Pre-Effective #2 Response Letter (SEC)
OppenheimerFunds, Inc.
2 World Financial Center, 225 Liberty Street, 11th Floor
New York, New York 10281-1008
April 1, 2005
Via Electronic Transmission
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Vincent DiStefano, Esq.
U.S. Securities and Exchange Commission
Mail Stop 0-7, Filer Support
6432 General Green Way
Alexandria, Virginia 22312
Re: Oppenheimer Portfolio Series
File Nos. 333-121449 and 811-21686
Dear Mr. DiStefano:
We have reviewed your comments on the registration statement on Form
N-1A for the Oppenheimer Portfolio Series ("Fund") filed with the Commission
on December 20, 2004 relating to four series ("Portfolios"), Conservative
Investor Fund, Moderate Investor Fund, Aggressive Investor Fund and Active
Allocation Fund. For your convenience, we have included each of your
comments in italics, followed by our response. The captions used below
correspond to the captions the Fund uses in the registration statement, and
defined terms have the meanings defined therein.
Prospectus
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Prospectus Summary
Overview
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1. Please define the term "tactical allocation" as it is used in this
disclosure.
We have added the following definition of "tactical allocation" to this
section:
"Tactical allocation" as used in this Prospectus, refers to a
strategy that involves adjusting the asset mix to take advantage
of temporary market conditions that may promise unusual
opportunities.
2. Please disclose how frequently the Manager will rebalance each Portfolio's
asset allocations. Also, please clarify whether, and if so, under what
circumstances, each Portfolio's percentage allocation to each asset class
may be changed.
Each Portfolio's allocation of assets to the underlying funds will be
monitored daily. The portfolio managers will monitor the market daily
and seek to maintain the asset allocation balance in response to
material changes in market or economic conditions. A rebalancing of
the percentage of each Portfolio's assts in the in the underlying funds
will be done at least annually. On page three of the prospectus, we
state that "In response to changing market or economic conditions, the
Manager may change the asset class allocations, or the Underlying Funds
or their target weightings at any time, without prior approval from or
notice to shareholders." It is anticipated that this will not take
place frequently and will be in response to significant changes in
market or economic conditions
About the Portfolios
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3. For each Portfolio, please disclose the percentage of assets it will
allocate to each underlying fund and under what circumstances the
allocation percentages may change.
The Portfolios do not have target asset allocations with regard to any
underlying fund. We have not included information regarding the initial
allocation of assets to the underlying funds since that allocation is
subject to change daily. We feel that stating a percentage could be
potentially misleading under the circumstances. We have indicated that
amount of a Portfolio is invested in the securities of an Underlying
Fund will affect the extent to which the Portfolio is subject to the
risks of that Underlying Fund.
4. Please summarize the investment objective and principal strategies and
risks of each underlying fund in which each Portfolio may invest.
The investment objective and a summary of the main strategies of each
underlying fund have been added in a section titled "More Information
About the Underling Funds" in the prospectus. All of the risks of
investing in the underlying funds are already included in the
discussion of the Portfolios.
5. Please summarize the commodities investments the underlying funds may make.
Only Real Asset Fund invests in commodities. The commodities
investments of the that fund are summarized in the section "More
Information About the Underlying Funds.".
6. Please clarify the meaning of the phrase "securities not generally defined
as equity or fixed income."
We have modified the disclosure as follows: "other asset classes (that
may include real estate related securities, commodities, real assets,
cash or cash equivalents, which are securities not generally defined as
equity or fixed income)."
7. Please disclose that non-investment grade securities are also known as
"junk" and carry an increased risk of default.
We have included the following disclosure regarding non-investment
grade securities:
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 include high-yield bonds, commonly
called "junk bonds," and are exposed to a greater risk that the issuers
of those securities might default and not meet their debt obligations.
These risks can reduce the Underlying Fund's share price and the income
it earns.
8. Please disclose the percentage of assets each underlying fund will invest
in derivative instruments.
Where a percentage limitation is applicable to an underlying fund, it
is included in that fund's registration statement. (The prospectus of
each underlying fund is available, without charge, by contacting the
Manager as indicated on the back cover of the Prospectus.) There is no
target range of indirect investment in derivatives at the Portfolio
level.
9. Please disclose that shareholders will receive at least 60 days advance
notice of any changes in a Portfolio's investment objective or principal
investment strategies.
We have added the disclosure that "Shareholders will receive at least
60 days advance notice of changes in the Portfolio's investment
objective or principal investment strategies."
10.Please provide in this section consistent, objective definitions of the
terms "small-cap," "mid-cap," and "large-cap."
We have modified the disclosure to indicate that we are using those
terms according to the definitions in the underlying funds.
11.Disclosure in this section indicates the Portfolios may invest in
securities other than shares of the underlying funds. Please disclose the
other types of securities in which the Portfolios may invest, and
summarize the risks of such investments.
A Portfolio may hold its assets in cash or cash equivalent securities
in anticipation of investment opportunities or redemptions. We have
added the following disclosure to the "Overview" section:
For temporary periods, a Portfolio may hold a portion of its assets in
cash, money market securities or other similar, liquid investments.
This will generally occur at times when the Manager is unable to
immediately invest funds received from purchases of Portfolio shares or
from redemptions of other investments.
Conservative Investor Portfolio
-------------------------------
12.The disclosure of risks of investing in special situation indicates the
underlying funds may invest in restructurings. Are the "restructurings"
of distressed companies? If so, how is such a speculative investment
appropriate for a "conservative" Portfolio?
One Underlying Fund may, at times, invest in restructurings of
distressed companies, but such investments will not constitute a
significant portion of that fund's portfolio or be a significant
strategy of the fund. Further, that Underlying Fund will be only a
portion of the Portfolio's international equity fund investments. For
the Conservative Portfolio, no more than 20% of its assets may be
invested in equity fund securities of any kind.
13.The disclosure indicates this Portfolio is diversified, yet it invests
in three underlying funds which are non-diversified. Please resolve this
contradiction.
Although three of the underlying funds in the Conservative Portfolio
are not diversified funds under the investment company act, those
underlying funds must meet the diversification requirements for
registered investment companies under the Internal Revenue Code. Since
the Portfolio's combined investment in those three funds will not
constitute more than 10% of the Portfolio's total holdings, the
Portfolio itself will be diversified.
14.How will the Portfolio monitor and resolve conflicts of interest
arising from the difference in fees the Manager may receive by virtue of
investing in one underlying fund instead of another? Please disclose the
risk of harm to shareholders.
We include the following disclosure:
AFFILIATED PORTFOLIO RISK. In managing the Portfolio, the Manager will
have authority to select and substitute Underlying Funds. The Manager
may be subject to potential conflicts of interest in selecting
Underlying Funds because the fees paid to it by some Underlying Funds
are higher than the fees paid by other Underlying Funds. However, the
Manager is a fiduciary to the Portfolio and is legally obligated to act
in its best interests when selecting Underlying Funds.
15.Please disclose the risk associated with the simultaneous purchase of a
security by one underlying fund and sale by another. Does the Manager
monitor the trading activities of the underlying funds?
Yes, the Manager monitors trading by the underlying funds in
connection with its Brokerage Policy as described in the Fund's
Statement of Additional Information.
Moderate Investor Fund
----------------------
16.The disclosure relating to the risks of using derivative investments
indicates the Real Asset Fund invests in commodity-linked notes and other
derivative instruments. Please explain supplementally how investment in
these synthetic instruments is consistent with the name of the underlying
fund.
These securities and their relationship to that fund's name are
explained in the Real Asset Fund prospectus as follows:
Commodity-linked derivative investments provide investors with exposure
to the investment returns of "real assets" that trade in the
commodities markets without investing directly in physical commodities.
"Real assets," as opposed to stocks or bonds, are assets that have
tangible properties, such as oil, livestock, and agricultural or metal
products.
17.The disclosure titled "How Risky is the Portfolio Overall?" does not
answer the question posed by the title. Please disclose the risk level of
the Portfolio.
We have added disclosure to this section of each Portfolio summarizing
the degree of risk and the suitability considerations.
Active Allocation Fund
----------------------
18.Please provide a complete listing of the types of "other asset classes"
in which the underlying funds may invest.
Please see our response to comment #6 above.
19.Please disclose here the investment strategies that constitute
"tactical allocation."
Please see our response to comment #1 above.
20.The disclosure indicates the Portfolio will allocate up to 20% of net
assets to "take advantage of short-term market opportunities." Will the
Portfolio market time the underlying funds?
No. The Portfolio will comply with all of the underlying fund's
anti-market timing policies.
Shareholder Fees
21.The disclosure preceding the fee table indicates the Portfolio pays
expenses for asset management, yet the fee table does not contain a
management fee. Please correct this inconsistency. Also, please delete
"Combined" from the line item "Combined Annual Portfolio Operating
Expenses" and indicate that the operating expenses are paid from Portfolio
assets.
We have revised the caption of the last line of the fee table to remove
the word "Combined" and to indicate that the expenses shown reflect
both the expenses of the respective Portfolio and the expenses of the
underlying funds that are attributable to the Portfolio's investment.
22. Please disclose the transfer agent's contractual fee rate.
The transfer agent fee is a per account fee and will therefore vary on
a percentage basis as account sizes change. Although the Portfolios
estimate that this fee will not exceed 0.25%, the transfer agent has
voluntarily agreed to cap this fee at 0.35%.
Can the Portfolio's Investment Objectives and Policies Change?
23.Please move this disclosure to the Summary.
This disclosure has been moved to the Summary as requested.
The Portfolios' Principal Investment Policies and Risks
24.Why may the Portfolios' asset allocation processes result in additional
transaction costs if the Portfolios invest solely in the underlying funds?
This language has been deleted.
25. Will any of the underlying funds invest in securities in default? If
so, please include a description of the attendant risks. Also, please
disclose whether an underlying fund will sell or hold non-investment grade
bonds in the event of default.
The requested disclosure has been added.
26.The disclosure in this section and elsewhere indicates the underlying
funds may have relatively high portfolio turnover. Please disclose the
consequences of high portfolio turnover, e.g., higher brokerage expenses
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and taxation issues. Please disclose the underlying funds' estimated
annual portfolio turnover.
The risks of high portfolio turnover are indicated in the disclosure.
The Portfolios will purchase most securities (i.e. shares of the
underlying funds) directly without any brokerage charges. It is not
required that we estimate the annual portfolio turnover rate of the
underlying funds, but we do indicate that it may be more than 100%.
The portfolio turnover for each underlying fund's most recently
completed fiscal year is included in its prospectus.
Special Risk Considerations
27.Please clarify that the securities of government-sponsored entities are
not backed by the full faith and credit of the U. S. government.
The requested information has been added.
At What Price Are Shares Sold?
28.Why does the disclosure relating to Net Asset Value not indicate that
the Portfolios will value their assets using the net asset values of the
underlying funds?
We have clarified this disclosure to indicate that the Portfolios
calculate their net asset value based on the net asset values of the
Underlying Funds and the Underlying Funds calculate their net asset
values according to the procedures described.
Statement of Additional Information
-----------------------------------
Investment Restrictions
29.While the disclosure lists the investment restrictions of the
underlying funds, it does not list those of the Portfolios. Please
disclose the Portfolios' investment restrictions in this section.
Disclosure regarding the Portfolios' investment restrictions has been
added to this section.
Disclosure of Portfolio Holdings
30.Please separate the descriptions of public and non-public disclosure of
portfolio holdings.
We have revised the disclosure to indicate which information relates to
the public disclosure of the portfolio holdings.
31.Please explain supplementally why disclosure of less than entire
portfolio holdings to consultants for retirement plans may be made without
obtaining a confidentiality agreement. Please disclose the risks to the
Portfolios of disclosing this non-public information without a
confidentiality agreement.
This disclosure requires a confidentiality agreement. The disclosure
has been revised to reflect that information.
Portfolio Proxy Voting
32.Please disclose the procedures the Portfolios uses when a vote presents a
conflict between the interests of the Portfolio shareholders and those of
the Adviser, principal underwriter or other affiliated persons. See Item
12(f) of Form N-1A.
The requested disclosure has been added.
Approval of Investment Advisory Agreement
33.This disclosure does not contain a reasonably detailed discussion of the
material factors that formed the basis for the board of directors' approval
of the investment advisory contract. Please include this information in the
disclosure. See Instruction to Item 12(b) (10) of Form N-1A.
The disclosure has been revised to comply with this requirement.
The registrant will be filing a pre-effective amendment reflecting
these changes, but does not expect to submit an exemptive application or
no-action request in connection with this registration statement.
The Fund requests acceleration of the effective date of the pending
registration statement, and will furnish the proper acknowledgements in that
regard.
Please direct any questions you may have regarding the filing or this
letter to me at 212-323-5089.
Sincerely,
/s/ Nancy S. Vann
Nancy S. Vann
Vice President and Assistant Counsel
Encl.
cc: Board IV Board of Trustees
Carl Algermissen, Esq.
Ronald M. Feiman, Esq.
Phillip Gillespie, Esq.
Dennis Hess
Scott Huebl
Michael Keogh
Gloria LaFond
Pankaj Naik
Steve McCandless
Brian Petersen
Brian Wixted
Robert Zack, Esq.