made special arrangements with
the Distributor for those purchases.
|_| 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 Class C TRAC-2000 program on November
24, 1995.
|_| A qualified Retirement Plan 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, if that
arrangement was consummated and share purchases commenced by December
31, 1996.
B. 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 sales charges (and no commissions are paid by the Distributor on such
purchases): |_| 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 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 through a broker-dealer that has entered into a
special agreement with the Distributor to allow the broker's customers to
purchase and pay for shares of Oppenheimer funds using the proceeds of
shares redeemed in the prior 30 days from a mutual fund (other than a fund
managed by the Manager or any of its subsidiaries) on which an initial
sales charge or contingent 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 shares of
the Fund, and the Distributor may require evidence of qualification for
this waiver.
|_| Shares purchased with the proceeds of maturing principal units of any
Qualified Unit Investment Liquid Trust Series.
|_| Shares purchased by the reinvestment of loan repayments by a
participant in a Retirement Plan for which the Manager or an affiliate
acts as sponsor.
C. 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 account value adjusted annually.
|_| Involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (please refer to "Shareholder Account
Rules and Policies," in the applicable fund Prospectus).
|_| For distributions from Retirement Plans, deferred compensation plans or
other employee benefit plans for any of the following purposes:
(10) 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.
(11) To return excess contributions.
(12)
To return contributions made due to a mistake of fact. (13) Hardship
withdrawals, as defined in the plan.12 (14) Under a Qualified Domestic Relations
Order, as defined in the Internal
Revenue Code, or, in the case of an IRA, a divorce or separation
agreement described in Section 71(b) of the Internal Revenue Code.
(15) To meet the minimum distribution requirements of the Internal Revenue Code.
(16) To make "substantially equal periodic payments" as described in
Section 72(t) of the Internal Revenue Code.
(17) For loans to participants or beneficiaries.
(18) Separation from service.13
(10) Participant-directed redemptions to purchase shares of a mutual
fund (other than a fund managed by the Manager or a subsidiary of the
Manager) if the plan has made special arrangements with the
Distributor. (11) Plan termination or "in-service distributions," if
the redemption proceeds are rolled over directly to an
OppenheimerFunds-sponsored IRA.
|_| For distributions from Retirement Plans having 500 or more eligible
employees, except distributions due to termination of all of the
Oppenheimer funds as an investment option under the Plan.
|_| For distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing
this waiver.
III. Waivers of Class B and Class C Sales Charges of Oppenheimer Funds
The Class B and Class C contingent deferred sales charges will not be applied to
shares purchased in certain types of transactions or redeemed in certain
circumstances described below.
A. Waivers for Redemptions in Certain Cases.
The Class B and Class C contingent deferred sales charges will be waived for
redemptions of shares in the following cases: |_| Shares redeemed involuntarily,
as described in "Shareholder Account Rules and
Policies," in the applicable Prospectus.
|_| 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.
|_| Distributions from accounts for which the broker-dealer of record has
entered into a special agreement with the Distributor allowing this
waiver.
|_| Redemptions of Class B shares held by Retirement Plans whose records
are maintained on a daily valuation basis by Merrill Lynch or an
independent record keeper under a contract with Merrill Lynch.
|_| Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
accounts of clients of financial institutions that have entered into a
special arrangement with the Distributor for this purpose.
|_| Redemptions requested in writing by a Retirement Plan sponsor of Class
C shares of an Oppenheimer fund in amounts of $1 million or more held
by the Retirement Plan for more than one year, if the redemption
proceeds are invested in Class A shares of one or more Oppenheimer
funds.
|-|
Distributions from Retirement Plans or other employee benefit plans for
any of the following purposes:
(15) 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 in an Oppenheimer fund.
(16) To return excess contributions made to a participant's account.
(17) To return contributions made due to a mistake of fact.
(18) To make hardship withdrawals, as defined in the plan.14
(19) To make distributions required under a Qualified Domestic Relations
Order or, in the case of an IRA, a divorce or separation agreement
described in Section 71(b) of the Internal Revenue Code.
(20) To meet the minimum distribution requirements of the Internal Revenue Code.
(21) To make "substantially equal periodic payments" as described in
Section 72(t) of the Internal Revenue Code.
(22) For loans to participants or beneficiaries.15
(23) On account of the participant's separation from service.16
(24) Participant-directed redemptions to purchase shares of a mutual
fund (other than a fund managed by the Manager or a subsidiary
of the Manager) offered as an investment option in a Retirement
Plan if the plan has made special arrangements with the
Distributor.
(25) Distributions made on account of a plan termination or
"in-service" distributions, if the redemption proceeds are
rolled over directly to an OppenheimerFunds-sponsored IRA.
(26) Distributions from Retirement Plans having 500 or more eligible
employees, but excluding distributions made because of the
Plan's elimination as investment options under the Plan of all
of the Oppenheimer funds that had been offered.
(27) For distributions from a participant's account under an
Automatic Withdrawal Plan after the participant reaches age 59
1/2, as long as the aggregate value of the distributions does
not exceed 10% of the account's value, adjusted annually.
(28) Redemptions of Class B shares under an Automatic Withdrawal Plan
for an account other than a Retirement Plan, if the aggregate
value of the redeemed shares does not exceed 10% of the
account's value, adjusted annually.
|_|Redemptions of Class B shares or Class C shares under an Automatic
Withdrawal Plan from an account other than a Retirement Plan if the
aggregate value of the redeemed shares does not exceed 10% of the
account's value annually.
B. Waivers for Shares Sold or Issued in Certain Transactions.
The contingent deferred sales charge is also waived on Class B and Class C
shares sold or issued in the following cases: |_| Shares sold to the Manager or
its affiliates.
|_| Shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor for that purpose.
|_| Shares issued in plans of reorganization to which the Fund is a party. |_|
Shares sold to present or former officers, directors, trustees or employees (and
their "immediate families" as defined above in Section I.A.) of the Fund, the
Manager and its affiliates and retirement plans established by them for their
employees.
IV. Special Sales Charge Arrangements for Shareholders of Certain
Oppenheimer Funds Who Were Shareholders of Former Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers for Class A,
Class B and Class C shares described in the Prospectus or Statement of
Additional Information of the Oppenheimer funds are modified as described below
for certain persons who were shareholders of the former Quest for Value Funds.
To be eligible, those persons must have been shareholders on November 24, 1995,
when OppenheimerFunds, Inc. became the investment advisor to those former Quest
for Value Funds. Those funds include:
Oppenheimer Quest Value Fund, Inc. Oppenheimer Quest Small Cap
Value Fund
Oppenheimer Quest Balanced Value Fund Oppenheimer Quest Global Value
Fund
Oppenheimer Quest Opportunity Value
Fund
These arrangements also apply to shareholders of the following funds when
they merged (were reorganized) into various Oppenheimer funds on November 24,
1995:
Quest for Value U.S. Government Income Quest for Value New York Tax-Exempt
Fund Fund
Quest for Value Investment Quality Quest for Value National Tax-Exempt
Income Fund Fund
Quest for Value Global Income Fund Quest for Value California
Tax-Exempt Fund
All of the funds listed above are referred to in this Appendix as the
"Former Quest for Value Funds." The waivers of initial and contingent deferred
sales charges described in this Appendix apply to shares of an Oppenheimer fund
that are either:
|_| acquired by such shareholder pursuant to an exchange of shares of an
Oppenheimer fund that was one of the Former Quest for Value Funds or
|_| purchased by such shareholder by exchange of shares of another
Oppenheimer fund that were acquired pursuant to the merger of any of
the Former Quest for Value Funds into that other Oppenheimer fund on
November 24, 1995.
A. Reductions or Waivers of Class A Sales Charges.
|X| Reduced Class A Initial Sales Charge Rates for Certain Former Quest
for Value Funds Shareholders.
Purchases by Groups and Associations. The following table sets forth the initial
sales charge rates for Class A shares purchased by members of "Associations"
formed for any purpose other than the purchase of securities. The rates in the
table apply if 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.
- --------------------------------------------------------------------------------
Initial Sales Initial Sales
Number of Eligible Charge as a % of Charge as a % of Commission as %
Employees or Members Offering Price Net Amount Invested of Offering Price
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9 or Fewer 2.50% 2.56% 2.00%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At least 10 but not 2.00% 2.04% 1.60%
more than 49
- --------------------------------------------------------------------------------
For purchases by 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 in the applicable fund's Prospectus.
Purchases made under this arrangement qualify for the lower of either the
sales charge rate in the table based on the number of members of an Association,
or the sales charge rate that applies under the Right of Accumulation described
in the applicable fund's Prospectus and Statement of Additional Information.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations also may purchase shares for their individual or
custodial accounts at these reduced sales charge rates, upon request to the
Distributor.
|X| Waiver of Class A Sales Charges for Certain Shareholders. Class A
shares purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
|_| Shareholders 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 who acquired shares of any Former Quest for Value Fund
by merger of any of the portfolios of the Unified Funds.
|X| 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 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.
B. Class A, Class B and Class C Contingent Deferred Sales Charge Waivers.
|X| 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, Class B or Class C shares of an Oppenheimer fund. The
shares must have been acquired by the 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. Those shares must have been
purchased prior to March 6, 1995 in connection with:
|_| withdrawals under an automatic withdrawal plan holding only either
Class B or Class C shares if the annual withdrawal does not exceed 10%
of the initial value of the account value, adjusted annually, and
|_| 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.
|X| 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, Class B or Class C
shares of an Oppenheimer fund. The shares must have been acquired by the 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
Former Quest for Value Fund merged. Those shares must have been purchased on or
after March 6, 1995, but prior to November 24, 1995:
|_| redemptions following the death or disability of the shareholder(s) (as
evidenced by a determination of total disability by the U.S. Social
Security Administration);
|_| withdrawals under an automatic withdrawal plan (but only for Class B or
Class C shares) where the annual withdrawals do not exceed 10% of the
initial value of the account value; adjusted annually, and
|-|
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, Class B or Class C
shares of the Oppenheimer fund described in this section if the proceeds are
invested in the same Class of shares in that fund or another Oppenheimer fund
within 90 days after redemption.
V. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
Funds Who Were Shareholders of Connecticut Mutual Investment Accounts, Inc.
The initial and contingent deferred sale charge rates and waivers for Class A
and Class B shares described in the respective Prospectus (or this Appendix) of
the following Oppenheimer funds (each is referred to as a "Fund" in this
section):
o Oppenheimer U. S. Government Trust,
o Oppenheimer Bond Fund,
o Oppenheimer Disciplined Value Fund and
o Oppenheimer Disciplined Allocation Fund
are modified as described below for those Fund shareholders who were
shareholders of the following funds (referred to as the "Former Connecticut
Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the
investment adviser to the Former Connecticut Mutual Funds:
Connecticut Mutual Liquid Account Connecticut Mutual Total Return
Account
Connecticut Mutual Government Securities CMIA LifeSpan Capital Appreciation
Account Account
Connecticut Mutual Income Account CMIA LifeSpan Balanced Account
Connecticut Mutual Growth Account CMIA Diversified Income Account
A. Prior Class A CDSC and Class A Sales Charge Waivers.
|_| Class A Contingent Deferred Sales Charge. Certain shareholders of a
Fund and the other Former Connecticut Mutual Funds are entitled to continue to
make additional purchases of Class A shares at net asset value without a Class A
initial sales charge, but subject to the Class A contingent deferred sales
charge that was in effect prior to March 18, 1996 (the "prior Class A CDSC").
Under the prior Class A CDSC, if any of those shares are redeemed within one
year of purchase, they will be assessed a 1% contingent deferred sales charge on
an amount equal to the current market value or the original purchase price of
the shares sold, whichever is smaller (in such redemptions, any shares not
subject to the prior Class A CDSC will be redeemed first).
Those shareholders who are eligible for the prior Class A CDSC are: (3)
persons whose purchases of Class A shares of a Fund and other Former
Connecticut Mutual Funds were $500,000 prior to March 18, 1996, as a
result of direct purchases or purchases pursuant to the Fund's policies
on Combined Purchases or Rights of Accumulation, who still hold those
shares in that Fund or other Former Connecticut Mutual Funds, and
(4) persons whose intended purchases under a Statement of Intention entered
into prior to March 18, 1996, with the former general distributor of
the Former Connecticut Mutual Funds to purchase shares valued at
$500,000 or more over a 13-month period entitled those persons to
purchase shares at net asset value without being subject to the Class A
initial sales charge.
Any of the Class A shares of a Fund and the other Former Connecticut
Mutual Funds that were purchased at net asset value prior to March 18, 1996,
remain subject to the prior Class A CDSC, or if any additional shares are
purchased by those shareholders at net asset value pursuant to this arrangement
they will be subject to the prior Class A CDSC.
|_| Class A Sales Charge Waivers. Additional Class A shares of a Fund may
be purchased without a sales charge, by a person who was in one (or more) of the
categories below and acquired Class A shares prior to March 18, 1996, and still
holds Class A shares:
(7) any purchaser, provided the total initial amount invested in the Fund
or any one or more of the Former Connecticut Mutual Funds totaled
$500,000 or more, including investments made pursuant to the Combined
Purchases, Statement of Intention and Rights of Accumulation features
available at the time of the initial purchase and such investment is
still held in one or more of the Former Connecticut Mutual Funds or a
Fund into which such Fund merged;
(8) any participant in a qualified plan, provided that the total initial
amount invested by the plan in the Fund or any one or more of the
Former Connecticut Mutual Funds totaled $500,000 or more;
(9) Directors of the Fund or any one or more of the Former Connecticut Mutual
Funds and members of their immediate families;
(10) employee benefit plans sponsored by Connecticut Mutual Financial Services,
L.L.C. ("CMFS"), the prior distributor of the Former Connecticut Mutual
Funds, and its affiliated companies;
(11) one or more members of a group of at least 1,000 persons (and persons
who are retirees from such group) engaged in a common business,
profession, civic or charitable endeavor or other activity, and the
spouses and minor dependent children of such persons, pursuant to a
marketing program between CMFS and such group; and
(12) an institution acting as a fiduciary on behalf of an individual or
individuals, if such institution was directly compensated by the
individual(s) for recommending the purchase of the shares of the Fund
or any one or more of the Former Connecticut Mutual Funds, provided the
institution had an agreement with CMFS.
Purchases of Class A shares made pursuant to (1) and (2) above may be
subject to the Class A CDSC of the Former Connecticut Mutual Funds described
above.
Additionally, Class A shares of a Fund may be purchased without a sales
charge by any holder of a variable annuity contract issued in New York State by
Connecticut Mutual Life Insurance Company through the Panorama Separate Account
which is beyond the applicable surrender charge period and which was used to
fund a qualified plan, if that holder exchanges the variable annuity contract
proceeds to buy Class A shares of the Fund.
B. Class A and Class B Contingent Deferred Sales Charge Waivers.
In addition to the waivers set forth in the Prospectus and in this Appendix,
above, the contingent deferred sales charge will be waived for redemptions of
Class A and Class B shares of a Fund and exchanges of Class A or Class B shares
of a Fund into Class A or Class B shares of a Former Connecticut Mutual Fund
provided that the Class A or Class B shares of the Fund to be redeemed or
exchanged were (i) acquired prior to March 18, 1996 or (ii) were acquired by
exchange from an Oppenheimer fund that was a Former Connecticut Mutual Fund.
Additionally, the shares of such Former Connecticut Mutual Fund must have been
purchased prior to March 18, 1996: (10) by the estate of a deceased shareholder;
(11) upon the disability of a shareholder, as defined in Section 72(m)(7) of the
Internal Revenue Code;
(12) for retirement distributions (or loans) to participants or
beneficiaries from retirement plans qualified under Sections 401(a) or
403(b)(7)of the Code, or from IRAs, deferred compensation plans created
under Section 457 of the Code, or other employee benefit plans;
(13) as tax-free returns of excess contributions to such retirement or employee
benefit plans;
(14)
in whole or in part, in connection with shares sold to any state, county,
or city, or any instrumentality, department, authority, or agency
thereof, that is prohibited by applicable investment laws from paying a
sales charge or commission in connection with the purchase of shares of
any registered investment management company;
(15) in connection with the redemption of shares of the Fund due to a
combination with another investment company by virtue of a merger,
acquisition or similar reorganization transaction;
(16) in connection with the Fund's right to involuntarily redeem or
liquidate the Fund;
(17) in connection with automatic redemptions of Class A shares and Class B
shares in certain retirement plan accounts pursuant to an Automatic
Withdrawal Plan but limited to no more than 12% of the original value
annually; or
(18) as involuntary redemptions of shares by operation of law, or under
procedures set forth in the Fund's Articles of Incorporation, or as
adopted by the Board of Directors of the Fund.
VI. Special Reduced Sales Charge for Former Shareholders of
Advance America Funds, Inc.
Shareholders of Oppenheimer Municipal Bond Fund, Oppenheimer U.S. Government
Trust, Oppenheimer Strategic Income Fund and Oppenheimer Equity Income Fund who
acquired (and still hold) shares of those funds as a result of the
reorganization of series of Advance America Funds, Inc. into those Oppenheimer
funds on October 18, 1991, and who held shares of Advance America Funds, Inc. on
March 30, 1990, may purchase Class A shares of those four Oppenheimer funds at a
maximum sales charge rate of 4.50%.
VII. Sales Charge Waivers on Purchases of Class M Shares of
Oppenheimer Convertible Securities Fund
Oppenheimer Convertible Securities Fund (referred to as the "Fund" in this
section) may sell Class M shares at net asset value without any initial sales
charge to the classes of investors listed below who, prior to March 11, 1996,
owned shares of the Fund's then-existing Class A and were permitted to purchase
those shares at net asset value without sales charge:
|_| the Manager and its affiliates,
|_| present or former officers, directors, trustees and employees (and
their "immediate families" as defined in the Fund's Statement of
Additional Information) of the Fund, the Manager and its affiliates,
and retirement plans established by them or the prior investment
advisor of the Fund for their employees,
|_| registered management investment companies or separate accounts of
insurance companies that had an agreement with the Fund's prior
investment advisor or distributor for that purpose,
|_| dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for
their employees,
|_| employees and registered representatives (and their spouses) of dealers
or brokers described in the preceding section or financial institutions
that have entered into sales arrangements with those dealers or brokers
(and whose identity is made known to the Distributor) or with the
Distributor, but only if the purchaser certifies to the Distributor at
the time of purchase that the purchaser meets these qualifications,
|_| dealers, brokers, or registered investment advisors that had entered
into an agreement with the Distributor or the prior distributor of the
Fund specifically providing for the use of Class M shares of the Fund
in specific investment products made available to their clients, and
|_| dealers, brokers or registered investment advisors that had entered
into an agreement with the Distributor or prior distributor of the
Fund's shares to sell shares to defined contribution employee
retirement plans for which the dealer, broker, or investment advisor
provides administrative services.
- --------------------------------------------------------------------------------
Oppenheimer Disciplined Allocation Fund
- --------------------------------------------------------------------------------
Internet Web Site:
www.oppenheimerfunds.com
Investment Adviser
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 Bank
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
KPMG LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
890
[GRAPHIC]
Semiannual Report April 30, 2000
Oppenheimer
Disciplined Allocation Fund
OppenheimerFunds(R)
The Right Way to Invest
REPORT HIGHLIGHTS
CONTENTS
1 President's Letter
3 An Interview
with Your Fund's
Managers
8 Financial
Statements
33 Officers and
Directors
o Despite a difficult environment for value-oriented stocks, the Fund benefited
from investments in technology, energy and utility company equities.
o We significantly increased our allocation of bonds and cash with a focus on
long-term Treasury bonds, a move that enhanced the Fund's performance.
o As corporate bond prices fell, we opportunistically increased our exposure to
attractive, high-quality corporate bonds.
Cumulative
Total Returns*
For the 6-Month Period
Ended 4/30/00
Class A
Without With
Sales Chg. Sales Chg.
- --------------------------
3.65% -2.31%
Class B
Without With
Sales Chg. Sales Chg.
- --------------------------
3.29% -1.32%
Class C
Without With
Sales Chg. Sales Chg.
- --------------------------
3.22% 2.30%
* See Notes on page 7 for further details.
PRESIDENT'S LETTER
Dear Shareholder,
For many years, we have encouraged investors to consider whether they could
tolerate more risk in their long-term investments by participating in the stock
market, which has historically provided higher long-term returns than any other
asset class. Today, however, we have a very different concern: some investors
may have assumed too much risk by concentrating their investments in just a
handful of stocks or sectors or by "chasing performance."
Several months ago, Alan Greenspan, the Chairman of the Federal Reserve
Board, stated his view that the spectacular returns some sectors of the market
were then experiencing may have been partly responsible for pushing our economy
to growth rates that could lead to higher inflation. Today it is clear that the
dramatic rise in the prices of a narrow segment of the market created enormous
wealth for some investors. The result of this newfound wealth has been a
substantial increase in spending that the Federal Reserve Board believes could
threaten the healthy growth of our economy.
That's why the Fed has been raising interest rates steadily and decisively
over the past year. By making borrowing more expensive, the Fed has been
attempting to slow economic growth. It is a precarious balancing act: too much
tightening creates the risk of recession, while too little opens the door to
inflation.
The implications of the Fed's resolve are clear: investors must continue to
be prepared for near-term market volatility. In the bond market, higher interest
rates usually lead to lower bond prices. In the stock market, slower economic
growth often reduces corporate earnings and puts downward pressure on stock
prices. Highly valued stocks can be particularly vulnerable to a correction. The
Securities and Exchange Commission Chairman, Arthur Levitt, has been cautioning
investors against the expectation that the types of returns seen in the recent
bull market will last forever.
[PHOTO]
Bridget A. Macaskill
President
Oppenheimer
Discipline Allocation
Fund
1 OPPENHEIMER DISCIPLINED ALLOCATION FUND
PRESIDENT'S LETTER
Because of the prospect of continued market volatility, we encourage you to
consider diversifying your investments. Indeed, diversification may help you
mitigate the effects of sharp declines in any one area. It may also help you
better position your portfolio to seek greater returns over the long run.
While some "new economy" stocks have risen over the last year, many so-called
"old economy" stocks are selling at low prices. In the bond market, higher
interest rates over the short term may reduce inflation concerns, which should
be beneficial over the long term. By buying out-of-favor investments, you may be
able to profit when and if they return to favor.
What specific investments should you consider today so that you are prepared
for tomorrow? The answer depends on your individual investing goals, risk
tolerance and financial circumstances. We urge you to talk with your financial
advisor about ways to diversify your portfolio. This may include considering
global diversification as part of your strategy. While investing abroad has
special risks, such as the effects of foreign currency fluctuations, it also
offers opportunities to participate in global economic growth and to hedge
against the volatility in U.S. markets.
We thank you for your continued confidence in OppenheimerFunds, The Right Way
to Invest.
Sincerely,
/s/ Bridget A. Macaskill
Bridget A. Macaskill
May 19, 2000
2 OPPENHEIMER DISCIPLINED ALLOCATION FUND
AN INTERVIEW WITH YOUR FUND'S MANAGERS
Q. How would you characterize the Fund's performance during the six months that
ended April 30, 2000?
A. This was a challenging period for both stock and bond investing, especially
among the value-oriented equities on which the Fund focuses its equity
investments. However, our disciplined strategy of allocating assets among
stocks, bonds and cash enabled us to limit risks and improve returns for our
shareholders.
Why has this been such a challenging period for the Fund's stock performance?
Historically, value stocks have proven to be bargains over the long term. How
ever, they tend to underperform the market when corporate earnings growth
appears likely to slow and concerns regarding the economic future are on the
rise. At such times, investors tend to seek large, growth-oriented companies.
Throughout the recent six-month period, actual U.S. economic growth remained
robust. However, the unusually rapid pace of U.S. economic growth raised
concerns that inflation might appear. In an effort to prevent the economy from
overheating, the Federal Reserve Board (the Fed) raised interest rates, and
declared that they intended to continue raising them until the pace of consumer
spending and economic growth slowed. The Fed's actions and statements heightened
uncertainties regarding the sustainability of U.S. economic growth, and
value-oriented stocks suffered as a result. Many of our holdings in traditional
value-oriented sectors were hard hit despite good earnings and strong business
conditions.
How did you allocate the Fund's assets in light of these conditions?
We conduct in-depth analyses of financial markets and economic trends to guide
our decisions on allocating the Fund's assets among stocks, bonds and cash.
During the recent period, our analyses led us to invest approximately 40% of the
Fund's
3 OPPENHEIMER DISCIPLINED ALLOCATION FUND
AN INTERVIEW WITH YOUR FUND'S MANAGERS
assets in bonds and cash. These investments enhanced the Fund's performance in
an environment that was generally unfavorable for value-oriented stocks.
What actions did you take to enhance the performance of the Fund's stocks?
We believe we positioned the Fund's equity holdings to perform as strongly as
possible during a difficult time for value investing. During the period, we
added substantially to our value-oriented technology holdings to take advantage
of strength in the computer and telecommunications industries. The percentage of
the Fund's assets allocated to technology rose from approximately 10% of the
Fund's stocks at the beginning of the period to approximately 20% near the end
of the period.1 Most of the Fund's best performing stocks were concentrated in
this sector. We also scored successes with several of our energy holdings, which
benefited from a rebound in energy prices, and certain utility holdings, which
participated in the explosive build-out of cellular and fiber-optic
communications networks.
While these moves enhanced the Fund's performance, the negative environment
for value investing still took a significant toll. Stocks in the consumer
staples sector, including beverage companies and other commodity suppliers, lost
value in spite of strong company fundamentals and good earnings performance.
Solid companies in the capital goods sector faced a similarly unfavorable
investment environment. Reasonably priced stocks of retailers in the consumer
cyclical sector also turned in disappointing performance as investors focused on
a narrow group of high growth companies in the sector.
How did you manage the Fund's bond exposure?
We invested a relatively high percentage of the Fund's bond portfolio in
long-term Treasury bonds. This proved to be an effective portfolio management
strategy. Due to supply and demand factors driven by a Treasury Department
buyback of long-term bonds, these investments outperformed most other sectors of
the bond market.
"We added substantially to our
value-oriented technology holdings to take
advantage of strength in the computer
and telecommunications industries."
4 OPPENHEIMER DISCIPLINED ALLOCATION FUND
Corporate bonds, on the other hand, came under pricing pressures as a result
of rising interest rates and an oversupply of corporate debt issuance. We took
advantage of the relatively low prices of high-quality corporate bonds during
the period, opportunistically increasing the Fund's exposure to
high-credit-rated corporate bonds.
What is your outlook for the future in light of today's market conditions?
A gap of unprecedented dimensions has opened between the prices of
value-oriented stocks and growth-oriented stocks. However, the vulnerability of
some overpriced growth stocks was exposed during April 2000, when prices of some
of the market's highest fliers fell significantly. We continue to believe a
balanced portfolio that includes bonds, undervalued stocks and cash offers
investors the potential for attractive long-term total returns. We remain
committed to a disciplined asset allocation and investment strategy designed to
deliver such returns to our investors. That's why Oppenheimer Disciplined
Allocation Fund remains part of The Right Way to Invest.
Average Annual
Total Returns
For the Periods Ended 3/31/00 2
Class A
1-Year 5-Year 10-Year
- ---------------------------
- -4.10% 9.75% 10.45%
Class B Since
1-Year 5-Year Inception
- ---------------------------
- -3.49% N/A 8.41%
Class C Since
1-Year 5-Year Inception
- ---------------------------
0.12% N/A 8.33%
Because of ongoing market
volatility, the Fund's returns
may fluctuate and may be
less than the results shown.
1. Portfolio is subject to change.
2. See Notes on page 7 for further details.
5 OPPENHEIMER DISCIPLINED ALLOCATION FUND
AN INTERVIEW WITH YOUR FUND'S MANAGERS
Portfolio Allocation 3
* Stocks 56.7%
* Bonds 38.3
* Cash
Equivalents 5.0
Top Ten Common Stock Holdings 4
- ---------------------------------------------------------------
Exxon Mobil Corp. 2.5%
- ---------------------------------------------------------------
Citigroup, Inc. 2.4
- ---------------------------------------------------------------
International Business Machines Corp. 2.1
- ---------------------------------------------------------------
Minnesota Mining & Manufacturing Co. 1.9
- ---------------------------------------------------------------
Apple Computer 1.9
- ---------------------------------------------------------------
SPX Corp. 1.9
- ---------------------------------------------------------------
Teradyne, Inc. 1.9
- ---------------------------------------------------------------
National Semiconductor Corp. 1.7
- ---------------------------------------------------------------
Kimberly-Clark Corp. 1.6
- ---------------------------------------------------------------
Gannett Co., Inc. 1.6
Top Five Common Stock Industries 4
- ---------------------------------------------------------------
Insurance 10.8%
- ---------------------------------------------------------------
Manufacturing 10.3
- ---------------------------------------------------------------
Electronics 8.8
- ---------------------------------------------------------------
Computer Hardware 6.3
- ---------------------------------------------------------------
Diversified Financial 6.1
3. Portfolio is subject to change. Percentages are as of April 30, 2000, and are
based on total market value of investments.
4. Portfolio is subject to change. Percentages are as of April 30, 2000, and are
based on total market value of common stock.
6 OPPENHEIMER DISCIPLINED ALLOCATION FUND
NOTES
In reviewing performance and rankings, please remember that past performance
does not guarantee future results. Investment return and principal value of an
investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost. For quarterly
updates on the Fund's performance, please contact your financial advisor, call
us at 1.800.525.7048 or visit our website at www.oppenheimerfunds.com.
Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
Cumulative total returns are not annualized. The Fund's total returns shown do
not show the effects of income taxes on an individual's investment. Taxes may
reduce your actual investment returns on income or gains paid by the Fund or any
gains you may realize if you sell your shares.
Class A shares of the Fund were first publicly offered on 9/16/85. Unless
otherwise noted, Class A returns include the current maximum initial sales
charge of 5.75%.
Class B shares of the Fund were first publicly offered on 10/2/95. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charge of 5% (1-year) and 2% (inception). Class B shares are subject to an
annual 0.75% asset-based sales charge.
Class C shares of the Fund were first publicly offered on 5/1/96. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
An explanation of the calculation of performance is in the Fund's Statement of
Additional Information.
7 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENT OF INVESTMENTS April 30, 2000 / Unaudited
Market Value
Shares See Note 1
==============================================================================================
Common Stocks--56.0%
- ----------------------------------------------------------------------------------------------
Basic Materials--1.8%
- ----------------------------------------------------------------------------------------------
Chemicals--0.9%
Dow Chemical Co. 9,800 $1,107,400
- ----------------------------------------------------------------------------------------------
Rohm & Haas Co. 14,800 527,250
-----------
1,634,650
- ----------------------------------------------------------------------------------------------
Paper--0.9%
Georgia Pacific Corp. 16,800 617,400
- ----------------------------------------------------------------------------------------------
Georgia Pacific Group/Timber Group 12,100 280,569
- ----------------------------------------------------------------------------------------------
Louisiana-Pacific Corp. 3,000 40,125
- ----------------------------------------------------------------------------------------------
Weyerhaeuser Co. 14,200 758,812
-----------
1,696,906
- ----------------------------------------------------------------------------------------------
Capital Goods--10.5%
- ----------------------------------------------------------------------------------------------
Aerospace/Defense--1.9%
Boeing Co. 30,900 1,226,344
- ----------------------------------------------------------------------------------------------
General Dynamics Corp. 16,100 941,850
- ----------------------------------------------------------------------------------------------
L-3 Communications Holdings, Inc. 1 9,000 479,250
- ----------------------------------------------------------------------------------------------
Northrop Grumman Corp. 9,900 701,662
------------
3,349,106
- ----------------------------------------------------------------------------------------------
Electrical Equipment--2.5%
AVX Corp. 6,000 584,625
- ----------------------------------------------------------------------------------------------
CommScope, Inc. 1 11,900 565,250
- ----------------------------------------------------------------------------------------------
Integrated Device Technology, Inc. 1 22,500 1,081,406
- ----------------------------------------------------------------------------------------------
Rockwell International Corp. 7,500 295,312
- ----------------------------------------------------------------------------------------------
SPX Corp. 1 17,400 1,911,825
-----------
4,438,418
- ----------------------------------------------------------------------------------------------
Industrial Services--0.3%
Valassis Communications, Inc. 1 13,200 449,625
- ----------------------------------------------------------------------------------------------
Manufacturing--5.8%
Avery-Dennison Corp. 7,300 479,062
- ----------------------------------------------------------------------------------------------
Ball Corp. 10,800 340,200
- ----------------------------------------------------------------------------------------------
Briggs & Stratton Corp. 4,800 184,200
- ----------------------------------------------------------------------------------------------
Cooper Industries, Inc. 19,000 651,937
- ----------------------------------------------------------------------------------------------
Crane Co. 24,100 647,687
- ----------------------------------------------------------------------------------------------
Deere & Co. 8,900 359,337
- ----------------------------------------------------------------------------------------------
Dover Corp. 28,700 1,458,319
- ----------------------------------------------------------------------------------------------
Eaton Corp. 4,500 378,000
- ----------------------------------------------------------------------------------------------
Honeywell International, Inc. 24,200 1,355,200
- ----------------------------------------------------------------------------------------------
Kulicke & Soffa Industries, Inc. 1 6,100 477,706
- ----------------------------------------------------------------------------------------------
Miller (Herman), Inc. 17,400 476,325
8 OPPENHEIMER DISCIPLINED ALLOCATION FUND
Market Value
Shares See Note 1
==============================================================================================
Manufacturing Continued
Minnesota Mining & Manufacturing Co. 22,300 $ 1,928,950
- ----------------------------------------------------------------------------------------------
Parker-Hannifin Corp. 13,100 609,150
- ----------------------------------------------------------------------------------------------
Textron, Inc. 6,700 414,981
- ----------------------------------------------------------------------------------------------
United Technologies Corp. 9,800 609,437
------------
10,370,491
- ----------------------------------------------------------------------------------------------
Communication Services--1.6%
- ----------------------------------------------------------------------------------------------
Telecommunications-Long Distance--0.7%
AT&T Corp. 26,650 1,244,222
- ----------------------------------------------------------------------------------------------
Telephone Utilities--0.9%
BellSouth Corp. 33,400 1,626,162
- ----------------------------------------------------------------------------------------------
Consumer Cyclicals--5.3%
- ----------------------------------------------------------------------------------------------
Autos & Housing--1.4%
Ethan Allen Interiors, Inc. 11,200 298,900
- ----------------------------------------------------------------------------------------------
Fortune Brands, Inc. 10,400 260,000
- ----------------------------------------------------------------------------------------------
Genuine Parts Co. 39,500 1,036,875
- ----------------------------------------------------------------------------------------------
Stanley Works (The) 16,300 480,850
- ----------------------------------------------------------------------------------------------
Vulcan Materials Co. 9,200 403,075
------------
2,479,700
- ----------------------------------------------------------------------------------------------
Consumer Services--0.2%
Harte-Hanks, Inc. 11,700 289,575
- ----------------------------------------------------------------------------------------------
Leisure & Entertainment--0.2%
MGM Grand, Inc. 14,200 418,900
- ----------------------------------------------------------------------------------------------
Media--1.6%
Central Newspapers, Inc., Cl. A 9,700 297,669
- ----------------------------------------------------------------------------------------------
Deluxe Corp. 11,900 299,731
- ----------------------------------------------------------------------------------------------
Gannett Co., Inc. 25,500 1,628,812
- ----------------------------------------------------------------------------------------------
Knight-Ridder, Inc. 13,200 647,625
------------
2,873,837
- ----------------------------------------------------------------------------------------------
Retail: General--0.7%
Family Dollar Stores, Inc. 5,000 95,312
- ----------------------------------------------------------------------------------------------
Federated Department Stores, Inc. 1 12,500 425,000
- ----------------------------------------------------------------------------------------------
May Department Stores Co. 4,700 129,250
- ----------------------------------------------------------------------------------------------
Sears Roebuck & Co. 17,700 648,262
------------
1,297,824
- ----------------------------------------------------------------------------------------------
Retail: Specialty--0.7%
BJ's Wholesale Club, Inc. 1 6,900 244,519
- ----------------------------------------------------------------------------------------------
Ross Stores, Inc. 6,200 128,650
- ----------------------------------------------------------------------------------------------
Sherwin-Williams Co. 17,800 442,775
- ----------------------------------------------------------------------------------------------
Tandy Corp. 8,500 484,500
------------
1,300,444
9 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
Market Value
Shares See Note 1
==============================================================================================
Textile/Apparel & Home Furnishings--0.5%
Jones Apparel Group, Inc. 1 5,100 $ 151,406
- ----------------------------------------------------------------------------------------------
Liz Claiborne, Inc. 7,000 324,187
- ----------------------------------------------------------------------------------------------
Shaw Industries, Inc. 26,700 422,194
-----------
897,787
- ----------------------------------------------------------------------------------------------
Consumer Staples--4.0%
- ----------------------------------------------------------------------------------------------
Beverages--0.8%
Adolph Coors Co., Cl. B 4,600 234,600
- ----------------------------------------------------------------------------------------------
Anheuser-Busch Cos., Inc. 18,000 1,270,125
-----------
1,504,725
- ----------------------------------------------------------------------------------------------
Entertainment--1.0%
Brinker International, Inc. 1 13,400 427,125
- ----------------------------------------------------------------------------------------------
Darden Restaurants, Inc. 13,900 256,281
- ----------------------------------------------------------------------------------------------
McDonald's Corp. 8,500 324,062
- ----------------------------------------------------------------------------------------------
Outback Steakhouse, Inc. 1 13,800 451,950
- ----------------------------------------------------------------------------------------------
Wendy's International, Inc. 15,300 342,337
-----------
1,801,755
- ----------------------------------------------------------------------------------------------
Food--1.1%
Bestfoods 11,400 572,850
- ----------------------------------------------------------------------------------------------
ConAgra, Inc. 15,100 285,012
- ----------------------------------------------------------------------------------------------
Hormel Foods Corp. 9,800 149,450
- ----------------------------------------------------------------------------------------------
IBP, Inc. 14,400 237,600
- ----------------------------------------------------------------------------------------------
International Home Foods, Inc. 1 19,700 286,881
- ----------------------------------------------------------------------------------------------
Keebler Foods Co. 14,200 446,412
-----------
1,978,205
- ----------------------------------------------------------------------------------------------
Food & Drug Retailers--0.2%
SUPERVALU, Inc. 20,100 415,819
- ----------------------------------------------------------------------------------------------
Household Goods--0.9%
Kimberly-Clark Corp. 28,300 1,643,169
- ----------------------------------------------------------------------------------------------
Energy--5.5%
- ----------------------------------------------------------------------------------------------
Energy Services--1.2%
Anadarko Petroleum Corp. 12,000 521,250
- ----------------------------------------------------------------------------------------------
ENSCO International, Inc. 21,700 720,169
- ----------------------------------------------------------------------------------------------
Global Marine, Inc. 1 36,700 880,800
-----------
2,122,219
- ----------------------------------------------------------------------------------------------
Oil: Domestic--2.6%
Apache Corp. 5,400 261,562
- ----------------------------------------------------------------------------------------------
Burlington Resources, Inc. 9,100 357,744
- ----------------------------------------------------------------------------------------------
Conoco, Inc., Cl. A 22,100 526,256
10 OPPENHEIMER DISCIPLINED ALLOCATION FUND
Market Value
Shares See Note 1
==============================================================================================
Oil: Domestic Continued
Exxon Mobil Corp. 31,878 $2,476,522
- ----------------------------------------------------------------------------------------------
Murphy Oil Corp. 7,500 442,500
- ----------------------------------------------------------------------------------------------
Texaco, Inc. 11,300 559,350
-----------
4,623,934
- ----------------------------------------------------------------------------------------------
Oil: International--1.7%
BP Amoco plc, ADR 22,400 1,142,400
- ----------------------------------------------------------------------------------------------
Royal Dutch Petroleum Co., NY Shares 20,500 1,176,187
- ----------------------------------------------------------------------------------------------
Total Fina Elf SA, Sponsored ADR 10,100 763,812
-----------
3,082,399
- ----------------------------------------------------------------------------------------------
Financial--11.7%
- ----------------------------------------------------------------------------------------------
Banks--2.2%
Bank of America Corp. 11,400 558,600
- ----------------------------------------------------------------------------------------------
Bank of New York Co., Inc. (The) 12,800 525,600
- ----------------------------------------------------------------------------------------------
Chase Manhattan Corp. 4,800 345,900
- ----------------------------------------------------------------------------------------------
Mellon Financial Corp. 13,700 440,112
- ----------------------------------------------------------------------------------------------
PNC Financial Services Group 12,200 532,225
- ----------------------------------------------------------------------------------------------
Roslyn Bancorp, Inc. 8,900 151,300
- ----------------------------------------------------------------------------------------------
UnionBanCal Corp. 7,500 207,656
- ----------------------------------------------------------------------------------------------
Wachovia Corp. 5,800 363,587
- ----------------------------------------------------------------------------------------------
Wells Fargo Co. 21,400 878,737
-----------
4,003,717
- ----------------------------------------------------------------------------------------------
Diversified Financial--3.4%
AMBAC Financial Group, Inc. 6,200 297,600
- ----------------------------------------------------------------------------------------------
American Express Co. 1,800 270,113
- ----------------------------------------------------------------------------------------------
Citigroup, Inc. 39,900 2,371,556
- ----------------------------------------------------------------------------------------------
Fannie Mae 10,300 621,219
- ----------------------------------------------------------------------------------------------
Freddie Mac 6,600 303,188
- ----------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 5,600 522,200
- ----------------------------------------------------------------------------------------------
John Hancock Financial Services, Inc. 1 20,600 375,950
- ----------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 9,200 706,100
- ----------------------------------------------------------------------------------------------
Nationwide Financial Services, Inc., Cl. A 3,200 89,200
- ----------------------------------------------------------------------------------------------
PMI Group, Inc. (The) 13,000 629,688
-----------
6,186,814
- ----------------------------------------------------------------------------------------------
Insurance--6.1%
ACE Ltd. 28,900 691,794
- ----------------------------------------------------------------------------------------------
Allmerica Financial Corp. 4,900 265,213
- ----------------------------------------------------------------------------------------------
Allstate Corp. 20,500 484,313
- ----------------------------------------------------------------------------------------------
American General Corp. 5,300 296,800
- ----------------------------------------------------------------------------------------------
American International Group, Inc. 10,475 1,148,977
11 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
Market Value
Shares See Note 1
==============================================================================================
Insurance Continued
AXA Financial, Inc. 14,000 $ 456,750
- ----------------------------------------------------------------------------------------------
Chubb Corp. 14,200 903,475
- ----------------------------------------------------------------------------------------------
Cigna Corp. 15,800 1,260,050
- ----------------------------------------------------------------------------------------------
Jefferson-Pilot Corp. 16,200 1,078,313
- ----------------------------------------------------------------------------------------------
Lincoln National Corp. 24,400 849,425
- ----------------------------------------------------------------------------------------------
Manulife Financial Corp. 28,400 445,525
- ----------------------------------------------------------------------------------------------
Marsh & McLennan Cos., Inc. 6,700 660,369
- ----------------------------------------------------------------------------------------------
MetLife, Inc. 1 22,100 366,031
- ----------------------------------------------------------------------------------------------
Radian Group, Inc. 13,000 662,188
- ----------------------------------------------------------------------------------------------
St. Paul Cos., Inc. 5,100 181,688
- ----------------------------------------------------------------------------------------------
XL Capital Ltd., Cl. A 24,200 1,152,525
------------
10,903,436
- ----------------------------------------------------------------------------------------------
Healthcare--0.9%
- ----------------------------------------------------------------------------------------------
Healthcare/Drugs--0.7%
UnitedHealth Group, Inc. 18,200 1,213,713
- ----------------------------------------------------------------------------------------------
Healthcare/Supplies & Services--0.2%
Columbia/HCA Healthcare Corp. 15,400 437,938
- ----------------------------------------------------------------------------------------------
Technology--10.2%
- ----------------------------------------------------------------------------------------------
Computer Hardware--3.5%
- ----------------------------------------------------------------------------------------------
Apple Computer, Inc. 1 15,500 1,922,969
- ----------------------------------------------------------------------------------------------
Hewlett-Packard Co. 6,700 904,500
- ----------------------------------------------------------------------------------------------
International Business Machines Corp. 8,800 2,098,550
- ----------------------------------------------------------------------------------------------
Lexmark International Group, Inc., Cl. A 1 11,900 1,404,200
------------
6,330,219
- ----------------------------------------------------------------------------------------------
Computer Services--0.7%
First Data Corp. 27,100 1,319,431
- ----------------------------------------------------------------------------------------------
Computer Software--0.4%
Symantec Corp. 1 11,700 730,519
- ----------------------------------------------------------------------------------------------
Communications Equipment--0.6%
ADC Telecommunications, Inc. 1 18,000 1,093,500
- ----------------------------------------------------------------------------------------------
Electronics--4.9%
Advanced Micro Devices, Inc. 1 7,700 675,675
- ----------------------------------------------------------------------------------------------
Atmel Corp. 1 3,000 146,813
- ----------------------------------------------------------------------------------------------
Cypress Semiconductor Corp. 1 12,400 644,025
- ----------------------------------------------------------------------------------------------
Dallas Semiconductor Corp. 27,400 1,176,488
- ----------------------------------------------------------------------------------------------
Intel Corp. 7,500 951,094
- ----------------------------------------------------------------------------------------------
National Semiconductor Corp. 1 27,900 1,694,925
- ----------------------------------------------------------------------------------------------
Novellus Systems, Inc. 1 15,400 1,026,988
- ----------------------------------------------------------------------------------------------
Teradyne, Inc. 1 17,100 1,881,000
- ----------------------------------------------------------------------------------------------
Zebra Technologies Corp., Cl. A 1 12,200 695,400
------------
8,892,408
12 OPPENHEIMER DISCIPLINED ALLOCATION FUND
Market Value
Shares See Note 1
==============================================================================================
Photography--0.1%
Polaroid Corp. 9,300 $ 187,744
- ----------------------------------------------------------------------------------------------
Transportation--0.9%
- ----------------------------------------------------------------------------------------------
Air Transportation--0.4%
Delta Air Lines, Inc. 12,900 680,475
- ----------------------------------------------------------------------------------------------
Railroads & Truckers--0.5%
Union Pacific Corp. 19,600 825,650
- ----------------------------------------------------------------------------------------------
Utilities--3.6%
- ----------------------------------------------------------------------------------------------
Electric Utilities--3.1%
Carolina Power & Light Co. 10,300 376,594
- ----------------------------------------------------------------------------------------------
Conectiv, Inc. 17,600 312,400
- ----------------------------------------------------------------------------------------------
Duke Energy Corp. 23,300 1,339,750
- ----------------------------------------------------------------------------------------------
FPL Group, Inc. 10,200 460,913
- ----------------------------------------------------------------------------------------------
Montana Power Co. 25,000 1,101,563
- ----------------------------------------------------------------------------------------------
Potomac Electric Power Co. 6,600 154,688
- ----------------------------------------------------------------------------------------------
Public Service Enterprise Group, Inc. 15,100 541,713
- ----------------------------------------------------------------------------------------------
Reliant Energy, Inc. 36,600 974,475
- ----------------------------------------------------------------------------------------------
Texas Utilities Co. 10,900 367,194
-------------
5,629,290
- ----------------------------------------------------------------------------------------------
Gas Utilities--0.5%
El Paso Energy Corp. 16,600 705,500
- ----------------------------------------------------------------------------------------------
NICOR, Inc. 5,700 193,088
-------------
898,588
-------------
Total Common Stocks (Cost $97,716,314) 100,873,314
==============================================================================================
Preferred Stocks--0.4%
- ----------------------------------------------------------------------------------------------
Ingersoll-Rand International Finance Corp. I, 6.22% Preferred
Redeemable Increased Dividend Equity Securities (Cost $750,000) 30,000 747,189
Units
==============================================================================================
Rights, Warrants and Certificates--0.1%
- ----------------------------------------------------------------------------------------------
Concentric Network Corp. Wts., Exp. 12/15/07 2 100 47,012
- ----------------------------------------------------------------------------------------------
Dairy Mart Convenience Stores, Inc. Wts., Exp. 12/12/01 2 666 233
- ----------------------------------------------------------------------------------------------
Intermedia Communications, Inc. Wts., Exp. 6/1/00 100 15,218
- ----------------------------------------------------------------------------------------------
Microcell Telecommunications, Inc. Wts., Exp. 6/1/06 3 500 42,500
- ----------------------------------------------------------------------------------------------
Nextel International Ltd. Wts., Exp. 4/15/07 2 100 1,813
- ----------------------------------------------------------------------------------------------
Price Communications Corp. Wts., Exp. 8/1/07 2 516 82,560
- ----------------------------------------------------------------------------------------------
Signature Brands USA, Inc. Wts., Exp. 8/15/02 2 100 2,013
-------------
Total Rights, Warrants and Certificates (Cost $8,004) 191,349
13 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
Principal Market Value
Amount See Note 1
===================================================================================================
Asset-Backed Securities--0.4%
Dayton Hudson Credit Card Master Trust, Asset-Backed Certificates,
Series 1997-1, Cl. A, 6.25%, 8/25/05 $ 125,000 $ 121,914
- ---------------------------------------------------------------------------------------------------
IROQUOIS Trust, Asset-Backed Amortizing Nts., Series 1997-2, Cl. A,
6.752%, 6/25/07 2 710,614 693,710
-----------
Total Asset-Backed Securities (Cost $835,500) 815,624
===================================================================================================
Mortgage-Backed Obligations--5.5%
Chase Commercial Mortgage Securities Corp., Commercial Mtg.
Obligations, Series 1996-1, Cl. A2, 7.60%, 3/18/06 1,500,000 1,483,711
- ---------------------------------------------------------------------------------------------------
Countrywide Funding Corp., Mtg. Pass-Through Certificates,
Series 1994 10, Cl. A3, 6%, 5/25/09 250,000 243,125
- ---------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Gtd. Multiclass Mtg. Participation
Certificates, 6% 3/1/09 587,269 561,418
- ---------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Interest-Only Stripped Mtg.-Backed Security:
Series 1542, Cl. QC, 7.793%, 10/15/20 4 352,832 31,864
Series 1583, Cl. IC, 9.157% -10.193%, 1/15/20 4 1,406,578 110,769
Series 1661, Cl. PK, 29.222%, 11/15/06 2,4 148,373 3,662
- ---------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
6%, 12/1/03 389,107 380,652
6.50%, 3/1/26-4/1/26 602,403 565,639
7.50%, 1/1/08-6/1/08 412,498 410,500
- ---------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Collateralized Mtg. Obligations, Gtd,
Multiclass Mtg. Participation Certificates,
Trust 1992-15, Cl. KZ, 7%, 2/25/22 884,138 816,166
- ---------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Collateralized Mtg. Obligations, Gtd.
Real Estate Mtg. Investment Conduit Pass-Through Certificates,
Trust 1993-190, Cl. Z, 5.85%, 7/25/08 140,163 139,024
- ---------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed
Security, Trust 1993-223, Cl. PM, 6.999%, 10/25/23 4 1,035,841 130,443
- ---------------------------------------------------------------------------------------------------
GE Capital Mortgage Services, Inc., Collateralized Mtg. Obligations,
Series 1998-12, Cl. A3, 6.50%, 4/25/29 500,000 440,547
- ---------------------------------------------------------------------------------------------------
GE Capital Mortgage Services, Inc., Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates, Series 1994-7, Cl. A18,
6%, 2/25/09 1,143,592 1,021,011
- ---------------------------------------------------------------------------------------------------
Government National Mortgage Assn.:
7%, 4/15/09-2/15/24 908,144 883,306
7.50%, 3/15/09 387,105 387,175
8%, 5/15/17 279,352 282,183
- ---------------------------------------------------------------------------------------------------
IMC Home Equity Trust, Asset-Backed Home Equity Securities Series
1998-3, Cl. A5, 6.36%, 8/20/22 5 700,000 680,312
- ---------------------------------------------------------------------------------------------------
Norwest Asset Securities Corp., Collateralized Mtg. Obligations, Gtd.
Multiclass Mtg. Participation Certificates:
Series 1999-16, Cl. A3, 6%, 6/25/29 500,000 469,219
Series 1999-18, Cl. A2, 6%, 7/25/29 1,000,000 925,781
-----------
Total Mortgage-Backed Obligations (Cost $10,278,195) 9,966,507
14 OPPENHEIMER DISCIPLINED ALLOCATION FUND
Principal Market Value
Amount See Note 1
===================================================================================================
U.S. Government Obligations--5.4%
- ---------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
6%, 2/15/26 $ 6,050,000 $ 5,885,519
7.50%, 11/15/16 6 2,000,000 2,239,376
8.75%, 5/15/17 6 1,250,000 1,562,110
------------
Total U.S. Government Obligations (Cost $9,850,961) 9,687,005
===================================================================================================
Foreign Government Obligations--0.1%
- ---------------------------------------------------------------------------------------------------
United Mexican States Bonds, 6.97%, 8/12/00 (Cost $249,407) 250,000 251,087
===================================================================================================
Non-Convertible Corporate Bonds and Notes--22.0%
- ---------------------------------------------------------------------------------------------------
Basic Materials--0.7%
- ---------------------------------------------------------------------------------------------------
Chemicals--0.6%
PPG Industries, Inc., 9% Debs., 5/1/21 315,000 348,433
- ---------------------------------------------------------------------------------------------------
Rohm & Haas Co., 7.85% Unsec. Debs., 7/15/29 650,000 647,149
------------
995,582
- ---------------------------------------------------------------------------------------------------
Metals--0.1%
Alcan Aluminum Ltd., 9.625% Debs., 7/15/19 105,000 106,158
- ---------------------------------------------------------------------------------------------------
Capital Goods--3.9%
- ---------------------------------------------------------------------------------------------------
Aerospace/Defense--0.3%
Raytheon Co., 6.45% Nts., 8/15/02 500,000 484,706
- ---------------------------------------------------------------------------------------------------
Industrial Services--2.1%
Fred Meyer, Inc., 7.375% Sr. Nts., 3/1/05 1,250,000 1,198,155
- ---------------------------------------------------------------------------------------------------
Norse CBO Ltd., 6.515% Collateralized Bond Obligations, Series 1A,
Cl. A3, 8/13/10 2 1,000,000 912,187
- ---------------------------------------------------------------------------------------------------
Owens-Illinois, Inc., 7.15% Sr. Nts., 5/15/05 1,000,000 908,329
- ---------------------------------------------------------------------------------------------------
USI American Holdings, Inc., 7.25% Sr. Nts., Series B, 12/1/06 830,000 780,423
------------
3,799,094
- ---------------------------------------------------------------------------------------------------
Manufacturing--1.5%
Federal-Mogul Corp., 7.50% Nts., 7/1/04 500,000 428,350
- ---------------------------------------------------------------------------------------------------
Fort James Corp., 6.875% Sr. Nts., 9/15/07 1,000,000 940,402
- ---------------------------------------------------------------------------------------------------
Kimberly-Clark Corp., 7.875% Debs., 2/1/23 355,000 342,816
- ---------------------------------------------------------------------------------------------------
Norsk Hydro AS, 8.75% Bonds, 10/23/01 500,000 508,500
- ---------------------------------------------------------------------------------------------------
U.S. Industries, Inc./USI American Holdings, Inc./USI Global Corp.,
7.125% Sr. Unsec. Nts., 10/15/03 500,000 482,105
------------
2,702,173
- ---------------------------------------------------------------------------------------------------
Communication Services--0.6%
- ---------------------------------------------------------------------------------------------------
Telecommunications-Long Distance--0.3%
US West Capital Funding, Inc., 6.125% Nts., 7/15/02 500,000 485,663
- ---------------------------------------------------------------------------------------------------
Telephone Utilities--0.3%
Telefonica de Argentina SA, 9.125% Nts., Series 1, 5/7/08 500,000 477,500
15 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
Principal Market Value
Amount See Note 1
===================================================================================================
Consumer Cyclicals--1.1%
- ---------------------------------------------------------------------------------------------------
Autos & Housing--0.7%
Ford Motor Co., 6.375% Sr. Unsec. Unsub. Nts., 2/1/29 $1,000,000 $ 823,999
- ---------------------------------------------------------------------------------------------------
Lear Corp., 7.96% Sr. Unsec. Nts., Series B, 5/15/05 500,000 460,232
-----------
1,284,231
- ---------------------------------------------------------------------------------------------------
Media--0.4%
Liberty Media Group, 8.25% Nts., 2/1/30 3 400,000 373,844
- ---------------------------------------------------------------------------------------------------
Reed Elsevier, Inc., 6.625% Nts., 10/15/23 3 400,000 343,104
-----------
716,948
- ---------------------------------------------------------------------------------------------------
Consumer Staples--3.4%
- ---------------------------------------------------------------------------------------------------
Broadcasting--0.7%
British Sky Broadcasting Group plc, 8.20% Sr. Unsec. Nts., 7/15/09 400,000 380,367
- ---------------------------------------------------------------------------------------------------
CSC Holdings, Inc., 7.625% Sr. Unsec. Debs., 7/15/18 1,000,000 867,410
-----------
1,247,777
- ---------------------------------------------------------------------------------------------------
Entertainment--0.8%
Tricon Global Restaurants, Inc., 7.45% Sr. Unsec. Nts., 5/15/05 1,000,000 918,367
- ---------------------------------------------------------------------------------------------------
Viacom, Inc., 6.75% Sr. Unsec. Nts., 1/15/03 530,000 514,895
-----------
1,433,262
- ---------------------------------------------------------------------------------------------------
Food--0.6%
CPC International, Inc., 6.15% Unsec. Nts., Series C, 1/15/06 500,000 469,881
- ---------------------------------------------------------------------------------------------------
Dole Food Co., 6.75% Nts., 7/15/00 650,000 645,399
-----------
1,115,280
- ---------------------------------------------------------------------------------------------------
Food & Drug Retailers--0.8%
Albertson's, Inc., 7.45% Unsec. Debs., 8/1/29 1,000,000 927,154
- ---------------------------------------------------------------------------------------------------
Price/Costco Cos., Inc., 7.125% Sr. Nts., 6/15/05 550,000 538,604
-----------
1,465,758
- ---------------------------------------------------------------------------------------------------
Household Goods--0.5%
Dial Corp. (The), 5.89% Medium-Term Nts., Series A, 10/22/01 750,000 726,907
- ---------------------------------------------------------------------------------------------------
Fort James Corp., 6.234% Nts., 3/15/01 250,000 246,858
-----------
973,765
- ---------------------------------------------------------------------------------------------------
Energy--3.3%
- ---------------------------------------------------------------------------------------------------
Energy Services--2.8%
- ---------------------------------------------------------------------------------------------------
Coastal Corp., 8.125% Sr. Nts., 9/15/02 565,000 568,463
- ---------------------------------------------------------------------------------------------------
Columbia Gas System, Inc., 6.80% Nts., Series C, 11/28/05 500,000 473,585
- ---------------------------------------------------------------------------------------------------
Gulf Canada Resources Ltd., 8.25% Sr. Nts., 3/15/17 575,000 526,125
- ---------------------------------------------------------------------------------------------------
Louisiana Land & Exploration Co., 7.65% Debs., 12/1/23 990,000 931,134
- ---------------------------------------------------------------------------------------------------
Petroleum Geo-Services ASA, 7.50% Nts., 3/31/07 825,000 788,981
- ---------------------------------------------------------------------------------------------------
Petroliam Nasional Berhad, 6.875% Nts., 7/1/03 3 500,000 479,266
16 OPPENHEIMER DISCIPLINED ALLOCATION FUND
Principal Market Value
Amount See Note 1
===================================================================================================
Energy Services Continued
TransCanada PipeLines Ltd., 9.875% Debs., 1/1/21 $ 500,000 $ 586,753
- ---------------------------------------------------------------------------------------------------
Williams Holdings of Delaware, Inc., 6.25% Sr. Unsec. Debs., 2/1/06 750,000 689,306
-----------
5,043,613
- ---------------------------------------------------------------------------------------------------
Oil: Domestic--0.5%
Norcen Energy Resources Ltd., 6.80% Debs., 7/2/02 1,000,000 971,641
- ---------------------------------------------------------------------------------------------------
Financial--6.5%
- ---------------------------------------------------------------------------------------------------
Banks--1.3%
Fleet Mtg./Norstar Group, Inc., 9.90% Sub. Nts., 6/15/01 360,000 369,374
- ---------------------------------------------------------------------------------------------------
Greenpoint Bank (Brooklyn New York), 6.70% Sr. Medium-Term Bank
Nts., 7/15/02 1,000,000 973,433
- ---------------------------------------------------------------------------------------------------
People's Bank of Bridgeport (Connecticut), 7.20% Sub. Nts., 12/1/06 1,000,000 969,886
-----------
2,312,693
- ---------------------------------------------------------------------------------------------------
Diversified Financial--2.4%
American General Institutional Capital,
8.125% Bonds, Series B, 3/15/46 3 575,000 536,087
- ---------------------------------------------------------------------------------------------------
Capital One Financial Corp., 7.25% Nts., 12/1/03 1,000,000 973,323
- ---------------------------------------------------------------------------------------------------
Conseco Financing Trust III, 8.796% Bonds, 4/1/27 850,000 276,250
- ---------------------------------------------------------------------------------------------------
Finova Capital Corp., 7.625% Sr. Nts., 9/21/09 750,000 673,664
- ---------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 5.625% Nts., 2/15/01 162,000 160,064
- ---------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc., 7.50% Sr. Unsec. Unsub. Nts., 1/28/05 750,000 742,500
- ---------------------------------------------------------------------------------------------------
GS Escrow Corp., 6.75% Sr. Unsec. Nts., 8/1/01 1,000,000 965,404
-----------
4,327,292
- ---------------------------------------------------------------------------------------------------
Insurance--1.6%
Conseco, Inc., 6.40% Nts., 6/15/01 500,000 327,500
- ---------------------------------------------------------------------------------------------------
Equitable Life Assurance Society (U.S.A.),
6.95% Surplus Nts., 12/1/05 3 500,000 479,556
- ---------------------------------------------------------------------------------------------------
GenAmerica Capital I, 8.525% Nts., 6/30/27 2 750,000 741,959
- ---------------------------------------------------------------------------------------------------
Life Re Capital Trust I, 8.72% Nts., 6/15/27 3 500,000 484,510
- ---------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., 6.75% Sr. Unsec. Nts., 11/15/06 1,000,000 926,164
-----------
2,959,689
- ---------------------------------------------------------------------------------------------------
Real Estate Investment Trusts--1.2%
Chelsea GCA Realty Partner, Inc., 7.75% Unsec. Nts., 1/26/01 1,050,000 1,049,793
- ---------------------------------------------------------------------------------------------------
First Industrial LP, 7.15% Bonds, 5/15/27 560,000 544,814
- ---------------------------------------------------------------------------------------------------
Simon DeBartolo Group LP, 6.625% Unsec. Nts., 6/15/03 500,000 473,524
-----------
2,068,131
- ---------------------------------------------------------------------------------------------------
Healthcare--0.5%
- ---------------------------------------------------------------------------------------------------
Healthcare/Supplies & Services--0.5%
Columbia/HCA Healthcare Corp., 6.875% Nts., 7/15/01 120,000 116,387
- ---------------------------------------------------------------------------------------------------
Tenet Healthcare Corp.:
8% Sr. Nts., 1/15/05 325,000 312,813
8.625% Sr. Unsec. Nts., 12/1/03 500,000 486,524
-----------
915,724
17 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
Principal Market Value
Amount See Note 1
===================================================================================================
Transportation--0.8%
- ---------------------------------------------------------------------------------------------------
Air Transportation--0.4%
Northwest Airlines Corp., 8.375% Unsec. Nts., 3/15/04 $ 750,000 $ 685,120
- ---------------------------------------------------------------------------------------------------
Railroads & Truckers--0.4%
CSX Corp., 7.05% Debs., 5/1/02 145,000 142,168
- ---------------------------------------------------------------------------------------------------
Norfolk Southern Corp., 7.35% Nts., 5/15/07 125,000 120,465
- ---------------------------------------------------------------------------------------------------
Union Pacific Corp., 7.60% Nts., 5/1/05 500,000 489,493
-----------
752,126
- ---------------------------------------------------------------------------------------------------
Utilities--1.2%
- ---------------------------------------------------------------------------------------------------
Electric Utilities--0.8%
El Paso Electric Co., 8.25% First Mtg. Bonds, Series C, 2/1/03 500,000 501,217
- ---------------------------------------------------------------------------------------------------
Hawaiian Electric Industries, Inc., 6.31% Medium-Term Nts.,
Series B, 2/19/02 1,000,000 972,638
-----------
1,473,855
- ---------------------------------------------------------------------------------------------------
Gas Utilities--0.4%
Tennessee Gas Pipeline Co., 7.50% Bonds, 4/1/17 825,000 791,796
-----------
Total Non-Convertible Corporate Bonds and Notes (Cost $42,613,688) 39,589,577
===================================================================================================
Convertible Corporate Bonds and Notes--0.0%
Geotek Communications, Inc., 12% Cv. Sr. Sub. Nts., 2/15/01
(Cost $92,540)1, 7 100,000 --
===================================================================================================
Short-Term Notes--4.7%
Federal Home Loan Bank, 5.88%, 5/1/00 (Cost $8,400,000) 8,400,000 8,400,000
18 OPPENHEIMER DISCIPLINED ALLOCATION FUND
Principal Market Value
Amount See Note 1
===================================================================================================
Repurchase Agreements--5.0%
Repurchase agreement with Zion First National Bank, 5.70%, dated
4/28/00, to be repurchased at $9,004,275 on 5/1/00, collateralized
by U.S. Treasury Bonds, 6.50%-12.75%, 11/15/10-11/15/26, with a
value of $5,426,461 and U.S. Treasury Nts., 4.50%-7%,
8/31/00-7/15/06, with a value of $3,775,773 (Cost $9,000,000) $ 9,000,000 $ 9,000,000
- ---------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $179,794,609) 99.6% 179,521,652
------------------------------
Other Assets Net of Liabilities 0.4 632,505
------------------------------
Net Assets 100.0% $180,154,157
==============================
<FN>
Footnotes to Statement of Investments
1. Non-income-producing security.
2. Identifies issues considered to be illiquid--See Note 6 of Notes to Financial
Statements.
3. Represents a security sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Directors. These securities amount to $2,738,867 or 1.52% of the Fund's net
assets as of April 30, 2000.
4. 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.
5. Represents the current interest rate for a variable or increasing rate
security.
6. Securities with an aggregate market value of $3,281,420 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 5 of Notes to Financial Statements.
7. Issuer is in default.
</FN>
See accompanying Notes to Financial Statements.
19 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES (Unaudited)
April 30, 2000
===================================================================================================
Assets
Investments, at value (cost $179,794,609)--see accompanying statement $ 179,521,652
- ---------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal paydowns 1,244,618
Daily variation on futures contracts 258,300
Investments sold 220,961
Shares of capital stock sold 47,951
Other 18,793
--------------
Total assets 181,312,275
===================================================================================================
Liabilities
Bank overdraft 71,070
- ---------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 641,893
Shares of capital stock redeemed 184,650
Directors' compensation 102,099
Shareholder reports 69,226
Transfer and shareholder servicing agent fees 38,560
Distribution and service plan fees 36,277
Other 14,343
--------------
Total liabilities 1,158,118
===================================================================================================
Net Assets $180,154,157
==============
===================================================================================================
Composition of Net Assets
Par value of shares of capital stock $ 13,014
- ---------------------------------------------------------------------------------------------------
Additional paid-in capital 181,295,219
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income 543,784
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (699,261)
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies (998,599)
--------------
Net Assets $180,154,157
==============
===================================================================================================
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$157,449,192 and 11,387,485 shares of capital stock outstanding) $13.83
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $14.67
- ---------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $18,841,359
and 1,344,347 shares of capital stock outstanding) $14.02
- ---------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $3,863,606
and 282,449 shares of capital stock outstanding) $13.68
See accompanying Notes to Financial Statements.
20 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENT OF OPERATIONS Unaudited
For the Six Months Ended April 30, 2000
===================================================================================================
Investment Income
Interest $3,481,916
- ---------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $1,011) 987,939
-----------
Total income 4,469,855
===================================================================================================
Expenses
Management fees 688,271
- ---------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 235,673
Class B 105,128
Class C 23,698
- ---------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 184,766
- ---------------------------------------------------------------------------------------------------
Directors' compensation 22,273
- ---------------------------------------------------------------------------------------------------
Accounting service fees 7,500
- ---------------------------------------------------------------------------------------------------
Custodian fees and expenses 4,801
- ---------------------------------------------------------------------------------------------------
Other 56,596
-----------
Total expenses 1,328,706
Less expenses paid indirectly (3,946)
-----------
Net expenses 1,324,760
===================================================================================================
Net Investment Income 3,145,095
===================================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments (4,797,787)
Closing of futures contracts 5,702,756
Foreign currency transactions 238
-----------
Net realized gain 905,207
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 2,182,132
Translation of assets and liabilities denominated in foreign currencies 72
-----------
Net change 2,182,204
-----------
Net realized and unrealized gain 3,087,411
===================================================================================================
Net Increase in Net Assets Resulting from Operations $6,232,506
===========
See accompanying Notes to Financial Statements.
21 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENTS OF CHANGES IN NET ASSETS
Six Months
Ended Year Ended
April 30, 2000 October 31,
(Unaudited) 1999
===================================================================================================
Operations
Net investment income $ 3,145,095 $ 8,579,053
- ---------------------------------------------------------------------------------------------------
Net realized gain 905,207 29,409,771
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 2,182,204 (28,350,463)
--------------------------------
Net increase in net assets resulting from operations 6,232,506 9,638,361
===================================================================================================
Dividends and/or Distributions to Shareholders
Dividends from net investment income:
Class A (3,092,632) (8,122,829)
Class B (234,454) (502,951)
Class C (53,616) (124,914)
- ---------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (24,684,810) (7,782,789)
Class B (2,228,824) (594,276)
Class C (532,325) (139,060)
===================================================================================================
Capital Stock Transactions
Net increase (decrease) in net assets resulting from
capital stock transactions:
Class A (78,469,013) (33,744,712)
Class B (2,790,828) 2,509,874
Class C (1,391,712) 1,126,929
===================================================================================================
Net Assets
Total decrease (107,245,708) (37,736,367)
- ---------------------------------------------------------------------------------------------------
Beginning of period 287,399,865 325,136,232
--------------------------------
End of period (including undistributed net investment
income of $543,784 and $779,391, respectively) $180,154,157 $287,399,865
================================
See accompanying Notes to Financial Statements.
22 OPPENHEIMER DISCIPLINED ALLOCATION FUND
FINANCIAL HIGHLIGHTS
Six Months Year Year
Ended Ended Ended
April 30, 2000 October 31, Dec. 31,
Class A (Unaudited) 1999 1998 1997 1996 1 1995
==================================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $15.03 $15.45 $16.81 $16.00 $15.46 $13.44
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .23 .44 .45 .51 2 .46 .60
Net realized and unrealized gain (loss) .28 (.01) .45 2.25 2 .49 2.59
-----------------------------------------------------------------------------
Total income from investment
operations .51 .43 .90 2.76 .95 3.19
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.23) (.44) (.45) (.56) (.36) (.60)
Distributions from net realized gain (1.48) (.41) (1.81) (1.39) (.05) (.57)
-----------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (1.71) (.85) (2.26) (1.95) (.41) (1.17)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.83 $15.03 $15.45 $16.81 $16.00 $15.46
=============================================================================
==================================================================================================================================
Total Return, at Net Asset Value 3 3.65% 2.62% 5.93% 18.82% 6.27% 23.95%
==================================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $157,449 $258,159 $298,558 $243,267 $233,289 $218,099
- ----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $194,771 $293,677 $268,715 $238,821 $228,203 $200,172
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 2.96% 2.72% 2.96% 3.17% 3.52% 4.00%
Expenses 1.12% 1.04% 1.04% 5 1.11% 5 1.11% 5 1.17% 5
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 6 28% 122% 97% 98% 85% 55%
<FN>
1. For the ten months ended October 31, 1996. The Fund changed its fiscal year
end from December 31 to October 31. On March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the Fund.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
4. Annualized for periods of less than one full year.
5. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended April 30, 2000, were $54,912,470 and $136,904,511, respectively. See
accompanying Notes to Financial Statements.
</FN>
23 OPPENHEIMER DISCIPLINED ALLOCATION FUND
FINANCIAL HIGHLIGHTS Continued
Six Months Year Year
Ended Ended Ended
April 30, 2000 October 31, Dec. 31,
Class B (Unaudited) 1999 1998 1997 1996 1 1995
==================================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $15.20 $15.62 $16.99 $16.16 $15.66 $15.48
- ----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .15 .31 .36 40 3 .31 .07
Net realized and unrealized gain .31 -- .43 2.27 3 .54 .70
-----------------------------------------------------------------------------
Total income from investment
operations .46 .31 .79 2.67 .85 .77
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.16) (.32) (.35) (.45) (.30) (.07)
Distributions from net realized gain (1.48) (.41) (1.81) (1.39) (.05) (.52)
-----------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (1.64) (.73) (2.16) (1.84) (.35) (.59)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.02 $15.20 $15.62 $16.99 $16.16 $15.66
=============================================================================
==================================================================================================================================
Total Return, at Net Asset Value 4 3.29% 1.84% 5.10% 17.96% 5.51% 4.93%
==================================================================================================================================
==================================================================================================================================
Ratios/Supplemental Data
==================================================================================================================================
Net assets, end of period (in thousands) $18,841 $23,522 $21,754 $8,720 $3,919 $650
- ----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $21,094 $24,648 $14,235 $6,183 $2,324 $375
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 5
Net investment income 2.18% 1.97% 2.19% 2.32% 2.86% 0.73%
Expenses 1.88% 1.80% 1.80% 6 1.89% 6 1.85% 6 1.92% 6
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 7 28% 122% 97% 98% 85% 55%
<FN>
1. For the ten months ended October 31, 1996. The Fund changed its fiscal year
end from December 31 to October 31. On March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the Fund.
2. For the period from October 2, 1995 (inception of offering) to December 31,
1995.
3. Per share amounts calculated based on the average shares outstanding during
the period.
4. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
5. Annualized for periods of less than one full year.
6. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
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 April 30, 2000, were $54,912,470 and $136,904,511, respectively.
See accompanying Notes to Financial Statements.
</FN>
24 OPPENHEIMER DISCIPLINED ALLOCATION FUND
Six Months Year
Ended Ended
April 30, 2000 October 31,
Class C (Unaudited) 1999 1998 1997 1996 1
=====================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $14.88 $15.31 $16.70 $15.93 $15.71
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .14 .32 .37 .44 2 .30
Net realized and unrealized gain (loss) .30 (.01) .40 2.19 2 .32
----------------------------------------------------------------
Total income from investment
operations .44 .31 .77 2.63 .62
- ---------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.16) (.33) (.35) (.47) (.35)
Distributions from net realized gain (1.48) (.41) (1.81) (1.39) (.05)
----------------------------------------------------------------
Total dividends and/or distributions
to shareholders (1.64) (.74) (2.16) (1.86) (.40)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.68 $14.88 $15.31 $16.70 $15.93
================================================================
=====================================================================================================================
Total Return, at Net Asset Value 3 3.22% 1.84% 5.10% 17.93% 4.08%
=====================================================================================================================
=====================================================================================================================
Ratios/Supplemental Data
=====================================================================================================================
Net assets, end of period (in thousands) $3,864 $5,719 $4,824 $1,473 $188
- ---------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $4,751 $5,876 $2,861 $805 $ 57
- ---------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 2.20% 1.97% 2.18% 2.18% 2.90%
Expenses 1.87% 1.80% 6 1.80% 5 1.92% 5 1.87% 5
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 6 28% 122% 97% 98% 85%
<FN>
1. For the period from May 1, 1996 (inception of offering) to October 31, 1996.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
4. Annualized for periods of less than one full year.
5. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended April 30, 2000, were $54,912,470 and $136,904,511, respectively. See
accompanying Notes to Financial Statements.
See accompanying Notes to Financial Statements.
</FN>
25 OPPENHEIMER DISCIPLINED ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Unaudited
===============================================================================
1. Significant Accounting Policies
Oppenheimer Disciplined Allocation Fund (the Fund), a series of Oppenheimer
Series Fund, Inc. (the Company), is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company. The Fund's
investment objective is to seek to maximize total investment return (including
capital appreciation and income) principally by allocating its assets among
stocks, corporate bonds, U.S. Government securities and money market
instruments, according to changing market conditions. The Fund's investment
advisor is OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B and Class C shares. Class A shares are sold
at their offering price, which is normally net asset value plus an initial
sales charge. Class B and Class C shares are sold without an initial sales
charge but may be subject to a contingent deferred sales charge (CDSC). All
classes of shares have identical rights to earnings, assets and voting
privileges, except that each class has its own expenses directly attributable
to that class and exclusive voting rights with respect to matters affecting
that class. Classes A, B and C shares have separate distribution and/or service
plans. 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.
- --------------------------------------------------------------------------------
Securities Valuation. Securities for which quotations are readily available are
valued at the last sale price, or if in the absence of a sale, at the last sale
price on the prior trading day if it is within the spread of the closing bid
and asked prices, and if not, at the closing bid price. Securities (including
restricted securities) for which quotations are not readily available are
valued primarily using dealer-supplied valuations, a portfolio pricing service
authorized by the Board of Directors, or at their fair value. Fair value is
determined in good faith under consistently applied procedures under the
supervision of the Board of Directors. Foreign currency 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, dealer or pricing service. Short-term "money market type" debt securities
with remaining maturities of sixty days or less are valued at cost (or last
determined market value) and adjusted for amortization or accretion to maturity
of any premium or discount.
- --------------------------------------------------------------------------------
Security Credit Risk. The Fund invests in high yield securities, which may be
subject to a greater degree of credit risk, greater market fluctuations and
risk of loss of income and principal, and may be more sensitive to economic
conditions than lower yielding, higher rated fixed income securities. The Fund
may acquire securities in default, and is not obligated to dispose
of securities whose issuers subsequently default. As of April 30, 2000,
securities with an aggregate market value of $100,000, representing 0.06% of
the Fund's net assets, were in default.
26 OPPENHEIMER DISCIPLINED ALLOCATION FUND
- --------------------------------------------------------------------------------
Foreign Currency Translation. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains
and losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is
required to be at least 102% of the resale price at the time of purchase. If
the seller of the agreement defaults and the value of the collateral declines,
or if the seller enters an insolvency proceeding, realization of the value of
the collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than
those attributable to a specific class), 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.
- --------------------------------------------------------------------------------
Directors' Compensation. The Fund has adopted an unfunded retirement plan for
the Fund's independent Board of Directors. Benefits are based on years of
service and fees paid to each director during the years of service. During the
six months ended April 30, 2000, a provision of $11,473 was made for the Fund's
projected benefit obligations and payments of $4,206 were made to retired
directors, resulting in an accumulated liability of $100,410 as of April 30,
2000.
The Board of Directors has adopted a deferred compensation plan for
independent directors that enables directors to elect to defer receipt of all
or a portion of annual compensation they are entitled to receive from the Fund.
Under the plan, the compensation deferred is periodically adjusted as though an
equivalent amount had been invested for the Board of Directors in shares of one
or more Oppenheimer funds selected by the director. The amount paid to the
Board of Directors under the plan will be determined based upon the performance
of the selected funds. Deferral of directors' fees under the plan will not
affect the net assets of the Fund, and will not materially affect the Fund's
assets, liabilities or net investment income per share.
27 OPPENHEIMER DISCIPLINED ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
================================================================================
1. Significant Accounting Policies Continued
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.
- --------------------------------------------------------------------------------
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes. The character of distributions made during the year from net
investment income or net realized gains may differ from its ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the fiscal year in which the income or realized gain was recorded
by the Fund.
- --------------------------------------------------------------------------------
Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Certain dividends from foreign
securities will be recorded as soon as the Fund is informed of the dividend if
such information is obtained subsequent to the ex-dividend date. Realized gains
and losses on investments and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used for
federal income tax purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
28 OPPENHEIMER DISCIPLINED ALLOCATION FUND
================================================================================
2. Shares of Capital Stock
The Fund has authorized 450 million of $0.001 par value shares of capital stock
of each class. Transactions in shares of capital stock were as follows:
Six Months Ended Year Ended
April 30, 2000 October 31, 1999
Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------
Class A
Sold 277,065 $ 3,831,413 1,351,571 $ 21,353,382
Dividends and/or
distributions reinvested 1,621,787 22,035,168 965,998 15,250,027
Redeemed (7,688,122) (104,335,594) (4,463,822) (70,348,121)
----------------------------------------------------------
Net decrease (5,789,270) $(78,469,013) (2,146,253) $(33,744,712)
==========================================================
- -------------------------------------------------------------------------------------------------
Class B
Sold 134,082 $ 1,884,145 547,606 $ 8,732,198
Dividends and/or
distributions reinvested 173,783 2,396,038 66,056 1,054,288
Redeemed (510,778) (7,071,011) (458,993) (7,276,612)
----------------------------------------------------------
Net increase (decrease) (202,913) $ (2,790,828) 154,669 $ 2,509,874
==========================================================
- -------------------------------------------------------------------------------------------------
Class C
Sold 37,031 $ 518,632 202,792 $ 3,181,342
Dividends and/or
distributions reinvested 41,113 553,295 16,189 252,900
Redeemed (180,140) (2,463,639) (149,699) (2,307,313)
----------------------------------------------------------
Net decrease (101,996) $ (1,391,712) (69,282) $ (1,126,929)
==========================================================
================================================================================
3. Unrealized Gains and Losses on Securities
As of April 30, 2000, net unrealized depreciation on securities of $272,957 was
composed of gross appreciation of $11,847,689, and gross depreciation of
$12,120,646.
================================================================================
4. Fees and Other Transactions with Affiliates
Management Fees. Management fees paid to the Manager are in accordance with the
investment advisory agreement with the Fund which provides for a fee of 0.625%
of the first $300 million of average annual net assets of the Fund, 0.50% of
the next $100 million and 0.45% of average annual net assets in excess of $400
million. The Fund's management fee for the six months ended April 30, 2000 was
0.63% of the average annual net assets for each class of shares, annualized for
periods of less than one full year.
- --------------------------------------------------------------------------------
Accounting Fees. The Manager acts as the accounting agent for the Fund at an
annual fee of $15,000, plus out-of-pocket costs and expenses reasonably
incurred.
29 OPPENHEIMER DISCIPLINED ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
================================================================================
4. Fees and Other Transactions with Affiliates Continued
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the
Manager, is the transfer and shareholder servicing agent for the Fund and for
other Oppenheimer funds. OFS's total costs of providing such services are
allocated ratably to these funds.
- --------------------------------------------------------------------------------
Distribution and Service Plan Fees. Under its General Distributor's Agreement
with the Manager, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of the different classes of shares of the Fund.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares is shown in the table below for the
period indicated.
Aggregate Class A Commissions Commissions Commissions
Front-End Front-End on Class A on Class B on Class C
Sales Charges Sales Charges Shares Shares Shares
on Class A Retained by Advanced by Advanced by Advanced by
Six Months Ended Shares Distributor Distributor 1 Distributor 1 Distributor 1
=================================================================================================================
April 30, 2000 $97,921 $72,734 $5,350 $55,944 $4,475
<FN>
1. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
</FN>
Class A Class B Class C
Contingent Deferred Contingent Deferred Contingent Deferred
Sales Charges Sales Charges Sales Charges
Six Months Ended Retained by Distributor Retained by Distributor Retained by Distributor
==============================================================================================================
April 30, 2000 $-- $42,054 $--
The Fund has adopted a Service Plan for Class A shares and Distribution and
Service Plans for Class B and Class C shares under Rule 12b-1 of the Investment
Company Act. Under those plans the Fund pays the Distributor for all or a
portion of its costs incurred in connection with the distribution and/or
servicing of the shares of the particular class.
- --------------------------------------------------------------------------------
Class A Service Plan Fees. Under the Class A service plan, the Distributor
currently uses the fees it receives from the Fund to pay brokers, dealers and
other financial institutions. The Class A service plan permits reimbursements
to the Distributor at a rate of up to 0.25% of average annual net assets of
Class A shares purchased. The Distributor makes payments to plan recipients
quarterly at an annual rate not to exceed 0.25% of the average annual net
assets consisting of Class A shares of the Fund. For the six months ended April
30, 2000, payments under the Class A plan totaled $235,673, all of which was
paid by the Distributor to recipients. That included $183,851 paid to an
affiliate of the Manager. Any unreimbursed expenses the Distributor incurs with
respect to Class A shares in any fiscal year cannot be recovered in subsequent
years.
- --------------------------------------------------------------------------------
Class B and Class C Distribution and Service Plan Fees. Under each plan,
service fees and distribution 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 Class B and Class C plans provide
for the Distributor to be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts paid by the Fund under
the plan during the period for which the fee is paid.
30 OPPENHEIMER DISCIPLINED ALLOCATION FUND
The Distributor retains the asset-based sales charge on Class B shares. The
Distributor retains the asset-based sales charge on Class C shares during the
first year the shares are outstanding. The asset-based sales charges on Class B
and Class C shares allow investors to buy shares without a front-end sales
charge while allowing the Distributor to compensate dealers that sell those
shares.
The Distributor's actual expenses in selling Class B and Class C shares may
be more than the payments it receives from the contingent deferred sales
charges collected on redeemed shares and asset-based sales charges from the
Fund under the plans. If any plan is terminated by the Fund, the Board of
Directors may allow the Fund to continue payments of the asset-based sales
charge to the Distributor for distributing shares before the plan was
terminated. The plans allow for the carry-forward of distribution expenses, to
be recovered from asset-based sales charges in subsequent fiscal periods.
Distribution fees paid to the Distributor for the six months ended April 30,
2000, were as follows:
Distributor's Distributor's
Aggregate Unreimbursed
Unreimbursed Expenses as %
Total Payments Amount Retained Expenses of Net Assets
Under Plan by Distributor Under Plan of Class
========================================================================================================
Class B Plan $105,128 $85,095 $639,545 3.39%
Class C Plan 23,698 8,626 66,731 1.73
================================================================================
5. Futures Contracts
The Fund may buy and sell futures contracts in order to gain exposure to or to
seek to 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 (initial margin) in an amount 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 may recognize 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
and/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.
31 OPPENHEIMER DISCIPLINED ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
================================================================================
5. Futures Contracts Continued
As of April 30, 2000, the Fund had outstanding futures contracts as follows:
Unrealized
Expiration Number of Valuation as of Appreciation
Contract Description Date Contracts April 30, 2000 (Depreciation)
======================================================================================================
Contracts to Purchase
NASDAQ 100 Index 6/15/00 23 $8,763,000 $(1,025,800)
Standard & Poor's 500 Index 6/15/00 16 5,840,000 300,400
- ------------------------------------------------------------------------------------------------------
$ (725,400)
=============
================================================================================
6. Illiquid Securities
As of April 30, 2000, investments in securities included issues that are
illiquid. 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 periodically) in illiquid securities. The
aggregate value of illiquid securities subject to this limitation as of April
30, 2000, was $2,485,149, which represents 1.38% of the Fund's net assets.
================================================================================
7. Bank Borrowings
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.45%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.08% per annum.
The Fund had no borrowings outstanding during the six months ended April 30,
2000.
32 OPPENHEIMER DISCIPLINED ALLOCATION FUND
OPPENHEIMER DISCIPLINED ALLOCATION FUND
A Series of Oppenheimer Series Fund, Inc.
- --------------------------------------------------------------------------------
Officers and Directors Leon Levy, Chairman of the Board of Directors
Donald W. Spiro, Vice Chairman of the Board of Directors
Bridget A. Macaskill, Director and President
Robert G. Galli, Director
Phillip A. Griffiths, Director
Benjamin Lipstein, Director
Elizabeth B. Moynihan, Director
Kenneth A. Randall, Director
Edward V. Regan, Director
Russell S. Reynolds, Jr., Director
Clayton K. Yeutter, Director
Peter M. Antos, Vice President
Stephen F. Libera, Vice President
Michael C. Strathearn, Vice President
Kenneth B. White, Vice President
Arthur J. Zimmer, Vice President
Andrew J. Donohue, Secretary
Brian W. Wixted, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Robert G. Zack, Assistant Secretary
================================================================================
Investment Advisor OppenheimerFunds, Inc.
================================================================================
Distributor OppenheimerFunds Distributor, Inc.
================================================================================
Transfer and OppenheimerFunds Services
Shareholder
Servicing Agent
================================================================================
Custodian of The Bank of New York
Portfolio Securities
================================================================================
Independent Auditors KPMG LLP
================================================================================
Legal Counsel Mayer, Brown & Platt
The financial statements included herein have been taken
from the records of the Fund without examination of
those records by the independent auditors.
This is a copy of a report to shareholders of
Oppenheimer Disciplined Allocation Fund. This report
must be preceded or accompanied by a Prospectus of
Oppenheimer Disciplined Allocation Fund. For material
information concerning the Fund, see the Prospectus.
Shares of Oppenheimer funds are not deposits or
obligations of any bank, are not guaranteed by any bank,
are not insured by the FDIC or any other agency, and
involve investment risks, including the possible loss of
the principal amount invested.
Oppenheimer funds are distributed by Oppenheimer Funds
Distributor, Inc., Two World Trade Center, New York, NY
10048-0203.
(C)Copyright 2000 OppenheimerFunds, Inc. All rights
reserved.
33 OPPENHEIMER DISCIPLINED ALLOCATION FUND
INFORMATION AND SERVICES
As an Oppenheimer fund shareholder, you can benefit from
special services designed to make investing simple. Whether
it's automatic investment plans, timely market updates, or
immediate account access, you can count on us whenever
you need assistance. So call us today, or visit our website--
we're here to help.
- --------------------------------------------------------------------------------
Internet
24-hr access to account information and transactions 1
www.oppenheimerfunds.com
- --------------------------------------------------------------------------------
General Information
Mon-Fri 8am-9pm ET, Sat 10am-4pm ET
1.800.525.7048
- --------------------------------------------------------------------------------
Telephone Transactions
Mon-Fri 8am-9pm ET, Sat 10am-4pm ET
1.800.852.8457
- --------------------------------------------------------------------------------
PhoneLink
24-hr automated information and automated transactions
1.800.533.3310
- --------------------------------------------------------------------------------
Telecommunications Device for the Deaf (TDD)
Mon-Fri 9am-6:30pm ET
1.800.843.4461
- --------------------------------------------------------------------------------
OppenheimerFunds Market Hotline
24 hours a day, timely and insightful messages on the
economy and issues that may affect your investments
1.800.835.3104
- --------------------------------------------------------------------------------
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270, Denver, CO 80217-5270
- --------------------------------------------------------------------------------
Ticker Symbols Class A: CNMTX Class B: CDABX Class C: CDACX
1. At times this website may be inaccessible or its transaction feature may be
unavailable.
OppenheimerFunds(R)
Distributor, Inc.
RS0205.001.0400 June 29, 2000
ANNUAL REPORT OCTOBER 31, 1999
OPPENHEIMER
DISCIPLINED ALLOCATION FUND
[PHOTO]
[OPPENHEIMER LOGO]
THE RIGHT WAY TO INVEST
CONTENTS
1 President's Letter
3 An Interview
with Your Fund's
Managers
7 Fund Performance
12 FINANCIAL
STATEMENTS
41 INDEPENDENT
AUDITORS' REPORT
42 Federal
Income Tax
Information
43 Officers and Directors
44 Oppenheimer Funds
Family
REPORT HIGHLIGHTS
- --------------------------------------------------------------------------------
THE FUND'S ASSET ALLOCATION SHIFTS HELPED CUSHION THE EFFECTS of a generally
unfavorable environment for value-oriented stock investing during the period.
DESPITE A CHALLENGING ENVIRONMENT FOR VALUE INVESTING, the Fund benefited from
investments in technology, financial companies, diversified manufacturers and
retailers.
ON THE FIXED INCOME SIDE, the Fund's focus on corporate bond holdings enhanced
performance.
AVERAGE ANNUAL
TOTAL RETURNS
For the 1-Year Period
Ended 10/31/99*
CLASS A
Without With
Sales Chg. Sales Chg.
- --------------------------
2.62% -3.28%
CLASS B
Without With
Sales Chg. Sales Chg.
- --------------------------
1.84% -3.03%
CLASS C
Without With
Sales Chg. Sales Chg.
- --------------------------
1.84% 0.87%
NOT FDIC INSURED.
NO BANK GUARANTEE.
MAY LOSE VALUE.
* See page 10 for further details.
PRESIDENT'S LETTER
- --------------------------------------------------------------------------------
[PHOTO]
BRIDGET A. MACASKILL
President
Oppenheimer
Disciplined Allocation Fund
DEAR SHAREHOLDER,
Whenever a new year begins--let alone a new decade or century--it makes sense to
pause a moment to assess where we've been and where we're going.
In retrospect, U.S. stocks and bonds in 1999 were subject to sudden and
substantial swings in investor sentiment because of economic uncertainty. When
the year began, investors were concerned that growth in the United States might
slow in response to economic weakness overseas. At mid-year, investors were
concerned that the economy was too strong, potentially rekindling inflationary
pressures. Yet, by year end, it became clearer that while the U.S. economy grew
robustly in 1999, inflation remained at low levels. Indeed, investors appeared
more comfortable with the economy after the Federal Reserve Board demonstrated
its inflation-fighting resolve by raising interest rates three times between
June and November.
As is normal in a rising-interest-rate environment, bond prices
generally declined in 1999, led lower by U.S. Treasury bonds. In the stock
market, while most major indices advanced, strong performance was mostly limited
to a handful of large-capitalization growth companies, principally in the
technology arena. Smaller and value-oriented stocks provided particularly
lackluster returns and, overall, foreign stocks outperformed U.S. stocks in
1999.
Looking forward, we expect the U.S. economy to remain on a
moderate-growth, low-inflation course. As recent revisions of 1999's economic
statistics demonstrated, the economy has defied many analysts' forecasts by
growing at a strong rate, which should be positive for the bond market.
Similarly, positive economic forces could help the stock market's performance
broaden to include value-oriented and smaller stocks.
We see particularly compelling opportunities outside of the U.S. market.
Many foreign stocks also ended 1999 more attractively valued than large-cap U.S.
stocks, and economic trends in overseas markets could lead to higher stock
prices. In Europe, corporate restructuring has just begun, giving
1 OPPENHEIMER DISCIPLINED ALLOCATION FUND
PRESIDENT'S LETTER
- --------------------------------------------------------------------------------
companies there the same potential for cost-cutting and productivity
improvements that U.S. companies enjoyed ten years ago. In Japan and Asia,
economic recovery is expected to gain strength, which could allow stocks to
rally from relatively low levels.
Another 1999 trend that should remain in force in 2000 is the growth of
businesses related to the Internet. The rise of e-commerce has been good for
consumers and the economy because of greater price competition, which has helped
keep inflation under control. The Internet has also been good for investors, as
even companies with no earnings have seen their stock prices soar. Clearly,
while the Internet is here to stay, not all "dot-com" companies will survive,
and many of these high-flying Internet stocks will eventually--and perhaps very
suddenly--return to more reasonable levels. The long-term winners are most
likely to be companies that support the Internet's growth with content or
infrastructure.
What else is in store for investors in 2000? While we do not have an
infallible crystal ball, we believe that in almost any investment environment,
consistent success stems from an unwavering focus on fundamental investment
principles such as maintaining a long-term perspective, using diversification to
manage risks, and availing oneself of the services of a knowledgeable financial
advisor. Indeed, these principles serve as the foundation for every investment
we offer, helping to make OppenheimerFunds The Right Way to Invest in 2000 and
beyond.
Sincerely,
/s/ BRIDGET A. MACASKILL November 19, 1999
Bridget A. Macaskill
These general market views represent opinions of OppenheimerFunds, Inc. and are
not intended to predict or depict performance of any particular fund. Specific
discussion, as it applies to your Fund, is contained in the pages that follow.
2 OPPENHEIMER DISCIPLINED ALLOCATION FUND
AN INTERVIEW WITH YOUR FUND'S MANAGERS
- --------------------------------------------------------------------------------
[PHOTO]
PORTFOLIO MANAGEMENT
TEAM (L TO R)
KENNETH WHITE,
PETER ANTOS,
MICHAEL STRATHEARN, STEPHEN LIBERA,
ARTHUR ZIMMER *
HOW DID THE FUND PERFORM DURING THE ONE-YEAR PERIOD THAT ENDED OCTOBER 31, 1999?
A. We are somewhat disappointed with the performance of the Fund's stock
holdings. The Fund focuses on value stocks, and this was not a favorable
environment for value investing. However, our disciplined strategy of allocating
assets among stocks, bonds and cash enabled us to limit risks during a volatile
period.
WHY WAS THIS SUCH A CHALLENGING PERIOD FOR THE FUND'S STOCK INVESTMENTS?
Historically, the kind of low P/E (price-earnings ratio) value stocks in which
the Fund invests have proven to be bargains over the long term. However, they
tend to underperform the market when corporate earnings growth appears likely to
slow and concerns regarding the economic future are on the rise. At such times,
investors tend to seek large, growth-oriented companies.
Throughout the recent one-year period, actual U.S. economic growth
remained robust. However, the threat of slowing growth fueled widespread
economic uncertainty. In late 1998 and early 1999, those uncertainties were
driven by economic difficulties in the world's emerging markets. Significant
weakness in Asian markets, along with Brazil's devaluation of its currency in
January 1999, raised the prospect of slowing corporate growth, since
multinational corporations can sell fewer products in depressed markets.
Consequently, the performance of the overall market--and value-oriented stocks
in particular--suffered.
*Not shown.
3 OPPENHEIMER DISCIPLINED ALLOCATION FUND
AN INTERVIEW WITH YOUR FUND'S MANAGERS
- --------------------------------------------------------------------------------
"We took advantage of attractive opportunities among technology and financial
company stocks that met our criteria for both attractive valuations and positive
quantitative signs of improvement."
In April 1999, continuing strength in the U.S. economy and signs of recovery in
emerging markets caused value-oriented stocks to rise. However, the rebound
proved short lived. In June, the Federal Reserve Board (Fed) embarked on a
series of interest rate hikes aimed at preventing the economy from overheating.
The Fed's actions renewed concerns regarding the sustainability of U.S. economic
growth. Value-oriented stocks again suffered as a result. Several of our
holdings in traditional value-oriented groups, such as housing and
manufacturing, were particularly hard hit despite good earnings and strong
business conditions.
HOW DID YOU ALLOCATE THE FUND'S ASSETS IN LIGHT OF THESE CONDITIONS?
We conduct in-depth analyses of financial markets and economic trends to guide
our decisions on allocating the Fund's assets among stocks, bonds and cash.
During much of the recent period, our analyses led us to invest between 40% and
50% of the Fund's assets in bonds and cash. These investments cushioned the
Fund's performance during a period which proved generally unfavorable for
value-oriented stocks. We finished the fiscal year with about 53% of the Fund
(including stock futures positions) invested in stocks. The valuation-related
factors of our quantitative asset allocation discipline are somewhat cautious
toward stocks at present, as they were for much of the last year, but the more
technical factors we monitor remain, on balance, positive.
WHAT ACTIONS DID YOU TAKE TO ENHANCE THE PERFORMANCE OF THE FUND'S STOCKS?
During the first few months of the period, we took advantage of attractive
opportunities among technology and finan-cial company stocks that met our
criteria for attractive valuations and positive quantitative signs of
improvement. Many of these companies, such as IBM Corp. and Citigroup, Inc.,
performed relatively well for much of the period, despite challenging conditions
for most value-oriented stocks.
4 OPPENHEIMER DISCIPLINED ALLOCATION FUND
AVERAGE ANNUAL TOTAL RETURNS
For the Periods Ended 9/30/99(1)
Class A
1-Year 5-Year 10-Year
- ----------------------------
- -0.11% 9.48% 9.86%
Class B
Since
1-Year 5-Year Inception
- ------------------------------
0.14% N/A 7.81%
Class C
Since
1-Year 5-Year Inception
- ------------------------------
4.14% N/A 7.89%
In mid-1999, when interest rate increases began to create an unfavorable
environment for financial stocks, we reduced our holdings in the financial
sector. We also scored successes with individual stocks in such diverse sectors
as capital goods and retailing.(2)
HOW DID YOU MANAGE THE FUND'S BOND EXPOSURE?
The Fund's bond portfolio remained heavily oriented toward the corporate bond
sector throughout the period. These investments proved favorable for the Fund,
since corporate bonds generally outpaced U.S. Government securities over the
period.
We were less successful in managing the Fund's average duration.
Duration is a measure of a bond's sensitivity to changes in interest rates. The
longer a portfolio's average duration, the higher the returns investors are
likely to receive in an environment of falling interest rates. We maintained a
relatively long average duration throughout the period in anticipation of
slowing economic growth and continued low inflation. This tactic proved
disappointing as stronger-than-expected business activity and subsequent
interest rate hikes by the Federal Reserve led to rising bond yields and lower
returns.
WHAT IS YOUR OUTLOOK FOR THE FUTURE IN LIGHT OF TODAY'S MARKET CONDITIONS?
Historically, we have found that value-oriented stocks tend to outperform the
stock market as a whole over time. Accordingly, we continue to believe a
balanced portfolio that includes high-quality bonds, undervalued stocks and
cash, offers investors the potential for attractive long-term total returns.
1. See page 10 for further details.
2. Please refer to the Statement of Investments beginning on page 12 for a
complete list of the Fund's holdings as of 10/31/99.
5 OPPENHEIMER DISCIPLINED ALLOCATION FUND
PORTFOLIO ALLOCATION(3)
[PIE CHART]
- - Stocks 52.8%
- - Bonds 30.3
- - Cash Equivalents 16.9
We remain committed to a disciplined asset allocation and investment strategy
designed to deliver such returns to our investors. That's why Oppenheimer
Disciplined Allocation Fund remains part of The Right Way to Invest.
TOP TEN STOCK HOLDINGS(4)
- ---------------------------------------------------------------------------
Citigroup, Inc. 2.7%
- ---------------------------------------------------------------------------
ALLTELL Corp. 2.5
- ---------------------------------------------------------------------------
IBM Corp. 2.4
- ---------------------------------------------------------------------------
Minnesota Mining & Manufacturing Co. 1.8
- ---------------------------------------------------------------------------
SBC Communications, Inc. 1.8
- ---------------------------------------------------------------------------
SPX Corp. 1.7
- ---------------------------------------------------------------------------
Jefferson-Pilot Corp. 1.7
- ---------------------------------------------------------------------------
Lexmark International Group, Inc., Cl. A 1.7
- ---------------------------------------------------------------------------
General Dynamics Corp. 1.6
- ---------------------------------------------------------------------------
Kimberly-Clark Corp. 1.5
- ---------------------------------------------------------------------------
TOP FIVE INDUSTRIES(4)
- ---------------------------------------------------------------------------
Insurance 13.4%
- ---------------------------------------------------------------------------
Manufacturing 8.6
- ---------------------------------------------------------------------------
Electric Utilities 6.4
- ---------------------------------------------------------------------------
Diversified Financial 6.2
- ---------------------------------------------------------------------------
Computer Hardware 6.1
- ---------------------------------------------------------------------------
3. Portfolio is subject to change. Percentages are as of October 31, 1999, and
are based on total market value of investments.
4. Portfolio is subject to change. Percentages are as of October 31, 1999, and
are based on total market value of common stocks.
6 OPPENHEIMER DISCIPLINED ALLOCATION FUNDD
FUND PERFORMANCE
- --------------------------------------------------------------------------------
HOW HAS THE FUND PERFORMED? Below is a discussion, by the Manager, of the Fund's
performance during its fiscal year ended October 31, 1999, followed by a
graphical comparison of the Fund's performance to two appropriate broad-based
market indices.
MANAGEMENT'S DISCUSSION OF PERFORMANCE. The fiscal year that ended October 31,
1999, was marked by persistent concerns regarding the sustainability of U.S.
economic growth. These concerns created a generally unfavorable environment for
value-oriented investing. Although several individual stock holdings in the
technology, financial, capital goods and retail sectors performed well, overall
Fund performance suffered as the market favored growth-oriented, large-company
investments for most of the period. On the fixed income side, the Fund's focus
on relatively strong-performing corporate bonds helped cushion the impact of
disappointing stock performance. The Fund's portfolio holdings, allocations and
strategies are subject to change.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each class of shares of the
Fund held until October 31, 1999. In the case of Class A shares, performance is
measured over a 10-year period. In the case of Class B, performance is measured
from inception of the class on October 2, 1995. In the case of Class C,
performance is measured from inception of the class on May 1, 1996. The Fund's
performance reflects the deduction of the maximum initial sales charge on Class
A shares, the applicable contingent deferred sales charge on Class B and Class C
shares, and reinvestments of all dividends and capital gains distributions.
The Fund's performance is compared to the performance of the Standard &
Poor's (S&P) 500 Index, a broad-based index of equity securities widely regarded
as a general measure of the performance of the U.S. equity securities market.
The Fund's performance is also compared to Merrill Lynch Corporate and
Government Master Index, a broad-based index of U.S. Treasury and government
agency securities, corporate and Yankee bonds regarded as a general measurement
of the performance of the domestic debt securities market.
Index performance reflects the reinvestment of income but does not
consider the effect of transaction costs, and none of the data in the graphs
shows the effect of taxes. The Fund's performance reflects the effects of Fund
business and operating expenses. While index comparisons may be useful to
provide a benchmark for the Fund's performance, it must be noted that the Fund's
investments are not limited to the securities in the indices.
7 OPPENHEIMER DISCIPLINED ALLOCATION FUND
FUND PERFORMANCE
- --------------------------------------------------------------------------------
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Disciplined Allocation Fund (Class A), S&P 500 Index and Merrill
Lynch Corporate and Government Master Index.
[The following table was originally a line graph in the printed materials.]
Oppenheimer Disciplined Merrill Lynch Corporate
Allocation Fund Class A S&P 500 Index and Government Master Index
12/31/88 $ 9,425 $ 10,000 $ 10,000
12/31/89 11,555 12,301 11,413
12/31/90 11,532 11,920 12,382
12/31/91 14,784 15,543 14,350
12/31/92 16,247 16,726 15,452
12/31/93 18,829 18,410 17,161
12/31/94 18,432 18,651 16,600
12/31/95 22,847 25,649 19,752
10/31/96 24,280 29,907 20,185
10/31/97 28,850 39,500 21,997
10/31/98 30,560 48,192 24,264
10/31/99 31,360 60,557 24,084
AVERAGE ANNUAL TOTAL RETURN OF CLASS A SHARES OF THE FUND AT 10/31/99(2)
3-YEAR -3.28% 5-YEAR 9.65% 10-YEAR 10.16%
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Disciplined Allocation Fund (Class B), S&P 500 Index and Merrill
Lynch Corporate and Government Master Index.
[The following table was originally a line graph in the printed materials.]
Oppenheimer Disciplined Merrill Lynch Corporate
Allocation Fund Class B S&P 500 Index and Government Master Index
11/30/92 $ 10,000 $ 10,000 $ 10,000
9/30/93 10,493 10,601 10,463
9/30/94 11,071 12,361 10,693
9/30/95 13,059 16,326 11,652
9/30/96 13,725 19,918 12,854
9/30/97 13,781 25,029 12,758
AVERAGE ANNUAL TOTAL RETURN OF CLASS B SHARES OF THE FUND AT 10/31/99(2)
1-YEAR -3.03% LIFE 8.18%
8 OPPENHEIMER DISCIPLINED ALLOCATION FUND
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Disciplined Allocation Fund (Class C), S&P 500 Index and Merrill
Lynch Corporate and Government Master Index.
[The following table was originally a line graph in the printed materials.]
Oppenheimer Disciplined Merrill Lynch Corporate
Allocation Fund Class B S&P 500 Index and Government Master Index
5/26/95 $ 10,000 $ 10,000 $ 10,000
9/30/95 10,408 10,906 10,524
9/30/96 12,274 14,405 11,469
9/30/97 12,900 17,574 12,651
9/30/98 13,138 22,083 12,557
AVERAGE ANNUAL TOTAL RETURN OF CLASS C SHARES OF THE FUND AT 10/31/99(2)
1-YEAR 0.87% LIFE 8.11%
The performance information for both indices in the graphs begins on 12/31/88
for Class A, 9/30/95 for Class B and 4/30/96 for Class C.
1. The Fund changed its fiscal year end from 12/31 to 10/31.
2. See page 10 for further details.
Past performance is not predictive of future performance. Graphs are not drawn
to the same scale.
9 OPPENHEIMER DISCIPLINED ALLOCATION FUND
NOTES
- --------------------------------------------------------------------------------
IN REVIEWING PERFORMANCE AND RANKINGS, PLEASE REMEMBER THAT PAST PERFORMANCE
DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. BECAUSE OF ONGOING
MARKET VOLATILITY, THE FUND'S PERFORMANCE MAY BE SUBJECT TO SUBSTANTIAL
SHORT-TERM CHANGES. FOR UPDATES ON THE FUND'S PERFORMANCE, PLEASE CONTACT YOUR
FINANCIAL ADVISOR, CALL US AT 1.800.525.7048 OR VISIT OUR WEBSITE,
WWW.OPPENHEIMERFUNDS.COM.
Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown.
CLASS A shares of the Fund were first publicly offered on 9/16/85. Class A
returns include the current maximum initial sales charge of 5.75%.
CLASS B shares of the Fund were first publicly offered on 10/2/95. Class B
returns include the applicable contingent deferred sales charge of 5% (1-year)
and 2% (inception). The ending account value shown in the graph is net of the
applicable 2% contingent deferred sales charge. Class B shares are subject to an
annual 0.75% asset-based sales charge.
CLASS C shares of the Fund were first publicly offered on 5/1/96. Class C
returns include the contingent deferred sales charge of 1% for the 1-year
period. Class C shares are subject to an annual 0.75% asset-based sales charge.
An explanation of the different performance calculations is in the Fund's
prospectus.
10 OPPENHEIMER DISCIPLINED ALLOCATION FUND
FINANCIALS
- --------------------------------------------------------------------------------
11 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENT OF INVESTMENTS October 31, 1999
- --------------------------------------------------------------------------------
MARKET VALUE
SHARES SEE NOTE 1
=======================================================================================================================
COMMON STOCKS--54.1%
- -----------------------------------------------------------------------------------------------------------------------
BASIC MATERIALS--2.2%
- -----------------------------------------------------------------------------------------------------------------------
CHEMICALS--1.1%
Dow Chemical Co. 13,200 $ 1,560,900
- -----------------------------------------------------------------------------------------------------------------------
International Flavors & Fragrances, Inc. 12,300 470,475
- -----------------------------------------------------------------------------------------------------------------------
Rohm & Haas Co. 26,100 998,325
-------------
3,029,700
- -----------------------------------------------------------------------------------------------------------------------
PAPER--1.1%
Georgia-Pacific Group 21,700 861,219
- -----------------------------------------------------------------------------------------------------------------------
Georgia-Pacific Group/Timber Group 16,000 382,000
- -----------------------------------------------------------------------------------------------------------------------
Louisiana-Pacific Corp. 43,700 554,444
- -----------------------------------------------------------------------------------------------------------------------
Rayonier, Inc. 7,900 323,900
- -----------------------------------------------------------------------------------------------------------------------
Weyerhaeuser Co. 18,100 1,080,344
-------------
3,201,907
- -----------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--7.2%
- -----------------------------------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE--1.2%
Cordant Technologies, Inc. 8,200 255,737
- -----------------------------------------------------------------------------------------------------------------------
General Dynamics Corp. 43,900 2,433,706
- -----------------------------------------------------------------------------------------------------------------------
Northrop Grumman Corp. 13,100 718,862
-------------
3,408,305
- -----------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--1.1%
Rockwell International Corp. 9,900 479,531
- -----------------------------------------------------------------------------------------------------------------------
SPX Corp.(1) 31,400 2,661,150
-------------
3,140,681
- -----------------------------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES--0.3%
Valassis Communications, Inc.(1) 17,400 748,200
- -----------------------------------------------------------------------------------------------------------------------
MANUFACTURING--4.6%
Avery-Dennison Corp. 9,700 606,250
- -----------------------------------------------------------------------------------------------------------------------
Ball Corp. 14,300 576,469
- -----------------------------------------------------------------------------------------------------------------------
Briggs & Stratton Corp. 12,600 736,312
- -----------------------------------------------------------------------------------------------------------------------
Cooper Industries, Inc. 20,100 865,556
- -----------------------------------------------------------------------------------------------------------------------
Dover Corp. 38,100 1,621,631
- -----------------------------------------------------------------------------------------------------------------------
Eaton Corp. 11,300 850,325
- -----------------------------------------------------------------------------------------------------------------------
ITT Industries, Inc. 23,100 789,731
- -----------------------------------------------------------------------------------------------------------------------
Miller (Herman), Inc. 23,000 498,812
- -----------------------------------------------------------------------------------------------------------------------
Minnesota Mining & Manufacturing Co. 30,200 2,870,887
12 OPPENHEIMER DISCIPLINED ALLOCATION FUND
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
MANUFACTURING Continued
Parker-Hannifin Corp. 17,300 $ 792,556
- -----------------------------------------------------------------------------------------------------------------------
Textron, Inc. 10,800 833,625
- -----------------------------------------------------------------------------------------------------------------------
United Technologies Corp. 38,000 2,299,000
-------------
13,341,154
- -----------------------------------------------------------------------------------------------------------------------
COMMUNICATION SERVICES--4.0%
- -----------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-LONG DISTANCE--2.4%
ADC Telecommunications, Inc.(1) 15,000 715,312
- -----------------------------------------------------------------------------------------------------------------------
ALLTELL Corp. 47,500 3,954,375
- -----------------------------------------------------------------------------------------------------------------------
AT&T Corp. 35,250 1,647,937
- -----------------------------------------------------------------------------------------------------------------------
L-3 Communications Holdings, Inc.(1) 16,100 679,219
-------------
6,996,843
- -----------------------------------------------------------------------------------------------------------------------
TELEPHONE UTILITIES--1.6%
BellSouth Corp. 40,400 1,818,000
- -----------------------------------------------------------------------------------------------------------------------
SBC Communications, Inc. 56,456 2,875,727
-------------
4,693,727
- -----------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--7.2%
- -----------------------------------------------------------------------------------------------------------------------
AUTOS & HOUSING--2.2%
Cooper Tire & Rubber Co. 23,200 390,050
- -----------------------------------------------------------------------------------------------------------------------
Ethan Allen Interiors, Inc. 21,800 775,262
- -----------------------------------------------------------------------------------------------------------------------
Fortune Brands, Inc. 13,800 489,037
- -----------------------------------------------------------------------------------------------------------------------
Genuine Parts Co. 58,900 1,535,081
- -----------------------------------------------------------------------------------------------------------------------
Southdown, Inc. 11,100 536,269
- -----------------------------------------------------------------------------------------------------------------------
Stanley Works (The) 21,600 599,400
- -----------------------------------------------------------------------------------------------------------------------
USG Corp. 19,500 966,469
- -----------------------------------------------------------------------------------------------------------------------
Vulcan Materials Co. 18,100 747,756
- -----------------------------------------------------------------------------------------------------------------------
York International Corp. 15,400 362,862
-------------
6,402,186
- -----------------------------------------------------------------------------------------------------------------------
CONSUMER SERVICES--0.3%
Harte-Hanks, Inc. 15,500 307,094
- -----------------------------------------------------------------------------------------------------------------------
Hertz Corp., Cl. A 10,500 455,437
-------------
762,531
- -----------------------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT--0.6%
Hasbro, Inc. 22,600 466,125
- -----------------------------------------------------------------------------------------------------------------------
MGM Grand, Inc.(1) 12,100 617,100
- -----------------------------------------------------------------------------------------------------------------------
Mirage Resorts, Inc.(1) 44,000 640,750
-------------
1,723,975
13 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
MEDIA--1.5%
Central Newspapers, Inc., Cl. A 12,900 $ 553,894
- -----------------------------------------------------------------------------------------------------------------------
Deluxe Corp. 15,700 443,525
- -----------------------------------------------------------------------------------------------------------------------
Gannett Co., Inc. 28,700 2,213,487
- -----------------------------------------------------------------------------------------------------------------------
Knight-Ridder, Inc. 17,500 1,111,250
-------------
4,322,156
- -----------------------------------------------------------------------------------------------------------------------
RETAIL: GENERAL--0.8%
Federated Department Stores, Inc.(1) 22,500 960,469
- -----------------------------------------------------------------------------------------------------------------------
May Department Stores Co. 18,700 648,656
- -----------------------------------------------------------------------------------------------------------------------
Nordstrom, Inc. 22,600 563,587
-------------
2,172,712
- -----------------------------------------------------------------------------------------------------------------------
RETAIL: SPECIALTY--0.8%
Ross Stores, Inc. 44,000 907,500
- -----------------------------------------------------------------------------------------------------------------------
Sherwin-Williams Co. 23,600 528,050
- -----------------------------------------------------------------------------------------------------------------------
TJX Cos., Inc. 35,000 949,375
-------------
2,384,925
- -----------------------------------------------------------------------------------------------------------------------
TEXTILE/APPAREL & HOME FURNISHINGS--1.0%
Jones Apparel Group, Inc.(1) 43,400 1,372,525
- -----------------------------------------------------------------------------------------------------------------------
Liz Claiborne, Inc. 13,900 556,000
- -----------------------------------------------------------------------------------------------------------------------
Shaw Industries, Inc. 35,300 544,944
- -----------------------------------------------------------------------------------------------------------------------
WestPoint Stevens, Inc. 21,600 409,050
-------------
2,882,519
- -----------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--5.0%
- -----------------------------------------------------------------------------------------------------------------------
BEVERAGES--0.8%
Adolph Coors Co., Cl. B 5,600 310,800
- -----------------------------------------------------------------------------------------------------------------------
Anheuser-Busch Cos., Inc. 27,300 1,960,481
-------------
2,271,281
- -----------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT--0.4%
Brinker International, Inc.(1) 17,700 412,631
- -----------------------------------------------------------------------------------------------------------------------
Darden Restaurants, Inc. 18,400 350,750
- -----------------------------------------------------------------------------------------------------------------------
Wendy's International, Inc. 18,300 436,912
-------------
1,200,293
14 OPPENHEIMER DISCIPLINED ALLOCATION FUND
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
FOOD--1.8%
Flowers Industries, Inc. 22,200 $ 374,625
- -----------------------------------------------------------------------------------------------------------------------
Heinz (H.J.) Co. 22,300 1,064,825
- -----------------------------------------------------------------------------------------------------------------------
Hormel Foods Corp. 18,100 780,562
- -----------------------------------------------------------------------------------------------------------------------
IBP, Inc. 58,400 1,397,951
- -----------------------------------------------------------------------------------------------------------------------
Keebler Foods Co.(1) 18,800 600,425
- -----------------------------------------------------------------------------------------------------------------------
Sara Lee Corp. 33,500 906,594
-------------
5,124,982
- -----------------------------------------------------------------------------------------------------------------------
FOOD & DRUG RETAILERS--0.3%
Albertson's, Inc. 18,200 660,888
- -----------------------------------------------------------------------------------------------------------------------
SUPERVALU, Inc. 10,800 226,800
-------------
887,688
- -----------------------------------------------------------------------------------------------------------------------
HOUSEHOLD GOODS--1.4%
Kimberly-Clark Corp. 37,400 2,360,875
- -----------------------------------------------------------------------------------------------------------------------
Premark International, Inc. 30,500 1,669,875
-------------
4,030,750
- -----------------------------------------------------------------------------------------------------------------------
TOBACCO--0.3%
UST, Inc. 35,200 974,600
- -----------------------------------------------------------------------------------------------------------------------
ENERGY--4.4%
- -----------------------------------------------------------------------------------------------------------------------
ENERGY SERVICES--0.5%
Anadarko Petroleum Corp. 12,000 369,750
- -----------------------------------------------------------------------------------------------------------------------
ENSCO International, Inc. 29,300 567,688
- -----------------------------------------------------------------------------------------------------------------------
Global Marine, Inc.(1) 36,700 557,381
-------------
1,494,819
- -----------------------------------------------------------------------------------------------------------------------
OIL: DOMESTIC--2.4%
Apache Corp. 15,200 592,800
- -----------------------------------------------------------------------------------------------------------------------
Burlington Resources, Inc. 12,100 421,988
- -----------------------------------------------------------------------------------------------------------------------
Conoco, Inc., Cl. A 29,200 801,175
- -----------------------------------------------------------------------------------------------------------------------
Exxon Corp. 26,700 1,977,469
- -----------------------------------------------------------------------------------------------------------------------
Mobil Corp. 16,800 1,621,200
- -----------------------------------------------------------------------------------------------------------------------
Murphy Oil Corp. 9,900 555,019
- -----------------------------------------------------------------------------------------------------------------------
Texaco, Inc. 15,000 920,625
-------------
6,890,276
15 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
OIL: INTERNATIONAL--1.5%
BP Amoco plc, ADR 29,600 $ 1,709,400
- -----------------------------------------------------------------------------------------------------------------------
Royal Dutch Petroleum Co., NY Shares 30,600 1,834,088
- -----------------------------------------------------------------------------------------------------------------------
Total Fina SA, Sponsored ADR 13,300 886,944
-------------
4,430,432
- -----------------------------------------------------------------------------------------------------------------------
FINANCIAL--13.6%
- -----------------------------------------------------------------------------------------------------------------------
BANKS--2.8%
Bank United Corp., Cl. A 5,900 230,100
- -----------------------------------------------------------------------------------------------------------------------
Chase Manhattan Corp. 10,600 926,175
- -----------------------------------------------------------------------------------------------------------------------
J.P. Morgan & Co., Inc. 6,200 811,425
- -----------------------------------------------------------------------------------------------------------------------
National City Corp. 28,400 837,800
- -----------------------------------------------------------------------------------------------------------------------
Old Kent Financial Corp. 18,845 767,934
- -----------------------------------------------------------------------------------------------------------------------
Roslyn Bancorp, Inc. 11,800 228,625
- -----------------------------------------------------------------------------------------------------------------------
UnionBanCal Corp. 26,100 1,133,719
- -----------------------------------------------------------------------------------------------------------------------
Wachovia Corp. 19,100 1,647,375
- -----------------------------------------------------------------------------------------------------------------------
Wells Fargo Co. 31,300 1,498,488
-------------
8,081,641
- -----------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL--3.4%
AMBAC Financial Group, Inc. 16,200 967,950
- -----------------------------------------------------------------------------------------------------------------------
Citigroup, Inc. 76,900 4,162,213
- -----------------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 14,000 994,000
- -----------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 18,500 2,040,781
- -----------------------------------------------------------------------------------------------------------------------
Nationwide Financial Services, Inc., Cl. A 21,300 806,738
- -----------------------------------------------------------------------------------------------------------------------
PMI Group, Inc. (The) 7,000 363,125
- -----------------------------------------------------------------------------------------------------------------------
Radian Group, Inc. 7,000 369,688
-------------
9,704,495
- -----------------------------------------------------------------------------------------------------------------------
INSURANCE--7.3%
ACE Ltd. 38,300 744,456
- -----------------------------------------------------------------------------------------------------------------------
Allstate Corp. 31,700 911,375
- -----------------------------------------------------------------------------------------------------------------------
American General Corp. 14,000 1,038,625
- -----------------------------------------------------------------------------------------------------------------------
American International Group, Inc. 18,375 1,891,477
- -----------------------------------------------------------------------------------------------------------------------
AXA Financial, Inc. 64,500 2,068,031
- -----------------------------------------------------------------------------------------------------------------------
Chubb Corp. 24,600 1,349,925
- -----------------------------------------------------------------------------------------------------------------------
Cigna Corp. 20,900 1,562,275
- -----------------------------------------------------------------------------------------------------------------------
Conseco, Inc. 41,200 1,001,675
- -----------------------------------------------------------------------------------------------------------------------
Hartford Life, Inc., Cl. A 21,600 1,128,600
- -----------------------------------------------------------------------------------------------------------------------
Jefferson-Pilot Corp. 34,900 2,619,681
16 OPPENHEIMER DISCIPLINED ALLOCATION FUND
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
INSURANCE Continued
Lincoln National Corp. 46,200 $ 2,130,975
- -----------------------------------------------------------------------------------------------------------------------
Manulife Financial Corp.(1) 37,600 453,550
- -----------------------------------------------------------------------------------------------------------------------
Marsh & McLennan Cos., Inc. 17,800 1,407,313
- -----------------------------------------------------------------------------------------------------------------------
Safeco Corp. 10,100 277,750
- -----------------------------------------------------------------------------------------------------------------------
St. Paul Cos., Inc. 26,800 857,600
- -----------------------------------------------------------------------------------------------------------------------
Torchmark Corp. 13,200 411,675
- -----------------------------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., Cl. A 28,200 1,015,200
-------------
20,870,183
- -----------------------------------------------------------------------------------------------------------------------
SAVINGS & LOANS--0.1%
Greenpoint Financial Corp. 9,000 256,500
- -----------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--5.9%
- -----------------------------------------------------------------------------------------------------------------------
COMPUTER HARDWARE--3.3%
Apple Computer, Inc.(1) 24,500 1,963,063S
- -----------------------------------------------------------------------------------------------------------------------
Hewlett-Packard Co. 14,000 1,036,875
- -----------------------------------------------------------------------------------------------------------------------
International Business Machines Corp. 38,400 3,777,600
- -----------------------------------------------------------------------------------------------------------------------
Lexmark International Group, Inc., Cl. A(1) 34,100 2,661,931
-------------
9,439,469
- -----------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES--0.6%
First Data Corp. 35,800 1,635,613
- -----------------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE--0.5%
BISYS Group, Inc. (The)(1) 13,400 683,400
- -----------------------------------------------------------------------------------------------------------------------
Synopsys, Inc.(1) 12,200 760,213
-------------
1,443,613
- -----------------------------------------------------------------------------------------------------------------------
ELECTRONICS--1.5%
Cypress Semiconductor Corp.(1) 27,800 710,638
- -----------------------------------------------------------------------------------------------------------------------
Dallas Semiconductor Corp. 8,000 471,000
- -----------------------------------------------------------------------------------------------------------------------
Intel Corp. 13,100 1,014,431
- -----------------------------------------------------------------------------------------------------------------------
National Semiconductor Corp.(1) 18,800 562,825
- -----------------------------------------------------------------------------------------------------------------------
Teradyne, Inc.(1) 37,600 1,447,600
-------------
4,206,494
- -----------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--0.8%
- -----------------------------------------------------------------------------------------------------------------------
AIR TRANSPORTATION--0.5%
Delta Air Lines, Inc. 24,000 1,306,500
- -----------------------------------------------------------------------------------------------------------------------
RAILROADS & TRUCKERS--0.3%
Union Pacific Corp. 16,900 942,175
17 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
UTILITIES--3.8%
- -----------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--3.4%
Carolina Power & Light Co. 13,600 $ 469,200
- -----------------------------------------------------------------------------------------------------------------------
Conectiv, Inc. 23,300 454,350
- -----------------------------------------------------------------------------------------------------------------------
Duke Energy Corp. 33,500 1,892,750
- -----------------------------------------------------------------------------------------------------------------------
Entergy Corp. 7,600 227,525
- -----------------------------------------------------------------------------------------------------------------------
FPL Group, Inc. 18,700 940,844
- -----------------------------------------------------------------------------------------------------------------------
Montana Power Co. 42,900 1,219,969
- -----------------------------------------------------------------------------------------------------------------------
Peco Energy Co. 14,200 542,263
- -----------------------------------------------------------------------------------------------------------------------
Potomac Electric Power Co. 18,900 518,569
- -----------------------------------------------------------------------------------------------------------------------
Public Service Enterprise Group, Inc. 20,000 791,250
- -----------------------------------------------------------------------------------------------------------------------
Reliant Energy, Inc. 48,400 1,318,900
- -----------------------------------------------------------------------------------------------------------------------
Texas Utilities Co. 17,100 662,625
- -----------------------------------------------------------------------------------------------------------------------
Unicom Corp. 22,400 858,200
-------------
9,896,445
- -----------------------------------------------------------------------------------------------------------------------
GAS UTILITIES--0.4%
El Paso Energy Corp. 24,600 1,008,600
- -----------------------------------------------------------------------------------------------------------------------
NICOR, Inc. 7,600 294,500
-------------
1,303,100
-------------
Total Common Stocks (Cost $157,899,001) 155,602,870
- -----------------------------------------------------------------------------------------------------------------------
OTHER SECURITIES--0.3%
Ingersoll-Rand International Finance Corp. I, 6.22% Preferred Redeemable
Increased Dividend Equity Securities, 5/16/01(1)(Cost $750,000) 30,000 748,125
UNITS
- -----------------------------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
Concentric Network Corp. Wts., Exp. 12/15/07(2) 100 25,012
- -----------------------------------------------------------------------------------------------------------------------
Dairy Mart Convenience Stores, Inc. Wts., Exp. 12/12/01(2) 666 233
- -----------------------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc. Wts., Exp. 6/1/00 100 8,715
- -----------------------------------------------------------------------------------------------------------------------
Microcell Telecommunications, Inc. Wts., Exp. 6/1/06(2) 500 21,375
- -----------------------------------------------------------------------------------------------------------------------
Nextel International Ltd. Wts., Exp. 4/15/07(2) 100 413
- -----------------------------------------------------------------------------------------------------------------------
Price Communications Corp. Wts., Exp. 8/1/07(2) 516 79,980
- -----------------------------------------------------------------------------------------------------------------------
Signature Brands, Inc. Wts.(2) 100 2,013
-------------
Total Rights, Warrants and Certificates (Cost $8,004) 137,741
18 OPPENHEIMER DISCIPLINED ALLOCATION FUND
FACE MARKET VALUE
AMOUNT SEE NOTE 1
=======================================================================================================================
ASSET-BACKED SECURITIES--0.8%
Dayton Hudson Credit Card Master Trust, Asset-Backed Certificates,
Series 1997-1, Cl. A, 6.25%, 8/25/05 $ 125,000 $ 122,969
- -----------------------------------------------------------------------------------------------------------------------
IROQUOIS Trust, Asset-Backed Amortizing Nts., Series 1997-2, Cl. A,
6.752%, 6/25/07(2) 920,591 909,299
- -----------------------------------------------------------------------------------------------------------------------
Olympic Automobile Receivables Trust, Automobile Receivables-Backed Nts.,
Series 1997-A, Cl. A-5, 6.80%, 2/15/05 1,150,000 1,142,094
-------------
Total Asset-Backed Securities (Cost $2,194,029) 2,174,362
=======================================================================================================================
MORTGAGE-BACKED OBLIGATIONS--4.0%
- -----------------------------------------------------------------------------------------------------------------------
Chase Commercial Mortgage Securities Corp., Commercial Mtg. Obligations,
Series 1996-1, Cl. A2, 7.60%, 3/18/06 1,500,000 1,525,195
- -----------------------------------------------------------------------------------------------------------------------
Countrywide Funding Corp., Mtg. Pass-Through Certificates, Series 1994-10,
Cl. A3, 6%, 5/25/09 250,000 245,390
- -----------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg. Participation Certificates, Series 1711, Cl. EA, 7%,
3/15/24 200,000 196,186
- -----------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Gtd. Multiclass Mtg. Participation
Certificates:
6%, 3/1/09 642,304 626,247
Series 1843, Cl. VB, 7%, 4/15/03 65,000 65,508
Series 1849, Cl. VA, 6%, 12/15/10 643,403 639,383
- -----------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Interest-Only Stripped Mtg.-Backed
Security:
Series 1542, Cl. QC, 9.411%, 10/15/20(3) 400,000 42,124
Series 1583, Cl. IC, 11.65%-12.752%, 1/15/20(3) 1,739,930 151,148
Series 1661, Cl. PK, 25.774%, 11/15/06(3) 261,995 9,825
- -----------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
6%, 12/1/03 474,525 468,494
6.50%, 3/1/26-4/1/26 633,275 610,415
7%, 4/1/00 11,155 11,163
7.50%, 1/1/08-6/1/08 466,950 473,221
Collateralized Mtg. Obligations, Gtd. Multiclass Mtg. Participation
Certificates, Trust 1992-15, Cl. KZ, 7%, 2/25/22 853,815 808,990
Collateralized Mtg. Obligations, Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, Trust 1993-190, Cl. Z, 5.85%, 7/25/08 219,938 218,907
Interest-Only Stripped Mtg.-Backed Security, Trust 1993-223, Cl. PM,
9.526%, 10/25/23(3) 1,215,494 157,625
- -----------------------------------------------------------------------------------------------------------------------
GE Capital Mortgage Services, Inc., Collateralized Mtg. Obligations,
Series 1998-12, Cl. A3, 6.50%, 4/25/29 500,000 455,469
19 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
FACE MARKET VALUE
AMOUNTS SEE NOTE 1
=======================================================================================================================
MORTGAGE-BACKED OBLIGATIONS Continued
GE Capital Mortgage Services, Inc., Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates, Series 1994-7, Cl. A18, 6%, 2/25/09 $1,143,592 $ 1,035,306
- -----------------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn.:
7%, 4/15/09-2/15/24 981,372 975,492
7.50%, 3/15/09 419,635 426,912
8%, 5/15/17 305,464 314,601
- -----------------------------------------------------------------------------------------------------------------------
IMC Home Equity Trust, Asset-Backed Home Equity Securities,
Series 1998-3, Cl. A5, 6.36%, 8/20/22(4) 700,000 687,312
- -----------------------------------------------------------------------------------------------------------------------
Northwest Asset Securities Corp., Gtd. Multiclass Mtg. Participation
Certificates:
Series 1999-16, Cl. A3, 6%, 6/25/29 500,000 479,375
Series 1999-18, Cl. A2, 6%, 7/25/29 1,000,000 943,750
-----------
Total Mortgage-Backed Obligations (Cost $11,684,578) 11,568,038
=======================================================================================================================
U.S. GOVERNMENT OBLIGATIONS--8.1%
U.S. Treasury Bonds:
6%, 2/15/26 6,800,000 6,453,628
7.50%, 11/15/16(5) 2,000,000 2,207,500
8.75%, 5/15/17(5) 8,250,000 10,173,281
STRIPS, 5.88%, 11/15/18(6) 6,000,000 1,736,472
- -----------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
5.625%, 5/15/08 2,500,000 2,412,500
6.125%, 8/15/07 250,000 249,141
-----------
Total U.S. Government Obligations (Cost $22,863,832) 23,232,522
=======================================================================================================================
FOREIGN GOVERNMENT OBLIGATIONS--0.1%
United Mexican States Bonds, 6.97%, 8/12/00 (Cost $248,358) 250,000 250,485
=======================================================================================================================
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--18.2%
BASIC MATERIALS--0.7%
- -----------------------------------------------------------------------------------------------------------------------
CHEMICALS--0.4%
PPG Industries, Inc., 9% Debs., 5/1/21 315,000 361,786
- -----------------------------------------------------------------------------------------------------------------------
Rohm & Haas Co., 7.85% Debs., 7/15/29(7) 650,000 666,229
-----------
1,028,015
- -----------------------------------------------------------------------------------------------------------------------
METALS--0.0%
Alcan Aluminum Ltd., 9.625% Debs., 7/15/19(2) 105,000 110,397
- -----------------------------------------------------------------------------------------------------------------------
PAPER--0.3%
Aracruz Celulose SA, 10.375% Debs., 1/31/02(7) 750,000 746,250
20 OPPENHEIMER DISCIPLINED ALLOCATION FUND
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--2.5%
- -----------------------------------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE--0.2%
Raytheon Co., 6.45% Nts., 8/15/02 $ 500,000 $ 492,060
- -----------------------------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES--1.8%
Fred Meyer, Inc., 7.375% Sr. Nts., 3/1/05 1,250,000 1,251,990
- -----------------------------------------------------------------------------------------------------------------------
Norse CBO Ltd., 6.515% Collateralized Bond Obligations, Series 1A,
Cl. A3, 8/13/10(2) 1,000,000 935,000
- -----------------------------------------------------------------------------------------------------------------------
Owens-Illinois, Inc., 7.15% Sr. Nts., 5/15/05 1,000,000 941,152
- -----------------------------------------------------------------------------------------------------------------------
Sun Co., Inc., 7.95% Debs., 12/15/01 1,175,000 1,196,374
- -----------------------------------------------------------------------------------------------------------------------
USI American Holdings, Inc., 7.25% Sr. Nts., Series B, 12/1/06 830,000 793,683
-----------
5,118,199
- -----------------------------------------------------------------------------------------------------------------------
MANUFACTURING--0.5%
Federal-Mogul Corp., 7.50% Nts., 7/1/04 500,000 477,303
- -----------------------------------------------------------------------------------------------------------------------
Norsk Hydro AS, 8.75% Bonds, 10/23/01 500,000 516,375
- -----------------------------------------------------------------------------------------------------------------------
U.S. Industries, Inc./USI American Holdings, Inc./USI Global Corp., 7.125%
Sr. Unsec. Nts., 10/15/03 500,000 492,237
-----------
1,485,915
- -----------------------------------------------------------------------------------------------------------------------
COMMUNICATION SERVICES--0.6%
- -----------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS: LONG DISTANCE--0.4%
AT&T Capital Corp., 6.25% Medium-Term Nts., Series F, 5/15/01 725,000 720,326
- -----------------------------------------------------------------------------------------------------------------------
US West Capital Funding, Inc., 6.125% Nts., 7/15/02 500,000 490,006
-----------
1,210,332
- -----------------------------------------------------------------------------------------------------------------------
TELEPHONE UTILITIES--0.2%
Liberty Media Group, 8.50% Nts., 7/15/29(7) 500,000 501,823
- -----------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--1.2%
- -----------------------------------------------------------------------------------------------------------------------
AUTOS & HOUSING--0.7%
Black & Decker Corp., 6.625% Nts., 11/15/00 810,000 811,602
- -----------------------------------------------------------------------------------------------------------------------
Ford Motor Co., 6.375% Sr. Unsec. Unsub. Nts., 2/1/29 1,000,000 864,853
- -----------------------------------------------------------------------------------------------------------------------
Lear Corp., 7.96% Sr. Nts., 5/15/05(7) 500,000 486,507
-----------
2,162,962
- -----------------------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT--0.0%
Hilton Hotels Corp., 7.375% Nts., 6/1/02 50,000 49,104
- -----------------------------------------------------------------------------------------------------------------------
MEDIA--0.1%
Reed Elsevier, Inc., 6.625% Nts., 10/15/23(7) 400,000 341,516
21 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------
RETAIL: GENERAL--0.4%
Federated Department Stores, Inc., 6.125% Cv. Sub. Nts., 9/1/01(4) $ 750,000 $ 737,779
- ----------------------------------------------------------------------------------------------------
Price/Costco Cos., Inc., 7.125% Sr. Nts., 6/15/05 550,000 553,699
------------
1,291,478
- ----------------------------------------------------------------------------------------------------
CONSUMER STAPLES--3.6%
- ----------------------------------------------------------------------------------------------------
BROADCASTING--0.5%
British Sky Broadcasting Group plc, 8.20% Nts., 7/15/09(7) 400,000 389,891
- ----------------------------------------------------------------------------------------------------
CSC Holdings, Inc., 7.625% Sr. Unsec. Debs., 7/15/18 1,000,000 911,250
------------
1,301,141
- ----------------------------------------------------------------------------------------------------
ENTERTAINMENT--0.8%
Tricon Global Restaurants, Inc., 7.45% Sr. Unsec. Nts., 5/15/05 1,000,000 961,591
- ----------------------------------------------------------------------------------------------------
Viacom, Inc.:
6.75% Sr. Unsec. Nts., 1/15/03 530,000 524,973
7.50% Sr. Nts., 1/15/02 750,000 761,791
------------
2,248,355
- ----------------------------------------------------------------------------------------------------
FOOD--1.2%
CPC International, Inc., 6.15% Unsec. Nts., Series C, 1/15/06 500,000 480,176
- ----------------------------------------------------------------------------------------------------
Dole Food Co., 6.75% Nts., 7/15/00 650,000 650,539
- ----------------------------------------------------------------------------------------------------
Grand Metro Inventory Corp., 7.125% Nts., 9/15/04 1,250,000 1,265,001
- ----------------------------------------------------------------------------------------------------
RACERS-Kellogg-98-1, 5.75% Nts., 2/2/017 1,000,000 994,108
------------
3,389,824
- ----------------------------------------------------------------------------------------------------
FOOD & DRUG RETAILERS--0.3%
Albertson's, Inc., 7.45% Unsec. Debs., 8/1/29 1,000,000 992,105
- ----------------------------------------------------------------------------------------------------
HOUSEHOLD GOODS--0.8%
Dial Corp. (The), 5.89% Medium-Term Nts., Series A, 10/22/01 750,000 731,795
- ----------------------------------------------------------------------------------------------------
Fort James Corp.:
6.234% Nts., 3/15/01 250,000 249,219
6.875% Sr. Nts., 9/15/07 1,000,000 965,299
- ----------------------------------------------------------------------------------------------------
Kimberly-Clark Corp., 7.875% Debs., 2/1/23 355,000 354,032
------------
2,300,345
22 OPPENHEIMER DISCIPLINED ALLOCATION FUND
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------
ENERGY--2.1%
- ----------------------------------------------------------------------------------------------------
ENERGY SERVICES--1.8%
Coastal Corp., 8.125% Sr. Nts., 9/15/02 $ 565,000 $ 582,310
- ----------------------------------------------------------------------------------------------------
Columbia Gas System, Inc., 6.80% Nts., Series C, 11/28/05 500,000 490,830
- ----------------------------------------------------------------------------------------------------
Gulf Canada Resources Ltd., 8.25% Sr. Nts., 3/15/17 575,000 509,444
- ----------------------------------------------------------------------------------------------------
Louisiana Land & Exploration Co., 7.65% Debs., 12/1/23 990,000 967,491
- ----------------------------------------------------------------------------------------------------
Petroleum Geo-Services ASA, 7.50% Nts., 3/31/07 825,000 821,869
- ----------------------------------------------------------------------------------------------------
Petroliam Nasional Berhad, 6.875% Nts., 7/1/03(7) 500,000 479,332
- ----------------------------------------------------------------------------------------------------
TransCanada PipeLines Ltd., 9.875% Debs., 1/1/21 500,000 595,215
- ----------------------------------------------------------------------------------------------------
Williams Holdings of Delaware, Inc., 6.25% Sr. Unsec. Debs., 2/1/06 750,000 705,497
------------
5,151,988
- ----------------------------------------------------------------------------------------------------
OIL: DOMESTIC--0.3%
Norcen Energy Resources Ltd., 6.80% Debs., 7/2/02 1,000,000 978,830
- ----------------------------------------------------------------------------------------------------
FINANCIAL--4.3%
- ----------------------------------------------------------------------------------------------------
BANKS--0.9%
Chase Manhattan Corp., 10.125% Sub. Nts., 11/1/00 250,000 258,906
- ----------------------------------------------------------------------------------------------------
Fleet Mtg./Norstar Group, Inc., 9.90% Sub. Nts., 6/15/01 360,000 377,653
- ----------------------------------------------------------------------------------------------------
Greenpoint Bank (Brooklyn, New York), 6.70% Sr. Medium-Term
Bank Nts., 7/15/02 1,000,000 984,799
- ----------------------------------------------------------------------------------------------------
Integra Financial Corp., 6.50% Sub. Nts., 4/15/00 110,000 110,136
- ----------------------------------------------------------------------------------------------------
People's Bank of Bridgeport (Connecticut), 7.20% Sub. Nts., 12/1/06 1,000,000 950,438
------------
2,681,932
- ----------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL--1.6%
American General Institutional Capital B, 8.125% Bonds,
Series B, 3/15/46(7) 575,000 582,170
- ----------------------------------------------------------------------------------------------------
Capital One Financial Corp., 7.25% Nts., 12/1/03 1,000,000 979,835
- ----------------------------------------------------------------------------------------------------
Conseco Financing Trust III, 8.796% Bonds, 4/1/27 850,000 752,371
- ----------------------------------------------------------------------------------------------------
Finova Capital Corp., 7.625% Sr. Nts., 9/21/09 750,000 753,363
- ----------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 5.625% Nts., 2/15/01 162,000 160,293
- ----------------------------------------------------------------------------------------------------
GS Escrow Corp., 6.75% Sr. Unsec. Nts., 8/1/01 1,000,000 974,567
- ----------------------------------------------------------------------------------------------------
PHH Corp., 6.50% Nts., 2/1/00 350,000 350,641
------------
4,553,240
- ----------------------------------------------------------------------------------------------------
INSURANCE--1.1%
Conseco, Inc., 6.40% Nts., 6/15/01 500,000 483,415
- ----------------------------------------------------------------------------------------------------
Equitable Life Assurance Society (U.S.A.), 6.95% Surplus Nts.,
12/1/05(7) 500,000 491,637
- ----------------------------------------------------------------------------------------------------
GenAmerica Capital I, 8.525% Nts., 6/30/27(2) 750,000 632,684
- ----------------------------------------------------------------------------------------------------
Life Re Capital Trust I, 8.72% Nts., 6/15/27(7) 500,000 507,222
- ----------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., 6.75% Sr. Unsec. Nts., 11/15/06 1,000,000 969,218
------------
3,084,176
23 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS--0.7%
Chelsea GCA Realty Partner, Inc., 7.75% Unsec. Nts., 1/26/01 $1,050,000 $ 1,056,030
- ----------------------------------------------------------------------------------------------------
First Industrial LP, 7.15% Bonds, 5/15/27 560,000 551,653
- ----------------------------------------------------------------------------------------------------
Simon DeBartolo Group LP, 6.625% Unsec. Nts., 6/15/03 500,000 480,955
-------------
2,088,638
- ----------------------------------------------------------------------------------------------------
HEALTHCARE--0.3%
- ----------------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES--0.3%
Columbia/HCA Healthcare Corp., 6.875% Nts., 7/15/01 120,000 116,730
- ----------------------------------------------------------------------------------------------------
Tenet Healthcare Corp.:
8% Sr. Nts., 1/15/05 325,000 307,938
8.625% Sr. Unsec. Nts., 12/1/03 500,000 491,641
-------------
916,309
- ----------------------------------------------------------------------------------------------------
TRANSPORTATION--0.8%
- ----------------------------------------------------------------------------------------------------
AIR TRANSPORTATION--0.3%
Northwest Airlines Corp., 8.375% Unsec. Nts., 3/15/04 750,000 730,790
- ----------------------------------------------------------------------------------------------------
RAILROADS & TRUCKERS--0.5%
CSX Corp., 7.05% Debs., 5/1/02 145,000 145,798
- ----------------------------------------------------------------------------------------------------
Norfolk Southern Corp., 7.35% Nts., 5/15/07 125,000 124,108
- ----------------------------------------------------------------------------------------------------
Union Pacific Corp.:
7% Nts., 6/15/00 605,000 607,871
7.60% Nts., 5/1/05 500,000 507,943
-------------
1,385,720
- ----------------------------------------------------------------------------------------------------
UTILITIES--2.1%
- ----------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--1.0%
Cleveland Electric Illumination, Inc., 6.86% First Mtg. Nts.,
10/1/08 1,500,000 1,411,833
- ----------------------------------------------------------------------------------------------------
El Paso Electric Co., 8.25% First Mtg. Bonds, Series C, 2/1/03 500,000 512,896
- ----------------------------------------------------------------------------------------------------
Hawaiian Electric Industries, Inc., 6.31% Medium-Term Nts.,
Series B, 2/19/02 1,000,000 980,894
-------------
2,905,623
- ----------------------------------------------------------------------------------------------------
GAS UTILITIES--1.1%
Northern Illinois Gas Co., 6.45% First Mtg. Bonds, 8/1/01 680,000 676,483
- ----------------------------------------------------------------------------------------------------
Southern California Gas Co., 6.38% Medium-Term Nts., 10/29/01 500,000 496,824
- ----------------------------------------------------------------------------------------------------
Tennessee Gas Pipeline Co., 7.50% Bonds, 4/1/17 825,000 810,228
- ----------------------------------------------------------------------------------------------------
Williams Cos., Inc. (The), 6.20% Nts., 8/1/02 1,250,000 1,226,760
-------------
3,210,295
-------------
Total Non-Convertible Corporate Bonds and Notes (Cost $54,233,858) 52,457,362
24 OPPENHEIMER DISCIPLINED ALLOCATION FUND
FACE MARKET VALUE
AMOUNT SEE NOTE 1
====================================================================================================
CONVERTIBLE CORPORATE BONDS AND NOTES--0.0%
- ----------------------------------------------------------------------------------------------------
Geotek Communications, Inc., 12% Cv. Sr. Sub. Nts., 2/15/01(8)
(Cost $92,540) $ 100,000 $ 625
====================================================================================================
SHORT-TERM NOTES--13.1%(9)
- ----------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 5.16%, 11/1/99 14,500,000 14,500,000
- ----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
5.14%, 11/4/99 7,700,000 7,696,676
5.20%, 12/10/99 5,000,000 4,971,833
5.23%, 11/8/99 5,395,000 5,389,514
- ----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.22%, 11/3/99 5,000,000 4,998,550
--------------
Total Short-Term Notes (Cost $37,556,573) 37,556,573
====================================================================================================
REPURCHASE AGREEMENTS--4.3%
- ----------------------------------------------------------------------------------------------------
Repurchase agreement with Zion First National Bank, 5.20%,
dated 10/29/99, to be repurchased at $12,405,373 on 11/1/99,
collateralized by U.S. Treasury Nts., 5.50%-7.875%,
12/31/99-11/15/04, with a value of $12,546,079 and U.S.
Treasury Bonds, 5.625%, 9/30/01, with a value of $109,610
(Cost $12,400,000) 12,400,000 12,400,000
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $299,930,773) 103.0% 296,128,703
- ----------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (3.0) (8,728,838)
----------------------------
NET ASSETS 100.0% $287,399,865
============================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income-producing security.
2. Identifies issues considered to be illiquid or restricted--See Note 6 of
Notes to Financial Statements.
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. Securities with an aggregate market value of $12,380,781 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 5 of Notes to Financial Statements.
6. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
7. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities
have been determined to be liquid under guidelines established by the Board of
Directors. These securities amount to $6,186,685 or 2.15% of the Fund's net
assets as of October 31, 1999.
8. Issuer is in default.
9. Short-term notes are generally traded on a discount basis; the interest rate
is the discount rate received by the Fund at the time of purchase.
See accompanying Notes to Financial Statements.
25 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES October 31, 1999
- --------------------------------------------------------------------------------
================================================================================================================
ASSETS
- ----------------------------------------------------------------------------------------------------------------
Investments, at value (cost $299,930,773)--see accompanying statement $ 296,128,703
- ----------------------------------------------------------------------------------------------------------------
Cash 682,120
- ----------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal paydowns 1,841,161
Investments sold 1,066,292
Daily variation on futures contracts 554,400
Shares of capital stock sold 53,917
Other 3,402
---------------
Total assets 300,329,995
================================================================================================================
LIABILITIES
- ----------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 12,046,692
Shares of capital stock redeemed 564,526
Directors' compensation 93,162
Distribution and service plan fees 62,763
Transfer and shareholder servicing agent fees 36,928
Other 126,059
---------------
Total liabilities 12,930,130
================================================================================================================
NET ASSETS $287,399,865
==============
================================================================================================================
COMPOSITION OF NET ASSETS
- ----------------------------------------------------------------------------------------------------------------
Par value of shares of capital stock $ 19,109
- ----------------------------------------------------------------------------------------------------------------
Additional paid-in capital 263,940,677
- ----------------------------------------------------------------------------------------------------------------
Undistributed net investment income 779,391
- ----------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions 25,841,491
- ----------------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments and translation of
assets and liabilities denominated in foreign currencies (3,180,803)
---------------
Net assets $287,399,865
===============
26 OPPENHEIMER DISCIPLINED ALLOCATION FUND
================================================================================================================
NET ASSET VALUE PER SHARE
- ----------------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $258,159,251 and 17,176,755 shares of capital stock outstanding) $15.03
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $15.95
- ----------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $23,521,762
and 1,547,260 shares of capital stock outstanding) $15.20
- ----------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $5,718,852
and 384,445 shares of capital stock outstanding) $14.88
See accompanying Notes to Financial Statements.
27 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENT OF OPERATIONS For the Year Ended October 31, 1999
- --------------------------------------------------------------------------------
================================================================================================================
INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------------------
Interest $ 9,464,177
- ----------------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $2,439) 2,722,741
--------------
Total income 12,186,918
================================================================================================================
EXPENSES
- ----------------------------------------------------------------------------------------------------------------
Management fees 1,994,511
- ----------------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 732,222
Class B 246,431
Class C 58,740
- ----------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 345,571
- ----------------------------------------------------------------------------------------------------------------
Shareholder reports 148,022
- ----------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 20,104
- ----------------------------------------------------------------------------------------------------------------
Accounting service fees 15,000
- ----------------------------------------------------------------------------------------------------------------
Other 56,993
-------------
Total expenses 3,617,594
Less expenses paid indirectly (9,729)
-------------
Net expenses 3,607,865
================================================================================================================
NET INVESTMENT INCOME 8,579,053
================================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments 23,229,928
Closing of futures contracts 6,180,223
Foreign currency transactions (380)
-------------
Net realized gain 29,409,771
- ----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments (28,349,571)
Translation of assets and liabilities denominated in foreign currencies (892)
-------------
Net change (28,350,463)
-------------
Net realized and unrealized gain 1,059,308
================================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 9,638,361
=============
See accompanying Notes to Financial Statements.
28 OPPENHEIMER DISCIPLINED ALLOCATION FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1999 1998
====================================================================================================
OPERATIONS
- ----------------------------------------------------------------------------------------------------
Net investment income $ 8,579,053 $ 8,315,523
- ----------------------------------------------------------------------------------------------------
Net realized gain 29,409,771 5,047,223
- ----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (28,350,463) 234,047
----------------------------
Net increase in net assets resulting from operations 9,638,361 13,596,793
====================================================================================================
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (8,122,829) (7,782,493)
Class B (502,951) (326,896)
Class C (124,914) (68,904)
- ----------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (7,782,789) (26,053,041)
Class B (594,276) (1,001,059)
Class C (139,060) (171,534)
====================================================================================================
CAPITAL STOCK TRANSACTIONS
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from capital stock
transactions:
Class A (33,744,712) 75,962,031
Class B 2,509,874 13,987,615
Class C 1,126,929 3,532,579
====================================================================================================
NET ASSETS
- ----------------------------------------------------------------------------------------------------
Total increase (decrease) (37,736,367) 71,675,091
- ----------------------------------------------------------------------------------------------------
Beginning of period 325,136,232 253,461,141
-----------------------------
End of period (including undistributed net investment
income of $779,391 and $986,365, respectively) $287,399,865 $325,136,232
-----------------------------
See accompanying Notes to Financial Statements.
29 OPPENHEIMER DISCIPLINED ALLOCATION FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
YEAR YEAR
ENDED ENDED
OCT. 31, DEC. 31,
CLASS A 1999 1998 1997 1996(1) 1995 1994
===============================================================================================================================
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.45 $ 16.81 $ 16.00 $ 15.46 $ 13.44 $ 14.54
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .44 .45 .51(2) .46 .60 .55
Net realized and unrealized gain (loss) (.01) .45 2.25(2) .49 2.59 (.86)
-------------------------------------------------------------------------------
Total income (loss) from
investment operations .43 .90 2.76 .95 3.19 (.31)
- -------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.44) (.45) (.56) (.36) (.60) (.55)
Distributions from net realized gain (.41) (1.81) (1.39) (.05) (.57) (.24)
-------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.85) (2.26) (1.95) (.41) (1.17) (.79)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.03 $15.45 $16.81 $16.00 $15.46 $13.44
===============================================================================
===============================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 2.62% 5.93% 18.82% 6.27% 23.95% (2.11)%
===============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $258,159 $298,558 $243,267 $233,289 $218,099 $177,904
- -------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $293,677 $268,715 $238,821 $228,203 $200,172 $187,655
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income 2.72% 2.96% 3.17% 3.52% 4.00% 3.80%
Expenses 1.04% 1.04%(5) 1.11%(5) 1.11%(5) 1.17%(5) 0.96%
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 122% 97% 98% 85% 55% 115%
1. For the ten months ended October 31, 1996. The Fund changed its fiscal year
end from December 31 to October 31. On March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the Fund.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
4. Annualized for periods of less than one full year.
5. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the period ended October 31, 1999, were $323,956,198 and $354,552,584,
respectively.
See accompanying Notes to Financial Statements.
30 OPPENHEIMER DISCIPLINED ALLOCATION FUND
YEAR PERIOD
ENDED ENDED
OCT. 31, DEC. 31,
CLASS B 1999 1998 1997 1996(1) 1995(7)
======================================================================================================================
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.62 $16.99 $16.16 $15.66 $15.48
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .31 .36 .40(2) .31 .07
Net realized and unrealized gain (loss) -- .43 2.27(2) .54 .70
-------------------------------------------------------------------
Total income (loss) from
investment operations .31 .79 2.67 .85 .77
- ----------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.32) (.35) (.45) (.30) (.07)
Distributions from net realized gain (.41) (1.81) (1.39) (.05) (.52)
-------------------------------------------------------------------
Total dividends and distributions
to shareholders (.73) (2.16) (1.84) (.35) (.59)
Net asset value, end of period $15.20 $15.62 $16.99 $16.16 $15.66
===================================================================
======================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 1.84% 5.10% 17.96% 5.51% 4.93%
======================================================================================================================
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $23,522 $21,754 $8,720 $3,919 $650
- ----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $24,648 $14,235 $6,183 $2,324 $375
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income 1.97% 2.19% 2.32% 2.86% 0.73%
Expenses 1.80% 1.80%(5) 1.89%(5) 1.85%(5) 1.92%(5)
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 122% 97% 98% 85% 55%
1. For the ten months ended October 31, 1996. The Fund changed its fiscal year
end from December 31 to October 31. On March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the Fund.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
4. Annualized for periods of less than one full year.
5. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the period ended October 31, 1999, were $323,956,198 and $354,552,584,
respectively.
7. For the period from October 2, 1995, (inception of offering) to December 31,
1995.
See accompanying Notes to Financial Statements.
31 OPPENHEIMER DISCIPLINED ALLOCATION FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS C YEAR ENDED OCTOBER 31, 1999 1998 1997 1996(8)
====================================================================================================================
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.31 $ 16.70 $ 15.93 $ 15.71
- --------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .32 .37 .44(2) .30
Net realized and unrealized gain (loss) (.01) .40 2.19(2) .32
---------------------------------------------------
Total income (loss) from investment operations .31 .77 2.63 .62
- --------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.33) (.35) (.47) (.35)
Distributions from net realized gain (.41) (1.81) (1.39) (.05)
---------------------------------------------------
Total dividends and distributions to shareholders (.74) (2.16) (1.86) (.40)
Net asset value, end of period $14.88 $15.31 $16.70 $15.93
===================================================
====================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 1.84% 5.10% 17.93% 4.08%
====================================================================================================================
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $5,719 $4,824 $1,473 $188
- --------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $5,876 $2,861 $ 805 $ 57
- --------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income 1.97% 2.18% 2.18% 2.90%
Expenses 1.80% 1.80%(5) 1.92%(5) 1.87%(5)
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 122% 97% 98% 85%
1. For the ten months ended October 31, 1996. The Fund changed its fiscal year
end from December 31 to October 31. On March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the Fund.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
4. Annualized for periods of less than one full year.
5. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the period ended October 31, 1999, were $323,956,198 and $354,552,584,
respectively.
7. For the period from October 2, 1995 (inception of offering) to December 31,
1995.
8. For the period from May 1, 1996 (inception of offering) to October 31, 1996.
See accompanying Notes to Financial Statements.
32 OPPENHEIMER DISCIPLINED ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Disciplined Allocation Fund (the Fund), a series of Oppenheimer
Series Fund, Inc. (the Company), is registered under the Investment Company Act
of 1940, as amended, as a diversified, open-end management investment company.
The Fund's investment objective is to maximize total investment return
(including both capital appreciation and income) principally by allocating its
assets among stocks, corporate bonds, U.S. government securities and money
market instruments, according to changing market conditions. The Fund's
investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund offers
Class A, Class B and Class C shares. Class A shares are sold with a front-end
sales charge on investments up to $1 million. Class B and Class C shares may be
subject to a contingent deferred sales charge (CDSC). All classes of shares have
identical rights to earnings, assets and voting privileges, except that each
class has its own expenses directly attributable to that class and exclusive
voting rights with respect to matters affecting that class. Classes A, B and C
have separate distribution and/or service plans. 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.
- --------------------------------------------------------------------------------
SECURITIES 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 Directors. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Directors 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. Foreign currency exchange contracts are valued based on the
closing prices of the foreign 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.
33 OPPENHEIMER DISCIPLINED ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES Continued
FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), 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.
- --------------------------------------------------------------------------------
DIRECTORS' COMPENSATION. The Fund has adopted a nonfunded retirement plan for
the Fund's independent Directors. Benefits are based on years of service and
fees paid to each Director during the years of service. During the year ended
October 31, 1999, a credit of $28,674 was made for the Fund's projected benefit
obligations and payments of $2,820 were made to retired Directors, resulting in
an accumulated liability of $93,143 as of October 31, 1999.
The Board of Directors has adopted a deferred compensation plan for
independent Directors that enables Directors to elect to defer receipt of all or
a portion of annual compensation they are entitled to receive from the Fund.
Under the plan, the compensation deferred is periodically adjusted as though an
equivalent amount had been invested for the Directors in shares of one or more
Oppenheimer funds selected by the Director. The amount paid to the Director
under the plan will be determined based upon the performance of the selected
funds. Deferral of Directors' fees under the plan will not affect the net assets
of the Fund, and will not materially affect the Fund's assets, liabilities or
net income per share.
34 OPPENHEIMER DISCIPLINED ALLOCATION FUND
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes. The character of distributions made during the year from net
investment income or net realized gains may differ from its ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the fiscal year in which the income or realized gain was recorded by
the Fund.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended October 31, 1999, amounts have been reclassified to reflect an
increase in additional paid-in capital of $32,040, a decrease in undistributed
net investment income of $35,333, and an increase in accumulated net realized
gain on investments of $3,293.
- --------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENTS. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
OTHER. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Foreign dividend income is often
recorded on the payable date. Realized gains and losses on investments and
unrealized appreciation and depreciation are determined on an identified cost
basis, which is the same basis used for federal income tax purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and lia-bilities 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.
35 OPPENHEIMER DISCIPLINED ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
2. SHARES OF CAPITAL STOCK
The Fund has authorized 450 million of $0.001 par value shares of capital stock.
Transactions in shares of capital stock were as follows:
YEAR ENDED OCTOBER 31, 1999 YEAR ENDED OCTOBER 31, 1998
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------
CLASS A
Sold 1,351,571 $ 21,353,382 1,454,634 $ 22,895,924
Dividends and/or
distributions reinvested 965,998 15,250,027 2,193,655 33,253,817
Acquisition--Note 7 -- -- 4,023,572 64,135,741
Redeemed (4,463,822) (70,348,121) (2,818,335) (44,323,451)
--------------------------------------------------------------------------
Net increase (decrease) (2,146,253) $ (33,744,712) 4,853,526 $ 75,962,031
==========================================================================
- --------------------------------------------------------------------------------------------------------------------
CLASS B
Sold 547,606 $ 8,732,198 589,123 $ 9,351,049
Dividends and/or
distributions reinvested 66,056 1,054,288 84,350 1,293,844
Acquisition--Note 7 -- -- 328,973 5,299,757
Redeemed (458,993) (7,276,612) (123,259) (1,957,035)
--------------------------------------------------------------------------
Net increase 154,669 $ 2,509,874 879,187 $ 13,987,615
==========================================================================
- --------------------------------------------------------------------------------------------------------------------
CLASS C
Sold 202,792 $ 3,181,342 193,669 $ 2,998,346
Dividends and/or
distributions reinvested 16,189 252,900 15,173 228,310
Acquisition--Note 7 -- -- 70,016 1,105,546
Redeemed (149,699) (2,307,313) (51,932) (799,623)
--------------------------------------------------------------------------
Net increase 69,282 $ 1,126,929 226,926 $ 3,532,579
==========================================================================
================================================================================
3. UNREALIZED GAINS AND LOSSES ON SECURITIES
As of October 31, 1999, net unrealized depreciation on securities of $3,802,070
was composed of gross appreciation of $10,453,650, and gross depreciation of
$14,255,720.
36 OPPENHEIMER DISCIPLINED ALLOCATION FUND
===============================================================================
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager are in accordance with the
investment advisory agreement with the Fund which provides for a fee of 0.625%
of the first $300 million of average annual net assets of the Fund, 0.50% of the
next $100 million and 0.45% of average annual net assets in excess of $400
million. The Fund's management fee for the year ended October 31, 1999 was 0.62%
of the average annual net assets for each class of shares.
- --------------------------------------------------------------------------------
ACCOUNTING FEES. The Manager acts as the accounting agent for the Fund at an
annual fee of $15,000, plus out-of-pocket costs and expenses reasonably
incurred.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer and shareholder servicing agent for the Fund and other
Oppenheimer funds. OFS's total costs of providing such services are allocated
ratably to these funds.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FEES. Under its General Distributor's Agreement
with the Manager, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of the different classes of shares of the Fund.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares is shown in the table below for the period
indicated.
AGGREGATE CLASS A COMMISSIONS COMMISSIONS COMMISSIONS
FRONT-END FRONT-END ON CLASS A ON CLASS B ON CLASS C
SALES CHARGES SALES CHARGES SHARES SHARES SHARES
ON CLASS A RETAINED BY ADVANCED BY ADVANCED BY ADVANCED BY
YEAR ENDED SHARES DISTRIBUTOR DISTRIBUTOR(1) DISTRIBUTOR(1) DISTRIBUTOR(1)
- -----------------------------------------------------------------------------------------------------------------------
October 31, 1999 $400,298 $295,333 $46,607 $250,032 $25,954
1. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
CLASS A CLASS B CLASS C
CONTINGENT DEFERRED CONTINGENT DEFERRED CONTINGENT DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES
YEAR ENDED RETAINED BY DISTRIBUTOR RETAINED BY DISTRIBUTOR RETAINED BY DISTRIBUTOR
- ------------------------------------------------------------------------------------------------------------------
October 31, 1999 $2,000 $57,857 $3,487
The Fund has adopted a Service Plan for Class A shares and Distribution and
Service Plans for Class B and Class C shares under Rule 12b-1 of the Investment
Company Act. Under those plans the Fund pays the Distributor for all or a
portion of its costs incurred in connection with the distribution and/or
servicing of the shares of the particular class.
37 OPPENHEIMER DISCIPLINED ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
CLASS A SERVICE PLAN FEES. Under the Class A service plan, the Distributor
currently uses the fees it receives from the Fund to pay brokers, dealers and
other financial institutions. The Class A service plan permits reimbursements to
the Distributor at a rate of up to 0.25% of average annual net assets of Class A
shares. The Distributor makes payments to plan recipients quarterly at an annual
rate not to exceed 0.25% of the average annual net assets consisting of Class A
shares of the Fund. For the fiscal year ended October 31, 1999, payments under
the Class A Plan totaled $732,222, all of which was paid by the Distributor to
recipients. That included $587,717 paid to an affiliate of the Distributor's
parent company. Any unreimbursed expenses the Distributor incurs with respect to
Class A shares in any fiscal year cannot be recovered in subsequent years.
- --------------------------------------------------------------------------------
CLASS B AND CLASS C DISTRIBUTION AND SERVICE PLAN FEES. Under each plan, service
fees and distribution 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 Class B and Class C plans provide for the
Distributor to be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts paid by the Fund under
the plan during the period for which the fee is paid.
The Distributor retains the asset-based sales charge on Class B shares. The
Distributor retains the asset-based sales charge on Class C shares during the
first year the shares are outstanding. The asset-based sales charges on Class B
and Class C shares allow investors to buy shares without a front-end sales
charge while allowing the Distributor to compensate dealers that sell those
shares.
The Distributor's actual expenses in selling Class B and Class C shares may
be more than the payments it receives from the contingent deferred sales charges
collected on redeemed shares and from the Fund under the plans. If either the
Class B or the Class C plan is terminated by the Fund, the Board of Directors
may allow the Fund to continue payments of the asset-based sales charge to the
Distributor for distributing shares before the plan was terminated. The plans
allow for the carry-forward of distribution expenses, to be recovered from
asset-based sales charges in subsequent fiscal periods.
Distribution fees paid to the Distributor for the year ended October 31,
1999, were as follows:
DISTRIBUTOR'S DISTRIBUTOR'S
AGGREGATE UNREIMBURSED
UNREIMBURSED EXPENSES AS %
TOTAL PAYMENTS AMOUNT RETAINED EXPENSES OF NET ASSETS
UNDER PLAN BY DISTRIBUTOR UNDER PLAN OF CLASS
- ------------------------------------------------------------------------------------------------------------------
Class B Plan $246,431 $206,253 $689,149 2.93%
Class C Plan 58,740 33,227 67,663 1.18
38 OPPENHEIMER DISCIPLINED ALLOCATION FUND
================================================================================
5. FUTURES CONTRACTS
The Fund may buy and sell futures contracts in order to gain exposure to or to
seek to 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 (initial margin) in an amount 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 may recognize 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
and/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.
As of October 31, 1999, the Fund had outstanding futures contracts as follows:
EXPIRATION NUMBER OF VALUATION AS OF UNREALIZED
CONTRACT DESCRIPTION DATE CONTRACTS OCTOBER 31, 1999 APPRECIATION
- ---------------------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
NASDAQ 100 Index 12/16/99 44 $11,677,600 $ 495,077
Standard & Poor's 500 Index 12/16/99 22 7,569,100 126,503
-----------------
$621,580
=================
================================================================================
6. ILLIQUID OR RESTRICTED SECURITIES
As of October 31, 1999, 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 Directors as reflecting fair value. A security may also 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
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limitation. The aggregate value of illiquid or restricted
securities subject to this limitation as of October 31, 1999, was $2,716,406,
which represents 0.95% of the Fund's net assets.
39 OPPENHEIMER DISCIPLINED ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
7. ACQUISITION OF OPPENHEIMER LIFESPAN BALANCED FUND
On June 12, 1998, the Fund acquired all of the net assets of Oppenheimer
LifeSpan Balanced Fund, pursuant to an agreement and plan of reorganization
approved by the Oppenheimer LifeSpan Balanced Fund shareholders on June 9, 1998.
The Fund issued (at an exchange ratio of 0.711330 for Class A, 0.789560 for
Class B, and 0.716167 for Class C of the Fund to one share of Oppenheimer
LifeSpan Balanced Fund) 4,023,572, 328,973 and 70,016 shares of capital stock
for Class A, Class B and Class C, respectively, valued at $64,135,741,
$5,299,757 and $1,105,546 in exchange for the net assets, resulting in combined
Class A net assets of $313,743,282, Class B net assets of $18,371,573 and Class
C net assets of $3,985,465 on June 12, 1998. The net assets acquired included
net unrealized appreciation of $3,969,222. The exchange qualified as a tax-free
reorganization for federal income tax purposes.
================================================================================
8. BANK BORROWINGS
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.45%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of 0.08%
per annum.
The Fund had no borrowings outstanding during the year ended October 31,
1999.
40 OPPENHEIMER DISCIPLINED ALLOCATION FUND
INDEPENDENT AUDITORS' REPORT
================================================================================
THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
OPPENHEIMER DISCIPLINED ALLOCATION FUND:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Disciplined Allocation Fund as of
October 31, 1999, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended and the financial highlights for each of the years in
the three-year period then ended, and the ten months ended October 31, 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. The financial
highlights for each of the years in the two-year period ended December 31, 1995,
were audited by other auditors whose report dated February 9, 1996, expressed an
unqualified opinion on this information.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1999, by correspondence with the custodian and brokers; and where
confirmations were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Disciplined Allocation Fund as of October 31, 1999, the results of
its operations for the year then ended, the changes in its net assets for each
of the years in the two-year period then ended, and the financial highlights for
each of the years in the three-year period then ended, and the ten months ended
October 31, 1996, in conformity with generally accepted accounting principles.
KPMG LLP
Denver, Colorado
November 19, 1999
41 OPPENHEIMER DISCIPLINED ALLOCATION FUND
FEDERAL INCOME TAX INFORMATION Unaudited
================================================================================
In early 2000 shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1999. Regulations of
the U.S. Treasury Department require the Fund to report this information to the
Internal Revenue Service.
Distributions of $0.5135, $0.4832 and $0.4848 per share were paid to Class
A, Class B and Class C shareholders, respectively, on December 30, 1998, of
which $0.4095 was designated as a "capital gain distribution" for federal income
tax purposes. Whether received in stock or in cash, the capital gain
distribution should be treated by shareholders as a gain from the sale of
capital assets held for more than one year (long-term capital gains).
Dividends paid by the Fund during the fiscal year ended October 31,
1999 which are not designated as capital gain distributions should be
multiplied by 15.17% to arrive at the net amount eligible for the corporate
dividend-received deduction.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
42 OPPENHEIMER DISCIPLINED ALLOCATION FUND
OPPENHEIMER DISCIPLINED ALLOCATION FUND
A Series of Oppenheimer Series Fund, Inc.
==========================================================================================
OFFICERS AND DIRECTORS Leon Levy, Chairman of the Board of Directors
Donald W. Spiro, Vice Chairman of the Board of Directors
Bridget A. Macaskill, Director and President
Robert G. Galli, Director
Phillip A. Griffiths, Director
Benjamin Lipstein, Director
Elizabeth B. Moynihan, Director
Kenneth A. Randall, Director
Edward V. Regan, Director
Russell S. Reynolds, Jr., Director
Pauline Trigere, Director
Clayton K. Yeutter, Director
Peter M. Antos, Vice President
Stephen F. Libera, Vice President
Michael C. Strathearn, Vice President
Kenneth B. White, Vice President
Arthur J. Zimmer, Vice President
Andrew J. Donohue, Secretary
Brian W. Wixted, Treasurer
Robert G. Zack, Assistant Secretary
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
==========================================================================================
INVESTMENT ADVISOR OppenheimerFunds, Inc.
==========================================================================================
DISTRIBUTOR OppenheimerFunds Distributor, Inc.
==========================================================================================
TRANSFER AND SHAREHOLDER OppenheimerFunds Services
SERVICING AGENT
==========================================================================================
CUSTODIAN OF The Bank of New York
PORTFOLIO SECURITIES
==========================================================================================
INDEPENDENT AUDITORS KPMG LLP
==========================================================================================
LEGAL COUNSEL Mayer, Brown & Platt
This is a copy of a report to shareholders of
Oppenheimer Disciplined Allocation Fund. This report
must be preceded or accompanied by a Prospectus of
Oppenheimer Disciplined Allocation Fund. For
material information concerning the Fund, see the
Prospectus.
SHARES OF OPPENHEIMER FUNDS ARE NOT DEPOSITS OR
OBLIGATIONS OF ANY BANK, ARE NOT GUARANTEED BY ANY
BANK, ARE NOT INSURED BY THE FDIC OR ANY OTHER
AGENCY, AND INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
43 OPPENHEIMER DISCIPLINED ALLOCATION FUND
OPPENHEIMERFUNDS FAMILY
=================================================================================================
GLOBAL EQUITY
Developing Markets Fund Global Fund
International Small Company Fund Quest Global Value Fund
Europe Fund Global Growth & Income Fund
International Growth Fund
=================================================================================================
EQUITY
Stock Stock & Bond
Enterprise Fund(1) Main Street(R) Growth & Income Fund
Discovery Fund Quest Opportunity Value Fund
Main Street(R) Small Cap Fund Total Return Fund
Quest Small Cap Value Fund Quest Balanced Value Fund
MidCap Fund Capital Income Fund(2)
Capital Appreciation Fund Multiple Strategies Fund
Growth Fund Disciplined Allocation Fund
Disciplined Value Fund Convertible Securities Fund
Quest Value Fund
Trinity Growth Fund Specialty
Trinity Core Fund Real Asset Fund
Trinity Value Fund Gold & Special Minerals Fund
=================================================================================================
FIXED INCOME
Taxable Municipal
International Bond Fund California Municipal Fund(3)
World Bond Fund Main Street(R) California Municipal Fund(3)
High Yield Fund Florida Municipal Fund(3)
Champion Income Fund New Jersey Municipal Fund(3)
Strategic Income Fund New York Municipal Fund(3)
Bond Fund Pennsylvania Municipal Fund(3)
Senior Floating Rate Fund Municipal Bond Fund
U.S. Government Trust Insured Municipal Fund
Limited-Term Government Fund Intermediate Municipal Fund
Rochester Division
Rochester Fund Municipals
Limited Term New York Municipal Fund
=================================================================================================
MONEY MARKET(4)
Money Market Fund Cash Reserves
1. Effective July 1, 1999, this fund is closed to new investors. See prospectus
for details.
2. On 4/1/99, the Fund's name was changed from "Oppenheimer Equity Income
Fund."
3. Available to investors only in certain states.
4. An investment in money market funds is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
these funds may seek to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in these funds.
Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc., Two
World Trade Center, New York, NY10048-0203.
(C) Copyright 1999 OppenheimerFunds, Inc. All rights reserved.
44 OPPENHEIMER DISCIPLINED ALLOCATION FUND
INFORMATION AND SERVICES
As an Oppenheimer fund shareholder, you can benefit from special services
designed to make investing simple. Whether it's automatic investment plans,
timely market updates, or immediate account access, you can count on us
whenever you need assistance. So call us today, or visit our website--we're
here to help.
INTERNET
24-hr access to account information and transactions
WWW.OPPENHEIMERFUNDS.COM
- --------------------------------------------------------------------------------
GENERAL INFORMATION
Mon-Fri 8:30am-9pm ET, Sat 10am-4pm ET
1.800.525.7048
- --------------------------------------------------------------------------------
TELEPHONE TRANSACTIONS
Mon-Fri 8:30am-9pm ET, Sat 10am-4pm ET
1.800.852.8457
- --------------------------------------------------------------------------------
PHONELINK
24-hr automated information and automated transactions
1.800.533.3310
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS DEVICE FOR THE DEAF (TDD)
Mon-Fri 8:30am-7pm ET
1.800.843.4461
- --------------------------------------------------------------------------------
OPPENHEIMERFUNDS INFORMATION HOTLINE
24 hours a day, timely and insightful messages on the economy and issues that
may affect your investments
1.800.835.3104
- --------------------------------------------------------------------------------
TRANSFER AND SHAREHOLDER SERVICING AGENT
OppenheimerFunds Services
P.O. Box 5270, Denver, CO 80217-5270
[LOGO] OppenheimerFunds(R)
Distributor, Inc.
RA0205.001.1099 December 30, 1999
[desert scene]
Annual Report December 31, 1999
Oppenheimer
Total Return Fund, Inc.
[logo] OppenheimerFunds(R)
The Right Way to Invest
REPORT HIGHLIGHTS
In a robust U.S. economic environment, the Fund showed strong gains from its
growth-oriented holdings, while value-oriented stocks languished.
Our strongest gains came from holdings in the technology and retail sectors.
During the period, we reduced our holdings in the weaker-performing financial
and health-care sectors.
Contents
[sidebar text]
- -----------------------------
1 President's Letter
3 An Interview
with Your Fund's
Managers
7 Fund Performance
12 Financial
Statements
35 Independent
Auditors' Report
36 Federal
Income Tax
Information
37 Officers and Directors
- -----------------------------
[callout]
- -----------------------
Average Annual
Total Returns
For the 1-Year Period
Ended 12/31/99*
Class A
Without With
Sales Chg. Sales Chg.
- -----------------------
18.34% 11.53%
Class B
Without With
Sales Chg. Sales Chg.
- -----------------------
17.37% 12.37%
Class C
Without With
Sales Chg. Sales Chg.
- -----------------------
17.37% 16.37%
Class Y
Without With
Sales Chg. Sales Chg.
- -----------------------
18.53% 18.53%
- -----------------------
[end callout]
- -----------------------
Not FDIC Insured.
No Bank Guarantee.
May Lose Value.
- -----------------------
*See page 10 for further details.
PRESIDENT'S LETTER
Dear shareholder,
Whenever a new year begins--let alone a new decade or century--it makes
sense to pause a moment to assess where we've been and where we're going.
In retrospect, U.S. stocks and bonds in 1999 were subject to sudden and
substantial swings in investor sentiment because of economic uncertainty. When
the year began, investors were concerned that growth in the United States might
slow in response to economic weakness overseas. At mid-year, investors were
concerned that the economy was too strong, potentially rekindling inflationary
pressures. Yet, by year end, it became clearer that while the U.S. economy grew
robustly in 1999, inflation remained at low levels. Indeed, investors appeared
more comfortable with the economy after the Federal Reserve Board demonstrated
its inflation-fighting resolve by raising interest rates three times between
June and November.
As is normal in a rising-interest-rate environment, bond prices generally
declined in 1999, led lower by U.S. Treasury bonds. In the stock market, while
most major indices advanced, strong performance was mostly limited to a handful
of large-capitalization growth companies, principally in the technology arena.
Smaller and value-oriented stocks provided particularly lackluster returns, and
overall, foreign stocks outperformed U.S. stocks in 1999.
Looking forward, we expect the U.S. economy to remain on a
moderate-growth, low-inflation course. As recent revisions of 1999's economic
statistics demonstrated, the economy has defied many analysts' forecasts by
growing at a strong rate, which should be positive for the bond market.
Similarly, positive economic forces could help the stock market's performance
broaden to include value-oriented and smaller stocks.
[photo]
James C. Swain
Chairman
Oppenheimer
Total Return Fund, Inc.
Bridget A. Macaskill
President
Oppenheimer
Total Return Fund, Inc.
1 OPPENHEIMER TOTAL RETURN FUND, INC.
PRESIDENT'S LETTER
We see particularly compelling opportunities outside of the U.S. market.
Many foreign stocks also ended 1999 more attractively valued than large-cap U.S.
stocks, and economic trends in overseas markets could lead to higher stock
prices. In Europe, corporate restructuring has just begun, giving companies
there the same potential for cost-cutting and productivity improvements that
U.S. companies enjoyed 10 years ago. In Japan and Asia, economic recovery is
expected to gain strength, which could allow stocks to rally from relatively low
levels.
Another 1999 trend that should remain in force in 2000 is the growth of
businesses related to the Internet. The rise of e-commerce has been good for
consumers and the economy because of greater price competition, which has helped
keep inflation under control. The Internet has also been good for investors, as
even companies with no earnings have seen their stock prices soar. Clearly,
while the Internet is here to stay, not all "dot-com" companies will survive,
and many of these high-flying Internet stocks will eventually--and perhaps very
suddenly--return to more reasonable levels. The long-term winners are most
likely to be companies that support the Internet's growth with content or
infrastructure.
What else is in store for investors in 2000? While we do not have an
infallible crystal ball, we believe that in almost any investment environment,
consistent success stems from an unwavering focus on fundamental investment
principles such as maintaining a long-term perspective, using diversification to
manage risk and availing oneself of the services of a knowledgeable financial
advisor. Indeed, these principles serve as the foundation for every investment
we offer, helping to make OppenheimerFunds The Right Way to Invest in 2000 and
beyond.
Sincerely,
/s/ James C. Swain /s/ Bridget A, Macaskill
James C. Swain Bridget A. Macaskill
January 24, 2000
These general market views represent opinions of OppenheimerFunds, Inc.
and are not intended to predict or depict performance of any particular fund.
Specific discussion, as it applies to your Fund, is contained in the pages that
follow.
2 OPPENHEIMER TOTAL RETURN FUND, INC.
AN INTERVIEW WITH YOUR FUND'S MANAGERS
[photo]
Portfolio Management
Team (l to r)
John Doney
Bruce Bartlett
Q How did Oppenheimer Total Return Fund, Inc. perform during 1999?
A. We're generally pleased with the Fund's positive performance during the
fiscal year that ended December 31, 1999. In particular, the growth component of
the Fund's portfolio delivered excellent returns, while the value-oriented
holdings served to help reduce the Fund's risk profile.
To what do you attribute the Fund's success?
Throughout 1999, U.S. economic growth remained robust, largely driven by the
performance of technology-oriented companies. However, the possibility that
growth might slow in the face of increasing domestic interest rates gave rise to
economic uncertainty. In such an environment, the market tends to reward
companies that appear most likely to deliver strong and sustainable growth.
These are precisely the kinds of companies on which the Fund's growth portfolio
focuses.
How did you manage the Fund in light of these conditions?
With technology fueling much of the economy's growth, we found many attractive
investments among companies supplying the building blocks of the world's
technological infrastructure. Our exposure to technology-related issues rose
from approximately 9% of the Fund's portfolio at the beginning of the year to
approximately 24% by year's end. In particular, we added to our positions in
companies that are
3 OPPENHEIMER TOTAL RETURN FUND, INC.
AN INTERVIEW WITH YOUR FUND'S MANAGERS
[callout]
"We found
many attractive
investments
among companies
supplying the
building blocks
of the world's
technological
infrastructure."
[end callout]
helping to build today's high-speed, high-capacity data communications and
telecommunications networks. By providing the equipment to increase the
geographical reach and bandwidth of these networks, such companies are profiting
from the explosive growth of the Internet and other forms of business
communications.
We also discovered attractive investments among consumer cyclical
companies, particularly those in the retail and specialty retail areas. Our
holdings included electronics retailers that are benefiting from strong consumer
demand for the latest generation of digital cameras, disk players and other
digital media. Home Depot, Inc., another substantial holding, grew rapidly as
consumers devoted increasing amounts of time and money to their homes.
Did any areas of the Fund's investments exhibit weakness during the period?
Financial stocks proved to be volatile performers during 1999. The sector was
buoyed during the first half of the year by the healthy U.S. economy and signs
of financial strength among worldwide emerging markets. However, financial
stocks generally suffered during the second half of the year under pressure from
slowing earnings and moderate, but consistent, increases in long-term interest
rates. In response, we significantly reduced our position in financial
companies.
We also reduced our healthcare holdings. Patents on many of the
blockbuster drugs that have driven the earnings of major pharmaceutical
companies in recent years are about to expire, exposing these companies to
heightened competition from generic drug producers. In addition, both
pharmaceutical firms and healthcare services companies face potential
4 OPPENHEIMER TOTAL RETURN FUND, INC.
[callout]
- ----------------------------
Average Annual
Total Returns
For the Periods Ended 12/31/99(1)
Class A
1-Year 5-Year 10-Year
- ----------------------------
11.53% 21.81% 16.04%
Class B Since
1-Year 5-Year Inception
- ----------------------------
12.37% 22.06% 16.93%
Class C Since
1-Year 5-Year Inception
- ----------------------------
16.37% N/A 21.16%
Class Y Since
1-Year 5-Year Inception
- ----------------------------
18.53% 23.41% 20.04%
- ----------------------------
[end callout]
regulatory challenges that we believe are likely to increase pricing pressures
and negatively affect the industry's earnings. We focused our remaining
healthcare investments on biotechnology firms with strong product pipelines and
an arsenal of recently approved drugs that face relatively little competition.
How did the Fund's value-oriented investments perform?
Despite a brief shift in market sentiment in favor of value-oriented stocks
that occurred in April, most value stocks performed poorly overall during 1999.
By the end of the year, the gap in performance between growth-oriented stocks
and value-oriented stocks had rarely been greater. As a result, the Fund's value
component fell to approximately 40% of the total portfolio by the end of the
period. Nevertheless, the events of April remind us that shifts in market
sentiment can occur suddenly and without warning. We continue to believe that
our value-oriented holdings provide an important foundation for the Fund's
long-term performance in the volatile world markets.
1. See page 10 for further details.
5 OPPENHEIMER TOTAL RETURN FUND, INC.
What is your outlook for the Fund?
We believe that economic conditions remain favorable for growth investing.
Furthermore, as global economies strengthen, we believe growing demand for basic
products and materials is also likely to improve conditions for value-oriented
companies as well. But regardless of the direction the economy and markets take,
we believe the events of the last year underscore the importance of a
diversified, long-term investment strategy that includes both value and growth
components. That's why we rigorously maintain our value-and-growth investment
strategy, and why Oppenheimer Total Return Fund, Inc. remains part of The Right
Way to Invest.
[pie chart]
Portfolio Allocation(2)
o Stocks 81.5%
o Bonds 3.9
o Cash Equivalents 14.6
[end pie chart]
Top Ten Stock Holdings(3)
- ----------------------------------------------------------
JDS Uniphase Corp. 11.0%
- ----------------------------------------------------------
Home Depot, Inc. 6.6
- ----------------------------------------------------------
Microsoft Corp. 5.2
- ----------------------------------------------------------
Wal-Mart Stores, Inc. 3.8
- ----------------------------------------------------------
Cisco Systems, Inc. 3.4
- ----------------------------------------------------------
Tyco International Ltd. 3.3
- ----------------------------------------------------------
Amgen, Inc. 3.3
- ----------------------------------------------------------
EMC Corp. 2.6
- ----------------------------------------------------------
Tandy Corp. 2.2
- ----------------------------------------------------------
Biogen, Inc. 2.0
Top Five Common Stock Industries(3)
- ----------------------------------------------------------
Electronics 14.4%
- ----------------------------------------------------------
Retail: Specialty 13.8
- ----------------------------------------------------------
Computer Software 6.7
- ----------------------------------------------------------
HealthCare/Drugs 6.2
- ----------------------------------------------------------
Computer Hardware 6.1
2. Portfolio is subject to change. Percentages are as of December 31, 1999, and
are based on total market value of investments.
3. Portfolio is subject to change. Percentages are as of December 31, 1999, and
are based on total market value of common stock.
6 OPPENHEIMER TOTAL RETURN FUND, INC.
FUND PERFORMANCE
How has the Fund performed? Below is a discussion, by the Manager, of the Fund's
performance during its fiscal year ended December 31, 1999, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index.
Management's discussion of performance. During the one-year period that ended
December 31, 1999, the performance of Oppenheimer Total Return Fund, Inc.
benefited strongly from the Fund's growth-oriented component. Driven by a strong
U.S. economy and fueled by rapid technological expansion, the Fund's technology
and retail holdings appreciated significantly during the year. The financial and
healthcare sectors proved less attractive, pressured by a variety of economic,
regulatory and competitive forces. In response, we significantly reduced the
Fund's exposure to these sectors. With the exception of a few weeks in April,
the Fund's value-oriented holdings underperformed the portfolio's
growth-oriented component. The Fund's portfolio holdings, allocations and our
management strategies are subject to change.
Comparing the Fund's performance to the market. The graphs that follow show the
performance of a hypothetical $10,000 investment in each class of the Fund held
until December 31, 1999. In the case of Class A shares, performance is measured
over a ten-year period. In the case of Class B shares, performance is measured
from the inception of the class on May 3, 1993. In the case of Class C shares,
performance is measured from the inception of the class on August 29, 1995. In
the case of Class Y shares, performance is measured from the inception of the
class on June 1, 1994. The Fund's performance reflects the deduction of the
maximum initial sales charge on Class A shares, the applicable contingent
deferred sales charge on Class B and Class C shares, and reinvestments of all
dividends and capital gains distributions.
The Fund's performance is compared to the performance of the S&P 500
Index. 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 income but
does not consider the effect of transaction costs, and none of the data in the
graphs shows the effect of taxes. The Fund's performance reflects the effects of
the Fund's 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 investments in the index.
7 OPPENHEIMER TOTAL RETURN FUND, INC.
FUND PERFORMANCE
Class A Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Total Return Fund, Inc. (Class A)
and S&P 500 Index
[line chart]
Oppenheimer Total Return Fund, Inc. Class A S&P 500 Index
12.31.89 9425 10000
9062 9690
12.31.91 12346 12635
13931 13597
12.31.93 16889 14966
15562 15162
12.31.95 20250 20851
24245 25630
12.31.97 30884 34176
37419 43944
12.31.99 44282 53181
[end line chart]
Average Annual Total Return of Class A Shares of the Fund at 12/31/99(1)
1-Year 11.53% 5-Year 21.81% 10-Year 16.04%
Class B Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Total Return Fund, Inc. (Class B)
and S&P 500 Index
[line chart]
Oppenheimer Total Return Fund, Inc. Class B S&P 500 Index
5.3.93 10000 10000
12.31.93 11309 10808
12.31.94 10332 10949
12.31.95 13330 15057
12.31.96 15835 18509
12.31.97 19978 24680
12.31.98 24025 31734
12.31.99 28197 38405
[end line chart]
Average Annual Total Return of Class B Shares of the Fund at 12/31/99(1)
1-Year 12.37% 5-Year 22.06% Life 16.93%
The performance information for the S&P 500 index begins on 12/31/89 for Class
A, 4/30/93 for Class B, 8/31/95 for Class C and 5/31/94 for Class Y.
1. See page 10 for further details.
8 OPPENHEIMER TOTAL RETURN FUND, INC.
Class C Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Total Return Fund, Inc. (Class C)
and S&P 500 Index
[line chart]
Oppenheimer Total Return Fund, Inc. Class C S&P 500 Index
8.29.95 10000 10000
12.31.95 10882 11049
12.31.96 12915 13581
12.31.97 16302 18109
12.31.98 19596 23285
12.31.99 22999 28180
[end line chart]
Average Annual Total Return of Class C Shares of the Fund at 12/31/99(1)
1-Year 16.37% Life 21.16%
Class Y Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Total Return Fund, Inc. (Class Y)
and S&P 500 Index
[line chart]
Oppenheimer Total Return Fund, Inc. Class Y S&P 500 Index
6.1.94 10000 10000
12.31.94 9686 10229
12.31.95 12613 14067
12.31.96 15120 17291
12.31.97 19283 23056
12.31.98 23396 29646
12.31.99 27731 35878
[end line chart]
Average Annual Total Return of Class Y Shares of the Fund at 12/31/99(1)
1-Year 18.53% 5-Year 23.41% Life 20.04%
Past performance is not predictive of future performance. Graphs are not drawn
to the same scale.
9 OPPENHEIMER TOTAL RETURN FUND, INC.
NOTES
In reviewing performance and rankings, please remember that past performance
does not guarantee future results. Investment return and principal value of an
investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost. Because of ongoing
market volatility, the Fund's performance may be subject to substantial
short-term changes. For updates on the Fund's performance, please contact your
financial advisor, call us at 1.800.525.7048 or visit our website,
www.oppenheimerfunds.com.
Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown.
Class A shares were first publicly offered on 10/2/47. The Fund's maximum sales
charge for Class A shares was higher prior to 4/1/91, so actual performance may
have been lower. Class A returns include the current maximum initial sales
charge of 5.75%.
Class B shares of the Fund were first publicly offered on 5/3/93. Class B
returns include the applicable contingent deferred sales charge of 5% (1-year)
and 1% (5-year). Because Class B shares convert to Class A shares 72 months
after purchase, the "life of class" return for Class B uses Class A performance
for the period after conversion. Class B shares are subject to an annual 0.75%
asset-based sales charge.
Class C shares of the Fund were first publicly offered on 8/29/95. Class C
returns include the contingent deferred sales charge of 1% for the 1-year
period. Class C shares are subject to an annual 0.75% asset-based sales charge.
Class Y shares of the Fund were first publicly offered on 6/1/94. Class Y shares
are offered only to certain institutional investors under special agreement with
the Distributor.
An explanation of the different performance calculations is in the
Fund's prospectus.
10 OPPENHEIMER TOTAL RETURN FUND, INC.
------------------------------------------------------------
Financials
11 OPPENHEIMER TOTAL RETURN FUND, INC.
STATEMENT OF INVESTMENTS December 31, 1999
Market Value
Shares See Note 1
=================================================================================================================
Common Stocks--77.8%
- -----------------------------------------------------------------------------------------------------------------
Basic Materials--1.5%
- -----------------------------------------------------------------------------------------------------------------
Chemicals--0.2%
International Flavors & Fragrances, Inc. 260,000 $ 9,815,000
- -----------------------------------------------------------------------------------------------------------------
Paper--1.3%
International Paper Co. 460,412 25,984,502
- -----------------------------------------------------------------------------------------------------------------
Pactiv Corp.(1) 300,000 3,187,500
- -----------------------------------------------------------------------------------------------------------------
Smurfit-Stone Container Corp.(1) 300,000 7,350,000
- -----------------------------------------------------------------------------------------------------------------
Sonoco Products Co. 330,000 7,507,500
- -----------------------------------------------------------------------------------------------------------------
Weyerhaeuser Co. 200,000 14,362,500
------------
58,392,002
- -----------------------------------------------------------------------------------------------------------------
Capital Goods--3.7%
- -----------------------------------------------------------------------------------------------------------------
Aerospace/Defense--0.1%
Goodrich (B.F.) Co. 200,000 5,500,000
- -----------------------------------------------------------------------------------------------------------------
Raytheon Co., Cl. A 12,754 316,459
------------
5,816,459
- -----------------------------------------------------------------------------------------------------------------
Industrial Services--0.3%
Republic Services, Inc.(1) 1,000,000 14,375,000
- -----------------------------------------------------------------------------------------------------------------
Manufacturing--3.3%
American Standard Cos., Inc.(1) 285,300 13,088,137
- -----------------------------------------------------------------------------------------------------------------
Honeywell International, Inc. 337,500 19,469,531
- -----------------------------------------------------------------------------------------------------------------
Tenneco Automotive Inc.(1) 60,000 558,750
- -----------------------------------------------------------------------------------------------------------------
Tyco International Ltd. 2,956,576 114,936,892
------------
148,053,310
- -----------------------------------------------------------------------------------------------------------------
Communication Services--4.3%
- -----------------------------------------------------------------------------------------------------------------
Telecommunications: Long Distance--1.8%
AT&T Corp. 246,554 12,512,615
- -----------------------------------------------------------------------------------------------------------------
MCI WorldCom, Inc.(1) 373,650 19,826,803
- -----------------------------------------------------------------------------------------------------------------
Nortel Networks Corp. 478,200 48,298,200
------------
80,637,618
- -----------------------------------------------------------------------------------------------------------------
Telephone Utilities--2.5%
Bell Atlantic Corp. 758,400 46,689,000
- -----------------------------------------------------------------------------------------------------------------
BellSouth Corp. 360,000 16,852,500
- -----------------------------------------------------------------------------------------------------------------
GTE Corp. 400,000 28,225,000
- -----------------------------------------------------------------------------------------------------------------
SBC Communications, Inc. 400,000 19,500,000
------------
111,266,500
12 OPPENHEIMER TOTAL RETURN FUND, INC.
Market Value
Shares See Note 1
- -----------------------------------------------------------------------------------------------------------------
Consumer Cyclicals--17.3%
- -----------------------------------------------------------------------------------------------------------------
Autos & Housing--0.3%
Delphi Automotive Systems Corp. 293,500 $ 4,622,625
- -----------------------------------------------------------------------------------------------------------------
Lear Corp.(1) 271,800 8,697,600
------------
13,320,225
- -----------------------------------------------------------------------------------------------------------------
Consumer Services--1.3%
Dun & Bradstreet Corp. 600,000 17,700,000
- -----------------------------------------------------------------------------------------------------------------
Young & Rubicam, Inc. 557,000 39,407,750
------------
57,107,750
- -----------------------------------------------------------------------------------------------------------------
Leisure & Entertainment--0.6%
Carnival Corp. 400,000 19,125,000
- -----------------------------------------------------------------------------------------------------------------
Hasbro, Inc. 300,000 5,718,750
------------
24,843,750
- -----------------------------------------------------------------------------------------------------------------
Media--0.0%
R.H. Donnelley Corp.(1) 100,000 1,887,500
- -----------------------------------------------------------------------------------------------------------------
Retail: General--4.3%
Kohl's Corp.(1) 820,000 59,193,750
- -----------------------------------------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 1,900,000 131,337,500
------------
190,531,250
- -----------------------------------------------------------------------------------------------------------------
Retail: Specialty--10.8%
Abercrombie & Fitch Co., Cl. A(1) 720,024 19,215,640
- -----------------------------------------------------------------------------------------------------------------
AutoNation, Inc.(1) 1,900,000 17,575,000
- -----------------------------------------------------------------------------------------------------------------
AutoZone, Inc.(1) 500,000 16,156,250
- -----------------------------------------------------------------------------------------------------------------
Best Buy Co., Inc.(1) 1,120,000 56,210,000
- -----------------------------------------------------------------------------------------------------------------
Circuit City Stores-Circuit City Group 600,000 27,037,500
- -----------------------------------------------------------------------------------------------------------------
Home Depot, Inc. 3,341,691 229,114,689
- -----------------------------------------------------------------------------------------------------------------
Intimate Brands, Inc., Cl. A 100,000 4,312,500
- -----------------------------------------------------------------------------------------------------------------
Linens 'N Things, Inc.(1) 555,800 16,465,575
- -----------------------------------------------------------------------------------------------------------------
OfficeMax, Inc.(1) 1,900,000 10,450,000
- -----------------------------------------------------------------------------------------------------------------
Sherwin-Williams Co. 302,200 6,346,200
- -----------------------------------------------------------------------------------------------------------------
Tandy Corp. 1,515,000 74,519,062
------------
477,402,416
- -----------------------------------------------------------------------------------------------------------------
Consumer Staples--4.3%
- -----------------------------------------------------------------------------------------------------------------
Beverages--0.4%
Anheuser-Busch Cos., Inc. 250,000 17,718,750
13 OPPENHEIMER TOTAL RETURN FUND, INC.
STATEMENT OF INVESTMENTS Continued
Market Value
Shares See Note 1
- -----------------------------------------------------------------------------------------------------------------
Broadcasting--0.5%
Fox Entertainment Group, Inc., A Shares(1) 200,000 $ 4,987,500
- -----------------------------------------------------------------------------------------------------------------
Infinity Broadcasting Corp., Cl. A(1) 500,100 18,097,369
------------
23,084,869
- -----------------------------------------------------------------------------------------------------------------
Entertainment--1.1%
Brinker International, Inc.(1) 500,000 12,000,000
- -----------------------------------------------------------------------------------------------------------------
Royal Caribbean Cruises Ltd. 700,000 34,518,750
------------
46,518,750
- -----------------------------------------------------------------------------------------------------------------
Food--0.5%
General Mills, Inc. 200,000 7,150,000
- -----------------------------------------------------------------------------------------------------------------
Heinz (H.J.) Co. 200,000 7,962,500
- -----------------------------------------------------------------------------------------------------------------
Nabisco Group Holdings Corp. 700,000 7,437,500
------------
22,550,000
- -----------------------------------------------------------------------------------------------------------------
Food & Drug Retailers--0.9%
CVS Corp. 943,000 37,661,062
- -----------------------------------------------------------------------------------------------------------------
Kroger Co.(1) 100,000 1,887,500
------------
39,548,562
- -----------------------------------------------------------------------------------------------------------------
Household Goods--0.8%
Dial Corp. (The) 950,000 23,096,875
- -----------------------------------------------------------------------------------------------------------------
Newell Rubbermaid, Inc. 400,000 11,600,000
------------
34,696,875
- -----------------------------------------------------------------------------------------------------------------
Tobacco--0.1%
Philip Morris Cos., Inc. 200,000 4,637,500
- -----------------------------------------------------------------------------------------------------------------
Energy--3.3%
- -----------------------------------------------------------------------------------------------------------------
Energy Services--0.7%
Coastal Corp. 400,000 14,175,000
- -----------------------------------------------------------------------------------------------------------------
Schlumberger Ltd. 253,600 14,265,000
- -----------------------------------------------------------------------------------------------------------------
Transocean Sedco Forex, Inc. 49,096 1,653,921
------------
30,093,921
- -----------------------------------------------------------------------------------------------------------------
Oil: Domestic--2.5%
Atlantic Richfield Co. 150,000 12,975,000
- -----------------------------------------------------------------------------------------------------------------
Conoco, Inc., Cl. B 624,600 15,536,925
- -----------------------------------------------------------------------------------------------------------------
Exxon Mobil Corp. 564,030 45,439,667
- -----------------------------------------------------------------------------------------------------------------
Tosco Corp. 400,000 10,875,000
- -----------------------------------------------------------------------------------------------------------------
Unocal Corp. 300,000 10,068,750
- -----------------------------------------------------------------------------------------------------------------
USX-Marathon Group 600,000 14,812,500
------------
109,707,842
14 OPPENHEIMER TOTAL RETURN FUND, INC.
Market Value
Shares See Note 1
- -----------------------------------------------------------------------------------------------------------------
Oil: International--0.1%
Royal Dutch Petroleum Co., NY Shares 100,000 $ 6,043,750
- -----------------------------------------------------------------------------------------------------------------
Financial--9.8%
- -----------------------------------------------------------------------------------------------------------------
Banks--4.0%
Bank of America Corp. 582,900 29,254,294
- -----------------------------------------------------------------------------------------------------------------
Bank One Corp. 330,000 10,580,625
- -----------------------------------------------------------------------------------------------------------------
Chase Manhattan Corp. 300,000 23,306,250
- -----------------------------------------------------------------------------------------------------------------
East West Bancorp, Inc.(2) 1,000,000 11,437,500
- -----------------------------------------------------------------------------------------------------------------
Fifth Third Bancorp 310,000 22,746,250
- -----------------------------------------------------------------------------------------------------------------
First Union Corp. 400,000 13,125,000
- -----------------------------------------------------------------------------------------------------------------
Firstar Corp. 625,000 13,203,125
- -----------------------------------------------------------------------------------------------------------------
FleetBoston Financial Corp. 200,600 6,983,387
- -----------------------------------------------------------------------------------------------------------------
KeyCorp 400,000 8,850,000
- -----------------------------------------------------------------------------------------------------------------
National City Corp. 620,000 14,686,250
- -----------------------------------------------------------------------------------------------------------------
PNC Bank Corp. 270,000 12,015,000
- -----------------------------------------------------------------------------------------------------------------
Summit Bancorp 360,000 11,025,000
------------
177,212,681
- -----------------------------------------------------------------------------------------------------------------
Diversified Financial--3.9%
American Express Co. 50,000 8,312,500
- -----------------------------------------------------------------------------------------------------------------
Anthracite Capital, Inc. 400,000 2,550,000
- -----------------------------------------------------------------------------------------------------------------
Citigroup, Inc. 1,250,700 69,492,019
- -----------------------------------------------------------------------------------------------------------------
Freddie Mac 200,000 9,412,500
- -----------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 108,200 10,191,087
- -----------------------------------------------------------------------------------------------------------------
Household International, Inc. 759,990 28,309,628
- -----------------------------------------------------------------------------------------------------------------
Imperial Credit Commercial Mortgage Investment Corp. 500,000 5,687,500
- -----------------------------------------------------------------------------------------------------------------
Schwab (Charles) Corp. 981,400 37,661,225
------------
171,616,459
- -----------------------------------------------------------------------------------------------------------------
Insurance--1.6%
Aetna, Inc. 225,000 12,557,813
- -----------------------------------------------------------------------------------------------------------------
AFLAC, Inc. 275,000 12,976,563
- -----------------------------------------------------------------------------------------------------------------
American General Corp. 300,000 22,762,500
- -----------------------------------------------------------------------------------------------------------------
Enhance Financial Services Group, Inc. 600,000 9,750,000
- -----------------------------------------------------------------------------------------------------------------
St. Paul Cos., Inc. 400,000 13,475,000
------------
71,521,876
- -----------------------------------------------------------------------------------------------------------------
Savings & Loans--0.3%
Local Financial Corp.(1) 400,000 4,150,000
- -----------------------------------------------------------------------------------------------------------------
Washington Mutual, Inc. 300,000 7,800,000
------------
11,950,000
15 OPPENHEIMER TOTAL RETURN FUND, INC.
STATEMENT OF INVESTMENTS Continued
Market Value
Shares See Note 1
- -----------------------------------------------------------------------------------------------------------------
Healthcare--5.9%
- -----------------------------------------------------------------------------------------------------------------
Healthcare/Drugs--4.9%
American Home Products Corp. 300,000 $ 11,831,250
- -----------------------------------------------------------------------------------------------------------------
Amgen, Inc.(1) 1,900,000 114,118,750
- -----------------------------------------------------------------------------------------------------------------
Biogen, Inc.(1) 827,800 69,949,100
- -----------------------------------------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 300,000 19,256,250
------------
215,155,350
- -----------------------------------------------------------------------------------------------------------------
Healthcare/Supplies & Services--1.0%
Bausch & Lomb, Inc. 150,000 10,265,625
- -----------------------------------------------------------------------------------------------------------------
Cardinal Health, Inc. 495,300 23,712,488
- -----------------------------------------------------------------------------------------------------------------
HEALTHSOUTH Corp.(1) 430,000 2,311,250
- -----------------------------------------------------------------------------------------------------------------
Medtronic, Inc. 229,000 8,344,188
------------
44,633,551
- -----------------------------------------------------------------------------------------------------------------
Technology--24.0%
- -----------------------------------------------------------------------------------------------------------------
Computer Hardware--4.7%
Dell Computer Corp.(1) 790,000 40,290,000
- -----------------------------------------------------------------------------------------------------------------
EMC Corp.(1) 833,300 91,038,025
- -----------------------------------------------------------------------------------------------------------------
Gateway, Inc.(1) 400,700 28,875,444
- -----------------------------------------------------------------------------------------------------------------
Lexmark International Group, Inc., Cl. A(1) 552,500 50,001,250
------------
210,204,719
- -----------------------------------------------------------------------------------------------------------------
Computer Software--5.2%
Compuware Corp.(1) 1,335,000 49,728,750
- -----------------------------------------------------------------------------------------------------------------
Microsoft Corp.(1) 1,545,861 180,479,272
------------
230,208,022
- -----------------------------------------------------------------------------------------------------------------
Communications Equipment--2.6%
Cisco Systems, Inc.(1) 1,094,000 117,194,750
- -----------------------------------------------------------------------------------------------------------------
Electronics--11.2%
Intel Corp. 290,000 23,870,625
- -----------------------------------------------------------------------------------------------------------------
JDS Uniphase Corp.(1) 2,359,416 380,603,294
- -----------------------------------------------------------------------------------------------------------------
Motorola, Inc. 225,000 33,131,250
- -----------------------------------------------------------------------------------------------------------------
Solectron Corp.(1) 350,000 33,293,750
- -----------------------------------------------------------------------------------------------------------------
Waters Corp.(1) 500,000 26,500,000
------------
497,398,919
- -----------------------------------------------------------------------------------------------------------------
Photography--0.3%
Eastman Kodak Co. 200,000 13,250,000
16 OPPENHEIMER TOTAL RETURN FUND, INC.
Market Value
Shares See Note 1
- -----------------------------------------------------------------------------------------------------------------
Utilities--3.7%
- -----------------------------------------------------------------------------------------------------------------
Electric Utilities--2.2%
AES Corp. (The)(1) 561,000 $ 41,934,750
- -----------------------------------------------------------------------------------------------------------------
Allegheny Energy, Inc. 210,000 5,656,875
- -----------------------------------------------------------------------------------------------------------------
Carolina Power & Light Co. 110,000 3,348,125
- -----------------------------------------------------------------------------------------------------------------
DQE, Inc. 144,100 4,989,462
- -----------------------------------------------------------------------------------------------------------------
Illinova Corp. 300,000 10,425,000
- -----------------------------------------------------------------------------------------------------------------
New Century Energies, Inc. 200,000 6,075,000
- -----------------------------------------------------------------------------------------------------------------
Southern Co. 298,500 7,014,750
- -----------------------------------------------------------------------------------------------------------------
Texas Utilities Co. 200,000 7,112,500
- -----------------------------------------------------------------------------------------------------------------
Unicom Corp. 300,000 10,050,000
--------------
96,606,462
- -----------------------------------------------------------------------------------------------------------------
Gas Utilities--1.5%
Enron Corp. 1,500,000 66,562,500
--------------
Total Common Stocks (Cost $2,041,966,331) 3,451,564,888
=================================================================================================================
Preferred Stocks--0.3%
TCI Pacific Communications, Inc., 5% Cum. Cv. Sr., Cl. A (Cost $4,851,250) 50,000 15,414,300
=================================================================================================================
Other Securities--2.1%
Coastal Corp., 6.625% Cv. Preferred Redeemable Increased
Dividend Equity Securities 300,000 6,993,750
- -----------------------------------------------------------------------------------------------------------------
Dollar General Corp., 8.50% Cv. Structured Yield Product
Exchangeable for Stock 271,100 9,793,487
- -----------------------------------------------------------------------------------------------------------------
MediaOne Group, Inc., 6.25% Cv. Premium Income Exchangeable Securities
for Airtouch Communications, Inc. Common Stock 258,000 27,864,000
- -----------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 6.25% Structured Yield Product
Exchangeable for Stock of IMC Global, Inc. 90,900 1,624,838
- -----------------------------------------------------------------------------------------------------------------
Newell Financial Trust I, 5.25% Cum. Cv. Quarterly Income
Preferred Securities, Non-Vtg.(2) 163,000 6,214,375
- -----------------------------------------------------------------------------------------------------------------
Premier Parks, Inc., 7.50% Cum. Cv. Premium Income
Equity Securities, Non-Vtg. 232,000 12,528,000
- -----------------------------------------------------------------------------------------------------------------
Reliant Energy, Inc., 7% Automatic Common Exchange Securities
for Time Warner, Inc. Common Stock 80,000 9,640,000
- -----------------------------------------------------------------------------------------------------------------
Sovereign Capital Trust II, 7.50% Cv. Preferred Income Equity Redeemable Stock(1) 87,900 4,285,125
- -----------------------------------------------------------------------------------------------------------------
St. George Bank, ADR 9% Cv. Structured Yield Product
Exchangeable for Common Stock of St. George Bank(2) 90,000 4,820,625
- -----------------------------------------------------------------------------------------------------------------
Texas Utilities Co., 9.25% Cv. Preferred Redeemable Increased
Dividend Equity Securities, Non-Vtg. 117,600 5,130,300
- -----------------------------------------------------------------------------------------------------------------
Union Pacific Capital Trust, 6.25% Cum. Term Income
Deferrable Equity Securities, Non-Vtg. 87,600 3,646,350
--------------
Total Other Securities (Cost $80,110,206) 92,540,850
17 OPPENHEIMER TOTAL RETURN FUND, INC.
STATEMENT OF INVESTMENTS Continued
Face Market Value
Amount(3) See Note 1
=================================================================================================================
U.S. Government Obligations--3.5%
U.S. Treasury Bonds:
6.625%, 2/15/27 $ 25,675,000 $ 25,434,297
STRIPS, 6.17%, 2/15/20(4) 100,000,000 25,646,800
STRIPS, 6.51%, 8/15/19(4) 100,000,000 26,478,100
STRIPS, 6.92%, 11/15/18(4) 54,000,000 15,044,778
- -----------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
6.25%, 2/15/07 31,200,000 30,712,500
6.625%, 3/31/02 30,050,000 30,265,999
------------
Total U.S. Government Obligations (Cost $158,147,522) 153,582,474
=================================================================================================================
Non-Convertible Corporate Bonds and Notes--0.0%
Dresdner Finance BV, 5.50% Gtd. Nts., 4/30/04 DEM (Cost $279,377) 417,000 425,928
=================================================================================================================
Convertible Corporate Bonds and Notes--1.4%
EMC Corp., 3.25% Cv. Sub. Nts., 3/15/02(2) 4,500,000 43,458,750
- -----------------------------------------------------------------------------------------------------------------
Level One Communications, Inc., 4% Cv. Sub. Nts., 9/1/04(2) 3,500,000 9,480,625
- -----------------------------------------------------------------------------------------------------------------
Offshore Logistics, Inc., 6% Cv. Sub. Nts., 12/15/03(2) 5,000,000 4,118,750
- -----------------------------------------------------------------------------------------------------------------
Sunrise Assisted Living, Inc., 5.50% Cv. Nts., 6/15/02(2) 3,409,000 2,684,588
------------
Total Convertible Corporate Bonds and Notes (Cost $16,490,250) 59,742,713
=================================================================================================================
Short-Term Notes--14.3%
CIT Group Holdings, Inc., 6.27%, 1/26/00(5) 50,000,000 49,782,292
- -----------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank:
5.60%, 1/7/00(5) 25,000,000 24,976,667
5.78%, 1/21/00(5) 25,000,000 24,919,722
- -----------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
5.60%, 1/13/00(5) 33,110,000 33,048,084
5.61%, 1/11/00(5) 44,728,000 44,658,299
5.65%, 1/10/00(5) 50,000,000 49,929,375
5.76%, 1/28/00(5) 40,000,000 39,827,200
- -----------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
5.61%, 1/18/00(5) 50,000,000 49,867,542
5.64%, 1/16/00(5) 50,000,000 49,960,833
- -----------------------------------------------------------------------------------------------------------------
General Electric Capital Services, 5.87%, 1/14/00(5) 50,000,000 49,894,014
- -----------------------------------------------------------------------------------------------------------------
Hertz Corp., 5.93%, 1/10/00(5) 50,000,000 49,925,875
- -----------------------------------------------------------------------------------------------------------------
IBM Credit Corp., 6.02%, 2/9/00(5) 50,000,000 49,673,916
- -----------------------------------------------------------------------------------------------------------------
Koch Industries, Inc.:
3.50%, 1/5/00(5) 20,000,000 19,991,111
4.50%, 1/3/00(5) 50,000,000 49,987,500
- -----------------------------------------------------------------------------------------------------------------
Wells Fargo Co., 5.94%, 1/12/00(5) 50,000,000 49,909,250
------------
Total Short-Term Notes (Cost $636,351,680) 636,351,680
18 OPPENHEIMER TOTAL RETURN FUND, INC.
Face Market Value
Amount(3) See Note 1
=================================================================================================================
Repurchase Agreements--0.2%
Repurchase agreement with Banc One Capital Markets, Inc., 2.75%, dated
12/31/99, to be repurchased at $11,402,613 on 1/3/00, collateralized
by U.S. Treasury Bonds, 5.25%-12%, 2/15/01-11/15/28, with a value
of $4,474,383 and U.S. Treasury Nts., 5%-7.50%, 12/31/00-2/15/07,
with a value of $7,160,234 (Cost $11,400,000) $11,400,000 $ 11,400,000
- -----------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $2,949,596,616) 99.6% 4,421,022,833
- -----------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 0.4 16,744,002
----------------------------
Net Assets 100.0% $4,437,766,835
============================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income-producing security.
2. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Directors. These securities amount to $82,215,213 or 1.85% of the Fund's net
assets as of December 31, 1999.
3. Face amount is reported in U.S. Dollars, except for those denoted in the
following currency:
DEM German Mark
4. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
5. Short-term notes are generally traded on a discount basis; the interest rate
is the discount rate received by the Fund at the time of purchase.
See accompanying Notes to Financial Statements.
19 OPPENHEIMER TOTAL RETURN FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES December 31, 1999
========================================================================================================
Assets
Investments, at value (cost $2,949,596,616)--see accompanying statement $4,421,022,833
- --------------------------------------------------------------------------------------------------------
Cash 1,154,274
- --------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 15,263,576
Interest and dividends 4,893,650
Shares of capital stock sold 2,537,231
Other 72,116
--------------
Total assets 4,444,943,680
========================================================================================================
Liabilities
Payables and other liabilities:
Shares of capital stock redeemed 3,897,881
Distribution and service plan fees 2,140,769
Transfer and shareholder servicing agent fees 514,069
Shareholder reports 444,246
Directors' compensation 7,053
Other 172,827
--------------
Total liabilities 7,176,845
========================================================================================================
Net Assets $4,437,766,835
==============
========================================================================================================
Composition of Net Assets
Par value of shares of capital stock $ 33,599,079
- --------------------------------------------------------------------------------------------------------
Additional paid-in capital 2,890,533,792
- --------------------------------------------------------------------------------------------------------
Undistributed net investment income 6,412,023
- --------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 35,796,031
- --------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies 1,471,425,910
--------------
Net assets $4,437,766,835
==============
========================================================================================================
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$3,157,204,313 and 238,298,222 shares of capital stock outstanding) $13.25
Maximum offering price per share (net asset value plus sales charge of 5.75% of
offering price) $14.06
- --------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of
$1,152,234,676 and 87,955,473 shares of capital stock outstanding) $13.10
- --------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $75,885,558
and 5,780,856 shares of capital stock outstanding) $13.13
- --------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $52,442,288 and 3,956,243 shares of capital stock outstanding) $13.26
See accompanying Notes to Financial Statements.
20 OPPENHEIMER TOTAL RETURN FUND, INC.
STATEMENT OF OPERATIONS For the Year Ended December 31, 1999
========================================================================================================
Investment Income
Interest $ 42,046,242
- --------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $25,688) 38,890,786
------------
Total income 80,937,028
========================================================================================================
Expenses
Management fees 21,073,662
- --------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 5,331,807
Class B 11,962,493
Class C 661,360
- --------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 3,235,481
Class B 1,411,254
Class C 77,447
Class Y 53,917
- --------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 169,062
Class B 20,025
Class C 4,932
Class Y 3,673
- --------------------------------------------------------------------------------------------------------
Custodian fees and expenses 81,921
- --------------------------------------------------------------------------------------------------------
Directors' compensation 80,666
- --------------------------------------------------------------------------------------------------------
Other 1,239,971
------------
Total expenses 45,407,671
Less expenses paid indirectly (23,971)
------------
Net expenses 45,383,700
========================================================================================================
Net Investment Income 35,553,328
========================================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments (including premiums on options exercised) 346,131,891
Closing and expiration of option contracts written 1,736,517
Foreign currency transactions (2,806)
------------
Net realized gain 347,865,602
- --------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 302,086,494
Translation of assets and liabilities denominated in foreign currencies (41,816)
------------
Net change 302,044,678
------------
Net realized and unrealized gain 649,910,280
========================================================================================================
Net Increase in Net Assets Resulting from Operations $685,463,608
============
See accompanying Notes to Financial Statements.
21 OPPENHEIMER TOTAL RETURN FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended December 31, 1999 1998
=======================================================================================================
Operations
Net investment income $ 35,553,328 $ 37,480,042
- -------------------------------------------------------------------------------------------------------
Net realized gain 347,865,602 243,431,853
- -------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 302,044,678 397,047,043
---------------------------------
Net increase in net assets resulting from operations 685,463,608 677,958,938
=======================================================================================================
Dividends and/or Distributions to Shareholders
Dividends from net investment income:
Class A (25,530,440) (30,566,836)
Class B (1,169,315) (5,719,175)
Class C (87,933) (263,905)
Class Y (526,019) (455,751)
- -------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (223,029,885) (172,164,137)
Class B (82,260,938) (80,057,166)
Class C (5,385,579) (3,815,686)
Class Y (3,747,230) (2,532,986)
=======================================================================================================
Capital Stock Transactions
Net increase (decrease) in net assets resulting from capital stock
transactions:
Class A 329,538,222 96,918,666
Class B (150,785,101) 100,622,566
Class C 12,461,790 16,796,414
Class Y 9,804,068 8,780,891
=======================================================================================================
Net Assets
Total increase 544,745,248 605,501,833
- -------------------------------------------------------------------------------------------------------
Beginning of period 3,893,021,587 3,287,519,754
---------------------------------
End of period (including undistributed net investment
income of $6,412,023 and $846,860, respectively) $4,437,766,835 $3,893,021,587
=================================
See accompanying Notes to Financial Statements.
22 OPPENHEIMER TOTAL RETURN FUND, INC.
FINANCIAL HIGHLIGHTS
Class A Year Ended December 31, 1999 1998 1997 1996 1995
=============================================================================================================
Per Share Operating Data
Net asset value, beginning of period $12.23 $11.00 $9.77 $9.35 $7.80
- -------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .14 .16 .16 .20 .23
Net realized and unrealized gain 2.01 2.09 2.49 1.63 2.09
----------------------------------------------------------
Total income from investment operations 2.15 2.25 2.65 1.83 2.32
- -------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.12) (.15) (.14) (.20) (.22)
Distributions from net realized gain (1.01) (.87) (1.28) (1.21) (.55)
----------------------------------------------------------
Total dividends and/or distributions
to shareholders (1.13) (1.02) (1.42) (1.41) (.77)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.25 $12.23 $11.00 $9.77 $9.35
==========================================================
=============================================================================================================
Total Return, at Net Asset Value(1) 18.34% 21.16% 27.39% 19.73% 30.12%
=============================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $3,157 $2,594 $2,238 $1,827 $1,551
- -------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $2,757 $2,388 $2,045 $1,685 $1,394
- -------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 1.12% 1.31% 1.43% 1.96% 2.53%
Expenses 0.87% 0.86%(3) 0.89%(3) 0.90%(3) 0.92%(3)
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 34% 38% 92% 118% 85%
1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of operations), 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 less than one full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
4. 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 December 31, 1999, were $1,189,628,921 and $1,455,549,024, respectively.
See accompanying Notes to Financial Statements.
23 OPPENHEIMER TOTAL RETURN FUND, INC.
FINANCIAL HIGHLIGHTS Continued
Class B Year Ended December 31, 1999 1998 1997 1996 1995
============================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $12.10 $10.89 $9.70 $9.29 $7.76
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .04 .06 .07 .12 .15
Net realized and unrealized gain 1.98 2.08 2.45 1.62 2.08
-----------------------------------------------------------------------
Total income from investment operations 2.02 2.14 2.52 1.74 2.23
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.01) (.06) (.05) (.12) (.15)
Distributions from net realized gain (1.01) (.87) (1.28) (1.21) (.55)
-----------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (1.02) (.93) (1.33) (1.33) (.70)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.10 $12.10 $10.89 $9.70 $9.29
=======================================================================
============================================================================================================================
Total Return, at Net Asset Value(1) 17.37% 20.25% 26.17% 18.78% 29.03%
============================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $1,152 $1,202 $987 $755 $590
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $1,196 $1,080 $878 $672 $511
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 0.32% 0.50% 0.62% 1.15% 1.70%
Expenses 1.67% 1.67%(3) 1.71%(3) 1.71%(3) 1.75%(3)
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 34% 38% 92% 118% 85%
1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of operations), 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 less than one full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
4. 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 December 31, 1999, were $1,189,628,921 and $1,455,549,024, respectively.
See accompanying Notes to Financial Statements.
24 OPPENHEIMER TOTAL RETURN FUND, INC.
Class C Year Ended December 31, 1999 1998 1997 1996 1995(5)
============================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $12.13 $10.92 $9.72 $9.33 $9.19
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .04 .06 .07 .16 .07
Net realized and unrealized gain 1.98 2.08 2.46 1.57 .73
-----------------------------------------------------------------------
Total income from investment operations 2.02 2.14 2.53 1.73 .80
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.02) (.06) (.05) (.13) (.11)
Distributions from net realized gain (1.00) (.87) (1.28) (1.21) (.55)
-----------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (1.02) (.93) (1.33) (1.34) (.66)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.13 $12.13 $10.92 $9.72 $9.33
=======================================================================
============================================================================================================================
Total Return, at Net Asset Value(1) 17.37% 20.20% 26.23% 18.67% 8.82%
============================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $76 $58 $37 $18 $2
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $66 $47 $27 $8 $1
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 0.31% 0.50% 0.63% 1.05% 1.42%
Expenses 1.68% 1.67%(3) 1.72%(3) 1.76%(3) 1.77%(3)
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 34% 38% 92% 118% 84%
1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of operations), 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 less than one full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
4. 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 December 31, 1999, were $1,189,628,921 and $1,455,549,024, respectively.
5. For the period from August 29, 1995 (inception of offering) to December 31,
1995.
See accompanying Notes to Financial Statements.
25 OPPENHEIMER TOTAL RETURN FUND, INC.
FINANCIAL HIGHLIGHTS Continued
Class Y Year Ended December 31, 1999 1998 1997 1996 1995
============================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $12.24 $11.00 $9.77 $9.35 $7.80
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .17 .17 .18 .23 .20
Net realized and unrealized gain 2.00 2.10 2.48 1.61 2.13
-----------------------------------------------------------------------
Total income from investment operations 2.17 2.27 2.66 1.84 2.33
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.14) (.16) (.15) (.21) (.23)
Distributions from net realized gain (1.01) (.87) (1.28) (1.21) (.55)
-----------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (1.15) (1.03) (1.43) (1.42) (.78)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.26 $12.24 $11.00 $9.77 $9.35
=======================================================================
============================================================================================================================
Total Return, at Net Asset Value(1) 18.53% 21.33% 27.53% 19.88% 30.23%
============================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $52 $39 $27 $18 $7
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $47 $34 $22 $13 $4
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 1.32% 1.39% 1.60% 2.08% 2.51%
Expenses 0.67% 0.80%(3) 0.74%(3) 0.77%(3) 0.87%(3)
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 34% 38% 92% 118% 85%
1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of operations), 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 less than one full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
4. 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 December 31, 1999, were $1,189,628,921 and $1,455,549,024, respectively.
5. For the period from August 29, 1995 (inception of offering) to December 31,
1995.
See accompanying Notes to Financial Statements.
26 OPPENHEIMER TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. Significant Accounting Policies
Oppenheimer Total Return Fund, Inc. (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment objective is to seek high
total return. The Fund's investment advisor is OppenheimerFunds, Inc. (the
Manager).
The Fund offers Class A, Class B, Class C and Class Y shares. Class A
shares are sold at their offering price, which is normally net asset value plus
an initial sales charge. Class B and Class C shares are sold without an initial
sales charge but may be subject to a contingent deferred sales charge (CDSC).
Class Y shares are sold to certain institutional investors without either a
front-end sales charge or a CDSC. All classes of shares have identical rights to
earnings, assets and voting privileges, except that each class has its own
expenses directly attributable to that class and exclusive voting rights with
respect to matters affecting that class. Classes A, B and C shares have separate
distribution and/or service plans. No such plan has been adopted for Class Y
shares. 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.
- --------------------------------------------------------------------------------
Securities 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 Directors. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Directors 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. Foreign currency exchange contracts are valued based on the
closing prices of the foreign 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.
27 OPPENHEIMER TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
1. Significant Accounting Policies Continued
Foreign Currency Translation. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than
those attributable to a specific class), 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.
- --------------------------------------------------------------------------------
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
28 OPPENHEIMER TOTAL RETURN FUND, INC.
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of the recognition of certain foreign currency gains (losses)
as ordinary income (loss) for tax purposes. The character of distributions made
during the year from net investment income or net realized gains may differ from
its ultimate characterization for federal income tax purposes. Also, due to
timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or realized gain
was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations.
Accordingly, during the year ended December 31, 1999, amounts have been
reclassified to reflect an increase in additional paid-in capital of $3,466, a
decrease in undistributed net investment income of $2,674,458, and an increase
in accumulated net realized gain on investments of $2,670,992.
- --------------------------------------------------------------------------------
Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Certain dividends from foreign
securities will be recorded as soon as the Fund is informed of the dividend if
such information is obtained subsequent to the ex-dividend date. Realized gains
and losses on investments and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used for federal
income tax purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
29 OPPENHEIMER TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
2. Capital Stock
The Fund has authorized 450 million, 200 million, 200 million and 10 million
shares of $0.10 par value Class A, Class B, Class C and Class Y capital stock,
respectively. Transactions in shares of capital stock were as follows:
Year Ended December 31, 1999 Year Ended December 31, 1998
Shares Amount Shares Amount
- -------------------------------------------------------------------------------------
Class A
Sold 38,779,624 $ 500,033,094 20,090,100 $238,366,108
Dividends and/or
distributions reinvested 19,101,991 234,710,226 16,639,080 191,036,172
Redeemed (31,642,249) (405,205,098) (28,120,324) (332,483,614)
---------------------------------------------------------
Net increase 26,239,366 $ 329,538,222 8,608,856 $ 96,918,666
=========================================================
- -------------------------------------------------------------------------------------
Class B
Sold 13,846,247 $ 175,056,306 13,699,912 $160,764,683
Dividends and/or
distributions reinvested 6,611,034 80,167,708 7,233,729 82,019,204
Redeemed (31,792,050) (406,009,115) (12,211,618) (142,161,321)
---------------------------------------------------------
Net increase (decrease) (11,334,769) $(150,785,101) 8,722,023 $100,622,566
=========================================================
- -------------------------------------------------------------------------------------
Class C
Sold 2,517,651 $ 31,966,080 2,117,847 $ 24,988,182
Dividends and/or
distributions reinvested 431,425 5,244,298 344,352 3,914,027
Redeemed (1,956,338) (24,748,588) (1,031,386) (12,105,795)
---------------------------------------------------------
Net increase 992,738 $ 12,461,790 1,430,813 $ 16,796,414
=========================================================
- -------------------------------------------------------------------------------------
Class Y
Sold 2,101,137 $ 26,918,940 1,821,738 $ 21,338,887
Dividends and/or
distributions reinvested 347,285 4,273,249 260,255 2,988,737
Redeemed (1,668,891) (21,388,121) (1,318,484) (15,546,733)
---------------------------------------------------------
Net increase 779,531 $ 9,804,068 763,509 $ 8,780,891
=========================================================
================================================================================
3. Unrealized Gains and Losses on Securities
As of December 31, 1999, net unrealized appreciation on securities of
$1,471,426,217 was composed of gross appreciation of $1,646,998,173, and gross
depreciation of $175,571,956.
30 OPPENHEIMER TOTAL RETURN FUND, INC.
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management Fees. 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% of
the first $100 million of average annual net assets of the Fund, 0.70% of the
next $100 million, 0.65% of the next $100 million, 0.60% of the next $100
million, 0.55% of the next $100 million and 0.50% of average annual net assets
in excess of $500 million. The Fund's management fee for the year ended December
31, 1999, was 0.52% of the average annual net assets for each class of shares.
- --------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer and shareholder servicing agent for the Fund and for other
Oppenheimer funds. OFS's total costs of providing such services are allocated
ratably to these funds.
- --------------------------------------------------------------------------------
Distribution and Service Plan Fees. Under its General Distributor's Agreement
with the Manager, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of the different classes of shares of the Fund.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares is shown in the table below for the period
indicated.
Aggregate Class A Commissions Commissions Commissions
Front-End Front-End on Class A on Class B on Class C
Sales Charges Sales Charges Shares Shares Shares
on Class A Retained by Advanced by Advanced by Advanced by
Year Ended Shares Distributor Distributor(1) Distributor(1) Distributor(1)
- -------------------------------------------------------------------------------------------------
December 31, 1999 $3,586,666 $1,235,653 $101,858 $4,474,217 $223,694
1. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
Class A Class B Class C
Contingent Deferred Contingent Deferred Contingent Deferred
Sales Charges Sales Charges Sales Charges
Year Ended Retained by Distributor Retained by Distributor Retained by Distributor
- -----------------------------------------------------------------------------------------------
December 31, 1999 $10,798 $1,286,143 $27,758
The Fund has adopted a Service Plan for Class A shares and Distribution
and Service Plans for Class B and Class C shares under Rule 12b-1 of the
Investment Company Act. Under those plans the Fund pays the Distributor for all
or a portion of its costs incurred in connection with the distribution and/or
servicing of the shares of the particular class.
31 OPPENHEIMER TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
4. Management Fees and Other Transactions with Affiliates Continued
Class A Service Plan Fees. Under the Class A service plan, the Distributor
currently uses the fees it receives from the Fund to pay brokers, dealers and
other financial institutions. The Class A service plan permits reimbursements to
the Distributor at a rate of up to 0.25% of average annual net assets of Class A
shares purchased. The Distributor makes payments to plan recipients quarterly at
an annual rate not to exceed 0.25% of the average annual net assets consisting
of Class A shares of the Fund. For the fiscal year ended December 31, 1999,
payments under the Class A Plan totaled $5,331,807, all of which was paid by the
Distributor to recipients. That included $433,314 paid to an affiliate of the
Manager. Any unreimbursed expenses the Distributor incurs with respect to Class
A shares in any fiscal year cannot be recovered in subsequent years.
- --------------------------------------------------------------------------------
Class B and Class C Distribution and Service Plan Fees. Under each plan, service
fees and distribution 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 Class B and Class C plans provide for the
Distributor to be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts paid by the Fund under
the plan during the period for which the fee is paid.
The Distributor retains the asset-based sales charge on Class B shares.
The Distributor retains the asset-based sales charge on Class C shares during
the first year the shares are outstanding. The asset-based sales charges on
Class B and Class C shares allow investors to buy shares without a front-end
sales charge while allowing the Distributor to compensate dealers that sell
those shares.
The Distributor's actual expenses in selling Class B and Class C shares
may be more than the payments it receives from the contingent deferred sales
charges collected on redeemed shares and asset-based sales charges from the Fund
under the plans. If any plan is terminated by the Fund, the Board of Directors
may allow the Fund to continue payments of the asset-based sales charge to the
Distributor for distributing shares before the plan was terminated. The plans
allow for the carry-forward of distribution expenses, to be recovered from
asset-based sales charges in subsequent fiscal periods.
Distribution fees paid to the Distributor for the year ended December 31, 1999,
were as follows:
Distributor's Distributor's
Aggregate Unreimbursed
Unreimbursed Expenses as %
Total Payments Amount Retained Expenses of Net Assets
Under Plan by Distributor Under Plan of Class
- -------------------------------------------------------------------------------
Class B Plan $11,962,493 $9,316,015 $8,634,201 0.75%
Class C Plan 661,360 248,487 707,054 0.93
32 OPPENHEIMER TOTAL RETURN FUND, INC.
================================================================================
5. Foreign Currency Contracts
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts for operational purposes and to seek to protect against
adverse exchange rate fluctuation. Risks to the Fund include the potential
inability of the counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates as provided by
a reliable bank, dealer or pricing service. Unrealized appreciation and
depreciation on foreign currency contracts are reported in the Statement of
Assets and Liabilities.
The Fund may realize a gain or loss upon the closing or settlement of the
forward transaction. Realized gains and losses are reported with all other
foreign currency gains and losses in the Statement of Operations.
Securities denominated in foreign currency to cover net exposure on
outstanding foreign currency contracts are noted in the Statement of Investments
where applicable.
================================================================================
6. Option 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.
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 note
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.
33 OPPENHEIMER TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
6. Option Activity Continued
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 December 31, 1999, was as follows:
Call Options
------------------------
Number of Amount of
Options Premiums
- -----------------------------------------------------------------------
Options outstanding as of
December 31, 1998 3,412 $ 671,969
Options written 9,512 2,334,239
Options closed or expired (12,512) (2,902,469)
Options exercised (412) (103,739)
------------------------
Options outstanding as of
December 31, 1999 -- $ --
========================
================================================================================
7. Bank Borrowings
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.45%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of 0.08%
per annum.
The Fund had no borrowings outstanding during the year ended December 31,
1999.
34 OPPENHEIMER TOTAL RETURN FUND, INC.
INDEPENDENT AUDITORS' REPORT
================================================================================
To the Board of Directors and Shareholders of Oppenheimer Total Return Fund,
Inc.:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Total Return Fund, Inc. as of
December 31, 1999, the related statement of operations for the year then ended,
the statements of changes in net assets for the years ended December 31, 1999
and 1998 and the financial highlights for the period January 1, 1995, to
December 31, 1999. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, 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, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Oppenheimer Total
Return Fund, Inc. as of December 31, 1999, 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
January 24, 2000
35 OPPENHEIMER TOTAL RETURN FUND, INC.
FEDERAL INCOME TAX INFORMATION Unaudited
================================================================================
In early 2000 shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1999. Regulations of
the U.S. Treasury Department require the Fund to report this information to the
Internal Revenue Service.
Distributions of $1.0366, $1.0066, $1.0086 and $1.0426 per share were paid
to Class A, Class B, Class C and Class Y shareholders on December 10, 1999, of
which $0.9880 was designated as a "capital gain distribution" for federal income
tax purposes. Whether received in stock or in cash, the capital gain
distribution should be treated by shareholders as a gain from the sale of
capital assets held for more than one year (long-term capital gains).
Dividends paid by the Fund during the fiscal year ended December 31, 1999,
which are not designated as capital gain distributions should be multiplied by
92.13% to arrive at the net amount eligible for the corporate dividend-received
deduction.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
36 OPPENHEIMER TOTAL RETURN FUND, INC.
OPPENHEIMER TOTAL RETURN FUND, INC.
================================================================================
Officers and Directors James C. Swain, Director and Chairman of the Board
Bridget A. Macaskill, Director and President
William H. Armstrong, Director
Robert G. Avis, Director
William A. Baker, Director
George C. Bowen, Director
Edward L. Cameron, Director
Jon S. Fossel, Director
Sam Freedman, Director
Raymond J. Kalinowski, Director
C. Howard Kast, Director
Robert M. Kirchner, Director
Ned M. Steel, Director
Bruce L. Bartlett, Vice President
John P. Doney, Vice President
Andrew J. Donohue, Vice President and Secretary
Brian W. Wixted, Treasurer
Robert G. Zack, Assistant Secretary
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
================================================================================
Investment Advisor OppenheimerFunds, Inc.
================================================================================
Distributor OppenheimerFunds Distributor, Inc.
================================================================================
Transfer and Shareholder OppenheimerFunds Services
Servicing Agent
================================================================================
Custodian of The Bank of New York
Portfolio Securities
================================================================================
Independent Auditors Deloitte & Touche LLP
================================================================================
Legal Counsel Myer, Swanson, Adams & Wolf, P.C.
This is a copy of a report to shareholders of
Oppenheimer Total Return Fund, Inc. This report must be
preceded or accompanied by a Prospectus of Oppenheimer
Total Return Fund, Inc. For material information
concerning the Fund, see the Prospectus.
Shares of Oppenheimer funds are not deposits or
obligations of any bank, are not guaranteed by any
bank, are not insured by the FDIC or any other agency,
and involve investment risks, including the possible
loss of the principal amount invested.
37 OPPENHEIMER TOTAL RETURN FUND, INC.
INFORMATION AND SERVICES
As an Oppenheimer fund shareholder, you can benefit from special services
designed to make investing simple. Whether it's automatic investment plans,
timely market updates, or immediate account access, you can count on us whenever
you need assistance. So call us today, or visit our website--we're here to
help.
- --------------------------------------------------------------------------------
Internet
24-hr access to account information and transactions
www.oppenheimerfunds.com
- --------------------------------------------------------------------------------
General Information
Mon-Fri 8:30am-9pm ET, Sat 10am-4pm ET
1.800.525.7048
- --------------------------------------------------------------------------------
Telephone Transactions
Mon-Fri 8:30am-9pm ET, Sat 10am-4pm ET
1.800.852.8457
- --------------------------------------------------------------------------------
PhoneLink
24-hr automated information and automated transactions
1.800.533.3310
- --------------------------------------------------------------------------------
Telecommunications Device for the Deaf (TDD)
Mon-Fri 8:30am-7pm ET
1.800.843.4461
- --------------------------------------------------------------------------------
OppenheimerFunds Information Hotline 24 hours a day, timely and insightful
messages on the economy and issues that may affect your investments
1.800.835.3104
- --------------------------------------------------------------------------------
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270, Denver, CO 80217-5270
[logo] Oppenheimer Funds(R)
RA0420.001.1299 February 29, 2000 Distributor, Inc.
OPPENHEIMER TOTAL RETURN FUND, INC.
FORM N-14
PART C
OTHER INFORMATION
Item 15. Indemnification
Reference is made to the provisions of paragraph (b) of Section 7 of
Article SEVENTH of Registrant's Articles of Incorporation filed as Exhibit 16(1)
to this Registration Statement, and incorporated herein by reference.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to Directors, 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 Director, officer or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such Director, 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 16. Exhibits
(1) (a) Articles of Incorporation dated 12/5/79: Previously filed with
Registrant's Post-Effective Amendment No. 48, 8/19/80, and refiled with
Registrant's Post-Effective Amendment No. 75, 4/27/95, pursuant to Item 102 of
Regulation S-T and incorporated herein by reference.
(b) Articles of Incorporation, amended as of 8/24/81: Previously filed with
Registrant's Post-Effective Amendment No. 50, 4/23/82, and refiled with
Registrant's Post-Effective Amendment No. 75, 4/27/95, pursuant to Item 102 of
Regulation S-T and incorporated herein by reference.
(c) Articles of Amendment dated 4/28/87 to Articles of Incorporation,
changing Registrant's name from "Hamilton Funds, Inc." to Oppenheimer Total
Return Fund, Inc.": Previously filed with Registrant's Post-Effective Amendment
No. 62, 4/27/87, and refiled with Registrant's Post-Effective Amendment No.
75,4/27/95, pursuant to Item 102 of Regulation S-T and incorporated herein by
reference.
(d) Articles of Amendment dated 3/23/93 to Articles of Incorporation:
Previously filed with Registrant's Post-Effective Amendment No. 72, 4/28/93,
refiled with Registrant's Post-Effective Amendment No. 75, 4/27/95, pursuant to
Item 102 of Regulation S-T, and incorporated herein by reference.
(e) Articles Supplementary dated 4/14/93 to Articles of Incorporation:
Previously filed with Registrant's Post-Effective Amendment No. 72, 4/28/93,
refiled with Registrant's Post-Effective Amendment No. 75, 4/27/95, pursuant to
Item 102 of Regulation S-T, and incorporated herein by reference.
(f) Articles Supplementary dated 3/30/94 to Articles of Incorporation:
Previously filed with Post-Effective Amendment No. 74, 3/29/94, and refiled with
Post-Effective Amendment No. 78, 3/29/96, pursuant to Item 102 of Regulation
S-T, and incorporated herein by reference.
(g) Articles Supplementary dated 7/13/95 to Articles of Incorporation:
Filed with Registrant's Post-Effective Amendment No. 77, 8/25/95, and
incorporated herein by reference.
(2) Amended By-Laws, dated 4/18/95: Filed with Registrant's Post-Effective
Amendment No. 77, 8/25/95, and incorporated herein by reference.
(3) Non Applicable.
(4) Agreement and Plan of Reorganization (see Exhibit A to Part A of this
Registration Statement).
(5) (a) Specimen Class A Share Certificate: Filed with Registrant's
Post-Effective Amendment No. 84, 5/1/00, and incorporated herein by reference.
(b) Specimen Class B Share Certificate: Filed with Registrant's
Post-Effective Amendment No. 84, 5/1/00, and incorporated herein by reference.
(c) Specimen Class C Share Certificate: Filed with Registrant's
Post-Effective Amendment No. 84, 5/1/00, and incorporated herein by reference.
(d) Specimen Class Y Share Certificate: Filed with Registrant's
Post-Effective Amendment No. 84, 5/1/00, and incorporated herein by reference.
(6) Investment Advisory Agreement between Registrant and Oppenheimer Management
Corporation dated 10/22/90: Previously filed with Post-Effective Amendment No.
68, 2/28/91, refiled with Registrant's Post-Effective Amendment No. 75, 4/27/95,
pursuant to Item 102 of Regulation S-T, and incorporated herein by reference
(7) (a) General Distributor's Agreement between Registrant and Oppenheimer Fund
Management, Inc. dated 10/13/92: Previously filed with Registrant's
Post-Effective Amendment No. 71, 2/26/93, refiled with Registrant's
Post-Effective Amendment No. 75, 4/27/95, pursuant to Item 102 of Regulation S-T
and incorporated herein by reference. (b) Form of Dealer Agreement of
OppenheimerFunds Distributor, Inc.: 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.
(c) 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.
(d) 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.
(8) Form of Deferred Compensation Plan for Disinterested Trustees/Directors:
Filed with Post-Effective Amendment No. 40 to the Registration Statement of
Oppenheimer High Yield Fund (Reg. No. 2-62076), 10/27/98, and incorporated
herein by reference.
(9) Custody Agreement with The Bank of New York dated 10/6/92: Previously filed
with Registrant's Post-Effective Amendment No. 71, 2/26/93, Refiled with
Post-Effective Amendment No. 75, 4/27/95, and incorporated herein by reference.
(10) (a) Service Plan and Agreement for Class A shares dated 7/1/94: Filed with
Registrant's Post-Effective Amendment No. 75, 4/27/95, and incorporated herein
by reference.
(b) Amended and Restated Distribution and Service Plan and Agreement for
Class B Shares dated 2/24/98: Previously filed with Registrant's Post-Effective
Amendment No. 81, 4/29/98, and incorporated herein by reference.
(c) Amended and Restated Distribution and Service Plan and Agreement for
Class C shares dated 2/24/98: Previously filed with Registrant's Post-Effective
Amendment No. 81, 4/29/98, and incorporated herein by reference
(11) Opinion and Consent of Counsel dated 7/06/00, filed herewith.
(12) (a) Tax Opinion Relating to the Reorganization: Draft Tax Opinion for Total
Return Fund, Inc., filed herewith.
(b) Tax Opinion Relating to the Reorganization: Draft Tax Opinion for
Disciplined Allocation Fund, filed herewith.
(13) Not applicable.
(14) (a) Consent of Deloitte & Touche LLP: Relating to Total Return Fund, Inc.,
filed herewith.
(b) Consent of KPMG LLP: Relating to Disciplined Allocation Fund, filed
herewith.
(15) Not applicable.
(16) Powers of Attorney: For all Trustees except Edward L. Cameron, previously
filed with Post-Effective Amendment No. 41 to the Registration Statement of
Oppenheimer High Yield Fund (Reg. No. 2-62078), 8/26/99, and incorporated herein
by reference.
- -- Power of Attorney: For Edward L. Cameron, filed with Post-Effective Amendment
No. 5 to the Registration Statement of Oppenheimer Real Asset Fund (Reg.
No.333-14887), 12/28/99.
(17) Non applicable.
Item 17. Undertakings
(a) Not applicable.
(b) Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
County of Arapahoe and State of Colorado on the 12th day of July, 2000.
Oppenheimer Total Return Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
By: /s/ James C. Swain*
James C. Swain, Chairman
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:
Signatures Title Date
/s/ James C. Swain* Chairman of the
- ------------------------------------- Board of Directors
James C. Swain and Principal Executive
Officer July 12, 2000
/s/ Bridget A. Macaskill* President
- ------------------------------------- and Director July
12, 2000
Bridget A. Macaskill
/s/ William L. Armstrong Director July 12, 2000
- -------------------------------------
William L. Armstrong
/s/ Robert G. Avis* Director July 12, 2000
- -------------------------------------
Robert G. Avis
/s/ George C. Bowen* Director July 12, 2000
- -------------------------------------
George C. Bowen
/s/ Edward Cameron Director July 12, 2000
- -------------------------------------
Edward Cameron
/s/ Jon S. Fossel* Director July 12, 2000
- -------------------------------------
Jon S. Fossel
/s/ Sam Freedman* Director July 12, 2000
- -------------------------------------
Sam Freedman
/s/ Raymond J. Kalinowski* Director July 12, 2000
- -------------------------------------
Raymond J. Kalinowski
/s/ C. Howard Kast* Director July 12, 2000
- -------------------------------------
C. Howard Kast
/s/ Robert M. Kirchner* Director July 12, 2000
- -------------------------------------
Robert M. Kirchner
/s/ Brian W. Wixted Treasurer and July 12, 2000
Brian W. Wixted Principal Financial and
Accounting Officer
*By:
/s/ Robert G. Zack
Robert G. Zack, Attorney-in-Fact
OPPENHEIMER TOTAL RETURN FUND, INC.
EXHIBIT INDEX
Exhibit No. Description
16 (11) Opinion and Consent of Counsel dated 7/06/00.
16 (12)(a) Draft Tax Opinion Relating to the Reorganization: For Total Return
Fund, Inc. (b) Draft Tax Opinion Relating to the Reorganization: For Disciplined
Allocation Fund
16 (14)(a) Consent of Deloitte & Touche LLP: Relating to Total Return Fund,
Inc., (b) Consent of KPMG LLP: Relating to Disciplined Allocation Fund