-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, O24OMj4XcSqXXLvwXLDXf/6Yg+Xe/PeibzkI6WFs59+zh9nVJudTgEM94H3sEceK gJ/kEv3L2aoNBoOdjOTiow== 0000701265-94-000007.txt : 19940502 0000701265-94-000007.hdr.sgml : 19940502 ACCESSION NUMBER: 0000701265-94-000007 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19940429 EFFECTIVENESS DATE: 19940501 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPPENHEIMER INTEGRITY FUNDS CENTRAL INDEX KEY: 0000701265 STANDARD INDUSTRIAL CLASSIFICATION: 0000 IRS NUMBER: 042912220 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 002-76547 FILM NUMBER: 94525099 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-03420 FILM NUMBER: 94525100 BUSINESS ADDRESS: STREET 1: 3410 S GALENA CITY: DENVER STATE: CO ZIP: 80231 BUSINESS PHONE: 3036713200 MAIL ADDRESS: STREET 2: 3410 SOUTH GALENA STREET 3RD FL CITY: DENVER STATE: CO ZIP: 80231 FORMER COMPANY: FORMER CONFORMED NAME: MASSMUTUAL INTEGRITY FUNDS DATE OF NAME CHANGE: 19910329 FORMER COMPANY: FORMER CONFORMED NAME: MASSMUTUAL LIQUID ASSETS TRUST DATE OF NAME CHANGE: 19880403 485BPOS 1 MASTER DOCUMENT Registration No. 2-76547 File No. 811-3420 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X / PRE-EFFECTIVE AMENDMENT NO. / / POST-EFFECTIVE AMENDMENT NO. 20 / X / and/or REGISTRATION STATEMENT UNDER THE / X / INVESTMENT COMPANY ACT OF 1940 AMENDMENT N0. 21 / X / OPPENHEIMER INTEGRITY FUNDS (Exact Name of Registrant as Specified in Charter) 3410 South Galena Street, Denver, Colorado 80231 (Address of Principal Executive Offices) 1-303-671-3200 (Registrant's Telephone Number) ANDREW J. DONOHUE, ESQ. Oppenheimer Management Corporation Two World Trade Center - Suite 3400 New York, New York 10048-0203 (Names and Addresses of Agent for Service) It is proposed that this filing will become effective / / Immediately upon filing pursuant to paragraph (b) / X / On May 1, 1994, pursuant to paragraph (b) / / 60 days after filing pursuant to paragraph (a) / / On ________________, pursuant to paragraph (a) of Rule 485 The Registrant has registered an indefinate number or amount of its shares under the Securities Act of 1933 pursuant to Rule 24f-2 promulgated under the Investment Company Act of 1940. A Rule 24f-2 Notice for the Registrant's fiscal year ended December 31, 1993, was filed on February 28, 1994. FORM N-1A OPPENHEIMER INTEGRITY FUNDS Cross Reference Sheet Prospectus for Oppenheimer Investment Grade Bond Fund Part A of Form N-1A Item No. Prospectus Heading - --------- ------------------ 1 Cover Page 2 Expenses 3 Financial Highlights; Performance of the Fund 4 Cover Page; Investment Objective and Policies 5 Expenses; How the Fund is Managed; Back Cover 5A Performance of the Fund 6 Dividends, Capital Gains and Taxes 7 How to Exchange Shares; Special Investor Services, Service Plan for Class A Shares; Distribution and Service Plan for Class B Shares; How to Buy Shares; How to Sell Shares 8 How to Sell Shares; How to Exchange Shares; Special Investor Services 9 * Prospectus for Oppenheimer Value Stock Fund Part A of Form N-1A Item No. Prospectus Heading - --------- ------------------ 1 Cover Page 2 Expenses 3 Financial Highlights; Performance of the Fund 4 Cover Page; Investment Objective and Policies 5 Expenses; How the Fund is Managed; Back Cover 5A Performance of the Fund 6 Dividends, Capital Gains and Taxes 7 How to Exchange Shares; Special Investor Services, Service Plan for Class A Shares; Distribution and Service Plan for Class B Shares; How to Buy Shares; How to Sell Shares 8 How to Sell Shares; How to Exchange Shares; Special Investor Services 9 * __________________ * Not applicable or negative answer. FORM N-1A OPPENHEIMER INTEGRITY FUNDS Cross Reference Sheet Statement of Additional Information for Oppenheimer Investment Grade Bond Fund Part B of Form N-1A Item No. Statement of Additional Information Heading - --------- ------------------------------------------- 10 Cover Page 11 Cover Page 12 * 13 Investment Objective and Policies; Other Investment Restrictions; Appendix A (Prospectus) - Description of Ratings 14 Trustees and Officers of the Fund; How the Fund is Managed 15 Trustees and Officers of the Fund - Major Shareholders; How the Fund is Managed 16 How the Fund is Managed; Distribution and Service Plans; Additional Information about the Fund 17 Brokerage Policies of the Fund 18 Additional Information about the Fund 19 About Your Account; Automatic Withdrawal Plan Provisions 20 Dividends, Capital Gains and Taxes 21 Distribution and Service Plans; Additional Information about the Fund 22 Dividends, Capital Gains and Taxes 23 Financial Statements Statement of Additional Information for Oppenheimer Value Stock Fund Part B of Form N-1A Item No. Statement of Additional Information Heading - --------- ------------------------------------------- 10 Cover Page 11 Cover Page 12 * 13 Investment Objective and Policies; Other Investment Restrictions; 14 Trustees and Officers of the Fund; How the Fund is Managed 15 Trustees and Officers of the Fund - Major Shareholders; How the Fund is Managed 16 How the Fund is Managed; Distribution and Service Plans; Additional Information about the Fund 17 Brokerage Policies of the Fund 18 Additional Information about the Fund 19 About Your Account; Automatic Withdrawal Plan Provisions 20 Dividends, Capital Gains and Taxes 21 Distribution and Service Plans; Additional Information about the Fund 22 Dividends, Capital Gains and Taxes 23 Financial Statements __________________ * Not applicable or negative answer. Oppenheimer Investment Grade Bond Fund Prospectus dated 5/1/94. Oppenheimer Investment Grade Bond Fund (the "Fund") is a mutual fund with the investment objective of seeking to achieve a high level of current income consistent with prudent investment risk and the stability of capital primarily through investment in a diversified portfolio of investment grade fixed-income securities. You should carefully review the risks associated with an investment in the Fund. Please refer to "Special Risks" on page __. The Fund offers two classes of shares: (1) Class A shares, which are sold at a public offering price that includes a front-end sales charge, and (2) Class B shares, which are sold without a front-end sales charge, although you may pay a sales charge when you redeem your shares, depending on how long you own them. Class B shares are also subject to an annual "asset-based sales charge." Each class of shares bears different expenses. In deciding which class of shares to buy, you should consider how much you plan to purchase, how long you plan to keep your shares, and other factors discussed in "How to Buy Shares" starting on page ____. This Prospectus explains concisely what you should know before investing in the Fund. Please read this Prospectus carefully and keep it for future reference. You can find more detailed information about the Fund in the May 1, 1994, Statement of Additional Information. For a free copy, call Oppenheimer Shareholder Services, the Fund's Transfer Agent, at 1-800-525-7048, or write to the Transfer Agent at the address on the back cover. The Statement of Additional Information has been filed with the Securities and Exchange Commission and is incorporated into this Prospectus by reference (which means that it is legally part of this Prospectus). Shares of the Fund are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the F.D.I.C. or any other agency, and involve investment risks, including the possible loss of principal. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Contents ABOUT THE FUND Expenses Financial Highlights Investment Objective and Policies How the Fund is Managed Performance of the Fund ABOUT YOUR ACCOUNT How to Buy Shares Class A Shares Class B Shares Special Investor Services AccountLink Automatic Withdrawal and Exchange Plans Reinvestment Privilege Retirement Plans How to Sell Shares By Mail By Telephone Checkwriting How to Exchange Shares Shareholder Account Rules and Policies Dividends, Capital Gains and Taxes Appendix: Description of Ratings Categories ABOUT THE FUND Expenses The Fund pays a variety of expenses directly for management of its assets, administration, distribution of its shares and other services, and those expenses are reflected in the Fund's net asset value per share. As a shareholder, you pay those expenses indirectly. Shareholders pay other expenses directly, such as sales charges. The following tables are provided to help you understand your direct expenses of investing in the Fund and your share of the Fund's operating expenses that you might expect to bear indirectly. The calculations are based on the Fund's expenses during its fiscal year ended December 31, 1993. - Shareholder Transaction Expenses are charges you pay when you buy or sell shares of the Fund. Please refer to pages 14 through 23 for an explanation of how and when these charges apply. Class A Shares Class B Shares -------------- -------------- Maximum Sales Charge on Purchases (as a % of offering price) 4.75% None Sales Charge on Reinvested Dividends None None Deferred Sales Charge (as a % of the lower of the original purchase price or redemption proceeds) None(1) 5% in the irst year, declining to 1% in the sixth year and eliminated thereafter Exchange Fee $5.00 $5.00** (1) If you invest more than $1 million in Class A shares, you may have to pay a sales charge of up to 1% if you sell your shares within 18 calendar months from the end of the calendar month during which you purchased those shares. See "How to Buy Shares - Class A Shares," below. - Annual Fund Operating Expenses are paid out of the Fund's assets and represent the Fund's expenses in operating its business. For example, the Fund pays management fees to its investment adviser, Oppenheimer Management Corporation (the "Manager") and other regular expenses for services, such as transfer agent fees, custodial fees paid to the bank that holds its portfolio securities, audit fees and legal and other expenses. The following numbers are projections of the Fund's business expenses based on the Fund's expenses in its last fiscal year. These amounts are shown as a percentage of the average net assets of each class of the Fund's shares for that year. The "12b-1 Distribution Plan Fees" for Class A shares are the Service Plan Fees (which are a maximum of 0.25% of average annual net assets of that class), and for Class B shares, are the Service Plan Fees (maximum of 0.25%) and the asset-based sales charge of 0.75%. The actual expense numbers for each class of shares in future years may be more or less, depending on a number of factors, including the actual amount of the assets represented by each class of shares. Class B shares were not publicly sold before May 1, 1993. Therefore, the Annual Fund Operating Expenses shown for Class B shares are based on expenses for the period from May 1, 1993 through December 31, 1993. Class A Shares Class B Shares -------------- -------------- Management Fees 0.50% 0.50% 12b-1 Distribution Plan Fees 0.25% 1.00% (includes Shareholder Service Plan Fees) Other Expenses 0.31% 0.40% Total Fund Operating Expenses 1.06% 1.90% - Examples. To try to show the effect of the expenses on an investment over time, we have created the hypothetical examples shown below. Assume that you make a $1,000 investment in each class of shares of the Fund, and that the Fund's annual return is 5%, and that its operating expenses for each class are the ones shown in the chart above. If you were to redeem your shares at the end of each period shown below, your investment would incur the following expenses by the end of each period shown: 1 year 3 years 5 years 10 years* ------ ------- ------- --------- Class A Shares $58 $80 $103 $171 Class B Shares $69 $90 $123 $180 If you did not redeem your investment, it would incur the following expenses: Class A Shares $58 $80 $103 $171 Class B Shares $19 $60 $103 $180 * The Class B expenses in years 7 through 10 are based on the Class A expenses shown above, because the Fund automatically converts your Class B shares into Class A shares after 6 years. Long-term Class B shareholders could pay the economic equivalent of more than the maximum front-end sales charge allowed under applicable regulations, because of the effect of the asset-based sales charge and contingent deferred sales charge. The automatic conversion is designed to minimize the likelihood that this will occur. Please refer to "How to Buy Shares - Class B Shares" for more information. These examples show the effect of expenses on an investment, but are not meant to state or predict actual or expected costs or investment returns of the Fund, all of which will vary. Financial Highlights The table on this page presents selected financial information about the Fund, including per share data and expense ratios and other data based on the Fund's average net assets. This information has been audited by Deloitte & Touche, the Fund's independent auditors, whose report on the Fund's financial statements for the fiscal year ended December 31, 1993 is included in the Statement of Additional Information. The information in the table for the fiscal periods prior to 1991 was audited by the Fund's previous independent auditors. Class B shares were publicly offered only during a portion of that period, commencing May 1, 1993.
FINANCIAL HIGHLIGHTS CLASS A --------------------------------------------------------------------------- ELEVEN YEAR MONTHS ENDED ENDED DEC. 31, DEC. 31, 1993 1992 1991(3) 1990 1989 1988(2) - ----------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA: Net asset value, beginning of period $10.74 $10.80 $9.86 $10.29 $10.12 $10.55 - ---------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income .69 .75 .82 .88(4) .92 .93 Net realized and unrealized gain (loss) on investments .40 (.05) .90 (.43) .19 (.36) ------ ------ ------ ------ ------ ------ Total income from investment operations 1.09 .70 1.72 .45 1.11 .57 - ---------------------------------------------------------------------------------------------------------------------- Dividends from net investment income (.71) (.76) (.78) (.88) (.94) (1.00) - ---------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $11.12 $10.74 $10.80 $9.86 $10.29 $10.12 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ - ---------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE(5) 10.30% 6.77% 18.28% 4.74% 11.31% 4.48% - ---------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $110,759 $106,290 $90,623 $87,021 $96,380 $102,293 - ---------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $111,702 $98,672 $86,471 $90,065 $100,891 $111,264 - ---------------------------------------------------------------------------------------------------------------------- Number of shares outstanding at end of period (in thousands) 9,963 9,899 8,390 8,829 9,369 10,108 - ---------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: Net investment income 6.20% 7.00% 8.02% 8.85% 8.85% 8.75% Expenses 1.06% 1.10% 1.23% 1.24%(4) 1.14% 1.05% - ---------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate(7) 110.1% 116.4% 97.1% 80.4% 41.3% 45.0% Class B - -------------------------------------------------------------------------------------------------------- -------- PERIOD ENDED YEAR ENDED JANUARY 31, DEC. 31, 1988(2) 1987(2) 1986(2) 1985(2) 1984(2) 1993(1) - ------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING DATA: Net asset value, beginning of period $11.30 $11.16 $10.91 $11.00 $11.07 $11.10 - ---------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income 1.09 1.16 1.22 1.27 1.28 .40 Net realized and unrealized gain (loss) on investments (.55) .22 .35 (.04) (.03) .03 -------- -------- -------- -------- -------- -------- Total income from investment operations .54 1.38 1.57 1.23 1.25 .43 - ---------------------------------------------------------------------------------------------------------------------- Dividends from net investment income (1.29) (1.24) (1.32) (1.32) (1.32) (.42) - ---------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.55 $11.30 $11.16 $10.91 $11.00 $11.11 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- - ---------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE(5) N/A N/A N/A N/A N/A 3.91% - ---------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $118,568 $125,513 $121,979 $117,293 $116,193 $1,809 - ---------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $118,724 $123,045 $118,253 $111,235 $115,058 $922 - ---------------------------------------------------------------------------------------------------------------------- Number of shares outstanding at end of period (in thousands) 11,234 11,103 10,930 10,751 10,563 163 - ---------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: Net investment income 10.28% 10.45% 11.26% 12.21% 11.69% 4.80%(6) Expenses .98% .93% .97% 1.01% .99% 1.90%(6) - ---------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate(7) 19.5% 59.8% 36.5% 76.7% 49.9% 110.1% 1. For the period from May 1, 1993 (inception of offering) to December 31, 1993. 2. Operating results prior to April 15, 1988 were achieved by the Fund's predecessor corporation as a closed-end fund under different investment objectives and policies. Such results are thus not necessarily representative of operating results the Fund may achieve under its current investment objectives and policies. 3. On March 28, 1991, Oppenheimer Management Corporation became the investment advisor to the Fund. 4. Net investment income would have been $.87 absent the voluntary expense limitation, resulting in an expense ratio of 1.26%. 5. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. 6. Annualized. 7. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the year ended December 31, 1993 were $123,943,358 and $134,301,656, respectively. See accompanying Notes to Financial Statements.
Investment Objective and Policies Objective. The Fund seeks to achieve a high level of current income consistent with prudent investment risk and the stability of capital primarily though investment in a diversified portfolio of investment grade fixed-income securities. Investment Policies and Strategies. In seeking its investment objective, the Fund only invests in (i) investment grade bonds - debt securities rated BBB or above by Standard & Poor's Corporation ("S&P") or Baa or above by Moody's Investors Service, Inc. ("Moody's") or, if unrated, are of comparable quality as determined by the Fund's Sub- Adviser, Massachusetts Mutual Life Insurance Company; (ii) U.S. Government Securities; and (iii) high quality, short-term money market instruments. Under normal market conditions, it is anticipated that the dollar-weighted average life of the Fund's portfolio will be between five and ten years. The dollar-weighted average portfolio maturity of the Fund as of December 31, 1993, was 6 years. While the Fund will generally purchase only investment grade debt securities, the Fund is permitted to hold lower-rated securities (securities rated "Ba" or lower by Moody's or "BB" or lower by S&P) until investment considerations indicate that their sale is appropriate or until maturity. Lower-rated securities are considered speculative and involve greater risk. They may be less liquid than higher-rated securities. If the Fund were forced to sell a lower-rated debt security during a period of rapidly-declining prices, it might experience significant losses especially if a substantial number of other holders decide to sell at the same time. Other risks may involve the default of the issuer or price changes in the issuer's securities due to changes in the issuer's financial strength or economic conditions. The Fund is not obligated to dispose of securities when issuers are in default or if the rating of the security is reduced. These risks are discussed in more detail in the Statement of Additional Information. When investing the Fund's assets, the Manager considers many factors, including current developments and trends in both the economy and the financial markets. The Fund may try to hedge against losses in the value of its portfolio of securities by using hedging strategies described below. The Fund's Sub-Adviser may employ special investment techniques, also described below. Additional information about the securities the Fund may invest in, the hedging strategies the Fund may employ and the special investment techniques may be found under the same headings in the Statement of Additional Information. - Portfolio Turnover. While it is a policy of the Fund generally not to engage in trading for short-term gains, portfolio changes will be made without regard to the length of time a security has been held or whether a sale would result in a profit or loss, if in the Sub-Adviser's judgment, such transactions are advisable in light of the circumstances of a particular company or within a particular industry or in light of market, economic or financial conditions. Higher levels of portfolio activity generally result in higher transaction costs and may also result in taxes on realized capital gains to be borne by the Fund's shareholders. See "Financial Highlights" above, "Dividends, Capital Gains and Taxes" below and "Brokerage Policies of the Fund" in the Statement of Additional Information. - Interest Rate Risks. In addition to credit risks, described below, debt securities are subject to changes in value due to changes in prevailing interest rates. When prevailing interest rates fall, the values of outstanding debt securities generally rise. Conversely, when interest rates rise, the values of outstanding debt securities generally decline. The magnitude of these fluctuations will be greater when the average maturity of the portfolio securities is longer. - Credit Risks. Debt securities are also subject to credit risks. Credit risk relates to the ability of the issuer of a debt security to make interest or principal payments on the security as they become due. Generally, higher-yielding, lower-rated bonds (which the Fund may hold) are subject to greater credit risk than higher-rated bonds. Securities issued or guaranteed by the U.S. Government are subject to little, if any, credit risk. While the Manager may rely to some extent on credit ratings by nationally recognized rating agencies, such as S&P or Moody's, in evaluating the credit risk of securities selected for the Fund's portfolio, it may also use its own research and analysis. However, many factors affect an issuer's ability to make timely payments, and there can be no assurance that the credit risks of a particular security will not change over time. - Can the Fund's Investment Objective and Policies Change? The Fund has an investment objective, which is described above, as well as investment policies it follows to try to achieve its objective. Additionally, the Fund uses certain investment techniques and strategies in carrying out those policies. The Fund's investment policies and practices are not "fundamental" unless the Prospectus or Statement of Additional Information says that a particular policy is "fundamental." Fundamental policies are those that cannot be changed without the approval of a "majority" of the Fund's outstanding voting shares. The term "majority" is defined in the Investment Company Act to be a particular level of vote by outstanding voting shares (and this term is explained in the Statement of Additional Information). The Fund's investment objective is a fundamental policy. The Fund's Board of Trustees may change non- fundamental policies without shareholder approval, although significant changes will be described in amendments to this Prospectus. Securities of Foreign Governments and Companies. The Fund may invest in debt securities issued or guaranteed by foreign companies, and debt securities of foreign governments or their agencies. These foreign securities may include debt obligations such as government bonds, debentures issued by companies, as well as notes. Some of these debt securities may have variable interest rates or "floating" interest rates that change in different market conditions. Those changes will affect the income the Fund receives. These securities are described in more detail in the Statement of Additional Information. The Fund is not restricted in the amount of its assets it may invest in foreign countries or in which countries. However, if the Fund's assets are held abroad, the countries in which they are held and the sub- custodians holding them must be approved by the Trust's Board of Trustees. - Risks of Foreign Securities. Investing in foreign securities, especially those issued in underdeveloped countries, generally involves special risks. For example, 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 changes in foreign currency rates, 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. If the Fund distributes more income during a period than it earns because of unfavorable currency exchange rates, those dividends may later have to be considered a return of capital. More information about the risks and potential rewards of foreign securities is contained in the Statement of Additional Information. U.S. Government Securities. Certain U.S. Government securities, including U.S. Treasury bills, notes and bonds, and mortgage participation certificates guaranteed by Government National Mortgage Association ("Ginnie Mae") are supported by the full faith and credit of the U.S. government, which in general terms means that the U.S. Treasury stands behind the obligation to pay principal and interest. Ginnie Mae certificates are one type of mortgage-related U.S. Government Security the Fund invests in. Other mortgage-related U.S. Government Securities the Fund invests in that are issued or guaranteed by federal agencies or government-sponsored entities are not supported by the full faith and credit of the U.S. government. Those securities include obligations supported by the right of the issuer to borrow from the U.S. Treasury, such as obligations of Federal Home Loan Mortgage Corporation ("Freddie Mac"), obligations supported only by the credit of the instrumentality, such as Federal National Mortgage Association ("Fannie Mae") and obligations supported by the discretionary authority of the U.S. Government to repurchase certain obligations of U.S. Government agencies or instrumentalities such as the Federal Land Banks and the Federal Home Loan Banks. Other U.S. Government Securities the Fund invests in are collateralized mortgage obligations ("CMOs"). The value of U.S. Government Securities will fluctuate depending on prevailing interest rates. Because the yields on U.S. Government Securities are generally lower than on corporate debt securities, when the Fund holds U.S. Government Securities it may attempt to increase the income it can earn from them by writing covered call options against them, when market conditions are appropriate. Writing covered calls is explained below, under "Other Investment Techniques and Strategies." - Mortgage-Backed U.S. Government Securities and CMOs. Certain mortgage-backed U.S. Government securities "pass-through" to investors the interest and principal payments generated by a pool of mortgages assembled for sale by government agencies. Pass-through mortgage-backed securities entail the risk that principal may be repaid at any time because of prepayments on the underlying mortgages. That may result in greater price and yield volatility than traditional fixed-income securities that have a fixed maturity and interest rate. The Fund may also invest in CMOs, which generally are obligations fully collateralized by a portfolio of mortgages or mortgage-related securities. Payment of the interest and principal generated by the pool of mortgages is passed through to the holders as the payments are received. CMOs are issued with a variety of classes or series which have different maturities. Certain CMOs may be more volatile and less liquid than other types of mortgage-related securities, because of the possibility of the prepayment of principal due to prepayments on the underlying mortgage loans. - Short-Term Debt Securities. The high quality, short-term money market instruments in which the Fund may invest include U.S. Treasury and agency obligations; commercial paper (short-term, unsecured, negotiable promissory notes of a domestic or foreign company), short-term obligations of corporate issuers; bank participation certificates; and certificates of deposit and bankers' acceptances (time drafts drawn on commercial banks usually in connection with international transactions) of banks and savings and loan associations. - Asset-Backed Securities. The Fund may invest in securities that represent fractional undivided interests in pools of consumer loans, similar in structure to the mortgage-backed securities in which the Fund may invest, described above. Payments of principal and interest are passed through to holders of asset-backed securities and are typically supported by some form of credit enhancement, such as a letter of credit, surety bond, or limited guarantee by another entity or having a priority to certain of the borrower's other securities. The degree of credit enhancement varies, and generally applies, until exhausted, to only a fraction of the asset-backed security's par value. If the credit enhancement of an asset-backed security held by the Fund has been exhausted, and if any required payments of principal and interest are not made with respect to the underlying loans, the Fund may then experience losses or delays in receiving payment. Further details are set forth in the Statement of Additional Information under "Investment Objective and Policies - Asset-Backed Securities." Other Investment Techniques and Strategies. The Fund may also use the investment techniques and strategies described below, which involve certain risks. The Statement of Additional Information contains more detailed information about these practices, including limitations designed to reduce some of the risks. - Writing Covered Calls. The Fund may write (i.e., sell) covered call options ("calls") to raise cash for liquidity purposes (for example, to meet redemption requirements) or for defensive reasons. The Fund may write calls only if certain conditions are met: (1) the calls must be listed on a domestic or foreign securities exchange or over-the-counter, and (2) each call must be "covered" while it is outstanding; that is, the Fund must own the securities on which the call is written or it must own other securities that are acceptable for the escrow arrangements required for calls. If a covered call written by the Fund is exercised on a security that has increased in value, the Fund will be required to sell the security at the call price and will not be able to realize any profit on the security above the call price. - Hedging With Options and Futures Contracts. The Fund may buy and sell options and futures contracts to manage its exposure to changing interest rates, securities prices and currency exchange rates. Some of these strategies, such as selling futures, buying puts and writing calls, hedge the Fund's portfolio against price fluctuations. Other hedging strategies, such as buying futures, writing puts and buying calls, tend to increase market exposure. The put and call options which the Fund may purchase and sell are exchange-traded or over-the-counter options. The Fund may invest in futures, where the securities which underlie such contracts are permissible investments for the Fund, index-based futures contracts which are appropriately correlated with the Fund's portfolio, the Fund may purchase and sell call and put options on futures contracts, and the Fund may engage in related closing transactions with respect to such options on futures contracts. The Fund may also invest in interest rate swap transactions. All of these are referred to as "hedging instruments." The initial margin deposits for futures contracts and premiums paid for related options may not exceed 5% of the value of the Fund's total assets. Writing puts requires the segregation of liquid assets to cover the put. The Fund does not use futures and options on futures for speculative purposes. The use of hedging instruments may include special risks. Hedging instruments can be volatile investments and may involve certain risks. If the Manager or Sub-Adviser uses a hedging instrument at the wrong time or judges market conditions incorrectly, hedging strategies may reduce the Fund's return. The Fund could also experience losses if the prices of its futures and options positions were not correlated with its other investments or if it could not close out a position because of an illiquid market for the future or option. Interest rate swaps are subject to credit risks (if the other party fails to meet its obligations) and also to interest rate risks, because the Fund could be obligated to pay more under its swap agreements than it receives under them, as a result of interest rate changes. Options trading involves the payment of premiums and has special tax effects on the Fund. There is also special risks in particular hedging strategies. For example, in writing puts, there is a risk that the Fund may be required to buy the underlying security at a disadvantageous price. These risks and the hedging strategies the Fund may use are described in greater detail in the Statement of Additional Information. - Illiquid and Restricted Securities. Under the policies and procedures established by the Trust's Board of Trustees, the Manager determines the liquidity of the Fund's investments. Investments may be illiquid because of the absence of an active trading market, making it difficult to value them or dispose of them promptly at an acceptable price. A restricted security is one that has a contractual restriction on its resale or which cannot be sold publicly until it is registered under the Securities Act of 1933. The Fund will not invest more than 10% of its net assets in illiquid or restricted securities (that limit may increase to 15% if certain state laws are changed or the Fund's shares are no longer sold in those states). Certain restricted securities, eligible for resale to qualified institutional purchasers, are not subject to that limit. - Loans of Portfolio Securities. The Fund may lend its portfolio securities amounting to not more than 25% of its total assets to brokers, dealers and other financial institutions, subject to certain conditions described in the Statement of Additional Information. The Fund presently does not intend to lend its portfolio securities, but if it does, the value of securities loaned is not expected to exceed 5% of the value of the Fund's total assets in the coming year. - Repurchase Agreements. The Fund may enter into repurchase agreements. There is no limit on the amount of the Fund's net assets that may be subject to repurchase agreements of seven days or less. The Fund will not enter into a repurchase agreement that will cause more than 15% of the Fund's net assets to be subject to repurchase agreements maturing in more than seven days. Repurchase agreements must be fully collateralized. However, if the vendor of the securities under a repurchase agreement 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. - Forward Commitments. The Fund may enter into contracts to purchase securities for a fixed price at a specified future date beyond customary settlement time ("forward commitments"). Forward commitments involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of decline in value of the Fund's other assets. The Fund may realize short-term gains or losses upon the sale of forward commitments. - "When-Issued" and Delayed Delivery Transactions. The Fund may purchase securities on a "when-issued" basis and may purchase or sell securities on a "delayed delivery" basis. These terms refer to securities that have been created and for which a market exists, but which are not available for immediate delivery. There may be a risk of loss to the Fund if the value of the security declines prior to the settlement date. - Derivative Instruments. The Fund can invest in a number of different kinds of "derivative securities." In general, a "derivative security" is a specially designed investment whose performance is linked to the performance of an underlying security or investment, such as an option, future or index. The risks of investing in such securities include not only the ability of the company issuing the security to pay the amount due on the security, but also the risk that the underlying security or investment might not perform the way the Manager expected it to perform. Examples include, among others, "index-linked" notes, which are debt securities of companies that call for payment on different terms than the typical note where the borrower pays back a fixed sum on maturity of the notes. The payment of an index-linked note depends on the performance of one or more market indices, such as the S&P 500 Index. Other examples include "debt exchangeable for common stock" of the issuer or "equity-linked debt securities" of the issuer. At maturity, the principal amount of the debt security is exchanged for common stock of the issuer or is payable based on the issuer's common stock price. A risk in either case is that the amount payable at maturity is less than the pricipal amount of the debt. - Other Investment Restrictions. The Fund has other investment restrictions which are fundamental policies. Under these fundamental policies, the Fund cannot do any of the following: (1) make short sales except for sales "against the box"; (2) borrow money or enter into reverse repurchase agreements, except that the Fund may borrow money from banks and enter into reverse repurchase agreements as a temporary measure for extraordinary or emergency purposes (but not for the purpose of making investments), provided that the aggregate amount of all such borrowings and commitments under such agreements does not, at the time of borrowing or of entering into such an agreement, exceed 10% of the Fund's total assets taken at current market value; the Fund will not purchase additional portfolio securities at any time that the aggregate amount of its borrowings and its commitments under reverse repurchase agreements exceeds 5% of the Fund's net assets (for purposes of this restriction, entering into portfolio lending agreements shall not be deemed to constitute borrowing money); (3) concentrate its investments in any particular industry except that it may invest up to 25% of the value of its total assets in the securities of issuers in any one industry (of the utility companies, gas, electric, water and telephone will each be considered as a separate industry); and (4) buy securities issued or guaranteed by any one issuer (except the U.S. Government or any of its agencies or instrumentalities) if with respect to 75% of its total assets (a) more than 5% of the Fund's total assets would be invested in the securities of that issuer, or (b) the Fund would own more than 10% of that issuer's voting securities. All of the percentage restrictions described above and elsewhere in this Prospectus apply only at the time the Fund purchases a security, and the Fund need not dispose of a security merely because the Fund's assets have changed or the security has increased in value relative to the size of the Fund. There are other fundamental policies discussed in the Statement of Additional Information. How the Fund is Managed Organization and History. Oppenheimer Integrity Funds (the "Trust") was organized in 1982 as a multi-series Massachusetts business trust and the Fund is a series of that Trust. That Trust is an open-end, diversified management investment company, with an unlimited number of authorized shares of beneficial interest. Each of the two series of the Trust is a fund that issues its own shares, has its own investment portfolio, and its own assets and liabilities. The Fund is governed by a Board of Trustees, which is responsible for protecting the interests of shareholders under Massachusetts law. The Trustees meet periodically throughout the year to oversee the Fund's activities, review its performance, and review the actions of the Manager. "Trustees and Officers of the Fund" in the Statement of Additional Information names the Trustees and provides more information about them and the officers of the Fund. Although the Fund is not required by law to hold annual meetings, it may hold shareholder meetings from time to time on important matters, and shareholders have the right to call a meeting to remove a Trustee or to take other action described in the Fund's Declaration of Trust. The Board of Trustees has the power, without shareholder approval, to divide unissued shares of the Fund into two or more classes. Each class has its own dividends and distributions, and pays certain expenses which may be different for the different classes. Each class may have a different net asset value. The Board has done so, and the Fund currently has two classes of shares, Class A and Class B. Each share has one vote at shareholder meetings, with fractional shares voting proportionally. Only shares of a class vote together on matters that affect that class alone. Shares are freely transferrable. The Manager and Its Affiliates. Since March 28, 1991, the Fund is managed by the Manager, which handles its day-to-day business. The Manager carries out its duties, subject to the policies established by the Board of Trustees, under an Investment Advisory Agreement which states the Manager's responsibilities and its fees, and describes the expenses that the Fund pays to conduct its business. The Manager has entered into a contract with Massachusetts Mutual Life Insurance Company to act as the Fund's Sub-Adviser. The Sub-Adviser is responsible for choosing the Fund's investments and its duties and responsibilities are set forth in the contract with the Manager. The Manager, not the Fund, pays the Sub- Adviser. The Manager has operated as an investment adviser since 1959. The Manager and its affiliates currently manage investment companies, including other OppenheimerFunds, with assets of more than $27 billion as of December 31, 1993, and with more than 1.8 million shareholder accounts. The Manager is owned by Oppenheimer Acquisition Corp., a holding company that is owned in part by senior officers of the Manager and controlled by the Sub-Adviser. - Portfolio Manager. The Portfolio Manager of the Fund (who is also a Vice President of the Fund) is Mary E. Wilson, a Vice President and Managing Director of the Sub-Adviser. She has been responsible for the day-to-day management of the Fund's portfolio since March, 1991. Ms. Wilson also serves as Senior Vice President of MML Series Investment Fund and Vice President of Mass Mutual Participation Investors and MassMutual Corporate Investors. - Fees and Expenses. Under the Investment Advisory Agreement, the Fund pays the Manager the following annual fees, which decline on additional assets as the Fund grows: 0.50% of the first $100 million of the Fund's average annual net assets, 0.45% of the next $200 million, 0.40% of the next $200 million, and 0.35% of net assets in excess of $500 million. The Fund's management fee for its last fiscal year was 0.50% of average annual net assets for Class A shares and 0.50% for Class B shares. Under the Sub-Advisory Agreement, the Manager pays the Sub-Advisor the following annual fees, which decline on additional assets as the Fund grows: 0.35% of the first $100 million of the Fund's average annual net assets; 0.25% of the next $200 million, 0.20% of the next $200 million; and 0.15% of net assets in excess of $500 million. The Fund pays expenses related to its daily operations, such as custodian fees, Trustees' fees, transfer agency fees, legal and auditing costs. Those expenses are paid out of the Fund's assets and are not paid directly by shareholders. However, those expenses reduce the net asset value of shares, and therefore are indirectly borne by shareholders through their investment. More information about the investment advisory agreement and the other expenses paid by the Fund is contained in the Statement of Additional Information. There is also information about the Fund's brokerage policies and practices in "Brokerage Policies of the Fund" in the Statement of Additional Information. That section discusses how brokers and dealers are selected for the Fund's portfolio transactions. Because the Fund purchases most of its portfolio securities directly from the sellers and not through brokers, it incurs relatively little expense for brokerage. From time to time it may use brokers when buying portfolio securities. When deciding which brokers to use, the Investment Advisory Agreement allows the Manager to consider whether brokers have sold shares of the Fund or any other funds for which the Manager or the Sub-Adviser or their affiliates exercise investment discretion. - The Distributor. The Fund's shares are sold through dealers and brokers that have a sales agreement with Oppenheimer Funds Distributor, Inc., a subsidiary of the Manager that acts as the Distributor. The Distributor also distributes the shares of other mutual funds managed by the Manager (the "OppenheimerFunds") and is sub-distributor for funds managed by a subsidiary of the Manager. - The Transfer Agent. The Fund's transfer agent is Oppenheimer Shareholder Services, a division of the Manager, which acts as the shareholder servicing agent for the Fund and the other OppenheimerFunds on an "at-cost" basis. Shareholders should direct inquiries about their accounts to the Transfer Agent at the address and toll-free numbers shown below in this Prospectus and on the back cover. Performance of the Fund Explanation of Performance Terminology. The Fund uses certain terms to illustrate its performance: "total return" and "yield." These terms are used to show the performance of each class of shares separately, because the performance of each class of shares will usually be different, as a result of the different kinds of expenses each class bears. This performance information may be published useful to help you see how well your investment has done and to compare it to other funds or market indices, as we have done below. It is important to understand that the Fund's yields and total returns represent past performance and should not be considered to be predictions of future returns or performance. This performance data is described below, but more detailed information about how total returns and yields are calculated is contained in the Statement of Additional Information, which also contains information about other ways to measure and compare the Fund's performance. The Fund's investment performance will vary, depending on market conditions, the composition of the portfolio, expenses and which class of shares you purchase. - Total Returns. There are different types of total returns used to measure the Fund's performance. Total return is the change in value of a hypothetical investment in the Fund over a given period, assuming that all dividends and capital gains distributions are reinvested in additional shares. The cumulative total return measures the change in value over the entire period (for example, ten years). An average annual total return shows the average rate of return for each year in a period that would produce the cumulative total return over the entire period. However, average annual total returns do not show the Fund's actual year- by-year performance. When total returns are quoted for Class A shares, they reflect the payment of the maximum initial sales charge. Total returns may be also quoted "at net asset value," without considering the effect of the sales charge, and those returns would be reduced if sales charges were deducted. When total returns are shown for a one-year period for Class B shares, they reflect the effect of the contingent deferred sales charge. They may also be shown based on the change in net asset value, without considering the effect of the contingent deferred sales charge. - Yield. Each Class of shares calculates its yield by dividing the annualized net investment income per share on the portfolio during a 30- day period by the maximum offering price on the last day of the period. The yield of each Class will differ because of the different expenses of each Class of shares. The yield data represents a hypothetical investment return on the portfolio, and does not measure an investment return based on dividends actually paid to shareholders. To show that return, a dividend yield may be calculated. Dividend yield is calculated by dividing the dividends of a Class derived from net investment income during a stated period by the maximum offering price on the last day of the period. Yields and dividend yields for Class A shares reflect the deduction of the maximum initial sales charge, but may also be shown based on the Fund's net asset value per share. Yields for Class B shares do not reflect the deduction of the contingent deferred sales charge. How Has the Fund Performed? Below is a discussion by the Manager of the Fund's performance during its last fiscal year ended December 31, 1993, followed by a graphical comparison of the Fund's performance to an appropriate broad-based market index. - Management's Discussion of Performance. Throughout most of 1993 the U.S. economy continued to grow slowly and interest rates declined steadily. This caused the value of many corporate bonds in the Fund's portfolio to appreciate. When the Manager felt that interest rates had reached their lowest point, the Manager sold a number of bonds at a substantial profit. In anticipation of rising interest rates, the Manager reinvested the proceeds from the sale of those bonds into investments with higher credit ratings to help protect the Fund's net asset value. In addition, the Manager emphasized investments in short-term U.S. Treasuries, which are less likely to fluctuate in price than longer-term securities in a rising interest rate environment. The historically low interest rates experienced over the past year have caused volatility in the mortgage-backed securities market. To insulate the Fund's portfolio from this effect, the Manager invested in a combination of very short-term mortgage-backed securities, which have a low risk of prepayment, and highly seasoned mortgage-backed securities that have already survived several refinancing waves. - Comparing the Fund's Performance to the Market. The chart below shows the performance of a hypothetical $10,000 investment in each Class of shares of the Fund held until December 31, 1993; in the case of Class A shares, since the inception of the Class on April 15, 1988, and in the case of Class B shares, from the inception of the Class on May 1, 1993, with all dividends and capital gains distributions reinvested in additional shares. The graph reflects the deduction of the 4.75% maximum initial sales charge on Class A shares and the maximum 5% contingent deferred sales charge on Class B shares. Because the Fund invests in investment grade fixed-income securities, the Fund's performance is compared to the performance of the Lehman Brothers Corporate Bond Index, a broad-based, unmanaged index of publicly- issued nonconvertible investment grade corporate debt of U.S. issuers, widely recognized as a measure of the U.S. fixed-rate corporate bond market. It includes a factor for the reinvestment of interest, but does not reflect expenses or taxes. Index performance reflects reinvestment of income but not capital gains or transaction costs, and none of the data below shows the effect of taxes. Also, the Fund's performance data reflects the effect of Fund business and operating expenses. While index comparisons may be useful to provide a benchmark for the Fund's performance, it must be noted that the Fund's investments are not limited to the securities in any one index and the index data does not reflect any assessment of the risk of the investments included in the index. Oppenheimer Investment Grade Bond Fund Comparison of Change in Value of $10,000 Hypothetical Investment to Lehman Brothers Corporate Bond Index (Graph) Past Performance is not predictive of future performance. Oppenheimer Investment Grade Bond Fund Average Annual Total Return at 12/31/93 1 Year 5 Year Life* Class A: 5.06% 9.12% 8.77% Cumulative Total Return at 12/31/93 Class B: -1.09%** _____________________________ * The Fund began operations on 4/15/88 ** Class B shares of the Fund first publicly sold on 5/1/93 ABOUT YOUR ACCOUNT How to Buy Shares Classes of Shares. The Fund offers investors two different classes of shares. The different classes of shares represent investments in the same portfolio of securities but are subject to different expenses and will likely have different share prices. - Class A Shares. If you buy Class A shares, you pay an initial sales charge (on investments up to $1 million). If you purchase Class A shares as part of an investment of at least $1 million in shares of one or more OppenheimerFunds, and you sell any of those shares within 18 months after your purchase, you will pay a contingent deferred sales charge. - Class B Shares. If you buy Class B shares, you pay no sales charge at the time of purchase, but if you sell your shares within six years, you will normally pay a contingent deferred sales charge that varies depending on how long you own your shares. Which Class of Shares Should You Choose? Once you decide that the Fund is an appropriate investment for you, the decision as to which class of shares is better suited to your needs depends on a number of factors which you should discuss with your financial advisors: - How Much Do You Plan To Invest? If you plan to invest a substantial amount, the reduced sales charges available for larger purchases of Class A shares may be more beneficial to you, and for purchases over $1 million, the contingent deferred sales charge on Class A shares may be more beneficial. The Distributor will not accept any order for $1 million or more for Class B shares on behalf of a single investor for that reason. - How Long Do You Expect To Hold Your Investment? While future financial needs cannot be predicted with certainty, investors who prefer not to pay an initial sales charge and who plan to hold their shares for more than five years might consider Class B shares. Investors who plan to redeem shares before the end of five years might prefer Class A shares. - Are There Differences In Account Features That Matter To You? Because some account features may not be available for Class B shareholders, such as checkwriting, you should carefully review how you plan to use your investment account before deciding which class of shares is better for you. Additionally, the dividends payable to Class B shareholders will be reduced by the additional expenses borne solely by that class, such as the asset-based sales charge to which Class B shares are subject, as described below and in the Statement of Additional Information. - How Does It Affect Payments To My Broker? A salesperson or any other person who is entitled to receive compensation for selling Fund shares may receive different compensation for selling one class than for selling another class. It is important that investors understand that the purpose of the contingent deferred sales charge and asset-based sales charge for Class B shares is the same as the purpose of the front-end sales charge on sales of Class A shares. How Much Must You Invest? You can open a Fund account with a minimum initial investment of $1,000 and make additional investments at any time with as little as $25. There are reduced minimum investments under special investment plans: - With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7) custodial plans and military allotment plans, you can make initial and subsequent investments for as little as $25; and subsequent purchases of at least $25 can be made by telephone through AccountLink. - Under pension and profit-sharing plans and Individual Retirement Accounts (IRAs), you can make an initial investment of as little as $250 (if your IRA is established under an Asset Builder Plan, the $25 minimum applies), and subsequent investments may be as little as $25. - There is no minimum investment requirement if you are buying shares by reinvesting dividends from the Fund or other OppenheimerFunds (a list of them appears in the Statement of Additional Information, or you can ask your dealer or call the Transfer Agent), or by reinvesting distributions from unit investment trusts that have made arrangements with the Distributor. How Are Shares Purchased? You can buy shares several ways -- through any dealer, broker or financial institution that has a sales agreement with the Distributor, or directly through the Distributor, or automatically from your bank account through an Asset Builder Plan under the OppenheimerFunds AccountLink service. When you buy shares, be sure to specify Class A or Class B shares. If you do not choose, your investment will be made in Class A shares. - Buying Shares Through Your Dealer. Your dealer will place your order with the Distributor on your behalf. - Buying Shares Through the Distributor. Complete an OppenheimerFunds New Account Application and return it with a check payable to "Oppenheimer Funds Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you don't list a dealer on the application, the Distributor will act as your agent in buying the shares. - Buying Shares Through OppenheimerFunds AccountLink. You can use AccountLink to link your Fund account with an account at a U.S. bank or other financial institution that is an Automated Clearing House (ACH) member, to transmit funds electronically to purchase shares, to send redemption proceeds, and to transmit dividends and distributions. Shares are purchased for your account on the regular business day the Distributor is instructed by you to initiate the ACH transfer to buy shares. You can provide those instructions automatically, under an Asset Builder Plan, described below, or by telephone instructions using OppenheimerFunds PhoneLink, also described below. You must request AccountLink privileges on the application or dealer settlement instructions used to establish your account. Please refer to "AccountLink," below for more details. - At What Price Are Shares Sold? Shares are sold at the public offering price based on the net asset value that is next determined after the Distributor receives the purchase order in Denver. In most cases, to receive that day's offering price, the Distributor must receive your order by 4:00 P.M., New York time (all references to time in this Prospectus mean "New York time."). The net asset value of each class of shares is determined as of that time on each day The New York Stock Exchange is open (which is a "regular business day"). If you buy shares through a dealer, the dealer must receive your order by 4:00 P.M., on a regular business day and transmit it to the Distributor so that it is received before the Distributor's close of business that day, which is normally 5:00 P.M. The Distributor may reject any purchase order for the Fund's shares, in its sole discretion. - Asset Builder Plans. You may purchase shares of the Fund (and up to four other OppenheimerFunds) automatically each month from your account at a bank or other financial institution under an Asset Builder Plan with AccountLink. Details are on the Application and in the Statement of Additional Information. - 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, where purchases are not subject to an initial sales charge, the offering price may be net asset value. In some cases, reduced sales charges may be available, as described below. When you invest, the Fund receives the net asset value for your account. The sales charge varies depending on the amount of your purchase and a portion may be retained by the Distributor and allocated to your dealer. The current sales charge rates and commissions paid to dealers and brokers are as follows:
Front-End Front-End Sales Charge Sales Charge Commission as Percentage as Approximate as Percentage of Offering Percentage of of Offering Amount of Purchase Price Amount Invested Price - ------------------ ------------- --------------- ------------- Less than $50,000 4.75% 4.98% 4.00% $50,000 or more but less than $100,000 4.50% 4.71% 3.75% $100,000 or more but less than $250,000 3.50% 3.63% 2.75% $250,000 or more but less than $500,000 2.50% 2.56% 2.00% $500,000 or more but less than $1 million 2.00% 2.04% 1.60% - -------------------------- The Distributor reserves the right to reallow the entire commission to dealers. If that occurs, the dealer may be considered an "underwriter" under Federal securities laws.
- Class A Contingent Deferred Sales Charge. There is no initial sales charge on purchases of Class A shares of any one or more OppenheimerFunds aggregating $1 million or more. However, the Distributor pays dealers of record commissions on such purchases in an amount equal to the sum of 1.0% of the first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of share purchases over $5 million. However, that commission will be paid only on the amount of those purchases in excess of $1 million that were not previously subject to a front-end sales charge and dealer commission. If you redeem any of those shares within 18 months of the end of the calendar month of their purchase, a contingent deferred sales charge (called the "Class A contingent deferred sales charge") will be deducted from the redemption proceeds. That sales charge will be equal to 1.0% of the aggregate net asset value of either (1) the redeemed shares (not including shares purchased by reinvestment of dividends or capital gain distributions) or (2) the original cost of the shares, whichever is less. However, the Class A contingent deferred sales charge will not exceed the aggregate commissions the Distributor paid to your dealer on all Class A shares of all OppenheimerFunds you purchased subject to the Class A contingent deferred sales charge. In determining whether a contingent deferred sales charge is payable, the Fund will first redeem shares that are not subject to the sales charge, including shares purchased by reinvestment of dividends and capital gains, and then will redeem other shares in the order that you purchased them. The Class A contingent deferred sales charge is waived in certain cases described in "Waivers of Class A Sales Charges" below. No Class A contingent deferred sales charge is charged on exchanges of shares under the Fund's Exchange Privilege (described below). However, if the shares acquired by exchange are redeemed within 18 months of the end of the calendar month of the purchase of the exchanged shares, the sales charge will apply. - Special Arrangements With Dealers. The Distributor may advance up to 13 months' commissions to dealers that have established special arrangements with the Distributor for Asset Builder Plans for their clients. Dealers whose sales of Class A shares of OppenheimerFunds (other than money market funds) under OppenheimerFunds-sponsored 403(b)(7) custodial plans exceed $5 million per year (calculated per quarter), will receive monthly one-half of the Distributor's retained commissions on those sales, and if those sales exceed $10 million per year, those dealers will receive the Distributor's entire retained commission on those sales. The Distributor sponsors an annual sales conference to which a dealer firm is eligible to send, with a guest, a registered representative who sells more than $2.5 million of Class A shares of OppenheimerFunds (other than money market funds) in a calendar year, or the dealer may, at its option, receive the equivalent cash value of that award as additional commission. Reduced Sales Charges for Class A Share Purchases. You may be eligible to buy Class A shares at reduced sales charge rates in one or more of the following ways: - Right of Accumulation. You and your spouse can cumulate Class A shares you purchase for your own accounts, or jointly, or on behalf of your children who are minors, under trust or custodial accounts. A fiduciary can cumulate shares purchased for a trust, estate or other fiduciary account (including one or more employee benefit plans of the same employer) that has multiple accounts. Additionally, you can cumulate current purchases of Class A shares of the Fund and other OppenheimerFunds with Class A shares of OppenheimerFunds you previously purchased subject to a sales charge, provided that you still hold your investment in one of the OppenheimerFunds; the value of those shares will be based on the greater of the amount you paid for the shares or their current value (at offering price). The OppenheimerFunds are listed in "Reduced Sales Charges" in the Statement of Additional Information, or a list can be obtained from the Transfer Agent. The reduced sales charge will apply only to current purchases and must be requested when you buy your shares. - Letter of Intent. Under a Letter of Intent, you may purchase Class A shares of the Fund and other OppenheimerFunds during a 13-month period at the reduced sales charge rate that applies to the aggregate amount of the intended purchases, including purchases made up to 90 days before the date of the Letter. More information is contained in the Application and in "Reduced Sales Charges" in the Statement of Additional Information. - Waivers of Class A Sales Charges. No sales charge is imposed on sales of Class A shares to the following investors: (1) the Manager or its affiliates; (2) present or former officers, directors, trustees and employees (and their "immediate families" as defined in "Reduced Sales Charges" in the Statement of Additional Information) of the Fund, the Manager and its affiliates, and retirement plans established by them for their employees; (3) registered management investment companies, or separate accounts of insurance companies having an agreement with the Manager or the Distributor for that purpose; (4) 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; (5) employees and registered representatives (and their spouses) of dealers or brokers described above or financial institutions that have entered into sales arrangements with such dealers or brokers (and are identified to the Distributor) or with the Distributor; the purchaser must certify to the Distributor at the time of purchase that the purchase is for the purchaser's own account (or for the benefit of such employee's spouse or minor children); (6) dealers, brokers or registered investment advisers that have entered into an agreement with the Distributor providing specifically for the use of shares of the Fund in particular investment products made available to their clients. Additionally, no sales charge is imposed on shares that are (a) issued in plans of reorganization, such as mergers, asset acquisitions and exchange offers, to which the Fund is a party or (b) purchased by the reinvestment of loan repayments by a participant in a retirement plan for which the Manager or its affiliates acts as sponsor, or (c) purchased by the reinvestment of dividends or other distributions reinvested from the Fund or other OppenheimerFunds (other than the Cash Reserves Funds) or unit investment trusts for which reinvestment arrangements have been made with the Distributor. There is a further discussion of this policy in "Reduced Sales Charges" in the Statement of Additional Information. The Class A contingent deferred sales charge is also waived if shares are redeemed in the following cases: (1) retirement distributions or loans to participants or beneficiaries from qualified retirement plans, deferred compensation plans or other employee benefit plans ("Retirement Plans"), (2) returns of excess contributions made to Retirement Plans, (3) Automatic Withdrawal Plan payments that are limited to no more than 12% of the original account value annually, and (4) involuntary redemptions of shares by operation of law or under the procedures set forth in the Fund's Declaration of Trust or adopted by the Board of Trustees. - Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class A shares to reimburse the Distributor for a portion of its costs incurred in connection with the personal service and maintenance of accounts that hold Class A shares. Reimbursement is made quarterly at an annual rate that may not exceed 0.25% of the average annual net assets of Class A shares of the Fund. The Distributor uses all of those fees to compensate dealers, brokers, banks and other financial institutions quarterly for providing personal service and maintenance of accounts of their customers that hold Class A shares and to reimburse itself (if the Fund's Board of Trustees authorizes such reimbursements, which it has not yet done) for its other expenditures under the Plan. Services to be provided include, among others, answering customer inquiries about the Fund, assisting in establishing and maintaining accounts in the Fund, making the Fund's investment plans available and providing other services at the request of the Fund or the Distributor. Payments are made by the Distributor quarterly at an annual rate not to exceed 0.25% of the average annual net assets of Class A shares held in accounts of the dealer or its customers. The payments under the Plan increase the annual expenses of Class A shares. For more details, please refer to "Distribution and Service Plans" in the Statement of Additional Information. 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 after their purchase, a contingent deferred sales charge will be deducted from the redemption proceeds. That sales charge will not apply to shares purchased by the reinvestment of dividends or capital gains distributions. The charge will be assessed on the lesser of the net asset value of the shares at the time of redemption or the original purchase price. The contingent deferred sales charge is not imposed on the amount of your account value represented by the increase in net asset value over the initial purchase price (including increases due to the reinvestment of dividends and capital gains distributions). The Class B contingent deferred sales charge is paid to the Distributor to reimburse its expenses of providing distribution-related services to the Fund in connection with the sale of Class B shares. To determine whether the contingent deferred sales charge applies to a redemption, the Fund redeems shares in the following order: (1) shares acquired by reinvestment of dividends and capital gains distributions, (2) shares held for over 6 years, and (3) shares held the longest during the 6-year period. The amount of the contingent deferred sales charge will depend on the number of years since you invested and the dollar amount being redeemed, according to the following schedule: Contingent Deferred Sales Charge Years Since Purchase Payment on Redemptions in that Year Was Made (As % of Amount Subject to Charge) - ---------------------------- ---------------------------------- 0 - 1 5.0% 1 - 2 4.0% 2 - 3 3.0% 3 - 4 3.0% 4 - 5 2.0% 5 - 6 1.0% 6 and following None In the table, a "year" is a 12-month period. All purchases are considered to have been made on the first regular business day of the month in which the purchase was made. - Waivers of Class B Sales Charge. The Class B contingent deferred sales charge will be waived if the shareholder requests it for any of the following redemptions: (1) distributions to participants or beneficiaries from Retirement Plans, if the distributions are made (a) under an Automatic Withdrawal Plan after the participant reaches age 59-1/2, as long as the payments are no more than 10% of the account value annually (measured from the date the Transfer Agent receives the request), or (b) following the death or disability (as defined in the Internal Revenue Code) of the participant or beneficiary; (2) redemptions from accounts other than Retirement Plans following the death or disability of the shareholder (you must provide evidence of a determination of disability by the Social Security Administration), and (3) returns of excess contributions to Retirement Plans. The contingent deferred sales charge is also waived on Class B shares in the following cases: (i) shares sold to the Manager or its affiliates; (ii) 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; (iii) shares issued in plans of reorganization to which the Fund is a party; and (iv) shares redeemed in involuntary redemptions as described above. Further details about this policy are contained in "Reduced Sales Charges" in the Statement of Additional Information. - Automatic Conversion of Class B Shares. 72 months after you purchase Class B shares, those shares will automatically convert to Class A shares. This conversion feature relieves Class B shareholders of the asset-based sales charge that applies to Class B shares under the Class B Distribution Plan, described below. The conversion is based on the relative net asset value of the two classes, and no sales load or other charge is imposed. When Class B shares convert, any other Class B shares that were acquired by the reinvestment of dividends and distributions on the converted shares will also convert to Class A shares. The conversion feature is subject to the continued availability of a tax ruling described in "Alternative Sales Arrangements - Class A and Class B Shares" in the Statement of Additional Information. - Distribution and Service Plan for Class B Shares. The Fund has adopted a Distribution and Service Plan for Class B shares to compensate the Distributor for its services and costs in distributing Class B shares and servicing accounts. Under the Plan, the Fund pays the Distributor an annual "asset-based sales charge" of 0.75% per year on Class B shares that are outstanding for less than 6 years. The Distributor also receives a service fee of 0.25% per year. Both fees are computed on the average annual net assets of Class B shares, determined as of the close of each regular business day. The asset-based sales charge allows investors to buy Class B shares without a front-end sales charge while allowing the Distributor to compensate dealers that sell Class B shares. The Distributor uses the service fee to compensate dealers for providing personal services and the maintenance of shareholder accounts that hold Class B shares. Those services are similar to those provided under the Class A Service Plan, described above. The asset-based sales charge and service fees increase Class B expenses by up to 1.00% of average net assets per year. The Distributor pays the 0.25% service fee to dealers in advance for the first year after Class B shares have been sold by the dealer. After the shares have been held for a year, the Distributor pays the fee on a quarterly basis. The Distributor pays sales commissions of 3.75% of the purchase price to dealers from its own resources at the time of sale. The Distributor retains the asset-based sales charge to recoup the sales commissions it pays, the advances of service fee payments it makes, and its financing costs. Because the Distributor's actual expenses in selling Class B shares may be more than the payments it receives from contingent deferred sales charges collected on redeemed shares and from the Fund under the Distribution and Service Plan for Class B shares, those expenses may be carried over and paid in future years. At December 31, 1993, the end of the Plan year, the Distributor had incurred unreimbursed expenses under the Plan of $85,104 (equal to 4.70% of the Fund's net assets represented by Class B shares on that date), which have been carried over into the present Plan year. If the Plan is terminated by the Fund, the Board of Trustees may allow the Fund to continue payments of the asset-based sales charge to the Distributor for certain expenses it incurred before the Plan was terminated. Special Investor Services AccountLink. OppenheimerFunds AccountLink links your Fund account to your account at your bank or other financial institution to enable you to send money electronically between those accounts to perform a number of types of account transactions, including purchases of shares by telephone (either through a service representative or by PhoneLink, described below), automatic investments under Asset Builder Plans, and sending dividends and distributions or Automatic Withdrawal Plan payments directly to your bank account. Please refer to the Application for details or call the Transfer Agent for more information. AccountLink privileges must be requested on the Application you use to buy shares, or on your dealer's settlement instructions if you buy your shares through your dealer. After your account is established, you can request AccountLink privileges on signature-guaranteed instructions to the Transfer Agent. AccountLink privileges will apply to each shareholder listed in the registration on your account as well as to your dealer representative of record unless and until the Transfer Agent receives written instructions terminating or changing those privileges. After you establish AccountLink for your account, any change of bank account information must be made by signature-guaranteed instructions to the Transfer Agent signed by all shareholders who own the account. - Using AccountLink to Buy Shares. Purchases may be made by telephone only after your account has been established. To purchase shares in amounts up to $250,000 through a telephone representative, call the Distributor at 1-800-852-8457. The purchase payment will be debited from your bank account. - PhoneLink. PhoneLink is the OppenheimerFunds automated telephone system that enables shareholders to perform a number of account transactions automatically using a touch-tone phone. PhoneLink may be used on already-established Fund accounts after you obtain a Personal Identification Number (PIN), by calling the special PhoneLink number: 1- 800-533-3310. - Purchasing Shares. You may purchase shares in amounts up to $100,000 by phone, by calling 1-800-533-3310. You must have established AccountLink privileges to link your bank account with the Fund, to pay for these purchases. - Exchanging Shares. With the OppenheimerFunds Exchange Privilege, described below, you can exchange shares automatically by phone from your Fund account to another OppenheimerFunds account you have already established by calling the special PhoneLink number. Please refer to "How to Exchange Shares," below, for details. - Selling Shares. You can redeem shares by telephone automatically by calling the PhoneLink number and the Fund will send the proceeds directly to your AccountLink bank account. Please refer to "How to Sell Shares," below for details. Automatic Withdrawal and Exchange Plans. The Fund has several plans that enable you to sell shares automatically or exchange them to another OppenheimerFunds account on a regular basis: - Automatic Withdrawal Plans. If your Fund account is $5,000 or more, you can establish an Automatic Withdrawal Plan to receive payments of at least $50 on a monthly, quarterly, semi-annual or annual basis. The checks may be sent to you or sent automatically to your bank account on AccountLink. You may even set up certain types of withdrawals of up to $1,500 per month by telephone. You should consult the Application and Statement of Additional Information for more details. - Automatic Exchange Plans. You can authorize the Transfer Agent to exchange an amount you establish in advance automatically for shares of up to five other OppenheimerFunds on a monthly, quarterly, semi-annual or annual basis under an Automatic Exchange Plan. The minimum purchase for each other OppenheimerFunds account is $25. These exchanges are subject to the terms of the Exchange Privilege, described below. Reinvestment Privilege. If you redeem some or all of your Fund shares, you have up to 6 months to reinvest all or part of the redemption proceeds in Class A shares of the Fund or other OppenheimerFunds without paying sales charge. This privilege applies to Class A shares that you sell, and Class B shares on which you paid a contingent deferred sales charge when you redeemed them. You must be sure to ask the Distributor for this privilege when you send your payment. Please consult the Statement of Additional Information for more details. Retirement Plans. Fund shares are available as an investment for your retirement plans. If you participate in a plan sponsored by your employer, the plan trustee or administrator must make the purchase of shares for your retirement plan account. The Distributor offers a number of different retirement plans that can be used by individuals and employers: - Individual Retirement Accounts including rollover IRAs, for individuals and their spouses - 403(b)(7) Custodial Plans for employees of eligible tax-exempt organizations, such as schools, hospitals and charitable organizations - SEP-IRAs and SAR-SEPs (Simplified Employee Pension Plans) for small business owners or people with income from self-employment - Pension and Profit-Sharing Plans for self-employed persons and small business owners Please call the Distributor for the OppenheimerFunds plan documents, which contain important information and applications. How to Sell Shares You can arrange to take money out of your account on any regular business day by selling (redeeming) some or all of your shares. Your shares will be sold at the next net asset value calculated after your order is received and accepted by the Transfer Agent. The Fund offers you a number of ways to sell your shares: in writing, by using the Fund's Checkwriting privilege or by telephone. You can also set up Automatic Withdrawal Plans to redeem shares on a regular basis, as described above. If you have questions about any of these procedures, and especially if you are redeeming shares in a special situation, such as due to the death of the owner, or from a retirement plan, please call the Transfer Agent first, at 1-800-525-7048, for assistance. - Retirement Accounts. To sell shares in an OppenheimerFunds retirement account in your name, call the Transfer Agent for a distribution request form. There are special income tax withholding requirements for distributions from retirement plans and you must submit a Withholding form with your request to avoid delay. If your retirement plan account is held for you by your employer, you must arrange for the distribution request to be sent by the plan administrator or trustee. There are additional details in the Statement of Additional Information. - Certain Requests Require a Signature Guarantee. To protect you and the Fund from fraud, certain redemption requests must be in writing and must include a signature guarantee in the following situations (there may be other situations also requiring a signature guarantee): - You wish to redeem more than $50,000 worth of shares and receive a check - The check is not payable to all shareholders listed on the account statement - The check is not sent to the address of record on your statement - Shares are being transferred to a Fund account with a different owner or name - Shares are redeemed by someone other than the owners (such as an Executor) - Where Can I Have My Signature Guaranteed? The Transfer Agent will accept a guarantee of your signature by a number of financial institutions, including: a U.S. bank, trust company, credit union or savings association, or from a foreign bank that has a U.S. correspondent bank, or by a U.S. registered dealer or broker in securities, municipal securities or government securities, or by a U.S. national securities exchange, a registered securities association or a clearing agency. If you are signing as a fiduciary or on behalf of a corporation, partnership or other business, you must also include your title in the signature. Selling Shares by Mail. Write a "letter of instructions" that includes: - Your name - The Fund's name - Your Fund account number (from your statement) - The dollar amount or number of shares to be redeemed - Any special payment instructions - Any share certificates for the shares you are selling, and - Any special requirements or documents requested by the Transfer Agent to assure proper authorization of the person asking to sell shares. Use the following address for requests by mail: Oppenheimer Shareholder Services P.O. Box 5270, Denver, Colorado 80217 Send Courier or Express Mail requests to: Oppenheimer Shareholder Services 10200 E. Girard Avenue, Building D Denver, Colorado 80231 Selling Shares by Telephone. You and your dealer representative of record may also sell your shares by telephone. To receive the redemption price on a regular business day, your call must be received by the Transfer Agent by 4:00 P.M. You may not redeem shares held in an OppenheimerFunds retirement plan or under a share certificate by telephone. - To redeem shares through a service representative, call 1-800-852- 8457 - To redeem shares automatically on PhoneLink, call 1-800-533-3310 Whichever method you use, you may have a check sent to the address on the account, or, if you have linked your Fund account to your bank account on AccountLink, you may have the proceeds wired to that account. - Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed by telephone, once in each 7-day period. The check must be payable to all owners of record of the shares and must be sent to the address on the account. This service is not available within 30 days of changing the address on an account. - Telephone Redemptions Through AccountLink. There are no dollar limits on telephone redemption proceeds sent to a bank account designated when you establish AccountLink. Normally the ACH wire to your bank is initiated on the business day after the redemption. You do not receive dividends on the proceeds of the shares you redeemed while they are waiting to be wired. CheckWriting. To be able to write checks against your Fund account, you may request that privilege on your account Application or you can contact the Transfer Agent for signature cards, which must be signed (with a signature guarantee) by all owners of the account and returned to the Transfer Agent so that checks can be sent to you to use. Shareholders with joint accounts can elect in writing to have checks paid over the signature of one owner. - Checks can be written to the order of whomever you wish, but may not be cashed at the Fund's bank or custodian. - Checkwriting privileges are not available for accounts holding Class B shares or Class A shares that are subject to a contingent deferred sales charge. - Checks must be written for at least $100. - Checks cannot be paid if they are written for more than your account value. Remember: your shares fluctuate in value and you should not write a check close to the total account value. - You may not write a check that would require the Fund to redeem shares that were purchased by check or Asset Builder Plan payments within the prior 15 days. - Don't use your checks if you changed your Fund account number. The Fund will charge a $10 fee, which may be deducted from your account, for any check that is not paid because (1) the owners of the account told the Fund not to pay the check, or (2) the check was for more than the account balance, or (3) the check did not have the proper signatures, (4) or the check was written for less than $100. How to Exchange Shares Shares of the Fund may be exchanged for shares of certain OppenheimerFunds at net asset value per share at the time of exchange, without sales charge. A $5 service fee will be deducted from the fund account you are exchanging into to help defray administrative costs. That charge is waived for automated exchanges between already established accounts on PhoneLink described below. To exchange shares, you must meet several conditions: - Shares of the fund selected for exchange must be available for sale in your state of residence - The prospectuses of this Fund and the fund whose shares you want to buy must offer the exchange privilege - You must hold the shares you buy when you establish your account for at least 7 days before you can exchange them; after the account is open 7 days, you can exchange shares every regular business day - You must meet the minimum purchase requirements for the fund you purchase by exchange - Before exchanging into a fund, you should obtain and read its prospectus Shares of a particular class may be exchanged only for shares of the same class in the other OppenheimerFunds. For example, you can exchange Class A shares of this Fund only for Class A shares of another fund. At present, not all of the OppenheimerFunds offer the same classes of shares. If a fund has only one class of shares that does not have a class designation, they are "Class A" shares for exchange purposes. In some cases, sales charges may be imposed on exchange transactions. Certain OppenheimerFunds offer Class A shares and either Class B or Class C shares, and a list can be obtained by calling the Distributor at 1-800- 525-7048. Please refer to "How to Exchange Shares" in the Statement of Additional Information for more details. Exchanges may be requested in writing or by telephone: - Written Exchange Requests. Submit an OppenheimerFunds Exchange Request form, signed by all owners of the account. Send it to the Transfer Agent at the addresses listed in "How to Sell Shares." - Telephone Exchange Requests. Telephone exchange requests may be made either by calling a service representative at 1-800-852-8457 or by using PhoneLink for automated exchanges, by calling 1-800-533-3310. Telephone exchanges may be made only between accounts that are registered with the same names and address. Shares held under certificates may not be exchanged by telephone. You can obtain a list of eligible OppenheimerFunds in the Statement of Additional Information or by calling the Transfer Agent at 1-800-525- 7048. Exchanges of shares involve a redemption of the shares of the fund you own and a purchase of shares of the other fund. There are certain exchange policies you should be aware of: - Shares are normally redeemed from one fund and purchased from the other fund in the exchange transaction on the same regular business day on which the Transfer Agent receives an exchange request by 4:00 P.M. that is in proper form, but either fund may delay the purchase of shares of the fund you are exchanging into if it determines it would be disadvantaged by a same-day transfer of the proceeds to buy shares. For example, the receipt of multiple exchange requests from a dealer in a "market-timing" strategy might require the disposition of securities at a time or price disadvantageous to the Fund. - Because excessive trading can hurt fund performance and harm shareholders, the Fund reserves the right to refuse any exchange request that will disadvantage it, or to refuse multiple exchange requests submitted by a shareholder or dealer. - The Fund may amend, suspend or terminate the exchange privilege at any time. Although the Fund will attempt to provide you notice whenever it is reasonably able to do so, it may impose these changes at any time. - If the Transfer Agent cannot exchange all the shares you request because of a restriction cited above, only the shares eligible for exchange will be exchanged. Shareholder Account Rules and Policies - Net Asset Value Per Share is determined for each class of shares as of 4:00 P.M. each day The New York Stock Exchange is open by dividing the value of the Fund's net assets attributable to a class by the number of shares of that class that are outstanding. The Fund's Board of Trustees has established procedures to value the Fund's securities to determine net asset value. In general, securities values are based on market value. There are special procedures for valuing illiquid and restricted securities, securities for which market values cannot be readily obtained, and call options and hedging instruments. These procedures are described more completely in the Statement of Additional Information. - The offering of shares may be suspended during any period in which the determination of net asset value is suspended, and the offering may be suspended by the Board of Trustees at any time the Board believes it is in the Fund's best interest to do so. - Telephone Transaction Privileges for purchases, redemptions or exchanges may be modified, suspended or terminated by the Fund at any time. If an account has more than one owner, the Fund and the Transfer Agent may rely on the instructions of any one owner. Telephone privileges apply to each owner of the account and the dealer representative of record for the account unless and until the Transfer Agent receives cancellation instructions from an owner of the account. - The Transfer Agent will record any telephone calls to verify data concerning transactions and has adopted other procedures to confirm that telephone instructions are genuine, by requiring callers to provide tax identification numbers and other account data or by using PINs, and by confirming such transactions in writing. If the Transfer Agent does not use reasonable procedures it may be liable for losses due to unauthorized transactions, but otherwise it will not be liable for losses or expenses arising out of telephone instructions reasonably believed to be genuine. If you are unable to reach the Transfer Agent during periods of unusual market activity, you may not be able to complete a telephone transaction and should consider placing your order by mail. - Redemption or transfer requests will not be honored until the Transfer Agent receives all required documents in proper form. From time to time, the Transfer Agent in its discretion may waive certain of the requirements for redemptions stated in this Prospectus. - Dealers that can perform account transactions for their clients by participating in NETWORKING through the National Securities Clearing Corporation are responsible for obtaining their clients' permission to perform those transactions and are responsible to their clients who are shareholders of the Fund if the dealer performs any transaction erroneously. - The redemption price for shares will vary from day to day because the value of the securities in the Fund's portfolio fluctuates, and the redemption price, which is the net asset value per share, will normally be different for Class A and Class B shares. Therefore, the redemption value of your shares may be more or less than their original cost. - Payment for redeemed shares is made ordinarily in cash and forwarded by check or through AccountLink (as elected by the shareholder under the redemption procedures described above) within 7 days after the Transfer Agent receives redemption instructions in proper form, except under unusual circumstances determined by the Securities and Exchange Commission delaying or suspending such payments. 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 15 days from the date the shares were purchased. That delay may be avoided if you purchase shares by 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 $1,000 for reasons other than the fact that the market value of shares has dropped, and in some cases involuntary redemptions may be made to repay the Distributor for losses from the cancellation of share purchase orders. - Under unusual circumstances shares of the Fund may be redeemed "in kind," which means that the redemption proceeds will be paid with securities from the Fund's portfolio. Please refer to the Statement of Additional Information for more details. - "Backup Withholding" of Federal income tax may be applied at the rate of 31% from dividends, distributions and redemption proceeds (including exchanges) if you fail to furnish the Fund a certified Social Security or taxpayer identification number when you sign your application, or if you violate Internal Revenue Service regulations on tax reporting of dividends. - The Fund does not charge a redemption fee, but if your dealer or broker handles your redemption, they may charge a fee. That fee can be avoided by redeeming your Fund shares directly through the Transfer Agent. Under the circumstances described in "How To Buy Shares," you may be subject to a contingent deferred sales charges when redeeming certain Class A and Class B shares. - To avoid sending duplicate copies of materials to households, the Fund will mail only one copy of each annual and semi-annual report and updated prospectus to shareholders having the same address on the Fund's records. However, each shareholder may call the Transfer Agent at 1-800- 525-7048 to ask that copies of those materials be sent personally to that shareholder. Dividends, Capital Gains and Taxes Dividends. The Fund declares dividends separately for Class A and Class B shares from net investment income each regular business day and pays those dividends to shareholders monthly. Normally, dividends are paid on the last business day of every month, but the Board of Trustees can change that date. Distributions may be made monthly from any net short-term capital gains the Fund realizes in selling securities. It is expected that distributions paid with respect to Class A shares will generally be higher than for Class B shares because expenses allocable to Class B shares will generally be higher. Capital Gains. The Fund may make distributions annually in December out of any net short-term or long-term capital gains, and the Fund may make supplemental distributions of dividends and capital gains following the end of its fiscal year. Long-term capital gains will be separately identified in the tax information the Fund sends you after the end of the year. Short-term capital gains are treated as dividends for tax purposes. There can be no assurance that the Fund will pay any capital gains distributions in a particular year. Distribution Options. When you open your account, specify on your application how you want to receive your distributions. For OppenheimerFunds retirement accounts, all distributions are reinvested. For other accounts, you have four options: - Reinvest All Distributions in the Fund. You can elect to reinvest all dividends and long-term capital gains distributions in additional shares of the Fund. - Reinvest Capital Gains Only. You can elect to reinvest long-term capital gains in the Fund while receiving dividends by check or sent to your bank account on AccountLink. - Receive All Distributions in Cash. You can elect to receive a check for all dividends and long-term capital gains distributions or have them sent to your bank on AccountLink. - Reinvest Your Distributions in Another OppenheimerFunds Account. You can reinvest all distributions in another OppenheimerFunds account you have established. Taxes. If your account is not a tax-deferred retirement account, you should be aware of the following tax implications of investing in the Fund. Long-term capital gains are taxable as long-term capital gains when distributed to shareholders. Dividends paid from short-term capital gains and net investment income are taxable as ordinary income. Distributions are subject to federal income tax and may be subject to state or local taxes. Your distributions are taxable when paid, whether you reinvest them in additional shares or take them in cash. Every year the Fund will send you and the IRS a statement showing the amount of each taxable distribution you received in the previous year. - "Buying a Dividend": When a fund goes ex-dividend, its share price is reduced by the amount of the distribution. If you buy shares on or just before the ex-dividend date, or just before the Fund declares a capital gains distribution, you will pay the full price for the shares and then receive a portion of the price back as a taxable dividend or capital gain. - Taxes on Transactions: Share redemptions, including redemptions for exchanges, are subject to capital gains tax. A capital gain or loss is the difference between the price you paid for the shares and the price you received when you sold them. - Returns of Capital: In certain cases distributions made by the Fund may be considered a non-taxable return of capital to shareholders. If that occurs, it will be identified in notices to shareholders. This information is only a summary of certain federal tax information about your investment. More information is contained in the Statement of Additional Information, and in addition you should consult with your tax adviser about the effect of an investment in the Fund on your particular tax situation. Description of Securities Ratings Description of Standard & Poor's Corporation ("Standard & Poor's") and Moody's Investors Service, Inc. ("Moody's") bond ratings: Standard & Poor's describes its four highest ratings for corporate debt as follows: AAA: Debt rated "AAA" has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. AA: Debt rated "AA" has a very strong capacity to pay interest and repay principal and differ from the higher rated issues only in a small degree. A: Debt rated "A" has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB: Debt rated "BBB" is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories. 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. Moody's describes its four highest corporate bond ratings as follows: Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." 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, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa: Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in 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 in Aaa securities. A: Bonds which are rated A possess many favorable investment attributes and may be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa: Bonds which are rated Baa are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating classification from Aa through B in its corporate bond rating system. The modifier 1 indicates that the security ranks in the higher end of its generic rating category; the modifier 2 indicates a mid- range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category. APPENDIX TO PROSPECTUS OF OPPENHEIMER INVESTMENT GRADE BOND FUND Graphic material included in Prospectus of Oppenheimer Investment Grade Bond Fund: "Comparison of Total Return of Oppenheimer Investment Grade Bond Fund with The Lehman Brothers Corporate Bond Index - Change in Value of a $10,000 Hypothetical Investment" A linear graph will be included in the Prospectus of Oppenheimer Investment Grade Bond Fund (the "Fund") depicting the initial account value and subsequent account value of a hypothetical $10,000 investment in the Fund during each of the Fund's fiscal years since April 15, 1988 to the end of each of the Fund's fiscal years (as to Class A shares) and since May 1, 1993 (as to Class B shares) and comparing such values with the same investments over the same time periods with The Lehman Brothers Corporate Bond Index. Set forth below are the relevant data points that will appear on the linear graph. Additional information with respect to the foregoing, including a description of The Lehman Brothers Corporate Bond Index, is set forth in the Prospectus under "Fund Performance Information - Management's Discussion of Performance." Oppenheimer Lehman Brothers Fiscal Year Investment Grade Corporate (Period) Ended Bond Fund A Bond Index - -------------- ----------------- --------------- 4/15/88 $ 9,525 $10,000 12/31/88 9,952 10,368 12/31/89 11,077 11,855 12/31/90 11,602 12,759 12/31/91 13,723 15,170 12/31/92 14,653 16,392 12/31/93 16,163 18,310 Oppenheimer Lehman Brothers Fiscal Year Investment Grade Corporate (Period) Ended Bond Fund B Bond Index - -------------- ----------------- --------------- 05/01/93 $10,000 $10,000 12/31/93 9,891 10,503 - ---------------------- (1) Class B shares of the Fund were first publicly offered on May 1, 1993. Oppenheimer Investment Grade Bond Fund 3410 South Galena Street, Denver, CO 80231 Telephone: 1-800-525-7048 Investment Adviser Oppenheimer Management Corporation Two World Trade Center New York, New York 10048-0203 Sub-Adviser Prospectus Massachusetts Mutual Life Insurance Company 1295 State Street Springfield, MA 01111 Distributor OPPENHEIMER Oppenheimer Funds Distributor, Inc. Investment Grade Bond Fund Two World Trade Center New York, New York 10048-0203 Transfer and Shareholder Servicing Agent Oppenheimer Shareholder Services P.O. Box 5270 Denver, Colorado 80217 1-800-525-7048 Custodian of Portfolio Securities Dated May 1, 1994 The Bank of New York One Wall Street New York, New York 10015 Independent Auditors (OppenheimerFunds Logo) Deloitte & Touche 1560 Broadway Denver, Colorado 80202 Legal Counsel Myer, Swanson & Adams, P.C. 1600 Broadway Denver, Colorado 80202 No dealer, broker, salesperson or any other person has been authorized to give any information or to make any representations other than those contained in this Prospectus or the Statement of Additional Information, and if given or made, such information and representations must not be relied upon as having been authorized by the Fund, Oppenheimer Management Corporation, Oppenheimer Funds Distributor, Inc., Massachusetts Mutual Life Insurance Company, or any affiliate thereof. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby in any state to any person to whom it is unlawful to make such offer in such state. PR286 (5/94) * Printed on recycled paper Oppenheimer Investment Grade Bond Fund 3410 South Galena Street, Denver, CO 80231 Telephone: 1-800-525-7048 Investment Adviser Oppenheimer Management Corporation Two World Trade Center New York, New York 10048-0203 Sub-Adviser Prospectus and Massachusetts Mutual Life Insurance Company New Account Application 1295 State Street Springfield, MA 01111 Distributor OPPENHEIMER Oppenheimer Funds Distributor, Inc. Investment Grade Bond Fund Two World Trade Center New York, New York 10048-0203 Transfer and Shareholder Servicing Agent Oppenheimer Shareholder Services P.O. Box 5270 Denver, Colorado 80217 1-800-525-7048 Custodian of Portfolio Securities Dated May 1, 1994 The Bank of New York One Wall Street New York, New York 10015 Independent Auditors (OppenheimerFunds Logo) Deloitte & Touche 1560 Broadway Denver, Colorado 80202 Legal Counsel Myer, Swanson & Adams, P.C. 1600 Broadway Denver, Colorado 80202 No dealer, broker, salesperson or any other person has been authorized to give any information or to make any representations other than those contained in this Prospectus or the Statement of Additional Information, and if given or made, such information and representations must not be relied upon as having been authorized by the Fund, Oppenheimer Management Corporation, Oppenheimer Funds Distributor, Inc., Massachusetts Mutual Life Insurance Company, or any affiliate thereof. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby in any state to any person to whom it is unlawful to make such offer in such state. PR285 (5/94) * Printed on recycled paper OPPENHEIMER INVESTMENT GRADE BOND FUND 3410 South Galena Street, Denver, Colorado 80231 1-800-525-7048 Statement of Additional Information dated May 1, 1994. This Statement of Additional Information of Oppenheimer Investment Grade Bond Fund is not a Prospectus. This document contains additional information about the Fund and supplements information in the Prospectus dated May 1, 1994. It should be read together with the Prospectus which may be obtained by writing to the Fund's Transfer Agent, Oppenheimer Shareholder Services, at P.O. Box 5270, Denver, Colorado 80217 or by calling the Transfer Agent at the toll-free number shown above. Contents Page About the Fund 2 Investment Objective and Policies 2 Other Investment Techniques and Strategies 7 Other Investment Restrictions 14 How the Fund is Managed 15 Organization and History 15 Trustees and Officers of the Fund 16 The Manager and Its Affiliates 19 Brokerage Policies of the Fund 21 Performance of the Fund 23 Distribution and Service Plans 26 About Your Account 29 How to Buy Shares 29 How to Sell Shares 35 How to Exchange Shares 39 Dividends, Capital Gains and Taxes 40 Additional Information About the Fund 43 Description of Securities Ratings 43 Independent Auditors' Report 46 Financial Statements 47 ABOUT THE FUND Investment Objective And Policies Investment Policies and Strategies. The investment objective and policies of the Fund are discussed in the Prospectus. Set forth below is supplemental information about those policies and the types of securities in which the Fund invests, as well as the strategies the Fund may use to try to achieve its objective. Capitalized terms used in this Statement of Additional Information have the same meaning as those terms have in the Prospectus. All fixed-income securities are subject to two types of risks: credit risk and interest rate risk. Credit risk relates to the ability of the issuer to meet interest or principal payments or both as they become due. Generally, higher yielding bonds are subject to credit risk to a greater extent than higher quality bonds. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting solely from the inverse relationship between price and yield of fixed-income securities. An increase in interest rates will tend to reduce the market value of fixed-income investments, and a decline in interest rates will tend to increase their value. In addition, debt securities with longer maturities, which tend to produce higher yields, are subject to potentially greater capital appreciation and depreciation than obligations with shorter maturities. Fluctuations in the market value of fixed-income securities subsequent to their acquisition will not affect cash income from such securities but will be reflected in the net asset values of the Fund's two classes of shares. - Investment Risks. All fixed-income securities are subject to two types of risks: credit risk and interest rate risk. Credit risk relates to the ability of the issuer to meet interest or principal payments or both as they become due. Generally, higher yielding bonds are subject to credit risk to a greater extent than higher quality bonds. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting solely from the inverse relationship between price and yield of outstanding fixed-income securities. An increase in prevailing interest rates will generally reduce the market value of fixed-income investments, and a decline in interest rates will tend to increase their value. In addition, debt securities with longer maturities, which tend to produce higher yields, are subject to potentially greater capital appreciation and depreciation than obligations with shorter maturities. Fluctuations in the market value of fixed-income securities subsequent to their acquisition will not affect the interest payable on those securities, and thus the cash income from such securities, but will be reflected in the valuations of these securities used to compute the Fund's net asset values. - Short-Term Debt Securities. The high quality, short-term money market instruments in which the Fund may invest include U.S. Treasury and agency obligations; commercial paper (short-term, unsecured, negotiable promissory notes of a domestic or foreign company) which, at the time of purchase, are rated in the two highest rating categories for commercial paper by S&P or Moody's or, if unrated, is issued by companies having an outstanding debt issue currently rated at least A by S&P or Moody's; short-term obligations of corporate issuers which are rated in the two highest rating categories for corporate debt securities by S&P or Moody's at the date of investment; bank participation certificates provided that at the date of investment each of the underlying loans is made to an issuer of securities rated at least A-2, AA or SP-2 by S&P or P-2 or Aa by Moody's and also provided the underlying loans have a remaining maturity of one year or less, and certificates of deposit and bankers' acceptances (time drafts drawn on commercial banks usually in connection with international transactions) of banks and savings and loan associations. Securities of Foreign Governments and Companies. As stated in the Prospectus, the Fund may invest in debt obligations (which may be dominated in U.S. dollars or non-U.S. currencies) issued or guaranteed by foreign corporations, and debt obligations of certain "supranational entities" (described below) and foreign governments or their agencies or instrumentalities. The percentage of the Fund's assets that will be allocated to foreign securities will vary depending on the relative yields of foreign and U.S. securities, the economies of foreign countries, the condition of such countries' financial markets, the interest rate climate of such countries and the relationship of such countries' currency to the U.S. dollar. These factors are judged on the basis of fundamental economic criteria (e.g., relative inflation levels and trends, growth rate forecasts, balance of payments status, and economic policies) as well as technical and political data. Investments in foreign securities offer potential benefits not available from investments solely in securities of domestic issuers, by offering the opportunity to invest in foreign issuers that appear to offer growth potential, or in foreign countries with economic policies or business cycles different from those of the U.S., or to reduce fluctuations in portfolio value by taking advantage of foreign bond or other markets that do not move in a manner parallel to U.S. markets. From time to time, U.S. government policies have discouraged certain investments abroad by U.S. investors, through taxation or other restrictions, and it is possible that such restrictions could be reimposed. Securities of foreign issuers that are represented by American depository receipts, or that are listed on a U.S. securities exchange, or are traded in the U.S. over-the-counter market are not considered "foreign securities," because they are not subject to many of the special considerations and risks (discussed below) that apply to foreign securities traded and held abroad. If the Fund's portfolio securities are held abroad, the countries in which such securities may be held and the sub-custodians holding them must be approved by the Fund's Board of Trustees under applicable SEC rules. - Risks of Investing in Foreign Securities. Investment in foreign securities involves considerations and risks not associated with investment in securities of U.S. issuers. For example, foreign issuers are not required to use generally-accepted accounting principles ("G.A.A.P."). If foreign securities are not registered under the Securities Act of 1933, the issuer does not have to comply with the disclosure requirements of the Securities Exchange Act of 1934. The values of foreign securities investments will be affected by incomplete or inaccurate information available as to foreign issuers, changes in currency rates, exchange control regulations or currency blockage, expropriation or nationalization of assets, application of foreign tax laws (including withholding taxes), changes in governmental administration or economic or monetary policy in the U.S. or abroad, or changed circumstances in dealings between nations. In addition, it is generally more difficult to obtain court judgments outside the United States. Costs will be incurred in connection with conversions between various currencies. Foreign brokerage commissions are generally higher than commissions in the U.S., and foreign securities markets may be less liquid, more volatile and less subject to governmental regulation than in the U.S. Investments in foreign countries could be affected by other factors not generally thought to be present in the U.S., including expropriation or nationalization, confiscatory taxation and potential difficulties in enforcing contractual obligations, and could be subject to extended settlement periods. The obligations of foreign governmental entities may or may not be supported by the full faith and credit of a foreign government. Obligations of "supranational entities" include those of international organizations designated or supported by governmental entities to promote economic reconstruction or development and of international banking institutions and related government agencies. Examples include the International Bank for Reconstruction and Development (the "World Bank"), the European Coal and Steel Community, the Asian Development Bank and the Inter-American Development Bank. The governmental members, or "stockholders," usually make initial capital contributions to the supranational entity and in many cases are committed to make additional capital contributions if the supranational entity is unable to repay its borrowings. Each supranational entity's lending activities are limited to a percentage of its total capital (including "callable capital" contributed by members at the entity's call), reserves and net income. There is no assurance that foreign governments will be able or willing to honor their commitments. Because the Fund may purchase securities denominated in foreign currencies, a change in the value of any such currency against the U.S. dollar will result in a change in the U.S. dollar value of the Fund's assets and its income available for distribution. In addition, although a portion of the Fund's investment income may be received or realized in foreign currencies, the Fund will be required to compute and distribute its income in U.S. dollars, and absorb the cost of currency fluctuations. The values of foreign investments and the investment income derived from them may also be affected unfavorably by changes in currency exchange control regulations. Although the Fund will invest only in securities denominated in foreign currencies that at the time of investment do not have significant government-imposed restrictions on conversion into U.S. dollars, there can be no assurance against subsequent imposition of currency controls. In addition, the values of foreign securities will fluctuate in response to a variety of factors, including changes in U.S. and foreign interest rates. U.S. Government Securities. U.S. Government Securities are debt obligations issued or guaranteed by the U.S. Government or one of its agencies or instrumentalities. The agencies and instrumentalities that issue U.S. Government Securities include, among others specifically mentioned: Federal Land Banks, the Farmers Home Administration, the Central Bank for Cooperatives, Federal Intermediate Credit Banks, Federal Home Loan Banks, Federal Farm Credit Banks and the U.S. Maritime Administration. The U.S. Government Securities the Fund can invest in are described in the Prospectus and include U.S. Treasury securities such as "zero coupon" Treasury securities and mortgage-backed securities and CMOs. - Mortgage-Backed U.S. Government Securities and CMOs. These securities represent participation interests in pools of residential mortgage loans made by lenders such as banks and savings and loan associations. The pools are assembled for sale to investors (such as the Fund) by government agencies, which issue or guarantee the securities relating to the pool. Such securities differ from conventional debt securities which generally provide for periodic payment of interest in fixed or determinable amounts (usually semi-annually) with principal payments at maturity or specified call dates. Some mortgage-backed U.S. Government securities in which the Fund may invest may be backed by the full faith and credit of the U.S. Treasury (e.g., direct pass-through certificates of Government National Mortgage Association); some are supported by the right of the issuer to borrow from the U.S. Government (e.g., obligations of Federal Home Loan Mortgage Corporation); and some are backed by only the credit of the issuer itself (e.g., Federal National Mortgage Association). Those guarantees do not extend to the value or yield of the mortgage-backed securities themselves or to the net asset value of the Fund's shares. The yield on mortgage-backed securities is based on the average expected life of the underlying pool of mortgage loans. The actual life of any particular pool will be shortened by any unscheduled or early payments of principal and interest. Principal prepayments generally result from the sale of the underlying property or the refinancing or foreclosure of underlying mortgages. The occurrence of prepayments is affected by a wide range of economic, demographic and social factors and, accordingly, it is not possible to predict accurately the average life of a particular pool. Yield on such pools is usually computed by using the historical record of prepayments for that pool, or, in the case of newly- issued mortgages, the prepayment history of similar pools. The actual prepayment experience of a pool of mortgage loans may cause the yield realized by the Fund to differ from the yield calculated on the basis of the expected average life of the pool. Prepayments tend to increase during periods of falling interest rates, while during periods of rising interest rates prepayments will most likely decline. When prevailing interest rates rise, the value of a pass- through security may decrease as do the values of other debt securities, but, when prevailing interest rates decline, the value of a pass-through security is not likely to rise to the extent that the values of other debt securities rise, because of the prepayment feature of pass-through securities. The Fund's reinvestment of scheduled principal payments and unscheduled prepayments it receives may occur at times when available investments offer higher or lower rates than the original investment, thus affecting the yield of the Fund. Monthly interest payments received by the Fund have a compounding effect which may increase the yield to the Fund more than debt obligations that pay interest semi-annually. Because of those factors, mortgage-backed securities may be less effective than Treasury bonds of similar maturity at maintaining yields during periods of declining interest rates. The Fund may purchase mortgage-backed securities at a premium or at a discount. Accelerated prepayments adversely affect yields for pass-through securities purchased at a premium (i.e., at a price in excess of their principal amount) and may involve additional risk of loss of principal because the premium may not have been fully amortized at the time the obligation is repaid. The opposite is true for pass-through securities purchased at a discount. - GNMA Certificates. Certificates of Government National Mortgage Association ("GNMA") are mortgage-backed securities of GNMA that evidence an undivided interest in a pool or pools of mortgages ("GNMA Certificates"). The GNMA Certificates that the Fund may purchase are of the "modified pass-through" type, which entitle the holder to receive timely payment of all interest and principal payments due on the mortgage pool, net of fees paid to the "issuer" and GNMA, regardless of whether the mortgagor actually makes the payments when due. The National Housing Act authorizes GNMA to guarantee the timely payment of principal and interest on securities backed by a pool of mortgages insured by the Federal Housing Administration ("FHA") or guaranteed by the Veterans Administration ("VA"). The GNMA guarantee is backed by the full faith and credit of the U.S. Government. GNMA is also empowered to borrow without limitation from the U.S. Treasury if necessary to make any payments required under its guarantee. The average life of a GNMA Certificate is likely to be substantially shorter than the original maturity of the mortgages underlying the securities. Prepayments of principal by mortgagors and mortgage foreclosures will usually result in the return of the greater part of principal investment long before the maturity of the mortgages in the pool. Foreclosures impose no risk to principal investment because of the GNMA guarantee, except to the extent that the Fund has purchased the certificates at a premium in the secondary market. - FNMA Securities. The Federal National Mortgage Association ("FNMA") was established to create a secondary market in mortgages insured by the FHA. FNMA issues guaranteed mortgage pass-through certificates ("FNMA Certificates"). FNMA Certificates resemble GNMA Certificates in that each FNMA Certificate represents a pro rata share of all interest and principal payments made and owed on the underlying pool. FNMA guarantees timely payment of interest and principal on FNMA Certificates. The FNMA guarantee is not backed by the full faith and credit of the U.S. Government. - FHLMC Securities. The Federal Home Loan Mortgage Corporation ("FHLMC") was created to promote development of a nationwide secondary market for conventional residential mortgages. FHLMC issues two types of mortgage pass-through securities ("FHLMC Certificates"): mortgage participation certificates ("PCs") and guaranteed mortgage certificates ("GMCs"). PCs resemble GNMA Certificates in that each PC represents a pro rata share of all interest and principal payments made and owed on the underlying pool. FHMLC guarantees timely monthly payment of interest on Pcs and the ultimate payment of principal. GMCs also represent a pro rata interest in a pool of mortgages. However, these instruments pay interest semi-annually and return principal once a year in guaranteed minimum payments. The expected average life of these securities is approximately ten years. The FHLMC guarantee is not backed by the full faith and credit of the U.S. Government. - Collateralized Mortgage-Backed Obligations ("CMOs"). CMOs are fully-collateralized bonds that are the general obligations of the issuer thereof, either the U.S. Government, a U.S. Government instrumentality, or a private issuer. Such bonds generally are secured by an assignment to a trustee (under the indenture pursuant to which the bonds are issued) of collateral consisting of a pool of mortgages. Payments with respect to the underlying mortgages generally are made to the trustee under the indenture. Payments of principal and interest on the underlying mortgages are not passed through to the holders of the CMOs as such (i.e., the character of payments of principal and interest is not passed through, and therefore payments to holders of CMOs attributable to interest paid and principal repaid on the underlying mortgages do not necessarily constitute income and return of capital, respectively, to such holders), but such payments are dedicated to payment of interest on and repayment of principal of the CMOs. CMOs often are issued in two or more classes with different characteristics such as varying maturities and stated rates of interest. Because interest and principal payments on the underlying mortgages are not passed through to holders of CMOs, CMOs of varying maturities may be secured by the same pool of mortgages, the payments on which are used to pay interest on each class and to retire successive maturities in sequence. Unlike other mortgage-backed securities (discussed above), CMOs are designed to be retired as the underlying mortgages are repaid. In the event of prepayment on such mortgages, the class of CMO first to mature generally will be paid down. Therefore, although in most cases the issuer of CMOs will not supply additional collateral in the event of such prepayment, there will be sufficient collateral to secure CMOs that remain outstanding. - Asset-Backed Securities. The value of an asset-backed security is affected by changes in the market's perception of the asset backing the security, the creditworthiness of the servicing agent for the loan pool, the originator of the loans, or the financial institution providing any credit enhancement, and is also affected if any credit enhancement has been exhausted. The risks of investing in asset-backed securities are ultimately dependent upon payment of consumer loans by the individual borrowers. As a purchaser of an asset-backed security, the Fund would generally have no recourse to the entity that originated the loans in the event of default by a borrower. The underlying loans are subject to prepayments, which shorten the weighted average life of asset-backed securities and may lower their return, in the same manner as described above for the prepayments of a pool of mortgage loans underlying mortgage- backed securities. Other Investment Techniques And Strategies Options on Securities. Special risks are associated with options that are not traded on exchanges (i.e., those that are traded over-the-counter). Closing transactions in over-the-counter options are effected directly with a particular broker-dealer, rather than with an anonymous third party on an exchange. Unlike closing transactions effected on an exchange, a closing transaction of an over-the- counter option will not actually extinguish the original option unless both the original option transaction and the closing transaction are effected with the same broker-dealer. Therefore, in an over-the-counter option transaction, the Fund bears the risk that the broker-dealer effecting the closing transaction will fail to meet its obligations. Also, in some circumstances, the Fund may not be able to close an over-the-counter option. The Fund might then have to exercise the option, and bear transaction costs on the exercise, to realize any benefit from the option. If the Fund writes an over-the- counter call option that it cannot close, it will have to retain the underlying security until the option expires or is exercised. This would limit the Fund's ability to realize a gain or avoid a loss if the value of the underlying security changes while the option is still outstanding. Also, over-the-counter options are not subject to the protections afforded by the Options Clearing Corporation to purchasers of exchange-traded options. The staff of the Division of Investment Management of the Securities and Exchange Commission (the "SEC") has taken the position that the premiums that a fund pays for the purchase of over-the-counter options, and the value of securities used to cover over-the-counter options written by a fund, are illiquid securities. Accordingly, the Fund intends to enter into over-the-counter options transactions only with primary dealers in U.S. Government Securities and only pursuant to agreements that will assure that the Fund will at all times have the right to repurchase the option written by it from the dealer at a specified formula price. The Fund will treat the amount by which such formula price exceeds the intrinsic value of the option (i.e., the amount, if any, by which the market price of the underlying security exceeds the exercise price of the option) as an illiquid investment. It is the present policy of the Trust not to enter into any over-the-counter option transaction if, as a result, more than 15% of its net assets would be invested in (i) illiquid investments (determined under the foregoing formula) relating to such over-the-counter options written by the Fund, (ii) such over-the-counter options purchased by the Fund, (iii) securities which are not readily marketable, and (iv) repurchase agreements maturing in more than seven days. The Trustees have adopted a non-fundamental policy that the Fund may write covered call options or write covered put options with respect to not more than 5% of the value of its net assets. Similarly, the Fund may only purchase call options and put options with a value of up to 5% of its net assets. The purpose in writing covered options is to realize greater income than would be realized on portfolio securities transactions alone. The writing of options involves certain risks. During the option period, the covered call writer has, in return for the premium on the option, given up the opportunity to profit from a price increase in the underlying securities above the exercise price, but, as long as its obligation as a writer continues, has retained the risk of loss should the price of the underlying security decline. A covered put writer assumes the risk that the market price for the underlying security will fall below the exercise price, in which case the writer could be required to purchase the security at a higher price than the then current market price of the security. In both cases, the writer has no control over the time when it may be required to fulfill its obligation as a writer of the option. Once an option writer has received an exercise notice, it cannot effect a closing purchase transaction in order to terminate its obligation under the option and must deliver or purchase the underlying securities at the exercise price. A fund may forego the benefits of appreciation on securities sold pursuant to call options or pay a higher price for securities acquired pursuant to put options. Futures Contracts and Options on Futures Contracts. While futures will be traded to reduce certain risks, futures trading itself entails certain other risks. One risk arises due to the imperfect correlation between movements in the price of the futures contracts and movements in the price of the securities which are the subject of such contracts. In addition, the market price of futures contracts may be affected by certain factors, such as the closing out of futures contracts by investors through offsetting transactions in order to avoid margin deposit and maintenance requirements, and the participation of speculators in the futures market. Another risk is that there may not be a liquid secondary market for a given futures contract or at a given time, and in such event it may not be possible for the Fund to close a futures position. Finally, successful use of futures contracts by the Fund is subject to the ability of the Fund's sub-adviser, Massachusetts Mutual Life Insurance Company ("MassMutual"), to predict correctly movements in the direction of interest rates and other factors affecting markets for securities. Thus, while the Fund may benefit from the use of such contracts, the operation of these risk factors may result in a poorer overall performance than if it had not entered into any futures contracts. Positions taken in the futures markets are not normally held to maturity, but are instead liquidated through offsetting transactions which may result in a profit or a loss. While futures positions taken by the Fund will usually be liquidated in this manner, the Fund may instead make or take delivery of the underlying securities whenever it appears economically advantageous to do so. - Interest Rate Swap Transactions. Swap agreements entail both interest rate risk and credit risk. There is a risk that, based on movements of interest rates in the future, the payments made by the Fund under a swap agreement will have been greater than those received by it. Credit risk arises from the possibility that the counterparty will default. If the counterparty to an interest rate swap defaults, the Fund's loss will consist of the net amount of contractual interest payments that the Fund has not yet received. The Manager will monitor the creditworthiness of counterparties to the Fund's interest rate swap transactions on an ongoing basis. The Fund will enter into swap transactions with appropriate counterparties pursuant to master netting agreements. A master netting agreement provides that all swaps done between the Fund and the counterparty under the master agreement shall be regarded as parts of an integral agreement. If on any date amounts are payable in the same currency in respect of one or more swap transactions, the net amount payable on that date in that currency shall be paid. In addition, the master netting agreement may provide that if one party defaults generally or on one swap, the counterparty may terminate the swaps with that party. Under such agreements, if there is a default resulting in a loss to one party, the measure of that party's damages is calculated by reference to the average cost of a replacement swap with respect to each swap (i.e., the mark-to-market value at the time of the termination of each swap). The gains and losses on all swaps are then netted, and the result is the counterparty's gain or loss on termination. The termination of all swaps and the netting of gains and losses on termination is generally referred to as "aggregation." - Additional Information About Hedging Instruments and Their Use. The Fund's Custodian, or a securities depository acting for the Custodian, will act as the Fund's escrow agent, through the facilities of the Options Clearing Corporation ("OCC"), as to the investments on which the Fund has written options traded on exchanges or as to other acceptable escrow securities, so that no margin will be required for such transactions. OCC will release the securities on the expiration of the option or upon the Fund's entering into a closing transaction. An option position may be closed out only on a market which provides secondary trading for options of the same series, and there is no assurance that a liquid secondary market will exist for any particular option. When the Fund writes an over-the-counter ("OTC") option, it will enter into an arrangement with a primary U.S. Government securities dealer, which would establish a formula price at which the Fund would have the absolute right to repurchase that OTC option. That formula price would generally be based on a multiple of the premium received for the option, plus the amount by which the option is exercisable below the market price of the underlying security (that is, the extent to which the option "is in-the-money"). When the Fund writes an OTC option, it will treat as illiquid (for purposes of the limit on its assets that may be invested in illiquid securities, stated in the Prospectus) the mark-to- market value of any OTC option held by it. The Securities and Exchange Commission ("SEC") is evaluating whether OTC options should be considered liquid securities, and the procedure described above could be affected by the outcome of that evaluation. - Regulatory Aspects of Hedging Instruments. The Fund must operate within certain restrictions as to its long and short positions in Futures and options thereon under a rule (the "CFTC Rule") adopted by the Commodity Futures Trading Commission (the "CFTC") under the Commodity Exchange Act (the "CEA"), which excludes the Fund from registration with the CFTC as a "commodity pool operator" (as defined under the CEA) if the Fund complies with the CFTC Rule. Under these restrictions the Fund will not, as to any positions, whether short, long or a combination thereof, enter into Futures and options thereon for which the aggregate initial margins and premiums exceed 5% of the fair market value of its total assets, with certain exclusions as defined in the CFTC Rule. Under the restrictions, the Fund also must, as to its short positions, use Futures and options thereon solely for bona-fide hedging purposes within the meaning and intent of the applicable provisions of the CEA. Transactions in options by the Fund are subject to limitations established by each of the exchanges governing the maximum number of options which may be written or held by a single investor or group of investors acting in concert, regardless of whether the options were written or purchased on the same or different exchanges or are held in one or more accounts or through one or more different exchanges or through one or more brokers. Thus, the number of options which the Fund may write or hold may be affected by options written or held by other entities, including other investment companies having the same or an affiliated investment adviser. Position limits also apply to Futures. An exchange may order the liquidation of positions found to be in violation of those limits and may impose certain other sanctions. Due to requirements under the Investment Company Act, when the Fund purchases a Future, the Fund will maintain, in a segregated account or accounts with its Custodian, cash or readily-marketable, short-term (maturing in one year or less) debt instruments in an amount equal to the market value of the securities underlying such Future, less the margin deposit applicable to it. - Tax Aspects of Covered Calls and Hedging Instruments. The Fund intends to qualify as a "regulated investment company" under the Internal Revenue Code. That qualification enables the Fund to "pass through" its income and realized capital gains to shareholders without the Fund having to pay tax on them. This avoids a "double tax" on that income and capital gains, since shareholders will be taxed on the dividends and capital gains they received from the Fund. One of the tests for the Fund's qualification is that less than 30% of its gross income (irrespective of losses) must be derived from gains realized on the sale of securities held for less than three months. To comply with that 30% cap, the Fund will limit the extent to which it engages in the following activities, but will not be precluded from them: (i) selling investments, including Futures, held for less than three months, whether or not they were purchased on the exercise of a call held by the Fund; (ii) purchasing calls or puts which expire in less than three months; (iii) effecting closing transactions with respect to calls or puts written or purchased less than three months previously; (iv) exercising puts or calls held by the Fund for less than three months; or (v) writing calls on investments held for less than three months. Certain foreign currency exchange contracts ("Forward Contracts") in which the Fund may invest are treated as "section 1256 contracts." Gains or losses relating to section 1256 contracts generally are characterized under the Internal Revenue Code as 60% long-term and 40% short-term capital gains or losses. However, foreign currency gains or losses arising from certain section 1256 contracts (including Forward Contracts) generally are treated as ordinary income or loss. In addition, section 1256 contracts held by the Fund at the end of each taxable year are "marked-to-market" with the result that unrealized gains or losses are treated as through they were realized. These contracts also may be marked-to-market for purposes of the excise tax applicable to investment company distributions and for other purposes under rules prescribed pursuant to the Internal Revenue Code. An election can be made by the Fund to exempt these transactions from this mark-to-market treatment. Certain Forward Contracts entered into by the Fund may result in "straddles" for Federal income tax purposes. The straddle rules may affect the character of gains (or losses) realized by the Fund on straddle positions. Generally, a loss sustained on the disposition of a position making up a straddle is allowed only to the extent such loss exceeds any unrecognized gain in the offsetting positions making up the straddle. Disallowed loss is generally allowed at the point where there is no unrecognized gain in the offsetting positions making up the straddle, or the offsetting position is disposed of. Under the Internal Revenue Code, gains or losses attributable to fluctuation in exchange rates that occur between the time the Fund accrues interest or other receivables or accrues expenses or other liabilities denominated in a foreign currency and the time the Fund actually collects such receivables or pays such liabilities generally are treated as ordinary income or ordinary loss. Similarly, on disposition of debt securities denominated in a foreign currency and on disposition of foreign currency forward contracts, gains or losses attributable to fluctuations in the value of a foreign currency between the date of acquisition of the securities or contract and the date of disposition are also treated as ordinary gain or loss. Currency gains and losses are offset against market gains and losses before determining a net "Section 988" gain or loss under the Internal Revenue Code, which may increase or decrease the amount of the Fund's investment company income available for distribution to its shareholders. - Risks of Hedging With Options and Futures. In addition to the risks with respect to hedging discussed in the Prospectus and above, there is a risk in using short hedging by selling Futures to attempt to protect against decline in value of the Fund's portfolio securities (due to an increase in interest rates) that the prices of such Futures will correlate imperfectly with the behavior of the cash (i.e., market value) prices of the Fund's securities. The ordinary spreads between prices in the cash and futures markets are subject to distortions due to differences in the natures of those markets. First, all participants in the futures markets are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close out futures contracts through offsetting transactions which could distort the normal relationship between the cash and futures markets. Second, the liquidity of the futures markets 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 markets could be reduced, thus producing distortion. Third, from the point of view of speculators, the deposit requirements in the futures markets are less onerous than margin requirements in the securities markets. Therefore, increased participation by speculators in the futures markets may cause temporary price distortions. If the Fund uses Hedging Instruments to establish a position in the debt securities markets as a temporary substitute for the purchase of individual debt securities (long hedging) by buying Futures and/or calls on such Futures or on debt securities, it is possible that the market may decline; if the Fund then concludes not to invest in such securities at that time because of concerns as to possible further market decline or for other reasons, the Fund will realize a loss on the Hedging Instruments that is not offset by a reduction in the price of the debt securities purchased. - Repurchase Agreements. The Fund may acquire securities that are subject to repurchase agreements, in order to generate income while providing liquidity. In a repurchase transaction, the Fund acquires a security from, and simultaneously resells it to, an approved vendor (a U.S. commercial bank, U.S. branch of a foreign bank or a broker-dealer which has been designated a primary dealer in government securities, which must meet the credit requirements set by the Trust's Board of Trustees from time to time), for delivery on an agreed upon future date. The sale price exceeds the purchase price by an amount that reflects an agreed-upon interest rate effective for the period during which the repurchase agreement is in effect. The majority of these transactions run from day to day, and delivery pursuant to resale typically will occur within one to five days of the purchase. Repurchase agreements are considered "loans" under the Investment Company Act, collateralized by the underlying security. The Fund's repurchase agreements will require that at all times while the repurchase agreement is in effect, the collateral's value must equal or exceed the repurchase price to collateralize the repayment obligation. Additionally, the Manager will impose creditworthiness requirements to confirm that the vendor is financially sound. If the vendor of a repurchase agreement fails to pay the agreed-upon resale price on the delivery date, the Fund's risks in such event may include any costs of disposing of the collateral, and any loss from any delay in foreclosing on the collateral. Additionally, the Sub-Adviser will monitor the creditworthiness of the vendor. - Illiquid and Restricted Securities. The Fund will not purchase or otherwise acquire any security if, as a result, more than 10% of its net assets (taken at current value) would be invested in securities that are illiquid by virtue of the absence of a readily available market or because of legal or contractual restrictions on resale ("restricted securities"). As noted in the prospectus, that amount may, in the future, increase to 15%. This policy applies to participation interests, bank time deposits, master demand notes, repurchase transactions having a maturity beyond seven days, over-the-counter options held by the Fund and that portion of assets used to cover such options. This policy is not a fundamental policy and does not limit purchases of restricted securities that are eligible for sale to qualified institutional purchasers pursuant to Rule 144A under the Securities Act of 1933, provided that those securities have been determined to be liquid by the Board of Trustees of the Fund or by the Manager under Board-approved guidelines. Those guidelines take into account the trading activity for such securities and the availability of reliable pricing information, among other factors. If there is a lack of trading interest in a particular Rule 144A security, the Fund's holding of that security may be deemed to be illiquid. There may be undesirable delays in selling illiquid securities at prices representing their fair value. The expenses of registration of restricted securities that are subject to legal restrictions on resale (excluding securities that may be resold by the Fund pursuant to Rule 144A) may be negotiated at the time such securities are purchased by the Fund. When registration is required, a considerable period may elapse between a decision to sell the securities and the time the Fund would be permitted to sell them. Thus, the Fund might not be able to obtain as favorable a price as that prevailing at the time of the decision to sell. The Fund also may acquire, through private placements, securities having contractual resale restrictions, which might lower the amount realizable upon the sale of such securities. - Loans of Portfolio Securities. The Fund may lend its portfolio securities (other than in repurchase transactions) to brokers, dealers and other financial institutions subject to the restrictions stated in the Prospectus. Under applicable regulatory requirements (which are subject to change), the loan collateral, on each business day must, at least equal the market value of the loaned securities and must consist of cash, bank letters of credit, U.S. Government Securities, or other cash equivalents in which the Fund is permitted to invest. To be acceptable as collateral, letters of credit must obligate a bank to pay amounts demanded by the Fund if the demand meets the terms of the letter. Such terms and the issuing bank must be satisfactory to the Fund. In a portfolio securities lending transaction, the Fund receives from the borrower an amount equal to the interest paid or the dividends declared on the loaned securities during the term of the loan as well as the interest on the collateral securities, less any finders' or administrative fees the Fund pays in arranging the loan. The Fund may share the interest it receives on the collateral securities with the borrower as long as it realizes at least a minimum amount of interest required by the lending guidelines established by its Board of Trustees. In connection with securities lending, the Fund might experience risks of delay in receiving additional collateral, or risks of delay in recovery of the securities, or loss of rights in the collateral should the borrower fail financially. The Fund will not lend its portfolio securities to any officer, trustee, employee or affiliate of the Trust, its Manager or Sub-Adviser. The terms of the Fund's loans must meet certain tests under the Internal Revenue Code and permit the Fund to reacquire loaned securities on five business days' notice or in time to vote on any important matter. - "When-Issued" and Delayed Delivery Transactions. The Fund may purchase securities on a "when-issued" basis, and may purchase or sell such securities on a "delayed delivery" basis. Although the Fund will enter into such transactions for the purpose of acquiring securities for its portfolio or for delivery pursuant to options contracts it has entered into, the Fund may dispose of a commitment prior to settlement. "When- issued" or "delayed delivery" refers to securities whose terms and indenture are available and for which a market exists, but which are not available for immediate delivery. When such transactions are negotiated, the price (which is generally expressed in yield terms) is fixed at the time the commitment is made, but delivery and payment for the securities take place at a later date. The Fund does not intend to make such purchases for speculative purposes. Such securities may bear interest at a lower rate than longer-term securities. The commitment to purchase a security for which payment will be made on a future date may be deemed a separate security and involve a risk of loss if the value of the security declines prior to the settlement date. During the period between commitment by the Fund and settlement (generally within two months but not to exceed 120 days), no payment is made for the securities purchased by the purchaser, and no interest accrues to the purchaser from the transaction. Such securities are subject to market fluctuation; the value at delivery may be less than the purchase price. The Fund will maintain a segregated account with its Custodian, consisting of cash, U.S. Government securities or other high grade debt obligations at least equal to the value of purchase commitments until payment is made. The Fund will engage in when-issued transactions in order to secure what is considered to be an advantageous price and yield at the time of entering into the obligation. When the Fund engages in when-issued or delayed delivery transactions, it relies on the buyer or seller, as the case may be, to consummate the transaction. Failure of the buyer or seller to do so may result in the Fund losing the opportunity to obtain a price and yield considered to be advantageous. At the time the Fund makes a commitment to purchase or sell a security on a when-issued or forward commitment basis, it records the transaction and reflects the value of the security purchased, or if a sale, the proceeds to be received, in determining its net asset value. If the Fund chooses to (i) dispose of the right to acquire a when-issued security prior to its acquisition or (ii) dispose of its right to deliver or receive against a forward commitment, it may incur a gain or loss. To the extent the Fund engages in when-issued and delayed delivery transactions, it will do so for the purpose of acquiring or selling securities consistent with its investment objective and policies and not for the purposes of investment leverage. The Fund enters into such transactions only with the intention of actually receiving or delivering the securities, although (as noted above), when-issued securities and forward commitments may be sold prior to settlement date. In addition, changes in interest rates before settlement in a direction other than that expected by the Manager will affect the value of such securities and may cause a loss to the Fund. When-issued transactions and forward commitments allow the Fund a technique to use against anticipated changes in interest rates and prices. For instance, in periods of rising interest rates and falling prices, the Fund might sell securities in its portfolio on a forward commitment basis to attempt to limit its exposure to anticipated falling prices. In periods of falling interest rates and rising prices, the Fund might sell portfolio securities and purchase the same or similar securities on a when-issued or forward commitment basis, thereby obtaining the benefit of currently higher cash yields. Other Investment Restrictions The Fund's significant investment restrictions are set forth in the Prospectus. There are additional investment restrictions that the Fund must follow that are also fundamental policies. Fundamental policies and the Fund's investment objective, cannot be changed without the vote of a "majority" of the Fund's outstanding voting securities. Under the Investment Company Act, such a "majority" vote is defined as the vote of the holders of the lesser of (i) 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 (ii) more than 50% of the outstanding shares. Under these additional restrictions, the Trust may not, on behalf of the Fund: (1) act as an underwriter, except to the extent that, in connection with the disposition of portfolio securities, the Fund may be deemed an underwriter under applicable laws; (2) invest in oil, gas or other mineral leases, rights, royalty contracts or exploration or development programs, real estate or real estate mortgage loans (this restriction does not prevent the Fund from purchasing securities secured or issued by companies investing or dealing in real estate and by companies that are not principally engaged in the business of buying and selling such leases, rights, contracts or programs); (3) purchase commodities or commodity contracts except futures contracts, including but not limited to contracts for the future delivery of securities and futures contracts based on securities indexes; (4) make loans other than by investing in obligations in which the Fund may invest consistent with its investment objective and policies and other than repurchase agreements and loans of portfolio securities; (5) pledge, mortgage or hypothecate its assets, except that, to secure permitted borrowings, it may pledge securities having a market value at the time of the pledge not exceeding 15% of the cost of the Fund's total assets and except in connection with permitted transactions in options, futures contracts and options on futures contracts, and except for reverse repurchase agreements and securities lending; (6) purchase or retain securities of any issuer if, to the knowledge of the Trust, more than 5% of such issuer's securities are beneficially owned by officers and trustees of the Trust or officers and directors of Massachusetts Mutual Life Insurance Company ("MassMutual") who individually beneficially own more than 1/2 of 1% of the securities of such issuer; and (7) make loans to an officer, trustee or employee of the Trust or to any officer, director or employee of MassMutual, or to MassMutual. In addition to the investment restrictions described above and those contained in the Prospectus, the Trustees of the Trust have voluntarily adopted certain policies and restrictions which are observed in the conduct of the affairs of the Fund. These represent intentions of the Trustees based upon current circumstances. They differ from fundamental investment policies in that the following additional investment restrictions may be changed or amended by action of the Trustees without requiring prior notice to or approval of shareholders. In accordance with such nonfundamental policies and guidelines, the Fund may not: (1) invest for the purpose of exercising control over, or management of, any company; (2) purchase any security of a company which (including any predecessor, controlling person, general partner and guarantor) has a record of less than three years of continuous operations or relevant business experience, if such purchase would cause more than 5% of the current value of the Fund's assets to be invested in such companies; and (3) invest in securities of other investment companies, except by purchase in the open market where no commission or profit to a sponsor or dealer results from such purchase other than the customary broker's commission, except when such purchase is part of a plan of merger, consolidation, reorganization or acquisition. How the Fund is Managed Organization and History. The Fund is one of two series of Oppenheimer Integrity Funds (the "Trust"). This Statement of Additional Information may be used with the Fund's Prospectus only to offer shares of the Fund. The Trust was established in 1982 as MassMutual Liquid Assets Trust and changed its name to MassMutual Integrity Funds on April 15, 1988. The Fund was reorganized from a closed-end investment company known as MassMutual Income Investors, Inc. into a series of the Trust on April 15, 1988. On March 29, 1991, the Trust changed its name from MassMutual Integrity Funds to Oppenheimer Integrity Funds and the Fund changed its name from MassMutual Investment Grade Bond Fund to Oppenheimer Investment Grade Bond Fund. Shares of the Fund represent an interest in the Fund proportionately equal to the interest of each other share of the same class and entitle the holder to one vote per share (and a fractional vote for a fractional share) on matters submitted to their vote at shareholders' meetings. Shareholders of the Fund and of the Trust's other series vote together in the aggregate on certain matters at shareholders' meetings, such as the election of Trustees and ratification of appointment of auditors for the Trust. Shareholders of a particular series or class vote separately on proposals which affect that series or class, and shareholders of a series or class which is not affected by that matter are not entitled to vote on the proposal. For example, only shareholders of a series, such as the Fund, vote exclusively on any material amendment to the investment advisory agreement with respect to the series. Only shareholders of a class of a series vote on certain amendments to the Distribution and/or Service Plans if the amendments affect that class. The Trustees are authorized to create new series and classes of series. The Trustees may reclassify unissued shares of the Trust or its series or classes into additional series or classes of shares. The Trustees may also divide or combine the shares of a class into a greater or lesser number of shares without thereby changing the proportionate beneficial interest of a shareholder in the Fund. Shares do not have cumulative voting rights or preemptive or subscription rights. Shares may be voted in person or by proxy. As a Massachusetts business Trust, the Trust is not required to hold, and does not plan to hold, regular annual meetings of shareholders. The Trust will hold meetings when required to do so by the Investment Company Act or other applicable law, or when a shareholder meeting is called by the Trustees or upon proper request of the shareholders. Shareholders have the right, upon the declaration in writing or vote of two-thirds of the outstanding shares of the Trust, to remove a Trustee. The Trustees will call a meeting of shareholders to vote on the removal of a Trustee upon the written request of the record holders of at least 10% of its outstanding shares. In addition, if the Trustees receive a request from at least 10 shareholders (who have been shareholders for at least six months) holding shares of the Trust valued at $25,000 or more or holding at least 1% of the Trust's outstanding shares, whichever is less, stating that they wish to communicate with other shareholders to request a meeting to remove a Trustee, the Trustees will then either make the Trust's shareholder list available to the applicants or mail their communication to all other shareholders at the applicant's expense, or the Trustees may take such other action as set forth under Section 16(c) of the Investment Company Act. The Trust's Declaration of Trust contains an express disclaimer of shareholder or Trustee liability for the Trust's obligations, and provides for indemnification and reimbursement of expenses out of its property for any shareholder held personally liable for its obligations. The Declaration of Trust also provides that the Fund shall, upon request, assume the defense of any claim made against any shareholder for any act or obligation of the Fund and satisfy any judgment thereon. Thus, while Massachusetts law permits a shareholder of a business trust (such as the Trust) to be held personally liable as a "partner" under certain circumstances, the risk of a Trust shareholder incurring financial loss on account of shareholder liability is limited to the relatively remote circumstances in which the Fund would be unable to meet its obligations described above. Any person doing business with the Trust, and any shareholder of the Trust, agrees under the Trust's Declaration of Trust to look solely to the assets of the Trust for satisfaction of any claim or demand which may arise out of any dealings with the Trust, and the Trustees shall have no personal liability to any such person, to the extent permitted by law. Trustees And Officers The Trust's Trustees and officers and their principal occupations and business affiliations during the past five years are listed below. All of the Trustees are also trustees, directors or managing general partners of Oppenheimer Total Return Fund, Inc., Oppenheimer Equity Income Fund, Oppenheimer High Yield Fund, Oppenheimer Cash Reserves, Oppenheimer Tax- Exempt Cash Reserves, Oppenheimer Tax-Exempt Bond Fund, Oppenheimer Limited-Term Government Fund, The New York Tax-Exempt Income Fund, Inc., Oppenheimer Champion High Yield Fund, Oppenheimer Main Street Funds, Inc., Oppenheimer Strategic Funds Trust, Oppenheimer Strategic Income & Growth Fund, Oppenheimer Strategic Investment Grade Bond Fund, Oppenheimer Strategic Short-Term Income Fund and Oppenheimer Variable Account Funds; as well as the following "Centennial Funds": Daily Cash Accumulation Fund, Inc., Centennial America Fund, L.P., Centennial Money Market Trust, Centennial Government Trust, Centennial New York Tax Exempt Trust, Centennial Tax Exempt Trust and Centennial California Tax Exempt Trust, (all of the foregoing funds are collectively referred to as the "Denver OppenheimerFunds"). Mr. Fossel is President and Mr. Swain is Chairman of the Denver OppenheimerFunds. As of March 29, 1994, the Trustees and officers of the Fund as a group owned less than 1% of the Fund's outstanding shares. Robert G. Avis, Trustee One North Jefferson Ave., St. Louis, Missouri 63103 Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G. Edwards, Inc. (its parent holding company); Chairman of A.G.E. Asset Management and A.G. Edwards Trust Company (its affiliated investment adviser and trust company, respectively). William A. Baker, Trustee 197 Desert Lakes Drive, Palm Springs, California 92264 Management Consultant. Charles Conrad, Jr., Trustee 5301 Bolsa Avenue, Huntington Beach, California 92647 Vice President of McDonnell Douglas Ltd.; formerly associated with the National Aeronautics and Space Administration. Jon S. Fossel, President and Trustee* Two World Trade Center, New York, New York 10048-0203 Chairman, Chief Executive Officer and a director of the Manager; President and a director of Oppenheimer Acquisition Corp. ("OAC"), the Manager's parent holding company; President and a director of HarbourView Asset Management Corporation ("HarbourView"), a subsidiary of the Manager; a director of Shareholder Services, Inc. ("SSI") and Shareholder Financial Services, Inc. ("SFSI"), transfer agent subsidiaries of the Manager; formerly President of the Manager. Raymond J. Kalinowski, Trustee 44 Portland Drive, St. Louis, Missouri 63131 Formerly Vice Chairman and a director of A.G. Edwards, Inc., parent holding company of A.G. Edwards & Sons, Inc. (a broker-dealer), of which he was a Senior Vice President. C. Howard Kast, Trustee 2552 East Alameda, Denver, Colorado 80209 Formerly the Managing Partner of Deloitte, Haskins & Sells (an accounting firm). Robert M. Kirchner, Trustee 7500 E. Arapahoe Road, Englewood, Colorado 80112 President of The Kirchner Company (management consultants). Ned M. Steel, Trustee 3416 S. Race Street, Englewood, Colorado 80110 Chartered Property and Casualty Underwriter; formerly Senior Vice President and a director ofVan Gilder Insurance Corp. (insurance brokers). James C. Swain, Chairman and Trustee* 3410 South Galena Street, Denver, Colorado 80231 Vice Chairman of the Manager; President and Director of Centennial Asset Management Corporation, an investment adviser subsidiary of the Manager ("Centennial"); formerly President and Director of Oppenheimer Asset Management Corporation ("OAMC"), an investment adviser which was a subsidiary of the Manager, and Chairman of the Board of SSI. Andrew J. Donohue, Vice President Executive Vice President and General Counsel of Oppenheimer Management Corporation ("OMC") (the "Manager") and Oppenheimer Funds Distributor, Inc. (the "Distributor"); an officer of other OppenheimerFunds; formerly Senior Vice President and Associate General Counsel of the Manager and the Distributor; Partner in, Kraft & McManimon (a law firm); an officer of First Investors Corporation (a broker-dealer) and First Investors Management Company, Inc. (broker-dealer and investment adviser); director and an officer of First Investors Family of Funds and First Investors Life Insurance Company. George C. Bowen, Vice President, Secretary and Treasurer 3410 South Galena Street Denver, Colorado 80231 Senior Vice President and Treasurer of the Manager; Vice President and Treasurer of the Distributor and HarbourView; Senior Vice President, Treasurer, Assistant Secretary and a director of Centennial; Vice President, Treasurer and Secretary of SSI and SFSI; an officer of other OppenheimerFunds; formerly Senior Vice President/Comptroller and Secretary of OAMC. Mary E. Wilson, Vice President and Portfolio Manager Vice President and Managing Director of the Sub-Advisor; Senior Vice President of MML Series Investment Fund; and Vice President of MassMutual Participation Investors and MassMutual Corporate Investors. Robert G. Zack, Assistant Secretary Two World Trade Center, New York, New York 10048-0203 Senior Vice President and Associate General Counsel of the Manager, Assistant Secretary of SSI and SFSI; an officer of other OppenheimerFunds. Robert Bishop, Assistant Treasurer 3410 South Galena Street, Denver, Colorado 80231 Assistant Vice President of the Manager/Mutual Fund Accounting; an officer of other OppenheimerFunds; previously a Fund Controller of the Manager, prior to which he was an Accountant for Resolution Trust Corporation and previously an Accountant and Commissions Supervisor for Stuart James Company Inc., a broker-dealer. Scott Farrar, Assistant Treasurer 3410 South Galena Street, Denver, Colorado 80231 Assistant Vice President of the Manager/Mutual Fund Accounting; an officer of other OppenheimerFunds; previously a Fund Controller for the Manager, prior to which he was an International Mutual Fund Supervisor for Brown Brothers Harriman & Co., a bank, and previously a Senior Fund Accountant for State Street Bank & Trust Company, before which he was a sales representative for Central Colorado Planning. __________________ *A Trustee who is an "interested person" of the Fund as defined in the Investment Company Act. - Remuneration of Trustees. The officers of the Trust are affiliated with the Manager; they and the Trustees of the Fund who are affiliated with the Manager (Mr. Swain and Mr. Fossel who is both an officer and Trustee) and receive no salary or fee from the Trust. During the Fund's fiscal year ended December 31, 1993, the remuneration (including expense reimbursements) paid to all Trustees of the Trust (excluding Mr. Fossel and Mr. Swain) as a group for services as Trustees and as members of one or more committees of the Board totaled $6,398. - Major Shareholders. As of March 29, 1994, the only entity that owned of record or was known by the Fund to own beneficially 5% or more of any class of the Fund's outstanding shares was MML Reinsurance LTD, 1295 State Street, Springfield, Massachusetts 01111, which owned 722,909.450 Class A shares (7.16%) of the Fund, and which represented less than 5% of the outstanding shares of the Trust. The Manager and Its Affiliates. The Manager is wholly-owned by Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by Massachusetts Mutual Life Insurance Company. OAC is also owned in part by certain of the Manager's directors and officers, some of whom also serve as officers of the Trust, and two of whom (Mr. Jon S. Fossel and Mr. James C. Swain) serve as Trustees of the Trust. - The Investment Advisory Agreement. The investment advisory agreement, dated as of March 28, 1991, between the Trust on behalf of the Fund and the Manager requires the Manager, at its expense, to provide the Fund with adequate office space, facilities and equipment, and to provide and supervise the activities of all administrative and clerical personnel required to provide effective corporate administration for the Fund, including the compilation and maintenance of records with respect to its operations, the preparation and filing of specified reports, and composition of proxy materials and registration statements for continuous public sale of shares of the Fund. Expenses not expressly assumed by the Manager under the advisory agreement or by the Distributor under the Distribution Agreement are paid by the Fund. The advisory agreement lists examples of expenses paid by the Fund, the major categories of which relate to interest, taxes, brokerage commissions, fees to certain Trustees, legal and audit expenses, custodian and transfer agent expenses, share issuance costs, certain printing and registration costs and non-recurring expenses, including litigation costs. The advisory agreement provides that in the absence of willful misfeasance, bad faith or gross negligence in the performance of its duties or reckless disregard for its obligations and duties under the advisory agreement, the Manager is not liable for any loss resulting from a good faith error or omission on its part with respect to any of its duties thereunder. The advisory agreement permits the Manager to act as investment adviser for any other person, firm or corporation and to use the name "Oppenheimer" in connection with other investment companies for which it may act as investment adviser or general distributor. If the Manager shall no longer act as investment adviser to the Fund, the right of the Fund to use the name "Oppenheimer" as part of its name may be withdrawn. MassMutual serves as investment sub-adviser to the Fund pursuant to a sub-advisory agreement between MassMutual and OMC dated as of March 28, 1991. Under the sub-advisory agreement, MassMutual is responsible for managing the Fund's portfolio of securities and making investment decisions with respect to the Fund's investments, subject to the Fund's investment policies established by the Board of Trustees of the Trust, and in accordance with the Fund's investment objective, policies and restrictions, set forth in the Prospectus and in this Statement of Additional Information. The Sub-Adviser's fee is paid by the Manager. The sub-advisory agreement has the same provisions as to renewal, termination and the standard of care as the investment advisory agreement, and both advisory agreements are subject to annual approval by the Trustees, who may terminate either advisory agreement on sixty days' notice approved by a majority of the Trustees. The advisory agreements contain no expense limitation. However, independently of the advisory agreements, the Manager has undertaken that the total expenses of the Fund in any fiscal year (including the management fee, but excluding taxes, interest, brokerage fees, distribution plan payments, and extraordinary expenses, such as litigation costs) shall not exceed (and the Manager undertakes to reduce the Fund's management fee in the amount by which such expenses shall exceed) the most stringent applicable state "blue sky" expense limitation requirement for qualification of sale of the Fund's shares. At present, that limitation is imposed by California and limits expenses (with specified exclusions) to 2.5% of the first $30 million of the Fund's average annual net assets, 2.0% of the next $70 million of average net assets and 1.5% of average net assets in excess of $100 million. The Manager reserves the right to change or eliminate this expense limitation at any time. The payment of the management fee at the end of any month will be reduced so that at no time will there be any accrued but unpaid liability under the above expense limitation. Prior to March 28, 1991, the Sub-Adviser was the Fund's investment adviser, and MML Investors Services, Inc. ("MMLISI"), a wholly-owned subsidiary of MassMutual (and therefore an affiliate of an affiliate of the Fund), was the Distributor of shares of the Fund. For the fiscal years ended December 31, 1991, the advisory fees paid to MassMutual for the period from January 1, 1991 to March 27, 1991 under the previous investment advisory agreement was $75,574, and the advisory fees paid to the Manager under the Agreement was $266,278 (net of a $21,414 reimbursement by the Sub-Adviser), of which $142,541 was paid by the Manager to MassMutual pursuant to the sub-advisory agreement. For the fiscal year ended December 31, 1992, the advisory fees paid to the Manager was $491,642, of which $342,743 was paid by the Manager to the Sub- Adviser. For the fiscal year ended December 31, 1993, the advisory fees paid to the Manager was $555,430, of which $380,790 was paid by the Manager to the Sub-Adviser. - The Distributor. Under the General Distributor's Agreement between the Trust and the Distributor, the Distributor acts as the Fund's principal underwriter in the continuous public offering of the Fund's Class A and Class B shares, but is not obligated to sell a specific number of shares. Expenses normally attributable to sales (other than those paid under the Class B Distribution and Service Plan), including advertising and the cost of printing and mailing prospectuses (other than those furnished to existing shareholders), are borne by the Distributor. During the Fund's fiscal years ended December 31, 1991, 1992 and 1993, the aggregate amount of sales charges on sales of the Fund's Class A shares was $100,682, $337,554 and $269,639, respectively, of which the Distributor and MMLISI retained in the aggregate $73,003, $213,717 and $163,271 in those respective years. From May 1, 1993 (commencement of offering of Class B shares) to December 31, 1993, the Distributor advanced $79,173 to broker-dealers on the sales of the Funds' Class B shares, $9,318 of which went to MMLISI. In addition, the Distributor collected $350 from contingent deferred sales charges assessed on Class B shares. - The Transfer Agent. Oppenheimer Shareholder Services, the Fund's tranfer agent, is responsible for maintaining the Fund's shareholder registry and shareholder accounting records, and for shareholder servicing and administrative functions. Brokerage Policies Of The Fund Brokerage Provisions of the Investment Advisory and Sub-Advisory Agreements. One of the duties of the Sub-Adviser under the sub-advisory agreement is to arrange the portfolio transactions of the Fund. In doing so, the Sub-Adviser is authorized by the sub-advisory agreement to employ broker-dealers ("brokers"), including "affiliated" brokers, as that term is defined in the Investment Company Act, as may, in its best judgment based on all relevant factors, implement the policy of the Fund to obtain, at reasonable expense, the "best execution" (prompt and reliable execution at the most favorable price obtainable) of such transactions. The Sub-Adviser need not seek competitive commission bidding or base its selection on "posted" rates, but is expected to be aware of the current rates of eligible brokers and to minimize the commissions paid to the extent consistent with the provisions of the sub-advisory agreement and the interests and policies of the Fund as established by the Trust's Board of Trustees. Under the sub-advisory agreement, the Sub-Adviser is authorized to select brokers which provide brokerage and/or research services for the Fund and/or the other accounts over which it or its affiliates have investment discretion. The commissions paid to such brokers may be higher than another qualified broker would have charged, if a good faith determination is made by the Sub-Adviser that the commission is reasonable in relation to the services provided. Most purchases made by the Fund are principal transactions at net prices, and the Fund incurs little or no brokerage costs. During the fiscal year ended December 31, 1991, 1992 and 1993, no brokerage commissions were paid by the Fund. Description of Brokerage Practices Followed by the Manager. Subject to the provisions of the advisory agreement, the procedures and rules described above, allocations of brokerage are made by portfolio managers under the supervision of the Manager's executive officers and the Sub- Adviser. Transactions in securities other than those for which an exchange is the primary market are generally done with principals or market makers. Brokerage commissions are paid primarily for effecting transactions in listed securities and otherwise only if it appears likely that a better price or execution can be obtained. When the Fund engages in an option transaction, ordinarily the same broker will be used for the purchase or sale of the option and any transactions in the securities to which the option relates. Option commissions may be relatively higher than those which would apply to direct purchases and sales of portfolio securities. The Sub-Adviser shall select broker-dealers to effect the Fund's portfolio transactions on the basis of its estimate of their ability to obtain best execution of particular and related portfolio transactions. The abilities of a broker-dealer to obtain best execution of particular portfolio transaction(s) will be judged by the Sub-Adviser on the basis of all relevant factors and considerations. The research services provided by a particular broker may be useful only to one or more of the advisory accounts of the Sub-Adviser and its affiliates, and investment research received for the commissions of those other accounts may be useful both to the Fund and one or more of such other accounts. Such research, which may be supplied by a third party at the instance of a broker, includes information and analyses on particular companies and industries as well as market or economic trends and portfolio strategy, receipt of market quotations for portfolio evaluations, information systems, computer hardware and similar products and services. If a research service also assists the Sub-Adviser in a non-research capacity (such as bookkeeping or other administrative functions), then only the percentage or component that provides assistance to the Sub-Adviser in the investment decision-making process may be paid for in commission dollars. The Board of Trustees has permitted 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 Sub-Adviser by making available additional views for consideration and comparisons, and enabling the Sub- Adviser to obtain market information for the valuation of securities held in the Fund's portfolio or being considered for purchase. The Board, including the independent Trustees of the Trust (those Trustees of the Trust who are not "interested persons," as defined in the Investment Company Act, and who have no direct or indirect financial interest in the operation of the advisory agreements or Distribution Plans described below), annually reviews information furnished by the Sub-Adviser as to the commissions paid to brokers furnishing such services so that the Board may ascertain whether the amount of such commissions was reasonably related to the value or benefit of such services. Securities held by the Fund may also be held by Sub-Adviser in its investment accounts and by other investment companies for which it acts as investment adviser. If the same security is purchased or sold for the Fund and such investment accounts or companies at or about the same time, such purchases or sales normally will be combined, to the extent practicable, and will be allocated as nearly as practicable on a pro rata basis in proportion to the amounts to be purchased and sold. The main factors to be considered will be the investment objectives of the respective portfolios, the relative size of portfolio holdings of the same or comparable security, availability of cash for investment by the various portfolios and the size of their respective investment commitments. It is believed that the ability of the Fund to participate in larger volume transactions will, in most cases, produce better execution for the Fund. In some cases, however, this procedure could have a detrimental effect on the price and amount of a security available to the Fund or the price at which a security may be sold. It is the opinion of the Trust's management that such execution advantage and the desirability of retaining the Sub- Adviser in that capacity outweigh the disadvantages, if any, which might result from this procedure. Performance of the Fund Yield and Total Return Information. As described in the Prospectus, from time to time the "standardized yield," "dividend yield," "average annual total return", "total return," and "total return at net asset value" of an investment in a class of the Fund may be advertised. An explanation of how yields and total returns are calculated for each class and the components of those calculations is set forth below. The Fund's advertisement of its performance must, under applicable rules of the Securities and Exchange Commission, include the average annual total returns for each class of shares of the Fund for the 1, 5 and 10-year periods (or the life of the class, if less) as of the most recently ended calendar quarter prior to the publication of the advertisement. This enables an investor to compare the Fund's performance to the performance of other funds for the same periods. However, a number of factors should be considered before using such information as a basis for comparison with other investments. An investment in the Fund is not insured; its yields and returns and share prices are not guaranteed and normally will fluctuate on a daily basis. When redeemed, an investor's shares may be worth more or less than their original cost. Yields and returns for any given past period are not a prediction or representation by the Fund of future yields or rates of return on its shares. The yields and returns of Class A and Class B shares of the Fund are affected by portfolio quality, the type of investments the Fund holds and its operating expenses allocated to a particular class. - Standardized Yields. The Fund's "yield" (referred to as "standardized yield") for a given 30-day period for a class of shares is calculated using the following formula set forth in rules adopted by the Securities and Exchange Commission that apply to all funds that quote yields: a-b 6 Standardized Yield = 2 ((------ + 1) - 1) cd The symbols above represent the following factors: a = dividends and interest earned during the 30-day period. b = expenses accrued for the period (net of any expense reimbursements). c = the average daily number of shares of that class outstanding during the 30-day period that were entitled to receive dividends. d = the maximum offering price per share of the class on the last day of the period, adjusted for undistributed net investment income. The standardized yield of a class of shares for a 30-day period may differ from its yield for any other period. The SEC formula assumes that the standardized yield for a 30-day period occurs at a constant rate for a six-month period and is annualized at the end of the six-month period. This standardized yield is not based on actual distributions paid by the Fund to shareholders in the 30-day period, but is a hypothetical yield based upon the net investment income from the Fund's portfolio investments calculated for that period. The standardized yield may differ from the "dividend yield" of that class, described below. Additionally, because each class of shares is subject to different expenses, it is likely that the standardized yields of the Fund's classes of shares will differ. For the 30-day period ended December 31, 1993, the standardized yields for the Fund's Class A and Class B shares were 6.03% and 5.52%, respectively. - Dividend Yield and Distribution Return. From time to time the Fund may quote a "dividend yield" or a "distribution return" for each class. Dividend yield is based on the Class A or Class B share dividends derived from net investment income during a stated period. Distribution return includes dividends derived from net investment income and from realized capital gains declared during a stated period. Under those calculations, the dividends and/or distributions for that class declared during a stated period of one year or less (for example, 30 days) are added together, and the sum is divided by the maximum offering price per share of that class) on the last day of the period. When the result is annualized for a period of less than one year, the "dividend yield" is calculated as follows: Dividend Yield of the Class = Dividends of the Class - ---------------------------------------------------- Max Offering Price of the Class (last day of period) Divided by number of days (accrual period) x 365 The maximum offering price for Class A shares includes the maximum front-end sales charge. For Class B shares, the maximum offering price is the net asset value per share, without considering the effect of contingent deferred sales charges. From time to time similar yield or distribution return calculations may also be made using the Class A net asset value (instead of its respective maximum offering price) at the end of the period. The dividend yields on Class A shares for the 30-day period ended December 31, 1993, were 5.43% and 5.70% when calculated at maximum offering price and at net asset value, respectively. The dividend yield on Class B shares for the 30-day period ended December 31, 1993, was 4.93% when calculated at net asset value. - Average Annual Total Returns. The "average annual total return" of each class is an average annual compounded rate of return for each year in a specified number of years. It is the rate of return based on the change in value of a hypothetical initial investment of $1,000 ("P" in the formula below) held for a number of years ("n") to achieve an Ending Redeemable Value ("ERV"), according to the following formula: ( ERV ) 1/n (-----) -1 = Average Annual Total Return ( P ) - Cumulative Total Returns. The cumulative "total return" calculation measures the change in value of a hypothetical investment of $1,000 over an entire period of years. Its calculation uses some of the same factors as average annual total return, but it does not average the rate of return on an annual basis. Cumulative total return is determined as follows: ERV - P = Cumulative Total Return ------- P In calculating total returns for Class A shares, the current maximum sales charge of 4.75% (as a percentage of the offering price) is deducted from the initial investment ("P") (unless the return is shown at net asset value, as discussed below). For Class B shares, the payment of the applicable contingent deferred sales charge (5.0% for the first year, 4.0% for the second year, 3.0% for the third and fourth years, 2.0% in the fifth year, 1.0% in the sixth year and none thereafter) is applied to the investment result for the time period shown (unless the total return is shown at net asset value, as described below). Total returns also assume that all dividends and capital gains distributions during the period are reinvested to buy additional shares at net asset value per share, and that the investment is redeemed at the end of the period. The "average annual total returns" on an investment in Class A shares of the Fund for the one year period ended December 31, 1993 and for the period from April 15, 1988 (the date the Fund became an open-end Fund) to December 31, 1993, were 5.06% and 8.77%, respectively. The cumulative "total return" on Class A shares for the latter period was 61.63%. For the fiscal period from May 1, 1993, through December 31, 1993, the average annual total return and the cumulative total return on an investment in Class B shares of the Fund were -1.64% and -1.09%, respectively. - Total Returns at Net Asset Value. From time to time the Fund may also quote an "average annual total return at net asset value" or a cumulative "total return at net asset value" for Class A or Class B 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 sales charges) and takes into consideration the reinvestment of dividends and capital gains distributions. The cumulative total returns at net asset value on the Fund's Class A shares for the fiscal year ended December 31, 1993, and for the period from April 15, 1988 to December 31, 1993 were 10.30% and 69.69%, respectively. The cumulative total return at net asset value on the Fund's Class B shares for the fiscal period from May 1, 1993 through December 31, 1993 was 3.91%. Other Performance Comparisons. From time to time the Fund may publish the ranking of its Class A or Class B shares by Lipper Analytical Services, Inc. ("Lipper"), a widely-recognized independent mutual fund monitoring service. Lipper monitors the performance of regulated investment companies, including the Fund, and ranks their performance for various periods based on categories relating to investment objectives. The performance of the Fund's classes is ranked against (i) all other funds, excluding money market funds, and (ii) all other general bond funds. The Lipper performance rankings are based on total return that includes the reinvestment of capital gains distributions and income dividends but does not take sales charges or taxes into consideration. The Fund's performance may also be compared to the performance of the Lipper General Bond Fund Index, which is a net asset value weighted index of general bond funds compiled by Lipper. It is calculated with adjustments for income dividends and capital gains distributions as of the ex-dividend date. From time to time the Fund may publish the ranking of the performance of its Class A or Class B shares by Morningstar, Inc., an independent mutual fund monitoring service that ranks mutual funds, including the Fund, in broad investment categories (equity, taxable bond, tax-exempt and other) monthly, based upon each fund's three, five and ten- year average annual total returns (when available) and a risk adjustment factor that reflects Fund performance relative to three-month U.S. Treasury bill monthly returns. Such returns are adjusted for fees and sales loads. There are five ranking categories with a corresponding number of stars: highest (5), above average (4), neutral (3), below average (2) and lowest (1). Ten percent of the funds, series or classes in an investment category receive 5 stars, 22.5% receive 4 stars, 35% receive 3 stars, 22.5% receive 2 stars, and the bottom 10% receive one star. Morningstar ranks the Class A and Class B shares of the Fund in relation to other taxable bond funds. The total return on an investment made in Class A or Class B shares of the Fund may be compared with the performance for the same period of the Consumer Price Index, the Salomon Brothers World Government Bond Fund Index, the Salomon Brothers High Grade Corporate Bond Index, the Shearson Lehman Government/Corporate Bond Index and the J.P. Morgan Government Bond Index. The Consumer Price Index is generally considered to be a measure of inflation. The Salomon Brothers World Government Bond Index generally represents the performance of government debt securities of various markets throughout the world, including the United States. The Salomon Brothers High Grade Corporate Bond Index generally represents the performance of high grade long-term corporate bonds, and the Shearson Lehman Government/Corporate Bond Index generally represents the performance of intermediate and long-term government and investment grade corporate debt securities. The J.P. Morgan Government Bond Index generally represents the performance of government bonds issued by various countries including the United States. The foregoing bond indices are unmanaged indices of securities that do not reflect reinvestment of capital gains or take investment costs into consideration, as these items are not applicable to indices. From time to time the Fund may also include in its advertisements and sales literature performance information about the Fund or rankings of the Fund's performance cited in newspapers or periodicals, such as The New York Times. These articles may include quotations of performance from other sources, such as Lipper or Morningstar. When comparing yield, total return and investment risk of an investment in Class A or Class B shares of the Fund with other investments, investors should understand that certain other investments have different risk characteristics than an investment in shares of the Fund. For example, certificates of deposit may have fixed rates of return and may be insured as to principal and interest by the FDIC, while the Fund's returns will fluctuate and its share values and returns are not guaranteed. Money market accounts offered by banks also may be insured by the FDIC and may offer stability of principal. U.S. Treasury securities are guaranteed as to principal and interest by the full faith and credit of the U.S. government. Money market mutual funds may seek to offer a fixed price per share. Distribution and Service Plans The Fund has adopted a Service Plan for Class A Shares and a Distribution and Service Plan for Class B shares of the Fund under Rule 12b-1 of the Investment Company Act, pursuant to which the Fund will reimburse the Distributor for all or a portion of its costs incurred in connection with the distribution and/or servicing of the shares of that class, as described in the Prospectus. Each Plan has been approved by a vote of (i) the Board of Trustees of the Fund, including a majority of the Independent Trustees, cast in person at a meeting called for the purpose of voting on that Plan, and (ii) the holders of a "majority" (as defined in the Investment Company Act) of the shares of each class (for the Distribution and Service Plan for the Class B shares, that vote was cast by the Manager as the then-sole initial holder of Class B shares of the Fund). In addition, under the Plans, the Manager and the Distributor, in their sole discretion, from time to time may use their own resources (which, in the case of the Manager, may include profits from the advisory fee it receives from the Fund) to make payments to brokers, dealers or other financial institutions (each is referred to as a "Recipient" under the Plans) for distribution and administrative services they perform. The Distributor and the Manager may, in their sole discretion, increase or decrease the amount of payments they make to Recipients from their own resources. Unless terminated as described below, each Plan continues in effect from year to year but only as long as such continuance is specifically approved at least annually by the Fund's Board of Trustees and its Independent Trustees by a vote cast in person at a meeting called for the purpose of voting on such continuance. Either Plan may be terminated at any time by the vote of a majority of the Independent Trustees or by the vote of the holders of a "majority" (as defined in the Investment Company Act) of the outstanding shares of that class. Neither Plan may be amended to increase materially the amount of payments to be made unless such amendment is approved by shareholders of the class affected by the amendment. All material amendments must be approved by the Independent Trustees. While the Plans are in effect, the Treasurer of the Trust shall provide separate written reports to the Trust's Board of Trustees at least quarterly on the amount of all payments made pursuant to each Plan, the purpose for which the payment was made and the identity of each Recipient that received any such payment. The report for the Class B Plan shall also include the distribution costs for that quarter, and such costs for previous fiscal periods that are carried forward, as explained in the Prospectus and below. Those reports, including the allocations on which they are based, will be subject to the review and approval of the Independent Trustees in the exercise of their fiduciary duty. Each Plan further provides that while it is in effect, the selection and nomination of those Trustees of the Trust who are not "interested persons" of the Trust is committed to the discretion of the Independent Trustees. This does not prevent the involvement of others in such selection and nomination if the final decision on any such selection or nomination is approved by a majority of the Independent Trustees. Under the Plans, no payment will be made to any Recipient in any quarter if the aggregate net asset value of all Fund shares held by the Recipient for itself and its customers did not exceed a minimum amount, if any, that may be determined from time to time by a majority of the Fund's Independent Trustees. Initially, the Board of Trustees has set the fee at the maximum rate and set no minimum amount. For the fiscal year ended December 31, 1993, payments under the Class A Plan totaled $279,190, all of which was paid by the Distributor to Recipients, including $181,032 paid to MMLISI. Any unreimbursed expenses incurred with respect to Class A shares for any fiscal quarter by the Distributor may not be recovered under the Class A Plan in subsequent fiscal quarters. Payments received by the Distributor under the Plan for Class A shares will not be used to pay any interest expense, carrying charges, or other financial costs, or allocation of overhead by the Distributor. The Class B Plan allows the service fee payment to be paid by the Distributor to Recipients in advance for the first year Class B shares are outstanding, and thereafter on a quarterly basis, as described in the Prospectus. Service fee payments by the Distributor to Recipients will be made (i) in advance for the first year Class B shares are outstanding, following the purchase of shares, in an amount equal to 0.25% of the net asset value of the shares purchased by the Recipient or its customers and (ii) thereafter, on a quarterly basis, computed as of the close of business each day at an annual rate of 0.25% of the average daily net asset value of Class B shares held in accounts of the Recipient or its customers. An exchange of shares does not entitle the Recipient to an advance payment of the service fee. In the event Class B shares are redeemed during the first year such shares are outstanding, the Recipient will be obligated to repay a pro rata portion of the advance of the service fee payment to the Distributor. Although the Class B Plan permits the Distributor to retain both the asset-based sales charges and the service fee on Class B shares, or to pay Recipients the service fee on a quarterly basis, without payment in advance, the Distributor presently intends to pay the service fee to Recipients in the manner described above. A minimum holding period may be established from time to time under the Class B Plan by the Board. Initially, the Board has set no minimum holding period. All payments under the Class B Plan become subject to the limitations imposed by the Rules of Fair Practice of the National Association of Securities Dealers, Inc. on payments of asset-based sales charges and service fees. The Distributor anticipates that it will take a number of years for it to recoup (from the Fund's payments to the Distributor under the Class B Plan and recoveries of the CDSC) the sales commissions paid to authorized brokers or dealers. For the Fiscal period from May 1, 1993 through December 31, 1993, payments under the Class B plan totaled $6,089. Asset-based sales charge payments are designed to permit an investor to purchase shares of the Fund without the assessment of a front- end sales load and at the same time permit the Distributor to compensate brokers and dealers in connection with the sale of Class B shares of the Fund. The Distributor's actual distribution expenses for any given year may exceed the aggregate of payments received pursuant to the Class B Plan and from contingent deferred sales charges, and such expenses will be carried forward and paid in future years. The Fund will be charged only for interest expenses, carrying charges or other financial costs that are directly related to the carry-forward of actual distribution expenses. For example, if the Distributor incurred distribution expenses of $4 million in a given fiscal year, of which $2,000,000 was recovered in the form of contingent deferred sales charges paid by investors and $1,600,000 were reimbursed in the form of payments made by the Fund to the Distributor under the Class B Plan, the balance of $400,000 (plus interest) would be subject to recovery in future fiscal years from such sources. The Class B Plan allows for the carry-forward of distribution expenses, to be recovered from asset-based sales charges in subsequent fiscal periods, as described in the Prospectus. The asset-based sales charge paid to the Distributor by the Fund under the Class B Plan is intended to allow the Distributor to recoup the cost of sales commissions paid to authorized brokers and dealers at the time of sale, plus financing costs, as described in the Prospectus. Such payments may also be used to pay for the following expenses in connection with the distribution of Class B shares: (i) financing the advance of the service fee payment to Recipients under the Class B Plan, (ii) compensation and expenses of personnel employed by the Distributor to support distribution of Class B shares, and (iii) costs of sales literature, advertising and prospectuses (other than those furnished to current shareholders) and state "blue sky" registration fees. About Your Account How To Buy Shares Alternative Sales Arrangements - Class A and Class B Shares. The Alternative Sales Arrangements permit an investor to choose the method of purchasing shares that is more beneficial to the investor depending on the amount of the purchase, the length of time the investor expects to hold shares and other relevant circumstances. Investors should understand that the purpose and function of the deferred sales charge and asset-based sales charge with respect to Class B shares are the same as those of the initial sales charge with respect to Class A shares. Any salesperson or other person entitled to receive compensation for selling Fund shares may receive different compensation with respect to one class of shares than the other. The Distributor will not accept any order for $1 million or more of Class B shares on behalf of a single investor (not including dealer "street name" or omnibus accounts) because generally it will be more advantageous for that investor to purchase Class A shares of the Fund instead. The two classes of shares each represent an interest in the same portfolio investments of the Fund. However, each class has different shareholder privileges and features. The net income attributable to Class B shares and the dividends payable on Class B shares will be reduced by incremental expenses borne solely by that class, including the asset-based sales charge to which Class B shares are subject. The conversion of Matured Class B shares to Class A shares is subject to the continuing availability of a private letter ruling from the Internal Revenue Service, or an opinion of counsel or tax adviser, to the effect that the conversion of Matured Class B shares does not constitute a taxable event for the holder under Federal income tax law. If such a revenue ruling or opinion is no longer available, the automatic conversion feature may be suspended, in which event no further conversions of Matured Class B shares would occur while such suspension remained in effect. Although Matured Class B shares could then be exchanged for Class A shares on the basis of relative net asset value of the two classes, without the imposition of a sales charge or fee, such exchange could constitute a taxable event for the holder, and absent such exchange, Class B shares might continue to be subject to the asset-based sales charge for longer than six years. The methodology for calculating the net asset value, dividends and distributions of the Fund's Class A and Class B shares recognizes two types of expenses. General expenses that do not pertain specifically to either class are allocated pro rata to the shares of each class, based on the percentage of the net assets of such class to the Fund's total net assets, and then equally to each outstanding share within a given class. Such general expenses include (i) management fees, (ii) legal, bookkeeping and audit fees, (iii) printing and mailing costs of shareholder reports, Prospectuses, Additional Statements and other materials for current shareholders, (iv) fees to unaffiliated Trustees, (v) custodian expenses, (vi) share issuance costs, (vii) organization and start-up costs, (viii) interest, taxes and brokerage commissions, and (ix) non-recurring expenses, such as litigation costs. Other expenses that are directly attributable to a class are allocated equally to each outstanding share within that class. Such expenses include (i) Distribution and Service Plan fees, (ii) incremental transfer and shareholder servicing agent fees and expenses, (iii) registration fees and (iv) shareholder meeting expenses, to the extent that such expenses pertain to a specific class rather than to the Fund as a whole. Determination of Net Asset Value Per Share. The net asset values per share of Class A and Class B shares of the Fund are determined as of 4:00 P.M. New York time each day the New York Stock Exchange (the "NYSE") is open by dividing the value of the Fund's net assets attributable to that class by the number of shares of that class outstanding. The NYSE's most recent annual holiday schedule (which is subject to change) states that it will close on New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day; it may also close on other days. Trading may occur in debt securities and in foreign securities at times when the NYSE is closed (including weekends and holidays, or after 4:00 P.M. on a regular business day). Because the net asset values of the Fund will not be calculated at such times, if securities held in the Fund's portfolio are traded at such times, the net asset values per share of Class A and Class B shares of the Fund may be significantly affected on such days when shareholders do not have the ability to purchase or redeem shares. The Trust's Board of Trustees has established procedures for the valuation of the Fund's securities, generally as follows: (i) equity securities traded on a securities exchange or on NASDAQ are valued at the last reported sale prices on their primary exchange or NASDAQ that day (or, in the absence of sales that day, at values based on the last sale prices of the preceding trading day or closing bid and asked prices); (ii) NASDAQ and other unlisted equity securities for which last sales prices are not regularly reported but for which over-the-counter market quotations are readily available are valued at the highest closing bid price at the time of valuation, or if no closing bid price is reported, on the basis of a closing bid price obtained from a dealer who maintains an active market in that security; (iii) securities (including restricted securities) not having readily available market quotations are valued at fair value under the Board's procedures; (iv) unlisted debt securities having a remaining maturity in excess of 60 days are valued at the mean between the asked and bid prices determined by a portfolio pricing service approved by the Trust's Board of Trustees or obtained from an active market maker on the basis of reasonable inquiry; (v) short-term debt securities having a remaining maturity of 60 days or less are valued at cost, adjusted for amortization of premiums and accretion of discounts; and (vi) securities traded on foreign exchanges or in foreign over-the- counter markets are valued as determined by a portfolio pricing service, approved by the Board, based on last sales prices reported on a principal exchange or the mean between closing bid and asked prices and reflect prevailing rates of exchange taken from the closing price on the London foreign exchange market that day. Foreign currency will be valued as close to the time fixed for the valuation date as is reasonably practicable. The value of securities denominated in foreign currency will be converted to U.S. dollars at the prevailing rates of exchange at the time of valuation. Trading in securities on European and Asian exchanges and over- the-counter markets is normally completed before the close of the NYSE. Events affecting the values of foreign securities traded in such markets that occur between the time their prices are determined and the close of the NYSE will not be reflected in the Fund's calculation of net asset value unless the Board of Trustees, the Manager or the Sub-Adviser, under procedures established by the Board of Trustees, determines that the particular event would materially affect the Fund's net asset value, in which case an adjustment would be made. In the case of U.S. Government Securities, mortgage-backed securities, foreign government securities and corporate bonds, when last sale information is not generally available, such pricing procedures may include "matrix" comparisons to the prices for comparable instruments on the basis of quality, yield, maturity, and other special factors involved. The Trust's Board of Trustees has authorized the Manager and/or the Sub- Adviser to employ a pricing service to price U.S. Government Securities, mortgage-backed securities, foreign government securities and corporate bonds. The Trustees will monitor the accuracy of such pricing services by comparing prices used for portfolio evaluation to actual sales prices of selected securities. Calls, puts and Futures are valued at the last sale prices on the principal exchanges or on the NASDAQ National Market on which they are traded, or, if there are no sales that day, in accordance with (i) above. Forward currency contracts are valued at the closing price on the London foreign exchange market. When the Fund writes an option, an amount equal to the premium received by the Fund is included in its Statement of Assets and Liabilities as an asset, and an equivalent deferred credit is included in the liability section. The deferred credit is adjusted ("marked-to- market") to reflect the current market value of the option. AccountLink. When shares are purchased through AccountLink, each purchase must be at least $25.00. Shares will be purchased on the regular business day the Distributor is instructed to initiate the Automated Clearing House transfer to buy the shares. Dividends will begin to accrue on such shares on the day the Fund receives Federal Funds for such purchase through the ACH system before 4:00 P.M., which is normally 3 days after the ACH transfer is initiated. The Distributor and the Fund are not responsible for any delays. If the Federal Funds are received after 4:00 P.M., dividends will begin to accrue on the next regular business day after such Federal Funds are received. Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge rate may be obtained for Class A shares under Right of Accumulation and Letters of Intent because of the economies of sales efforts and reduction in expenses realized by the Distributor, dealers and brokers making such sales. No sales charge is imposed in certain other circumstances described in the Prospectus because the Distributor incurs little or no selling expenses. The term "immediate family" refers to one's spouse, children, grandchildren, grandparents, parents, parents-in- law, brothers and sisters, sons- and daughters-in-law, a sibling's spouse and a spouse's siblings. - The OppenheimerFunds. The OppenheimerFunds are those mutual funds for which the Distributor acts as the distributor or the sub- distributor and include the following: Oppenheimer Tax-Free Bond Fund Oppenheimer New York Tax-Exempt Fund Oppenheimer California Tax-Exempt Fund Oppenheimer Intermediate Tax-Exempt Bond Fund Oppenheimer Insured Tax-Exempt Bond Fund Oppenheimer Main Street California Tax-Exempt Fund Oppenheimer Florida Tax-Exempt Fund Oppenheimer Pennsylvania Tax-Exempt Fund Oppenheimer New Jersey Tax-Exempt Fund Oppenheimer Fund Oppenheimer Discovery Fund Oppenheimer Time Fund Oppenheimer Target Fund Oppenheimer Special Fund Oppenheimer Equity Income Fund Oppenheimer Value Stock Fund Oppenheimer Asset Allocation Fund Oppenheimer Total Return Fund, Inc. Oppenheimer Main Street Income & Growth Fund Oppenheimer High Yield Fund Oppenheimer Champion High Yield Fund Oppenheimer Investment Grade Bond Fund Oppenheimer U.S. Government Trust Oppenheimer Limited-Term Government Fund Oppenheimer Mortgage Income Fund Oppenheimer Global Fund Oppenheimer Global Bio-Tech Fund Oppenheimer Global Environment Fund Oppenheimer Global Growth & Income Fund Oppenheimer Gold & Special Minerals Fund Oppenheimer Strategic Income Fund Oppenheimer Strategic Investment Grade Bond Fund Oppenheimer Strategic Short-Term Income Fund Oppenheimer Strategic Income & Growth Fund Oppenheimer Strategic Diversified Income Fund the following "Money Market Funds": Oppenheimer Money Market Fund, Inc. Oppenheimer Cash Reserves Oppenheimer Tax-Exempt Cash Reserves Centennial Money Market Trust Centennial Tax Exempt Trust Centennial Government Trust Centennial New York Tax Exempt Trust Centennial California Tax Exempt Trust Centennial America Fund, L.P. Daily Cash Accumulation Fund, Inc. There is an initial sales charge on the purchase of Class A shares of each of the OppenheimerFunds except Money Market Funds (under certain circumstances described herein, redemption proceeds of Money Market Fund shares may be subject to a contingent deferred sales charge). - Letters of Intent. A Letter of Intent ("Letter") is the investor's statement of intention to purchase Class A shares of the Fund (and other eligible OppenheimerFunds) sold with a front-end sales charge during the 13-month period from the investor's first purchase pursuant to the Letter (the "Letter of Intent period"), which may, at the investor's request, include purchases made up to 90 days prior to the date of the Letter. The Letter states the investor's intention to make the aggregate amount of purchases (excluding any purchases made by reinvestments of dividends or distributions or purchases made at net asset value without sales charge), which together with the investor's holdings of such funds (calculated at their respective public offering prices calculated on the date of the Letter) will equal or exceed the amount specified in the Letter to obtain the reduced sales charge rate (as set forth in the Prospectus) applicable to purchases of shares in that amount (the "intended amount"). Each purchase under the Letter will be made at the public offering price applicable to a single lump-sum purchase of shares in the intended amount, as described in the Prospectus. In submitting a Letter, the investor makes no commitment to purchase shares, but if the investor's purchases of shares within the Letter of Intent period, when added to the value (at offering price) of the investor's holdings of shares on the last day of that period, do not equal or exceed the intended amount, the investor agrees to pay the additional amount of sales charge applicable to such purchases, as set forth in "Terms of Escrow," below (as those terms may be amended from time to time). The investor agrees that shares equal in value to 5% of the intended amount will be held in escrow by the Transfer Agent subject to the Terms of Escrow. Also, the investor agrees to be bound by the terms of the Prospectus, this Statement of Additional Information and the Application used for such Letter of Intent, and if such terms are amended, as they may be from time to time by the Fund, that those amendments will apply automatically to existing Letters of Intent. If the total eligible purchases made during the Letter of Intent period do not equal or exceed the intended 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 amount and exceed the amount needed to qualify for the next sales charge rate reduction set forth in the applicable prospectus, the sales charges paid will be adjusted to the lower rate, but only if and when the dealer returns to the Distributor the excess of the amount of commissions allowed or paid to the dealer over the amount of commissions that apply to the actual amount of purchases. The excess commissions returned to the Distributor will be used to purchase additional shares for the investor's account at the net asset value per share in effect on the date of such purchase, promptly after the Distributor's receipt thereof. In determining the total amount of purchases made under a Letter, shares redeemed by the investor prior to the termination of the Letter of Intent period will be deducted. It is the responsibility of the dealer of record and/or the investor to advise the Distributor about the Letter in placing any purchase orders for the investor during the Letter of Intent period. All of such purchases must be made through the Distributor. - Terms of Escrow that Apply to Letters of Intent. 1. Out of the initial purchase (or subsequent purchases if necessary) made pursuant to a Letter, shares of the Fund equal in value to 5% of the intended amount specified in the Letter shall be held in escrow by the Transfer Agent. For example, if the intended amount specified under the Letter 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 amount specified in the Letter, the investor must remit to the Distributor an amount equal to the difference between the dollar amount of sales charges actually paid and the amount of sales charges which would have been paid if the total amount purchased had been made at a single time. Such sales charge adjustment will apply to any shares redeemed prior to the completion of the Letter. If such difference in sales charges is not paid within twenty days after a request from the Distributor or the dealer, the Distributor will, within sixty days of the expiration of the Letter, redeem the number of escrowed shares necessary to realize such difference in sales charges. Full and fractional shares remaining after such redemption will be released from escrow. If a request is received to redeem escrowed shares prior to the payment of such additional sales charge, the sales charge will be withheld from the redemption proceeds. 4. By signing the Letter, the investor irrevocably constitutes and appoints the Transfer Agent as attorney-in-fact to surrender for redemption any or all escrowed shares. 5. The shares eligible for purchase under the Letter (or the holding of which may be counted toward completion of the Letter) do not include any shares sold without a front-end sales charge or shares subject to a Class A contingent deferred sales charge unless (for the purpose of determining completion of the obligation to purchase shares under the Letter) the shares were acquired in exchange for shares of one of the OppenheimerFunds whose shares were acquired by payment of a sales charge. 6. Shares held in escrow hereunder will automatically be exchanged for shares of another fund to which an exchange is requested, as described in the section of the Prospectus entitled "How to Exchange Shares," and the escrow will be transferred to that other fund. Asset Builder Plans. To establish an Asset Builder Plan from a bank account, a check (minimum $25) for the initial purchase must accompany the application. Shares purchased by Asset Builder Plan payments from bank accounts are subject to the redemption restrictions for recent purchases described in "How To Sell Shares," in the Prospectus. Asset Builder Plans also enable shareholders of Oppenheimer Tax-Exempt Cash Reserves or Oppenheimer Cash Reserves to use those accounts for monthly automatic purchases of shares of up to four other Eligible Funds. There is a sales charge on the purchase of certain Eligible Funds. An application should be obtained from the Transfer Agent, completed and returned, and a prospectus of the selected fund(s) (available from the Distributor) should be obtained before initiating Asset Builder payments. The amount of the Asset Builder investment may be changed or the automatic investments may be terminated at any time by writing to the Transfer Agent. A reasonable period (approximately 15 days) is required after the Transfer Agent's receipt of such instructions to implement them. The Fund reserves the right to amend, suspend, or discontinue offering such plans at any time without prior notice. Cancellation of Purchase Orders. Cancellation of purchase orders for the Fund's shares (for example, when a purchase check is returned to the Fund unpaid) causes a loss to be incurred when the net asset value of the Fund's shares on the cancellation date is less than on the purchase date. That loss is equal to the amount of the decline in the net asset value per share multiplied by the number of shares in the purchase order. The investor is responsible for that loss. If the investor fails to compensate the Fund for the loss, the Distributor will do so. The Fund may reimburse the Distributor for that amount by redeeming shares from any account registered in that investor's name, or the Fund or the Distributor may seek other redress. Checkwriting. When a check is presented to the Bank for clearance, the Bank will ask the Fund to redeem a sufficient number of full and fractional shares in the shareholder's account to cover the amount of the check. This enables the shareholder to continue receiving dividends on those shares until the check is presented to the Fund. Checks may not be presented for payment at the offices of the Bank or the Fund's Custodian. This limitation does not affect the use of checks for the payment of bills or to obtain cash at other banks. The Fund reserves the right to amend, suspend or discontinue offering checkwriting privileges at any time without prior notice. How to Sell Shares Information on how to sell shares of the Fund is stated in the Prospectus. The information below supplements the terms and conditions for redemptions set forth in the Prospectus. - Payments "In Kind". The Prospectus states that payment for shares tendered for redemption is ordinarily made in cash. However, if the Board of Trustees of the Trust determines 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, the Fund may pay the redemption proceeds in whole or in part by a distribution "in kind" of securities from the portfolio of the Fund, in lieu of cash, in conformity with applicable rules of the Securities and Exchange Commission. The Fund has elected to be governed by Rule 18f-1 under the Investment Company Act, pursuant to which the Fund is obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of the net assets of the Fund during any 90-day period for any one shareholder. If shares are redeemed in kind, the redeeming shareholder might incur brokerage or other costs in selling the securities for cash. The method of valuing securities used to make redemptions in kind will be the same as the method the Fund uses to value it portfolio securities described above under "Determination of Net Asset Value Per Share" and such valuation will be made as of the time the redemption price is determined. - Involuntary Redemptions. The Trust's Board of Trustees has the right to cause the involuntary redemption of the shares held in any account if the aggregate net asset value of such shares is less than $1,000 or such lesser amount as the Board may fix. The Board of Trustees will not cause the involuntary redemption of shares in an account if the aggregate net asset value of such shares has fallen below the stated minimum solely as a result of market fluctuations. Should the Board elect to exercise this right, it may also fix, in accordance with the Investment Company Act, the requirements for any notice to be given to the shareholders in question (not less than 30 days), or may set requirements for permission to increase the investment, and other terms and conditions so that the shares would not be involuntarily redeemed. Reinvestment Privilege. Within six months of a redemption, a shareholder may reinvest all or part of the redemption proceeds of (i) Class A shares, or (ii) Class B shares that were subject to the Class B contingent deferred sales charge when redeemed, in Class A shares of the Fund or any of the other OppenheimerFunds into which shares of the Fund are exchangeable as described below, at the net asset value next computed after receipt by the Transfer Agent of the reinvestment order. The shareholder must ask the Distributor for such privilege at the time of reinvestment. Any capital gain that was realized when the shares were redeemed is taxable, and reinvestment will not alter any capital gains tax payable on that gain. If there has been a capital loss on the redemption, some or all of the loss may not be tax deductible, depending on the timing and amount of the reinvestment. However, in that case the sales charge would be added to the basis of the shares acquired by the reinvestment of the redemption proceeds. 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 OppenheimerFunds 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. 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. Transfer of Shares. Shares are not subject to the payment of a contingent deferred sales charge of either class at the time of transfer to the name of another person or entity (whether the transfer occurs by absolute assignment, gift or bequest, not involving, directly or indirectly, a public sale). The transferred shares will remain subject to the contingent deferred sales charge, calculated as if the transferee shareholder had acquired the transferred shares in the same manner and at the same time as the transferring shareholder. If less than all shares held in an account are transferred, and some but not all shares in the account would be subject to a contingent deferred sales charge if redeemed at the time of transfer, the priorities described in the Prospectus under "How to Buy Shares" for the imposition of the Class B contingent deferred sales charge will be followed in determining the order in which shares are transferred. Distributions From Retirement Plans. Requests for distributions from OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, 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. The request must: (i) state the reason for the distribution; (ii) state the owner's awareness of tax penalties if the distribution is premature; and (iii) conform to the requirements of the plan and the Fund's other redemption requirements. Participants (other than self-employed persons) in OppenheimerFunds-sponsored pension or profit-sharing plans may not directly request redemption of their accounts. The employer or plan administrator must sign the request. Distributions from pension and profit sharing plans are subject to special requirements under the Internal Revenue Code and certain documents (available from the Transfer Agent) must be completed before the distribution may be made. Distributions from retirement plans are subject to withholding requirements under the Internal Revenue Code, and IRS Form W-4P (available from the Transfer Agent) must be submitted to the Transfer Agent with the distribution request, or the distribution may be delayed. Unless the shareholder has provided the Transfer Agent with a certified tax identification number, the Internal Revenue Code requires that tax be withheld from any distribution even if the shareholder elects not to have tax withheld. The Fund, the Manager, the Distributor, the Trustee and the Transfer Agent assume no responsibility to determine whether a distribution satisfies the conditions of applicable tax laws and will not be responsible for any tax penalties assessed in connection with a distribution. Special Arrangements for Repurchase of Shares from Dealers and Brokers. The Distributor is the Fund's agent to repurchase its shares from authorized dealers or brokers. The repurchase price will be the net asset value next computed after the receipt of an order placed by such dealer or broker, except that orders received from dealers or brokers after 4:00 P.M. on a regular business day will be processed at that day's net asset value if such orders were received by the dealer or broker from its customers prior to 4:00 P.M., and were transmitted to and received by the Distributor prior to its close of business that day (normally 5:00 P.M.). Payment ordinarily will be made within seven days after the Distributor's receipt of the required documents, with signature(s) guaranteed as described above. Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund valued at $5,000 or more can authorize the Transfer Agent to redeem shares (minimum $50) automatically on a monthly, quarterly, semi-annual or annual basis under an Automatic Withdrawal Plan. Shares will be redeemed three business days prior to the date requested by the shareholder for receipt of the payment. Automatic withdrawals of up to $1,500 per month may be requested by telephone if payments are by check payable to all shareholders of record and sent to the address of record for the account (and if the address has not been changed within the prior 30 days). Required minimum distributions from OppenheimerFunds-sponsored retirement plans may not be arranged on this basis. Payments are normally made by check, but shareholders having AccountLink privileges (see "How To Buy Shares") may arrange to have Automatic Withdrawal Plan payments transferred to the bank account designated on the OppenheimerFunds New Account Application or signature-guaranteed instructions. The Fund cannot guarantee receipt of the payment on the date requested and reserves the right to amend, suspend or discontinue offering such plans at any time without prior notice. Because of the sales charge assessed on Class A share purchases, shareholders should not make regular additional Class A purchases while participating in an Automatic Withdrawal Plan. Class B shareholders should not establish withdrawal plans, because of the imposition of the Class B CDSC on such withdrawals (except where the Class B CDSC is waived as described in "Class B Contingent Deferred Sales Charge"). By requesting an Automatic Withdrawal or Exchange Plan, the shareholder agrees to the terms and conditions applicable to such plans, as stated below and in the provisions of the OppenheimerFunds Application relating to such Plans, as well as the Prospectus. These provisions may be amended from time to time by the Fund and/or the Distributor. When adopted, such amendments will automatically apply to existing Plans. - Automatic Exchange Plans. Shareholders can authorize the Transfer Agent (on the OppenheimerFunds Application or signature- guaranteed instructions) to exchange a pre-determined amount of shares of the Fund for shares (of the same class) of other OppenheimerFunds automatically on a monthly, quarterly, semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount that may be exchanged to each other fund account is $25. Exchanges made under these plans are subject to the restrictions that apply to exchanges as set forth in "Exchange Privilege" in the Prospectus and "How to Exchange Shares" below in this Statement of Additional Information. - Automatic Withdrawal Plans. Fund shares will be redeemed as necessary to meet withdrawal payments. Shares acquired without a sales charge will be redeemed first and thereafter 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 such plans should not be considered as a yield or income on your investment. It may not be desirable to purchases additional Class A shares while making automatic withdrawals because of the sales charges that apply to purchases when made. Accordingly, a shareholder normally should not maintain an Automatic Withdrawal Plan while simultaneously making regular purchases of Class A shares. The transfer agent will administer the investor's Automatic Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder") who executed the Plan authorization and application submitted to the Transfer Agent. The Transfer Agent shall incur no liability to the Planholder for any action taken or omitted by the Transfer Agent in good faith to administer the Plan. Certificates will not be issued for shares of the Fund purchased for and held under the Plan, but the Transfer Agent will credit all such shares to the account of the Planholder on the records of the Fund. Any share certificates held by a Planholder may be surrendered unendorsed to the Transfer Agent with the Plan application so that the shares represented by the certificate may be held under the Plan. For accounts subject to Automatic Withdrawal Plans, distributions of capital gains must be reinvested in shares of the Fund, which will be done at net asset value without a sales charge. Dividends on shares held in the account may be paid in cash or reinvested. Redemptions of shares needed to make withdrawal payments will be made at the net asset value per share determined on the redemption date. Checks or AccountLink payments of the proceeds of Plan withdrawals will normally be transmitted three business days prior to the date selected for receipt of the payment (the date selected for receipt is an approximate date), according to the choice specified in writing by the Planholder. The amount and the interval of disbursement payments and the address to which checks are to be mailed or AccountLink payments are to be sent may be changed at any time by the Planholder by writing to the Transfer Agent. A signature guarantee may be required. The Planholder should allow at least two weeks' time in mailing such notification for the requested change to be put in effect. The Planholder may, at any time, instruct the Transfer Agent by written notice (in proper form in accordance with the requirements of the then-current Prospectus of the Fund) to redeem all, or any part of, the shares held under the Plan. In that case, the Transfer Agent will redeem the number of shares requested at the net asset value per share in effect in accordance with the Fund's usual redemption procedures and will mail a check for the proceeds to the Planholder. The Plan may be terminated at any time by the Planholder by writing to the Transfer Agent. A Plan may also be terminated at any time by the Transfer Agent upon receiving directions to that effect from the Fund. The Transfer Agent will also terminate a Plan upon receipt of evidence satisfactory to it of the death or legal incapacity of the Planholder. Upon termination of a Plan by the Transfer Agent or the Fund, shares that have not been redeemed from the account will be held in uncertificated form in the name of the Planholder, and the account will continue as a dividend-reinvestment, uncertificated account unless and until proper instructions are received from the Planholder or his or her executor or guardian, or other authorized person. To use shares held under the Plan as collateral for a debt, the Planholder may request issuance of a portion of the shares in certificated form. Upon written request from the Planholder, the Transfer Agent will determine the number of shares for which a certificate may be issued without causing the withdrawal checks to stop because of exhaustion of uncertificated shares needed to continue payments. However, should such uncertificated shares become exhausted, Plan withdrawals will terminate. If the Transfer Agent ceases to act as transfer agent for the Fund, the Planholder will be deemed to have appointed any successor transfer agent to act as agent in administering the Plan. How to Exchange Shares As stated in the Prospectus, shares of a particular class of OppenheimerFunds having more than one class of shares may be exchanged only for shares of the same class of other OppenheimerFunds. All of the OppenheimerFunds offer Class A shares, but only the following other OppenheimerFunds offer Class B shares: Oppenheimer Strategic Income Fund Oppenheimer Strategic Income & Growth Fund Oppenheimer Strategic Investment Grade Bond Fund Oppenheimer Strategic Short-Term Income Fund Oppenheimer New York Tax-Exempt Fund Oppenheimer Tax-Free Bond Fund Oppenheimer California Tax-Exempt Fund Oppenheimer Pennsylvania Tax-Exempt Fund Oppenheimer Florida Tax-Exempt Fund Oppenheimer New Jersey Tax-Exempt Fund Oppenheimer Insured Tax-Exempt Bond Fund Oppenheimer Main Street California Tax-Exempt Fund Oppenheimer Total Return Fund, Inc. Oppenheimer Value Stock Fund Oppenheimer Limited-Term Government Fund Oppenheimer High Yield Fund Oppenheimer Mortgage Income Fund Oppenheimer Cash Reserves (Class B shares are only available by exchange) Oppenheimer Special Fund Oppenheimer Equity Income Fund Oppenheimer Global Fund Oppenheimer Discovery Fund Class A shares of OppenheimerFunds may be exchanged for shares of any Money Market Fund; shares of any Money Market Fund purchased without a sales charge may be exchanged for shares of OppenheimerFunds offered with a sales charge upon payment of the sales charge (or, if applicable, may be used to purchase shares of OppenheimerFunds subject to a CDSC); and shares of this Fund acquired by reinvestment of dividends or distributions from any other of the OppenheimerFunds or from any unit investment trust for which reinvestment arrangements have been made with the Distributor may be exchanged at net asset value for shares of any of the OppenheimerFunds. No CDSC is imposed on exchanges of shares of either class purchased subject to a CDSC. However, when Class A shares acquired by exchange of Class A shares purchased subject to a Class A CDSC are redeemed within 18 months of the end of the calendar month of the initial purchase of the exchanged Class A shares, the Class A CDSC is imposed on the redeemed shares (see "Class A Contingent Deferred Sales Charge" in the Prospectus), and the Class B CDSC is imposed on Class B shares redeemed within six years of the initial purchase of the exchanged Class B shares. The Fund reserves the right to reject telephone or written exchange requests submitted in bulk by anyone on behalf of 10 or more accounts. The Fund may accept requests for exchanges of up to 50 accounts per day from representatives of authorized dealers that qualify for this privilege. In connection with any exchange request, the number of shares exchanged may be less than the number requested if the exchange or the number requested would include shares subject to a restriction cited in the Prospectus or this Statement of Additional Information or shares covered by a share certificate that is not tendered with the request. In those cases, only the shares available for exchange without restriction will be exchanged. When Class B 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 contingent deferred sales charge will be followed in determining the order in which the shares are exchanged. Shareholders should take into account the effect of any exchange on the applicability and rate of any contingent deferred sales charge that might be imposed in the subsequent redemption of remaining shares. Shareholders owning shares of both classes must specify whether they intend to exchange Class A or Class B shares. When exchanging shares by telephone, the shareholder must either have an existing account in the fund to which the exchange is to be made. For full or partial exchanges of an account made by telephone, any special account features such as Asset Builder Plans, Automatic Withdrawal Plans and retirement plan contributions will be switched to the new account unless the Transfer Agent is instructed otherwise. If all telephone lines are busy (which might occur, for example, during periods of substantial market fluctuations), shareholders might not be able to request exchanges by telephone and would have to submit written exchange requests. Shares to be exchanged are redeemed on the regular business day the Transfer Agent receives an exchange request in proper form (the "Redemption Date"). Normally, shares of the fund to be acquired are purchased on the Redemption Date, but such purchases may be delayed by either fund up to five business days if it determines that it would be disadvantaged by an immediate transfer of the redemption proceeds. The Fund reserves the right, in its discretion, to refuse any exchange request that may disadvantage it (for example, if the receipt of multiple exchange request from a dealer might require the disposition of portfolio securities at a time or at a price that might be disadvantageous to the Fund). The different OppenheimerFunds available for exchange have different investment objectives, policies and risks, and a shareholder should assure that the Fund selected is appropriate for his or her investment and should be aware of the tax consequences of an exchange. For federal 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 transaction. Dividends, Capital Gains and Taxes Dividends and Distributions. Dividends will be payable on shares held of record at the time of the previous determination of net asset value, or as otherwise described in "How to Buy Shares." Daily dividends on newly purchased shares will not be declared or paid until such time as Federal Funds (funds credited to a member bank's account at the Federal Reserve Bank) are available from the purchase payment for such shares. Normally, purchase checks received from investors are converted to Federal Funds on the next business day. Dividends will be declared on shares repurchased by a dealer or broker for four business days following the trade date (i.e., to and including the day prior to settlement of the repurchase). If all shares in an account are redeemed, all dividends accrued on shares of the same class in the account will be paid together with the redemption proceeds. Dividends, distributions and the proceeds of the redemption of Fund shares represented by checks returned to the Transfer Agent by the Postal Service as undeliverable will be invested in shares of Oppenheimer Money Market Fund, Inc., as promptly as possible after the return of such checks to the Transfer Agent, to enable the investor to earn a return on otherwise idle funds. Tax Status of the Fund's Dividends and Distributions. The Federal tax treatment of the Fund's dividends and capital gains distributions is explained in the Prospectus under the caption "Dividends, Capital Gains and Taxes." Special provisions of the Internal Revenue Code govern the eligibility of the Fund's dividends for the dividends-received deduction for corporate shareholders. Long-term capital gains distributions are not eligible for the deduction. In addition, the amount of dividends paid by the Fund which may qualify for the deduction is limited to the aggregate amount of qualifying dividends which the Fund derives from its portfolio investments that the Fund has held for a minimum period, usually 46 days. A corporate shareholder will not be eligible for the deduction on dividends paid on shares held for 45 days or less. To the extent the Fund's dividends are derived from its gross income from option premiums, interest income or short-term gains from the sale of securities, or dividends from foreign corporations, its dividends will not qualify for the deduction. It is expected that for the most part the Fund's dividends will not qualify, because of the nature of the investments held by the Fund in its portfolio. The amount of a class's distributions may vary from time to time depending on market conditions, the composition of the Fund's portfolio, and expenses borne by the Fund or borne separately by a class, as described in "Alternative Sales Arrangements -- Class A and Class B," above. Dividends are calculated in the same manner, at the same time and on the same day for shares of each class. However, dividends on Class B shares are expected to be lower as a result of the asset-based sales charge on Class B shares, and Class B dividends will also differ in amount as a consequence of any difference in net asset value between Class A and Class B shares. Distributions may be made annually in December out of any net short-term or long-term capital gains realized from the sale of securities, premiums from expired calls written by the Fund and net profits from Hedging Instruments and closing purchase transactions realized in the twelve months ending on October 31 of the current year. Any difference between the net asset value of Class A and Class B shares will be reflected in such distributions. Distributions from net short- term capital gains are taxable to shareholders as ordinary income and when paid by the Fund are considered "dividends." The Fund may make a supplemental distribution of capital gains and ordinary income following the end of its fiscal year. Any long-term capital gains distributions will be identified separately when paid and when tax information is distributed by the Fund. If prior distributions must be re-characterized at the end of the fiscal year as a result of the effect of the Fund's investment policies, shareholders may have a non-taxable return of capital, which will be identified in notices to shareholders. There is no fixed dividend rate and there can be no assurance as to the payment of any dividends or the realization of any capital gains. 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 and intends to qualify in future years, but reserves the right not to qualify. The Internal Revenue Code contains a number of complex tests to determine whether the Fund will qualify, and the Fund might not meet those tests in a particular year. For example, if the Fund derives 30% or more of its gross income from the sale of securities held less than three months, it may fail to qualify (see "Tax Aspects of Covered Calls and Hedging Instruments," above). If it does not qualify, the Fund will be treated for tax purposes as an ordinary corporation and will receive no tax deduction for payments of dividends and distributions made to shareholders. Under the Internal Revenue Code, by December 31 each year the Fund must distribute 98% of its taxable investment income earned from January 1 through December 31 of that year and 98% of its capital gains realized in the period from November 1 of the prior year through October 31 of the current year, or else the Fund must pay an excise tax on the amounts not distributed. While it is presently anticipated that the Fund will meet those requirements, the Fund's Board and the Manager might determine in a particular year that it would be in the best interest of shareholders for the Fund not to make such distributions at the required levels and to pay the excise tax on the undistributed amounts. That would reduce the amount of income or capital gains available for distribution to shareholders. The Internal Revenue Code requires that a holder (such as the Fund) of a zero coupon security accrue as income each year a portion of the discount at which the security was purchased even though the Fund receives no interest payment in cash on the security during the year. As an investment company, the Fund must pay out substantially all of its net investment income each year or be subject to excise taxes, as described above. Accordingly, when the Fund holds zero coupon securities, it may be required to pay out as an income distribution each year an amount which is greater than the total amount of cash interest the Fund actually received during that year. Such distributions will be made from the cash assets of the Fund or by liquidation of portfolio securities, if necessary. The Fund may realize a gain or loss from such sales. In the event the Fund realizes net capital gains from such transactions, its shareholders may receive a larger capital gain distribution than they would have had in the absence of such transactions. Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to reinvest all dividends and/or capital gains distributions in shares of the same class of any of the other OppenheimerFunds listed in "Reduced Sales Charges" above at net asset value without sales charge. Class B shareholders should be aware that as of the date of this Statement of Additional Information, not all OppenheimerFunds offer Class B shares. The names of funds that do offer Class B shares can be obtained by referring to "How to Exchange Shares," above or by calling the Distributor at 1-800-525-7048. To elect this option, the shareholder must notify the Transfer Agent in writing and either have an existing account in the fund selected for reinvestment or must obtain a prospectus for that fund and an application from the Distributor to establish an account. The investment will be made at the net asset value per share in effect at the close of business on the payable date of the dividend or distribution. Dividends and/or distributions from certain of the OppenheimerFunds may be invested in shares of this Fund on the same basis. Additional Information About The Fund The Custodian. The Bank of New York is the Custodian of the Fund's assets. The Custodian's responsibilities include safeguarding and controlling the Fund's portfolio securities, collecting income on the portfolio securities and handling the delivery of such securities to and from the Fund. The Manager has represented to the Fund that the banking relationships between the Manager and the Custodian have been and will continue to be unrelated to and unaffected by the relationship between the Fund and the Custodian. It will be the practice of the Fund to deal with the Custodian in a manner uninfluenced by any banking relationship the Custodian may have with the Manager and its affiliates. Independent Auditors. The independent auditors of the Fund audit the Fund's financial statements and perform other related audit services. They also act as auditors for certain other funds advised by the Manager and its affiliates. Description of Securities Ratings Description of Standard & Poor's Corporation ("Standard & Poor's") and Moody's Investors Service, Inc. ("Moody's") commercial paper, bond and municipal securities ratings: Commercial Paper Ratings Standard & Poor's commercial paper ratings are graded into four categories, ranging from "A" for the highest quality obligations to "D" for the lowest. The "A-l" and "A-2" categories are described as follows: "A" - Issues assigned this highest rating are regarded as having the greatest capacity for timely payment. Issues in this category are further refined with the designations 1, 2, and 3 to indicate the relative degree of safety. "A-l" - This designation indicates that the degree of safety regarding timely payment is either overwhelming or very strong. Those issues determined to possess overwhelming safety characteristics will be noted with a plus (+) sign designation. "A-2" - Capacity for timely payment on issues with this designation is strong. However, the relative degree of safety is not as high as for issues designated "A-l." Moody's employs three designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers. The two highest designations are as follows: Issuers (or supporting institutions) rated Prime-1 (or P-1) have a superior ability for repayment of senior short-term debt obligations. Prime-1 repayment ability will normally be evidenced by many of the following characteristics: - Leading market positions in well-established industries. - High rates of return on funds employed. - Conservative capitalization structure with moderate reliance on debt and ample asset protection. - Broad margins in earnings coverage of fixed financial charges and high internal cash generation. - Well-established access to a range of financial markets and assured sources of alternate liquidity. Issuers (or supporting institutions) rated Prime-2 (or P-2) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. S&P's ratings for Municipal Notes due in three years or less are: SP-1: Very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus (+) designation. SP-2: Satisfactory capacity to pay principal and interest. Bond Ratings Standard & Poor's describes its four highest ratings for corporate debt as follows: AAA: Debt rated "AAA" has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. AA: Debt rated "AA" has a very strong capacity to pay interest and repay principal and differ from the higher rated issues only in a small degree. A: Debt rated "A" has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB: Debt rated "BBB" is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories. 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. Moody's describes its four highest corporate bond ratings as follows: Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." 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, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa: Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in 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 in Aaa securities. A: Bonds which are rated A possess many favorable investment attributes and may be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa: Bonds which are rated Baa are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating classification from Aa through B in its corporate bond rating system. The modifier 1 indicates that the security ranks in the higher end of its generic rating category; the modifier 2 indicates a mid- range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category. INDEPENDENT AUDITORS' REPORT - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders of Oppenheimer Investment Grade Bond Fund: We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Oppenheimer Investment Grade Bond Fund as of December 31, 1993, the related statement of operations for the year then ended, the statements of changes in net assets for the years ended December 31, 1993 and 1992 and the financial highlights for the period January 1, 1991 to December 31, 1993. 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 (except for total return) for the period February 1, 1983 to December 31, 1990 were audited by other auditors whose report dated February 4, 1991, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned at December 31, 1993 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 Investment Grade Bond Fund at December 31, 1993, 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 Denver, Colorado January 21, 1994
------------------------------------------- STATEMENT OF INVESTMENTS December 31, 1993 FACE MARKET VALUE AMOUNT SEE NOTE 1 - ------------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM SECURITIES: COMMERCIAL PAPER--15.7% - ----------------------------------------------------------------------------------------------------------------------------------- Caterpillar Financial Services Corp., 3.40%, 1/6/94 $2,500,000 $2,498,819 ----------------------------------------------------------------------------------------------------- ConAgra, Inc., 3.40%, 1/11/94 1,975,000 1,973,135 ----------------------------------------------------------------------------------------------------- Countrywide Funding Corp., 3.50%, 1/3/94 2,500,000 2,499,514 ----------------------------------------------------------------------------------------------------- Ford Motor Credit Co., 3.40%, 1/5/94 160,000 160,000 ----------------------------------------------------------------------------------------------------- General Motors Acceptance Corp., 3.05%, 1/3/94 390,000 390,000 ----------------------------------------------------------------------------------------------------- GTE Northwest, Inc., 3.31%, 1/12/94 1,800,000 1,798,180 ----------------------------------------------------------------------------------------------------- ITT Financial Corp., 3.35%, 1/7/94 665,000 665,000 ----------------------------------------------------------------------------------------------------- Kerr-McGee Credit Corp., 3.45%, 1/4/94 2,500,000 2,499,281 ----------------------------------------------------------------------------------------------------- Maytag Corp., 3.55%, 1/10/94 1,900,000 1,898,314 ----------------------------------------------------------------------------------------------------- Public Service Co. of Colorado, 3.70%, 1/7/94 1,185,000 1,184,269 ----------------------------------------------------------------------------------------------------- Tyson Foods, Inc., 3.45%, 1/5/94 2,100,000 2,099,195 ------------ Total Short-Term Securities: Commercial Paper (Cost $17,665,707) 17,665,707 - ----------------------------------------------------------------------------------------------------------------------------------- GOVERNMENT OBLIGATIONS--64.1% - ----------------------------------------------------------------------------------------------------------------------------------- AGENCY: FULL FAITH Allentown, Pennsylvania, 8.74% U.S. Government Gtd. Nts., Series A, 8/1/01 65,000 75,934 AND CREDIT--1.1% ----------------------------------------------------------------------------------------------------- Fajardo, Puerto Rico, 8.74% U.S. Government Gtd. Nts., Series A, 8/1/01 300,000 350,466 ----------------------------------------------------------------------------------------------------- New Haven, Connecticut, 8.74% U.S. Government Gtd. Nts., Series A, 8/1/01 400,000 467,288 ----------------------------------------------------------------------------------------------------- Trujillo Alto, Puerto Rico, 8.74% U.S. Government Gtd. Nts., Series A, 8/1/01 235,000 274,531 ------------ 1,168,219 - ----------------------------------------------------------------------------------------------------------------------------------- COLLATERALIZED MORTGAGE Federal Home Loan Mortgage Corp., 7.50% Collateralized Mortgage OBLIGATIONS/GOVERNMENT--7.0% Obligation Gtd. Multiclass Mortgage Participation Certificates, 2/15/07 2,000,000 2,083,700 ----------------------------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp., 7% Gtd. Multiclass Mortgage Participation Certificates, Series 1460, Cl. 1460-H, 5/15/07 1,500,000 1,543,890 ----------------------------------------------------------------------------------------------------- Federal National Mortgage Assn., 58.60% Collateralized Mortgage Obligation Gtd. Real Estate Mortgage Investment Conduit Pass-Through Certificates, 10/25/22(1) 883,689 636,256 ----------------------------------------------------------------------------------------------------- JHM Acceptance Corp., 8.96% Collateralized Mortgage Obligation, Series E, Cl. E-6, 4/1/19 2,000,000 2,142,880 ----------------------------------------------------------------------------------------------------- Morgan Stanley Mortgage Trust 28, 8% Collateralized Mortgage Obligation, Series 28, Cl. 28-5, 12/1/15 1,437,032 1,459,895 ------------ 7,866,621 - ----------------------------------------------------------------------------------------------------------------------------------- MORTGAGE-BACKED Federal Home Loan Mortgage Corp.: SECURITIES--4.8% 13.50%, 11/1/10 136,564 158,472 12.50%, 4/1/14 66,775 75,804 9% Certificates of Participation, 3/1/17 1,080,848 1,150,963 ----------------------------------------------------------------------------------------------------- Federal National Mortgage Assn., 8% Gtd. Mortgage Pass-Through Certificates, 8/1/17 1,446,631 1,513,060
------------------------------------ FACE MARKET VALUE AMOUNT SEE NOTE 1 - ------------------------------------------------------------------------------------------------------------------------------------ MORTGAGE-BACKED SECURITIES Government National Mortgage Assn.: (CONTINUED) 12%, 1/15/99 $110,981 $123,443 9%, 2/15/09 305,000 328,266 9%, 3/15/09 271,249 291,941 9%, 5/15/09 34,955 37,621 9%, 6/15/09 190,257 204,770 10%, 11/15/09 1,281,866 1,405,797 15%, 2/15/12 26,453 31,364 12%, 5/15/14 3,170 3,706 12.75%, 5/15/15 31,287 36,146 12.75%, 6/15/15 68,024 78,590 ------------ 5,439,943 - ----------------------------------------------------------------------------------------------------------------------------------- TREASURY--50.2% U.S. Treasury Bonds: 7.875%, 2/15/21 900,000 1,048,212 8%, 11/15/21 2,000,000 2,369,360 7.25%, 8/15/22 7,600,000 8,295,855 7.125%, 2/15/23 4,000,000 4,329,960 ----------------------------------------------------------------------------------------------------- U.S. Treasury Nts.: 8.50%, 7/15/97 6,925,000 7,751,637 6.375%, 1/15/99 1,200,000 1,260,744 7%, 4/15/99 12,350,000 13,326,390 8%, 5/15/01 1,900,000 2,174,303 7.875%, 8/15/01 2,600,000 2,959,918 5.57%, 8/15/03 13,000,000 12,959,309 ------------ 56,475,688 - ----------------------------------------------------------------------------------------------------------------------------------- FOREIGN GOVERNMENT Quebec, Canada (Province of), 8.80% Debs., 4/15/03 1,000,000 1,156,200 ------------ BONDS AND NOTES--1.0% Total Government Obligations (Cost $70,668,745) 72,106,671 - ----------------------------------------------------------------------------------------------------------------------------------- ASSET-BACKED SECURITIES--1.2% - ----------------------------------------------------------------------------------------------------------------------------------- AUTO RECEIVABLES--1.2% General Motors Acceptance Corp. Grantor Trust, Series 1992-E, Cl.A, 4.75%, 8/15/97 879,210 884,694 ----------------------------------------------------------------------------------------------------- Select Auto Receivables Trust, 7.65% Asset-Backed Certificates, 1991-2 Cl. A, 7/15/96 499,029 509,963 ------------ Total Asset-Backed Securities (Cost $1,383,949) 1,394,657 - ----------------------------------------------------------------------------------------------------------------------------------- CORPORATE BONDS AND NOTES--29.1% - ----------------------------------------------------------------------------------------------------------------------------------- AIRLINES--1.5% United Air Lines, Inc., 10.11% 1991 Equipment Trust Certificates, Series B, 2/19/06 1,467,010 1,700,363 - ----------------------------------------------------------------------------------------------------------------------------------- AUTOMOBILES, TRUCKS Ford Motor Co., 7.875% Debs., 10/15/96 3,000,000 3,188,823 AND PARTS--2.9% - ----------------------------------------------------------------------------------------------------------------------------------- COMMERCIAL SERVICES--1.4% Comdisco, Inc., 6.20% Med.-Term Nts., 3/15/96 1,500,000 1,529,063 - ----------------------------------------------------------------------------------------------------------------------------------- FINANCIAL/INSURANCE--3.7% Ford Motor Credit Co., 9.90% Med.-Term Nts., 11/6/97 2,000,000 2,237,206 ----------------------------------------------------------------------------------------------------- Leucadia National Corp., 7.75% Sr. Nts., 8/15/13 2,000,000 1,955,948 ------------ 4,193,154
------------------------------------- STATEMENT OF INVESTMENTS (Continued) FACE MARKET VALUE AMOUNT SEE NOTE 1 - ------------------------------------------------------------------------------------------------------------------------------------ FOOD AND RESTAURANTS--1.0% Wendy's International, Inc., 12.125% Debs., 4/1/95 $1,000,000 $1,077,300 - ----------------------------------------------------------------------------------------------------------------------------------- HEALTHCARE/MEDICAL Baxter International, Inc., 9.25% Nts., 9/15/96 1,000,000 1,102,631 PRODUCTS--1.8% ----------------------------------------------------------------------------------------------------- Imcera Group, Inc., 6% Nts., 10/15/03 1,000,000 967,128 ------------ 2,069,759 - ----------------------------------------------------------------------------------------------------------------------------------- HOTELS/MOTELS--1.3% Marriott International, Inc., 6.75% Sr. Nts., Series A, 12/15/03 1,500,000 1,493,377 - ----------------------------------------------------------------------------------------------------------------------------------- LEISURE/ENTERTAINMENT--0.9% Toro Co. (The), 11% Debs., 8/1/17 1,000,000 1,055,000 - ----------------------------------------------------------------------------------------------------------------------------------- MANUFACTURING: Textron, Inc., 9.55% Med.-Term Nts., 3/19/01 500,000 597,940 DIVERSIFIED--0.5% - ----------------------------------------------------------------------------------------------------------------------------------- MEDIA--2.3% News America Holdings, Inc., 7.50% Gtd. Sr. Nts., 3/1/00 2,500,000 2,610,640 - ----------------------------------------------------------------------------------------------------------------------------------- METALS/MINING--3.5% AMAX, Inc., 9.875% Nts., 6/13/01 1,000,000 1,177,383 ----------------------------------------------------------------------------------------------------- Newmont Mining Corp., 8.625% Nts., 4/1/02 1,000,000 1,112,903 ----------------------------------------------------------------------------------------------------- Teck Corp., 8.70% Debs., 5/1/02 1,500,000 1,665,801 ------------ 3,956,087 - ----------------------------------------------------------------------------------------------------------------------------------- OIL AND GAS: EXPLORATION Marathon Oil Co., 9.50% Gtd. Nts., 3/1/94 1,500,000 1,508,506 AND PRODUCTION--1.4% - ----------------------------------------------------------------------------------------------------------------------------------- OIL AND GAS: INTEGRATED--2.9% Union Oil Co. of California: 9.625% Gtd. Debs., 5/15/96 1,500,000 1,593,485 8.75% Nts., 8/15/01 1,500,000 1,696,594 ------------ 3,290,079 - ----------------------------------------------------------------------------------------------------------------------------------- PAPER AND FOREST Georgia-Pacific Corp., 9.95% Debs., 6/15/02 1,500,000 1,816,089 PRODUCTS--1.6% - ----------------------------------------------------------------------------------------------------------------------------------- RAILROADS/EQUIPMENT--2.4% CSX Corp., 9.50% Sr. Nts., 11/15/96 2,500,000 2,705,147 ------------ Total Corporate Bonds and Notes (Cost $31,523,837) 32,791,327 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $121,242,238) 110.1% 123,958,362 - ----------------------------------------------------------------------------------------------------------------------------------- LIABILITIES IN EXCESS OF OTHER ASSETS (10.1) (11,389,977) --------- ------------ NET ASSETS 100.0% $112,568,385 --------- ------------ --------- ------------ 1. Interest rate resets monthly, based on LIBOR. See accompanying Notes to Financial Statements.
------------------------------------------------------ STATEMENT OF ASSETS AND LIABILITIES December 31, 1993 - ----------------------------------------------------------------------------------------------------------------------------------- ASSETS Investments, at value (cost $121,242,238)--see accompanying statement $123,958,362 ------------------------------------------------------------------------------------------------------- Cash 215,492 ------------------------------------------------------------------------------------------------------- Receivables: Interest 1,737,916 Shares of beneficial interest sold 431,065 Investments sold 188,975 ------------------------------------------------------------------------------------------------------- Other 22,252 ------------ Total assets 126,554,062 - ----------------------------------------------------------------------------------------------------------------------------------- LIABILITIES Payables and other liabilities: Investments purchased 12,972,500 Dividends 569,872 Shares of beneficial interest redeemed 239,614 Distribution assistance--Note 4 77,058 Deferred trustee fees--Note 5 34,149 Other 92,484 ------------ Total liabilities 13,985,677 - ----------------------------------------------------------------------------------------------------------------------------------- NET ASSETS $112,568,385 ------------ ------------ - ----------------------------------------------------------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS Paid-in capital $111,376,568 ------------------------------------------------------------------------------------------------------- Overdistributed net investment income (56,074) ------------------------------------------------------------------------------------------------------- Accumulated net realized loss from investment transactions (1,468,233) ------------------------------------------------------------------------------------------------------- Net unrealized appreciation on investments--Note 3 2,716,124 ------------ Net assets $112,568,385 ------------ ------------ - ----------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE Class A Shares: Net asset value and redemption price per share (based on net assets of $110,759,490 and 9,963,302 shares of beneficial interest outstanding) $11.12 Maximum offering price per share (net asset value plus sales charge of 4.75% of offering price) $11.67 ------------------------------------------------------------------------------------------------------- Class B Shares: Net asset value, redemption price and offering price per share (based on net assets of $1,808,895 and 162,838 shares of beneficial interest outstanding) $11.11
See accompanying Notes to Financial Statements.
------------------------------------------------------------- STATEMENT OF OPERATIONS For the Year Ended December 31, 1993 - ------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Interest $8,145,735 - ------------------------------------------------------------------------------------------------------------------- EXPENSES Management fees--Note 4 555,430 --------------------------------------------------------------------------------------- Distribution assistance: Class A--Note 4 279,190 Class B--Note 4 6,089 --------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees--Note 4 171,164 --------------------------------------------------------------------------------------- Shareholder reports 98,061 --------------------------------------------------------------------------------------- Custodian fees and expenses 26,144 --------------------------------------------------------------------------------------- Legal and auditing fees 13,774 --------------------------------------------------------------------------------------- Trustees' fees and expenses 6,398 --------------------------------------------------------------------------------------- Registration and filing fees: Class A 4,542 Class B 582 --------------------------------------------------------------------------------------- Other 29,281 ----------- Total expenses 1,190,655 - ------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME 6,955,080 - ------------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED Net realized gain on investments 3,772,429 GAIN ON INVESTMENTS --------------------------------------------------------------------------------------- Net change in unrealized appreciation on investments: Beginning of year 2,693,891 End of year--Note 3 2,716,124 ----------- Net change 22,233 ----------- Net realized and unrealized gain on investments 3,794,662 - ------------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $10,749,742 ----------- -----------
See accompanying Notes to Financial Statements.
----------------------------------- STATEMENTS OF CHANGES IN NET ASSETS YEAR ENDED DECEMBER 31, ------------------------- 1993 1992 - ---------------------------------------------------------------------------------------------------------------------------------- OPERATIONS Net investment income $6,955,080 $6,898,017 ------------------------------------------------------------------------------------------------------ Net realized gain on investments 3,772,429 2,881,367 ------------------------------------------------------------------------------------------------------ Net change in unrealized appreciation or depreciation on investments 22,233 (3,303,621) ------------ ------------ Net increase in net assets resulting from operations 10,749,742 6,475,763 - ---------------------------------------------------------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS Dividends from net investment income: Class A ($.707 and $.763 per share, respectively) (7,067,709) (7,002,468) Class B ($.420 per share) (33,652) -- - ---------------------------------------------------------------------------------------------------------------------------------- BENEFICIAL INTEREST Net increase in net assets resulting from Class A beneficial interest TRANSACTIONS transactions--Note 2 802,199 16,193,234 ------------------------------------------------------------------------------------------------------ Net increase in net assets resulting from Class B beneficial interest transactions--Note 2 1,828,205 -- - ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS Total increase 6,278,785 15,666,529 ------------------------------------------------------------------------------------------------------ Beginning of year 106,289,600 90,623,071 ------------ ------------ End of year (including (overdistributed) undistributed net investment income of ($56,074) and $90,207, respectively) $112,568,385 $106,289,600 ------------ ------------ ------------ ------------
See accompanying Notes to Financial Statements.
FINANCIAL HIGHLIGHTS CLASS A --------------------------------------------------------------------------- ELEVEN YEAR MONTHS ENDED ENDED DEC. 31, DEC. 31, 1993 1992 1991(3) 1990 1989 1988(2) - ----------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA: Net asset value, beginning of period $10.74 $10.80 $9.86 $10.29 $10.12 $10.55 - ---------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income .69 .75 .82 .88(4) .92 .93 Net realized and unrealized gain (loss) on investments .40 (.05) .90 (.43) .19 (.36) ------ ------ ------ ------ ------ ------ Total income from investment operations 1.09 .70 1.72 .45 1.11 .57 - ---------------------------------------------------------------------------------------------------------------------- Dividends from net investment income (.71) (.76) (.78) (.88) (.94) (1.00) - ---------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $11.12 $10.74 $10.80 $9.86 $10.29 $10.12 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ - ---------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE(5) 10.30% 6.77% 18.28% 4.74% 11.31% 4.48% - ---------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $110,759 $106,290 $90,623 $87,021 $96,380 $102,293 - ---------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $111,702 $98,672 $86,471 $90,065 $100,891 $111,264 - ---------------------------------------------------------------------------------------------------------------------- Number of shares outstanding at end of period (in thousands) 9,963 9,899 8,390 8,829 9,369 10,108 - ---------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: Net investment income 6.20% 7.00% 8.02% 8.85% 8.85% 8.75% Expenses 1.06% 1.10% 1.23% 1.24%(4) 1.14% 1.05% - ---------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate(7) 110.1% 116.4% 97.1% 80.4% 41.3% 45.0% Class B - -------------------------------------------------------------------------------------------------------- -------- PERIOD ENDED YEAR ENDED JANUARY 31, DEC. 31, 1988(2) 1987(2) 1986(2) 1985(2) 1984(2) 1993(1) - ------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING DATA: Net asset value, beginning of period $11.30 $11.16 $10.91 $11.00 $11.07 $11.10 - ---------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income 1.09 1.16 1.22 1.27 1.28 .40 Net realized and unrealized gain (loss) on investments (.55) .22 .35 (.04) (.03) .03 -------- -------- -------- -------- -------- -------- Total income from investment operations .54 1.38 1.57 1.23 1.25 .43 - ---------------------------------------------------------------------------------------------------------------------- Dividends from net investment income (1.29) (1.24) (1.32) (1.32) (1.32) (.42) - ---------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.55 $11.30 $11.16 $10.91 $11.00 $11.11 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- - ---------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE(5) N/A N/A N/A N/A N/A 3.91% - ---------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $118,568 $125,513 $121,979 $117,293 $116,193 $1,809 - ---------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $118,724 $123,045 $118,253 $111,235 $115,058 $922 - ---------------------------------------------------------------------------------------------------------------------- Number of shares outstanding at end of period (in thousands) 11,234 11,103 10,930 10,751 10,563 163 - ---------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: Net investment income 10.28% 10.45% 11.26% 12.21% 11.69% 4.80%(6) Expenses .98% .93% .97% 1.01% .99% 1.90%(6) - ---------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate(7) 19.5% 59.8% 36.5% 76.7% 49.9% 110.1% 1. For the period from May 1, 1993 (inception of offering) to December 31, 1993. 2. Operating results prior to April 15, 1988 were achieved by the Fund's predecessor corporation as a closed-end fund under different investment objectives and policies. Such results are thus not necessarily representative of operating results the Fund may achieve under its current investment objectives and policies. 3. On March 28, 1991, Oppenheimer Management Corporation became the investment advisor to the Fund. 4. Net investment income would have been $.87 absent the voluntary expense limitation, resulting in an expense ratio of 1.26%. 5. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. 6. Annualized. 7. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the year ended December 31, 1993 were $123,943,358 and $134,301,656, respectively. See accompanying Notes to Financial Statements.
----------------------------- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. SIGNIFICANT Oppenheimer Investment Grade Bond Fund (the Fund) is ACCOUNTING POLICIES a separate fund of Oppenheimer Integrity Funds, a diversified, open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment advisor is Oppenheimer Management Corporation (the Manager). The Fund offers both Class A and Class B shares. Class A shares are sold with a front-end sales charge. Class B shares may be subject to a contingent deferred sales charge. Both classes of shares have identical rights to earnings, assets and voting privileges, except that each class has its own distribution plan, expenses directly attributable to a particular class and exclusive voting rights with respect to matters affecting a single class. Class B shares will automatically convert to Class A shares six years after the date of purchase. The following is a summary of significant accounting policies consistently followed by the Fund. ----------------------------------------------------- INVESTMENT VALUATION. Portfolio securities are valued at 4:00 p.m. (New York time) on each trading day. Long-term debt securities are valued by a portfolio pricing service approved by the Board of Trustees. Long-term debt securities which cannot be valued by the approved portfolio pricing service are valued by averaging the mean between the bid and asked prices obtained from two active market makers in such securities. Short-term debt securities having a remaining maturity of 60 days or less are valued at cost (or last determined market value) adjusted for amortization to maturity of any premium or discount. Securities for which market quotes are not readily available are valued under procedures established by the Board of Trustees to determine fair value in good faith. ----------------------------------------------------- ALLOCATION OF INCOME, EXPENSES AND GAINS AND LOSSES. Income, expenses (other than those attributable to a specific class) and gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class. ----------------------------------------------------- FEDERAL INCOME TAXES. The Fund intends to continue to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income, including any net realized gain on investments not offset by loss carryovers, to shareholders. Therefore, no federal income tax provision is required. At December 31, 1993, the Fund had available for federal income tax purposes an unused capital loss carryover of approximately $1,400,000, $442,000 of which will expire in 1997, and $958,000 in 1998. ----------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare dividends separately for Class A and Class B shares from net investment income each regular business day and pay such dividends monthly. Distributions from net realized gains on investments, if any, will be declared at least once each year. ----------------------------------------------------- OTHER. Investment transactions are accounted for on the date the investments are purchased or sold (trade date). Discount on securities purchased is amortized over the life of the respective securities, in accordance with federal income tax requirements. Realized gains and losses on investments and unrealized appreciation and depreciation are determined on an identified cost basis, which is the same basis used for federal income tax purposes. 11 Oppenheimer Investment Grade Bond Fund ------------------------------------------ NOTES TO FINANCIAL STATEMENTS (Continued) - -------------------------------------------------------------------------------- 2. SHARES OF The Fund has authorized an unlimited number of no BENEFICIAL INTEREST par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
YEAR ENDED DECEMBER 31, 1993(1) YEAR ENDED DECEMBER 31, 1992 ------------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT ---------------------------------------------------------------------------------------------- Class A: Sold 2,953,788 $33,325,053 2,484,198 $26,675,262 Dividends reinvested 259,953 2,897,712 216,393 2,318,129 Redeemed (3,149,098) (35,420,566) (1,191,950) (12,800,157) ---------- ----------- ---------- ----------- Net increase 64,643 $802,199 1,508,641 $16,193,234 ---------- ----------- ---------- ----------- ---------- ----------- ---------- ----------- Class B: Sold 195,606 $ 2,198,191 -- $ -- Dividends reinvested 2,293 25,726 -- -- Redeemed (35,061) (395,712) -- -- ---------- ----------- ---------- ----------- Net increase 162,838 $ 1,828,205 -- $ -- ---------- ----------- ---------- ----------- ---------- ----------- ---------- ----------- 1. For the year ended December 31, 1993 for Class A shares and for the period from May 1, 1993 (inception of offering) to December 31, 1993 for Class B shares.
- -------------------------------------------------------------------------------- 3. UNREALIZED GAINS AND At December 31, 1993, net unrealized appreciation on LOSSES ON INVESTMENTS investments of $2,716,124 was composed of gross appreciation of $3,957,810, and gross depreciation of $1,241,686. - -------------------------------------------------------------------------------- 4. MANAGEMENT FEES Management fees paid to the Manager were in AND OTHER TRANSACTIONS accordance with the investment advisory agreement WITH AFFILIATES with the Fund which provides for an annual fee of .50% on the first $100 million of net assets with a reduction of .05% on each $200 million thereafter, to .35% on net assets in excess of $500 million. The Manager has agreed to reimburse the Fund if aggregate expenses (with specified exceptions) exceed the most stringent applicable regulatory limit on Fund expenses. For the year ended December 31, 1993, commissions (sales charges paid by investors) on sales of Class A shares totaled $269,639, of which $163,271 was retained by Oppenheimer Funds Distributor, Inc. (OFDI), a subsidiary of the Manager, as general distributor, and by an affiliated broker/dealer. During the year ended December 31, 1993, OFDI received contingent deferred sales charges of $350 upon redemption of Class B shares. Oppenheimer Shareholder Services (OSS), a division of the Manager, is the transfer and shareholder servicing agent for the Fund, and for other registered investment companies. OSS's total costs of providing such services are allocated ratably to these companies. Under separate approved plans of distribution, each class may expend up to .25% of its net assets annually to reimburse OFDI for costs incurred in distributing shares of the Fund, including amounts paid to brokers, dealers, banks and other institutions. In addition, Class B shares are subject to an asset-based sales charge of .75% of net assets annually, to reimburse OFDI for sales commissions paid from its own resources at the time of sale and associated financing costs. In the event of termination or discontinuance of the Class B plan of distribution, the Fund would be contractually obligated to pay OFDI for any expenses not previously reimbursed or recovered through contingent deferred sales charges. During the year ended December 31, 1993, OFDI paid $181,032 to an affiliated broker/dealer as reimbursement for Class A distribution-related expenses and retained $6,089 as reimbursement for Class B distribution-related expenses and sales commissions. - -------------------------------------------------------------------------------- 5. DEFERRED TRUSTEE A former trustee elected to defer receipt of fees COMPENSATION earned. These deferred fees earn interest at a rate determined by the current Board of Trustees at the beginning of each calendar year, compounded each quarter-end. As of December 31, 1993, the Fund was incurring interest at a rate of 6.01% per annum. Deferred fees are payable in annual installments, with accrued interest, each April 1 through 1995. Investment Adviser Oppenheimer Management Corporation Two World Trade Center New York, New York 10048-0203 Sub-Adviser Massachusetts Mutual Life Insurance Company 1295 State Street Springfield, MA 01111 Distributor Oppenheimer Funds Distributor, Inc. Two World Trade Center New York, New York 10048-0203 Transfer and Shareholder Servicing Agent Oppenheimer Shareholder Services P.O. Box 5270 Denver, Colorado 80217 1-800-525-7048 Custodian of Portfolio Securities The Bank of New York One Wall Street New York, New York 10015 Independent Auditors Deloitte & Touche 1560 Broadway Denver, Colorado 80202 Legal Counsel Myer, Swanson & Adams, P.C. 1600 Broadway Denver, Colorado 80202-4918 Oppenheimer Value Stock Fund Prospectus dated 5/1/94 Oppenheimer Value Stock Fund (the "Fund") is a mutual fund with the investment objective of seeking long-term growth of capital and income primarily through investments in stocks of well established companies. You should carefully review the risks associated with an investment in the Fund. The Fund offers two classes of shares: (1) Class A shares, which are sold at a public offering price that includes a front-end sales charge, and (2) Class B shares, which are sold without a front-end sales charge, although you may pay a sales charge when you redeem your shares, depending on how long you own them. Class B shares are also subject to an annual "asset-based sales charge." Each class of shares bears different expenses. In deciding which class of shares to buy, you should consider how much you plan to purchase, how long you plan to keep your shares, and other factors discussed in "How to Buy Shares" starting on page 11. This Prospectus explains concisely what you should know before investing in the Fund. Please read this Prospectus carefully and keep it for future reference. You can find more detailed information about the Fund in the May 1, 1994, Statement of Additional Information. For a free copy, call Oppenheimer Shareholder Services, the Fund's Transfer Agent, at 1-800-525-7048, or write to the Transfer Agent at the address on the back cover. The Statement of Additional Information has been filed with the Securities and Exchange Commission and is incorporated into this Prospectus by reference (which means that it is legally part of this Prospectus). Shares of the Fund are not deposits or obligations of any bank, nor are they guaranteed by any bank are not insured by the F.D.I.C. or any other agency, and involve investment risks, including the possible loss of principal. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Contents ABOUT THE FUND Expenses Financial Highlights Investment Objective and Policies How the Fund is Managed Performance of the Fund ABOUT YOUR ACCOUNT How to Buy Shares Class A Shares Class B Shares Special Investor Services AccountLink Automatic Withdrawal and Exchange Plans Reinvestment Privilege Retirement Plans How to Sell Shares By Mail By Telephone How to Exchange Shares Shareholder Account Rules and Policies Dividends, Capital Gains and Taxes ABOUT THE FUND Expenses The Fund pays a variety of expenses directly for management of its assets, administration, distribution of its shares and other services and these expenses are reflected in the Fund's net asset value per share. As a shareholder, you pay these expenses indirectly. Shareholders pay other expenses directly, such as sales charges. The following tables are provided to help you understand your direct expenses of investing in the Fund and your share of the Fund's operating expenses you might expect to bear indirectly. The calculations are based on the Fund's expenses during its fiscal year ended December 31, 1993. - Shareholder Transaction Expenses are charges you pay when you buy or sell shares of the Fund. Please refer to pages ____ through _____ for an explanation of how and when these charges apply. Class A Shares Class B Shares -------------- -------------- Maximum Sales Charge on Purchases (as a % of offering price) 5.75% None Sales Charge on Reinvested Dividends None None Deferred Sales Charge (as a % of the lower of the original purchase price or redemption proceeds) None(1) 5% in the first year, declining to 1% in the sixth year and eliminated thereafter Exchange Fee $5.00 $5.00** (1) If you invest more than $1 million in Class A shares, you may have to pay a sales charge of up to 1% if you sell your shares within 18 calendar months from the end of the calendar month during which you purchased those shares. See "How to Buy Shares - Class A Shares," below. - Annual Fund Operating Expenses are paid out of the Fund's assets and represent the Fund's expenses in operating its business. For example, the Fund pays management fees to its investment adviser, Oppenheimer Management Corporation (the "Manager") and other regular expenses for services, such as transfer agent fees, custodial fees paid to the bank that holds its portfolio securities, audit fees and legal and other expenses. The following numbers are projections of the Fund's business expenses based on the Fund's expenses in its last fiscal year. These amounts are shown as a percentage of the average net assets of each class of the Fund's shares for that year. The "12b-1 Distribution Plan Fees" for Class A shares are the Service Plan Fees (which are a maximum of 0.25% of average annual net assets of that class), and for Class B shares, are the Service Plan Fees (maximum of 0.25%) and the asset-based sales charge of 0.75%. The actual expense numbers for each class of shares in future years may be more or less, depending on a number of factors, including the actual amount of the assets represented by each class of shares. Class B shares were not publicly sold before May 1, 1993. Therefore, the Annual Fund Operating Expenses shown for Class B shares are based on expenses for the period from May 1, 1993 through December 31, 1993. Class A Shares Class B Shares -------------- -------------- Management Fees 0.75% 0.75% 12b-1 Distribution Plan Fees 0.25% 1.00% (includes Shareholder Service Plan Fees) Other Expenses 0.24% 0.39% Total Fund Operating Expenses 1.24% 2.14% - Examples. To try to show the effect of the expenses on an investment over time, we have created the hypothetical examples shown below. Assume that you make a $1,000 investment in each class of shares of the Fund, and that the Fund's annual return is 5%, and that its operating expenses for each class are the ones shown in the chart above. If you were to redeem your shares at the end of each period shown below, your investment would incur the following expenses by the end of each period shown: 1 year 3 years 5 years 10 years* ------ ------- ------- --------- Class A Shares $69 $95 $122 $99 Class B Shares $72 $97 $135 $203 If you did not redeem your investment, it would incur the following expenses: Class A Shares $69 $95 $122 $199 Class B Shares $22 $67 $115 $203 * The Class B expenses in years 7 through 10 are based on the Class A expenses shown above, because the Fund automatically converts your Class B shares into Class A shares after 6 years. Long-term Class B shareholders could pay the economic equivalent of more than the maximum front-end sales charge allowed under applicable regulations, because of the effect of the asset-based sales charge and contingent deferred sales charge. The automatic conversion is designed to minimize the likelihood that this will occur. Please refer to "How to Buy Shares - Class B Shares" for more information. These examples show the effect of expenses on an investment, but it is not meant to state or predict actual or expected costs or investment returns of the Fund, all of which will vary. Financial Highlights The table on this page presents selected financial information about the Fund, including per share data and expense ratios and other data based on the Fund's average net assets. This information has been audited by Deloitte & Touche, the Fund's independent auditors, whose report on the Fund's financial statements for the fiscal year ended December 31, 1993 is included in the Statement of Additional Information. The information in the table for the fiscal periods prior to 1991 was audited by the Fund's previous independent auditors. Class B shares were publicly offered only during a portion of that period, commencing May 1, 1993.
CLASS A CLASS B --------------------------------------------------------------------------------- ------------ YEAR ENDED PERIOD ENDED DECEMBER 31, DECEMBER 31, 1993 1992 1991(3) 1990 1989 1988 1987 1986(2) 1993(1) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING DATA: Net asset value, beginning of period - ------------------------------------------------------------------------------------------------------------------------------------ $14.19 $13.57 $11.39 $12.08 $10.47 $ 9.51 $9.98 $10.16 $14.60 Income (loss) from investment operations: Net investment income .29 .32 .33 .37 .40 .33 .34 .01 .17 Net realized and unrealized gain (loss) on investments .98 .97 2.49 (.57) 1.87 1.15 (.22) (.19) .51 ------- ------ ------ ------ ------ ------ ------ ------ --------- Total income (loss) from investment operations 1.27 1.29 2.82 (.20) 2.27 1.48 .12 (.18) .68 - ------------------------------------------------------------------------------------------------------------------------------------ Dividends and distributions to shareholders: Dividends from net investment income (.29) (.32) (.33) (.39) (.41) (.33) (.41) -- (.17) Distributions from net realized gain on investments (.76) (.35) (.31) (.10) (.25) (.19) (.18) -- (.76) ------- ------ ------ ------ ------ ------ ------ ------ --------- Total dividends and distributions to shareholders (1.05) (.67) (.64) (.49) (.66) (.52) (.59) -- (.93) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $14.41 $14.19 $13.57 $11.39 $12.08 $10.47 $9.51 $ 9.98 $14.35 ------- ------ ------ ------ ------ ------ ------ ------ --------- ------- ------ ------ ------ ------ ------ ------ ------ --------- - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN, AT NET ASSET VALUE(4) 8.97% 9.61% 25.23% (1.53)% 21.93% 15.61% 1.10% (1.77)% 4.63% - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $90,470 $59,376 $49,381 $40,153 $37,713 $27,434 $19,377 $20,162 $5,158 - ------------------------------------------------------------------------------------------------------------------------------------ Average net assets (in thousands) $80,229 $53,485 $45,581 $39,104 $33,742 $24,658 $22,322 (2) $2,527 - ------------------------------------------------------------------------------------------------------------------------------------ Number of shares outstanding at end of period (in thousands) 6,280 4,184 3,639 3,526 3,122 2,620 2,039 2,021 359 - ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: Net investment income 1.97% 2.34% 2.59% 3.22% 3.51% 3.45% 3.15% (2) .97%(5) Expenses, before voluntary reimbursement 1.24% 1.19% 1.31% 1.36% 1.40% 1.21% .70% (2) 2.14%(5) Expenses, net of voluntary reimbursement N/A N/A 1.26% 1.30% 1.30% 1.19% N/A (2) N/A - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate(6) 24.3% 12.3% 14.5% 13.5% 14.9% 13.1% 10.8% (2) 24.3% 1. For the period from May 1, 1993 (inception of offering) to December 31, 1993. 2. For the period from December 22, 1986 to December 31, 1986. Ratios during this development period would not be indicative of representative results. 3. On March 28, 1991, Oppenheimer Management Corporation became the investment advisor to the Fund. 4. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. 5. Annualized. 6. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the year ended December 31, 1993 were $25,469,747 and $17,554,755, respectively.
Investment Objective and Policies Objective. The Fund seeks long-term growth of capital and income primarily through investments in stocks of well established companies. Investment Policies and Strategies. In seeking its investment objective the Fund will invest, under normal market conditions, in a diversified portfolio of (i) common stocks that pay cash dividends, (ii) securities convertible into common stocks, and (iii) other equity securities issued by companies with a market capitalization of at least $500 million or with a history of at least five years of operations as a public company, and which are listed on a national securities exchange or traded in the over-the-counter markets. The Fund will invest primarily in cash dividend-paying stocks. To provide liquidity or for temporary defensive purposes, the Fund may invest all or any portion of its assets in high-quality, short-term money market instruments. Concert Capital Management, Inc. (the "Sub-Adviser") will seek to invest in the securities of companies which, in its opinion, are of high quality, offer above-average dividend growth potential and are attractively valued in the marketplace. This would include stocks selling below their historical price/earnings ranges relative to the Standard & Poor's 500 Stock Index or below their historical price/book value ranges. The Sub-Adviser will give strong consideration to securities of companies whose current prices do not adequately reflect, in its opinion, the ongoing business value of the enterprise. The Fund may try to hedge against losses in the value of its portfolio securities by using hedging strategies described below. The Sub-Adviser may employ special investment techniques, also described below. Additional information about the securities the Fund may invest in, the hedging strategies the Fund may employ and the special investment techniques may be found under the same headings in the Statement of Additional Information. - Investment Risks. Because of the types of companies the Fund invests in and the investment techniques the Fund uses, some of which may be speculative, the Fund is designed for those investors who are investing for the long-term and who are willing to accept greater risks of loss of their capital in the hope of achieving capital appreciation. Investing for capital appreciation entails the risk of loss of all or part of your principal. There is no assurance that the Fund will achieve its objective, and when you redeem your shares, they may be worth more or less than what you paid for them. - Portfolio Turnover. While it is a policy of the Fund generally not to engage in trading for short-term gains, portfolio changes will be made without regard to the length of time a security has been held or whether a sale would result in a profit or loss, if in the Sub- Adviser's judgment, such transactions are advisable in light of the circumstances of a particular company or within a particular industry or in light of market, economic or financial conditions. Higher levels of portfolio activity generally result in higher transaction costs and may also result in taxes on realized capital gains to be borne by the Fund's shareholders. See "Financial Highlights" above, "Dividends, Capital Gains and Taxes" below and "Brokerage Policies of the Fund" in the Statement of Additional Information. - Can the Fund's Investment Objective and Policies Change? The Fund has an investment objective, which is described above, as well as investment policies it follows to try to achieve its objective. Additionally, the Fund uses certain investment techniques and strategies in carrying out those policies. The Fund's investment policies and practices are not "fundamental" unless the Prospectus or Statement of Additional Information says that a particular policy is "fundamental." Fundamental policies are those that cannot be changed without the approval of a "majority" of the Fund's outstanding voting shares. The term "majority" is defined in the Investment Company Act to be a particular level of vote by outstanding voting shares (and this term is explained in the Statement of Additional Information). The Fund's investment objective is a fundamental policy. The Fund's Board of Trustees may change non- fundamental policies without shareholder approval, although significant changes will be described in amendments to this Prospectus. Securities of Foreign Governments and Companies. The Fund may invest in debt and equity securities issued or guaranteed by foreign companies, and debt securities of foreign governments or their agencies. These foreign securities may include debt obligations such as government bonds, debentures issued by companies, as well as notes. Some of these debt securities may have variable interest rates or "floating" interest rates that change in different market conditions. Those changes will affect the income the Fund receives. These securities are described in more detail in the Statement of Additional Information. The Fund is not restricted in the amount of its assets it may invest in foreign countries or in which countries. However, if the Fund's assets are held abroad, the countries in which they are held and the sub- custodians holding them must be approved by the Fund's Board of Trustees. The Fund may buy or sell foreign currencies and foreign currency forward contracts (agreements to exchange one currency for another at a future date) to hedge currency risks and to facilitate transactions in foreign investments. Although currency forward contracts can be used to protect the Fund from adverse exchange rate changes, there is a risk of loss if the Sub-Adviser fails to predict currency exchange movements correctly. - Risks of Foreign Securities. Investing in foreign securities, especially those issued in underdeveloped countries, generally involves special risks. For example, 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 changes in foreign currency rates, 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. If the Fund distributes more income during a period than it earns because of unfavorable currency exchange rates, those dividends may later have to be considered a return of capital. More information about the risks and potential rewards of foreign securities is contained in the Statement of Additional Information. Other Investment Techniques and Strategies. The Fund may also use the investment techniques and strategies described below, which involve certain risks. The Statement of Additional Information contains more detailed information about these practices, including limitations designed to reduce some of the risks. - Writing Covered Calls. The Fund may write (i.e., sell) covered call options ("calls") only if certain conditions are met: (1) the calls must be listed on a domestic or foreign securities exchange or over- the-counter, and (2) each call must be "covered" while it is outstanding; that is, the Fund must own the securities on which the call is written or it must own other securities that are acceptable for the escrow arrangements required for calls. If a covered call written by the Fund is exercised on a security that has increased in value, the Fund will be required to sell the security at the call price and will not be able to realize any profit on the security above the call price. - Hedging With Options and Futures Contracts. The Fund may buy and sell options and futures contracts to manage its exposure to changing interest rates, securities prices and currency exchange rates. Some of these strategies, such as selling futures, buying puts and writing calls, hedge the Fund's portfolio against price fluctuations. Other hedging strategies, such as buying futures, writing puts and buying calls, tend to increase market exposure. The put and call options which the Fund may purchase and sell are exchange-traded or over-the-counter options. The Fund may invest in futures, where the securities which underlie such contracts are permissible investments for the Fund, and index-based futures contracts which are appropriately correlated with the Fund's portfolio. The Fund may purchase and sell call and put options on futures contracts, and the Fund may engage in related closing transactions with respect to such options on futures contracts. The Fund may also invest in interest rate swap transactions. All of these are referred to as "hedging instruments." The initial margin deposits for futures contracts and premiums paid for related options may not exceed 5% of the value of the Fund's total assets. Writing puts requires the segregation of liquid assets to cover the put. The Fund does not use futures and options on futures for speculative purposes. Hedging instruments can be volatile investments and may involve certain risks. If the Sub-Adviser uses a hedging instrument at the wrong time or judges market conditions incorrectly, hedging strategies may reduce the Fund's return. The Fund could also experience losses if the prices of its futures and options positions were not correlated with its other investments or if it could not close out a position because of an illiquid market for the future or option. Interest rate swaps are subject to credit risks (if the other party fails to meet its obligations) and also to interest rate risks, because the Fund could be obligated to pay more under its swap agreements than it receives under them, as a result of interest rate changes. Options trading involves the payment of premiums and has special tax effects on the Fund. There is also special risks in particular hedging strategies. For example, in writing puts, there is a risk that the Fund may be required to buy the underlying security at a disadvantageous price. These risks and the hedging strategies the Fund may use are described in greater detail in the Statement of Additional Information. - Illiquid and Restricted Securities. Under the policies and procedures established by the Fund's Board of Trustees, the Manager determines the liquidity of the Fund's investments. Investments may be illiquid because of the absence of an active trading market, making it difficult to value them or dispose of them promptly at an acceptable price. A restricted security is one that has a contractual restriction on its resale or which cannot be sold publicly until it is registered under the Securities Act of 1933. The Fund will not invest more than 10% of its net assets in illiquid or restricted securities (that limit may increase to 15% if certain state laws are changed or the Fund's shares are no longer sold in those states). Certain restricted securities, eligible for resale to qualified institutional purchasers, are not subject to that limit. - Loans of Portfolio Securities. The Fund may lend its portfolio securities amounting to not more than 25% of its total assets to brokers, dealers and other financial institutions, subject to certain conditions described in the Statement of Additional Information. The Fund presently does not intend to lend its portfolio securities, but if it does, the value of securities loaned is not expected to exceed 5% of the value of the Fund's total assets in the coming year. - Repurchase Agreements. The Fund may enter into repurchase agreements. There is no limit on the amount of the Fund's net assets that may be subject to repurchase agreements of seven days or less. The Fund will not enter into repurchase agreements that will cause more than 15% of the Fund's net assets to be subject to repurchase agreements maturing in more than seven days. Repurchase agreements must be fully collateralized. However, if the vendor of the securities under a repurchase agreement 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. - Forward Commitments. The Fund may enter into contracts to purchase securities for a fixed price at a specified future date beyond customary settlement time ("forward commitments"). Forward commitments involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of decline in value of the Fund's other assets. The Fund may realize short-term gains or losses upon the sale of forward commitments. - "When-Issued" and Delayed Delivery Transactions. The Fund may purchase securities on a "when-issued" basis and may purchase or sell securities on a "delayed delivery" basis. These terms refer to securities that have been created and for which a market exists, but which are not available for immediate delivery. There may be a risk of loss to the Fund if the value of the security declines prior to the settlement date. Other Investment Restrictions. The Fund has other investment restrictions which are "fundamental" policies. Under these fundamental policies, the Fund cannot do any of the following: (1) make short sales except for sales "against the box"; (2) borrow money or enter into reverse repurchase agreements, except that the Fund may borrow money from banks and enter into reverse repurchase agreements as a temporary measure for extraordinary or emergency purposes (but not for the purpose of making investments), provided that the aggregate amount of all such borrowings and commitments under such agreements does not, at the time of borrowing or of entering into such an agreement, exceed 10% of the Fund's total assets taken at current market value; the Fund will not purchase additional portfolio securities at any time that the aggregate amount of its borrowings and its commitments under reverse repurchase agreements exceeds 5% of the Fund's net assets (for purposes of this restriction, entering into portfolio lending agreements shall not be deemed to constitute borrowing money); (3) concentrate its investments in any particular industry except that it may invest up to 25% of the value of its total assets in the securities of issuers of any one industry (of the utility companies, gas, electric, water and telephone will each be considered as a separate industry); and (4) buy securities issued or guaranteed by any one issuer (except the U.S. Government or any of its agencies or instrumentalities) if with respect to 75% of its total assets (a) more than 5% of the Fund's total assets would be invested in the securities of such issuer, or (b) the Fund would own more than 10% of that issuer's voting securities. All of the percentage restrictions described above and elsewhere in this Prospectus apply only at the time the Fund purchases a security, and the Fund need not dispose of a security merely because the Fund's assets have changed or the security has increased in value relative to the size of the Fund. There are other fundamental policies discussed in the Statement of Additional Information. How the Fund is Managed Organization and History. Oppenheimer Integrity Funds (the "Trust") was organized in 1982 as a multi-series Massachusetts business trust and the Fund is a series of that Trust. That Trust is an open-end, diversified management investment company, with an unlimited number of authorized shares of beneficial interest. Each of the two series of the Trust is a fund that issues its own shares, has its own investment portfolio, and its own assets and liabilities. The Fund is governed by a Board of Trustees, which is responsible for protecting the interests of shareholders under Massachusetts law. The Trustees meet periodically throughout the year to oversee the Fund's activities, review its performance, and review the actions of the Manager. "Trustees and Officers of the Fund" in the Statement of Additional Information names the Trustees and provides more information about them and the officers of the Fund. Although the Fund is not required by law to hold annual shareholder meetings, it may hold meetings from time to time on important matters, and shareholders have the right to call a meeting to remove a Trustee or to take other action described in the Trust's Declaration of Trust. The Board of Trustees has the power, without shareholder approval, to divide unissued shares of the Fund into two or more classes. Each class has its own dividends and distributions, and pays certain expenses which may be different for the different classes. Each class may have a different net asset value. The Board has done so, and the Fund currently has two classes of shares, Class A and Class B. Each share has one vote at shareholder meetings, with fractional shares voting proportionally. Only shares of a class vote together on matters that affect that class alone. Shares are freely transferrable. The Manager and Its Affiliates. Since March 28, 1991, the Fund has been managed by the Manager, which handles its day-to-day business. The Manager carries out its duties, subject to the policies established by the Board of Trustees, under an Investment Advisory Agreement which states the Manager's responsibilities and its fees, and describes the expenses that the Fund pays to conduct its business. The Manager has entered into a contract with Concert Capital Management, Inc. ("Concert Capital"), an indirect wholly-owned subsidiary of Massachusetts Mutual Life Insurance Company, to act as the Fund's Sub-Adviser. The Sub-Adviser is responsible for choosing the Fund's investments and its duties and responsibilities are set forth in the contract with the Manager. The Manager, not the Fund, pays the Sub-Adviser. The Manager has operated as an investment adviser since 1959. The Manager and its affiliates currently manage investment companies, including other OppenheimerFunds, with assets of more than $27 billion as of December 31, 1993, and with more than 1.8 million shareholder accounts. The Manager is owned by Oppenheimer Acquisition Corp., a holding company that is owned in part by senior officers of the Manager and controlled by MassMutual. The Sub-Adviser was created by MassMutual in 1982 and is provided business services by it. The Sub-Adviser and MassMutual advise investment companies and institutional clients. - Portfolio Manager. The Portfolio Manager of the Fund (who is also a Vice President of the Fund) is David B. Salerno, a Managing Director of the Sub-Adviser. He has been responsible for the day-to-day management of the Fund's portfolio since its inception in 1982. Mr. Salerno also serves as a Senior Vice President of MML Series Investment Fund. - Fees and Expenses. Under the Investment Advisory Agreement, the Fund pays the Manager the following annual fees, which decline on additional assets as the Fund grows: 0.75% of the first $100 million of the Fund's average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, and 0.66% of net assets in excess of $500 million. The Fund's management fee for its last fiscal year was 0.75% of average annual net assets for Class A shares and 0.75% for Class B shares. Under the Sub-Advisory Agreement, the Manager pays the Sub- Advisor the following annual fees, which decline on additional assets as the Fund grows: 0.40% of the first $50 million of the Fund's average annual net assets and 0.20% of net assets in excess of $50 million. The Fund pays expenses related to its daily operations, such as custodian fees, Trustees' fees, transfer agency fees, legal and auditing costs. Those expenses are paid out of the Fund's assets and are not paid directly by shareholders. However, those expenses reduce the net asset value of shares, and therefore are indirectly borne by shareholders through their investment. More information about the investment advisory agreement and the other expenses paid by the Fund is contained in the Statement of Additional Information. There is also information about the Fund's brokerage policies and practices in "Brokerage Policies of the Fund" in the Statement of Additional Information. That section discusses how brokers and dealers are selected for the Fund's portfolio transactions. The Fund usually uses brokers when buying portfolio securities. When deciding which brokers to use, the Investment Advisory Agreement allows the Manager to consider whether brokers have sold shares of the Fund or any other funds for which the Manager or the Sub-Adviser or their affiliates exercise investment discretion. - The Distributor. The Fund's shares are sold through dealers and brokers that have a sales agreement with Oppenheimer Funds Distributor, Inc., a subsidiary of the Manager that acts as the Distributor. The Distributor also distributes the shares of other mutual funds managed by the Manager (the "OppenheimerFunds") and is sub- distributor for funds managed by a subsidiary of the Manager. - The Transfer Agent. The Fund's transfer agent is Oppenheimer Shareholder Services, a division of the Manager, which acts as the shareholder servicing agent for the Fund and the other OppenheimerFunds on an "at-cost" basis. Shareholders should direct inquiries about their accounts to the Transfer Agent at the address and toll-free numbers shown below in this Prospectus or on the back cover. Performance of the Fund Explanation of Performance Terminology. The Fund uses certain terms to illustrate its performance. These terms are used to show the performance of each class of shares separately, because the performance of each class of shares will usually be different, as a result of the different kinds of expenses each class bears. This performance information may be useful to help you see how well your investment has done and to compare it to other funds or market indices, as we have done below. It is important to understand that the Fund's total returns represent past performance and should not be considered to be predictions of future returns or performance. This performance data is described below, but more detailed information about how total returns are calculated is contained in the Statement of Additional Information, which also contains information about other ways to measure and compare the Fund's performance. The Fund's investment performance will vary, depending on market conditions, the composition of the portfolio, expenses and which class of shares you purchase. - Total Returns. There are different types of "total returns" used to measure the Fund's performance. Total return is the change in value of a hypothetical investment in the Fund over a given period, assuming that all dividends and capital gains distributions are reinvested in additional shares. The cumulative total return measures the change in value over the entire period (for example, ten years). An average annual total return shows the average rate of return for each year in a period that would produce the cumulative total return over the entire period. However, average annual total returns do not show the Fund's actual year- by-year performance. When total returns are quoted for Class A shares, they reflect the payment of the maximum initial sales charge. Total returns may also be quoted "at net asset value," without considering the effect of the sales charge, and those returns would be reduced if sales charges were deducted. When total returns are shown for a one-year period for Class B shares, they reflect the effect of the contingent deferred sales charge. They may be also shown based just on the change in net asset value, without considering the effect of the contingent deferred sales charge. How Has the Fund Performed? Below is a discussion by the Manager of the Fund's performance during its last fiscal year ended December 31, 1993, followed by a graphical comparison of the Fund's performance to an appropriate broad-based market index. - Management's Discussion of Performance. Throughout most of 1993 the U.S. economy continued to grow slowly and interest rates declined steadily. In that environment, the Manager identified opportunities for growth by investing in high-quality companies that were in the process of restructuring their operations to focus on core businesses. The Fund has realized substantial gains from its investments in value stocks -- stocks whose prices have dropped below their perceived normal valuations and holding them until the Manager believes they have fully realized their true value. - Comparing the Fund's Performance to the Market. The chart below shows the performance of a hypothetical $10,000 investment in each Class of shares of the Fund held until December 31, 1993; in the case of Class A shares, since inception of the class on December 26, 1986, and in the case of Class B shares, from the inception of the Class on May 1, 1993, with all dividends and capital gains distributions reinvested in additional shares. The graph reflects the deduction of the 5.75% maximum initial sales charge on Class A shares and the maximum 5% contingent deferred sales charge on Class B shares. Because the Fund invests in equity securities of well established companies, the Fund's performance is compared to the performance of the S&P 500 Index, an unmanaged index of 500 widely-held common stocks traded on the New York and American Stock Exchanges and the over-the-counter market. It is widely recognized as a general measure of stock market performance. It includes a factor for the reinvestment of dividends but does not reflect expenses or taxes. Index performance reflects reinvestment of income but not capital gains or transaction costs, and none of the data below shows the effect of taxes. Also, the Fund's performance data reflects the effect of Fund business and operating expenses. While index comparisons may be useful to provide a benchmark for the Fund's performance, it must be noted that the Fund's investments are not limited to the securities in any one index and the index data does not reflect any assessment of the risk of the investments included in the index. Oppenheimer Value Stock Fund Comparison of Change in Value of $10,000 Hypothetical Investment to S&P 500 Index (Graph) Past Performance is not predictive of future performance. Oppenheimer Value Stock Fund Average Annual Total Return at 12/31/93 1 Year 5 Year Life* ------ ------ ----- Class A: 2.70% 11.10% 9.92% Cumulative Total Return at 12/31/93 Class B: -0.37%** _____________________________ * The Fund (Class A shares) began operations on 12/22/86 ** Class B shares of the Fund first publicly offered on 5/1/93 ABOUT YOUR ACCOUNT How to Buy Shares Classes of Shares. The Fund offers investors two different classes of shares. The different classes of shares represent investments in the same portfolio of securities but are subject to different expenses and will likely have different share prices. - Class A Shares. If you buy Class A shares, you pay an initial sales charge (on investments up to $1 million). If you purchase Class A shares as part of an investment of at least $1 million in shares of one or more OppenheimerFunds, and you sell any of those shares within 18 months after your purchase, you will pay a contingent deferred sales charge, which will vary depending on the amount you invested. - Class B Shares. If you buy Class B shares, you pay no sales charge at the time of purchase, but if you sell your shares within six years, you will normally pay a contingent deferred sales charge that varies depending on how long you own your shares. Which Class of Shares Should You Choose? Once you decide that the Fund is an appropriate investment for you, the decision as to which class of shares is better suited to your needs depends on a number of factors which you should discuss with your financial advisors: - How Much Do You Plan To Invest? If you plan to invest a substantial amount, the reduced sales charges available for larger purchases of Class A shares may be more beneficial to you, and for purchases over $1 million, the contingent deferred sales charge on Class A shares may be more beneficial. The Distributor will not accept any order for $1 million or more for Class B shares on behalf of a single investor for that reason. - How Long Do You Expect To Hold Your Investment? While future financial needs cannot be predicted with certainty, investors who prefer not to pay an initial sales charge and who plan to hold their shares for more than five years might consider Class B shares. Investors who plan to redeem shares before the end of five years might prefer Class A shares. - Are There Differences In Account Features That Matter To You? Because some account features may not be available for Class B shareholders, such as checkwriting, you should carefully review how you plan to use your investment account before deciding which class of shares is better for you. Additionally, the dividends payable to Class B shareholders will be reduced by the additional expenses borne solely by that class, such as the asset-based sales charge to which Class B shares are subject, as described below and in the Statement of Additional Information. - How Does It Affect Payments To My Broker? A salesperson or any other person who is entitled to receive compensation for selling Fund shares may receive different compensation for selling one class than for selling another class. It is important that investors understand that the purpose of the contingent deferred sales charge and asset-based sales charge for Class B shares is the same as the purpose of the front-end sales charge on sales of Class A shares. How Much Must You Invest? You can open a Fund account with a minimum initial investment of $1,000 and make additional investments at any time with as little as $25. There are reduced minimum investments under special investment plans: - With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7) custodial plans and military allotment plans, you can make initial and subsequent investments for as little as $25; and subsequent purchases of at least $25 can be made by telephone through AccountLink. - Under pension and profit-sharing plans and Individual Retirement Accounts (IRAs), you can make an initial investment of as little as $250 (if your IRA is established under an Asset Builder Plan, the $25 minimum applies), and subsequent investments may be as little as $25. - There is no minimum investment requirement if you are buying shares by reinvesting dividends from the Fund or other OppenheimerFunds (a list of them appears in the Statement of Additional Information, or you can ask your dealer or call the Transfer Agent), or by reinvesting distributions from unit investment trusts that have made arrangements with the Distributor. How Are Shares Purchased? You can buy shares several ways -- through any dealer, broker or financial institution that has a sales agreement with the Distributor, or directly through the Distributor, or automatically from your bank account through an Asset Builder Plan under the OppenheimerFunds AccountLink service. When you buy shares, be sure to specify Class A or Class B shares. If you do not choose, your investment will be made in Class A shares. - Buying Shares Through Your Dealer. Your dealer will place your order with the Distributor on your behalf. - Buying Shares Through the Distributor. Complete an OppenheimerFunds New Account Application and return it with a check payable to "Oppenheimer Funds Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you don't list a dealer on the application, the Distributor will act as your agent in buying the shares. - Buying Shares Through OppenheimerFunds AccountLink. You can use AccountLink to link your Fund account with an account at a U.S. bank or other financial institution that is an Automated Clearing House (ACH) member, to transmit funds electronically to purchase shares, to send redemption proceeds, and to transmit dividends and distributions. Shares are purchased for your account on the regular business day the Distributor is instructed by you to initiate the ACH transfer to buy shares. You can provide those instructions automatically, under an Asset Builder Plan, described below, or by telephone instructions using OppenheimerFunds PhoneLink, also described below. You must request AccountLink privileges on the application or dealer settlement instructions used to establish your account. Please refer to "AccountLink," below for more details. - At What Price Are Shares Sold? Shares are sold at the public offering price based on the net asset value that is next determined after the Distributor receives the purchase order in Denver. In most cases, to receive that day's offering price, the Distributor must receive your order by 4:00 P.M., New York time (all references to time in this Prospectus mean "New York time."). The net asset value of each class of shares is determined as of that time on each day The New York Stock Exchange is open (which is a "regular business day"). If you buy shares through a dealer, the dealer must receive your order by 4:00 P.M., on a regular business day and transmit it to the Distributor so that it is received before the Distributor's close of business that day, which is normally 5:00 P.M. The Distributor may reject any purchase order for the Fund's shares, in its sole discretion. - Asset Builder Plans. You may purchase shares of the Fund (and up to four other OppenheimerFunds) automatically each month from your account at a bank or other financial institution under an Asset Builder Plan with AccountLink. Details are on the Application and in the Statement of Additional Information. 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, where purchases are not subject to an initial sales charge, the offering price may be net asset value. In some cases, reduced sales charges may be available, as described below. When you invest, the Fund receives the net asset value for your account. The sales charge varies depending on the amount of your purchase and a portion may be retained by the Distributor and allocated to your dealer. The current sales charge rates and commissions paid to dealers and brokers are as follows:
Front-End Front-End Sales Charge Sales Charge Commission as Percentage as Approximate as Percentage of Offering Percentage of of Offering Amount of Purchase Price Amount Invested Price - ------------------ ------------- --------------- ------------- Less than $25,000 5.75% 6.10% 4.75% $25,000 or more but less than $50,000 5.50% 5.82% 4.75% $50,000 or more but less than $100,00 4.75% 4.99% 4.00% $100,000 or more but less than $250,000 3.75% 3.90% 3.00% $250,000 or more but less than $500,000 2.50% 2.56% 2.00% $500,000 or more but less than $1 million 2.00% 2.04% 1.60% - ------------------------ The Distributor reserves the right to reallow the entire commission to dealers. If that occurs, the dealer may be considered an "underwriter" under Federal securities laws.
- Class A Contingent Deferred Sales Charge. There is no initial sales charge on purchases of Class A shares of any one or more OppenheimerFunds aggregating $1 million or more. However, the Distributor pays dealers of record commissions on such purchases in an amount equal to the sum of 1.0% of the first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of share purchases over $5 million. However, that commission will be paid only on the amount of those purchases in excess of $1 million that were not previously subject to a front-end sales charge and dealer commission. If you redeem any of those shares within 18 months of the end of the calendar month of their purchase, a contingent deferred sales charge (called the "Class A contingent deferred sales charge") will be deducted from the redemption proceeds. That sales charge will be equal to 1.0% of the aggregate net asset value of either (1) the redeemed shares (not including shares purchased by reinvestment of dividends or capital gain distributions) or (2) the original cost of the shares, whichever is less. However, the Class A contingent deferred sales charge will not exceed the aggregate commissions the Distributor paid to your dealer on all Class A shares of all OppenheimerFunds you purchased subject to the Class A contingent deferred sales charge. In determining whether a contingent deferred sales charge is payable, the Fund will first redeem shares that are not subject to the sales charge, including shares purchased by reinvestment of dividends and capital gains, and then will redeem other shares in the order that you purchased them. The Class A contingent deferred sales charge is waived in certain cases described in "Waivers of Class A Sales Charges" below. No Class A contingent deferred sales charge is charged on exchanges of shares under the Fund's Exchange Privilege (described below). However, if the shares acquired by exchange are redeemed within 18 months of the end of the calendar month of the purchase of the exchanged shares, the sales charge will apply. - Special Arrangements With Dealers. The Distributor may advance up to 13 months' commissions to dealers that have established special arrangements with the Distributor for Asset Builder Plans for their clients. Dealers whose sales of Class A shares of OppenheimerFunds (other than money market funds) under OppenheimerFunds-sponsored 403(b)(7) custodial plans exceed $5 million per year (calculated per quarter), will receive monthly one-half of the Distributor's retained commissions on those sales, and if those sales exceed $10 million per year, those dealers will receive the Distributor's entire retained commission on those sales. The Distributor sponsors an annual sales conference to which a dealer firm is eligible to send, with a guest, a registered representative who sells more than $2.5 million of Class A shares of OppenheimerFunds (other than money market funds) in a calendar year, or the dealer may, at its option, receive the equivalent cash value of that award as additional commission. Reduced Sales Charges for Class A Share Purchases. You may be eligible to buy Class A shares at reduced sales charge rates in one or more of the following ways: - Right of Accumulation. You and your spouse can cumulate Class A shares you purchase for your own accounts, or jointly, or on behalf of your children who are minors, under trust or custodial accounts. A fiduciary can cumulate shares purchased for a trust, estate or other fiduciary account (including one or more employee benefit plans of the same employer) that has multiple accounts. Additionally, you can cumulate current purchases of Class A shares of the Fund and other OppenheimerFunds with Class A shares of OppenheimerFunds you previously purchased subject to a sales charge, provided that you still hold your investment in one of the OppenheimerFunds; the value of those shares will be based on the greater of the amount you paid for the shares or their current value (at offering price). The OppenheimerFunds are listed in "Reduced Sales Charges" in the Statement of Additional Information, or a list can be obtained from the Transfer Agent. The reduced sales charge will apply only to current purchases and must be requested when you buy your shares. - Letter of Intent. Under a Letter of Intent, you may purchase Class A shares of the Fund and other OppenheimerFunds during a 13-month period at the reduced sales charge rate that applies to the aggregate amount of the intended purchases, including purchases made up to 90 days before the date of the Letter. More information is contained in the Application and in "Reduced Sales Charges" in the Statement of Additional Information. - Waivers of Class A Sales Charges. No sales charge is imposed on sales of Class A shares to the following investors: (1) the Manager or its affiliates; (2) present or former officers, directors, trustees and employees (and their "immediate families" as defined in "Reduced Sales Charges" in the Statement of Additional Information) of the Fund, the Manager and its affiliates, and retirement plans established by them for their employees; (3) registered management investment companies, or separate accounts of insurance companies having an agreement with the Manager or the Distributor for that purpose; (4) 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; (5) employees and registered representatives (and their spouses) of dealers or brokers described above or financial institutions that have entered into sales arrangements with such dealers or brokers (and are identified to the Distributor) or with the Distributor; the purchaser must certify to the Distributor at the time of purchase that the purchase is for the purchaser's own account (or for the benefit of such employee's spouse or minor children); (6) dealers, brokers or registered investment advisers that have entered into an agreement with the Distributor providing specifically for the use of shares of the Fund in particular investment products made available to their clients. Additionally, no sales charge is imposed on shares that are (a) issued in plans of reorganization, such as mergers, asset acquisitions and exchange offers, to which the Fund is a party or (b) purchased by the reinvestment of loan repayments by a participant in a retirement plan for which the Manager or its affiliates acts as sponsor, or (c) purchased by the reinvestment of dividends or other distributions reinvested from the Fund or other OppenheimerFunds (other than the Cash Reserves Funds) or unit investment trusts for which reinvestment arrangements have been made with the Distributor. There is a further discussion of this policy in "Reduced Sales Charges" in the Statement of Additional Information. The Class A contingent deferred sales charge is also waived if shares are redeemed in the following cases: (1) retirement distributions or loans to participants or beneficiaries from qualified retirement plans, deferred compensation plans or other employee benefit plans ("Retirement Plans"), (2) returns of excess contributions made to Retirement Plans, (3) Automatic Withdrawal Plan payments that are limited to no more than 12% of the original account value annually, and (4) involuntary redemptions of shares by operation of law or under the procedures set forth in the Fund's Declaration of Trust or adopted by the Board of Trustees. - Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class A shares to reimburse the Distributor for a portion of its costs incurred in connection with the personal service and maintenance of accounts that hold Class A shares. Reimbursement is made quarterly at an annual rate that may not exceed 0.25% of the average annual net assets of Class A shares of the Fund. The Distributor uses all of those fees to compensate dealers, brokers, banks and other financial institutions quarterly for providing personal service and maintenance of accounts of their customers that hold Class A shares and to reimburse itself (if the Fund's Board of Trustees authorizes such reimbursements, which it has not yet done) for its other expenditures under the Plan. Services to be provided include, among others, answering customer inquiries about the Fund, assisting in establishing and maintaining accounts in the Fund, making the Fund's investment plans available and providing other services at the request of the Fund or the Distributor. Payments are made by the Distributor quarterly at an annual rate not to exceed 0.25% of the average annual net assets of Class A shares held in accounts of the dealer or its customers. The payments under the Plan increase the annual expenses of Class A shares. For more details, please refer to "Distribution and Service Plans" in the Statement of Additional Information. Class B Shares. Class B shares are sold at net asset value per share without an initial sales charge. However, if Class B shares are redeemed within 6 years of their purchase, a contingent deferred sales charge will be deducted from the redemption proceeds. That sales charge will not apply to shares purchased by the reinvestment of dividends or capital gains distributions. The charge will be assessed on the lesser of the net asset value of the shares at the time of redemption or the original purchase price. The contingent deferred sales charge is not imposed on the amount of your account value represented by the increase in net asset value over the initial purchase price (including increases due to the reinvestment of dividends and capital gains distributions). The Class B contingent deferred sales charge is paid to the Distributor to reimburse its expenses of providing distribution-related services to the Fund in connection with the sale of Class B shares. To determine whether the contingent deferred sales charge applies to a redemption, the Fund redeems shares in the following order: (1) shares acquired by reinvestment of dividends and capital gains distributions, (2) shares held for over 6 years, and (3) shares held the longest during the 6-year period. The amount of the contingent deferred sales charge will depend on the number of years since you invested and the dollar amount being redeemed, according to the following schedule: Contingent Deferred Sales Charge Years Since Purchase Payment on Redemptions in that Year Was Made (As % of Amount Subject to Charge) - ---------------------------- ---------------------------------- 0 - 1 5.0% 1 - 2 4.0% 2 - 3 3.0% 3 - 4 3.0% 4 - 5 2.0% 5 - 6 1.0% 6 and following None In the table, a "year" is a 12-month period. All purchases are considered to have been made on the first regular business day of the month in which the purchase was made. - Waivers of Class B Sales Charge. The Class B contingent deferred sales charge will be waived if the shareholder requests it for any of the following redemptions: (1) distributions to participants or beneficiaries from Retirement Plans, if the distributions are made (a) under an Automatic Withdrawal Plan after the participant reaches age 59-1/2, as long as the payments are no more than 10% of the account value annually (measured from the date the Transfer Agent receives the request), or (b) following the death or disability (as defined in the Internal Revenue Code) of the participant or beneficiary; (2) redemptions from accounts other than Retirement Plans following the death or disability of the shareholder (you must provide evidence of a determination of disability by the Social Security Administration), and (3) returns of excess contributions to Retirement Plans. The contingent deferred sales charge is also waived on Class B shares in the following cases: (i) shares sold to the Manager or its affiliates; (ii) 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; (iii) shares issued in plans of reorganization to which the Fund is a party; and (iv) shares redeemed in involuntary redemptions as described above. Further details about this policy are contained in "Reduced Sales Charges" in the Statement of Additional Information. - Automatic Conversion of Class B Shares. 72 months after you purchase Class B shares, those shares will automatically convert to Class A shares. This conversion feature relieves Class B shareholders of the asset-based sales charge that applies to Class B shares under the Class B Distribution Plan, described below. The conversion is based on the relative net asset value of the two classes, and no sales load or other charge is imposed. When Class B shares convert, any other Class B shares that were acquired by the reinvestment of dividends and distributions on the converted shares will also convert to Class A shares. The conversion feature is subject to the continued availability of a tax ruling described in "Alternative Sales Arrangements - Class A and Class B Shares" in the Statement of Additional Information. - Distribution and Service Plan for Class B Shares. The Fund has adopted a Distribution and Service Plan for Class B shares to compensate the Distributor for its services and costs in distributing Class B shares and servicing accounts. Under the Plan, the Fund pays the Distributor an annual "asset-based sales charge" of 0.75% per year on Class B shares that are outstanding for 6 years or less. The Distributor also receives a service fee of 0.25% per year. Both fees are computed on the average annual net assets of Class B shares, determined as of the close of each regular business day. The asset-based sales charge allows investors to buy Class B shares without a front-end sales charge while allowing the Distributor to compensate dealers that sell Class B shares. The Distributor uses the service fee to compensate dealers for providing personal services for accounts that hold Class B shares. Those services are similar to those provided under the Class A Service Plan, described above. The asset-based sales charge and service fees increase Class B expenses by up to 1.00% of average net assets per year. The Distributor pays the 0.25% service fee to dealers in advance for the first year after Class B shares have been sold by the dealer. After the shares have been held for a year, the Distributor pays the fee on a quarterly basis. The Distributor pays sales commissions of 3.75% of the purchase price to dealers from its own resources at the time of sale. The Distributor retains the asset-based sales charge to recoup the sales commissions it pays, the advances of service fee payments it makes, and its financing costs. Because the Distributor's actual expenses in selling Class B shares may be more than payments it receives from contingent deferred sales charges collected on redeemed shares and from the Fund under the Disstribution and Service Plan for Class B shares, those expenses may be carried over and paid in future years. At December 31, 1993, the end of the Plan year, the Distributor had incurred unreimbursed expenses under the Plan of $219,470 (equal to 4.3% of the Fund's net assets represented by Class B shares on that date), which have been carried over into the present Plan year. If the Plan is terminated by the Fund, the Board of Trustees may allow the Fund to continue payments of the asset-based sales charge to the Distributor for certain expenses it incurred before the Plan was terminated. Special Investor Services AccountLink. OppenheimerFunds AccountLink links your Fund account to your account at your bank or other financial institution to enable you to send money electronically between those accounts to perform a number of types of account transactions, including purchases of shares by telephone (either through a service representative or by PhoneLink, described below), automatic investments under Asset Builder Plans, and sending dividends and distributions or Automatic Withdrawal Plan payments directly to your bank account. Please refer to the Application for details or call the Transfer Agent for more information. AccountLink privileges must be requested on the Application you use to buy shares, or on your dealer's settlement instructions if you buy your shares through your dealer. After your account is established, you can request AccountLink privileges on signature-guaranteed instructions to the Transfer Agent. AccountLink privileges will apply to each shareholder listed in the registration on your account as well as to your dealer representative of record unless and until the Transfer Agent receives written instructions terminating or changing those privileges. After you establish AccountLink for your account, any change of bank account information must be made by signature-guaranteed instructions to the Transfer Agent signed by all shareholders who own the account. - Using AccountLink to Buy Shares. Purchases may be made by telephone only after your account has been established. To purchase shares in amounts up to $250,000 through a telephone representative, call the Distributor at 1-800-852-8457. The purchase payment will be debited from your bank account. - PhoneLink. PhoneLink is the OppenheimerFunds automated telephone system that enables shareholders to perform a number of account transactions automatically using a touch-tone phone. PhoneLink may be used on already-established Fund accounts after you obtain a Personal Identification Number (PIN), by calling the special PhoneLink number: 1- 800-533-3310. - Purchasing Shares. You may purchase shares in amounts up to $100,000 by phone, by calling 1-800-533-3310. You must have established AccountLink privileges to link your bank account with the Fund, to pay for these purchases. - Exchanging Shares. With the OppenheimerFunds Exchange Privilege, described below, you can exchange shares automatically by phone from your Fund account to another OppenheimerFunds account you have already established by calling the special PhoneLink number. Please refer to "How to Exchange Shares," below, for details. - Selling Shares. You can redeem shares by telephone automatically by calling the PhoneLink number and the Fund will send the proceeds directly to your AccountLink bank account. Please refer to "How to Sell Shares," below for details. Automatic Withdrawal and Exchange Plans. The Fund has several plans that enable you to sell shares automatically or exchange them to another OppenheimerFunds account on a regular basis: - Automatic Withdrawal Plans. If your Fund account is $5,000 or more, you can establish an Automatic Withdrawal Plan to receive payments of at least $50 on a monthly, quarterly, semi-annual or annual basis. The checks may be sent to you or sent automatically to your bank account on AccountLink. You may even set up certain types of withdrawals of up to $1,500 per month by telephone. You should consult the Application and Statement of Additional Information for more details. - Automatic Exchange Plans. You can authorize the Transfer Agent to exchange an amount you establish in advance automatically for shares of up to five other OppenheimerFunds on a monthly, quarterly, semi-annual or annual basis under an Automatic Exchange Plan. The minimum purchase for each other OppenheimerFunds account is $25. These exchanges are subject to the terms of the Exchange Privilege, described below. Reinvestment Privilege. If you redeem some or all of your Fund shares, you have up to 6 months to reinvest all or part of the redemption proceeds in Class A shares of the Fund or other OppenheimerFunds without paying sales charge. This privilege applies to Class A shares that you sell, and Class B shares on which you paid a contingent deferred sales charge when you redeemed them. You must be sure to ask the Distributor for this privilege when you send your payment. Please consult the Statement of Additional Information for more details. Retirement Plans. Fund shares are available as an investment for your retirement plans. If you participate in a plan sponsored by your employer, the plan trustee or administrator must make the purchase of shares for your retirement plan account. The Distributor offers a number of different retirement plans that can be used by individuals and employers: - Individual Retirement Accounts including rollover IRAs, for individuals and their spouses - 403(b)(7) Custodial Plans for employees of eligible tax-exempt organizations, such as schools, hospitals and charitable organizations - SEP-IRAs and SAR-SEPs (Simplified Employee Pension Plans) for small business owners or people with income from self-employment - Pension and Profit-Sharing Plans for self-employed persons and small business owners Please call the Distributor for the OppenheimerFunds plan documents, which contain important information and applications. How to Sell Shares You can arrange to take money out of your account on any regular business day by selling (redeeming) some or all of your shares. Your shares will be sold at the next net asset value calculated after your order is received and accepted by the Transfer Agent. The Fund offers you a number of ways to sell your shares: in writing or by telephone. You can also set up Automatic Withdrawal Plans to redeem shares on a regular basis, as described above. If you have questions about any of these procedures, and especially if you are redeeming shares in a special situation, such as due to the death of the owner, or from a retirement plan, please call the Transfer Agent first, at 1-800-525-7048, for assistance. - Retirement Accounts. To sell shares in an OppenheimerFunds retirement account in your name, call the Transfer Agent for a distribution request form. There are special income tax withholding requirements for distributions from retirement plans and you may be required to submit a Withholding form with your request to avoid delay. If your retirement plan account is held for you by your employer, you must arrange for the distribution request to be sent by the plan administrator or trustee. There are additional details in the Statement of Additional Information. - Certain Requests Require a Signature Guarantee. To protect you and the Fund from fraud, certain redemption requests must be in writing and must include a signature guarantee in the following situations (there may be other situations also requiring a signature guarantee): - You wish to redeem more than $50,000 worth of shares and receive a check - The check is not payable to all shareholders listed on the account statement - The check is not sent to the address of record on your statement - Shares are being transferred to a Fund account with a different owner or name - Shares are redeemed by someone other than the owners (such as an Executor) - Where Can I Have My Signature Guaranteed? The Transfer Agent will accept a guarantee of your signature by a number of financial institutions, including: a U.S. bank, trust company, credit union or savings association, or by a foreign bank that has a U.S. correspondent bank, or by a U.S. registered dealer or broker in securities, municipal securities or government securities, or from a U.S. national securities exchange, a registered securities association or a clearing agency. If you are signing as a fiduciary or on behalf of a corporation, partnership or other business, you must also include your title in the signature. Selling Shares by Mail. Write a "letter of instructions" that includes: - Your name - The Fund's name - Your Fund account number (from your statement) - The dollar amount or number of shares to be redeemed - Any special payment instructions - Any share certificates for the shares you are selling, and - Any special requirements or documents requested by the Transfer Agent to assure proper authorization of the person asking to sell shares. Use the following address for requests by mail: Oppenheimer Shareholder Services P.O. Box 5270, Denver, Colorado 80217 Send courier or Express Mail requests to: Oppenheimer Shareholder Services 10200 E. Girard Avenue, Building D Denver, Colorado 80231 Selling Shares by Telephone. You and your dealer representative of record may also sell your shares by telephone. To receive the redemption price on a regular business day, your call must be received by the Transfer Agent by 4:00 P.M. You may not redeem shares held in an OppenheimerFunds retirement plan or under a share certificate by telephone. - To redeem shares through a service representative, call 1-800-852- 8457 - To redeem shares automatically on PhoneLink, call 1-800-533-3310 Whichever method you use, you may have a check sent to the address on the account, or, if you have linked your Fund account to your bank account on AccountLink, you may have the proceeds wired to that account. - Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed by telephone, once in each 7-day period. The check must be payable to all owners of record of the shares and must be sent to the address on the account. This service is not available within 30 days of changing the address on an account. - Telephone Redemptions Through AccountLink. There are no dollar limits on telephone redemption proceeds sent to a bank account designated when you establish AccountLink. Normally the ACH wire to your bank is initiated on the business day after the redemption. You do not receive dividends on the proceeds of the shares you redeemed while they are waiting to be wired. How to Exchange Shares Shares of the Fund may be exchanged for shares of certain OppenheimerFunds at net asset value per share at the time of exchange, without sales charge. A $5 service fee will be deducted from the fund account you are exchanging into to help defray administrative costs. That charge is waived for automated exchanges between already established accounts on PhoneLink described below. To exchange shares, you must meet several conditions: - Shares of the fund selected for exchange must be available for sale in your state of residence - The prospectuses of this Fund and the fund whose shares you want to buy must offer the exchange privilege - You must hold the shares you buy when you establish your account for at least 7 days before you can exchange them; after the account is open 7 days, you can exchange shares every regular business day - You must meet the minimum purchase requirements for the fund you purchase by exchange - Before exchanging into a fund, you should obtain and read its prospectus Shares of a particular class may be exchanged only for shares of the same class in the other OppenheimerFunds. For example, you can exchange Class A shares of this Fund only for Class A shares of another fund. At present, not all of the OppenheimerFunds offer the same classes of shares. If a fund has only one class of shares that does not have a class designation, they are "Class A" shares for exchange purposes. In some cases, sales charges may be imposed on exchange transactions. Certain OppenheimerFunds offer Class A shares and either Class B or Class C shares, and a list can be obtained by calling the Distributor at 1-800- 525-7048. Please refer to "How to Exchange Shares" in the Statement of Additional Information for more details about this policy. Exchanges may be requested in writing or by telephone: - Written Exchange Requests. Submit an OppenheimerFunds Exchange Request form, signed by all owners of the account. Send it to the Transfer Agent at the addresses listed in "How to Sell Shares." - Telephone Exchange Requests. Telephone exchange requests may be made either by calling a service representative at 1-800-852-8457 or by using PhoneLink for automated exchanges, by calling 1-800-533-3310. Telephone exchanges may be made only between accounts that are registered with the same names and address. Shares held under certificates may not be exchanged by telephone. You can obtain a list of eligible OppenheimerFunds in the Statement of Additional Information or by calling the Transfer Agent at 1-800-525- 7048. Exchanges of shares involve a redemption of the shares of the fund you own and a purchase of shares of the other fund. There are certain exchange policies you should be aware of: - Shares are normally redeemed from one fund and purchased from the other fund in the exchange transaction on the same regular business day on which the Transfer Agent receives an exchange request by 4:00 P.M. that is in proper form, but either fund may delay the purchase of shares of the fund you are exchanging into if it determines it would be disadvantaged by a same-day transfer of the proceeds to buy shares. For example, the receipt of multiple exchange requests from a dealer in a "market-timing" strategy might require the disposition of securities at a time or price disadvantageous to the Fund. - Because excessive trading can hurt fund performance and harm shareholders, the Fund reserves the right to refuse any exchange request that will disadvantage it, or to refuse multiple exchange requests submitted by a shareholder or dealer. - The Fund may amend, suspend or terminate the exchange privilege at any time. Although the Fund will attempt to provide you notice whenever it is reasonably able to do so, it may impose these changes at any time. - If the Transfer Agent cannot exchange all the shares you request because of a restriction cited above, only the shares eligible for exchange will be exchanged. Shareholder Account Rules and Policies - Net Asset Value Per Share is determined for each class of shares as of 4:00 P.M. each day The New York Stock Exchange is open by dividing the value of the Fund's net assets attributable to a class by the number of shares of that class that are outstanding. The Fund's Board of Trustees has established procedures to value the Fund's securities to determine net asset value. In general, securities values are based on market value. There are special procedures for valuing illiquid and restricted securities, securities for which market values cannot be readily obtained, and call options and hedging instruments. These procedures are described more completely in the Statement of Additional Information. - The offering of shares may be suspended during any period in which the determination of net asset value is suspended, and the offering may be suspended by the Board of Trustees at any time the Board believes it is in the Fund's best interest to do so. - Telephone Transaction Privileges for purchases, redemptions or exchanges may be modified, suspended or terminated by the Fund at any time. If an account has more than one owner, the Fund and the Transfer Agent may rely on the instructions of any one owner. Telephone privileges apply to each owner of the account and the dealer representative of record for the account unless and until the Transfer Agent receives cancellation instructions from an owner of the account. - The Transfer Agent will record any telephone calls to verify data concerning transactions and has adopted other procedures to confirm that telephone instructions are genuine, by requiring callers to provide tax identification numbers and other account data or by using PINs, and by confirming such transactions in writing. If the Transfer Agent does not use reasonable procedures it may be liable for losses due to unauthorized transactions, but otherwise it will not be liable for losses or expenses arising out of telephone instructions reasonably believed to be genuine. If you are unable to reach the Transfer Agent during periods of unusual market activity, you may not be able to complete a telephone transaction and should consider placing your order by mail. - Redemption or transfer requests will not be honored until the Transfer Agent receives all required documents in proper form. From time to time, the Transfer Agent in its discretion may waive certain of the requirements for redemptions stated in this Prospectus. - Dealers that can perform account transactions for their clients by participating in NETWORKING through the National Securities Clearing Corporation are responsible for obtaining their clients' permission to perform those transactions and are responsible to their clients who are shareholders of the Fund if the dealer performs any transaction erroneously. - The redemption price for shares will vary from day to day because the value of the securities in the Fund's portfolio fluctuates, and the redemption price, which is the net asset value per share, will normally be different for Class A and Class B shares. Therefore, the redemption value of your shares may be more or less than their original cost. - Payment for redeemed shares is made ordinarily in cash and forwarded by check or through AccountLink (as elected by the shareholder under the redemption procedures described above) within 7 days after the Transfer Agent receives redemption instructions in proper form, except under unusual circumstances determined by the Securities and Exchange Commission delaying or suspending such payments. 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 15 days from the date the shares were purchased. That delay may be avoided if you purchase shares by 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 $1,000 for reasons other than the fact that the market value of shares has dropped, and in some cases involuntary redemptions may be made to repay the Distributor for losses from the cancellation of share purchase orders. - Under unusual circumstances, shares of the Fund may be redeemed "in kind," which means that the redemption proceeds will be paid with securities from the Fund's portfolio. Please refer to the Statement of Additional Information for more details. - "Backup Withholding" of Federal income tax may be applied at the rate of 31% from dividends, distributions and redemption proceeds (including exchanges) if you fail to furnish the Fund a certified Social Security or taxpayer identification number when you sign your application, or if you violate Internal Revenue Service regulations on tax reporting of dividends. - The Fund does not charge a redemption fee, but if your dealer or broker handles your redemption, they may charge a fee. That fee can be avoided by redeeming your Fund shares directly through the Transfer Agent. Under the circumstances described in "How To Buy Shares," you may be subject to a contingent deferred sales charges when redeeming certain Class A and Class B shares. - To avoid sending duplicate copies of materials to households, the Fund will mail only one copy of each annual and semi-annual report and updated prospectus to shareholders having the same address on the Fund's records. However, each shareholder may call the Transfer Agent at 1-800- 525-7048 to ask that copies of those materials be sent personally to that shareholder. Dividends, Capital Gains and Taxes Dividends. The Fund declares dividends separately for Class A and Class B shares from net investment income and pays such dividends to shareholders quarterly. It is expected that distributions paid with respect to Class A shares will generally be higher than for Class B shares because expenses allocable to Class B shares will generally be higher. Capital Gains. The Fund may make distributions annually in December out of any net short-term or long-term capital gains, and the Fund may make supplemental distributions of dividends and capital gains following the end of its fiscal year. Long-term capital gains will be separately identified in the tax information the Fund sends you after the end of the year. Short-term capital gains are treated as dividends for tax purposes. There can be no assurance that the Fund will pay any capital gains distributions in a particular year. Distribution Options. When you open your account, specify on your application how you want to receive your distributions. For OppenheimerFunds retirement accounts, all distributions are reinvested. For other accounts, you have four options: - Reinvest All Distributions In The Fund. You can elect to reinvest all dividends and long-term capital gains distributions in additional shares of the Fund. - Reinvest Capital Gains Only. You can elect to reinvest long-term capital gains in the Fund while receiving dividends by check or sent to your bank account on AccountLink. - Receive All Distributions In Cash. You can elect to receive a check for all dividends and long-term capital gains distributions or have them sent to your bank on AccountLink. - Reinvest Your Distributions In Another OppenheimerFunds Account. You can reinvest all distributions in another OppenheimerFunds account you have established. Taxes. If your account is not a tax-deferred retirement account, you should be aware of the following tax implications of investing in the Fund. Long-term capital gains are taxable as long-term capital gains when distributed to shareholders. Dividends paid from short-term capital gains and net investment income are taxable as ordinary income. Distributions are subject to federal income tax and may be subject to state or local taxes. Your distributions are taxable when paid, whether you reinvest them in additional shares or take them in cash. Every year the Fund will send you and the IRS a statement showing the amount of each taxable distribution you received in the previous year. - "Buying A Dividend": When a fund goes ex-dividend, its share price is reduced by the amount of the distribution. If you buy shares on or just before the ex-dividend date, or just before the Fund declares a capital gains distribution, you will pay the full price for the shares and then receive a portion of the price back as a taxable dividend or capital gain. - Taxes On Transactions: Share redemptions, including redemptions for exchanges, are subject to capital gains tax. A capital gain or loss is the difference between the price you paid for the shares and the price you received when you sold them. - Returns Of Capital: In certain cases distributions made by the Fund may be considered a non-taxable return of capital to shareholders. If that occurs, it will be identified in notices to shareholders. This information is only a summary of certain federal tax information about your investment. More information is contained in the Statement of Additional Information, and in addition you should consult with your tax adviser about the effect of an investment in the Fund on your particular tax situation. APPENDIX TO PROSPECTUS OF OPPENHEIMER VALUE STOCK FUND Graphic material included in Prospectus of Oppenheimer Value Stock Fund: "Comparison of Total Return of Oppenheimer Value Stock Fund with the S&P 500 Index - Change in Value of a $10,000 Hypothetical Investment" A linear graph will be included in the Prospectus of Oppenheimer Value Stock Fund (the "Fund") depicting the initial account value and subsequent account value of a hypothetical $10,000 investment in the Fund during each of the Fund's fiscal years since December 31, 1986 to the end of each of the Fund's most recently completed seven fiscal years (as to Class A shares) and since May 1, 1993 (as to Class B shares) and comparing such values with the same investments over the same time periods with the S&P 500 Index. Set forth below are the relevant data points that will appear on the linear graph. Additional information with respect to the foregoing, including a description of the S&P Index, is set forth in the Prospectus under "Fund Performance Information - Management's Discussion of Performance." Oppenheimer Fiscal Year Value Stock (Period) Ended Fund A S&P 500 Index - -------------- ----------- ------------- 12/22/86 $ 9,425 $10,000 12/31/86 9,258 9,936 12/31/87 9,360 10,458 12/31/88 10,820 12,189 12/31/89 13,193 16,045 12/31/90 12,991 15,546 12/31/91 16,268 20,272 12/31/92 17,831 21,815 12/31/93 19,430 24,009 Oppenheimer Fiscal Year Value Stock (Period) Ended Fund B(1) S&P 500 Index - -------------- ----------- ------------- 5/1/93 $10,000 $10,000 12/31/93 9,963 10,525 - ---------------------- (1) Class B shares of the Fund were first publicly offered on May 1, 1993. Oppenheimer Value Stock Fund 3410 South Galena Street, Denver, CO 80231 Telephone: 1-800-525-7048 Investment Adviser Oppenheimer Management Corporation Two World Trade Center New York, New York 10048-0203 Sub-Adviser Prospectus Concert Capital Management, Inc. 125 High Street Boston, Massachusetts 02110 Distributor OPPENHEIMER Oppenheimer Funds Distributor, Inc. Value Stock Fund Two World Trade Center New York, New York 10048-0203 Transfer and Shareholder Servicing Agent Oppenheimer Shareholder Services P.O. Box 5270 Denver, Colorado 80217 1-800-525-7048 Custodian of Portfolio Securities Dated May 1, 1994 The Bank of New York One Wall Street New York, New York 10015 Independent Auditors Deloitte & Touche 1560 Broadway Denver, Colorado 80202 Legal Counsel (OppenheimerFunds Logo) Myer, Swanson & Adams, P.C. 1600 Broadway Denver, Colorado 80202 No dealer, broker, salesperson or any other person has been authorized to give any information or to make any representations other than those contained in this Prospectus or the Statement of Additional Information, and if given or made, such information and representations must not be relied upon as having been authorized by the Fund, Oppenheimer Management Corporation, Oppenheimer Funds Distributor, Inc., Concert Capital Management, Inc., or any affiliate thereof. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby in any state to any person to whom it is unlawful to make such offer in such state. PR326 (5/94) * Printed on recycled paper) Oppenheimer Value Stock Fund 3410 South Galena Street, Denver, CO 80231 Telephone: 1-800-525-7048 Investment Adviser Oppenheimer Management Corporation Two World Trade Center New York, New York 10048-0203 Sub-Adviser Prospectus and Concert Capital Management, Inc. New Account Application 125 High Street Boston, Massachusetts 02110 Distributor OPPENHEIMER Oppenheimer Funds Distributor, Inc. Value Stock Fund Two World Trade Center New York, New York 10048-0203 Transfer and Shareholder Servicing Agent Oppenheimer Shareholder Services P.O. Box 5270 Denver, Colorado 80217 1-800-525-7048 Custodian of Portfolio Securities Dated May 1, 1994 The Bank of New York One Wall Street New York, New York 10015 Independent Auditors Deloitte & Touche 1560 Broadway Denver, Colorado 80202 Legal Counsel (OppenheimerFunds Logo) Myer, Swanson & Adams, P.C. 1600 Broadway Denver, Colorado 80202 No dealer, broker, salesperson or any other person has been authorized to give any information or to make any representations other than those contained in this Prospectus or the Statement of Additional Information, and if given or made, such information and representations must not be relied upon as having been authorized by the Fund, Oppenheimer Management Corporation, Oppenheimer Funds Distributor, Inc., Concert Capital Management, Inc., or any affiliate thereof. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby in any state to any person to whom it is unlawful to make such offer in such state. PR325 (5/94) * Printed on recycled paper) OPPENHEIMER VALUE STOCK FUND 3410 South Galena Street, Denver, Colorado 80231 1-800-525-7048 Statement of Additional Information dated May 1, 1994. This Statement of Additional Information of Oppenheimer Value Stock Fund is not a Prospectus. This document contains additional information about the Fund and supplements information in the Prospectus dated May 1, 1994. It should be read together with the Prospectus which may be obtained by writing to the Fund's Transfer Agent, Oppenheimer Shareholder Services, at P.O. Box 5270, Denver, Colorado 80217 or by calling the Transfer Agent at the toll-free number shown above. Contents Page About the Fund 2 Investment Objective and Policies 2 Other Investment Techniques and Strategies 4 Other Investment Restrictions 12 How the Fund is Managed 13 Organization and History 13 Trustees and Officers of the Fund 14 The Manager and Its Affiliates 16 Brokerage Policies of the Fund 19 Performance of the Fund 21 Distribution and Service Plans 23 About Your Account 25 How to Buy Shares 25 How to Sell Shares 31 How to Exchange Shares 35 Dividends, Capital Gains and Taxes 37 Additional Information About the Fund 38 Independent Auditors' Report 40 Financial Statements 41 ABOUT THE FUND Investment Objective and Policies Investment Policies and Strategies. The investment objective and policies of the Fund are discussed in the Prospectus. Set forth below is supplemental information about those policies and the types of securities in which the Fund invests, as well as the strategies the Fund may use to try to achieve its objective. Capitalized terms used in this Statement of Additional Information have the same meaning as those terms have in the Prospectus. The U.S. government obligations in which the Fund may invest as described in the Prospectus include U.S. Treasury bills, notes and bonds which are direct obligations of the U.S. government and debt obligations issued, assumed, guaranteed or sponsored by agencies or instrumentalities established under the authority of an Act of Congress, or obligations secured by such securities. The Fund may invest up to 5% of the value of its assets in warrants in an effort to build a position in the underlying common stocks and, of such 5%, no more than 2% may be invested in warrants that are not listed on the New York Stock Exchange or the American Stock Exchange. A warrant typically gives the holder the right to purchase underlying stock at a specified price for a designated period of time. Warrants may be a relatively volatile investment. The holder of a warrant takes the risk that the market price of the underlying stock may never equal or exceed the exercise price of the warrant. A warrant will expire without value if it is not exercised or sold during its exercise period. - Short-Term Debt Securities. The high-quality, short-term money market instruments the Fund may invest in to provide liquidity or for temporary defensive purposes include U.S. government obligations; commercial paper which at the date of the investment is rated A-1 or A-2 by Standard & Poor's Corporation ("Standard & Poor's") or P-1 or P-2 by Moody's Investors Service, Inc. ("Moody's") or, if unrated, is issued by companies having an outstanding debt issue currently rated at least A by Standard & Poor's or Moody's; short-term obligations of corporate issuers which at the date of investment are rated AAA or AA by Standard & Poor's or Aaa or Aa by Moody's; bank participation certificates, provided that at the date of investment each of the underlying loans is made to an issuer of securities rated at least A-2, AA or SP-2 by Standard & Poor's or P-2 or Aa by Moody's, and also provided that the underlying loans have a remaining maturity of one year or less; and certificates of deposit and bankers' acceptances of banks and savings and loan associations. - Securities of Foreign Governments and Companies. As stated in the Prospectus, the Fund may invest in debt obligations and equity securities (which may be dominated in U.S. dollars or non-U.S. currencies) issued or guaranteed by foreign corporations, and debt obligations of certain "supranational entities" (described below) and foreign governments or their agencies or instrumentalities. The percentage of the Fund's assets that will be allocated to foreign securities will vary depending on the relative yields of foreign and U.S. securities, the economies of foreign countries, the condition of such countries' financial markets, the interest rate climate of such countries and the relationship of such countries' currency to the U.S. dollar. These factors are judged on the basis of fundamental economic criteria (e.g., relative inflation levels and trends, growth rate forecasts, balance of payments status, and economic policies) as well as technical and political data. Investments in foreign securities offer potential benefits not available from investments solely in securities of domestic issuers, by offering the opportunity to invest in foreign issuers that appear to offer growth potential, or in foreign countries with economic policies or business cycles different from those of the U.S., or to reduce fluctuations in portfolio value by taking advantage of foreign bond or other markets that do not move in a manner parallel to U.S. markets. From time to time, U.S. government policies have discouraged certain investments abroad by U.S. investors, through taxation or other restrictions, and it is possible that such restrictions could be reimposed. Securities of foreign issuers that are represented by American depository receipts, or that are listed on a U.S. securities exchange, or are traded in the U.S. over-the-counter market are not considered "foreign securities," because they are not subject to many of the special considerations and risks (discussed below) that apply to foreign securities traded and held abroad. If the Fund's portfolio securities are held abroad, the countries in which such securities may be held and the sub-custodians holding them must be approved by the Fund's Board of Trustees under applicable SEC rules. - Risks of Investing in Foreign Securities. Investment in foreign securities involves considerations and risks not associated with investment in securities of U.S. issuers. For example, foreign issuers are not required to use generally-accepted accounting principles ("G.A.A.P."). If foreign securities are not registered under the Securities Act of 1933, the issuer does not have to comply with the disclosure requirements of the Securities Exchange Act of 1934. The values of foreign securities investments will be affected by incomplete or inaccurate information available as to foreign issuers, changes in currency rates, exchange control regulations or currency blockage, expropriation or nationalization of assets, application of foreign tax laws (including withholding taxes), changes in governmental administration or economic or monetary policy in the U.S. or abroad, or changed circumstances in dealings between nations. In addition, it is generally more difficult to obtain court judgments outside the United States. The values of foreign securities will be affected by changes in currency rates or exchange control regulations or currency blockage, application of foreign tax laws, including withholding taxes, changes in governmental administration or economic or monetary policy (in the U.S. or abroad) or changed circumstances in dealings between nations. Costs will be incurred in connection with conversions between various currencies. Foreign brokerage commissions are generally higher than commissions in the U.S., and foreign securities markets may be less liquid, more volatile and less subject to governmental regulation than in the U.S. Investments in foreign countries could be affected by other factors not generally thought to be present in the U.S., including expropriation or nationalization, confiscatory taxation and potential difficulties in enforcing contractual obligations, and could be subject to extended settlement periods. The obligations of foreign governmental entities may or may not be supported by the full faith and credit of a foreign government. Obligations of "supranational entities" include those of international organizations designated or supported by governmental entities to promote economic reconstruction or development and of international banking institutions and related government agencies. Examples include the International Bank for Reconstruction and Development (the "World Bank"), the European Coal and Steel Community, the Asian Development Bank and the Inter-American Development Bank. The governmental members, or "stockholders," usually make initial capital contributions to the supranational entity and in many cases are committed to make additional capital contributions if the supranational entity is unable to repay its borrowings. Each supranational entity's lending activities are limited to a percentage of its total capital (including "callable capital" contributed by members at the entity's call), reserves and net income. There is no assurance that foreign governments will be able or willing to honor their commitments. Because the Fund may purchase securities denominated in foreign currencies, a change in the value of any such currency against the U.S. dollar will result in a change in the U.S. dollar value of the Fund's assets and its income available for distribution. In addition, although a portion of the Fund's investment income may be received or realized in foreign currencies, the Fund will be required to compute and distribute its income in U.S. dollars, and absorb the cost of currency fluctuations. The values of foreign investments and the investment income derived from them may also be affected unfavorably by changes in currency exchange control regulations. Although the Fund will invest only in securities denominated in foreign currencies that at the time of investment do not have significant government-imposed restrictions on conversion into U.S. dollars, there can be no assurance against subsequent imposition of currency controls. In addition, the values of foreign securities will fluctuate in response to a variety of factors, including changes in U.S. and foreign interest rates. - Convertible Securities. While convertible securities are a form of debt security in many cases, their conversion feature (allowing conversion into equity securities) causes them to be regarded more as "equity equivalents" so that the rating assigned to the security has less impact on the investment decision than in the case of non-convertible fixed income securities. To determine whether convertible securities should be regarded as "equity equivalents," the Manager examines the following factors: (1) whether, at the option of the investor, the convertible security can be exchanged for a fixed number of shares of common stock of the issuer, (2) whether the issuer of the convertible securities has restated its earnings per share of common stock on a fully diluted basis (considering the effect of 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 common stock. Other Investment Techniques and Strategies - Options on Securities. Special risks are associated with options that are not traded on exchanges (i.e., those that are traded over-the- counter). Closing transactions in over-the-counter options are effected directly with a particular broker-dealer, rather than with an anonymous third party on an exchange. Unlike closing transactions effected on an exchange, a closing transaction of an over-the- counter option will not actually extinguish the original option unless both the original option transaction and the closing transaction are effected with the same broker- dealer. Therefore, in an over-the-counter option transaction, the Fund bears the risk that the broker-dealer effecting the closing transaction will fail to meet its obligations. Also, in some circumstances, the Fund may not be able to close an over-the-counter option. The Fund might then have to exercise the option, and bear transaction costs on the exercise, to realize any benefit from the option. If the Fund writes an over-the- counter call option that it cannot close, it will have to retain the underlying security until the option expires or is exercised. This would limit the Fund's ability to realize a gain or avoid a loss if the value of the underlying security changes while the option is still outstanding. Also, over-the-counter options are not subject to the protections afforded by the Options Clearing Corporation to purchasers of exchange-traded options. The staff of the Division of Investment Management of the Securities and Exchange Commission (the "SEC") has taken the position that the premiums that a fund pays for the purchase of over-the-counter options, and the value of securities used to cover over-the-counter options written by a fund, are illiquid securities. Accordingly, the Fund intends to enter into over-the-counter options transactions only with primary dealers in U.S. Government Securities and only pursuant to agreements that will assure that the Fund will at all times have the right to repurchase the option written by it from the dealer at a specified formula price. The Fund will treat the amount by which such formula price exceeds the intrinsic value of the option (i.e., the amount, if any, by which the market price of the underlying security exceeds the exercise price of the option) as an illiquid investment. It is the present policy of the Trust not to enter into any over-the-counter option transaction if, as a result, more than 15% of its net assets would be invested in (i) illiquid investments (determined under the foregoing formula) relating to such over-the-counter options written by the Fund, (ii) such over-the-counter options purchased by the Fund, (iii) securities which are not readily marketable, and (iv) repurchase agreements maturing in more than seven days. The Trustees have adopted a non-fundamental policy that the Fund may write covered call options or write covered put options with respect to not more than 5% of the value of its net assets. Similarly, the Fund may only purchase call options and put options with a value of up to 5% of its net assets. A fund's purpose in writing covered options is to realize greater income than would be realized on portfolio securities transactions alone. The writing of options involves certain risks. During the option period, the covered call writer has, in return for the premium on the option, given up the opportunity to profit from a price increase in the underlying securities above the exercise price, but, as long as its obligation as a writer continues, has retained the risk of loss should the price of the underlying security decline. A covered put writer assumes the risk that the market price for the underlying security will fall below the exercise price, in which case the writer could be required to purchase the security at a higher price than the then current market price of the security. In both cases, the writer has no control over the time when it may be required to fulfill its obligation as a writer of the option. Once an option writer has received an exercise notice, it cannot effect a closing purchase transaction in order to terminate its obligation under the option and must deliver or purchase the underlying securities at the exercise price. A fund may forego the benefits of appreciation on securities sold pursuant to call options or pay a higher price for securities acquired pursuant to put options. - Futures Contracts and Options on Futures Contracts. While futures will be traded to reduce certain risks, futures trading itself entails certain other risks. One risk arises due to the imperfect correlation between movements in the price of the futures contracts and movements in the price of the securities which are the subject of such contracts. In addition, the market price of futures contracts may be affected by certain factors, such as the closing out of futures contracts by investors through offsetting transactions in order to avoid margin deposit and maintenance requirements, and the participation of speculators in the futures market. Another risk is that there may not be a liquid secondary market for a given futures contract or at a given time, and in such event it may not be possible for the Fund to close a futures position. Finally, successful use of futures contracts by the Fund is subject to the ability of the Fund's sub-adviser, Concert Capital Management, Inc. ("Concert Capital"), to predict correctly movements in the direction of interest rates and other factors affecting markets for securities. Thus, while the Fund may benefit from the use of such contracts, the operation of these risk factors may result in a poorer overall performance than if it had not entered into any futures contracts. Positions taken in the futures markets are not normally held to maturity, but are instead liquidated through offsetting transactions which may result in a profit or a loss. While futures positions taken by the Fund will usually be liquidated in this manner, the Fund may instead make or take delivery of the underlying securities whenever it appears economically advantageous to do so. - Interest Rate Swap Transactions. Swap agreements entail both interest rate risk and credit risk. There is a risk that, based on movements of interest rates in the future, the payments made by the Fund under a swap agreement will have been greater than those received by it. Credit risk arises from the possibility that the counterparty will default. If the counterparty to an interest rate swap defaults, the Fund's loss will consist of the net amount of contractual interest payments that the Fund has not yet received. The Manager will monitor the creditworthiness of counterparties to the Fund's interest rate swap transactions on an ongoing basis. The Fund will enter into swap transactions with appropriate counterparties pursuant to master netting agreements. A master netting agreement provides that all swaps done between the Fund and the counterparty under the master agreement shall be regarded as parts of an integral agreement. If on any date amounts are payable in the same currency in respect of one or more swap transactions, the net amount payable on that date in that currency shall be paid. In addition, the master netting agreement may provide that if one party defaults generally or on one swap, the counterparty may terminate the swaps with that party. Under such agreements, if there is a default resulting in a loss to one party, the measure of that party's damages is calculated by reference to the average cost of a replacement swap with respect to each swap (i.e., the mark-to-market value at the time of the termination of each swap). The gains and losses on all swaps are then netted, and the result is the counterparty's gain or loss on termination. The termination of all swaps and the netting of gains and losses on termination is generally referred to as "aggregation." - Additional Information About Hedging Instruments and Their Use. The Fund's Custodian, or a securities depository acting for the Custodian, will act as the Fund's escrow agent, through the facilities of the Options Clearing Corporation ("OCC"), as to the investments on which the Fund has written options traded on exchanges or as to other acceptable escrow securities, so that no margin will be required for such transactions. OCC will release the securities on the expiration of the option or upon the Fund's entering into a closing transaction. An option position may be closed out only on a market which provides secondary trading for options of the same series, and there is no assurance that a liquid secondary market will exist for any particular option. When the Fund writes an over-the-counter ("OTC") option, it will enter into an arrangement with a primary U.S. Government securities dealer, which would establish a formula price at which the Fund would have the absolute right to repurchase that OTC option. That formula price would generally be based on a multiple of the premium received for the option, plus the amount by which the option is exercisable below the market price of the underlying security (that is, the extent to which the option "is in-the-money"). When the Fund writes an OTC option, it will treat as illiquid (for purposes of the limit on its assets that may be invested in illiquid securities, stated in the Prospectus) the mark-to- market value of any OTC option held by it. The Securities and Exchange Commission ("SEC") is evaluating whether OTC options should be considered liquid securities, and the procedure described above could be affected by the outcome of that evaluation. - Regulatory Aspects of Hedging Instruments. The Fund must operate within certain restrictions as to its long and short positions in Futures and options thereon under a rule (the "CFTC Rule") adopted by the Commodity Futures Trading Commission (the "CFTC") under the Commodity Exchange Act (the "CEA"), which excludes the Fund from registration with the CFTC as a "commodity pool operator" (as defined under the CEA) if the Fund complies with the CFTC Rule. Under these restrictions the Fund will not, as to any positions, whether short, long or a combination thereof, enter into Futures and options thereon for which the aggregate initial margins and premiums exceed 5% of the fair market value of its total assets, with certain exclusions as defined in the CFTC Rule. Under the restrictions, the Fund also must, as to its short positions, use Futures and options thereon solely for bona-fide hedging purposes within the meaning and intent of the applicable provisions of the CEA. Transactions in options by the Fund are subject to limitations established by each of the exchanges governing the maximum number of options which may be written or held by a single investor or group of investors acting in concert, regardless of whether the options were written or purchased on the same or different exchanges or are held in one or more accounts or through one or more different exchanges or through one or more brokers. Thus, the number of options which the Fund may write or hold may be affected by options written or held by other entities, including other investment companies having the same or an affiliated investment adviser. Position limits also apply to Futures. An exchange may order the liquidation of positions found to be in violation of those limits and may impose certain other sanctions. Due to requirements under the Investment Company Act, when the Fund purchases a Future, the Fund will maintain, in a segregated account or accounts with its Custodian, cash or readily-marketable, short-term (maturing in one year or less) debt instruments in an amount equal to the market value of the securities underlying such Future, less the margin deposit applicable to it. - Tax Aspects of Covered Calls and Hedging Instruments. The Fund intends to qualify as a "regulated investment company" under the Internal Revenue Code. That qualification enables the Fund to "pass through" its income and realized capital gains to shareholders without the Fund having to pay tax on them. This avoids a "double tax" on that income and capital gains, since shareholders will be taxed on the dividends and capital gains they receive from the Fund. One of the tests for the Fund's qualification is that less than 30% of its gross income (irrespective of losses) must be derived from gains realized on the sale of securities held for less than three months. To comply with that 30% cap, the Fund will limit the extent to which it engages in the following activities, but will not be precluded from them: (i) selling investments, including Futures, held for less than three months, whether or not they were purchased on the exercise of a call held by the Fund; (ii) purchasing calls or puts which expire in less than three months; (iii) effecting closing transactions with respect to calls or puts written or purchased less than three months previously; (iv) exercising puts or calls held by the Fund for less than three months; or (v) writing calls on investments held for less than three months. Certain foreign currency exchange contracts ("Forward Contracts") in which the Fund may invest are treated as "section 1256 contracts." Gains or losses relating to section 1256 contracts generally are characterized under the Internal Revenue Code as 60% long-term and 40% short-term capital gains or losses. However, foreign currency gains or losses arising from certain section 1256 contracts (including Forward Contracts) generally are treated as ordinary income or loss. In addition, section 1256 contracts held by the Fund at the end of each taxable year are "marked-to-market" with the result that unrealized gains or losses are treated as through they were realized. These contracts also may be marked-to-market for purposes of the excise tax applicable to investment company distributions and for other purposes under rules prescribed pursuant to the Internal Revenue Code. An election can be made by the Fund to exempt these transactions from this mark-to-market treatment. Certain Forward Contracts entered into by the Fund may result in "straddles" for Federal income tax purposes. The straddle rules may affect the character of gains (or losses) realized by the Fund on straddle positions. Generally, a loss sustained on the disposition of a position making up a straddle is allowed only to the extent such loss exceeds any unrecognized gain in the offsetting positions making up the straddle. Disallowed loss is generally allowed at the point where there is no unrecognized gain in the offsetting positions making up the straddle, or the offsetting position is disposed of. Under the Internal Revenue Code, gains or losses attributable to fluctuation in exchange rates that occur between the time the Fund accrues interest or other receivables or accrues expenses or other liabilities denominated in a foreign currency and the time the Fund actually collects such receivables or pays such liabilities generally are treated as ordinary income or ordinary loss. Similarly, on disposition of debt securities denominated in a foreign currency and on disposition of foreign currency forward contracts, gains or losses attributable to fluctuations in the value of a foreign currency between the date of acquisition of the securities or contract and the date of disposition are also treated as ordinary gain or loss. Currency gains and losses are offset against market gains and losses before determining a net "Section 988" gain or loss under the Internal Revenue Code, which may increase or decrease the amount of the Fund's investment company income available for distribution to its shareholders. - Risks of Hedging With Options and Futures. In addition to the risks with respect to hedging discussed in the Prospectus and above, there is a risk in using short hedging by selling Futures to attempt to protect against decline in value of the Fund's portfolio securities (due to an increase in interest rates) that the prices of such Futures will correlate imperfectly with the behavior of the cash (i.e., market value) prices of the Fund's securities. The ordinary spreads between prices in the cash and futures markets are subject to distortions due to differences in the natures of those markets. First, all participants in the futures markets are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close out futures contracts through offsetting transactions which could distort the normal relationship between the cash and futures markets. Second, the liquidity of the futures markets 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 markets could be reduced, thus producing distortion. Third, from the point of view of speculators, the deposit requirements in the futures markets are less onerous than margin requirements in the securities markets. Therefore, increased participation by speculators in the futures markets may cause temporary price distortions. If the Fund uses Hedging Instruments to establish a position in the debt securities markets as a temporary substitute for the purchase of individual debt securities (long hedging) by buying Futures and/or calls on such Futures or on debt securities, it is possible that the market may decline; if the Fund then concludes not to invest in such securities at that time because of concerns as to possible further market decline or for other reasons, the Fund will realize a loss on the Hedging Instruments that is not offset by a reduction in the price of the debt securities purchased. - Repurchase Agreements. The Fund may acquire securities that are subject to repurchase agreements, in order to generate income while providing liquidity. In a repurchase transaction, the Fund acquires a security from, and simultaneously resells it to, an approved vendor (a U.S. commercial bank, U.S. branch of a foreign bank or a broker-dealer which has been designated a primary dealer in government securities, which must meet the credit requirements set by the Fund's Board of Trustees from time to time), for delivery on an agreed upon future date. The sale price exceeds the purchase price by an amount that reflects an agreed-upon interest rate effective for the period during which the repurchase agreement is in effect. The majority of these transactions run from day to day, and delivery pursuant to resale typically will occur within one to five days of the purchase. Repurchase agreements are considered "loans" under the Investment Company Act, collateralized by the underlying security. The Fund's repurchase agreements will require that at all times while the repurchase agreement is in effect, the collateral's value must equal or exceed the repurchase price to collateralize the repayment obligation. Additionally, the Manager will impose creditworthiness requirements to confirm that the vendor is financially sound and will continuously monitor the collateral's value. If the vendor of a repurchase agreement fails to pay the agreed-upon resale price on the delivery date, the Fund's risks in such event may include any costs of disposing of the collateral, and any loss from any delay in foreclosing on the collateral. Additionally, the Sub-Adviser will monitor the creditworthiness of the vendor. - Illiquid and Restricted Securities. The Fund will not purchase or otherwise acquire any security if, as a result, more than 10% of its net assets (taken at current value) would be invested in securities that are illiquid by virtue of the absence of a readily available market or because of legal or contractual restrictions on resale ("restricted securities"). As noted in the prospectus, that amount may, in the future, increase to 15%. This policy applies to participation interests, bank time deposits, master demand notes, repurchase transactions having a maturity beyond seven days, over-the-counter options held by the Fund and that portion of assets used to cover such options. This policy is not a fundamental policy and does not limit purchases of restricted securities that are eligible for sale to qualified institutional purchasers pursuant to Rule 144A under the Securities Act of 1933, provided that those securities have been determined to be liquid by the Board of Trustees or by the Manager under Board-approved guidelines. Those guidelines take into account trading activity for such securities and the availability of reliable pricing information, among other factors. If there is a lack of trading interest in particular Rule 144A security, the Fund's holding of that security may be deemed to be illiquid. There may be undesirable delays in selling illiquid securities at prices representing their fair value. The expenses of registration of restricted securities that are subject to legal restrictions on resale (excluding securities that may be resold by the Fund pursuant to Rule 144A), may be negotiated at the time such securities are purchased by the Fund. When registration is required, a considerable period may elapse between a decision to sell the securities and the time the Fund would be permitted to sell them. Thus, the Fund might not be able to obtain as favorable a price as that prevailing at the time of the decision to sell. The Fund also may acquire, through private placements, securities having contractual resale restrictions, which might lower the amount realizable upon the sale of such securities. - Loans of Portfolio Securities. The Fund may lend its portfolio securities (other than in repurchase transactions) to brokers, dealers and other financial institutions subject to the restrictions stated in the Prospectus. Under applicable regulatory requirements (which are subject to change), the loan collateral, on each business day must, at least equal the market value of the loaned securities and must consist of cash, bank letters of credit, U.S. Government Securities, or other cash equivalents in which the Fund is permitted to invest. To be acceptable as collateral, letters of credit must obligate a bank to pay amounts demanded by the Fund if the demand meets the terms of the letter. Such terms and the issuing bank must be satisfactory to the Fund. In a portfolio securities lending transaction, the Fund receives from the borrower an amount equal to the interest paid or the dividends declared on the loaned securities during the term of the loan as well as the interest on the collateral securities, less any finders' or administrative fees the Fund pays in arranging the loan. The Fund may share the interest it receives on the collateral securities with the borrower as long as it realizes at least a minimum amount of interest required by the lending guidelines established by its Board of Trustees. In connection with securities lending, the Fund might experience risks of delay in receiving additional collateral, or risks of delay in recovery of the securities, or loss of rights in the collateral should the borrower fail financially. The Fund will not lend its portfolio securities to any officer, trustee, employee or affiliate of the Trust, its Manager or Sub-Adviser. The terms of the Fund's loans must meet certain tests under the Internal Revenue Code and permit the Fund to reacquire loaned securities on five business days' notice or in time to vote on any important matter. - "When-Issued" and Delayed Delivery Transactions. The Fund may purchase securities on a "when-issued" basis, and may purchase or sell such securities on a "delayed delivery" basis. Although the Fund will enter into such transactions for the purpose of acquiring securities for its portfolio or for delivery pursuant to options contracts it has entered into, the Fund may dispose of a commitment prior to settlement. "When- issued" or "delayed delivery" refers to securities whose terms and indenture are available and for which a market exists, but which are not available for immediate delivery. When such transactions are negotiated, the price (which is generally expressed in yield terms) is fixed at the time the commitment is made, but delivery and payment for the securities take place at a later date. The Fund does not intend to make such purchases for speculative purposes. Such securities may bear interest at a lower rate than longer-term securities. The commitment to purchase a security for which payment will be made on a future date may be deemed a separate security and involve a risk of loss if the value of the security declines prior to the settlement date. During the period between commitment by the Fund and settlement (generally within two months but not to exceed 120 days), no payment is made for the securities purchased by the purchaser, and no interest accrues to the purchaser from the transaction. Such securities are subject to market fluctuation; the value at delivery may be less than the purchase price. The Fund will maintain a segregated account with its Custodian, consisting of cash, U.S. Government securities or other high grade debt obligations at least equal to the value of purchase commitments until payment is made. The Fund will engage in when-issued transactions in order to secure what is considered to be an advantageous price and yield at the time of entering into the obligation. When the Fund engages in when-issued or delayed delivery transactions, it relies on the buyer or seller, as the case may be, to consummate the transaction. Failure of the buyer or seller to do so may result in the Fund losing the opportunity to obtain a price and yield considered to be advantageous. At the time the Fund makes a commitment to purchase or sell a security on a when-issued or forward commitment basis, it records the transaction and reflects the value of the security purchased, or if a sale, the proceeds to be received, in determining its net asset value. If the Fund chooses to (i) dispose of the right to acquire a when-issued security prior to its acquisition or (ii) dispose of its right to deliver or receive against a forward commitment, it may incur a gain or loss. To the extent the Fund engages in when-issued and delayed delivery transactions, it will do so for the purpose of acquiring or selling securities consistent with its investment objective and policies and not for the purposes of investment leverage. The Fund enters into such transactions only with the intention of actually receiving or delivering the securities, although (as noted above), when-issued securities and forward commitments may be sold prior to settlement date. In addition, changes in interest rates before settlement in a direction other than that expected by the Manager will affect the value of such securities and may cause a loss to the Fund. When-issued transactions and forward commitments allow the Fund a technique to use against anticipated changes in interest rates and prices. For instance, in periods of rising interest rates and falling prices, the Fund might sell securities in its portfolio on a forward commitment basis to attempt to limit its exposure to anticipated falling prices. In periods of falling interest rates and rising prices, the Fund might sell portfolio securities and purchase the same or similar securities on a when-issued or forward commitment basis, thereby obtaining the benefit of currently higher cash yields. - Short Sales Against-the-Box. In such short sales, while the short position is open, the Fund must own an equal amount of the securities sold short, or by virtue of ownership of other securities have the right, without payment of further consideration, to obtain an equal amount of the securities sold short. Short sales against-the-box may be made to defer, for Federal income tax purposes, recognition of gain or loss on the sale of securities "in the box" until the short position is closed out. Other Investment Restrictions The Fund's significant investment restrictions are set forth in the Prospectus. There are additional investment restrictions that the Fund must follow that are also fundamental policies. Fundamental policies and the Fund's investment objective cannot be changed without the vote of a "majority" of the Fund's outstanding voting securities. Under the Investment Company Act, such a "majority" vote is defined as the vote of the holders of the lesser of (i) 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 (ii) more than 50% of the outstanding shares. Under these additional restrictions, the Trust may not, on behalf of the Fund: (1) act as an underwriter, except to the extent that, in connection with the disposition of portfolio securities, the Fund may be deemed an underwriter under applicable laws; (2) invest in oil, gas or other mineral leases, rights, royalty contracts or exploration or development programs, real estate or real estate mortgage loans (this restriction does not prevent the Fund from purchasing securities secured or issued by companies investing or dealing in real estate and by companies that are not principally engaged in the business of buying and selling such leases, rights, contracts or programs); (3) purchase commodities or commodity contracts except futures contracts, including but not limited to contracts for the future delivery of securities and futures contracts based on securities indexes; (4) make loans other than by investing in obligations in which the Fund may invest consistent with its investment objective and policies and other than repurchase agreements and loans of portfolio securities; (5) pledge, mortgage or hypothecate its assets, except that, to secure permitted borrowings, it may pledge securities having a market value at the time of the pledge not exceeding 15% of the cost of the Fund's total assets and except in connection with permitted transactions in options, futures contracts and options on futures contracts, and except for reverse repurchase agreements and securities lending; (6) purchase or retain securities of any issuer if, to the knowledge of the Trust, more than 5% of such issuer's securities are beneficially owned by officers and trustees of the Trust or officers and directors of Massachusetts Mutual Life Insurance Company ("MassMutual") who individually beneficially own more than 1/2 of 1% of the securities of such issuer; and (7) make loans to an officer, trustee or employee of the Trust or to any officer, director or employee of MassMutual, or to MassMutual. In addition to the investment restrictions described above and those contained in the Prospectus, the Trustees of the Trust have voluntarily adopted certain policies and restrictions which are observed in the conduct of the affairs of the Fund. These represent intentions of the Trustees based upon current circumstances. They differ from fundamental investment policies in that the following additional investment restrictions may be changed or amended by action of the Trustees without requiring prior notice to or approval of shareholders. In accordance with such nonfundamental policies and guidelines, the Fund may not: (1) invest for the purpose of exercising control over, or management of, any company; (2) purchase any security of a company which (including any predecessor, controlling person, general partner and guarantor) has a record of less than three years of continuous operations or relevant business experience, if such purchase would cause more than 5% of the current value of the Fund's assets to be invested in such companies; and (3) invest in securities of other investment companies, except by purchase in the open market where no commission or profit to a sponsor or dealer results from such purchase other than the customary broker's commission, except when such purchase is part of a plan of merger, consolidation, reorganization or acquisition. How the Fund is Managed Organization and History. The Fund is one of two series of Oppenheimer Integrity Funds (the "Trust"). This Statement of Additional Information may be used with the Fund's Prospectus only to offer shares of the Fund. The Trust was established in 1982 as MassMutual Liquid Assets Trust and changed its name to MassMutual Integrity Funds on April 15, 1988. The Fund was established as a separate Massachusetts business trust known as MassMutual Equity Investors Trust in 1986, and was reorganized as a series of the Trust on April 15, 1988. On March 29, 1991, the Trust changed its name from MassMutual Integrity Funds to Oppenheimer Integrity Funds and the Fund changed its name from MassMutual Value Stock Fund to Oppenheimer Value Stock Fund. As a Massachusetts business Trust, the Trust is not required to hold, and does not plan to hold, regular annual meetings of shareholders. The Trust will hold meetings when required to do so by the Investment Company Act or other applicable law, or when a shareholder meeting is called by the Trustees or upon proper request of the shareholders. Shareholders have the right, upon the declaration in writing or vote of two-thirds of the outstanding shares of the Trust, to remove a Trustee. The Trustees will call a meeting of shareholders to vote on the removal of a Trustee upon the written request of the record holders of at least 10% of its outstanding shares. In addition, if the Trustees receive a request from at least 10 shareholders (who have been shareholders for at least six months) holding shares of the Trust valued at $25,000 or more or holding at least 1% of the Trust's outstanding shares, whichever is less, stating that they wish to communicate with other shareholders to request a meeting to remove a Trustee, the Trustees will then either make the Trust's shareholder list available to the applicants or mail their communication to all other shareholders at the applicant's expense, or the Trustees may take such other action as set forth under Section 16(c) of the Investment Company Act. The Trust's Declaration of Trust contains an express disclaimer of shareholder or Trustee liability for the Trust's obligations, and provides for indemnification and reimbursement of expenses out of its property for any shareholder held personally liable for its obligations. The Declaration of Trust also provides that the Fund shall, upon request, assume the defense of any claim made against any shareholder for any act or obligation of the Fund and satisfy any judgment thereon. Thus, while Massachusetts law permits a shareholder of a business trust (such as the Trust) to be held personally liable as a "partner" under certain circumstances, the risk of a Trust shareholder incurring financial loss on account of shareholder liability is limited to the relatively remote circumstances in which the Fund would be unable to meet its obligations described above. Any person doing business with the Trust, and any shareholder of the Trust, agrees under the Trust's Declaration of Trust to look solely to the assets of the Trust for satisfaction of any claim or demand which may arise out of any dealings with the Trust, and the Trustees shall have no personal liability to any such person, to the extent permitted by law. Trustees And Officers The Trust's Trustees and officers and their principal occupations and business affiliations during the past five years are listed below. All of the Trustees are also trustees, directors or managing general partners of Oppenheimer Total Return Fund, Inc., Oppenheimer Equity Income Fund, Oppenheimer High Yield Fund, Oppenheimer Cash Reserves, Oppenheimer Tax- Exempt Cash Reserves, Oppenheimer Tax-Exempt Bond Fund, Oppenheimer Limited-Term Government Fund, The New York Tax-Exempt Income Fund, Inc., Oppenheimer Champion High Yield Fund, Oppenheimer Main Street Funds, Inc., Oppenheimer Strategic Funds Trust, Oppenheimer Strategic Income & Growth Fund, Oppenheimer Strategic Investment Grade Bond Fund, Oppenheimer Strategic Short-Term Income Fund and Oppenheimer Variable Account Funds; as well as the following "Centennial Funds": Daily Cash Accumulation Fund, Inc., Centennial America Fund, L.P., Centennial Money Market Trust, Centennial Government Trust, Centennial New York Tax Exempt Trust, Centennial Tax Exempt Trust and Centennial California Tax Exempt Trust, (all of the foregoing funds are collectively referred to as the "Denver OppenheimerFunds"). Mr. Fossel is President and Mr. Swain is Chairman of the Denver OppenheimerFunds. As of March 29, 1994, the Trustees and officers of the Fund as a group owned less than 1% of the Fund's outstanding shares. Robert G. Avis, Trustee One North Jefferson Ave., St. Louis, Missouri 63103 Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G. Edwards, Inc. (its parent holding company); Chairman of A.G.E. Asset Management and A.G. Edwards Trust Company (its affiliated investment adviser and trust company, respectively). William A. Baker, Trustee 197 Desert Lakes Drive, Palm Springs, California 92264 Management Consultant. Charles Conrad, Jr., Trustee 5301 Bolsa Avenue, Huntington Beach, California 92647 Vice President of McDonnell Douglas Ltd.; formerly associated with the National Aeronautics and Space Administration. Jon S. Fossel, President and Trustee* Two World Trade Center, New York, New York 10048-0203 Chairman, Chief Executive Officer and a director of the Manager; President and a director of Oppenheimer Acquisition Corp. ("OAC"), the Manager's parent holding company; President and a director of HarbourView Asset Management Corporation ("HarbourView"), a subsidiary of the Manager; a director of Shareholder Services, Inc. ("SSI") and Shareholder Financial Services, Inc. ("SFSI"), transfer agent subsidiaries of the Manager; formerly President of the Manager. Raymond J. Kalinowski, Trustee 44 Portland Drive, St. Louis, Missouri 63131 Formerly Vice Chairman and a director of A.G. Edwards, Inc., parent holding company of A.G. Edwards & Sons, Inc. (a broker-dealer), of which he was a Senior Vice President. C. Howard Kast, Trustee 2552 East Alameda, Denver, Colorado 80209 Formerly the Managing Partner of Deloitte, Haskins & Sells (an accounting firm). Robert M. Kirchner, Trustee 7500 E. Arapahoe Road, Englewood, Colorado 80112 President of The Kirchner Company (management consultants). Ned M. Steel, Trustee 3416 S. Race Street, Englewood, Colorado 80110 Chartered Property and Casualty Underwriter; formerly Senior Vice President and a director ofVan Gilder Insurance Corp. (insurance brokers). James C. Swain, Chairman and Trustee* 3410 South Galena Street, Denver, Colorado 80231 Vice Chairman of the Manager; President and Director of Centennial Asset Management Corporation, an investment adviser subsidiary of the Manager ("Centennial"); formerly President and Director of Oppenheimer Asset Management Corporation ("OAMC"), an investment adviser which was a subsidiary of the Manager, and Chairman of the Board of SSI. Andrew J. Donohue, Vice President Executive Vice President and General Counsel of Oppenheimer Management Corporation ("OMC") (the "Manager") and Oppenheimer Funds Distributor, Inc. (the "Distributor"); an officer of other OppenheimerFunds; formerly Senior Vice President and Associate General Counsel of the Manager and the Distributor; Partner in, Kraft & McManimon (a law firm); an officer of First Investors Corporation (a broker-dealer) and First Investors Management Company, Inc. (broker-dealer and investment adviser); director and an officer of First Investors Family of Funds and First Investors Life Insurance Company. George C. Bowen, Vice President, Secretary and Treasurer 3410 South Galena Street Denver, Colorado 80231 Senior Vice President and Treasurer of the Manager; Vice President and Treasurer of the Distributor and HarbourView; Senior Vice President, Treasurer, Assistant Secretary and a director of Centennial; Vice President, Treasurer and Secretary of SSI and SFSI; an officer of other OppenheimerFunds; formerly Senior Vice President/Comptroller and Secretary of OAMC. David B. Salerno, Vice President and Portfolio Manager 100 Northfield Drive, Windsor, Connecticut 06095 Managing Director of the Sub-Advisor; Senior Vice President of MML Series Investment Fund. Robert G. Zack, Assistant Secretary Two World Trade Center, New York, New York 10048-0203 Senior Vice President and Associate General Counsel of the Manager, Assistant Secretary of SSI and SFSI; an officer of other OppenheimerFunds. Robert Bishop, Assistant Treasurer 3410 South Galena Street, Denver, Colorado 80231 Assistant Vice President of the Manager/Mutual Fund Accounting; an officer of other OppenheimerFunds; previously a Fund Controller of the Manager, prior to which he was an Accountant for Resolution Trust Corporation and previously an Accountant and Commissions Supervisor for Stuart James Company Inc., a broker-dealer. __________________ *A Trustee who is an "interested person" of the Fund as defined in the Investment Company Act. Remuneration of Trustees. The officers of the Trust are affiliated with the Manager; they and the Trustees of the Fund who are affiliated with the Manager (Mr. Swain and Mr. Fossel, who is both an officer and Trustee) and receive no salary or fee from the Fund. During the Fund's fiscal year ended December 31, 1993, the remuneration (including expense reimbursements) paid to all Trustees of the Fund (excluding Mr. Fossel and Mr. Swain) as a group for services as Trustees and as members of one or more committees totaled $7,731. Major Shareholders. As of March 29, 1994, the only entity that owned of record or was known by the Fund to own beneficially 5% or more of any class of the Fund's outstanding shares was Massachusetts Mutual Life Insurance Company, 1295 State Street, Springfield, Massachusetts 01111, which owned 2,957,743.930 Class A shares (44.27%) of the Fund, and which represented 17.63% of the Trust. The Manager and Its Affiliates. The Manager is wholly-owned by Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by Massachusetts Mutual Life Insurance Company. OAC is also owned in part by certain of the Manager's directors and officers, some of whom also serve as officers of the Fund, and two of whom (Mr. Jon S. Fossel and Mr. James C. Swain) serve as Trustees of the Fund. - The Investment Advisory Agreement. The investment advisory agreement, dated as of March 28, 1991, between the Trust on behalf of the Fund and the Manager requires the Manager, at its expense, to provide the Fund with adequate office space, facilities and equipment and to provide and supervise the activities of all administrative and clerical personnel required to provide effective corporate administration for the Fund, including the compilation and maintenance of records with respect to its operations, the preparation and filing of specified reports, and composition of proxy materials and registration statements for continuous public sale of shares of the Fund. Expenses not expressly assumed by the Manager under the advisory agreement or by the Distributor under the Distribution Agreement are paid by the Fund. The advisory agreement lists examples of expenses paid by the Fund, the major categories of which relate to interest, taxes, brokerage commissions, fees to certain Trustees, legal and audit expenses, custodian and transfer agent expenses, share issuance costs, certain printing and registration costs and non-recurring expenses, including litigation costs. The advisory agreement provides that in the absence of willful misfeasance, bad faith or gross negligence in the performance of its duties or reckless disregard for its obligations and duties under the advisory agreement, the Manager is not liable for any loss resulting from a good faith error or omission on its part with respect to any of its duties thereunder. The advisory agreement permits the Manager to act as investment adviser for any other person, firm or corporation and to use the name "Oppenheimer" in connection with other investment companies for which it may act as investment advisor or general distributor. If the Manager shall no longer act as investment adviser to the Fund, the right of the Fund to use the name "Oppenheimer" as part of its name may be withdrawn. Prior to April 23, 1993, MassMutual served as the Fund's investment sub-adviser under a prior sub-advisory agreement (the "Prior Sub-Advisory Agreement"). The Manager paid MassMutual a sub-advisory fee under the Prior Sub-Advisory Agreement at the following annual rates: 0.40% of the Fund's first $100 million of average annual net assets, 0.30% of the next $200 million, 0.25% of the next $200 million and 0.20% of average annual net assets in excess of $500 million. From January 1, 1993 through April 23, 1993, MassMutual temporarily delegated to the Sub- Adviser its duties to manage the investment and reinvestment of the Fund's assets under the Prior Sub-Advisory Agreement (but not its other duties). MassMutual also transferred the senior investment personnel responsible for advising the Fund to the Sub-Adviser. The delegation of duties to the Sub-Adviser was subject to MassMutual's supervision and control and subject to MassMutual's right to terminate the delegation at any time. On April 23, 1993, the Fund's shareholders approved a new sub- advisory agreement (the "sub-advisory agreement") with the Sub-Adviser, thereby terminating the delegation of duties under the Prior Sub-Advisory Agreement. The sub-advisory fees paid under the sub-advisory agreement are stated in the Prospectus. In connection with approval of the sub- advisory agreement by the Trust's Board of Trustees and shareholders, MassMutual has represented that there will be no substantive change in the sub-advisory relationship other than the restructuring of investment advisory duties between MassMutual and the Sub-Adviser pursuant to MassMutual's internal reorganization of its investment advisory services for equity assets. MassMutual has agreed to guarantee the performance of the Sub-Adviser under the sub-advisory agreement. That guarantee may be amended or terminated by a written instrument signed by MassMutual, the Manager and the Fund, and shall terminate if for three consecutive 12 month fiscal year ends the Sub-Adviser has total stockholders equity of at least $200,000 according to its annual audited financial statements delivered to the Fund. Attaining such level of stockholders equity shall not preclude the Trust's Board of Trustees from considering the financial condition of the Sub-Adviser or any other matters in determining at any time whether to terminate, approve or renew the sub-advisory agreement. Under the sub-advisory agreement, the Sub-Advisor is responsible for managing the Fund's portfolio of securities and making investment decisions with respect to the Fund's investments subject to the Fund's investment policies established by the Board of Trustees of the Trust, and in accordance with the Fund's investment objective, policies and restrictions, set forth in the Prospectus and this Additional Statement. The sub-advisory agreement has the same provisions as to renewal, termination and the standard of care as the investment advisory agreement, and both advisory agreements are subject to annual approval by the Trustees, who may terminate either advisory agreement on sixty days' notice approved by a majority of the Trustees. The advisory agreements contain no expense limitation. However, independently of the advisory and sub-advisory agreements, the Manager has undertaken that the total expenses of the Fund in any fiscal year (including the management fee, but excluding taxes, interest, brokerage fees, distribution plan payments, and extraordinary expenses, such as litigation costs) shall not exceed (and the Manager undertakes to reduce the Fund's management fee in the amount by which such expenses shall exceed) the most stringent applicable state "blue sky" expense limitation requirement for qualification of sale of the Fund's shares. At present, that limitation is imposed by California and limits expenses (with specified exclusions) to 2.5% of the first $30 million of the Fund's average annual net assets, 2.0% of the next $70 million of average net assets and 1.5% of average net assets in excess of $100 million. The Manager reserves the right to change or eliminate this expense limitation at any time. The payment of the management fee at the end of any month will be reduced so that at no time will there be any accrued but unpaid liability under the above expense limitation. Prior to March 28, 1991, MassMutual was the Fund's investment adviser, and MML Investors Services, Inc. ("MMLISI"), a wholly-owned subsidiary of MassMutual (and therefore an affiliate of an affiliate of the Fund), was the Distributor of shares of the Fund. For the fiscal year ended December 31, 1991, the advisory fees paid to MassMutual for the period from January 1, 1991 to March 27, 1991 pursuant to the prior investment advisory agreement, were $75,574, and the advisory fees paid to the Manager were $266,278 (net of a $21,414 expense assumption by MassMutual), of which $142,541 was paid by the Manager to MassMutual pursuant to the ub-advisory agreement. For the fiscal year ended December 31, 1992, the advisory fees paid by the Fund to the Manager was $401,148, of which $215,035 was paid by the Manager to MassMutual pursuant to the Fund's prior sub-advisory agreement. For the fiscal year ended December 31, 1993, the advisory fees paid by the Fund to the Manager were $614,932, of which $264,792 was paid by the Manager to the Sub-Advisor. - The Distributor. Under the General Distributor's Agreement between the Trust and the Distributor, the Distributor acts as the Fund's principal underwriter in the continuous public offering of the Fund's Class A and Class B shares, but is not obligated to sell a specific number of shares. Expenses normally attributable to sales (other than those paid under the Class B Distribution and Service Plan), including advertising and the cost of printing and mailing prospectuses (other than those furnished to existing shareholders), are borne by the Distributor. During the Fund's fiscal years ended December 31, 1991, 1992 and 1993, the aggregate amount of sales charges on sales of the Fund's Class A shares was $83,992, $171,597 and $296,555, respectively, of which the Distributor and MMLISI retained in the aggregate $81,195, $162,902 and $232,226 in those respective years. From May 1, 1993 (commencement of offering of Class B shares) to December 31, 1993, the Distributor advanced $204,505 to broker-dealers on the sales of the Funds' Class B shares, $72,372 of which went to MMLISI. In addition, the Distributor collected $58 from contingent deferred sales charges assessed on Class B shares. - The Transfer Agent. Oppenheimer Shareholder Services, the Fund's tranfer agent, is responsible for maintaining the Fund's shareholder registry and shareholder accounting records, and for shareholder servicing and administrative functions. Brokerage Policies Of The Fund Brokerage Provisions of the Investment Advisory and Sub-Advisory Agreements. One of the duties of the Sub-Adviser under the sub-advisory agreement is to arrange the portfolio transactions of the Fund. In doing so, the Sub-Adviser is authorized by the sub-advisory agreement to employ broker-dealers ("brokers"), including "affiliated" brokers, as that term is defined in the Investment Company Act, as may, in its best judgment based on all relevant factors, implement the policy of the Fund to obtain, at reasonable expense, the "best execution" (prompt and reliable execution at the most favorable price obtainable) of such transactions. Under the sub-advisory agreement, the Sub-Adviser is authorized to select brokers which provide brokerage and/or research services for the Fund and/or the other accounts over which it or its affiliates have investment discretion. The commissions paid to such brokers may be higher than another qualified broker would have charged, if a good faith determination is made by the Sub-Adviser that the commission is reasonable in relation to the services provided. Description of Brokerage Practices Followed by the Manager. Subject to the provisions of the advisory agreement, the procedures and rules described above, allocations of brokerage are made by portfolio managers under the supervision of the Manager's executive officers and the Sub- Adviser. Transactions in securities other than those for which an exchange is the primary market are generally done with principals or market makers. Brokerage commissions are paid primarily for effecting transactions in listed securities and otherwise only if it appears likely that a better price or execution can be obtained. When the Fund engages in an option transaction, ordinarily the same broker will be used for the purchase or sale of the option and any transactions in the securities to which the option relates. Option commissions may be relatively higher than those which would apply to direct purchases and sales of portfolio securities. The research services provided by a particular broker may be useful only to one or more of the advisory accounts of the Sub-Adviser and its affiliates, and investment research received for the commissions of those other accounts may be useful both to the Fund and one or more of such other accounts. Such research, which may be supplied by a third party at the instance of a broker, includes information and analyses on particular companies and industries as well as market or economic trends and portfolio strategy, receipt of market quotations for portfolio evaluations, information systems, computer hardware and similar products and services. If a research service also assists the Sub-Adviser in a non-research capacity (such as bookkeeping or other administrative functions), then only the percentage or component that provides assistance to the Sub-Adviser in the investment decision-making process may be paid for in commission dollars. The research services provided by brokers broaden the scope and supplement the research activities of the Sub-Adviser by making available additional views for consideration and comparisons, and enabling the Sub- Adviser to obtain market information for the valuation of securities held in the Fund's portfolio or being considered for purchase. The Board, including the independent Trustees of the Trust (those Trustees of the Trust who are not "interested persons," as defined in the Investment Company Act, and who have no direct or indirect financial interest in the operation of the advisory agreements, or Distribution Plans described below) or in any agreements relating to those Plans, annually reviews information furnished by the Sub-Adviser as to the commissions paid to brokers furnishing such services so that the Board may ascertain whether the amount of such commissions was reasonably related to the value or benefit of such services. Pursuant to the sub-advisory agreement, the Sub-Adviser is authorized, in arranging the purchase and sale of the Fund's portfolio securities, to employ or deal with such members of the securities exchanges, brokers or dealers as may in the its best judgement implement the policy of the Fund to obtain, at reasonable expense, the "best execution" (i.e., prompt and reliable execution at the most favorable security price obtainable) of the Fund's portfolio transactions. The Sub- Adviser shall select broker-dealers to effect the Fund's portfolio transactions on the basis of its estimate of their ability to obtain best execution of particular and related portfolio transactions. The abilities of a broker-dealer to obtain best execution of particular portfolio transaction(s) will be judged by the Sub-Adviser on the basis of all relevant factors and considerations. Securities held by the Fund may also be held by Sub-Adviser in its investment accounts and by other investment companies for which it acts as investment adviser. If the same security is purchased or sold for the Fund and such investment accounts or companies at or about the same time, such purchases or sales normally will be combined, to the extent practicable, and will be allocated as nearly as practicable on a pro rata basis in proportion to the amounts to be purchased and sold. The main factors to be considered will be the investment objectives of the respective portfolios, the relative size of portfolio holdings of the same or comparable security, availability of cash for investment by the various portfolios and the size of their respective investment commitments. It is believed that the ability of the Fund to participate in larger volume transactions will, in most cases, produce better execution for the Fund. In some cases, however, this procedure could have a detrimental effect on the price and amount of a security available to the Fund or the price at which a security may be sold. It is the opinion of the Trust's management that such execution advantage and the desirability of retaining the Sub- Adviser in that capacity outweigh the disadvantages, if any, which might result from this procedure. Paul Hallingby, Jr. is a director of MassMutual and a General Partner of Bear Stearns & Co., Inc. ("Bear Stearns"). For its fiscal years ended December 31, 1991, 1992 and 1993, the Fund paid brokerage fees to Bear Stearns of $822, $1,110 and $4,239, respectively. For the fiscal year ended December 31, 1993, the Fund placed 6.7% of its transactions involving payment of commissions with Bear Stearns, for which it was paid 8.2% of the Fund's aggregate brokerage fees for that period. During the fiscal years ended December 31, 1991, 1992 and 1993, total brokerage commissions paid by the Fund (not including spreads or concessions on principal transactions on a net trade basis) were $14,863, $20,543 and $51,707, respectively. During the fiscal year ended December 31, 1993, $26,271 was paid to dealers as brokerage commissions in return for research services (including special research, statistical information and execution); the aggregate dollar amount of those transactions was $35,562,706. The transactions giving rise to those commissions were allocated in accordance with the internal allocation procedures described above. Performance of the Fund Total Return Information. As described in the Prospectus, from time to time the "average annual total return", "total return," and "total return at net asset value" of an investment in a class of the Fund may be advertised. An explanation of how total returns are calculated for each class and the components of those calculations is set forth below. The Fund's advertisement of its performance must, under applicable rules of the Securities and Exchange Commission, include the average annual total returns for each class of shares of the Fund for the 1, 5 and 10-year periods (or the life of the class, if less) as of the most recently ended calendar quarter prior to the publication of the advertisement. This enables an investor to compare the Fund's performance to the performance of other funds for the same periods. However, a number of factors should be considered before using such information as a basis for comparison with other investments. An investment in the Fund is not insured; its total returns and share prices are not guaranteed and normally will fluctuate on a daily basis. When redeemed, an investor's shares may be worth more or less than their original cost. Total returns for any given past period are not a prediction or representation by the Fund of future rates of return on its shares. The total returns of Class A and Class B shares of the Fund are affected by portfolio quality, the type of investments the Fund holds and its operating expenses allocated to a particular class. - Average Annual Total Returns. The "average annual total return" of each class is an average annual compounded rate of return for each year in a specified number of years. It is the rate of return based on the change in value of a hypothetical initial investment of $1,000 ("P" in the formula below) held for a number of years ("n") to achieve an Ending Redeemable Value ("ERV"), according to the following formula: ( ERV ) 1/n (-----) -1 = Average Annual Total Return ( P ) - Cumulative Total Returns. The cumulative "total return" calculation measures the change in value of a hypothetical investment of $1,000 over an entire period of years. Its calculation uses some of the same factors as average annual total return, but it does not average the rate of return on an annual basis. Cumulative total return is determined as follows: ERV - P - ------- = Cumulative Total Return P 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 at net asset value, as discussed below). For Class B shares, the payment of the applicable contingent deferred sales charge (5.0% for the first year, 4.0% for the second year, 3.0% for the third and fourth years, 2.0% in the fifth year, 1.0% in the sixth year and none thereafter) is applied to the investment result for the time period shown (unless the total return is shown at net asset value, as described below). Total returns also assume that all dividends and capital gains distributions during the period are reinvested to buy additional shares at net asset value per share, and that the investment is redeemed at the end of the period. The "average annual total returns" on an investment in Class A shares of the Fund for the one and five-year periods ended December 31, 1993 and for the period from December 22, 1986 (the date the Fund became an open-end Fund) to December 31, 1993, were 2.70%, 11.10% and 9.92%, respectively. The cumulative "total return" on Class A shares for the latter period was 94.30%. For the fiscal period from May 1, 1993, through December 31, 1993, the average annual total return and the cumulative total return on an investment in Class B shares of the Fund were (0.55%) and (0.37%), respectively. - Total Returns at Net Asset Value. From time to time the Fund may also quote an "average annual total return at net asset value" or a cumulative "total return at net asset value" for Class A or Class B 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 sales charges) and takes into consideration the reinvestment of dividends and capital gains distributions. The cumulative "total returns at net asset value" on the Fund's Class A shares for the fiscal year ended December 31, 1993, and for the period from December 22, 1986 to December 31, 1993 were 8.97% and 106.16%, respectively. The cumulative total return at net asset value on the Fund's Class B shares for the fiscal period from May 1, 1993 through December 31, 1993 was 4.63%. Other Performance Comparisons. From time to time the Fund may publish the ranking of its Class A or Class B shares by Lipper Analytical Services, Inc. ("Lipper"), a widely-recognized independent mutual fund monitoring service. Lipper monitors the performance of regulated investment companies, including the Fund, and ranks their performance for various periods based on categories relating to investment objectives. The performance of the Fund's classes is ranked against (i) all other funds, excluding money market funds, and (ii) all other equity funds. The Lipper performance rankings are based on total return that includes the reinvestment of capital gains distributions and income dividends but does not take sales charges or taxes into consideration. From time to time the Fund may publish the ranking of the performance of its Class A or Class B shares by Morningstar, Inc., an independent mutual fund monitoring service that ranks various mutual funds, including the Fund, based upon the fund's three, five and ten-year average annual total returns (when available) and a risk factor that reflects fund performance relative to three-month U.S. Treasury bill monthly returns. Such returns are adjusted for fees and sales loads. There are five ranking categories with a corresponding number of stars: highest (5), above average (4), neutral (3), below average (2) and lowest (1). Morningstar ranks the Fund in relation to other equity funds. The total return on an investment made in Class A or Class B shares of the Fund may be compared with performance for the same period of the Standard & Poor's 500 Index or the New York Stock Exchange Index, which are widely-recognized indices of stock performance. Such indices consist of unmanaged groups of common stocks. Neither of those indices includes the reinvestment of income dividends or takes the sales charges or taxes into consideration, as these items are not applicable to indices. From time to time the Fund may also include in its advertisements and sales literature performance information about the Fund or rankings of the Fund's performance cited in newspapers or periodicals, such as The New York Times. These articles may include quotations of performance from other sources, such as Lipper or Morningstar. When comparing total return and investment risk of an investment in Class A or Class B shares of the Fund with other investments, investors should understand that certain other investments have different risk characteristics than an investment in shares of the Fund. For example, certificates of deposit may have fixed rates of return and may be insured as to principal and interest by the FDIC, while the Fund's returns will fluctuate and its share values and returns are not guaranteed. Money market accounts offered by banks also may be insured by the FDIC and may offer stability of principal. U.S. Treasury securities are guaranteed as to principal and interest by the full faith and credit of the U.S. government. Money market mutual funds may seek to offer a fixed price per share. Distribution and Service Plans The Fund has adopted a Service Plan for Class A Shares and a Distribution and Service Plan for Class B shares of the Fund under Rule 12b-1 of the Investment Company Act, pursuant to which the Fund will reimburse the Distributor for all or a portion of its costs incurred in connection with the distribution and/or servicing of the shares of that class, as described in the Prospectus. Each Plan has been approved by a vote of (i) the Board of Trustees of the Fund, including a majority of the Independent Trustees, cast in person at a meeting called for the purpose of voting on that Plan, and (ii) the holders of a "majority" (as defined in the Investment Company Act) of the shares of each class (for the Distribution and Service Plan for the Class B shares, that vote was cast by the Manager as the then-sole initial holder of Class B shares of the Fund). In addition, under the Plans, the Manager and the Distributor may, in their sole discretion, from time to time may use their own resources (which, in the case of the Manager, may include profits from the advisory fee it receives from the Fund) to make payments to brokers, dealers or other financial institutions (each is referred to as a "Recipient" under the Plans) for distribution and administrative services they perform. The Distributor and the Manager may, in their sole discretion, increase or decrease the amount of payments they make to Recipients from their own resources. Unless terminated as described below, each Plan continues in effect from year to year but only as long as such continuance is specifically approved at least annually by the Fund's Board of Trustees and its Independent Trustees by a vote cast in person at a meeting called for the purpose of voting on such continuance. Either Plan may be terminated at any time by the vote of a majority of the Independent Trustees or by the vote of the holders of a "majority" (as defined in the Investment Company Act) of the outstanding shares of that class. Neither Plan may be amended to increase materially the amount of payments to be made unless such amendment is approved by shareholders of the class affected by the amendment. All material amendments must be approved by the Independent Trustees. While the Plans are in effect, the Treasurer of the Trust shall provide separate written reports to the Trust's Board of Trustees at least quarterly on the amount of all payments made pursuant to each Plan, the purpose for which the payment was made and the identity of each Recipient that received any such payment. The report for the Class B Plan shall also include the distribution costs for that quarter, and such costs for previous fiscal periods that are carried forward, as explained in the Prospectus and below. Those reports, including the allocations on which they are based, will be subject to the review and approval of the Independent Trustees in the exercise of their fiduciary duty. Each Plan further provides that while it is in effect, the selection and nomination of those Trustees of the Trust who are not "interested persons" of the Trust is committed to the discretion of the Independent Trustees. This does not prevent the involvement of others in such selection and nomination if the final decision on any such selection or nomination is approved by a majority of the Independent Trustees. Under the Plans, no payment will be made to any Recipient in any quarter if the aggregate net asset value of all Fund shares held by the Recipient for itself and its customers did not exceed a minimum amount, if any, that may be determined from time to time by a majority of the Fund's Independent Trustees. Initially, the Board of Trustees has set the fee at the maximum rate and set no minimum amount. For the fiscal year ended December 31, 1993, payments under the Class A Plan totaled $198,834, all of which was paid by the Distributor to Recipients, including $149,525 paid to MMLISI. Any unreimbursed expenses incurred with respect to Class A shares for any fiscal quarter by the Distributor may not be recovered under the Class A Plan in subsequent fiscal quarters. Payments received by the Distributor under the Plan for Class A shares will not be used to pay any interest expense, carrying charges, or other financial costs, or allocation of overhead by the Distributor. The Class B Plan allows the service fee payment to be paid by the Distributor to Recipients in advance for the first year Class B shares are outstanding, and thereafter on a quarterly basis, as described in the Prospectus. Service fee payments by the Distributor to Recipients will be made (i) in advance for the first year Class B shares are outstanding, following the purchase of shares, in an amount equal to 0.25% of the net asset value of the shares purchased by the Recipient or its customers and (ii) thereafter, on a quarterly basis, computed as of the close of business each day at an annual rate of 0.25% of the average daily net asset value of Class B shares held in accounts of the Recipient or its customers. An exchange of shares does not entitle the Recipient to an advance payment of the service fee. In the event Class B shares are redeemed during the first year such shares are outstanding, the Recipient will be obligated to repay a pro rata portion of the advance of the service fee payment to the Distributor. Although the Class B Plan permits the Distributor to retain both the asset-based sales charges and the service fee on Class B shares, or to pay Recipients the service fee on a quarterly basis, without payment in advance, the Distributor presently intends to pay the service fee to Recipients in the manner described above. A minimum holding period may be established from time to time under the Class B Plan by the Board. Initially, the Board has set no minimum holding period. All payments under the Class B Plan become subject to the limitations imposed by the Rules of Fair Practice of the National Association of Securities Dealers, Inc. of asset-based sales charges and service fees. The Distributor anticipates that it will take a number of years for it to recoup (from the Fund's payments to the Distributor under the Class B Plan and recoveries of the CDSC) the sales commissions paid to authorized brokers or dealers. For the Fiscal period from May 1, 1993 through December 31, 1993, payments under the Class B plan totaled $16,056. Asset-based sales charge payments are designed to permit an investor to purchase shares of the Fund without the assessment of a front- end sales load and at the same time permit the Distributor to compensate brokers and dealers in connection with the sale of Class B shares of the Fund. The Distributor's actual distribution expenses for any given year may exceed the aggregate of payments received pursuant to the Class B Plan and from contingent deferred sales charges, and such expenses will be carried forward and paid in future years. The Fund will be charged only for interest expenses, carrying charges or other financial costs that are directly related to the carry-forward of actual distribution expenses. For example, if the Distributor incurred distribution expenses of $4 million in a given fiscal year, of which $2,000,000 was recovered in the form of contingent deferred sales charges paid by investors and $1,600,000 were reimbursed in the form of payments made by the Fund to the Distributor under the Class B Plan, the balance of $400,000 (plus interest) would be subject to recovery in future fiscal years from such sources. In the event the Class B Plan is terminated, the Distributor is entitled to continue to receive the asset-based sales charge of 0.75% per annum on Class B shares sold prior to termination until the Distributor has recovered its Class B distribution expenses incurred prior to termination from such payments and from the Class B CDSC. The Class B Plan allows for the carry-forward of distribution expenses, to be recovered from asset-based sales charges in subsequent fiscal periods, as described in the Prospectus. The asset-based sales charge paid to the Distributor by the Fund under the Class B Plan is intended to allow the Distributor to recoup the cost of sales commissions paid to authorized brokers and dealers at the time of sale, plus financing costs, as described in the Prospectus. Such payments may also be used to pay for the following expenses in connection with the distribution of Class B shares: (i) financing the advance of the service fee payment to Recipients under the Class B Plan, (ii) compensation and expenses of personnel employed by the Distributor to support distribution of Class B shares, and (iii) costs of sales literature, advertising and prospectuses (other than those furnished to current shareholders) and state "blue sky" registration fees. About Your Account How To Buy Shares Alternative Sales Arrangements - Class A and Class B Shares. The Alternative Sales Arrangements permit an investor to choose the method of purchasing shares that is more beneficial to the investor depending on the amount of the purchase, the length of time the investor expects to hold shares and other relevant circumstances. Investors should understand that the purpose and function of the deferred sales charge and asset-based sales charge with respect to Class B shares are the same as those of the initial sales charge with respect to Class A shares. Any salesperson or other person entitled to receive compensation for selling Fund shares may receive different compensation with respect to one class of shares than the other. The Distributor will not accept any order for $1 million or more of Class B shares on behalf of a single investor (not including dealer "street name" or omnibus accounts) because generally it will be more advantageous for that investor to purchase Class A shares of the Fund instead. The two classes of shares each represent an interest in the same portfolio investments of the Fund. However, each class has different shareholder privileges and features. The net income attributable to Class B shares and the dividends payable on Class B shares will be reduced by incremental expenses borne solely by that class, including the asset-based sales charge to which Class B shares are subject. The conversion of Matured Class B shares to Class A shares is subject to the continuing availability of a private letter ruling from the Internal Revenue Service, or an opinion of counsel or tax adviser, to the effect that the conversion of Matured Class B shares does not constitute a taxable event for the holder under Federal income tax law. If such a revenue ruling or opinion is no longer available, the automatic conversion feature may be suspended, in which event no further conversions of Matured Class B shares would occur while such suspension remained in effect. Although Matured Class B shares could then be exchanged for Class A shares on the basis of relative net asset value of the two classes, without the imposition of a sales charge or fee, such exchange could constitute a taxable event for the holder, and absent such exchange, Class B shares might continue to be subject to the asset-based sales charge for longer than six years. The methodology for calculating the net asset value, dividends and distributions of the Fund's Class A and Class B shares recognizes two types of expenses. General expenses that do not pertain specifically to either class are allocated pro rata to the shares of each class, based on the percentage of the net assets of such class to the Fund's total net assets, and then equally to each outstanding share within a given class. Such general expenses include (i) management fees, (ii) legal, bookkeeping and audit fees, (iii) printing and mailing costs of shareholder reports, Prospectuses, Additional Statements and other materials for current shareholders, (iv) fees to unaffiliated Trustees, (v) custodian expenses, (vi) share issuance costs, (vii) organization and start-up costs, (viii) interest, taxes and brokerage commissions, and (ix) non-recurring expenses, such as litigation costs. Other expenses that are directly attributable to a class are allocated equally to each outstanding share within that class. Such expenses include (i) Distribution and Service Plan fees, (ii) incremental transfer and shareholder servicing agent fees and expenses, (iii) registration fees and (iv) shareholder meeting expenses, to the extent that such expenses pertain to a specific class rather than to the Fund as a whole. Determination of Net Asset Value Per Share. The net asset values per share of Class A and Class B shares of the Fund are determined as of 4:00 P.M. New York time each day the New York Stock Exchange (the "NYSE") is open by dividing the value of the Fund's net assets attributable to that class by the number of shares of that class outstanding. The NYSE's most recent annual holiday schedule (which is subject to change) states that it will close on New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day; it may also close on other days. Trading may occur in debt securities and in foreign securities at times when the NYSE is closed (including weekends and holidays, or after 4:00 P.M. on a regular business day). Because the net asset values of the Fund will not be calculated at such times, if securities held in the Fund's portfolio are traded at such times, the net asset values per share of Class A and Class B shares of the Fund may be significantly affected on such days when shareholders do not have the ability to purchase or redeem shares. The Trust's Board of Trustees has established procedures for the valuation of the Fund's securities generally as follows: (i) equity securities traded on a securities exchange or on NASDAQ are valued at the last reported sale prices on their primary exchange or NASDAQ that day (or, in the absence of sales that day, at values based on the last sale prices of the preceding trading day or closing bid and asked prices); (ii) NASDAQ and other unlisted equity securities for which last sales prices are not regularly reported but for which over-the-counter market quotations are readily available are valued at the highest closing bid price at the time of valuation, or if no closing bid price is reported, on the basis of a closing bid price obtained from a dealer who maintains an active market in that security; (iii) securities (including restricted securities) not having readily available market quotations are valued at fair value under the Board's procedures; (iv) unlisted debt securities having a remaining maturity in excess of 60 days are valued at the mean between the asked and bid prices determined by a portfolio pricing service approved by the Trust's Board of Trustees or obtained from an active market maker on the basis of reasonable inquiry; (v) short-term debt securities having a remaining maturity of 60 days or less are valued at cost, adjusted for amortization of premiums and accretion of discounts; and (vi) securities traded on foreign exchanges or in foreign over-the- counter markets are valued as determined by a portfolio pricing service, approved by the Board, based on last sales prices reported on a principal exchange or the mean between closing bid and asked prices and reflect prevailing rates of exchange taken from the closing price on the London foreign exchange market that day. Foreign currency will be valued as close to the time fixed for the valuation date as is reasonably practicable. The value of securities denominated in foreign currency will be converted to U.S. dollars at the prevailing rates of exchange at the time of valuation. Trading in securities on European and Asian exchanges and over- the-counter markets is normally completed before the close of the NYSE. Events affecting the values of foreign securities traded in such markets that occur between the time their prices are determined and the close of the NYSE will not be reflected in the Fund's calculation of net asset value unless the Board of Trustees, the Manager or the Sub-Adviser, under procedures established by the Board of Trustees, determines that the particular event would materially affect the Fund's net asset value, in which case an adjustment would be made. In the case of U.S. Government Securities, mortgage-backed securities, foreign fixed-income securities and corporate bonds, when last sale information is not generally available, such pricing procedures may include "matrix" comparisons to the prices for comparable instruments on the basis of quality, yield, maturity, and other special factors involved. The Trust's Board of Trustees has authorized the Manager and/or the Sub- Adviser to employ a pricing service to price U.S. Government Securities, mortgage-backed securities, foreign government securities and corporate bonds. The Trustees will monitor the accuracy of such pricing services by comparing prices used for portfolio evaluation to actual sales prices of selected securities. Calls, puts and Futures are valued at the last sale prices on the principal exchanges or on the NASDAQ National Market on which they are traded, or, if there are no sales that day, in accordance with (i) above. Forward currency contracts are valued at the closing price on the London foreign exchange market. When the Fund writes an option, an amount equal to the premium received by the Fund is included in its Statement of Assets and Liabilities as an asset, and an equivalent deferred credit is included in the liability section. The deferred credit is adjusted ("marked-to- market") to reflect the current market value of the option. AccountLink. When shares are purchased through AccountLink, each purchase must be at least $25.00. Shares will be purchased on the regular business day the Distributor is instructed to initiate the Automated Clearing House transfer to buy the shares. Dividends will begin to accrue on such shares on the day the Fund receives Federal Funds for such purchase through the ACH system before 4:00 P.M., which is normally 3 days after the ACH transfer is initiated. The Distributor and the Fund are not responsible for any delays. If the Federal Funds are received after 4:00 P.M., dividends will begin to accrue on the next regular business day after such Federal Funds are received. Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge rate may be obtained for Class A shares under Right of Accumulation and Letters of Intent because of the economies of sales efforts and reduction in expenses realized by the Distributor, dealers and brokers making such sales. No sales charge is imposed in certain other circumstances described in the Prospectus because the Distributor incurs little or no selling expenses. The term "immediate family" refers to one's spouse, children, grandchildren, grandparents, parents, parents-in- law, brothers and sisters, sons- and daughters-in-law, a sibling's spouse and a spouse's siblings. - The OppenheimerFunds. The OppenheimerFunds are those mutual funds for which the Distributor acts as the distributor or the sub- distributor and include the following: Oppenheimer Tax-Free Bond Fund Oppenheimer New York Tax-Exempt Fund Oppenheimer California Tax-Exempt Fund Oppenheimer Intermediate Tax-Exempt Bond Fund Oppenheimer Insured Tax-Exempt Bond Fund Oppenheimer Main Street California Tax-Exempt Fund Oppenheimer Florida Tax-Exempt Fund Oppenheimer Pennsylvania Tax-Exempt Fund Oppenheimer New Jersey Tax-Exempt Fund Oppenheimer Fund Oppenheimer Discovery Fund Oppenheimer Time Fund Oppenheimer Target Fund Oppenheimer Special Fund Oppenheimer Equity Income Fund Oppenheimer Value Stock Fund Oppenheimer Asset Allocation Fund Oppenheimer Total Return Fund, Inc. Oppenheimer Main Street Income & Growth Fund Oppenheimer High Yield Fund Oppenheimer Champion High Yield Fund Oppenheimer Investment Grade Bond Fund Oppenheimer U.S. Government Trust Oppenheimer Limited-Term Government Fund Oppenheimer Mortgage Income Fund Oppenheimer Global Fund Oppenheimer Global Bio-Tech Fund Oppenheimer Global Environment Fund Oppenheimer Global Growth & Income Fund Oppenheimer Gold & Special Minerals Fund Oppenheimer Strategic Income Fund Oppenheimer Strategic Investment Grade Bond Fund Oppenheimer Strategic Short-Term Income Fund Oppenheimer Strategic Income & Growth Fund Oppenheimer Strategic Diversified Income Fund the following "Money Market Funds": Oppenheimer Money Market Fund, Inc. Oppenheimer Cash Reserves Oppenheimer Tax-Exempt Cash Reserves Centennial Money Market Trust Centennial Tax Exempt Trust Centennial Government Trust Centennial New York Tax Exempt Trust Centennial California Tax Exempt Trust Centennial America Fund, L.P. Daily Cash Accumulation Fund, Inc. There is an initial sales charge on the purchase of Class A shares of each of the OppenheimerFunds except Money Market Funds (under certain circumstances described herein, redemption proceeds of Money Market Fund shares may be subject to a contingent deferred sales charge). - Letters of Intent. A Letter of Intent ("Letter") is the investor's statement of intention to purchase Class A shares of the Fund (and other eligible OppenheimerFunds) sold with a front-end sales charge during the 13-month period from the investor's first purchase pursuant to the Letter (the "Letter of Intent period"), which may, at the investor's request, include purchases made up to 90 days prior to the date of the Letter. The Letter states the investor's intention to make the aggregate amount of purchases (excluding any purchases made by reinvestments of dividends or distributions or purchases made at net asset value without sales charge), which together with the investor's holdings of such funds (calculated at their respective public offering prices calculated on the date of the Letter) will equal or exceed the amount specified in the Letter to obtain the reduced sales charge rate (as set forth in the Prospectus) applicable to purchases of shares in that amount (the "intended amount"). Each purchase under the Letter will be made at the public offering price applicable to a single lump-sum purchase of shares in the intended amount, as described in the Prospectus. In submitting a Letter, the investor makes no commitment to purchase shares, but if the investor's purchases of shares within the Letter of Intent period, when added to the value (at offering price) of the investor's holdings of shares on the last day of that period, do not equal or exceed the intended amount, the investor agrees to pay the additional amount of sales charge applicable to such purchases, as set forth in "Terms of Escrow," below (as those terms may be amended from time to time). The investor agrees that shares equal in value to 5% of the intended amount will be held in escrow by the Transfer Agent subject to the Terms of Escrow. Also, the investor agrees to be bound by the terms of the Prospectus, this Statement of Additional Information and the Application used for such Letter of Intent, and if such terms are amended, as they may be from time to time by the Fund, that those amendments will apply automatically to existing Letters of Intent. If the total eligible purchases made during the Letter of Intent period do not equal or exceed the intended 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 amount and exceed the amount needed to qualify for the next sales charge rate reduction set forth in the applicable prospectus, the sales charges paid will be adjusted to the lower rate, but only if and when the dealer returns to the Distributor the excess of the amount of commissions allowed or paid to the dealer over the amount of commissions that apply to the actual amount of purchases. The excess commissions returned to the Distributor will be used to purchase additional shares for the investor's account at the net asset value per share in effect on the date of such purchase, promptly after the Distributor's receipt thereof. In determining the total amount of purchases made under a Letter, shares redeemed by the investor prior to the termination of the Letter of Intent period will be deducted. It is the responsibility of the dealer of record and/or the investor to advise the Distributor about the Letter in placing any purchase orders for the investor during the Letter of Intent period. All of such purchases must be made through the Distributor. - Terms of Escrow that Apply to Letters of Intent. 1. Out of the initial purchase (or subsequent purchases if necessary) made pursuant to a Letter, shares of the Fund equal in value to 5% of the intended amount specified in the Letter shall be held in escrow by the Transfer Agent. For example, if the intended amount specified under the Letter 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 amount specified in the Letter, the investor must remit to the Distributor an amount equal to the difference between the dollar amount of sales charges actually paid and the amount of sales charges which would have been paid if the total amount purchased had been made at a single time. Such sales charge adjustment will apply to any shares redeemed prior to the completion of the Letter. If such difference in sales charges is not paid within twenty days after a request from the Distributor or the dealer, the Distributor will, within sixty days of the expiration of the Letter, redeem the number of escrowed shares necessary to realize such difference in sales charges. Full and fractional shares remaining after such redemption will be released from escrow. If a request is received to redeem escrowed shares prior to the payment of such additional sales charge, the sales charge will be withheld from the redemption proceeds. 4. By signing the Letter, the investor irrevocably constitutes and appoints the Transfer Agent as attorney-in-fact to surrender for redemption any or all escrowed shares. 5. The shares eligible for purchase under the Letter (or the holding of which may be counted toward completion of the Letter) do not include any shares sold without a front-end sales charge or not subject to a Class A contingent deferred sales charge unless (for the purpose of determining completion of the obligation to purchase shares under the Letter) the shares were acquired in exchange for shares of one of the OppenheimerFunds whose shares were acquired by payment of a 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 "Exchange Privilege," and the escrow will be transferred to that other fund. Asset Builder Plans. To establish an Asset Builder Plan from a bank account, a check (minimum $25) for the initial purchase must accompany the application. Shares purchased by Asset Builder Plan payments from bank accounts are subject to the redemption restrictions for recent purchases described in "How To Sell Shares," in the Prospectus. Asset Builder Plans also enable shareholders of Oppenheimer Tax-Exempt Cash Reserves or Oppenheimer Cash Reserves to use those accounts for monthly automatic purchases of shares of up to four other Eligible Funds. There is a sales charge on the purchase of certain Eligible Funds. An application should be obtained from the Transfer Agent, completed and returned, and a prospectus of the selected fund(s) (available from the Distributor) should be obtained before initiating Asset Builder payments. The amount of the Asset Builder investment may be changed or the automatic investments may be terminated at any time by writing to the Transfer Agent. A reasonable period (approximately 15 days) is required after the Transfer Agent's receipt of such instructions to implement them. The Fund reserves the right to amend, suspend, or discontinue offering such plans at any time without prior notice. Cancellation of Purchase Orders. Cancellation of purchase orders for the Fund's shares (for example, when a purchase check is returned to the Fund unpaid) causes a loss to be incurred when the net asset value of the Fund's shares on the cancellation date is less than on the purchase date. That loss is equal to the amount of the decline in the net asset value per share multiplied by the number of shares in the purchase order. The investor is responsible for that loss. If the investor fails to compensate the Fund for the loss, the Distributor will do so. The Fund may reimburse the Distributor for that amount by redeeming shares from any account registered in that investor's name, or the Fund or the Distributor may seek other redress. How to Sell Shares Information on how to sell shares of the Fund is stated in the Prospectus. The information below supplements the terms and conditions for redemptions set forth in the Prospectus. - Payments "In Kind". The Prospectus states that payment for shares tendered for redemption is ordinarily made in cash. However, if the Board of Trustees of the Trust determines 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, the Fund may pay the redemption proceeds in whole or in part by a distribution "in kind" of securities from the portfolio of the Fund, in lieu of cash, in conformity with applicable rules of the Securities and Exchange Commission. The Fund has elected to be governed by Rule 18f-1 under the Investment Company Act, pursuant to which the Fund is obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of the net assets of the Fund during any 90-day period for any one shareholder. If shares are redeemed in kind, the redeeming shareholder might incur brokerage or other costs in selling the securities for cash. The method of valuing securities used to make redemptions in kind will be the same as the method the Fund uses to value it portfolio securities described above under "Determination of Net Asset Value Per Share" and such valuation will be made as of the time the redemption price is determined. - Involuntary Redemptions. The Trust's Board of Trustees has the right to cause the involuntary redemption of the shares held in any account if the aggregate net asset value of such shares is less than $1,000 or such lesser amount as the Board may fix. The Board of Trustees will not cause the involuntary redemption of shares in an account if the aggregate net asset value of such shares has fallen below the stated minimum solely as a result of market fluctuations. Should the Board elect to exercise this right, it may also fix, in accordance with the Investment Company Act, the requirements for any notice to be given to the shareholders in question (not less than 30 days), or may set requirements for permission to increase the investment, and other terms and conditions so that the shares would not be involuntarily redeemed. Reinvestment Privilege. Within six months of a redemption, a shareholder may reinvest all or part of the redemption proceeds of (i) Class A shares, or (ii) Class B shares that were subject to the Class B contingent deferred sales charge when redeemed, in Class A shares of the Fund or any of the other OppenheimerFunds into which shares of the Fund are exchangeable as described below, at the net asset value next computed after receipt by the Transfer Agent of the reinvestment order. The shareholder must ask the Distributor for such privilege at the time of reinvestment. Any capital gain that was realized when the shares were redeemed is taxable, and reinvestment will not alter any capital gains tax payable on that gain. If there has been a capital loss on the redemption, some or all of the loss may not be tax deductible, depending on the timing and amount of the reinvestment. Under the Internal Revenue Code, if the redemption proceeds of Fund shares on which a sales charge was paid are reinvested in shares of the Fund or another of the OppenheimerFunds within 90 days of payment of the sales charge, the shareholder's basis in the shares of the Fund that were redeemed may not include the amount of the sales charge paid. That would reduce the loss or increase the gain recognized from the redemption. However, in that case, the sales charge would be added to the basis of the shares acquired by the reinvestment of the redemption proceeds. The Fund may amend, suspend or cease offering this reinvestment privilege at any time as to shares redeemed after the date of such amendment, suspension or cessation. Transfer of Shares. Shares are not subject to the payment of a contingent deferred sales charge of either class at the time of transfer to the name of another person or entity (whether the transfer occurs by absolute assignment, gift or bequest, not involving, directly or indirectly, a public sale). The transferred shares will remain subject to the contingent deferred sales charge, calculated as if the transferee shareholder had acquired the transferred shares in the same manner and at the same time as the transferring shareholder. If less than all shares held in an account are transferred, and some but not all shares in the account would be subject to a contingent deferred sales charge if redeemed at the time of transfer, the priorities described in the Prospectus under "How to Buy Shares" for the imposition of the Class B contingent deferred sales charge will be followed in determining the order in which shares are transferred. Distributions From Retirement Plans. Requests for distributions from OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, 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. The request must: (i) state the reason for the distribution; (ii) state the owner's awareness of tax penalties if the distribution is premature; and (iii) conform to the requirements of the plan and the Fund's other redemption requirements. Participants (other than self-employed persons) in OppenheimerFunds-sponsored pension or profit-sharing plans may not directly request redemption of their accounts. The employer or plan administrator must sign the request. Distributions from pension and profit sharing plans are subject to special requirements under the Internal Revenue Code and certain documents (available from the Transfer Agent) must be completed before the distribution may be made. Distributions from retirement plans are subject to withholding requirements under the Internal Revenue Code, and IRS Form W-4P (available from the Transfer Agent) must be submitted to the Transfer Agent with the distribution request, or the distribution may be delayed. Unless the shareholder has provided the Transfer Agent with a certified tax identification number, the Internal Revenue Code requires that tax be withheld from any distribution even if the shareholder elects not to have tax withheld. The Fund, the Manager, the Distributor, the Trustee and the Transfer Agent assume no responsibility to determine whether a distribution satisfies the conditions of applicable tax laws and will not be responsible for any tax penalties assessed in connection with a distribution. Special Arrangements for Repurchase of Shares from Dealers and Brokers. The Distributor is the Fund's agent to repurchase its shares from authorized dealers or brokers. The repurchase price will be the net asset value next computed after the receipt of an order placed by such dealer or broker, except that orders received from dealers or brokers after 4:00 P.M. on a regular business day will be processed at that day's net asset value if such orders were received by the dealer or broker from its customers prior to 4:00 P.M., and were transmitted to and received by the Distributor prior to its close of business that day (normally 5:00 P.M.). Payment ordinarily will be made within seven days after the Distributor's receipt of the required documents, with signature(s) guaranteed as described above. Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund valued at $5,000 or more can authorize the Transfer Agent to redeem shares (minimum $50) automatically on a monthly, quarterly, semi-annual or annual basis under an Automatic Withdrawal Plan. Shares will be redeemed three business days prior to the date requested by the shareholder for receipt of the payment. Automatic withdrawals of up to $1,500 per month may be requested by telephone if payments are by check payable to all shareholders of record and sent to the address of record for the account (and if the address has not been changed within the prior 30 days). Required minimum distributions from OppenheimerFunds-sponsored retirement plans may not be arranged on this basis. Payments are normally made by check, but shareholders having AccountLink privileges (see "How To Buy Shares") may arrange to have Automatic Withdrawal Plan payments transferred to the bank account designated on the OppenheimerFunds New Account Application or signature-guaranteed instructions. The Fund cannot guarantee receipt of the payment on the date requested and reserves the right to amend, suspend or discontinue offering such plans at any time without prior notice. Because of the sales charge assessed on Class A share purchases, shareholders should not make regular additional Class A purchases while participating in an Automatic Withdrawal Plan. Class B shareholders should not establish withdrawal plans, because of the imposition of the Class B CDSC on such withdrawals (except where the Class B CDSC is waived as described in "Class B Contingent Deferred Sales Charge"). By requesting an Automatic Withdrawal or Exchange Plan, the shareholder agrees to the terms and conditions applicable to such plans, as stated below and in the provisions of the OppenheimerFunds Application relating to such Plans, as well as the Prospectus. These provisions may be amended from time to time by the Fund and/or the Distributor. When adopted, such amendments will automatically apply to existing Plans. - Automatic Exchange Plans. Shareholders can authorize the Transfer Agent (on the OppenheimerFunds Application or signature- guaranteed instructions) to exchange a pre-determined amount of shares of the Fund for shares (of the same class) of other OppenheimerFunds automatically on a monthly, quarterly, semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount that may be exchanged to each other fund account is $25. Exchanges made under these plans are subject to the restrictions that apply to exchanges as set forth in "Exchange Privilege" in the Prospectus and "How to Exchange Shares" below in this Statement of Additional Information. - Automatic Withdrawal Plans. Fund shares will be redeemed as necessary to meet withdrawal payments. Shares acquired without a sales charge will be redeemed first and thereafter 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 such plans should not be considered as a yield or income on your investment. It may not be desirable to purchases additional Class A shares while making automatic withdrawals because of the sales charges that apply to purchases when made. Accordingly, a shareholder normally may not maintain an Automatic Withdrawal Plan while simultaneously making regular purchases of Class A shares. The transfer agent will administer the investor's Automatic Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder") who executed the Plan authorization and application submitted to the Transfer Agent. The Transfer Agent shall incur no liability to the Planholder for any action taken or omitted by the Transfer Agent in good faith to administer the Plan. Certificates will not be issued for shares of the Fund purchased for and held under the Plan, but the Transfer Agent will credit all such shares to the account of the Planholder on the records of the Fund. Any share certificates held by a Planholder may be surrendered unendorsed to the Transfer Agent with the Plan application so that the shares represented by the certificate may be held under the Plan. For accounts subject to Automatic Withdrawal Plans, distributions of capital gains must be reinvested in shares of the Fund, which will be done at net asset value without a sales charge. Dividends on shares held in the account may be paid in cash or reinvested. Redemptions of shares needed to make withdrawal payments will be made at the net asset value per share determined on the redemption date. Checks or AccountLink payments of the proceeds of Plan withdrawals will normally be transmitted three business days prior to the date selected for receipt of the payment (the date selected for receipt is an approximate date), according to the choice specified in writing by the Planholder. The amount and the interval of disbursement payments and the address to which checks are to be mailed or AccountLink payments are to be sent may be changed at any time by the Planholder by writing to the Transfer Agent. The Planholder should allow at least two weeks' time in mailing such notification for the requested change to be put in effect. The Planholder may, at any time, instruct the Transfer Agent by written notice (in proper form in accordance with the requirements of the then- current Prospectus of the Fund) to redeem all, or any part of, the shares held under the Plan. In that case, the Transfer Agent will redeem the number of shares requested at the net asset value per share in effect in accordance with the Fund's usual redemption procedures and will mail a check for the proceeds to the Planholder. The Plan may be terminated at any time by the Planholder by writing to the Transfer Agent. A Plan may also be terminated at any time by the Transfer Agent upon receiving directions to that effect from the Fund. The Transfer Agent will also terminate a Plan upon receipt of evidence satisfactory to it of the death or legal incapacity of the Planholder. Upon termination of a Plan by the Transfer Agent or the Fund, shares that have not been redeemed from the account will be held in uncertificated form in the name of the Planholder, and the account will continue as a dividend-reinvestment, uncertificated account unless and until proper instructions are received from the Planholder or his or her executor or guardian, or other authorized person. To use shares held under the Plan as collateral for a debt, the Planholder may request issuance of a portion of the shares in certificated form. Upon written request from the Planholder, the Transfer Agent will determine the number of shares for which a certificate may be issued without causing the withdrawal checks to stop because of exhaustion of uncertificated shares needed to continue payments. However, should such uncertificated shares become exhausted, Plan withdrawals will terminate. If the Transfer Agent ceases to act as transfer agent for the Fund, the Planholder will be deemed to have appointed any successor transfer agent to act as agent in administering the Plan. How to Exchange Shares As stated in the Prospectus, shares of a particular class of OppenheimerFunds having more than one class of shares may be exchanged only for shares of the same class of other OppenheimerFunds. All of the OppenheimerFunds offer Class A shares, but only the following other OppenheimerFunds offer Class B shares: Oppenheimer Strategic Income Fund Oppenheimer Strategic Income & Growth Fund Oppenheimer Strategic Investment Grade Bond Fund Oppenheimer Strategic Short-Term Income Fund Oppenheimer New York Tax-Exempt Fund Oppenheimer Tax-Free Bond Fund Oppenheimer California Tax-Exempt Fund Oppenheimer Pennsylvania Tax-Exempt Fund Oppenheimer Florida Tax-Exempt Fund Oppenheimer New Jersey Tax-Exempt Fund Oppenheimer Insured Tax-Exempt Bond Fund Oppenheimer Main Street California Tax-Exempt Fund Oppenheimer Total Return Fund, Inc. Oppenheimer Investment Grade Bond Fund Oppenheimer Limited-Term Government Fund Oppenheimer High Yield Fund Oppenheimer Mortgage Income Fund Oppenheimer Cash Reserves (Class B shares are only available by exchange) Oppenheimer Special Fund Oppenheimer Equity Income Fund Oppenheimer Global Fund Oppenheimer Discovery Fund Class A shares of OppenheimerFunds may be exchanged for shares of any Money Market Fund; shares of any Money Market Fund purchased without a sales charge may be exchanged for shares of OppenheimerFunds offered with a sales charge upon payment of the sales charge (or, if applicable, may be used to purchase shares of OppenheimerFunds subject to a CDSC); and shares of this Fund acquired by reinvestment of dividends or distributions from any other of the OppenheimerFunds or from any unit investment trust for which reinvestment arrangements have been made with the Distributor may be exchanged at net asset value for shares of any of the OppenheimerFunds. No CDSC is imposed on exchanges of shares of either class purchased subject to a CDSC. However, when Class A shares acquired by exchange of Class A shares purchased subject to a Class A CDSC are redeemed within 18 months of the end of the calendar month of the initial purchase of the exchanged Class A shares, the Class A CDSC is imposed on the redeemed shares (see "Class A Contingent Deferred Sales Charge" in the Prospectus), and the Class B CDSC is imposed on Class B shares redeemed within six years of the initial purchase of the exchanged Class B shares. The Fund reserves the right to reject telephone or written exchange requests submitted in bulk by anyone on behalf of 10 or more accounts. The Fund may accept requests for exchanges of up to 50 accounts per day from representatives of authorized dealers that qualify for this privilege. In connection with any exchange request, the number of shares exchanged may be less than the number requested if the exchange or the number requested would include shares subject to a restriction cited in the Prospectus or this Statement of Additional Information or shares covered by a share certificate that is not tendered with the request. In those cases, only the shares available for exchange without restriction will be exchanged. When Class B 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 contingent deferred sales charge will be followed in determining the order in which the shares are exchanged. Shareholders should take into account the effect of any exchange on the applicability and rate of any contingent deferred sales charge that might be imposed in the subsequent redemption of remaining shares. Shareholders owning shares of both classes must specify whether they intend to exchange Class A or Class B shares. When exchanging shares by telephone, the shareholder must either have an existing account in, or acknowledge receipt of a prospectus of, the fund to which the exchange is to be made. For full or partial exchanges of an account made by telephone, any special account features such as Asset Builder Plans, Automatic Withdrawal Plans and retirement plan contributions will be switched to the new account unless the Transfer Agent is instructed otherwise. If all telephone lines are busy (which might occur, for example, during periods of substantial market fluctuations), shareholders might not be able to request exchanges by telephone and would have to submit written exchange requests. Shares to be exchanged are redeemed on the regular business day the Transfer Agent receives an exchange request in proper form (the "Redemption Date"). Normally, shares of the fund to be acquired are purchased on the Redemption Date, but such purchases may be delayed by either fund up to five business days if it determines that it would be disadvantaged by an immediate transfer of the redemption proceeds. The Fund reserves the right, in its discretion, to refuse any exchange request that may disadvantage it (for example, if the receipt of multiple exchange request from a dealer might require the disposition of portfolio securities at a time or at a price that might be disadvantageous to the Fund). The different OppenheimerFunds available for exchange have different investment objectives, policies and risks, and a shareholder should assure that the Fund selected is appropriate for his or her investment and should be aware of the tax consequences of an exchange. For federal 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 transaction. Dividends, Capital Gains And Taxes Dividends and Distributions. Dividends will be payable on shares held of record at the time of the previous determination of net asset value, or as otherwise described in "How to Buy Shares." Dividends will be declared on shares repurchased by a dealer or broker for four business days following the trade date (i.e., to and including the day prior to settlement of the repurchase). If all shares in an account are redeemed, all dividends accrued on shares of the same class in the account will be paid together with the redemption proceeds. Dividends, distributions and the proceeds of the redemption of Fund shares represented by checks returned to the Transfer Agent by the Postal Service as undeliverable will be invested in shares of Oppenheimer Money Market Fund, Inc., as promptly as possible after the return of such checks to the Transfer Agent, to enable the investor to earn a return on otherwise idle funds. Tax Status of the Fund's Dividends and Distributions. The Federal tax treatment of the Fund's dividends and capital gains distributions is explained in the Prospectus under the caption "Dividends, Capital Gains and Taxes." Special provisions of the Internal Revenue Code govern the eligibility of the Fund's dividends for the dividends-received deduction for corporate shareholders. Long-term capital gains distributions are not eligible for the deduction. In addition, the amount of dividends paid by the Fund which may qualify for the deduction is limited to the aggregate amount of qualifying dividends which the Fund derives from its portfolio investments that the Fund has held for a minimum period, usually 46 days. A corporate shareholder will not be eligible for the deduction on dividends paid on shares held for 45 days or less. To the extent the Fund's dividends are derived from its gross income from option premiums, interest income or short-term gains from the sale of securities, or dividends from foreign corporations, its dividends will not qualify for the deduction. It is expected that for the most part the Fund's dividends will not qualify, because of the nature of the investments held by the Fund in its portfolio. The amount of a class's distributions may vary from time to time depending on market conditions, the composition of the Fund's portfolio, and expenses borne by the Fund or borne separately by a class, as described in "Alternative Sales Arrangements -- Class A and Class B," above. Dividends are calculated in the same manner, at the same time and on the same day for shares of each class. However, dividends on Class B shares are expected to be lower as a result of the asset-based sales charge on Class B shares, and Class B dividends will also differ in amount as a consequence of any difference in net asset value between Class A and Class B shares. Distributions may be made annually in December out of any net short-term or long-term capital gains realized from the sale of securities, premiums from expired calls written by the Fund and net profits from Hedging Instruments and closing purchase transactions realized in the twelve months ending on October 31 of the current year. Any difference between the net asset value of Class A and Class B shares will be reflected in such distributions. Distributions from net short- term capital gains are taxable to shareholders as ordinary income and when paid by the Fund are considered "dividends." The Fund may make a supplemental distribution of capital gains and ordinary income following the end of its fiscal year. Any long-term capital gains distributions will be identified separately when paid and when tax information is distributed by the Fund. If prior distributions must be re-characterized at the end of the fiscal year as a result of the effect of the Fund's investment policies, shareholders may have a non-taxable return of capital, which will be identified in notices to shareholders. There is no fixed dividend rate and there can be no assurance as to the payment of any dividends or the realization of any capital gains. 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 and intends to qualify in future years, but reserves the right not to qualify. The Internal Revenue Code contains a number of complex tests to determine whether the Fund will qualify, and the Fund might not meet those tests in a particular year. For example, if the Fund derives 30% or more of its gross income from the sale of securities held less than three months, it may fail to qualify (see "Tax Aspects of Covered Calls and Hedging Instruments," above). If it does not qualify, the Fund will be treated for tax purposes as an ordinary corporation and will receive no tax deduction for payments of dividends and distributions made to shareholders. Under the Internal Revenue Code, by December 31 each year the Fund must distribute 98% of its taxable investment income earned from January 1 through December 31 of that year and 98% of its capital gains realized in the period from November 1 of the prior year through October 31 of the current year, or else the Fund must pay an excise tax on the amounts not distributed. While it is presently anticipated that the Fund will meet those requirements, the Trust's Board and Manager might determine in a particular year that it would be in the best interest of shareholders for the Fund not to make such distributions at the required levels and to pay the excise tax on the undistributed amounts. That would reduce the amount of income or capital gains available for distribution to shareholders. Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to reinvest all dividends and/or capital gains distributions in shares of the same class of any of the other OppenheimerFunds listed in "Reduced Sales Charges" above at net asset value without sales charge. Class B shareholders should be aware that as of the date of this Statement of Additional Information, not all OppenheimerFunds offer Class B shares. The names of funds that do offer Class B shares can be obtained by calling the Distributor at 1-800-525-7048. To elect this option, the shareholder must notify the Transfer Agent in writing and either have an existing account in the fund selected for reinvestment or must obtain a prospectus for that fund and an application from the Distributor to establish an account. The investment will be made at the net asset value per share in effect at the close of business on the payable date of the dividend or distribution. Dividends and/or distributions from certain of the OppenheimerFunds may be invested in shares of the Fund on the same basis. Additional Information About The Fund The Custodian. The Bank of New York is the Custodian of the Fund's assets. The Custodian's responsibilities include safeguarding and controlling the Fund's portfolio securities, collecting income on the portfolio securities and handling the delivery of such securities to and from the Fund. The Manager has represented to the Fund that the banking relationships between the Manager and the Custodian have been and will continue to be unrelated to and unaffected by the relationship between the Fund and the Custodian. It will be the practice of the Fund to deal with the Custodian in a manner uninfluenced by any banking relationship the Custodian may have with the Manager and its affiliates. Independent Auditors. The independent auditors of the Fund audit the Fund's financial statements and perform other related audit services. They also act as auditors for certain other funds advised by the Manager and its affiliates. INDEPENDENT AUDITORS' REPORT - ------------------------------------------------------------------------------- The Board of Trustees and Shareholders of Oppenheimer Value Stock Fund: We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Oppenheimer Value Stock Fund as of December 31, 1993, the related statement of operations for the year then ended, the statements of changes in net assets for the years ended December 31, 1993 and 1992, and the financial highlights for the period January 1, 1991 to December 31, 1993. 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 (except for total return) for the period December 22, 1986 to December 31, 1990 were audited by other auditors whose report dated February 4, 1991, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned at December 31, 1993 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 Value Stock Fund at December 31, 1993, 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 Denver, Colorado January 21, 1994 STATEMENT OF INVESTMENTS December 31, 1993
FACE MARKET VALUE AMOUNT SEE NOTE 1 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- SHORT-TERM NOTES-9.1% - ----------------------------------------------------------------------------------------------------------------------------- Caterpillar Financial Services Corp., 3.40%, 1/6/94 $2,000,000 $1,999,056 ------------------------------------------------------------------------------------------ ConAgra, Inc., 3.40%, 1/11/94 910,000 909,140 ------------------------------------------------------------------------------------------ Corning, Inc., 3.50%, 1/5/94 1,900,000 1,899,261 ------------------------------------------------------------------------------------------ General Motors Acceptance Corp., 3.05%, 1/5/94 645,000 645,000 ------------------------------------------------------------------------------------------ Indiana Michigan Power Co., 3.50%, 1/4/94 1,330,000 1,329,612 ------------------------------------------------------------------------------------------ Public Service Co. of Colorado, 3.70%, 1/7/94 1,870,000 1,868,847 ---------- Total Short-Term Notes (Cost $8,650,916) 8,650,916 SHARES - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- COMMON STOCKS-89.5% - ----------------------------------------------------------------------------------------------------------------------------- BASIC MATERIALS-7.1% - ----------------------------------------------------------------------------------------------------------------------------- ALUMINUM-0.9% Reynolds Metals Co. 18,000 816,750 - ----------------------------------------------------------------------------------------------------------------------------- CHEMICALS-1.3% Du Pont (E.I.) De Nemours & Co. 25,000 1,206,250 - ----------------------------------------------------------------------------------------------------------------------------- CHEMICALS: SPECIALTY-1.9% Lubrizol Corp. (The) 25,500 870,187 ------------------------------------------------------------------------------------------ Nalco Chemical Co. 26,500 993,750 ---------- 1,863,937 - ----------------------------------------------------------------------------------------------------------------------------- METAL: MISCELLANEOUS-1.2% Phelps Dodge Corp. 23,500 1,145,625 - ----------------------------------------------------------------------------------------------------------------------------- PAPER AND FOREST PRODUCTS-1.8% Westvaco Corp. 23,000 819,375 ------------------------------------------------------------------------------------------ Willamette Industries, Inc. 19,000 940,500 ---------- 1,759,875 - ----------------------------------------------------------------------------------------------------------------------------- CONSUMER CYCLICALS-15.9% - ----------------------------------------------------------------------------------------------------------------------------- AUTOMOBILES-1.8% Ford Motor Co. 27,000 1,741,500 - ----------------------------------------------------------------------------------------------------------------------------- AUTO PARTS: AFTER MARKET-1.9% Genuine Parts Co. 48,500 1,824,813 - ----------------------------------------------------------------------------------------------------------------------------- HARDWARE AND TOOLS-1.3% Stanley Works (The) 28,500 1,268,250 - ----------------------------------------------------------------------------------------------------------------------------- LEISURE TIME-1.4% Eastman Kodak Co. 24,800 1,388,800 - ----------------------------------------------------------------------------------------------------------------------------- PUBLISHING-3.6% Dun & Bradstreet Corp. (The) 30,000 1,848,750 ------------------------------------------------------------------------------------------ McGraw-Hill, Inc. 23,000 1,555,375 ---------- 3,404,125 - ----------------------------------------------------------------------------------------------------------------------------- RETAIL STORES: DEPARTMENT May Department Stores Co. 40,500 1,594,687 STORES-1.7% - ----------------------------------------------------------------------------------------------------------------------------- RETAIL STORES: GENERAL K Mart Corp. 42,100 894,625 ------------------------------------------------------------------------------------------ MERCHANDISE CHAINS-2.4% Penney (J.C.) Co., Inc. 26,500 1,387,938 ---------- 2,282,563 - ----------------------------------------------------------------------------------------------------------------------------- RETAIL: SPECIALTY-0.7% Rite Aid Corp. 40,000 635,000 - ----------------------------------------------------------------------------------------------------------------------------- TEXTILES: APPAREL V.F. Corp. 22,500 1,037,812 MANUFACTURERS-1.1% - ----------------------------------------------------------------------------------------------------------------------------- CONSUMER NON-CYCLICALS-10.8% - ----------------------------------------------------------------------------------------------------------------------------- BEVERAGES: ALCOHOLIC-1.4% Brown-Forman Corp., Cl. B 15,500 1,352,375 - ----------------------------------------------------------------------------------------------------------------------------- DRUGS-2.3% Pfizer, Inc. 32,500 2,242,500
MARKET VALUE SHARES SEE NOTE 1 - ----------------------------------------------------------------------------------------------------------------------------- FOOD PROCESSING-2.9% CPC International, Inc. 28,000 $1,333,500 ------------------------------------------------------------------------------------------ Gerber Products Co. 19,000 539,125 ------------------------------------------------------------------------------------------ Pioneer Hi-Bred International, Inc. 21,000 819,000 ---------- 2,691,625 - ----------------------------------------------------------------------------------------------------------------------------- HEALTHCARE: DIVERSIFIED-2.0% Bristol-Myers Squibb Co. 33,000 1,918,125 - ----------------------------------------------------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS-1.0% Clorox Co. (The) 18,300 992,775 - ----------------------------------------------------------------------------------------------------------------------------- MEDICAL PRODUCTS-1.2% Becton, Dickinson & Co. 30,600 1,097,775 - ----------------------------------------------------------------------------------------------------------------------------- ENERGY-7.9% - ----------------------------------------------------------------------------------------------------------------------------- OIL: INTEGRATED DOMESTIC-1.7% Atlantic Richfield Co. 10,500 1,105,125 ------------------------------------------------------------------------------------------ USX-Marathon Group 32,000 528,000 ---------- 1,633,125 - ----------------------------------------------------------------------------------------------------------------------------- OIL: INTEGRATED Amoco Corp. 26,500 1,401,187 INTERNATIONAL-6.2% ------------------------------------------------------------------------------------------ Chevron Corp. 22,000 1,916,750 ------------------------------------------------------------------------------------------ Mobil Corp. 19,500 1,540,500 ------------------------------------------------------------------------------------------ Royal Dutch Petroleum Co. 10,200 1,064,625 ---------- 5,923,062 - ----------------------------------------------------------------------------------------------------------------------------- FINANCIAL-10.7% - ----------------------------------------------------------------------------------------------------------------------------- FINANCIAL SERVICES: American Express Co. 40,500 1,250,438 MISCELLANEOUS-1.3% - ----------------------------------------------------------------------------------------------------------------------------- INSURANCE: LIFE-1.0% Jefferson-Pilot Corp. 19,850 930,469 - ----------------------------------------------------------------------------------------------------------------------------- INSURANCE: MULTI-LINE-1.1% Unitrin, Inc. 23,500 1,022,250 - ----------------------------------------------------------------------------------------------------------------------------- INSURANCE: PROPERTY AND Chubb Corp. (The) 9,500 739,812 CASUALTY-2.5% ------------------------------------------------------------------------------------------ SAFECO Corp. 30,000 1,650,000 ---------- 2,389,812 - ----------------------------------------------------------------------------------------------------------------------------- MAJOR BANKS: REGIONAL-4.8% Comerica, Inc. 51,000 1,357,875 ------------------------------------------------------------------------------------------ CoreStates Financial Corp. 56,000 1,463,000 ------------------------------------------------------------------------------------------ Norwest Corp. 38,000 926,250 ------------------------------------------------------------------------------------------ Wachovia Corp. 25,540 855,590 ---------- 4,602,715 - ----------------------------------------------------------------------------------------------------------------------------- INDUSTRIAL-16.5% - ----------------------------------------------------------------------------------------------------------------------------- COMMERCIAL SERVICES-1.4% Donnelley (R.R.) & Sons Co. 28,500 887,062 ------------------------------------------------------------------------------------------ Omnicom Group, Inc. 10,000 462,500 ---------- 1,349,562 - ----------------------------------------------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT-8.4% AMP, Inc. 40,000 2,525,000 ------------------------------------------------------------------------------------------ General Electric Co. 29,000 3,041,375 ------------------------------------------------------------------------------------------ Grainger (W.W.), Inc. 22,000 1,265,000 ------------------------------------------------------------------------------------------ Hubbell, Inc., Cl.B 22,021 1,191,887 ---------- 8,023,262
STATEMENT OF INVESTMENTS (Continued)
MARKET VALUE SHARES SEE NOTE 1 - ----------------------------------------------------------------------------------------------------------------------------- MANUFACTURING: DIVERSIFIED Crane Co. 17,800 $ 440,550 INDUSTRIALS-5.2% ------------------------------------------------------------------------------------------ Dover Corp. 19,500 1,184,625 ------------------------------------------------------------------------------------------ General Signal Corp. 37,500 1,289,063 ------------------------------------------------------------------------------------------ Harsco Corp. 24,000 975,000 ------------------------------------------------------------------------------------------ Parker-Hannifin Corp. 29,000 1,094,750 ---------- 4,983,988 - ----------------------------------------------------------------------------------------------------------------------------- RAILROADS-1.5% Norfolk Southern Corp. 20,000 1,410,000 - ----------------------------------------------------------------------------------------------------------------------------- TECHNOLOGY-13.3% AEROSPACE/DEFENSE-4.1% Boeing Co. (The) 14,700 635,775 ------------------------------------------------------------------------------------------ Lockheed Corp. 25,000 1,706,250 ------------------------------------------------------------------------------------------ Rockwell International Corp. 22,000 816,750 ------------------------------------------------------------------------------------------ TRW, Inc. 10,500 727,125 ---------- 3,885,900 - ----------------------------------------------------------------------------------------------------------------------------- COMPUTER SYSTEMS-0.9% International Business Machines Corp. 14,300 807,950 - ----------------------------------------------------------------------------------------------------------------------------- ELECTRONICS: INSTRUMENTATION-2.1% Hewlett-Packard Co. 25,500 2,014,500 - ----------------------------------------------------------------------------------------------------------------------------- OFFICE EQUIPMENT AND Minnesota Mining and Manufacturing Co. 25,000 2,718,750 SUPPLIES-6.2% ------------------------------------------------------------------------------------------ Pitney Bowes, Inc. 50,000 2,068,750 ------------------------------------------------------------------------------------------ Xerox Corp. 13,500 1,206,562 ---------- 5,994,062 - ----------------------------------------------------------------------------------------------------------------------------- UTILITIES-7.3% - ----------------------------------------------------------------------------------------------------------------------------- ELECTRIC COS.-3.7% Allegheny Power System, Inc. 11,000 291,500 ------------------------------------------------------------------------------------------ Niagara Mohawk Power Corp. 46,000 931,500 ------------------------------------------------------------------------------------------ NIPSCO Industries, Inc. 26,000 854,750 ------------------------------------------------------------------------------------------ SCANA Corp. 16,500 820,875 ------------------------------------------------------------------------------------------ Union Electric Co. 16,000 628,000 ---------- 3,526,625 NATURAL GAS-1.0% Consolidated Natural Gas Co. 20,500 963,500 - ----------------------------------------------------------------------------------------------------------------------------- TELEPHONE (NEW)-2.6% Ameritech Corp. 15,600 1,197,300 ------------------------------------------------------------------------------------------ Bell Atlantic Corp. 7,600 448,400 ------------------------------------------------------------------------------------------ Southern New England Telecommunications Corp. 24,500 885,063 ---------- 2,530,763 Total Common Stocks (Cost $69,387,905) 85,507,145 - ----------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $78,038,820) 98.6% 94,158,061 - ----------------------------------------------------------------------------------------------------------------------------- OTHER ASSETS NET OF LIABILITIES 1.4 1,470,159 ------- ---------- NET ASSETS 100.0% $95,628,220 ------- ---------- ------- ----------
See accompanying Notes to Financial Statements. STATEMENT OF ASSETS AND LIABILITIES December 31, 1993 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- ASSETS Investments, at value (cost $78,038,820)-see accompanying statement $94,158,061 ------------------------------------------------------------------------------------------ Cash 1,516,373 ------------------------------------------------------------------------------------------ Receivables: Shares of beneficial interest sold 540,617 Dividends and interest 176,365 Investments sold 13,685 ------------------------------------------------------------------------------------------ Other 9,052 ----------- Total assets 96,414,153 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- LIABILITIES Payables and other liabilities: Investments purchased 403,474 Shares of beneficial interest redeemed 240,929 Distribution assistance-Note 4 57,283 Dividends and distributions 34,797 Deferred trustee fees-Note 5 8,765 Other 40,685 ----------- Total liabilities 785,933 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- NET ASSETS $95,628,220 ----------- ----------- - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- COMPOSITION OF Paid-in capital $79,551,976 NET ASSETS ------------------------------------------------------------------------------------------ Undistributed net investment income 225 ------------------------------------------------------------------------------------------ Distributions in excess of net realized gain from investment transactions (43,222) ------------------------------------------------------------------------------------------ Net unrealized appreciation on investments-Note 3 16,119,241 ----------- Net assets $95,628,220 ----------- ----------- - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE Class A Shares: PER SHARE Net asset value and redemption price per share (based on net assets of $90,469,747 and 6,279,938 shares of beneficial interest outstanding) $14.41 Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $15.29 ------------------------------------------------------------------------------------------ Class B Shares: Net asset value, redemption price and offering price per share (based on net assetsof $5,158,473 and 359,470 shares of beneficial interest outstanding) $14.35
See accompanying Notes to Financial Statements. STATEMENT OF OPERATIONS For the Year Ended December 31, 1993 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Dividends $2,301,756 ------------------------------------------------------------------------------------------ Interest 324,670 ---------- Total income 2,626,426 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- EXPENSES Management fees-Note 4 614,932 ------------------------------------------------------------------------------------------ Distribution assistance: Class A-Note 4 198,834 Class B-Note 4 16,056 ------------------------------------------------------------------------------------------ Transfer and shareholder servicing agent fees-Note 4 72,447 ------------------------------------------------------------------------------------------ Shareholder reports 57,937 ------------------------------------------------------------------------------------------ Legal and auditing fees 20,583 ------------------------------------------------------------------------------------------ Custodian fees and expenses 20,266 ------------------------------------------------------------------------------------------ Registration and filing fees: Class A 8,929 Class B 1,337 ------------------------------------------------------------------------------------------ Trustees' fees and expenses 7,731 ------------------------------------------------------------------------------------------ Other 9,117 ---------- Total expenses 1,028,169 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME 1,598,257 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED Net realized gain on investments 4,772,844 ------------------------------------------------------------------------------------------ GAIN (LOSS) ON INVESTMENTS Net change in unrealized appreciation on investments (52,118) ---------- Net realized and unrealized gain on investments 4,720,726 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $6,318,983
See accompanying Notes to Financial Statements. STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, ------------------------------- 1993 1992 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- OPERATIONS Net investment income $ 1,598,257 $ 1,250,163 ------------------------------------------------------------------------------------------ Net realized gain on investments 4,772,844 1,430,983 ------------------------------------------------------------------------------------------ Net change in unrealized appreciation or depreciation on investments (52,118) 2,336,062 ----------- ----------- Net increase in net assets resulting from operations 6,318,983 5,017,208 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- DIVIDENDS AND Dividends from net investment income: DISTRIBUTIONS TO Class A ($.288 and $.322 per share, respectively) (1,573,023) (1,252,511) SHAREHOLDERS Class B ($.166 per share) (33,142) -- ------------------------------------------------------------------------------------------ Distributions from net realized gain on investments: Class A ($.76 and $.346 per share, respectively) (4,515,011) (1,431,916) Class B ($.76 per share) (258,413) -- - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- BENEFICIAL INTEREST Net increase in net assets resulting from TRANSACTIONS Class A beneficial interest transactions-Note 2 30,973,434 7,662,567 ------------------------------------------------------------------------------------------ Net increase in net assets resulting from Class B beneficial interest transactions-Note 2 5,339,170 -- - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- NET ASSETS Total increase 36,251,998 9,995,348 ------------------------------------------------------------------------------------------ Beginning of year 59,376,222 49,380,874 ----------- ----------- End of year (including undistributed net investment income of $225 and $8,133, respectively) $95,628,220 $59,376,222 ----------- ----------- ----------- -----------
See accompanying Notes to Financial Statements. FINANCIAL HIGHLIGHTS
CLASS A CLASS B --------------------------------------------------------------------------------- ------------ YEAR ENDED PERIOD ENDED DECEMBER 31, DECEMBER 31, 1993 1992 1991(3) 1990 1989 1988 1987 1986(2) 1993(1) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING DATA: Net asset value, beginning of period - ------------------------------------------------------------------------------------------------------------------------------------ $14.19 $13.57 $11.39 $12.08 $10.47 $ 9.51 $9.98 $10.16 $14.60 Income (loss) from investment operations: Net investment income .29 .32 .33 .37 .40 .33 .34 .01 .17 Net realized and unrealized gain (loss) on investments .98 .97 2.49 (.57) 1.87 1.15 (.22) (.19) .51 ------- ------ ------ ------ ------ ------ ------ ------ --------- Total income (loss) from investment operations 1.27 1.29 2.82 (.20) 2.27 1.48 .12 (.18) .68 - ------------------------------------------------------------------------------------------------------------------------------------ Dividends and distributions to shareholders: Dividends from net investment income (.29) (.32) (.33) (.39) (.41) (.33) (.41) -- (.17) Distributions from net realized gain on investments (.76) (.35) (.31) (.10) (.25) (.19) (.18) -- (.76) ------- ------ ------ ------ ------ ------ ------ ------ --------- Total dividends and distributions to shareholders (1.05) (.67) (.64) (.49) (.66) (.52) (.59) -- (.93) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $14.41 $14.19 $13.57 $11.39 $12.08 $10.47 $9.51 $ 9.98 $14.35 ------- ------ ------ ------ ------ ------ ------ ------ --------- ------- ------ ------ ------ ------ ------ ------ ------ --------- - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN, AT NET ASSET VALUE(4) 8.97% 9.61% 25.23% (1.53)% 21.93% 15.61% 1.10% (1.77)% 4.63% - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $90,470 $59,376 $49,381 $40,153 $37,713 $27,434 $19,377 $20,162 $5,158 - ------------------------------------------------------------------------------------------------------------------------------------ Average net assets (in thousands) $80,229 $53,485 $45,581 $39,104 $33,742 $24,658 $22,322 (2) $2,527 - ------------------------------------------------------------------------------------------------------------------------------------ Number of shares outstanding at end of period (in thousands) 6,280 4,184 3,639 3,526 3,122 2,620 2,039 2,021 359 - ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: Net investment income 1.97% 2.34% 2.59% 3.22% 3.51% 3.45% 3.15% (2) .97%(5) Expenses, before voluntary reimbursement 1.24% 1.19% 1.31% 1.36% 1.40% 1.21% .70% (2) 2.14%(5) Expenses, net of voluntary reimbursement N/A N/A 1.26% 1.30% 1.30% 1.19% N/A (2) N/A - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate(6) 24.3% 12.3% 14.5% 13.5% 14.9% 13.1% 10.8% (2) 24.3% 1. For the period from May 1, 1993 (inception of offering) to December 31, 1993. 2. For the period from December 22, 1986 to December 31, 1986. Ratios during this development period would not be indicative of representative results. 3. On March 28, 1991, Oppenheimer Management Corporation became the investment advisor to the Fund. 4. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. 5. Annualized. 6. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the year ended December 31, 1993 were $25,469,747 and $17,554,755, respectively.
See accompanying Notes to Financial Statements. NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 1. SIGNIFICANT Oppenheimer Value Stock Fund (the Fund) is a separate ACCOUNTING POLICIES fund of Oppenheimer Integrity Funds, a diversified, open-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment advisor is Oppenheimer Management Corporation (the Manager). The Fund offers both Class A and Class B shares. Class A shares are sold with a front-end sales charge. Class B shares may be subject to a contingent deferred sales charge. Both classes of shares have identical rights to earnings, assets and voting privileges, except that each class has its own distribution plan, expenses directly attributable to a particular class and exclusive voting rights with respect to matters affecting a single class. Class B shares will automatically convert to Class A shares six years after the date of purchase. The following is a summary of significant accounting policies consistently followed by the Fund. ----------------------------------------------------- INVESTMENT VALUATION. Portfolio securities are valued at 4:00 p.m. (New York time) on each trading day. Listed and unlisted securities for which such information is regularly reported are valued at the last sale price of the day or, in the absence of sales, at values based on the closing bid or asked price or the last sale price on the prior trading day. Short-term debt securities having a remaining maturity of 60 days or less are valued at cost (or last determined market value) adjusted for amortization to maturity of any premium or discount. Securities for which market quotes are not readily available are valued under procedures established by the Board of Trustees to determine fair value in good faith. ----------------------------------------------------- ALLOCATION OF INCOME, EXPENSES AND GAINS AND LOSSES. Income, expenses (other than those attributable to a specific class) and gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class. ----------------------------------------------------- FEDERAL INCOME TAXES. The Fund intends to continue to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income, including any net realized gain on investments not offset by loss carryovers, to shareholders. Therefore, no federal income tax provision is required. ----------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders are recorded on the ex-dividend date. ----------------------------------------------------- OTHER. Investment transactions are accounted for on the date the investments are purchased or sold (trade date) and dividend income is recorded on the ex-dividend date. 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. - ------------------------------------------------------------------------------- 2. SHARES OF The Fund has authorized an unlimited number of no par BENEFICIAL INTEREST value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
YEAR ENDED DECEMBER 31, 1993(1) YEAR ENDED DECEMBER 31, 1992 ------------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT ---------------------------------------------------------------------------------------------------------- Class A: Sold 2,167,501 $19,481,793 741,739 $10,397,819 Issued in connection with the acquisition of Oppenheimer Blue Chip Fund-Note 6 1,356,899 20,149,959 -- -- Dividends and distributions reinvested 379,876 5,528,826 58,050 817,191 Redeemed (1,808,202) (14,187,144) (254,477) (3,552,443) --------- ----------- ------- ----------- Net increase 2,096,074 $30,973,434 545,312 $ 7,662,567 --------- ----------- ------- ----------- --------- ----------- ------- ----------- ---------------------------------------------------------------------------------------------------------- Class B: Sold 357,108 $ 5,313,077 -- $ -- Dividends and distributions reinvested 18,763 270,609 -- -- Redeemed (16,401) (244,516) -- -- Net increase 359,470 $ 5,339,170 -- $ -- 1. For the year ended December 31, 1993 for Class A shares and for the period from May 1, 1993 (inception of offering) to December 31, 1993 for Class B shares.
NOTES TO FINANCIAL STATEMENTS (Continued) - ------------------------------------------------------------------------------- 3. UNREALIZED GAINS AND At December 31, 1993, net unrealized appreciation of LOSSES ON INVESTMENTS investments of $16,119,241 was composed of gross appreciation of $18,112,985, and gross depreciation of $1,993,744. 4. MANAGEMENT FEES Management fees paid to the Manager were in accordance AND OTHER with the investment advisory agreement with the Fund TRANSACTIONS WITH which provides for an annual fee of .75% on the first AFFILIATES $100 million of net assets with a reduction of .03% on each $200 million thereafter, to .66% on net assets in excess of $500 million. The Manager has agreed to reimburse the Fund if aggregate expenses (with specified exceptions) exceed the most stringent applicable regulatory limit on Fund expenses. For the year ended December 31, 1993, commissions (sales charges paid by investors) on sales of Class A shares totaled $296,555, of which $232,226 was retained by Oppenheimer Funds Distributor, Inc. (OFDI), a subsidiary of the Manager, as general distributor, and by an affiliated broker/dealer. During the year ended December 31, 1993, OFDI received contingent deferred sales charges of $58 upon redemption of Class B shares. Oppenheimer Shareholder Services (OSS), a division of the Manager, is the transfer and shareholder servicing agent for the Fund, and for other registered investment companies. OSS's total costs of providing such services are allocated ratably to these companies. Under separate approved plans of distribution, each class may expend up to .25% of its net assets annually to reimburse OFDI for costs incurred in distributing shares of the Fund, including amounts paid to brokers, dealers, banks and other institutions. In addition, Class B shares are subject to an asset-based sales charge of .75% of net assets annually, to reimburse OFDI for sales commissions paid from its own resources at the time of sale and associated financing costs. In the event of termination or discontinuance of the Class B plan of distribution, the Fund would be contractually obligated to pay OFDI for any expenses not previously reimbursed or recovered through contingent deferred sales charges. During the year ended December 31, 1993, OFDI paid $149,525 to an affiliated broker/dealer as reimbursement for Class A distribution-related expenses and retained $16,056 as reimbursement for Class B distribution-related expenses and sales commissions. - ------------------------------------------------------------------------------- 5. DEFERRED TRUSTEE A former trustee elected to defer receipt of fees COMPENSATION earned. These deferred fees earn interest at a rate determined by the current Board of Trustees at the beginning of each calendar year, compounded each quarter-end. As of December 31, 1993, the Fund was incurring interest at a rate of 6.01% per annum. Deferred fees are payable in annual installments, with accrued interest, each April 1 through 1995. - ------------------------------------------------------------------------------- 6. ACQUISITION OF On March 26, 1993, the Fund acquired all of the net OPPENHEIMER assets of Oppenheimer Blue Chip Fund (Blue Chip), BLUE CHIP FUND pursuant to an Agreement and Plan of Reorganization approved by the Blue Chip shareholders on January 28, 1993. The Fund issued 1,356,899 shares of beneficial interest, valued at $20,149,959, in exchange for the net assets, resulting in combined net assets of $83,976,756 on March 26, 1993. The net assets acquired included net unrealized appreciation of $2,523,063. The exchange was tax-free. Investment Adviser Oppenheimer Management Corporation Two World Trade Center New York, New York 10048-0203 Sub-Adviser Concert Capital Management, Inc. 125 High Street Boston, Massachusetts 02110 Distributor Oppenheimer Funds Distributor, Inc. Two World Trade Center New York, New York 10048-0203 Transfer and Shareholder Servicing Agent Oppenheimer Shareholder Services P.O. Box 5270 Denver, Colorado 80217 1-800-525-7048 Custodian of Portfolio Securities The Bank of New York One Wall Street New York, New York 10015 Independent Auditors Deloitte & Touche 1560 Broadway Denver, Colorado 80202 Legal Counsel Myer, Swanson & Adams, P.C. 1600 Broadway Denver, Colorado 80202-4918 OPPENHEIMER INTEGRITY FUNDS FORM N-1A PART C OTHER INFORMATION Item 24. Financial Statements and Exhibits (a) Financial Statements: 1. Financial Highlights (See Parts A and B, Prospectus and Statement of Additional Information): Filed herewith. 2. Independent Auditors' Reports (See Part B, Statement of Additional Information): Filed herewith. 3. Statements of Investments (See Part B, Statement of Additional Information): Filed herewith. 4. Statements of Assets and Liabilities (See Part B, Statement of Additional Information): Filed herewith. 5. Statements of Operations (See Part B, Statement of Additional Information): Filed herewith. 6. Statements of Changes in Net Assets (See Part B, Statement of Additional Information): Filed herewith. 7. Notes to Financial Statements (See Part B, Statement of Additional Information): Filed herewith. 8. Independent Auditors' Consent: Filed herewith. (b) Exhibits: 1. Amended and Restated Declaration of Trust dated April 30, 1993: Filed with Registrant's Post-Effective Amendment No. 18, 4/30/93, and incorporated herein by reference. 2. Registrant's By-Laws dated 6/25/91: Filed with Registrant's Post-Effective Amendment No. 16, 5/1/92, and incorporated herewith by reference. 3. Not applicable. 4. (i) Specimen Class A Share Certificate for Oppenheimer Value Stock Fund: Filed herewith. (ii) Specimen Class A Share Certificate for Oppenheimer Investment Grade Bond Fund: Filed herewith. (iii) Specimen Class B Share Certificate for Oppenheimer Value Stock Fund: Filed herewith. (iv) Specimen Class B Share Certificate for Oppenheimer Investment Grade Bond Fund: Filed herewith. 5. (i) Investment Advisory Agreement dated 3/28/91 for Oppenheimer Investment Grade Bond Fund: Filed as Exhibit 5(i) of Registrant's Post-Effective Amendment No. 15, 3/29/91, and incorporated herein by reference. (ii) Investment Advisory Agreement dated 3/28/91 for Oppenheimer Value Stock Fund: Filed with Registrant's Post-Effective Amendment No. 16, 5/1/92, and incorporated herein by reference. (iii) Investment Sub-Advisory Agreement dated 3/28/91 for Oppenheimer Investment Grade Bond Fund: Filed as Exhibit 5(iii) of Registrant's Post-Effective Amendment No. 15, 3/29/91, and incorporated herein by reference. (iv) Investment Sub-Advisory Agreement dated 4/23/93 for Oppenheimer Value Stock Fund - Filed with Registrant's Post-Effective Amendment No. 18, 4/30/93, and incorporated herein by reference. (v) Letter dated 12/16/92 concerning temporary delegation of duties to manage Oppenheimer Value Stock Fund - Filed with Registrant's Post-Effective Amendment No. 18, 4/30/93, and incorporated herein by reference. (vi) Unconditional Guarantee Agreement dated 1/1/93 by Massachusetts Mutual Life Insurance Company to Oppenheimer Value Stock Fund of Concert Capital Management, Inc.'s performance - Filed with Registrant's Post-Effective Amendment No. 18, 4/30/93, and incorporated herein by reference. 6. (i) General Distributor's Agreement dated 10/13/92: Filed with Registrant's Post-Effective Amendment No. 17, 2/26/93, and incorporated herein by reference. (ii) Form of Oppenheimer Fund Management, Inc. Dealer Agreement: Filed with Post-Effective Amendment No. 12 to the Registration Statement of Oppenheimer Government Securities Fund (Reg. No. 33-02769), 12/2/92, and incorporated herein by reference. (iii) Form of Oppenheimer Fund Management, Inc. Broker Agreement: Filed with Post-Effective Amendment No. 12 to the Registration Statement of Oppenheimer Government Securities Fund (Reg. No. 33-02769), 12/2/92, and incorporated herein by reference. (iv) Form of Oppenheimer Fund Management, Inc. Agency Agreement: Filed with Post-Effective Amendment No. 12 to the Registration Statement of Oppenheimer Government Securities Fund (Reg. No. 33-02769), 12/2/92, and incorporated herein by reference. (v) Broker Agreement between Oppenheimer Fund Management, Inc. and Newbridge Securities, Inc. dated 10/1/86: Filed as Exhibit 6 of Post-Effective Amendment No. 25 of Oppenheimer Special Fund (Reg. No. 2-45272), 11/1/86, and incorporated herein by reference. 7. Not applicable. 8. Custody Agreement dated 11/12/92, between the Registrant and The Bank of New York: Filed with Registrant's Post-Effective Amendment No. 17, 2/26/93, and incorporated herein by reference. 9. Agreement and Plan of Reorganization dated 8/25/92 between Oppenheimer Value Stock Fund and Oppenheimer Blue Chip Fund: Filed herewith. 10. Opinion and Consent of Counsel dated 2/11/91: Incorporated herein by reference to Registrant's Rule 24f-2 Notice filed on 2/19/91. 11. Not applicable. 12. Not applicable. 13. Not applicable. 14. (i) Form of Individual Retirement Account Trust Agreement: Filed as Exhibit 14 of Post-Effective Amendment No. 21 of Oppenheimer U.S. Government Trust (Reg. No. 2-76645), 8/25/93, and incorporated herein by reference. (ii) Form of prototype Standardized and Non-Standardized Profit-Sharing Plan and Money Purchase Pension Plan for self-employed persons and corporations: Filed with Post-Effective Amendment No. 3 of Oppenheimer Global Growth & Income Fund (File No. 33-33799), 1/31/92, and incorporated herein by reference. (iii) Form of Tax-Sheltered Retirement Plan and Custody Agreement for employees of public schools and tax-exempt organizations: Filed as Exhibit 14 of Post-Effective Amendment No. 22 of Oppenheimer Directors Fund (File No. 2-62240), 2/1/90, and incorporated herein by reference. (iv) Form of Simplified Employee Pension IRA: Filed as an Exhibit to Post-Effective Amendment No. 36 of Oppenheimer Equity Income Fund (Reg. No. 2-33043), 10/23/91, and incorporated herein by reference. (v) Form of SAR-SEP Simplified Employee Pension IRA: Filed with Registrant's Post-Effective Amendment No. 20, 3/1/94, and incorporated herein by reference. 15. (i) Service Plan and Agreement under Rule 12b-1 of the Investment Company Act of 1940 for Class A shares of Oppenheimer Investment Grade Bond Fund dated 6/22/93: Filed with Registrant's Post-Effective Amendment No. 20, 3/1/94, and incorporated herein by reference. (ii) Service Plan and Agreement under Rule 12b-1 of the Investment Company Act of 1940 for Class A shares of Oppenheimer Value Stock Fund dated 6/22/93: Filed with Registrant's Post-Effective Amendment No. 20, 3/1/94, and incorporated herein by reference. (iii) Distribution and Service Plan and Agreement under Rule 12b-1 of the Investment Company Act of 1940 for Class B shares of Oppenheimer Investment Grade Bond Fund dated 6/22/93: Filed with Registrant's Post-Effective Amendment No. 20, 3/1/94, and incorporated herein by reference. (iv) Distribution and Service Plan and Agreement under Rule 12b-1 of the Investment Company Act of 1940 for Class B shares of Oppenheimer Value Stock Fund dated 6/22/93: Filed with Registrant's Post-Effective Amendment No. 20, 3/1/94, and incorporated herein by reference. 16. (i) Performance Computation Schedule for Oppenheimer Value Stock Fund: Filed herewith. (ii) Performance Computation Schedule for Oppenheimer Investment Grade Bond Fund: Filed herewith. -- Powers of Attorney and Certified Board Resolution: Filed with Registrant's Post-Effective Amendment No. 20, 3/1/94, and incorporated herein by reference. Item 25. Persons Controlled by or Under Common Control with Registrant ------------------------------------------------------------- None Item 26. Number of Holders of Securities ------------------------------- Number of Record Holders Title of Class as of March 29, 1994 -------------- ------------------------ Oppenheimer Investment Grade Bond Fund Class A Shares of Beneficial Interest 9,769 Class B Shares of Beneficial Interest 184 Oppenheimer Value Stock Fund Class A Shares of Beneficial Interest 5,550 Class B Shares of Beneficial Interest 807 Item 27. Indemnification --------------- Article IV of Registrant's Declaration of Trust generally provides, among other things, for the indemnification of Registrant's Trustees and officers in a manner consistent with Securities and Exchange Commission Release No. IC-11330. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to trustees, officers and controlling persons of Registrant pursuant to the foregoing provisions or otherwise, Registrant has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a trustee, officer or controlling person of Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person, Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. Item 28. (a) Business and Other Connections of Investment Adviser and Sub-Advisers ---------------------------------------------------- (i) Oppenheimer Management Corporation ("Oppenheimer") is the investment adviser of the Registrant; it and certain subsidiaries and its affiliates act in the same capacity to other registered investment companies as described in Parts A and B hereto. (ii) Massachusetts Mutual Life Insurance Company ("MassMutual") and Concert Capital Management, Inc. ("Concert Capital"), an indirect wholly owned management subsidiary of MassMutual, are the investment sub-advisers of the Registrant's two series, Oppenheimer Investment Grade Bond Fund and Oppenheimer Value Stock Fund, respectively. MassMutual offers life, health, disability and accumulation products in the personal, business and estate insurance markets. MassMutual and Concert Capital also act as investment advisors to other registered investment companies, a real estate investment trust, certain of MassMutual's insurance company subsidiaries and various employee benefit plans. (b) Business and Other Connections of Officers and Directors of Investment Adviser and Sub-Adviser ----------------------------------------------------------- For information as to the business, profession, vocation or employment of a substantial nature of each of the officers and directors of Oppenheimer, MassMutual and Concert Capital, reference is made to Part B of this Registration Statement and to the registrations on Form ADV of Oppenheimer, MassMutual and Concert Capital, filed under the Investment Advisers Act of 1940, which are incorporated herein by reference. Item 29.Principal Underwriter (a) Oppenheimer Funds Distributor, Inc. is the Distributor of the Fund's shares. It is also the Distributor of each of the other registered open-end investment companies for which Oppenheimer Management Corporation is the investment adviser, as described in Parts A and B hereof. (b) The information contained in the registration on Form BD of Oppenheimer Funds Distributor, Inc., filed under the Securities Exchange Act of 1934, is incorporated herein by reference. (c) Not applicable. Item 30. Location of Accounts and Records The accounts, books and other documents required to be maintained by Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and rules promulgated thereunder are in the possession of both Oppenheimer Management Corporation at its offices at 3410 South Galena Street, Denver, Colorado 80231 and MassMutual at its offices at 1295 State Street, Springfield, Massachusetts 01111. Item 31. Management Services Not applicable. Item 32. Undertakings (a) Not applicable. (b) Not applicable. (c) Not applicable. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and/or the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Denver and State of Colorado on the 28th day of April, 1994. OPPENHEIMER INTEGRITY FUNDS /s/ James C. Swain * by: -------------------------- 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 and on the dates indicated: Signatures: Title Date - ----------- ----------------- ------------ /s/ James C. Swain* Chairman of the Board April 28, 1994 - ----------------------- of Trustees and James C. Swain Principal Executive Officer /s/ Jon S. Fossel* President and Trustee April 28, 1994 - ---------------------- Jon S. Fossel /s/ George Bowen* Treasurer and April 28, 1994 - ---------------------- Principal Financial George Bowen and Accounting Officer /s/ Robert G. Avis* Trustee April 28, 1994 - ---------------------- Robert G. Avis /s/ William A. Baker* Trustee April 28, 1994 - ---------------------- William A. Baker /s/ Charles Conrad, Jr.* Trustee April 28, 1994 - ---------------------- Charles Conrad, Jr. /s/ Raymond J. Kalinowski* Trustee April 28, 1994 - ---------------------- Raymond J. Kalinowski /s/ C. Howard Kast* Trustee April 28, 1994 - ---------------------- C. Howard Kast /s/ Robert M. Kirchner* Trustee April 28, 1994 - ---------------------- Robert M. Kirchner /s/ Ned M. Steel* Trustee April 28, 1994 - --------------------------- Ned M. Steel *By: /s/ Robert G. Zack ------------------------------------- Robert G. Zack, Attorney-in-Fact OPPENHEIMER INTEGRITY FUNDS EXHIBIT INDEX Exhibit No. Document Description - ----------- -------------------- 24(a)(8) Independent Auditors' Consent 24(b)4(i) Specimen Share Certificate for Class A Shares of Oppenheimer Value Stock Fund 24(b)4(ii) Specimen Share Certificate for Class A Shares of Oppenheimer Investment Grade Bond 24(b)4(iii) Specimen Share Certificate for Class B Shares of Oppenheimer Value Stock Fund 24(b)4(iv) Specimen Share Certificate for Class B Shares of Oppenheimer Investment Grade Bond 24(b)9 Agreement and Plan of Reorganization dated 8/25/92, between Oppenheimer Value Stock Fund and Oppenheimer Blue Chip Fund 24(b)16(i) Performance Computation Schedule for Oppenheimer Value Stock Fund 24(b)16(ii) Performance Computation Schedule for Oppenheimer Investment Grade Bond Fund EX-23 2 CONSENT OF INDEPENDENT AUDITORS Exhibit 24(a)(8) INDEPENDENT AUDITORS' CONSENT - ----------------------------- Oppenheimer Integrity Funds: We hereby consent to the use in Post-Effective Amendment No. 20 to Registration Statement No. 2-76547 of our report dated January 21, 1994 appearing in the Statement of Additional Information, which is a part of such Registration Statement, and to the reference to us under the caption "Condensed Financial Information" appearing in the Prospectus, which is also a part of such Registration Statement. DELOITTE & TOUCHE Denver, Colorado April 28, 1994 EX-99 3 SPECIMEN SHARE CERT OPPENHEIMER INTEGRITY FUNDS Share Certificate (8-1/2" x 11") I. FACE OF CERTIFICATE (All text and other matter lies within 8-1/4" x 10-3/4" decorative border, 5/16" wide) (upper left corner, box with heading: NUMBER [of shares] (upper right corner) share certificate no. (upper right box with heading: CLASS A SHARES below cert. no.) (centered below boxes) OPPENHEIMER INTEGRITY FUNDS A MASSACHUSETTS BUSINESS TRUST SERIES: OPPENHEIMER VALUE STOCK FUND (at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR CERTAIN DEFINITIONS (box with number) CUSIP 683947 10 5 (at left) is the owner of (centered) FULLY PAID CLASS A SHARES OF BENEFICIAL INTEREST OF OPPENHEIMER VALUE STOCK FUND a series of OPPENHEIMER INTEGRITY FUNDS (hereinafter called the "Trust"), transferable only on the books of the Trust by the holder hereof in person or by duly authorized attorney, upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Trust's Declaration of Trust to all of which the holder by acceptance hereof assents. This certificate is not valid until countersigned by the Transfer Agent. WITNESS the facsimile seal of the Fund [Trust] [Corporation] and the signatures of its duly authorized officers. (signature Dated: (signature at left of seal) at right of seal) _______________________ ___________________ SECRETARY PRESIDENT (centered at bottom) 1-1/2" diameter facsimile seal with legend FUND, TRUST OR CORPORATION NAME SEAL 1982 COMMONWEALTH OF MASSACHUSETTS (at lower right, printed vertically) Countersigned OPPENHEIMER SHAREHOLDER SERVICES (A DIVISION OF OPPENHEIMER MANAGEMENT CORPORATION) Denver (COLO) Transfer Agent By ____________________________ Authorized Signature II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension) The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS NOT TC - as joint tenants with rights of survivorship and not as tenants in common UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________ (Cust) (Minor) UNDER UGMA/UTMA ___________________ (State) Additional abbreviations may also be used though not in the above list. For Value Received ................ hereby sell(s), assign(s), and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE AND PROVIDE CERTIFICATION BY TRANSFEREE (box for identifying number) _______________________________________________________________________ (Please print or type name and address of assignee) ______________________________________________________ ________________________________________________Class A Shares of beneficial interest [capital stock] represented by the within Certificate, and do hereby irrevocably constitute and appoint ___________________________ Attorney to transfer the said shares on the books of the within named Fund with full power of substitution in the premises. Dated: ______________________ Signed: __________________________ ___________________________________ (Both must sign if joint owners) Signature(s) __________________________ guaranteed Name of Guarantor by: _____________________________ Signature of Officer/Title (text printed NOTICE: The signature(s) to this assignment must vertically to right correspond with the name(s) as written upon the of above paragraph) face of the certificate in every particular without alteration or enlargement or any change whatever. (text printed in Signatures must be guaranteed by a financial box to left of institution of the type described in the current signature(s)) prospectus of the Fund. PLEASE NOTE: This document contains a watermark OppenheimerFunds when viewed at an angle. It is invalid without this "four hands" watermark: logotype edgar\325CERTA EX-99 4 SPECIMEN SHARE CERT OPPENHEIMER INTEGRITY FUNDS Share Certificate (8-1/2" x 11") I. FACE OF CERTIFICATE (All text and other matter lies within 8-1/4" x 10-3/4" decorative border, 5/16" wide) (upper left corner, box with heading: NUMBER [of shares] (upper right corner) share certificate no. (upper right box with heading: CLASS A SHARES below cert. no.) (centered below boxes) OPPENHEIMER INTEGRITY FUNDS A MASSACHUSETTS BUSINESS TRUST SERIES: OPPENHEIMER INVESTMENT GRADE BOND FUND (at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR CERTAIN DEFINITIONS (box with number) CUSIP 683946 10 7 (at left) is the owner of (centered) FULLY PAID CLASS A SHARES OF BENEFICIAL INTEREST OF OPPENHEIMER INVESTMENT GRADE BOND FUND a series of OPPENHEIMER INTEGRITY FUNDS (hereinafter called the "Trust"), transferable only on the books of the Trust by the holder hereof in person or by duly authorized attorney, upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Trust's Declaration of Trust to all of which the holder by acceptance hereof assents. This certificate is not valid until countersigned by the Transfer Agent. WITNESS the facsimile seal of the Fund [Trust] [Corporation] and the signatures of its duly authorized officers. (signature Dated: (signature at left of seal) at right of seal) _______________________ ___________________ SECRETARY PRESIDENT (centered at bottom) 1-1/2" diameter facsimile seal with legend FUND, TRUST OR CORPORATION NAME SEAL 1982 COMMONWEALTH OF MASSACHUSETTS (at lower right, printed vertically) Countersigned OPPENHEIMER SHAREHOLDER SERVICES (A DIVISION OF OPPENHEIMER MANAGEMENT CORPORATION) Denver (COLO) Transfer Agent By ____________________________ Authorized Signature II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension) The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS NOT TC - as joint tenants with rights of survivorship and not as tenants in common UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________ (Cust) (Minor) UNDER UGMA/UTMA ___________________ (State) Additional abbreviations may also be used though not in the above list. For Value Received ................ hereby sell(s), assign(s), and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE AND PROVIDE CERTIFICATION BY TRANSFEREE (box for identifying number) _______________________________________________________________________ (Please print or type name and address of assignee) ______________________________________________________ ________________________________________________Class A Shares of beneficial interest [capital stock] represented by the within Certificate, and do hereby irrevocably constitute and appoint ___________________________ Attorney to transfer the said shares on the books of the within named Fund with full power of substitution in the premises. Dated: ______________________ Signed: __________________________ ___________________________________ (Both must sign if joint owners) Signature(s) __________________________ guaranteed Name of Guarantor by: _____________________________ Signature of Officer/Title (text printed NOTICE: The signature(s) to this assignment must vertically to right correspond with the name(s) as written upon the of above paragraph) face of the certificate in every particular without alteration or enlargement or any change whatever. (text printed in Signatures must be guaranteed by a financial box to left of institution of the type described in the current signature(s)) prospectus of the Fund. PLEASE NOTE: This document contains a watermark OppenheimerFunds when viewed at an angle. It is invalid without this "four hands" watermark: logotype edgar\285CERTA EX-99 5 SPECIMEN SHARE CERT OPPENHEIMER INTEGRITY FUNDS Share Certificate (8-1/2" x 11") I. FACE OF CERTIFICATE (All text and other matter lies within 8-1/4" x 10-3/4" decorative border, 5/16" wide) (upper left corner, box with heading: NUMBER [of shares] (upper right corner) share certificate no. (upper right box with heading: CLASS B SHARES below cert. no.) (centered below boxes) OPPENHEIMER INTEGRITY FUNDS A MASSACHUSETTS BUSINESS TRUST SERIES: OPPENHEIMER VALUE STOCK FUND (at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR CERTAIN DEFINITIONS (box with number) CUSIP 683947 20 4 (at left) is the owner of (centered) FULLY PAID CLASS B SHARES OF BENEFICIAL INTEREST OF OPPENHEIMER VALUE STOCK FUND a series of OPPENHEIMER INTEGRITY FUNDS (hereinafter called the "Trust"), transferable only on the books of the Trust by the holder hereof in person or by duly authorized attorney, upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Trust's Declaration of Trust to all of which the holder by acceptance hereof assents. This certificate is not valid until countersigned by the Transfer Agent. WITNESS the facsimile seal of the Fund [Trust] [Corporation] and the signatures of its duly authorized officers. (signature Dated: (signature at left of seal) at right of seal) _______________________ ___________________ SECRETARY PRESIDENT (centered at bottom) 1-1/2" diameter facsimile seal with legend FUND, TRUST OR CORPORATION NAME SEAL 1982 COMMONWEALTH OF MASSACHUSETTS (at lower right, printed vertically) Countersigned OPPENHEIMER SHAREHOLDER SERVICES (A DIVISION OF OPPENHEIMER MANAGEMENT CORPORATION) Denver (COLO) Transfer Agent By ____________________________ Authorized Signature II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension) The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS NOT TC - as joint tenants with rights of survivorship and not as tenants in common UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________ (Cust) (Minor) UNDER UGMA/UTMA ___________________ (State) Additional abbreviations may also be used though not in the above list. For Value Received ................ hereby sell(s), assign(s), and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE AND PROVIDE CERTIFICATION BY TRANSFEREE (box for identifying number) _______________________________________________________________________ (Please print or type name and address of assignee) ______________________________________________________ ________________________________________________Class B Shares of beneficial interest [capital stock] represented by the within Certificate, and do hereby irrevocably constitute and appoint ________________________ Attorney to transfer the said shares on the books of the within named Fund with full power of substitution in the premises. Dated: ______________________ Signed: __________________________ ___________________________________ (Both must sign if joint owners) Signature(s) __________________________ guaranteed Name of Guarantor by: _____________________________ Signature of Officer/Title (text printed NOTICE: The signature(s) to this assignment must vertically to right correspond with the name(s) as written upon the of above paragraph) face of the certificate in every particular without alteration or enlargement or any change whatever. (text printed in Signatures must be guaranteed by a financial box to left of institution of the type described in the current signature(s)) prospectus of the Fund. PLEASE NOTE: This document contains a watermark OppenheimerFunds when viewed at an angle. It is invalid without this "four hands" watermark: logotype edgar\325CERTB EX-99 6 SPECIMEN SHARE CERT OPPENHEIMER INTEGRITY FUNDS Share Certificate (8-1/2" x 11") I. FACE OF CERTIFICATE (All text and other matter lies within 8-1/4" x 10-3/4" decorative border, 5/16" wide) (upper left corner, box with heading: NUMBER [of shares] (upper right corner) share certificate no. (upper right box with heading: CLASS B SHARES below cert. no.) (centered below boxes) OPPENHEIMER INTEGRITY FUNDS A MASSACHUSETTS BUSINESS TRUST SERIES: OPPENHEIMER INVESTMENT GRADE BOND FUND (at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR CERTAIN DEFINITIONS (box with number) CUSIP 683946 20 6 (at left) is the owner of (centered) FULLY PAID CLASS B SHARES OF BENEFICIAL INTEREST OF OPPENHEIMER INVESTMENT GRADE BOND FUND a series of OPPENHEIMER INTEGRITY FUNDS (hereinafter called the "Trust"), transferable only on the books of the Trust by the holder hereof in person or by duly authorized attorney, upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Trust's Declaration of Trust to all of which the holder by acceptance hereof assents. This certificate is not valid until countersigned by the Transfer Agent. WITNESS the facsimile seal of the Fund [Trust] [Corporation] and the signatures of its duly authorized officers. (signature Dated: (signature at left of seal) at right of seal) _______________________ ___________________ SECRETARY PRESIDENT (centered at bottom) 1-1/2" diameter facsimile seal with legend FUND, TRUST OR CORPORATION NAME SEAL 1982 COMMONWEALTH OF MASSACHUSETTS (at lower right, printed vertically) Countersigned OPPENHEIMER SHAREHOLDER SERVICES (A DIVISION OF OPPENHEIMER MANAGEMENT CORPORATION) Denver (COLO) Transfer Agent By ____________________________ Authorized Signature II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension) The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS NOT TC - as joint tenants with rights of survivorship and not as tenants in common UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________ (Cust) (Minor) UNDER UGMA/UTMA ___________________ (State) Additional abbreviations may also be used though not in the above list. For Value Received ................ hereby sell(s), assign(s), and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE AND PROVIDE CERTIFICATION BY TRANSFEREE (box for identifying number) _______________________________________________________________________ (Please print or type name and address of assignee) ______________________________________________________ ________________________________________________Class B Shares of beneficial interest [capital stock] represented by the within Certificate, and do hereby irrevocably constitute and appoint ___________________________ Attorney to transfer the said shares on the books of the within named Fund with full power of substitution in the premises. Dated: ______________________ Signed: __________________________ ___________________________________ (Both must sign if joint owners) Signature(s) __________________________ guaranteed Name of Guarantor by: _____________________________ Signature of Officer/Title (text printed NOTICE: The signature(s) to this assignment must vertically to right correspond with the name(s) as written upon the of above paragraph) face of the certificate in every particular without alteration or enlargement or any change whatever. (text printed in Signatures must be guaranteed by a financial box to left of institution of the type described in the current signature(s)) prospectus of the Fund. PLEASE NOTE: This document contains a watermark OppenheimerFunds when viewed at an angle. It is invalid without this "four hands" watermark: logotype edgar\285CERTB EX-2 7 AGREE AND PLAN OF REORGANIZATION AGREEMENT AND PLAN OF REORGANIZATION AGREEMENT AND PLAN OF REORGANIZATION dated this 25th day of August, 1992, by and between Oppenheimer Blue Chip Fund (the "Fund"), a Massachusetts business trust, and Oppenheimer Integrity Funds ("Integrity Funds"), a Massachusetts business trust, regarding one of its series, Oppenheimer Value Stock Fund ("Value Stock"). 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 the Fund through the acquisition by Value Stock of substantially all of the assets of the Fund in exchange for the shares of beneficial interest ("shares") of Value Stock and the assumption by Value Stock of certain liabilities of the Fund, which shares of Value Stock are thereafter to be distributed by the Fund pro rata to its shareholders in complete liquidation of the 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 a Plan of Reorganization pursuant to Section 368(a)(1) of the Code as follows: The reorganization will be comprised of the acquisition of substantially all of the properties and assets of the Fund in exchange for shares of Value Stock and the assumption by Value Stock of certain liabilities of the Fund, followed by the distribution of such Value Stock shares to the shareholders of the Fund in exchange for their shares of the Fund, all upon and subject to the terms of the Agreement hereinafter set forth. The share transfer books of the 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 the Fund; redemption requests received by the Fund after that date shall be treated as requests for the redemption of the shares of Value Stock to be distributed to the shareholder in question as provided in Section 5. 2. On the Closing Date (as hereinafter defined), all of the assets of the Fund on that date, excluding a cash reserve (the "Cash Reserve") to be retained by the Fund sufficient in its discretion for the payment of the expenses of the Fund's dissolution and its liabilities, but not in excess of the amount contemplated by Section 10E, shall be delivered as provided in Section 8 to Value Stock, in exchange for and against delivery to the Fund on the Closing Date of a number of shares of Value Stock having an aggregate net asset value equal to the value of the assets of the Fund so transferred and delivered. 3. The net asset value of shares of Value Stock and the value of the assets of the 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 shares of Value Stock and the Fund shall be done in the manner used by Value Stock and the Fund, respectively, in the computation of such net asset value per share as set forth in their respective prospectuses. The methods used by Value Stock in such computation shall be applied to the valuation of the securities of the Fund to be transferred to Value Stock. The 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 the Fund's shareholders all of the 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 shall be at the office of Oppenheimer Management Corporation (the "Agent"), Two World Trade Center, Suite 3400, New York, New York 10048, at 4:00 P.M. New York time on January 29, 1993, 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 (the "Act") or any rule, regulation or order thereunder, suspended the redemption of its shares or postponed payment therefor, 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 this Agreement shall be permitted to terminate this Agreement without liability to either party for such termination. 5. As soon as practicable after the closing, the Fund shall distribute on a pro rata basis: to the shareholders of the Fund on the Valuation Date the shares of Value Stock received by the Fund on the Closing Date in exchange for the assets of the Fund in liquidation and cancellation of the outstanding shares of the Fund; for the purpose of the distribution by the Fund of such shares of Value Stock to its shareholders, Value Stock will promptly cause the Agent to: (a) credit an appropriate number of shares of Value Stock on the books of Value Stock to each shareholder of the Fund in accordance with a list (the "Shareholder List") of its shareholders received from the Fund; and (b) confirm an appropriate number of shares of Value Stock to each shareholder of the Fund; certificates for shares of Value Stock will be issued upon written request of a former shareholder of the Fund but only for whole shares with fractional shares credited to the name of the shareholder on the books of Value Stock. The Shareholder List shall indicate, as of the close of business on the Valuation Date, the name and address of each shareholder of the Fund, indicating his or her share balance. The Fund agrees to supply the Shareholder List to Value Stock not later than the Closing Date. Shareholders of the Fund holding certificates representing their shares shall 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 their certificates in order to redeem the shares of Value Stock which they received. 6. Within one year after the closing, the 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 Value Stock, 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 the 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 the 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, Value Stock will be in compliance with all of its investment policies and restrictions. At the closing, the Fund shall deliver to Value Stock two copies of a list setting forth the securities then owned by the Fund and the respective federal income tax bases thereof. 8. Portfolio securities or written evidence acceptable to Value Stock of record ownership thereof by The Depository Trust Company or through the Federal Reserve Book Entry System or any other depository approved by the Fund pursuant to Rule 17f-4 under the Act shall be delivered, or transferred by appropriate transfer or assignment documents, by the Fund on the Closing Date to Value Stock, or at its direction, to its custodian bank, duly endorsed 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, or a check for the appropriate purchase price thereof. The cash delivered shall be in the form of certified or bank cashiers' checks or by bank wire payable to the order of Value Stock for the account of Value Stock. Shares of Value Stock representing the number of shares of Value Stock being delivered against the securities and cash of the Fund, registered in the name of the Fund, shall be transferred to the Fund on the Closing Date. Such shares shall thereupon be assigned by the Fund to its shareholders so that the shares of Value Stock may be distributed as provided in Section 5. If, at the Closing Date, the Fund is unable to make delivery under this Section 8 to Value Stock of any of its portfolio securities or cash for the reason that any of such securities purchased by the Fund, or the cash proceeds of a sale of portfolio securities, prior to the Closing Date have not yet been delivered to it or the Fund's custodian, then the delivery requirements of this Section 8 with respect to said undelivered securities or cash will be waived and the Fund will deliver to Value Stock by or on the Closing Date and with respect to said undelivered securities or cash executed copies of an agreement or agreements of assignment in a form reasonably satisfactory to Value Stock, together with such other documents, including a due bill or due bills and brokers' confirmation slips as may reasonably be required by Value Stock. 9. Value Stock shall not assume the liabilities (except for portfolio securities purchased which have not settled and for shareholder redemption and dividend checks outstanding) of the Fund, but the 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 the proxies and proxy statements associated with this reorganization will be paid by the Fund. The cost of mailing the proxies and proxy statements, and the cost of the tax opinion will be split between the Fund and Value Stock. 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 the Fund associated with this reorganization, including legal, accounting and transfer agent expenses, will be borne by the Fund and Value Stock, respectively. 10. The obligations of Value Stock hereunder shall be subject to the following conditions: A. The Board of Trustees of the Fund shall have authorized the execution of this Agreement, and the shareholders of the Fund shall have approved the Agreement and the transactions contemplated herein, and the Fund shall have furnished to Value Stock copies of resolutions to that effect certified by the Secretary or an Assistant Secretary of the Fund; such shareholder approval shall have been by the vote of the holders of a majority as defined in the Act of the outstanding voting securities of the Fund at a meeting for which proxies have been solicited by the Proxy Statement and Prospectus. B. Value Stock shall have received an opinion dated the Closing Date of counsel to the Fund, to the effect that (i) the Fund is a business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts with full corporate powers to carry on its business as then being conducted and to enter into and perform this Agreement; and (ii) that all corporate action necessary to make this Agreement, according to its terms, valid, binding and enforceable on the Fund and to authorize effectively the transactions contemplated by this Agreement have been taken by the Fund. C. The representations and warranties of the Fund contained herein shall be true and correct at and as of the Closing Date, and Value Stock shall have been furnished with a certificate of the President, or the Vice President, or the Secretary or the Assistant Secretary or the Treasurer of the Fund, dated the Closing Date, to that effect. D. On the Closing Date, the Fund shall have furnished to Value Stock a certificate of the Treasurer or Assistant Treasurer of the Fund as to the amount of the capital loss carry-over and net unrealized appreciation or depreciation, if any, with respect to the 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 the Fund at the close of business on the Valuation Date. F. A Registration Statement filed by Integrity Funds under the Securities Act of 1933 on Form N-14 and containing a preliminary form of the Proxy Statement and Prospectus, shall have become effective under that Act not later than June 30, 1992. G. On the Closing Date, Value Stock shall have received a letter of Robert G. Galli, attorney-at-law, or Andrew J. Donohue, attorney-at-law, or other counsel acceptable to Value Stock, stating that nothing has come to his attention which in his judgment would indicate that as of the Closing Date there were any material actual or contingent liabilities of the Fund arising out of litigation brought against the Fund or claims asserted against it, or pending or to the best of his knowledge threatened litigation not reflected in or apparent by the most recent audited financial statements and footnotes thereto of the Fund delivered to Value Stock. Such letter may also include such additional statements relating to the scope of the review conducted by such counsel and his responsibilities and liabilities as are not unreasonable under the circumstances. H. Value Stock shall have received an opinion, dated the Closing Date, of Deloitte & Touche, to the same effect as the opinion contemplated by Section 11.E. of this Agreement. I. Value Stock shall have received at the closing all of the assets of the Fund to be conveyed hereunder, which assets shall be free and clear of all liens, encumbrances, security interests, restrictions and limitations whatsoever. J. Value Stock and the Fund shall have been granted an Exemptive Order pursuant to Section 17(b) of the Act from the "joint transaction" prohibition of Section 17(a) of the Act, and shall also have received a clearance letter from the Federal Trade Commission regarding their Hart-Scott-Rodino pre-merger filing (16 CFR 801) under the Hart- Scott-Rodino Anti-Trust Improvements Act of 1976 (15 U.S.C.A. Paragraph 18A). 11. The obligations of the Fund hereunder shall be subject to the following conditions: A. The Board of Trustees of Integrity Funds shall have authorized the execution of this Agreement, and the transactions contemplated hereby, and Integrity Funds shall have furnished to the Fund copies of resolutions to that effect certified by the Secretary or an Assistant Secretary of Integrity Funds. B. The Fund's shareholders shall have approved this Agreement and the transactions contemplated hereby, by an affirmative vote of the holders of a majority as defined in the Act of the outstanding voting securities of the Fund, and the Fund shall have furnished Value Stock copies of resolutions to that effect certified by the Secretary or an Assistant Secretary of the Fund. C. The Fund shall have received an opinion dated the Closing Date of counsel to Integrity Funds, to the effect that (i) Integrity Funds is a validly existing Massachusetts business trust with full power to carry on its business as then being conducted and to enter into and perform this Agreement; (ii) all action necessary to make this Agreement, according to its terms, valid, binding and enforceable upon Integrity Funds and to authorize effectively the transactions contemplated thereby have been taken by Integrity Funds, and (iii) the shares of Value Stock to be issued hereunder are duly authorized and when issued will be validly issued, fully-paid and non-assessable except as set forth in Value Stock's Prospectus and Statement of Additional Information. D. The representations and warranties of Integrity Funds on behalf of Value Stock contained herein shall be true and correct at and as of the Closing Date, and the Fund shall have been furnished with a certificate of the President or the Secretary or the Treasurer of Integrity Funds to that effect dated the Closing Date. E. The Fund shall have received an opinion of Deloitte & Touche to the effect that the Federal tax consequences of the transaction, if carried out in the manner outlined in this Plan of Reorganization and in accordance with (i) the Fund's representation that there is no plan or intention by any Fund shareholder who owns 5% or more of the Fund's outstanding shares, and, to the Fund's best knowledge, there is no plan or intention on the part of the remaining Fund shareholders, to redeem, sell, exchange or otherwise dispose of a number of Value Stock shares received in the transaction that would reduce the Fund shareholders' ownership of Value Stock 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 Fund shares as of the same date, and (ii) the representation by each of the Fund and Integrity Funds that, as of the Closing Date, the Fund and Integrity Funds 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 Reorganization Plan will qualify as a tax-free "reorganization" within the meaning of Section 368(a)(1) of the Internal Revenue Code of 1986, as amended, and under the regulations promulgated thereunder. 2. The Fund and Integrity Funds on behalf of Value Stock will each qualify as a "party to a reorganization" within the meaning of Section 368(b)(2). 3. No gain or loss will be recognized by the shareholders of the Fund upon the distribution of shares of beneficial interest in Value Stock to the shareholders of the Fund pursuant to Section 354. 4. Under Section 361(a) no gain or loss will be recognized by the Fund by reason of the transfer of its assets solely in exchange for shares of Value Stock. 5. Under Section 1032 no gain or loss will be recognized by Value Stock by reason of the transfer of the Fund's assets solely in exchange for shares of Value Stock. 6. The shareholders of the Fund will have the same tax basis and holding period for the shares of beneficial interest in Value Stock that they receive as they had for the Fund shares that they previously held, pursuant to Sections 358(a) and 1223(1), respectively. 7. The securities transferred by the Fund to Value Stock will have the same tax basis and holding period in the hands of Value Stock as they had for the Fund, pursuant to Sections 362(b) and 1223(1), respectively. F. The Cash Reserve shall not exceed 10% of the value of the net assets, nor 30% in value of the gross assets, of the Fund at the close of business on the Valuation Date. G. A Registration Statement filed by Integrity Funds under the Securities Act of 1933 on Form N-14, containing a preliminary form of the Proxy Statement and Prospectus, shall have become effective under that Act not later than June 30, 1993. H. On the Closing Date, the Fund shall have received a letter of Robert G. Galli, attorney-at-law, or Andrew J. Donohue, attorney-at- law, or other counsel acceptable to the Fund, stating that nothing has come to his attention which in his judgment would indicate that as of the Closing Date there were any material actual or contingent liabilities of Value Stock arising out of litigation brought against Value Stock or claims asserted against it, or pending or, to the best of his knowledge, threatened litigation not reflected in or apparent by the most recent audited financial statements and footnotes thereto of Value Stock delivered to the Fund. Such letter may also include such additional statements relating to the scope of the review conducted by such counsel and his responsibilities and liabilities as are not unreasonable under the circumstances. I. The Fund shall acknowledge receipt of the shares of Value Stock. J. Value Stock and the Fund shall have been granted an Exemptive Order pursuant to Section 17(b) of the Act from the "joint transaction" prohibition of Section 17(a) of the Act, and shall also have received a clearance letter from the Federal Trade Commission regarding their Hart-Scott Rodino pre-merger filing (16 CFR 801) under the Hart- Scott-Rodino Anti-Trust Improvements Act of 1976 (15 U.S.C.A. Paragraph 18A). 12. The Fund hereby represents and warrants that: (a) The financial statements of the Fund as at September 30, 1991 (audited) and March 31, 1992 (unaudited) heretofore furnished to Value Stock, present fairly the financial position, results of operations, and changes in net assets of the Fund as of that date, in conformity with generally accepted accounting principles applied on a basis consistent with the preceding year; and that from September 30, 1991 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 the Fund, it being agreed that a decrease in the size of the 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) The Fund has authority to transfer all of the assets of the 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 the Fund's Registration Statement under the Securities Act of 1933, as amended, is true, correct and complete, conforms to the requirements of the Securities Act of 1933 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 Securities Act of 1933 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 the Fund and no material legal, administrative or other proceedings pending or, to the knowledge of the Fund, threatened against the Fund, not reflected in such prospectus; (e) There are no material contracts outstanding to which the Fund is a party other than those ordinary in the conduct of its business; (f) The Fund is a business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts; (g) All Federal and other tax returns and reports of the 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 the 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 the Fund ended September 30, 1991 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) The Fund has elected to be treated as a regulated investment company and, for each fiscal year of its operations, the Fund has met the requirements of Subchapter M of the Code for qualification and treatment as a regulated investment company and the Fund intends to meet such requirements with respect to its current taxable year. 13. Integrity Funds hereby represents and warrants that: (a) The financial statements of Value Stock as at December 31, 1991 (audited) and June 30, 1992 (unaudited) heretofore furnished to the Fund, present fairly the financial position, results of operations, and changes in net assets of Value Stock, 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, 1991 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 Value Stock, it being understood that a decrease in the size of Value Stock 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 Integrity Fund's Registration Statement under the Securities Act of 1933, as amended, is true, correct and complete, conforms to the requirements of the Securities Act of 1933 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 Securities Act of 1933 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 Integrity Funds and no material, legal, administrative or other proceedings pending or, to the knowledge of Integrity Funds, threatened against Integrity Funds, not reflected in such prospectus; (d) There are no material contracts outstanding to which Integrity Funds is a party other than those ordinary in the conduct of its business and there are no outstanding options or rights to acquire its shares; (e) Integrity Funds is a validly existing Massachusetts business trust; has all necessary and material Federal, state and local authorizations to own all its properties and assets and to carry on its business as now being conducted; the shares of Value Stock which it issues to the Fund pursuant to this Agreement will be duly authorized, validly issued, fully-paid and non-assessable, except as otherwise set forth in Integrity Funds' Registration Statement; will conform to the description thereof contained in Integrity Funds' Registration Statement, and will be duly registered under the Securities Act of 1933 and in the states where registration is required; and Integrity Funds 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 Value Stock 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 Value Stock 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 Value Stock ended December 31, 1991 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) Integrity Funds has elected to be treated as a regulated investment company and, for each fiscal year of its operations, Integrity Funds has met the requirements of Subchapter M of the Code for qualification and treatment as a regulated investment company and Integrity Funds intends to meet such requirements with respect to its current taxable year; (h) Value Stock has no plan or intention (i) to dispose of any of the assets transferred by the Fund, other than in the ordinary course of business, or (ii) to redeem or reacquire any of the 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, Value Stock 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 this 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 this Agreement is valid, binding and enforceable in accordance with its terms and that the execution, delivery and performance of this 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. Integrity Funds, on behalf of Value Stock, hereby represents to and covenants with the Fund that, if the reorganization becomes effective, Integrity Funds will treat each shareholder of the Fund who received any of Value Stock's shares as a result of the reorganization as having made the minimum initial purchase of shares of Value Stock received by such shareholder for the purpose of making additional investments in shares of such series, regardless of the value of the shares of Value Stock received. 15. Integrity Funds agrees that it will prepare and file a Registration Statement under the Securities Act of 1933 on Form N-14 and which shall contain a preliminary form of proxy statement and prospectus contemplated by Rule 145 under the Securities Act of 1933. The final form of such proxy statement and prospectus is referred to in this Agreement as the "Proxy Statement and Prospectus" and that term shall include any prospectus to shareholders of Value Stock which is included in the material mailed to the shareholders of the Fund. 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. 16. The obligations of the parties under this Agreement shall be subject to the right of either party to abandon and terminate this Agreement without liability if the other party breaches any material provision of this Agreement or if any material legal, administrative or other proceeding shall be instituted or threatened between the date of this Agreement and the Closing Date (i) seeking to restrain or otherwise prohibit the transactions contemplated hereby and/or (ii) asserting a material liability of either party, which proceeding has not been terminated or the threat thereof removed prior to the Closing Date. 17. This 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 this Agreement shall not be assignable. 18. All prior or contemporaneous agreements and representations are merged into this 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 acknowledgement of such waiver. 19. The Fund understands that the obligations of Integrity Funds under this Agreement are not binding upon any Trustee or shareholder of Integrity Funds personally, but bind only Integrity Funds and Integrity Funds' property. The Fund represents that it has notice of the provisions of the Declaration of Trust of Integrity Funds disclaiming shareholder and Trustee liability for acts or obligations of Integrity Funds. 20. Integrity Funds understands that the obligations of the Fund under this Agreement are not binding upon any Trustee or shareholder of the Fund personally, but bind only the Fund and the Fund's property. Integrity Funds represents that it has notice of the provisions of the Declaration of Trust of the Fund disclaiming shareholder and Trustee liability for acts or obligations of the Fund. IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed and attested by its officers thereunto duly authorized on the date first set forth above. Attest: OPPENHEIMER INTEGRITY FUNDS ____________________________ ___________________________________________ Robert G. Zack Jon S. Fossel, President Attest: OPPENHEIMER BLUE CHIP FUND ____________________________ ____________________________________________ Robert G. Zack Robert G. Galli, Vice President MERGE/3252 EX-99 8 PERFORMANCE COMP SCHED Oppenheimer Value Stock Fund Exhibit 24(b)(16) to Form N-1A Performance Data Computation Schedule The Fund's average annual total returns and total returns are calculated as described below, on the basis of the Fund's distributions for the past 10 years, which are as follows:
Distribution Amount From Amount From Reinvestment Investment Long or Short-Term Reinvestment (Ex)Date Income Capital Gains Price Class A Shares 03/19/87 0.0900 0.0100 11.270 12/31/87 0.3138 0.1777 9.520 06/30/88 0.1800 0.0000 10.460 09/30/88 0.0700 0.0000 10.530 12/30/88 0.0806 0.1894 10.590 03/31/89 0.1000 0.0000 11.060 06/30/89 0.1200 0.0000 11.770 09/29/89 0.0900 0.0000 12.300 12/29/89 0.0993 0.2507 11.990 03/30/90 0.1000 0.0000 11.700 06/29/90 0.1000 0.0000 12.230 09/28/90 0.0900 0.0000 10.600 12/31/90 0.0964 0.1036 10.850 04/03/91 0.0900 0.0000 12.840 06/21/91 0.0800 0.0000 13.040 09/20/91 0.0800 0.0000 13.150 12/20/91 0.0840 0.3110 12.680 03/27/92 0.0800 0.0000 13.510 06/26/92 0.0800 0.0000 13.780 09/25/92 0.0800 0.0000 13.970 12/28/92 0.0820 0.3460 14.220 03/24/93 0.0700 0.0000 14.790 06/25/93 0.0700 0.0000 14.650 09/24/93 0.0700 0.0000 14.910 12/29/93 0.0780 0.7600 14.460 Class B Shares 06/25/93 0.0600 0.0000 14.630 09/24/93 0.0530 0.0000 14.870 12/29/93 0.0530 0.7600 14.400
1. AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 12/31/93: The formula for calculating average annual total return is as follows: 1 ERV n --------------- = n (---) - 1 = average annual total return number of years P Where: ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the period P = hypothetical initial investment of $1,000 Class A Shares Examples, assuming a maximum sales charge of 5.75%: One Year Five Year Inception $1,027.03 1 $1,692.45 .2 $1,943.04 .1424 (---------) - 1 = 2.70% (---------) - 1 = 11.10% (---------) - 1 = 9.92% $1,000 $1,000 $1,000 Examples at NAV: One Year Five Year Inception $1,089.69 1 $1,795.71 .2 $2,061.58 .1424 (---------) - 1 = 8.97% (---------) - 1 = 12.42% (---------) - 1 = 10.85% $1,000 $1,000 $1,000 Class B Shares Example, assuming a maximum contingent deferred sales charge of 5.00% for the first year: Inception (05/01/93) $ 996.34 1.5000 (---------) - 1 = <0.55%> $1,000 Example at NAV: Inception (05/01/93) $1,046.34 1.5000 (---------) - 1 = 7.03% $1,000 Oppenheimer Value Stock Fund Page 3 April 28, 1994 2. CUMULATIVE TOTAL RETURNS FOR THE PERIODS ENDED 12/31/93: The formula for calculating cumulative total return is as follows: ERV - P ------- = Cumulative Total Return P Class A Shares Examples, assuming a maximum sales charge: One Year Five Year Inception $1,027.03 - 1,000 $1,692.45 - 1,000 $1,943.04 - 1,000 ----------------------- = 2.70% ----------------------- = 69.25% ----------------------- = 94.30% $1,000 $1,000 $1,000 Examples at NAV: One Year Five Year Inception $1,089.69 - 1,000 $1,795.71 - 1,000 $2,061.58 - 1,000 ----------------------- = 8.97% ----------------------- = 79.57% - ----------------------- = 106.16% $1,000 $1,000 $1,000 Class B Shares Inception (05/01/93)(at Maximum Contingent Deferred Sales Charge of 5.00%) $ 996.34 - $1,000 -------------------- = <0.37%> $1,000 Inception (05/01/93)(at NAV) $1,046.34 - $1,000 -------------------- = 4.63% $1,000 EX-99 9 PERFORMANCE COMP SCHED Oppenheimer Investment Grade Bond Fund Exhibit 24(b)(16) to Form N-1A Performance Data Computation Schedule The Fund's average annual total returns and total returns are calculated as described below, on the basis of the Fund's distributions for the past 10 years, which are as follows:
Distribution Amount From Amount From Reinvestment Investment Long or Short-Term Reinvestment (Ex)Date Income Capital Gains Price Class A Shares 06/30/88 0.2600 0.0000 10.360 09/30/88 0.2400 0.0000 10.370 12/30/88 0.2500 0.0000 10.110 03/31/89 0.2500 0.0000 10.020 06/30/89 0.2400 0.0000 10.450 09/29/89 0.2300 0.0000 10.360 12/29/89 0.2200 0.0000 10.290 01/31/90 0.0800 0.0000 10.120 02/28/90 0.0800 0.0000 9.930 03/30/90 0.0800 0.0000 9.930 04/30/90 0.0700 0.0000 9.840 05/31/90 0.0700 0.0000 10.060 06/29/90 0.0700 0.0000 9.960 07/31/90 0.0750 0.0000 9.900 08/31/90 0.0750 0.0000 9.810 09/28/90 0.0750 0.0000 9.690 10/31/90 0.0700 0.0000 9.790 11/30/90 0.0750 0.0000 9.930 12/31/90 0.0640 0.0000 9.780 01/31/91 0.0650 0.0000 10.030 02/28/91 0.0650 0.0000 9.970 04/03/91 0.0650 0.0000 9.980 05/01/91 0.0650 0.0000 10.040 05/29/91 0.0650 0.0000 10.030 06/26/91 0.0650 0.0000 9.930 07/24/91 0.0620 0.0000 9.980 08/21/91 0.0650 0.0000 10.250 09/18/91 0.0650 0.0000 10.290 10/16/91 0.0600 0.0000 10.370 11/20/91 0.0650 0.0000 10.470 12/18/91 0.0760 0.0000 10.550 01/15/92 0.0600 0.0000 10.670 02/19/92 0.0650 0.0000 10.470 03/18/92 0.0650 0.0000 10.380 04/15/92 0.0610 0.0000 10.530 05/20/92 0.0650 0.0000 10.610 06/17/92 0.0620 0.0000 10.600 07/15/92 0.0600 0.0000 10.800 08/19/92 0.0600 0.0000 10.990 09/16/92 0.0600 0.0000 11.050 10/21/92 0.0600 0.0000 10.830 11/18/92 0.0600 0.0000 10.790 12/16/92 0.0850 0.0000 10.730 01/20/93 0.0500 0.0000 10.790 02/17/93 0.0600 0.0000 10.990 03/17/93 0.0600 0.0000 11.060 04/21/93 0.0600 0.0000 11.160 05/19/93 0.0600 0.0000 11.050 06/16/93 0.0560 0.0000 11.110 07/29/93 0.0810 0.0000 11.180 08/30/93 0.0590 0.0000 11.350 09/30/93 0.0530 0.0000 11.350 10/29/93 0.0565332 0.0000 11.340 11/30/93 0.0574140 0.0000 11.130 12/31/93 0.0538857 0.0000 11.120 Class B Shares 05/19/93 0.0540 0.0000 11.050 06/16/93 0.0490 0.0000 11.100 07/29/93 0.0740 0.0000 11.180 08/30/93 0.0520 0.0000 11.350 09/30/93 0.0460 0.0000 11.340 10/29/93 0.0489813 0.0000 11.330 11/30/93 0.0493279 0.0000 11.120 12/31/93 0.0466107 0.0000 11.110
1. AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 12/31/93: The formula for calculating average annual total return is as follows: 1 ERV n --------------- = n (---) - 1 = average annual total return number of years P Where: ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the period P = hypothetical initial investment of $1,000 Class A Shares Examples, assuming a maximum sales charge of 4.75%: One Year Five Year Inception $1,050.64 1 $1,546.93 .2 $1,616.26 .1750 (---------) - 1 = 5.06% (---------) - 1 = 9.12% (---------) - 1 = 8.77% $1,000 $1,000 $1,000 Examples at NAV: One Year Five Year Inception $1,103.04 1 $1,624.07 .2 $1,696.86 .1750 (---------) - 1 = 10.30% (---------) - 1 = 10.18% (---------) - 1 = 9.70% $1,000 $1,000 $1,000 Class B Shares Example, assuming a maximum contingent deferred sales charge of 5.00% for the first year: Inception 05/01/93) $ 989.07 1.5000 (---------) - 1 = <1.64%> $1,000 Example at NAV: Inception 05/01/93) $1,039.07 1.5000 (---------) - 1 = 5.92% $1,000 Oppenheimer Investment Grade Bond Fund Page 4 April 28, 1994 2. CUMULATIVE TOTAL RETURNS FOR THE PERIODS ENDED 12/31/93: The formula for calculating cumulative total return is as follows: ERV - P ------- = Cumulative Total Return P Class A Shares Examples, assuming a maximum sales charge: One Year Five Year Inception $1,050.64 - 1,000 $1,546.93 - 1,000 $1,616.26 - 1,000 ----------------------- = 5.06% ----------------------- = 54.69% - ----------------------- = 61.26% $1,000 $1,000 $1,000 Examples at NAV: One Year Five Year Inception $1,103.04 - 1,000 $1,624.07 - 1,000 $1,696.86 - 1,000 ----------------------- = 10.30% ----------------------- = 62.41% - ----------------------- = 69.69% $1,000 $1,000 $1,000 Class B Shares Inception (05/01/93)(at Maximum Contingent Deferred Sales Charge of 5.00%) $ 989.07 - $1,000 -------------------- = <1.09%> $1,000 Inception (05/01/93)(at NAV) $1,039.07 - $1,000 -------------------- = 3.91% $1,000 Oppenheimer Investment Grade Bond Fund Page 5 April 28, 1994 3. STANDARDIZED YIELDS FOR THE 30-DAY PERIOD ENDED 12/31/93: The Fund's standardized yield is calculated using the following formula set forth in the SEC rules: a - b 6 Standardized Yield = 2 {(------- + 1) - 1} cd or e The symbols above represent the following factors: a = Dividends and interest earned during the 30-day period. b = Expenses accrued for the period (net of any expense reimbursements). c = Average daily number of Fund shares outstanding during the 30-day period that were entitled to receive dividends. d = The Fund's maximum offering price (including sales charge) per share on the last day of the period, adjusted for undeclared net investment income. e = The Fund's net asset value (excluding contingent deferred sales charge) per share on the last day of the period, adjusted for undeclared net investment income. Class A Shares Example, assuming a maximum sales charge of 4.75% $680,389.53 - $105,737.47 6 2 {( --------------------------- + 1) - 1} = 6.03% 9,927,856 x $11.67 Class B Shares Example at NAV: $ 10,431.40 - $ 2,723.14 6 2 {( --------------------------- + 1) - 1} = 5.52% 152,448 x $11.11 Oppenheimer Investment Grade Bond Fund Page 6 April 28, 1994 4. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 12/31/93: The Fund's dividend yields are calculated using the following formula: a x 12 Dividend Yield = ------ b or c The symbols above represent the following factors: a = The dividend earned during the period. b = The Fund's maximum offering price (including sales charge) per share on the last day of the period. c = The Fund's Net Asset Value (excluding sales charge)per share on the last day of the period. Examples: Class A Shares Dividend Yield $.0538857 x 12 at Maximum Offer -------------- = 5.54% $11.67 Dividend Yield $.0538857 x 12 at Net Asset Value -------------- = 5.82% $11.12 Class B Shares Dividend Yield $.0466107 x 12 at Net Asset Value -------------- = 5.03% $11.11 -----END PRIVACY-ENHANCED MESSAGE-----