Registration No. 333-05579
File No. 811-07657
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 2 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 3 / /
Oppenheimer Developing Markets Fund
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(Exact Name of Registrant as Specified in Charter)
Two World Trade Center, New York, New York 10048-0203
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(Address of Principal Executive Offices)
212-323-0200
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(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
/ / Immediately upon filing pursuant to paragraph (b)
/ X / On December 19,1997 pursuant to paragraph (b)
/ / 60 days after filing, pursuant to paragraph (a)(1)
/ / On (date) pursuant to paragraph (a)(1)
/ / 75 days after filing, pursuant to paragraph (a)(2)
/ / On (date) pursuant to paragraph (a)(2) of Rule 485.
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A Rule 24f-2 Notice for the Registrant's fiscal year ending August 31, 1997 was
filed on November 5, 1997.
<PAGE>
FORM N-1A
Oppenheimer Developing Markets Fund
Cross Reference Sheet
Part A of
Form N-1A
Item No. Prospectus Heading
1 Front Cover Page
2 Expenses; Overview of the Fund
3 Financial Highlights, Performance of the Fund
4 Front Cover Page; Investment Objective and Policies;
Investment Risks; Investment Techniques and Strategies; How
the Fund is Managed
5 Expenses; How the Fund is Managed; Back Cover
5A *
6 Investment Objective and Policies - Portfolio Turnover,
Dividends, Capital Gains and Taxes; How the Fund is Managed --
Organization and History; The Transfer Agent
7 How to Exchange Shares; Special Investor Services; Service
Plan for Class A shares; Distribution and Service Plans for
Class B and Class C Shares; How to Buy Shares; How to Exchange
Shares; How to Sell Shares; Shareholder Account Rules and
Policies
8 How to Sell Shares; How to Exchange Shares; Special Investor
Services
9 *
Part B of
Form N-1A
Item No. Heading in Statement of Additional Information
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Investment Policies and
Strategies; Other Investment Techniques and Strategies; Other
Investment Restrictions
14 How the Fund is Managed -- Trustees and Officers of the Fund
15 How the Fund is Managed -- Major Shareholders
16 How the Fund is Managed -- The Manager and its Affiliates;
Additional Information about the Fund; Distribution and
Service Plans; Back Cover
17 How the Fund is Managed; Brokerage Policies of the Fund
18 About Your Account - Alternative Sales Arrangements- Class A,
Class B and Class C Shares
19 About Your Account -- How to Buy Shares, How to Sell Shares,
How to Exchange Shares
20 Dividends, Capital Gains and Taxes
21 How the Fund is Managed; Additional Information about the Fund
- The Distributor; Distribution and Service Plans
22 Performance of the Fund
23 Financial Statements
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*Not applicable or negative answer.
<PAGE>
OPPENHEIMER
Developing Markets Fund
Prospectus dated December 19, 1997
Oppenheimer Developing Markets Fund is a mutual fund that aggressively seeks
capital appreciation as its investment objective. The receipt of income is an
incidental consideration in the selection of the Fund's portfolio securities. In
seeking its objective, the Fund invests primarily in equity securities of
issuers in emerging markets throughout the world. The Fund emphasizes
investments in "growth-type" companies in industry sectors that the portfolio
managers believe have appreciation possibilities. The Fund may also use
"hedging" instruments to try to reduce the risks of market and currency
fluctuations that affect the value of the securities the Fund holds.
Some of the Fund's investment techniques may be considered speculative.
Foreign investing involves special risks that do not affect investments in
domestic issuers, such as currency fluctuations. Investments in emerging markets
can be very volatile. These techniques may increase the risks of investing in
the Fund and the Fund's operating costs. You should carefully review the risks
associated with an investment in the Fund. See "Investment Objective and
Policies" and "Investment Risks" for more information about the types of
securities the Fund invests in and the risks of investing in the Fund.
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 December
19, 1997 Statement of Additional Information. For a free copy, call
OppenheimerFunds Services, the Fund's Transfer Agent, at 1-800-525-7048, or
write to the Transfer Agent at the address on the back cover. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference (which means
that it is legally part of this Prospectus).
(logo) OppenheimerFunds
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 the principal amount
invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
Contents
A B O U T T H E F U N D
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objective and Policies
Investment Risks
Investment Techniques and Strategies
How the Fund is Managed
Performance of the Fund
A B O U T Y O U R A C C O U N T
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
A-1 Appendix A: Special Sales Charge Arrangements
B-1 Appendix B: List of Developing Markets Countries
<PAGE>
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net asset
value per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the Fund's
business operating expenses that you will bear indirectly.
o Shareholder Transaction Expenses are charges you pay when you buy or
sell shares of the Fund. See "About Your Account," starting on page __, for an
explanation of how and when these charges apply.
Class A Class B Class C
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Maximum Sales Charge on Purchases
(as a % of offering price) 5.75% None None
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Maximum Deferred Sales Charge (as
a % of the lower of the original
offering price or redemption
proceeds) None(1) 5% in the 1st 1% if redeemed
year, declining within 12
to 1% in the 6th months of
year and purchase(2)
eliminated
thereafter(2)
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Maximum Sales Charge on Reinvested
Dividends None None None
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Exchange Fee None None None
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Redemption Fee None None None
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(1) If you invest $1 million or more ($500,000 or more for purchases by
"Retirement Plans" as defined in "Class A contingent Deferred Sales Charge" on
page __) in Class A shares, you may have to pay a sales charge of up to 1% if
you sell your shares within 12 calendar months (18 months for shares purchased
prior to May 1, 1997) from the end of the calendar month during which you
purchased
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those shares. See "How to Buy Shares - Buying Class A Shares," below.
(2) For more information on contingent deferred sales charges, see "How to Buy
Shares-Buying Class B Shares" and "How To buy Shares Buying Class C Shares"
below.
o Annual Fund Operating Expenses are paid out of the Fund's assets and
represent the Fund's expenses in operating its business. For example, the Fund
pays management fees to its investment advisor, OppenheimerFunds, Inc. (which is
referred to in this Prospectus as the "Manager"). The rates of the Manager's
fees are set forth in "How the Fund is Managed" below. The Fund has other
regular expenses for services, such as transfer agent fees, custodial fees paid
to the bank that holds its portfolio securities, audit fees and legal expenses.
Those expenses are detailed in the Fund's financial statements in the Statement
of Additional Information.
Annual Fund Operating Expenses (as a percentage of average net assets):
Class A Class B Class C
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Management Fees 1.00% 1.00% 1.00%
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12b-1 Distribution Plan Fees 0.18% 1.00% 1.00%
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Other Expenses 0.76% 0.78% 0.77%
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Total Fund Operating Expenses 1.94% 2.78% 2.77%
The numbers in the table are based upon the Fund's expenses in the fiscal
period November 18, 1996 (commencement of operations) to August 31, 1997. These
amounts are shown as a percentage of the average net assets of each class of the
Fund's shares for that period and have been annualized. The 12b-1 Plan Fees for
Class A shares are service fees. The maximum fee is 0.25% of average net assets
of that class. For Class B and Class C shares, the 12b-1 Distribution Plan Fees
are service fees (the fee is 0.25% of average net assets of the respective
class) and the asset-based sales charge is 0.75%. These plans are described in
greater detail in "How to Buy Shares."
The actual expenses for each class of shares in future years may be more
or less than the numbers in the table, depending on a number of factors,
including changes in the actual value of the
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Fund's assets represented by each class of shares.
o Examples. To try to show the effect of these expenses on an investment
over time, we have created the hypothetical examples shown below. Assume that
you make a $1,000 investment in each class of shares of the Fund, that the
Fund's annual return is 5%, and that its operating expenses for each class are
the ones shown in the Annual Fund Operating Expenses table above. If you were to
redeem your shares at the end of each period shown below, your investment would
incur the following expenses by the end of 1 and 3 years:
1 year 3 years 5 years 10 years*
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Class A Shares $76 $115 $156 $271
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Class B Shares $78 $116 $167 $272
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Class C Shares $38 $ 86 $146 $310
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10 years*
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Class A Shares $76 $115 $156 $271
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Class B Shares $28 $ 86 $147 $272
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Class C Shares $28 $ 86 $146 $310
*In the first example, expenses include the Class A initial sales charge
and the applicable Class B or Class C contingent deferred sales charge. In the
second example, Class A expenses include the initial sales charge, but Class B
and Class C expenses do not include contingent deferred sales charges. Because
of the effect of the asset-based sales charge and contingent deferred sales
charge imposed on Class B and Class C shares, long-term holders of Class B and
Class C shares could pay the economic equivalent of more than the maximum
front-end sales charge allowed under applicable regulations. For Class B
shareholders, the automatic conversion of Class B shares to Class A Shares is
designed to minimize the likelihood that this will occur. Please refer to "How
to Buy Shares - Buying Class B Shares" for more information.
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<PAGE>
These examples show the effect of expenses on an investment, but are not
meant to state or predict actual or expected costs or investment returns of the
Fund, all of which may be more or less than the amounts shown.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with references
to the section of this Prospectus where more complete information can be found.
You should carefully read the entire Prospectus before making a decision about
investing in the Fund. Keep the Prospectus for reference after you invest,
particularly for information about your account, such as how to sell or exchange
shares.
o What Is the Fund's Investment Objective? The Fund aggressively seeks
capital appreciation as its investment objective. The receipt of income is an
incidental consideration in the selection of the Fund's portfolio securities.
o What Does the Fund Invest In? In seeking its objective, the Fund invests
primarily in equity securities of issuers in emerging markets throughout the
world. Investments in debt securities may be made (as described in "Investment
Policies and Strategies") in what the Manager perceives to be normal market
conditions and without limitation as a temporary defensive measure or for
liquidity purposes in what the Manager perceives to be uncertain market
conditions (as described in "Investment Techniques and Strategies"). The Fund
may also use hedging instruments and certain derivative investments to try to
manage investment risks. These investments are more fully explained in
"Investment Objective and Policies" starting on page __.
o Who Manages the Fund? The Fund's investment advisor is OppenheimerFunds,
Inc., which (including subsidiaries) as of September 30, 1997, manages
investment company portfolios having over $75 billion in assets. The Manager is
paid an advisory fee by the Fund, based on its net assets. The Fund's portfolio
managers, who are primarily responsible for the day-to-day management of the
Fund's portfolio, are Frank Jennings and Rajeev Bhaman. Messrs. Jennings and
Bhaman are Vice Presidents of the Manager. Prior to joining the Manager, Mr.
Jennings was the Managing Director of Global Equities at Mitchell Hutchins Asset
Management, Inc., a subsidiary of PaineWebber, Inc. Prior to that, Mr. Jennings
was a global funds manager for AIG Global Investors. Prior to joining
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<PAGE>
the Manager, Mr. Bhaman was Vice President for Asian Equities of Barclays de
Zoete Wedd Inc. The Fund's Board of Trustees, which is elected by shareholders,
oversees the investment advisor and the portfolio managers. Please refer to "How
the Fund is Managed" starting on page __ for more information about the Manager
and its fees.
o How Risky is the Fund? All investments carry risks to some degree. It is
important to remember that the Fund is an aggressive capital appreciation fund
designed for long-term investors for a portion of their investments and is not
designed for investors seeking income or conservation of capital. The Fund's
investments are subject to changes in their value as a result of many factors
such as changes in general stock market movements or the change in value of
particular stocks because of an event affecting the issuer. The Fund's
investments in foreign securities are subject to additional risks associated
with investing abroad, such as the effect of currency rate changes on stock
values, and to the special risks of investing in emerging markets. These changes
affect the value of the Fund's investments and its price per share. The Fund may
borrow up to 33 1/3% of the value of its total assets in the aggregate from
banks on an unsecured basis. A portion of such borrowed funds may be used to
purchase additional portfolio securities. Leveraging, or the purchase of
securities with borrowed funds, is a speculative investment technique.
In the Oppenheimer funds spectrum, the Fund is expected to be
significantly more volatile than stock funds that do not invest aggressively for
capital appreciation or in emerging markets. While the Manager tries to reduce
some risks by diversifying investments, by carefully researching securities
before they are purchased for the portfolio, and in some cases by using hedging
techniques, there is no guarantee of success in achieving the Fund's objective,
and your shares may be worth more or less than their original cost when you
redeem them. Please refer to "Investment Risks" starting on page __ for a more
complete discussion of the Fund's investment risks.
o How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic Investment
Plan under AccountLink. Please refer to "How to Buy Shares" beginning on page __
for more details.
o Will I Pay a Sales Charge to Buy Shares? The Fund has
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<PAGE>
three classes of shares. Each class has the same investment portfolio but
different expenses. Class A shares are offered with a front-end sales charge,
starting at 5.75%, and reduced for larger purchases. Class B and Class C shares
are offered without a front-end sales charge, but may be subject to a contingent
deferred sales charge if redeemed within 6 years or 12 months, respectively, of
purchase. There is also an annual asset-based sales charge on Class B and Class
C shares. Please review "How to Buy Shares" starting on page __ for more
details, including a discussion about factors you and your financial advisor
should consider in determining which class may be appropriate for you.
o How Can I Sell My Shares? Shares can be redeemed by mail or by telephone
call to the Transfer Agent on any business day, or through your dealer. See "How
to Sell Shares" on page __. The Fund also offers exchange privileges to other
Oppenheimer funds, described in "How to Exchange Shares" on page __.
o How Has the Fund Performed? The Fund measures its performance by quoting
its average annual total returns and cumulative total returns, which measure
historical performance. Those returns can be compared to the returns (over
similar periods) of other funds. Of course, other funds may have different
objectives, investments and levels of risk. The Fund's performance can also be
compared to that of a broad based market index which we have done beginning on
page __. Please remember that past performance does not guarantee future
results.
Financial Highlights
The table on the following page presents selected financial information about
the Fund, including per share data, expense ratios and other data for the period
from November 18, 1996 (commencement of operations) through August 31, 1997.
This information has been audited by KPMG Peat Marwick LLP, the Fund's
independent auditors, whose report on the Fund's Financial Statements for the
fiscal period ended August 31, 1997 is included in the Statement of Additional
Information.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS CLASS A CLASS B CLASS C
------------ ------------ ------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED
AUGUST 31, AUGUST 31, AUGUST 31,
1997(1) 1997(1) 1997(1)
====================================================================================
<S> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.00 $10.00 $10.00
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Income from investment operations:
Net investment income .07 .03 .04
Net realized and unrealized gain 2.75 2.70 2.70
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Total income from investment operations 2.82 2.73 2.74
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Net asset value, end of period $12.82 $12.73 $12.74
====== ====== ========
====================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) 28.20% 27.30% 27.40%
====================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $37,613 $20,470 $3,713
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Average net assets (in thousands) $17,852 $7,802 $1,560
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Ratios to average net assets:(3)
Net investment income 1.45% 0.87% 0.98%
Expenses(4) 1.94% 2.78% 2.77%
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Portfolio turnover rate(5) 26.7% 26.7% 26.7%
Average brokerage commission rate(6) $0.0012 $0.0012 $0.0012
</TABLE>
1. For the period from November 18, 1996 (commencement of operations) to August
31, 1997.
2. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or commencement of operations), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
3. Annualized.
4. The expense ratio reflects the effect of gross expenses paid indirectly by
the Fund.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the period ended August 31, 1997 were $60,015,886 and $5,966,015,
respectively.
6. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total of related shares
purchased and sold. Generally, non-U.S. commissions are lower than U.S.
commissions when expressed as cents per share but higher when expressed as a
percentage of transactions because of the lower per-share prices of many
non-U.S. securities.
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<PAGE>
Investment Objective and Policies
Objective. The Fund aggressively seeks capital appreciation as its
investment objective.
Investment Policies and Strategies. In seeking its objective, the Fund invests
primarily in equity securities of issuers in emerging markets throughout the
world. For purposes of the Fund's operations such markets will consist of all
countries determined by the Manager to have developing or emerging economies and
markets ("Developing Markets"). The Fund's investments in equity securities may
include common stock, preferred stock, rights and warrants to acquire such
securities and substantially similar forms of equity with comparable risk
characteristics, including equity securities convertible into common stock.
These securities may be listed on securities exchanges, traded in various
over-the-counter markets, or may have no organized trading market. The Fund may
invest in securities of smaller, less well-known companies as well as those of
large, well-known companies (if they are "growth-type" companies, as described
below).
The selection of securities is made, among other things, on the basis of
the Manager's view of a security's potential for capital appreciation. The
receipt of current income is an incidental consideration in the selection of
portfolio securities. A portion of the Fund's assets may be invested in other
types of securities for liquidity purposes.
Under normal market conditions the Fund will invest at least 65% of its
total assets in equity securities of issuers whose principal activities are
located in at least three different Developing Markets. While the Fund intends
to invest primarily in equity securities of such issuers, the Fund may invest up
to 35% of its total assets in any combination of (i) debt securities of
government or corporate issuers in Developing Markets; (ii) equity and debt
securities of issuers in developed countries, including the United States; and
(iii) cash and money market instruments.
The Fund may invest in debt securities, whether issued by domestic or
foreign issuers, which are rated below investment grade by Moody's Investors
Service, Inc., Standard & Poor's Corporation, Fitch Investors Service, Inc.,
Duff & Phelps, Inc. or another nationally recognized statistical rating
organization ("NRSRO") or in unrated securities, which in the opinion of the
Manager, are of comparable quality. Such investments in below-investment grade
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<PAGE>
debt securities must be in the aggregate less than 35% of the Fund's net assets.
The Fund may, but is not required to, invest up to 100% of its assets in foreign
securities.
The Manager determines where an issuer's principal activities are located
by considering, among other things, such factors as its country of organization,
the principal trading market for its securities, the source of its revenues and
the location of its assets. The issuer's principal activities generally may be
deemed by the Manager to be located in a particular country if: (a) the security
is issued or guaranteed by the government of that country or any of its
agencies, authorities or instrumentalities; (b) the issuer is organized under
the laws of, and maintains a principal office in, that country; (c) the issuer
has its principal securities trading market in that country; (d) the issuer
derives 50% or more of its total revenues (alone or on a consolidated basis)
from goods sold or services performed in that country; or (e) the issuer has 50%
or more of its assets in that country.
o Can the Fund's Investment Objective and Policies Change? The Fund's
investment objective is a fundamental policy, and, as such, may not be changed
without shareholder approval. The Fund's investment policies and techniques are
not "fundamental" unless this Prospectus or the Statement of Additional
Information says that a particular policy or technique 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 of 1940 ("Investment Company Act") to be a
particular percentage of outstanding voting shares (and this term is explained
in the Statement of Additional Information). The Fund's Board of Trustees may
change non-fundamental policies without shareholder approval, although
significant changes will be described in amendments to this Prospectus.
o Foreign Securities. "Foreign Securities" selected by the Fund include
equity securities issued by companies organized under the laws of a foreign
country, and debt securities (such as convertible debentures or bonds) issued or
guaranteed by foreign companies or by foreign governments or their agencies.
Foreign Securities also include securities that are traded primarily on a
foreign securities exchange or over-the-counter market, as well as securities of
companies that the Manager determines derive a significant portion of their
revenue or profits from foreign
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<PAGE>
business, investments or sales or have a significant portion of their assets
abroad. Foreign Securities may include securities of foreign issuers represented
in the U.S. markets by American Depository Receipts (ADRs) or other similar
arrangements.
o Developing Markets. For purposes of the Fund's operations, Developing
Markets will consist of all countries determined by the Manager, from time to
time, to have developing or emerging economies and markets. These countries
generally include every country in the world except the United States, Canada,
Japan, Australia, New Zealand and most countries located in Western Europe.
The Fund intends to focus its investments in those Developing Markets
which the Manager believes may have strongly developing economies now or in the
future and in which the markets are believed by the Manager to be becoming more
sophisticated. For purposes of the Fund's policy of investing under normal
market conditions at least 65% of its total assets in equity securities of
issuers whose principal activities are located in at least three different
Developing Markets, the Fund will consider investment in the Developing Markets
listed in Appendix B to this Prospectus, among others.
Although the Manager currently considers each of the countries listed in
Appendix B as eligible for investment, the Fund may not be invested in all such
markets at all times. Moreover, investing in some of those markets currently may
not be considered by the Manager to be desirable or feasible, due to, among
other things, the lack of adequate custody arrangements for the Fund's assets,
overly burdensome repatriation and other restrictions, the lack of organized and
liquid securities markets, unacceptable political risks or for other reasons. In
addition to the above-listed countries which are eligible for investment, the
Manager may make investments in issuers in Developing Markets not specifically
listed above where investing may become desirable subsequent to the date of this
Prospectus.
o Growth-Type Companies. These are companies that the Manager believes are
entering into a growth cycle in their business, with the expectation that their
stock may increase in value. Growth companies may include larger, established
companies that the Manager believes are entering a growth phase, whether because
of the development of new products or markets, improved sales, technological
developments, or for other reasons. Growth
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<PAGE>
companies may also include companies that the Manager believes may generate or
apply new technologies, new or improved distribution techniques, or new
services, companies that own or develop natural resources, companies that may
benefit from changing consumer demands or lifestyles, or companies with
projected earnings growth in excess of the average. They may also include newer
companies that the Manager believes may be in new or developing industries, or
which are developing new products or services, or expanding into new markets for
their products. In either case, growth-type companies have what the Manager
believes to be favorable prospects for the long term. Newer growth-type
companies normally incur losses or retain all or a large part of their earnings
for research, development and investment in capital assets. Therefore, they tend
not to emphasize the payment of dividends. Since the receipt of income is an
incidental consideration in the selection of portfolio securities, the absence
of dividend history is not a negative factor in the assessment of securities
under consideration.
In selecting stocks for investment, the Manager looks for companies with,
among other things, capable management, sound financial and accounting policies
and successful product development and marketing relative to other companies, as
well as other factors.
o Portfolio Turnover. A change in the securities held by the Fund is known
as "portfolio turnover." The Fund ordinarily does not engage in short-term
trading to try to achieve its objective. As a result, the Fund's portfolio
turnover is not expected to be more than 100% each year. Portfolio turnover
affects brokerage costs, dealer markups and other transaction costs, and results
in the Fund's realization of capital gains or losses for tax purposes. The
Financial Highlights table above shows the Fund's portfolio turnover rate during
the fiscal period ended August 31, 1997.
Investment Risks
All investments carry risks to some degree, whether they are risks that market
prices of the investment will fluctuate (this is known as "market risk") or that
the underlying issuer will experience financial difficulties and may default on
its obligation under a fixed-income investment to pay interest and repay
principal (this is referred to as "credit risk"). These general investment risks
and the special risks of certain types of investments that the Fund may hold are
described below. They affect the value of the Fund's
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investments, its investment performance and the prices of its shares. These
risks collectively form the risk profile of the Fund.
Because of the types of securities the Fund invests in and the investing
techniques the Fund uses, the Fund is designed for investors who are investing
for the long term. It is not intended for investors who are seeking assured
income or preservation of capital. While the Manager tries to reduce risks by
diversifying investments, by carefully researching securities before they are
purchased and, in some cases by using hedging techniques, changes in overall
market prices can occur at any time. There is no assurance that the Fund will
achieve its investment objective. When you redeem your shares, they may be worth
more or less than what you paid for them.
o Equity Investment Risks. Because the Fund normally invests most, or a
substantial portion, of its assets in equity securities, the value of the Fund's
portfolio will be affected by changes in the stock markets. At times, these
markets can be volatile, and stock prices can change substantially. This market
risk will affect the Fund's net asset values per share, which will fluctuate as
the values of the Fund's portfolio securities change. Not all stock prices
change uniformly or at the same time, not all stock markets move in the same
direction at the same time, and other factors can affect a particular stock's
price (for example, poor earnings reports by an issuer, loss of major customers,
major litigation against an issuer, or changes in government regulations
affecting an industry). Not all of these factors can be predicted.
The Fund attempts to limit certain market risks by diversifying its
investments, that is, by not holding a substantial amount of the stock of any
one company and by not investing too great a percentage of the Fund's assets in
any one country. In addition, the Fund does not concentrate its investments in
any one industry or group of industries.
o Foreign Securities Risks. The Fund may invest up to 100% of its assets in
foreign securities. Transactions involving foreign equity or debt securities or
foreign currencies, and transactions entered into in foreign countries, involve
significant considerations and risks not typically associated with investing in
U.S. markets. These include, among other things, changes in currency rates,
exchange control regulations, governmental administration or economic or
monetary policy (in the U.S. or
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abroad) or circumstances in dealings between nations. Costs may be incurred in
connection with conversions between various currencies. Special considerations
may also include more limited information about foreign issuers, higher
brokerage and custody costs, different or less stringent accounting standards
and less developed trading markets. Foreign securities markets may also be less
liquid, more volatile and less subject to government supervision than in the
U.S. Investments in foreign countries are affected by other factors including
the risk of expropriation, confiscatory taxation and potential difficulties in
enforcing contractual obligations and may be subject to extended settlement
periods. More information about the risks and potential rewards of investing in
foreign securities is contained in the Statement of Additional Information.
o Special Risks of Developing Market Investments. The risks of investing
in foreign securities are intensified in the case of investments in Developing
Markets. In general, Developing Markets may offer special investment
opportunities because their securities markets, industries and capital structure
are growing rapidly, but investments in these countries involve special material
risks not present in mature foreign markets (such as England, Germany and Japan,
for example). Settlement of securities trades may be subject to extended delays,
so that the Fund may not receive securities purchased or the proceeds of sales
of securities on a timely basis. Developing Markets generally have smaller, less
developed trading markets and exchanges, which may result in a lack of liquidity
(so that the Fund may not be able to dispose of those securities rapidly and at
a reasonable price) and greater volatility, which can materially affect the
value of the securities held by the Fund, and therefore its net asset value per
share. Developing Market countries may have relatively unstable governments,
present the risk of nationalization of businesses or prohibitions on
repatriation of assets. The economies of Developing Market countries may be
predominantly based on only a few industries and may be highly vulnerable to
changes in local or global trade conditions. There may also be less developed
legal and accounting systems and less protection of property rights than more
developed countries. In addition, in some Developing Market countries, general
and/or industry specific restrictions on foreign ownership may preclude the Fund
from acquiring desirable securities.
o Special Risks of Lower-Grade Securities. The Fund can invest in domestic
and foreign debt obligations, including high-yield, below-investment grade debt
securities (including both rated and unrated securities). Such investments in
the aggregate must comprise less than 35% of the value of the Fund's net assets.
These "lower-grade" securities are commonly know as "junk bonds." The Fund will
not invest in debt securities, whether issued by domestic or foreign issuers,
which have a rating by a NRSRO of less than C or in debt securities which are in
default at the time of purchase. All corporate debt securities (whether foreign
or domestic) are subject to some degree of credit risk. High yield, lower-grade
securities, whether rated or unrated, often have speculative characteristics and
special risks that make them riskier investments than investment grade
securities. There may be less of a market for them and therefore they may be
harder to sell at an acceptable price. There is a relatively greater possibility
that the issuer's earnings may be insufficient to make the payments of interest
due on the bonds. The issuer's low creditworthiness may increase the potential
for its insolvency. For foreign lower- grade debt securities, these risks are in
addition to the risks of investing in foreign securities, described above. These
risks mean that the Fund may not achieve the expected income from lower-grade
securities, and that the Fund's net asset value per share may be affected by
declines in value of these securities.
o Special Risks of Derivative Investments. The Fund can invest in a number
of different kinds of derivative investments. In general, a "derivative
investment" is a specially designed investment whose performance is linked to
the performance of another investment or security, such as an option, future,
index, currency or commodity. The company issuing the instrument may fail to pay
the amount due on the maturity of the instrument. Also, the underlying
investment or security on which the derivative is based, and the derivative
itself, may not perform the way the Manager expected it to perform. Markets,
underlying securities and indices may move in a direction not anticipated by the
Manager. Performance of derivative investments may also be influenced by
interest rate and stock market changes in the U.S. and abroad. All of this can
mean that the Fund will realize less principal or income from the investment
than expected. Certain derivative investments held by the Fund may trade in the
over-the-counter market and may be illiquid. See "Illiquid and Restricted
Securities."
o Special Risks of Hedging Instruments. The use of hedging instruments
requires special skills and knowledge of investment techniques that are
different from what is required for normal
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portfolio management. If the Manager uses hedging instruments at the wrong time
or judges market conditions incorrectly, hedging strategies may reduce the
Fund's return. The Fund could also experience losses if the prices of its
futures and options positions were not correlated with its other investments or
if it could not close out a position because of an illiquid market for the
future or option.
Options trading involves the payment of premiums, and options, futures and
forward contracts are subject to special tax rules that may affect the amount,
timing and character of the Fund's income and distributions. There are also
special risks in particular hedging strategies. For example, 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 if the investment has increased in value above the
call price. The use of Forward Contracts may reduce the gain that would
otherwise result from a change in the relationship between the U.S. dollar and a
foreign currency. These risks are described in greater detail in the Statement
of Additional Information.
Investment Techniques and Strategies
The Fund may also use the investment techniques and strategies described below.
These techniques involve certain risks. The Statement of Additional Information
contains more information about these practices, including limitations on their
use that may help to reduce some of the risks.
o Factors Considered in Selecting Foreign Securities. The Manager
presently intends to employ an investment strategy in selecting foreign
securities that considers the Manager's view of the effects of worldwide trends
on the growth of various business sectors. These trends or "global themes" in
the Manager's view, currently include telecommunications expansion, emerging
consumer markets, infrastructure development, natural resource use and
development, corporate restructuring, capital market development in foreign
countries, health care expansion, and global integration. These trends, which
may affect the growth of companies which have businesses in these sectors or
which are affected by their development, may suggest opportunities for investing
the Fund's assets. The Manager does not invest a fixed or specific amount of the
Fund's assets in any one sector, and these themes or this investment strategy
may change over time.
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The Fund may also seek to take advantage of changes in the business cycle
by investing in companies that are believed by the Manager to be sensitive to
those changes as well as in "special situations" the Manager believes present
opportunities for capital growth. For example, when a country's economy is
expanding, companies in the financial services and consumer products industries
may be in a position to benefit from changes in the business cycle and may
present long-term growth opportunities.
When investing the Fund's assets, the Manager considers many factors,
including, among other things, the global themes discussed above, general
economic conditions and the trends in foreign stock markets. The Fund may try to
hedge against losses in the value of its portfolio of securities by using
hedging strategies and derivative investments described below.
o Foreign Debt Securities. The Fund may invest in debt securities of
foreign companies or governments, including Developing Market debt securities.
To the extent that the Fund does invest in debt securities, the Manager intends
to focus primarily on convertible debt securities, that is, securities that can
be converted into the issuer's common stock at the Fund's election. These
securities entitle the owner to receive interest until the security is redeemed
(or converted) or matures. On maturity the principal is repaid. The Manager
generally considers convertible securities to be "equity equivalents" because of
the conversion feature, and because the security's rating has less impact on the
investment decision than in the case of non-convertible securities. Capital
appreciation in debt securities in which the Fund invests may arise as a result
of favorable changes in relative foreign exchange rates or in relative interest
rate levels, the creditworthiness of issuers and/or in the convertibility of
such securities into equity securities.
Debt securities of government or corporate issuers in Developing Markets
often are rated below investment grade or are not rated by U.S. rating agencies.
Foreign debt securities are also subject to, among other things, interest rate
risk (the price of the security will tend to move down when interest rates rise,
and may go up when interest rates fall). They are also subject to "credit risk"
(the risk of the issuer's default). A discussion of the risks associated with
investments in lower-rated or unrated debt securities and a description of
rating categories of principal rating organizations are contained in the
Statement of Additional Information.
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o Privatization Programs. The governments in some Developing Markets have
been engaged in programs of selling part or all of their interests in government
owned or controlled enterprises ("privatization programs"). The Manager believes
that privatization programs may offer opportunities for significant capital
appreciation, and intends to consider investment of assets of the Fund in
privatization programs in what it considers to be appropriate circumstances. In
certain Developing Markets, the ability of foreign entities such as the Fund to
participate in privatization programs may be limited by local law and/or the
terms on which the Fund may be permitted to participate may be less advantageous
than those afforded local investors. There can be no assurance that these
governments will continue to sell enterprises currently owned or controlled by
them or that privatization programs will be successful.
o Domestic Securities. In general, the Fund does not expect that under
normal circumstances it will hold significant amounts of securities of U.S.
issuers. It can, however, under normal market conditions hold equity and debt
securities, including lower- rated and unrated debt securities, of U.S. issuers
as described above. However, when market conditions are believed by the Manager
to be unstable the Fund may invest without limit in U.S. Government securities
or high-quality U.S. short-term debt securities for temporary defensive
purposes, as discussed below in "Temporary Defensive Measures".
o Investment in Other Investment Companies. The Fund may be able to invest
in certain Developing Markets solely or primarily through governmentally
authorized investment vehicles or companies. The Fund generally may invest up to
10% of its total assets in the aggregate in shares of other investment companies
and up to 5% of its total assets in any one investment company, as long as each
investment does not represent more than 3% of the outstanding voting securities
of the acquired investment company. These limitations do not apply in the case
of investment company securities which may be purchased as part of a plan of
merger, consolidation, reorganization or acquisition. Investment in other
investment companies may involve the payment of substantial premiums above the
value of such investment companies' portfolio securities, and is subject to
limitations under the Investment Company Act and market availability. The Fund
does not intend to invest in such investment companies unless, in the judgment
of the Manager, the potential benefits of such investment justify the payment of
any applicable premiums or sales charge. As a
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shareholder in an investment company, the Fund would bear its ratable share of
that investment company's expenses, including its advisory and administration
fees. At the same time, the Fund would continue to pay its own management fees
and other expenses.
o Temporary Defensive Measures. When market conditions are considered by
the Manager to be unstable, as a temporary defensive measure, the Fund may
invest without limit in cash (U.S. dollars and foreign currencies) and/or high
quality debt securities (including securities issued by the U.S. Government or
its agencies or instrumentalities, securities issued by foreign governments,
cash equivalents and commercial paper in the top two rating categories of a
nationally-recognized securities rating organization such as Standard & Poor's
Corporation). It is expected that under such circumstances the Fund would
generally select short-term debt securities (which are securities maturing in
one year or less from date of purchase), since those securities usually may be
disposed of quickly and their prices tend not to be as volatile as the prices of
longer term debt securities.
o Loans of Portfolio Securities. To raise cash for liquidity purposes and
to earn income, the Fund may lend its portfolio securities, other than in
repurchase transactions, to brokers, dealers and other financial institutions.
The Fund must receive collateral for a loan. These loans are limited to not more
than 10% of the value of the Fund's total assets and are subject to the
conditions described in the Statement of Additional Information.
o Repurchase Agreements. To maintain liquidity to meet shareholder
redemption requests, to settle portfolio trades, or to earn income or for
defensive purposes, the Fund may enter into repurchase agreements. In a
repurchase transaction, the Fund buys a security and simultaneously sells it to
the seller for delivery at a future date. They are used primarily for cash
liquidity purposes.
Repurchase agreements must be fully collateralized. However, if the seller
fails to pay the resale price on the delivery date, the Fund may incur costs in
disposing of the collateral and may experience losses if there is any delay in
its ability to do so. The Fund will not enter into a repurchase agreement that
causes more than 10% of its net assets to be subject to repurchase agreements
having a maturity beyond seven days.
Foreign repurchase agreements present risks which are not
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present in U.S. repurchase agreements. They may be denominated in foreign
currencies. Some counterparties in these transactions may be less creditworthy
than those in U.S. markets. Foreign repurchase agreements may involve greater
risk of loss if the counterparty defaults.
o When-Issued and Forward Commitment Securities. The Fund may purchase
securities on a "when-issued" basis and may purchase or sell such securities on
a "forward commitment" basis in order to hedge against anticipated changes in
interest rates and prices. The price is fixed at the time the commitment is
made, but delivery and payment for the securities take place at a later date.
When- issued and forward commitments may be sold prior to the settlement date,
but the Fund will purchase or sell when-issued securities and forward
commitments only with the intention of actually receiving or delivering the
securities, as the case may be. No income accrues on securities which have been
purchased pursuant to a forward commitment or on a when-issued basis prior to
delivery to the Fund. There may be a risk of loss if the value of the security
changes prior to the settlement date. If the Fund disposes of the right to
acquire a when-issued security prior to its acquisition or disposes of its right
to deliver or receive against a forward commitment, it may incur a gain or loss.
At the time the Fund enters into a transaction on a when-issued or forward
commitment basis, the Fund will identify with its Custodian certain assets,
which may be liquid assets of any type, including equity and debt securities of
any grade, equal to the value of the when-issued or forward commitment
securities and such assets will be marked to market daily.
o Borrowing for Leverage and Liquidity. The Fund may borrow money from
banks on an unsecured basis for temporary or emergency purposes, for liquidity
purposes to meet redemption requests from shareholders, or to buy portfolio
securities. The Fund's borrowings for investment purposes may not exceed 10% of
its total assets and the Fund's borrowings in the aggregate may not exceed 33
1/3% of the value of its total assets. Borrowing for investment purposes is a
speculative investment technique known as "leveraging". This investment
technique may subject the Fund to greater risks and costs, including the burden
of interest expense, an expense the Fund would not otherwise incur. The Fund can
borrow only if it maintains a 300% ratio of assets to borrowings at all times in
the manner set forth in the Investment Company Act. The Fund's ability to borrow
money from banks, subject to this requirement, is a fundamental policy.
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o Warrants and Rights. The Fund may invest in warrants or rights. Warrants
basically are options to purchase stock at set prices that are valid for a
limited period of time. Rights are similar to warrants but normally have a short
duration and are distributed directly by the issuer to its shareholders. For
further details, see "Warrants and Rights" in the Statement of Additional
Information.
o Special Situations. The Fund may invest in securities of companies that
the Manager believes are in "special situations" that may present opportunities
for capital appreciation. A "special situation" may be an event such as a
proposed merger, reorganization, or other unusual development that is expected
to occur and which may result in an increase in the value of a company's
securities, regardless of general business conditions or the movement of prices
in the securities market as a whole. There is a risk that the price of the
security may decline if the anticipated development fails to occur.
o Investing In Small, Unseasoned Companies. The Fund may invest in
securities of small, unseasoned companies. These are companies that have been in
operation less than three years, including the operations of any predecessors.
Securities of these companies may have limited liquidity (which means that the
Fund may have difficulty selling them at an acceptable price when it wants to)
and the price of these securities may be volatile. See "Investing in Small,
Unseasoned Companies" in the Statement of Additional Information for a further
discussion of the risks involved in such investments.
o Illiquid and Restricted Securities. Under the policies and procedures
established by the Fund's Board of Trustees, the Manager determines the
liquidity of certain of the Fund's investments. Investments may be illiquid
because of the absence of an active trading market, making it difficult to value
them or dispose of them promptly at an acceptable price. A restricted security
is one that has a contractual restriction on its resale or which cannot be sold
publicly until it is registered under the Securities Act of 1933 in the United
States or under similar laws in foreign countries. Subject to the Board's
current restriction, which may change from time to time, the Fund will not
invest more than 15% of its net assets in illiquid or restricted securities. The
Fund's percentage limitation on these investments does not apply to certain
restricted securities that are eligible for resale to qualified institutional
purchasers. See "Restricted and Illiquid
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Securities" in the Statement of Additional Information for further details. The
Manager monitors holdings of illiquid securities on an ongoing basis and at
times the Fund may be required to sell some holdings to maintain adequate
liquidity. Illiquid securities include repurchase agreements maturing in more
than seven days, or certain participation interests other than those with puts
exercisable within seven days.
o Hedging. As described below, the Fund may purchase and sell certain
kinds of futures contracts, put and call options, forward contracts, and options
on futures and securities indices. These are all referred to as "hedging
instruments." The Fund does not use hedging instruments for speculative
purposes, and has limits on the use of them described below. The hedging
instruments the Fund may use are described below and in greater detail in "Other
Investment Techniques and Strategies" in the Statement of Additional
Information.
The Fund may buy and sell options, futures and forward contracts for a
number of purposes. It may do so to try to manage its exposure to the
possibility that the prices of its portfolio securities may decline, or to
establish a position in the securities market as a temporary substitute for
purchasing individual securities. Some of these strategies, such as selling
futures, buying puts and writing covered calls, may, to a certain degree, hedge
the Fund's portfolio against price fluctuations. Other hedging strategies, such
as buying futures and call options, tend to increase the Fund's exposure to the
securities market.
Forward contracts are used to try to manage foreign currency risks on the
Fund's foreign investments. Foreign currency options may be used to try to
protect against declines in the dollar value of foreign securities the Fund
owns, or to try to protect against an increase in the dollar cost of buying
foreign securities. Writing covered call options may also provide income to the
Fund for liquidity purposes.
o Futures. The Fund may buy and sell futures contracts that relate (1)
stock indices (referred to as Stock Index Futures), (2) other securities indices
(together with Stock Index Futures, referred to as Financial Futures), (3)
interest rates (these are referred to as Interest Rate Futures), (4) foreign
currencies (these are referred to as Forward Contracts) and (5) commodities
(those are referred to as commodity futures). These types of Futures are
described in "Hedging With Options and Futures
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Contracts" in the Statement of Additional Information.
o Puts and Call Options. The Fund may buy and sell exchange-traded and
over-the-counter put and call options, including index options, securities
options, currency options, commodities options, and options on the other types
of futures described in "Futures" above. A call or put may be purchased only if,
after the purchase, the value of all call and put options held by the Fund will
not exceed 5% of the Fund's total assets.
If the Fund sells (that is, writes) a call option, it must be "covered."
That means the Fund must own the security subject to the call while the call is
outstanding, or, for other types of written calls, the Fund must segregate
liquid assets to enable it to satisfy its obligations if the call is exercised.
When the Fund writes a call, it receives cash (called a premium). The call gives
the buyer the ability to buy the investment on which the call was written from
the Fund at the call price during the period in which the call may be exercised.
If the value of the investment does not rise above the call price, it is likely
that the call will lapse without being exercised, while the Fund keeps the cash
premium (and the investment). Not more than 25% of the Fund's total assets may
be subject to calls.
The Fund may buy puts whether or not it holds the underlying investment in
the portfolio. Buying a put on an investment gives the Fund the right to sell
the investment at a set price to a seller of a put on that investment. If the
Fund writes a put, the put must be covered by segregated liquid assets. The Fund
will not write puts if more than 50% of the Fund's total assets would have to be
segregated to cover put options.
o Forward Contracts. Forward Contracts are foreign currency exchange
contracts. They are used to buy or sell foreign currency for future delivery at
a fixed price. The Fund uses them to try to "lock in" the U.S. dollar price of a
security denominated in a foreign currency that the Fund has bought or sold, or
to protect against possible losses from changes in the relative values of the
U.S. dollar and foreign currency. The Manager intends to limit the Fund's net
exposure under Forward Contracts in a particular foreign currency to the amount
of its assets denominated in that currency or denominated in a
closely-correlated currency.
o Derivative Investments. In general, a "derivative investment" is a
specially designed investment. Its performance is
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linked to the performance of another investment or security, such as an option,
future, index, currency or commodity. The Fund can invest in a number of
different kinds of "derivative investments." They are used in some cases for
hedging purposes and in other cases to seek total return. In the broadest sense,
exchange-traded options and futures contracts (discussed in "Hedging," above)
may be considered "derivative investments."
There are special risks in investing in derivative investments. The
company issuing the instrument may fail to pay the amount due on the maturity of
the instrument. Also, the underlying investment or security on which the
derivative is based might not perform the way the Manager expected it to
perform. The performance of derivative investments may also be influenced by
interest rate and stock market changes in the U.S. and abroad. All of this can
mean that the Fund may incur losses or realize less principal or income from the
investment than expected. Certain derivative investments held by the Fund may
trade in the over-the-counter market and may be illiquid. See "Illiquid and
Restricted Securities" for an explanation.
Other Investment Restrictions. The Fund has certain investment restrictions that
are fundamental policies. Under these restrictions, the Fund cannot do any of
the following:
o 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, more than 5% of the Fund's total assets would be invested
in securities of that issuer, or the Fund would then own more than 10% of that
issuer's voting securities;
o concentrate investments in any particular industry. Therefore the Fund
will not purchase the securities of companies in any one industry if,
thereafter, 25% or more of the value of the Fund's total assets would consist of
securities of companies in that industry.
Unless the Prospectus states that a percentage restriction applies on an
ongoing basis, it applies only at the time the Fund makes an investment, and the
Fund need not sell securities to meet the percentage limits if the value of the
investment increases in proportion to the size of the Fund. Additional
investment
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restrictions are listed in "Other Investment Restrictions" in the Statement of
Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized in May, 1996 as a Massachusetts
business trust. The Fund is an open-end, diversified management investment
company, with an unlimited number of authorized shares of beneficial interest.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The Trustees
periodically meet throughout the year to oversee the Fund's activities, review
its performance, and review the actions of the Manager. The Trustees are elected
by shareholders of the Fund. The initial Board has been elected by the Manager
as sole initial shareholder. "Trustees and Officers of the Fund" in the
Statement of Additional Information lists the Trustees and officers of the Fund
and provides more information about them. Although the Fund will not normally
hold annual meetings of its shareholders, it may hold shareholder meetings from
time to time on important matters, and shareholders have the right to call a
meeting to remove a Trustee or to take other action described in the Fund's
Declaration of Trust.
The Board of Trustees has the power, without shareholder approval, to
divide unissued shares of the Fund into two or more classes. The Board has done
so, and the Fund currently has three classes of shares, Class A, Class B and
Class C. All classes invest in the same investment portfolio. Each class has its
own dividends and distributions and pays certain expenses, which may be
different for the different classes. Each class may have a different net asset
value. Each share has one vote at shareholder meetings, with fractional shares
voting proportionally. Only shares of a particular class vote as a class on
matters that affect that class alone. Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager,
OppenheimerFunds, Inc., which is responsible for selecting the Fund's
investments and handling its day-to-day business. The Manager carries out its
duties, subject to the policies established by the Board of Trustees, under an
Investment Advisory Agreement which states the Manager's responsibilities. The
Agreement sets forth the fees paid by the Fund to the Manager and describes the
expenses that the Fund is responsible to pay to conduct its
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business.
The Manager has operated as an investment advisor since 1959. The Manager
(including subsidiaries) currently manages investment companies, including other
Oppenheimer funds, with assets of more than $75 billion as of September 30,
1997, and with more than 3 million shareholder accounts. The Manager is owned by
Oppenheimer Acquisition Corp., a holding company that is owned in part by senior
officers of the Manager and controlled by Massachusetts Mutual Life Insurance
Company.
o Portfolio Managers. The Portfolio Managers of the Fund are Frank Jennings
and Rajeev Bhaman, who are employed by the Manager. Messrs. Jennings and Bhaman
are the persons principally responsible for the day-to-day management of the
Fund's portfolio. Mr. Jennings also serves as an officer and portfolio manager
for other Oppenheimer funds. He was previously a Managing Director of Global
Equities at Mitchell Hutchins Asset Management Inc., a subsidiary of
PaineWebber, Inc. Prior to that, Mr. Jennings was a global funds manager for AIG
Global Investors. Prior to joining the Manager, Mr. Bhaman was Vice President
for Asian Equities of Barclays de Zoete Wedd Inc.
o 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: 1.00% of the first $250 million of average annual net assets, 0.95%
of the next $250 million, 0.90% of the next $500 million, and 0.85% of average
annual net assets in excess of $1 billion. The Fund's management fee is higher
than that paid by most other mutual funds, but is comparable to fees paid by
funds having similar investment objectives and policies. The higher fees result
from the fact that investing in equity securities of companies in Developing
Markets, which are not widely followed by professional analysts, requires the
Manager to invest additional time and incur added expense in developing
specialized resources, including research facilities.
The Fund pays expenses related to its daily operations, such as custodian
fees, certain Trustees' fees, transfer agency fees, legal fees and auditing
costs. Those expenses are paid out of the Fund's assets and are not paid
directly by shareholders. However, those expenses reduce the net asset value of
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
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Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of Additional
Information. That section discusses how brokers and dealers are selected for the
Fund's portfolio transactions. When deciding which brokers to use, the Manager
is permitted by the Investment Advisory Agreement to consider whether brokers
have sold shares of the Fund or any other funds for which the Manager serves as
investment advisor.
o The Distributor. The Fund's shares are sold through dealers, brokers and
other financial institutions that have a sales agreement with OppenheimerFunds
Distributor, Inc., a subsidiary of the Manager that acts as the Fund's
Distributor. The Distributor also distributes the shares of other Oppenheimer
funds and is sub- distributor for funds managed by a subsidiary of the Manager.
o The Transfer Agent. The Fund's transfer agent is OppenheimerFunds
Services, a division of the Manager, which acts as the shareholder servicing
agent for the Fund on an "at-cost" basis. It also acts as the shareholder
servicing agent for the other Oppenheimer funds. Shareholders should direct
inquiries about their accounts to the Transfer Agent at the address and
toll-free number shown below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms "total return"
and "average annual total return" to illustrate its performance. The performance
of each class of shares is shown separately, because the performance of each
class will usually be different as a result of the different kinds of expenses
each class bears. These returns measure the performance of a hypothetical
account in the Fund over various periods, and do not show the performance of
each shareholder's account (which will vary if dividends are received in cash,
or shares are sold or purchased). The Fund's performance information may help
you see how well your Fund has done over time and to compare it to other funds
or market indices.
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
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total returns are calculated is contained in the Statement of Additional
Information, which also contains information about other ways to measure and
compare the Fund's performance. The Fund's investment performance will vary over
time, depending on market conditions, the composition of the portfolio, expenses
and which class of shares you purchase.
o Total Returns. There are different types of total returns used to
measure the Fund's performance. Total return is the change in value of a
hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares.
The cumulative total return measures the change in value over the entire period
(for example, ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the cumulative total
return over the entire period. However, average annual total returns do not show
the Fund's actual year-by-year performance.
When total returns are quoted for Class A shares, normally the current
maximum initial sales charge has been deducted. When total returns are shown for
Class B or Class C shares, normally the contingent deferred sales charge that
applies to the period for which total return is shown has been deducted.
However, total returns may also be quoted "at net asset value," without
considering the effect of the sales charge, and those returns would be less if
sales charges were deducted.
How Has the Fund Performed? Below is a discussion by the Manager of the Fund's
performance during the fiscal period ended August 31, 1997, followed by a
graphic comparison of the Fund's performance to appropriate broad-based market
indices.
o Management's Discussion of Performance. During the period from
commencement of operations on November 18, 1996 through fiscal period ended
August 31, 1997, the Fund's positive performance was principally affected by the
diversity of its holdings worldwide, which reduced the Fund's volatility. The
Fund had meaningful positions in several markets that performed well during the
period, including Russia, Turkey, Lebanon, Egypt and India, as well as Latin
America, particularly Brazil and Mexico. To a large extent, the Fund's positive
performance was due to its smaller position in the weak Southeast Asian markets
relative to the balance of is holdings. The Fund's investment included stock of
companies in the banking and telecommunications sectors. The Fund's portfolio
and
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its portfolio managers' strategies are subject to change.
o Comparing the Fund's Performance to the Market. The graphs below show
the performance of a hypothetical $10,000 investment in each class of shares of
the Fund from November 18, 1996 (inception of the Fund) held until its fiscal
year period ended August 31, 1997. the graphs assume that all dividends and
capital gains distributions were reinvested in additional shares. The graphs
reflect the deduction of the 5.75% maximum initial sales charge on class A
shares and the applicable contingent deferred sales charge on Class B and Class
C shares.
The Fund's performance is compared to the performance of the Morgan
Stanley Capital International ("MSCI")Emerging Markets Free Index, an unmanaged
capitalization-weighted equity index of issuers located in more than 25
developing countries. Certain countries within this index are included at less
than 100% of their market capitalization wight due to onerous foreign investment
restrictions not present in other developing markets. The MSCI Emerging Markets
Free Index is widely recognized as a performance measure of stock investment
opportunities available in developing markets to foreign investors.
Index performance reflects the reinvestment of dividends but does not
consider the effect of capital gains or transaction costs, and none of the data
in the graphs shows the effect of taxes. 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 or countries in the MSCI
Emerging Markets Fee Index. Moreover, index performance data does not reflect
any assessment of the risk of the investments included in the index.
Class A Shares
Comparison of Change in Value of $10,000 Hypothetical Investments
In:
Oppenheimer Developing Markets Fund (Class A)and Morgan Stanley
Capital International Emerging Markets Free Index
[Graph]
Cummulative Total Return of Class A Shares of the Fund at 8/31/97(1)
Life of Class
- -------------
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<PAGE>
20.83%
Class B Shares
Comparison of Change in Value of $10,000 Hypothetical Investments
In:
Oppenheimer Developing Markets Fund (Class B) and Morgan Stanley
Capital International Emerging Markets Free Index
[Graph]
Cummulative Total Return of Class B Shares of the Fund at 8/31/97(2)
Life of Class
- -------------
22.30%
Total returns and ending account values in the graphs show change in share value
and include reinvestment of all dividends and capital gains distributions.
(1) The inception date of the Fund (Class A shares) was 11/18/96. Class A
cumulative total return is shown net of the applicable 5.75% maximum initial
sales charge. (2) Class B shares of the Fund were first publicly offered on
11/18/96. class b cumulative total return is shown net of the applicable 5%
contingent deferred sales charge for the life-of- class. the ending account
value for Class B shares in the graph is net of the applicable 5% contingent
deferred sales charge.
Past performance is not predictive of future performance. Graphs may not be
drawn to same scale.
Class C Shares
Comparison of Change in Value of $10,000 Hypothetical Investments
In:
Oppenheimer Developing Markets Fund (Class C) and Morgan Stanley
Capital International Emerging Markets Free Index
[Graph]
Cummulative Total Return of Class C Shares of the Fund at 8/31/97(3)
Life of Class
- -------------
26.40%
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<PAGE>
Total return and ending account values in the graphs show change in share value
and include reinvestment of all dividends and capital gains distributions.
(3) Class C shares of the Fund were first publicly offered on 11/18/96. Class C
cumulative total return is shown net of applicable 1% contingent deferred sales
charge for the life of the class.
Past performance is not predictive of future performance. Graphs are not drawn
to same scales.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Classes of Shares. The Fund offers investors three different classes of shares.
The different classes of shares represent investments in the same portfolio of
securities but are subject to different expenses and will likely have different
share prices.
o Class A Shares. If you buy Class A shares, you may pay an initial sales
charge on investments up to $1 million (up to $500,000 for purchases by
"Retirement Plans," as defined in "Class A Contingent Deferred Sales Charge" on
page __). If you purchase Class A shares as part of an investment of at least $1
million ($500,000 for Retirement Plans) in shares of one or more Oppenheimer
funds, you will not pay an initial sales charge, but if you sell any of those
shares within 12 months of buying them (18 months if the shares were purchased
prior to May 1, 1997), you may pay a contingent deferred sales charge. The
amount of that sales charge will vary depending on the amount you invested.
Sales charge rates are described in "Buying Class A Shares" below.
o Class B Shares. If you buy Class B shares, you pay no sales charge at
the time of purchase, but if you sell your shares within six years of buying
them, you will normally pay a contingent deferred sales charge. That sales
charge varies depending on how long you own your shares, as described in "Buying
Class B Shares" below.
o Class C Shares. If you buy Class C shares, you pay no sales charge at
the time of purchase, but if you sell your shares within 12 months of buying
them, you will normally pay a contingent
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deferred sales charge of 1%, as discussed in "Buying Class C Shares" below.
Which Class of Shares Should You Choose? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
better suited to your needs depends on a number of factors which you should
discuss with your financial advisor. The Fund's operating costs that apply to a
class of shares and the effect of the different types of sales charges on your
investment will vary your investment results over time. The most important
factors to consider are how much you plan to invest and how long you plan to
hold your investment. If your goals and objectives change over time and you plan
to purchase additional shares, you should re-evaluate those factors to see if
you should consider another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the maximum
sales charge rates that apply to each class, considering the effect of the
annual asset-based sales charge on Class B and Class C shares (which, like all
expenses, will affect your investment return). For the sake of comparison, we
have assumed that there is a 10% rate of appreciation in the investment each
year. Of course, the actual performance of your investment cannot be predicted
and will vary, based on the Fund's actual investment returns and the operating
expenses borne by each class of shares, and which class you invest in.
The factors discussed below are not intended to be investment advice or
recommendations, because each investor's financial considerations are different.
The discussion below of the factors to consider in purchasing a particular class
of shares assumes that you will purchase only one class of shares and not a
combination of shares of different classes.
o How Long Do You Expect to Hold Your Investment? While future financial
needs cannot be predicted with certainty, knowing how long you expect to hold
your investment will assist you in selecting the appropriate class of shares.
Because of the effect of class-based expenses, your choice will also depend on
how much you plan to invest. For example, the reduced sales charges available
for larger purchases of Class A shares may, over time, offset the effect of
paying an initial sales charge on your investment (which reduces the amount of
your investment dollars used to buy shares
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<PAGE>
for your account), compared to the effect over time of higher class-based
expenses on shares of Class B or Class C shares for which no initial sales
charge is paid.
o Investing for the Short Term. If you have a short-term investment
horizon (that is, you plan to hold your shares for not more than six years), you
should probably consider purchasing Class A or Class C shares rather than Class
B shares, because of the effect of the Class B contingent deferred sales charge
if you redeem in less than 7 years, as well as the effect of the Class B
asset-based sales charge on the investment return for that class in the
short-term. Class C shares might be the appropriate choice (especially for
investments of less than $100,000), because there is no initial sales charge on
Class C shares, and the contingent deferred sales charge does not apply to
amounts you sell after holding them one year.
However, if you plan to invest more than $100,000 for the shorter term,
then the more you invest and the more your investment horizon increases toward
six years, Class C shares might not be as advantageous as Class A shares. That
is because the annual asset-based sales charge on Class C shares will have a
greater impact on your account over the longer term than the reduced front-end
sales charge available for larger purchases of Class A shares. For example,
Class A shares might be more advantageous than Class C (as well as Class B
shares) for investments of more than $100,000 expected to be held for 5 or 6
years (or more). For investments over $250,000 expected to be held 4 to 6 years
(or more), Class A shares may become more advantageous than Class C (and Class
B). If investing $500,000 or more, Class A may be more advantageous as your
investment horizon approaches 3 years or more.
For investors who invest $1 million or more, in most cases Class A shares
will be the most advantageous choice, no matter how long you intend to hold your
shares. For that reason, the Distributor normally will not accept purchase
orders of $500,000 or more of Class B shares or $1 million or more of Class C
shares from a single investor.
o Investing for the Longer Term. If you are investing for the longer term,
for example, for retirement, and do not expect to need access to your money for
seven years or more, Class B shares may be an appropriate consideration, if you
plan to invest less than $100,000. If you plan to invest more than $100,000 over
the long term, Class A shares will likely be more advantageous than
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Class B shares or Class C shares, as discussed above, because of the effect of
the expected lower expenses for Class A shares and the reduced initial sales
charges available for larger investments in Class A shares under the Fund's
Right of Accumulation.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses on a hypothetical investment over time, using
the assumed annual performance return stated above, and therefore you should
analyze your options carefully.
o Are There Differences in Account Features That Matter to You? Because
some account features may not be available to Class B or Class C shareholders,
or other features (such as Automatic Withdrawal Plans) might not be advisable
(because of the effect of the contingent deferred sales charge) for Class B or
Class C shareholders, you should carefully review how you plan to use your
investment account before deciding which class of shares to buy. Additionally,
dividends payable to Class B and Class C shareholders will be reduced by the
additional expenses borne by those classes that are not borne by Class A, such
as the Class B and Class C asset-based sales charges described below and in the
Statement of Additional Information. Share certificates are not available for
Class B or Class C shares, and if you are considering using your shares as
collateral for a loan, that may be a factor to consider.
o How Does It Affect Payments to My Broker? A salesperson, such as a
broker, or any other person who is entitled to receive compensation for selling
Fund shares may receive different compensation for selling one class of shares
than for selling another class. It is important that investors understand that
the purposes of the Class B and Class C contingent deferred sales charges and
asset-based sales charges are the same as the purpose of the front-end sales
charge on sales of Class A shares: that is, to compensate the Distributor for
commissions it pays to dealers and financial institutions for selling shares.
The Distributor may pay additional periodic compensation from its own resources
to securities dealers or financial institutions based upon the value of shares
of the Fund owned by the dealer or financial institution for its own account or
for its customers.
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.
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<PAGE>
o With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7) custodial
plans and military allotment plans, you can make initial and subsequent
investments of as little as $25; and subsequent purchases of at least $25 can be
made by telephone through AccountLink.
o Under pension, profit-sharing and 401(k) plans and Individual Retirement
Accounts (IRAs), you can make an initial investment of as little as $250 (if
your IRA is established under an Asset Builder Plan, the $25 minimum applies),
and subsequent investments may be as little as $25.
o There is no minimum investment requirement if you are buying shares by
reinvesting dividends from the Fund or other Oppenheimer funds (a list of them
appears in the Statement of Additional Information, or you can ask your dealer
or call the Transfer Agent), or by reinvesting distributions from unit
investment trusts that have made arrangements with the Distributor.
o 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, directly through the Distributor, or automatically from your bank
account through an Asset Builder Plan under the OppenheimerFunds AccountLink
service. The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase (and redemption) orders. When you buy
shares, be sure to specify Class A, Class B, or Class C shares. If you do not
choose, your investment will be made in Class A shares.
o Buying Shares Through Your Dealer. Your dealer will place your order with
the Distributor on your behalf.
o Buying Shares Through the Distributor. Complete an OppenheimerFunds New
Account Application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you
don't list a dealer on the application, the Distributor will act as your agent
in buying the shares. However, it is recommended that you discuss your
investment first with a financial advisor, to be sure that it is appropriate for
you.
o Payment by Federal Funds Wire: Shares may be purchased by Federal Funds
wire. The minimum investment is $2,500. You must first call the
Distributor's Wire Department at 1-800-525-7041 to
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<PAGE>
notify the Distributor of the wire, and receive further
instructions.
o Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or other
financial institution that is an Automated Clearing House (ACH) member. You can
then transmit funds electronically to purchase shares, to have the Transfer
Agent send redemption proceeds, or to transmit dividends and distributions to
your bank account.
Shares are purchased for your account on AccountLink on the regular
business day the Distributor is instructed by you to initiate the ACH transfer
to buy shares. You can provide those instructions automatically, under an Asset
Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. You should request AccountLink
privileges on the application or dealer settlement instructions used to
establish your account. See "AccountLink" below for more details.
o Asset Builder Plans. You may purchase shares of the Fund (and up to four
other Oppenheimer funds) automatically each month from your account at a bank or
other financial institution under an Asset Builder Plan with AccountLink.
Details are in the Statement of Additional Information.
o At What Price Are Shares Sold? Shares are sold at the public offering
price based on the net asset value (and any initial sales charge that applies)
that is next determined after the Distributor receives the purchase order in
Denver, Colorado or the order is received and transmitted to the Distributor by
an entity authorized by the Fund to accept purchase or redemption orders. The
Fund has authorized the Distributor, certain broker-dealers and agents or
intermediaries designated by the Distributor or those broker-dealers to accept
orders. In most cases, to enable you to receive that day's offering price, the
Distributor or an authorized entity must receive your order by the time of day
The New York Stock Exchange closes, which is normally 4:00 P.M., New York time,
but may be earlier on some days (all references to time in this Prospectus mean
"New York time"). The net asset value of each class of shares is determined as
of that time on each day The New York Stock Exchange is open (which is a
"regular business day"). If you buy shares through a dealer, normally your order
must be transmitted to the Distributor so that it is received before the
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<PAGE>
Distributor's close of business that day, which is normally 5:00 P.M. The
Distributor, in its sole discretion, may reject any purchase order for the
Fund's shares.
Special Sales Charge Arrangements for Certain Persons. Appendix A to this
Prospectus sets forth conditions for the waiver of, or exemption from, sales
charges or the special sales charge rates that apply to purchases of shares of
the Fund (including purchases by exchange) by a person who was a shareholder of
one of the Former Quest for Value Funds (as defined in that Appendix).
Buying Class A Shares. Class A shares are sold at their offering price, which is
normally net asset value plus an initial sales charge. However, in some cases,
described below, purchases are not subject to an initial sales charge, and the
offering price will be the net asset value. In some cases, reduced sales charges
may be available, as described below. Out of the amount you invest, the Fund
receives the net asset value to invest for your account. The sales charge varies
depending on the amount of your purchase. A portion of the sales charge may be
retained by the Distributor and allocated to your dealer as commission. The
current sales charge rates and commissions paid to dealers and brokers are as
follows:
Front-End Front-End
Sales Charge Sales Charge Commission
as Percentage as Percentage as Percentage
Amount of of Offering of Amount of Offering
Purchase Price 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 $100,000 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
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to dealers. If that occurs, the dealer may be considered an "underwriter" under
Federal securities laws.
o Class A Contingent Deferred Sales Charge. There is no initial sales
charge on purchases of Class A shares of any one or more of the Oppenheimer
funds in the following cases:
o Purchases aggregating $1 million or more;
o Purchases by a retirement plan qualified under section 401 (a) if the
retirement plan has total plan assets of $500,000 or more;
o Purchases by a retirement plan qualified under sections 401(a) or 401(k)
of the Internal Revenue Code, by a non-qualified deferred compensation plan,
employee benefit plan, group retirement plan (see "How to Buy Shares -
Retirement Plans" in the Statement of Additional Information for further
details), an employee's 403(b)(7) custodial plan account, SEP IRA, SARSEP, or
SIMPLE plan (all of these plans are collectively referred to as "Retirement
Plans") that: (1) buys shares costing $500,000 or more or (2) has, at the time
of purchase, 100 or more eligible participants, or (3) certifies that it
projects to have annual plan purchases of $200,000 or more; or
o Purchases by an OppenheimerFunds Rollover IRA if the purchases are made
(1) through a broker, dealer, bank or registered investment advisor that has
made special arrangements with the Distributor for these purchases, or (2) by a
direct rollover of a distribution from a qualified retirement plan if the
administrator of that plan has made special arrangements with the Distributor
for these purchases.
The Distributor pays dealers of record commissions on those purchases in
an amount equal to (i) 1.0% for non-Retirement Plan accounts, and (ii) for
Retirement Plan accounts, 1.0% of the first $2.5 million, plus 0.50% of the next
$2.5 million, plus 0.25% of purchases over $5 million, calculated on a calendar
year basis. That commission will be paid only on those purchases that were not
previously subject to a front end sales charge and dealer commission. No sales
commission will be paid to the dealer, broker or financial institution on sales
of Class A shares purchased with the redemption proceeds of shares of a mutual
fund offered as an investment option in a Retirement Plan in which Oppenheimer
funds are also offered as investment option under a special arrangement
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<PAGE>
with the Distributor if the purchase occurs more than 30 days after the addition
of the Oppenheimer funds as an investment option to the Retirement Plan.
If you redeem any of those shares purchased prior to May 1, 1997, 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")
may be deducted from the redemption proceeds. A Class A contingent deferred
sales charge may be deducted from the redemption proceeds of any of those shares
purchased on or after May 1, 1997 that are redeemed within 12 months of the end
of the calendar month of their purchase. That sales charge will be equal to 1.0%
of the lesser of (1) the aggregate net asset value of the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gains
distributions) or (2) the original offering price (which is the original net
asset value) of the redeemed shares. The Class A contingent deferred sales
charge will not exceed the aggregate amount of the commissions the Distributor
paid to your dealer on all Class A shares of all Oppenheimer funds you purchased
subject to the Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable, the
Fund will first redeem shares that are not subject to the sales charge,
including shares purchased by reinvestment of dividends and capital gains, and
then will redeem other shares in the order that you purchased them. The Class A
contingent deferred sales charge is waived in certain cases described in
"Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges of
shares under the Fund's exchange privilege (described below). However, if the
shares acquired by exchange are redeemed within 18 months of the end of the
calendar month of the purchase of the exchanged shares, the sales charge will
apply.
o Special Arrangements With Dealers. The Distributor may advance up to 13
months' commissions to dealers that have established special arrangements with
the Distributor for Asset Builder Plans for their clients.
Reduced Sales Charges for Class A Share Purchases. You may be eligible to buy
Class A shares at reduced sales charge rates in one or more of the following
ways:
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o Right of Accumulation. To qualify for the lower sales charge rates that
apply to larger purchases of Class A shares, you and your spouse can add
together Class A and Class B shares you purchase for your individual accounts,
or jointly, or for trust or custodial accounts on behalf of your children who
are minors. A fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit plans of the
same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A and Class
B shares of the Fund and other Oppenheimer funds to reduce the sales charge rate
that applies to current purchases of Class A shares. You can also include Class
A and Class B shares of Oppenheimer funds you previously purchased subject to an
initial or contingent deferred sales charge to reduce the sales charge rate for
current purchases of Class A shares, provided that you still hold your
investment in one of the Oppenheimer funds. The Distributor will add the value,
at current offering price, of the shares you previously purchased and currently
own to the value of current purchases to determine the sales charge rate that
applies. The Oppenheimer funds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Distributor. The reduced sales charge will apply only to current purchases and
must be requested when you buy your shares.
o Letter of Intent. Under a Letter of Intent, if you purchase Class A
shares or Class A shares and Class B shares of the Fund and other Oppenheimer
funds during a 13-month period, you can reduce the sales charge rate that
applies to your purchases of Class A shares. The total amount of your intended
purchases of both Class A and Class B shares will determine the reduced sales
charge rate for the Class A shares purchased during that period. This can
include purchases made up to 90 days before the date of the Letter. More
information is contained in the Application and in "Reduced Sales Charges" in
the Statement of Additional Information.
o Waivers of Class A Sales Charges. The Class A sales charges are not
imposed in the circumstances described below. There is an explanation of this
policy in "Reduced Sales Charges" in the Statement of Additional Information. In
order to receive a waiver of the Class A contingent deferred sales charge, you
must notify the Transfer Agent which conditions apply.
Waivers of Initial and Contingent Deferred Sales Charges for
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Certain Purchasers. Class A shares purchased by the following
investors are not subject to any Class A sales charges:
o the Manager or its affiliates;
o 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;
o registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose;
o 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;
o 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);
o dealers, brokers or registered investment advisors that have entered
into an agreement with the Distributor providing specifically for the use of
shares of the Fund in particular investment products or employee investment
plans made available to their clients (those clients may be charged the
transaction fee by their dealer, broker or advisor for the purchase or sale of
fund shares);
o (1) investment advisors and financial planners who have entered into an
agreement for this purpose with the Distributor and who charge an advisory,
consulting or other fee for their services and buy shares for their own accounts
or the accounts of their clients, (2) Retirement Plans and deferred compensation
plans and trusts used to fund those Plans (including, for example, plans
qualified or created under sections 401(a), 403(b) or 457 of the Internal
Revenue Code), and "rabbi trusts" that buy shares for their own accounts, in
each case if those purchases are made
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<PAGE>
through a broker or agent or other financial intermediary that has made special
arrangements with the Distributor for those purchases; and (3) clients of
investment advisors or financial planners (that have entered into an agreement
for this purpose with the Distributor) who buy shares for their own accounts may
also purchase shares without sales charge but only if their accounts are linked
to a master account of their investment advisor or financial planner on the
books and records of the broker, agent or financial intermediary with which the
Distributor has made such special arrangements (each of these investors may be
charged a fee by the broker, agent or financial intermediary for purchasing
shares);
o directors, trustees, officers or full-time employees of OpCap Advisors
or its affiliates, their relatives or any trust, pension, profit sharing or
other benefit plan which beneficially owns shares for those persons;
o accounts for which Oppenheimer Capital is the investment advisor (the
Distributor must be advised of this arrangement) and persons who are directors
or trustees of the company or trust which is the beneficial owner of such
accounts;
o any unit investment trust that has entered into an appropriate agreement
with the Distributor;
o a TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a Former Quest for Value Fund were
exchanged for Class A shares of that fund due to the termination of the Class B
and C TRAC-2000 program on November 24, 1995; or
o qualified retirement plans that had agreed with the former Quest for
Value Advisors to purchase shares of any of the Former Quest for Value Funds at
net asset value, with such shares to be held through DCXchange, a sub-transfer
agency mutual fund clearinghouse, provided that such arrangements are
consummated and share purchases commenced by December 31, 1996.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following transactions
are not subject to Class A sales charges:
o shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
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o shares purchased by the reinvestment of loan repayments by a participant
in a retirement plan for which the Manager or its affiliates acts as sponsor;
o shares purchased by the reinvestment of dividends or other distributions
reinvested from the Fund or other Oppenheimer funds (other than Oppenheimer Cash
Reserves) or unit investment trusts for which reinvestment arrangements have
been made with the Distributor;
o shares purchased and paid for with the proceeds of shares redeemed prior
to 30 days from a mutual fund (other than a fund managed by the Manager or any
of its subsidiaries) on which an initial sales charge or contingent deferred
sales charge was paid (this waiver also applies to shares purchased by exchange
of shares of Oppenheimer Money Market Fund, Inc. that were purchased and paid
for in this manner); this waiver must be requested when the purchase order is
placed for your shares of the Fund, and the Distributor may require evidence of
your qualification for this waiver; or
o shares purchased with the proceeds of maturing principal of units of any
Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge is also waived if
shares that would otherwise be subject to the contingent deferred sales charge
are redeemed in the following cases:
o to make Automatic Withdrawal Plan payments that are limited annually to
no more than 12% of the original account value;
o involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (see "Shareholder Account Rules and Policies,"
below);
o if, at the time of purchase of shares (prior to May 1, 1997) the dealer
agreed in writing to accept the dealer's portion of the sales commission in
installments of 1/18th of the commission per month (and no further commission
will be payable if the shares are redeemed within 18 months of purchase);
o if, at the time of purchase of shares (on or after May 1, 1997) the
dealer agrees in writing to accept the dealer's portion
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of the sales commission in installments of 1/12th of the commission per month
(and no further commission will be payable if the shares are redeemed within 12
months of purchase);
o for distributions from Retirement Plans, deferred compensation plans or
other employee benefit plans for any of the following purposes: (1) following
the death or disability (as defined in the Internal Revenue Code) of the
participant or beneficiary (the death or disability must occur after the
participant's account was established); (2) to return excess contributions; (3)
to return contributions made due to a mistake of fact; (4) hardship withdrawals,
as defined in the plan; (5) under a Qualified Domestic Relations Order, as
defined in the Internal Revenue Code; (6) to meet the minimum distribution
requirements of the Internal Revenue Code; (7) to establish "substantially equal
periodic payments" as described in Section 72(t) of the Internal Revenue Code;
(8) for retirement distributions or loans to participants or beneficiaries; (9)
separation from service; (10) participant-directed redemptions to purchase
shares of a mutual fund (other than a fund managed by the Manager or its
subsidiary) offered as an investment option in a Retirement Plan in which
Oppenheimer funds are also offered as investment options under a special
arrangement with the Distributor; or (11) plan termination or "in-service
distributions", if the redemption proceeds are rolled over directly to an
OppenheimerFunds IRA;
o for distributions from Retirement Plans having 500 or more eligible
participants, except distributions due to termination of all of the Oppenheimer
funds as an investment option under the Plan; or
o for distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing this waiver.
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 shareholder 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
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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 service providers or
their customers. The payments under the Plan increase the annual expenses of
Class A shares. For more details, please refer to "Distribution and Service
Plans" in the Statement of Additional Information.
Buying Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed within
6 years of their purchase, a contingent deferred sales charge will be deducted
from the redemption proceeds. That sales charge will not apply to shares
purchased by the reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge will be based on the lesser of the net asset
value of the redeemed shares at the time of redemption or the original offering
price (which is the original net asset value). The contingent deferred sales
charge is not imposed on the amount of your account value represented by an
increase in net asset value over the initial purchase price. The Class B
contingent deferred sales charge is paid to the Distributor to reimburse its
expenses of providing distribution-related services to the Fund in connection
with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 6 years, and (3) shares held the longest during the 6-year period. The
contingent deferred sales charge is not imposed in the circumstances described
in "Waivers of Class B and Class C Sales Charges" below.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
Years Since Beginning of Contingent Deferred Sales Charge
Month in Which Purchase on Redemption in that Year
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Order Was Accepted (As % of Amount Subject to Charge)
- -------------------------------------------------------------------
0 - 1 5.0%
- -----------------------------------------------------------------
1 - 2 4.0%
- -------------------------------------------------------------------
2 - 3 3.0%
- ------------------------------------------------------------------
3 - 4 3.0%
- ------------------------------------------------------------------
4 - 5 2.0%
- -----------------------------------------------------------------
5 - 6 1.0%
- -------------------------------------------------------------------
6 and following None
- -----------------------------------------------------------------
In the table, a "year" is a 12-month period. All purchases are considered
to have been made on the first regular business day of the month in which the
purchase was made.
o Automatic Conversion of Class B Shares. 72 months after you purchase
Class B shares, those shares will automatically convert to Class A shares. This
conversion feature relieves Class B shareholders of the asset-based sales charge
that applies to Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset value of the
two classes, and no sales load or other charge is imposed. When Class B shares
convert, any other Class B shares that were acquired by the reinvestment of
dividends and distributions on the converted shares will also convert to Class A
shares. The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A, Class B and Class
C Shares" in the Statement of Additional Information.
Buying Class C Shares. Class C shares are sold at net asset value per share
without an initial sales charge. However, if Class C shares are redeemed within
12 months of their purchase, a contingent deferred sales charge of 1.0% will be
deducted from the redemption proceeds. That sales charge will not apply to
shares purchased by the reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge will be based on the lesser
of the net asset value of the redeemed shares at the time of redemption or the
original offering price (which is the
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original net asset value). The contingent deferred sales charge is not imposed
on the amount of your account value represented by the increase in net asset
value over the initial purchase price. The Class C contingent deferred sales
charge is paid to compensate the Distributor for its expenses of providing
distribution-related services to the Fund in connection with the sale of Class C
shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 12 months, and (3) shares held the longest during the 12-month period.
Distribution and Service Plans for Class B and Class C Shares. The Fund has
adopted Distribution and Service Plans for Class B and Class C shares to
compensate the Distributor for its costs in distributing Class B and C shares
and servicing accounts. Under the Plans, the Fund pays the Distributor an annual
"asset-based sales charge" of 0.75% per year on Class B shares that are
outstanding for six years or less and on Class C shares. The Distributor also
receives a service fee of 0.25% per year under each Plan.
Under each Plan, both fees are computed on the average of the net asset
value of shares in the respective class, determined as of the close of each
regular business day during the period. The asset-based sales charge and service
fees increase Class B and Class C expenses by 1.00% of the net assets per year
of the respective class per year.
The Distributor uses the service fees to compensate dealers for providing
personal services for accounts that hold Class B or C shares. Those services are
similar to those provided under the Class A Service Plan, described above. The
Distributor pays the 0.25% service fees to dealers in advance for the first year
after Class B or Class C shares have been sold by the dealer and retains the
service fee paid by the Fund in that year. After the shares have been held for a
year, the Distributor pays the service fees to dealers on a quarterly basis.
The asset-based sales charge allows investors to buy Class B or Class C
shares without a front-end sales charge while allowing the Distributor to
compensate dealers that sell those shares. The Fund pays the asset-based sales
charges to the Distributor for its services rendered in distributing Class B and
Class C shares. Those payments are at a fixed rate that is not related to the
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Distributor's expenses. The services rendered by the Distributor include paying
and financing the payment of sales commissions, service fees and other costs of
distributing and selling Class B and Class C shares.
The Distributor currently pays sales commissions of 3.75% of the purchase
price of Class B shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class B shares is therefore
4.00% of the purchase price. The Distributor retains the Class B asset-based
sales charge. The Distributor may pay the Class B service fee and the
asset-based sales charge to the dealer quarterly in lieu of paying the sales
commission and service fee advance at the time of purchase.
The Distributor currently pays sales commissions of 0.75% of the purchase
price of Class C shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class C shares is therefore
1.00% of the purchase price. The Distributor plans to pay the asset-based sales
charge as an ongoing commission to the dealer on Class C shares that have been
outstanding for a year or more. The Distributor may pay the Class C service fee
and the asset-based sales charge to the dealer quarterly in lieu of paying the
sales commission and service fee advance at the time of purchase.
The Distributor's actual expenses in selling Class B and Class C 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 Plans for Class B and Class C shares. At August 31, 1997, the end of the
Class B Plan year, the Distributor had incurred unreimbursed expenses in
connection with the sales of Class B shares of $355,034 (equal to 0.94% of the
Fund's net assets represented by Class B shares on that date). At August 31,
1997, the end of the Class C Plan year, the Distributor had incurred
unreimbursed expenses in connection with the sales of Class C shares of $38,902
(equal to 1.05% of the Fund's net assets represented by Class C shares on that
date). If the Fund terminates either of its Plans, the Board of Directors may
allow the Fund to continue payments of the asset-based sales charge to the
Distributor for distributing shares before the Plan was terminated.
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o Waivers of Class B and Class C Sales Charges. The Class B and Class C
contingent deferred sales charges will not be applied to shares purchased in
certain types of transactions nor will it apply to Class B and Class C shares
redeemed in certain circumstances as described below. The reasons for this
policy are in "Reduced Sales Charges" in the Statement of Additional
Information. In order to receive a waiver of the Class or Class C contingent
deferred sales charge, you must notify the Transfer Agent which conditions
apply.
Waivers for Redemptions in Certain Cases. The Class B and Class C
contingent deferred sales charges will be waived for redemptions of shares in
the following cases:
o distributions to participants or beneficiaries from Retirement Plans, if
the distributions are made (a) under an Automatic Withdrawal Plan after the
participant reaches age 59-1/2, as long as the payments are no more than 10% of
the account value annually (measured from the date the Transfer Agent receives
the request), or (b) following the death or disability (as defined in the
Internal Revenue Code) of the participant or beneficiary (the death or
disability must have occurred after the account was established);
o redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder, including a trustee of a
"grantor" trust or revocable living trust for which the trustee is also the sole
beneficiary (the death or disability must have occurred after the account was
established, and for disability you must provide evidence of a determination of
disability by the Social Security Administration);
o returns of excess contributions to Retirement Plans;
o distributions from retirement plans to make "substantially equal
periodic payments" as permitted in Section 72(t) of the Internal Revenue Code
that do not exceed 10% of the account value annually, measured from the date the
Transfer Agent receives the request;
o shares redeemed involuntarily, as described in "Shareholder Account Rules
and Policies," below;
o distributions from OppenheimerFunds prototype 401(k) plans and from
certain Massachusetts Mutual Life Insurance Company
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<PAGE>
prototype 401(k) plans (1) for hardship withdrawals; (2) under a Qualified
Domestic Relations Order, as defined in the Internal Revenue Code; (3) to meet
minimum distribution requirements as defined in the Internal Revenue Code; (4)
to make "substantially equal periodic payments" as described in Section 72(t) of
the Internal Revenue Code; (5) for separation from service; (6) for loans to
participants or beneficiaries; or
o distributions from 401(k) plans sponsored by broker-dealers that have
entered into a special agreement with the Distributor allowing this waiver.
Waivers for Shares Sold or Issued in Certain Transactions. The contingent
deferred sales charge is also waived on Class B and Class C shares sold or
issued in the following cases:
o shares sold to the Manager or its affiliates;
o shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or the
Distributor for that purpose; or
o shares issued in plans of reorganization to which the Fund
is a party.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send money
electronically between those accounts to perform a number of types of account
transactions. These include 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 call the Transfer
Agent for more information.
AccountLink privileges should be requested on your dealer's settlement
instructions if you buy your shares through your dealer. After your account is
established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent. AccountLink privileges
will apply to each shareholder listed in the registration on your account as
well as to your dealer representative of record unless and until the
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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.
o 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.
o 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.
o 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.
o Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your Fund
account to another Oppenheimer funds account you have already established by
calling the special PhoneLink number. Please refer to "How to Exchange Shares,"
below for details.
o 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.
Shareholder Transactions by Fax. Requests for certain account transactions may
be sent to the Transfer Agent by fax (telecopier). Please call 1-800-525-7048
for information about which transactions are included. Transaction requests
submitted by fax are subject to the same rules and restrictions as written and
telephone requests described in this Prospectus.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that enable
you to sell shares automatically or exchange them
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to another Oppenheimer funds account on a regular basis:
o Automatic Withdrawal Plans. If your Fund account is worth $5,000 or
more, you can establish an Automatic Withdrawal Plan to receive payments of at
least $50 on a monthly, quarterly, semi-annual or annual basis. The checks may
be sent to you or sent automatically to your bank account on AccountLink. You
may even set up certain types of withdrawals of up to $1,500 per month by
telephone. You should consult the Statement of Additional Information for more
details.
o Automatic Exchange Plans. You can authorize the Transfer Agent to
exchange automatically an amount you establish in advance for shares of up to
five other Oppenheimer funds on a monthly, quarterly, semi-annual or annual
basis under an Automatic Exchange Plan. The minimum purchase for each
Oppenheimer funds account is $25. These exchanges are subject to the terms of
the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies to Class A shares that you
purchased subject to an initial sales charge and to Class A or Class B shares on
which you paid a contingent deferred sales charge when you redeemed them. This
privilege does not apply to Class C shares. You must be sure to ask the
Distributor for this privilege when you send your payment. Please consult the
Statement of Additional Information for more details.
Retirement Plans. Fund shares are available as an investment for your retirement
plans. If you participate in a plan sponsored by your employer, the plan trustee
or administrator must make the purchase of shares for your retirement plan
account. The Distributor offers a number of different retirement plans that can
be used by individuals and employers:
o Individual Retirement Accounts including rollover IRAs, for individuals
and their spouses and SIMPLE IRAs offered by employers
o 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
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o SEP-IRAs (Simplified Employee Pension Plans) for small business owners
or people with income from self-employment, including SAR/SEP-IRAs
o Pension and Profit-Sharing Plans for self-employed persons and other
employers
o 401(k) prototype retirement plans for businesses
Please call the Distributor for the OppenheimerFunds plan documents, which
contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account by selling (redeeming) some or
all of your shares on any regular business day. Your shares will be sold at the
next net asset value calculated after your order is received and accepted by the
Transfer Agent. The Fund offers you a number of ways to sell your shares: in
writing or by telephone. You can also set up Automatic Withdrawal Plans to
redeem shares on a regular basis, as described above. If you have questions
about any of these procedures, and especially if you are redeeming shares in a
special situation, such as due to the death of the owner, or from a retirement
plan, please call the Transfer Agent first, at 1-800-525-7048, for assistance.
o 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.
o 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):
o You wish to redeem more than $50,000 worth of shares and receive a check
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o The redemption check is not payable to all shareholders listed on the
account statement
o The redemption check is not sent to the address of record on your account
statement
o Shares are being transferred to a Fund account with a different owner or
name
o Shares are redeemed by someone other than the owners (such as an
Executor)
o Where Can I Have My Signature Guaranteed? The Transfer Agent will accept
a guarantee of your signature by a number of financial institutions, including:
a U.S. bank, trust company, credit union or savings association, or by a foreign
bank that has a U.S. correspondent bank, or by a U.S. registered dealer or
broker in securities, municipal securities or government securities, or by a
U.S. national securities exchange, a registered securities association or a
clearing agency. If you are signing 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:
o Your name
o The Fund's name
o Your Fund account number (from your account statement)
o The dollar amount or number of shares to be redeemed
o Any special payment instructions
o Any share certificates for the shares you are selling
o The signatures of all registered owners exactly as the account is
registered, and
o Any special requirements or documents requested by the Transfer Agent to
assure proper authorization of the person asking to sell shares.
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Use the following address for requests by mail:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
Send courier or Express Mail requests to:
OppenheimerFunds 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 the close of
The New York Stock Exchange that day, which is normally 4:00 P.M., but may be
earlier on some days. You may not redeem shares held in an OppenheimerFunds
retirement plan or under a share certificate by telephone.
o To redeem shares through a service representative, call 1- 800-852-8457.
o To redeem shares automatically on PhoneLink, call 1-800- 533-3310.
Whichever method you use, you may have a check sent to the address on the
account statement, or, if you have linked your Fund account to your bank account
on AccountLink, you may have the proceeds sent to that bank account.
o Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed by
telephone, in any 7-day period. The check must be payable to all owners of
record of the shares and must be sent to the address on the account statement.
This service is not available within 30 days of changing the address on an
account.
o Telephone Redemptions Through AccountLink. There are no dollar limits on
telephone redemption proceeds sent to a bank account designated when you
establish AccountLink. Normally the ACH transfer to your bank is initiated on
the business day after the redemption. You do not receive dividends on the
proceeds of the shares you redeemed while they are waiting to be transferred.
Selling Shares Through Your Dealer. The Distributor has made arrangements to
repurchase Fund shares from dealers and brokers on
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behalf of their customers. Brokers or dealers may charge for that service.
Please call your dealer for more information about this procedure. Please refer
to "Special Arrangements for Repurchase of Shares from Dealers and Brokers" in
the Statement of Additional Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain Oppenheimer funds at
net asset value per share at the time of exchange, without sales charge. To
exchange shares, you must meet several conditions:
o Shares of the fund selected for exchange must be available for sale in
your state of residence.
o The prospectuses of this Fund and the fund whose shares you want to buy
must offer the exchange privilege.
o You must hold the shares you buy when you establish your account for at
least 7 days before you can exchange them; after the account is open 7 days, you
can exchange shares every regular business day.
o You must meet the minimum purchase requirements for the fund you
purchase by exchange.
o Before exchanging into a fund, you should obtain and read its prospectus.
Shares of a particular class of the Fund may be exchanged only for shares
of the same class in the other Oppenheimer funds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At present,
Oppenheimer Money Market Fund, Inc., offers only one class of shares, which are
considered to be Class A shares for this purpose. In some cases, sales charges
may be imposed on exchange transactions. See "How to Exchange Shares" in the
Statement of Additional Information for more details.
Exchanges may be requested in writing or by telephone:
o 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
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Shares."
o Telephone Exchange Requests. Telephone exchange requests may be made
either by calling a service representative at 1-800- 852-8457 or by using
PhoneLink for automated exchanges, by calling 1-800-533-3310. Telephone
exchanges may be made only between accounts that are registered with the same
name(s) and address. Shares held under certificates may not be exchanged by
telephone.
You can find a list of Oppenheimer funds currently available for exchanges
in the Statement of Additional Information or obtain one by calling a service
representative at 1-800-525-7048. That list can change from time to time.
There are certain exchange policies you should be aware of:
o Shares are normally redeemed from one fund and purchased from the other
fund in the exchange transaction on the same regular business day on which the
Transfer Agent receives an exchange request that is in proper form by the close
of The New York Stock Exchange that day, which is normally 4:00 P.M., but may be
earlier on some days. However, either fund may delay the purchase of shares of
the fund you are exchanging into up to seven days if it determines it would be
disadvantaged by a same-day transfer of the proceeds to buy shares. For example,
the receipt of multiple exchange requests from a dealer in a "market-timing"
strategy might require the sale of portfolio securities at a time or price
disadvantageous to the Fund.
o 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.
o The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund will attempt to provide you notice whenever it is
reasonably able to do so, it may impose these changes at any time.
o For tax purposes, exchanges of shares involve a redemption of the shares
of the fund you own and a purchase of shares of the other fund, which may result
in a capital gain or loss. For more information about taxes affecting exchanges,
please refer to "How to Exchange Shares" in the Statement of Additional
Information.
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o If the Transfer Agent cannot exchange all the shares you request because
of a restriction cited above, only the shares eligible for exchange will be
exchanged.
Shareholder Account Rules and Policies
o Net Asset Value Per Share is determined for each class of shares as of
the close of The New York Stock Exchange (which is normally 4:00 p.m. but may be
earlier on some days) on each day the Exchange is open by dividing the value of
the Fund's net assets attributable to a class by the number of shares of that
class that are outstanding. The Fund's Board of Trustees has established
procedures to value the Fund's securities to determine net asset value. In
general, securities values are based on market value. There are special
procedures for valuing illiquid and restricted securities and obligations for
which market values cannot be readily obtained. These procedures are described
more completely in the Statement of Additional Information.
o 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.
o 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.
o The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not use
reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund will be
liable for losses or expenses arising out of telephone instructions reasonably
believed to be genuine. If you are unable
-57-
<PAGE>
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.
o 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.
o Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing Corporation
are responsible for obtaining their clients' permission to perform those
transactions and are responsible to their clients who are shareholders of the
Fund if the dealer performs any transaction erroneously or improperly.
o The redemption price for shares will vary from day to day because the
values of the securities in the Fund's portfolio fluctuate, and the redemption
price, which is the net asset value per share, will normally be different for
Class A, Class B and Class C shares. Therefore, the redemption value of your
shares may be more or less than their original cost.
o Payment for redeemed shares is made ordinarily in cash and forwarded by
check or through AccountLink (as elected by the shareholder under the redemption
procedures described above) within 7 days after the Transfer Agent receives
redemption instructions in proper form, except under unusual circumstances
determined by the Securities and Exchange Commission delaying or suspending such
payments. For accounts registered in the name of a broker/dealer, payment will
be forwarded within 3 business days. The Transfer Agent may delay forwarding a
check or processing a payment via AccountLink for recently purchased shares, but
only until the purchase payment has cleared. That delay may be as much as 10
days from the date the shares were purchased. That delay may be avoided if you
purchase shares by federal funds wire, certified check or arrange with your bank
to provide telephone or written assurance to the Transfer Agent that your
purchase payment has cleared.
o Involuntary redemptions of small accounts may be made by the Fund if the
account value has fallen below $200 for reasons other than the fact that the
market value of shares has dropped, and in some cases involuntary redemptions
may be made to repay the Distributor for losses from the cancellation of share
purchase
-58-
<PAGE>
orders.
o Under unusual circumstances, shares of the Fund may be redeemed "in
kind" which means that the redemption proceeds will be paid with securities from
the Fund's portfolio. Please refer to "How to Sell Shares" in the Statement of
Additional Information for more details.
o "Backup Withholding" of Federal income tax may be applied at the rate of
31% from taxable dividends, distributions and redemption proceeds (including
exchanges) if you fail to furnish the Fund a certified Social Security or
Employer Identification Number when you sign your application, or if you violate
Internal Revenue Service regulations on tax reporting of income.
o 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 charge when redeeming certain Class A, Class B and
Class C shares.
o To avoid sending duplicate copies of materials to households, the Fund
will mail only one copy of each annual and semi-annual report to shareholders
having the same last name and address on the Fund's records. However, each
shareholder may call the Transfer Agent at 1-800-525-7048 to ask that copies of
those materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B and Class
C shares from net investment income, if any, on an annual basis and normally
pays those dividends to shareholders in December, but the Board of Trustees can
change that date. The Board may also cause the Fund to declare dividends after
the close of the Fund's fiscal year (which ends August 31st). Because the Fund
does not have an objective of seeking current income, the amounts of dividends
it pays, if any, will likely be small. Dividends paid on Class A shares will
generally be higher than for Class B or Class C shares because expenses
allocable to Class B and Class C shares will generally be higher than for Class
A shares. There is no fixed dividend rate and there can be no assurance that the
Fund will pay any dividends.
-59-
<PAGE>
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 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:
o 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.
o Reinvest Long-Term Capital Gains Only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or sent
to your bank account on AccountLink.
o 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.
o Reinvest Your Distributions in Another Oppenheimer Fund Account. You can
reinvest all distributions in the same class of shares of another Oppenheimer
fund account you have established.
Taxes. If your account is not a tax-deferred retirement account, you should be
aware of the following tax implications of investing in the Fund. Long-term
capital gains are taxable as long-term capital gains when distributed to
shareholders. It does not matter how long you held your shares. Dividends paid
from short-term capital gains and net investment income are taxable as ordinary
income. These dividends and 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 all
taxable distributions you received in the previous year. So that the Fund will
not have to pay taxes on the amounts it distributes to shareholders as dividends
and capital gains, the Fund intends to manage its investments so that it will
qualify as a "regulated
-60-
<PAGE>
investment company" under the Internal Revenue Code, although it reserves the
right not to qualify in a particular year.
When more than 50% of its assets are invested in foreign securities at the
end of any fiscal year, the Fund may elect that Section 853 of the Internal
Revenue Code will apply to it to permit shareholders to take a credit (or a
deduction) on their own federal income tax returns for foreign taxes paid by the
Fund. "Dividends, Capital Gains and Taxes" in the Statement of Additional
Information contains further information about this tax provision.
o "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.
o Taxes on Transactions. Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. Generally speaking, a capital gain
or loss is the difference between the price you paid for the shares and the
price you received when you sold them.
o Returns of Capital. In certain cases distributions made by the Fund may
be considered a non-taxable return of capital to shareholders. If that occurs,
it will be identified in notices to shareholders. A non-taxable return of
capital may reduce your tax basis in your Fund shares.
This information is only a summary of certain Federal tax information
about your investment. More information is contained in the Statement of
Additional Information. In addition you should consult with your tax advisor
about the effect of an investment in the Fund on your particular tax situation.
-61-
<PAGE>
APPENDIX A
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers for Class A,
Class B and Class C shares of the Fund described elsewhere in this Prospectus
are modified as described below for those shareholders of (i) Oppenheimer Quest
Value Fund, Inc., Oppenheimer Quest Growth & Income Value Fund, Oppenheimer
Quest Opportunity Value Fund, Oppenheimer Quest Small Cap Value Fund and
Oppenheimer Quest Global Value Fund, Inc. on November 24, 1995, when
OppenheimerFunds, Inc. became the investment advisor to those funds, and (ii)
Quest for Value U.S. Government Income Fund, Quest for Value Investment Quality
Income Fund, Quest for Value Global Income Fund, Quest for Value New York
Tax-Exempt Fund, Quest for Value National Tax-Exempt Fund and Quest for Value
California Tax-Exempt Fund when those funds merged into various Oppenheimer
funds on November 24, 1995. The funds listed above are referred to in this
Prospectus as the "Former Quest for Value Funds." The waivers of initial and
contingent deferred sales charges described in this Appendix apply to shares of
the Fund (i) acquired by such shareholder pursuant to an exchange of shares of
one of the Oppenheimer funds that was one of the Former Quest for Value Funds or
(ii) purchased by such shareholder by exchange of shares of other Oppenheimer
funds that were acquired pursuant to the merger of any of the Former Quest for
Value Funds into an Oppenheimer fund on November 24, 1995.
Class A Sales Charges
o Reduced Class A Initial Sales Charge Rates for Certain Former Quest
Shareholders
o Purchases by Groups, Associations and Certain Qualified Retirement
Plans. The following table sets forth the initial sales charge rates for Class A
shares purchased by a "Qualified Retirement Plan" through a single broker,
dealer or financial institution, or by members of "Associations" formed for any
purpose other than the purchase of securities if that Qualified Retirement Plan
or that Association purchased shares of any of the Former Quest for Value Funds
or received a proposal to purchase such shares from OCC Distributors prior to
November 24, 1995. For this purpose only, a "Qualified Retirement Plan" includes
any 401(k) plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a
A-1
<PAGE>
single employer.
Front-End Front-End
Sales Sales Commission
Charge Charge as
Number of as a as a Percentage
Eligible Percentage Percentage of
Employees of Offering of Amount Offering
or Members Price Invested Price
- -------------------------------------------------------------------------------
9 or fewer 2.50% 2.56% 2.00%
- -------------------------------------------------------------------------------
At least 10 but not
more than 49 2.00% 2.04% 1.60%
- -------------------------------------------------------------------------------
For purchases by Qualified Retirement plans and Associations having 50 or
more eligible employees or members, there is no initial sales charge on
purchases of Class A shares, but those shares are subject to the Class A
contingent deferred sales charge described beginning on page __ of this
Prospectus.
Purchases made under this arrangement qualify for the lower of the sales
charge rate in the table based on the number of eligible employees in a
Qualified Retirement Plan or members of an Association or the sales charge rate
that applies under the Rights of Accumulation described above in the Prospectus.
In addition, purchases by 401(k) plans that are Qualified Retirement Plans
qualify for the waiver of the Class A initial sales charge if they qualified to
purchase shares of any of the Former Quest For Value Funds by virtue of
projected contributions or investments of $1 million or more each year.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations, or as eligible employees in Qualified Retirement Plans
also may purchase shares for their individual or custodial accounts at these
reduced sales charge rates, upon request to the Fund's Distributor.
o Waiver of Class A Sales Charges for Certain Shareholders. Class A shares
of the Fund purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
o Shareholders of the Fund who were shareholders of the AMA
A-2
<PAGE>
Family of Funds on February 28, 1991 and who acquired shares of any of the
Former Quest for Value Funds by merger of a portfolio of the AMA Family of
Funds.
o Shareholders of the Fund who acquired shares of any Former Quest for
Value Fund by merger of any of the portfolios of the Unified Funds.
o Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions. The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares of the Fund purchased by the following investors
who were shareholders of any Former Quest for Value Fund:
o Investors who purchased Class A shares from a dealer that is or was not
permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship under the Employee Retirement
Income Security Act of 1974 and regulations adopted under that law.
o Participants in Qualified Retirement Plans that purchased shares of any
of the Former Quest For Value Funds pursuant to a special "strategic alliance"
with the distributor of those funds. The Fund's Distributor will pay a
commission to the dealer for purchases of Fund shares as described above in
"Class A Contingent Deferred Sales Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge Waivers
o Waivers for Redemptions of Shares Purchased Prior to March 6, 1995. In
the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, Class B or Class C shares of the Fund acquired by merger
of a Former Quest for Value Fund into the Fund or by exchange from an
Oppenheimer fund that was a Former Quest for Value Fund merged, if those shares
were purchased prior to March 6, 1995: in connection with (i) distributions to
participants or beneficiaries of plans qualified under Section 401(a) of the
Internal Revenue Code or from custodial accounts under Section 403(b)(7) of the
Code, Individual Retirement Accounts, deferred compensation plans under Section
457 of the Code, and other employee benefit plans, and returns of excess
contributions made to each type of plan, (ii) withdrawals under an automatic
withdrawal plan holding only either Class B or Class C shares if the annual
withdrawal does not exceed 10% of the
A-3
<PAGE>
initial value of the account, and (iii) liquidation of a shareholder's account
if the aggregate net asset value of shares held in the account is less than the
required minimum value of such accounts.
o Waivers for Redemptions of Shares Purchased on or After March 6, 1995
but Prior to November 24, 1995. In the following cases, the contingent deferred
sales charge will be waived for redemptions of Class A, Class B or Class C
shares of the Fund acquired by merger of a Former Quest for Value Fund into the
Fund or by exchange from an Oppenheimer fund that was a Former Quest For Value
Fund or into which such fund merged, if those shares were purchased on or after
March 6, 1995, but prior to November 24, 1995: (1) distributions to participants
or beneficiaries from Individual Retirement Accounts under Section 408(a) of the
Internal Revenue Code or retirement plans under Section 401(a), 401(k), 403(b)
and 457 of the Code, if those distributions are made either (a) to an individual
participant as a result of separation from service or (b) following the death or
disability (as defined in the Code) of the participant or beneficiary; (2)
returns of excess contributions to such retirement plans; (3) redemptions other
than from retirement plans following the death or disability of the
shareholder(s) (as evidenced by a determination of total disability by the U.S.
Social Security Administration); (4) withdrawals under an automatic withdrawal
plan (but only for Class B or C shares) where the annual withdrawals do not
exceed 10% of the initial value of the account; and (5) liquidation of a
shareholder's account if the aggregate net asset value of shares held in the
account is less than the required minimum account value. A shareholder's account
will be credited with the amount of any contingent deferred sales charge paid on
the redemption of any Class A, Class B or Class C shares of the Fund described
in this section if within 90 days after that redemption, the proceeds are
invested in the same Class of shares in this Fund or another Oppenheimer fund.
A-4
<PAGE>
APPENDIX B
Developing Markets Countries
Algeria
Argentina
Bangladesh
Bolivia
Botswana
Brazil
Bulgaria
Chile
China
Colombia
Costa Rica
Cyprus
Czech Republic
Ecuador
Egypt
Estonia
Ghana
Greece
Guyana
Hong Kong
Hungary
India
Indonesia
Iran
Israel
Ivory Coast
Jamaica
Jordan
Kenya
Latvia
Lebanon
Lithuania
Malaysia
Mauritius
Mexico
Morocco
Myanmar
Namibia
Nigeria
Pakistan
Paraguay
Peru
Philippines
Poland
Portugal
Russia
Singapore
Slovakia
Republic Slovenia
South Africa
South Korea
Sri Lanka
Swaziland
Taiwan
Tanzania
Thailand
Tunisia
Turkey
Ukraine
Uruguay
Venezuela
Vietnam
Zambia
Zimbabwe
B-1
<PAGE>
Oppenheimer Developing Markets Fund
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
No dealer, broker, salesperson or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus or the Statement of Additional Information, and if given or
made, such information and representations must not be relied upon as having
been authorized by the Fund, OppenheimerFunds, Inc., OppenheimerFunds
Distributor, Inc. or any affiliate thereof. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the securities
offered hereby in any state to any person to whom it is unlawful to make such an
offer in such state.
PR0785.001.1297
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER DEVELOPING MARKETS FUND
Graphic material included in Prospectus of Oppenheimer Developing Markets
Fund: "Comparison of Total Return of Oppenheimer Developing Markets Fund with
Morgan Stanley Capital International Emerging Markets Free Index".
Linear graphs will be included in the Prospectus of Oppenheimer Developing
Markets Fund (the "Fund") depicting the initial account value and subsequent
account value of a hypothetical $10,000 investment in each Class A, Class B and
Class C shares of the Fund from inception of the Fund (November 18, 1996) to
fiscal period end August 31, 1997, in each case comparing such values with the
same investments over the same time periods with the Morgan Stanley Capital
International Emerging Markets Free Index ("Morgan Stanley Index"). Set forth
below are the relevant data points that will appear on the linear graphs.
Additional information with respect to the foregoing, including a description of
the Morgan Stanley Index is set forth in the Prospectus under "Comparing the
Fund's Performance to the Market."
Oppenheimer
Developing
Markets Fund
- Class A Morgan Stanley Index
-------------- ------------------------
11/18/96(1) $9,425 $10,000
8/31/97 $12,083 $10,306
Oppenheimer
Developing
Markets Fund
- Class B Morgan Stanley Index
-------------- ------------------------
11/18/96(1) $10,000 $10,000
8/31/97 $12,230 $10,306
Oppenheimer
Developing
Markets Fund
- Class C Morgan Stanley Index
-------------- ------------------------
11/18/96(1) $10,000 $10,000
8/31/97 $12,640 $10,306
(1) Inception date for each Class A, Class B and Class C shares was 11/18/96.
<PAGE>
Oppenheimer Developing Markets Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated December 19, 1997
This Statement of Additional Information of Oppenheimer Developing Markets
Fund is not a Prospectus. This document contains additional information about
the Fund and supplements information in the Prospectus dated December 19, 1997.
It should be read together with the Prospectus, which may be obtained by writing
to the Fund's Transfer Agent, OppenheimerFunds Services at P.O. Box 5270,
Denver, Colorado 80217 or by calling the Transfer Agent at the toll-free number
shown above.
Contents
Page
About the Fund
Investment Objective and Policies.............................................
Investment Policies and Strategies..........................................
Other Investment Techniques and Strategies..................................
Other Investment Restrictions...............................................
How the Fund is Managed.......................................................
Organization of the Fund....................................................
Trustees and Officers of the Fund...........................................
The Manager and Its Affiliates..............................................
Brokerage Policies of the Fund................................................
Performance of the Fund.......................................................
Distribution and Service Plans................................................
About Your Account
How to Buy Shares.............................................................
How to Sell Shares............................................................
How to Exchange Shares........................................................
Dividends, Capital Gains and Taxes............................................
Additional Information About the Fund.........................................
Financial Information About the Fund
Independent Auditors' Report..................................................
Financial Statements..........................................................
Appendices
Appendix A: Corporate Industry Classifications............................A-1
Appendix B: Description of Ratings........................................B-1
<PAGE>
About the Fund
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and policies of the
Fund are described in the Prospectus. Set forth below is supplemental
information about those policies and the types of securities in which the Fund
may invest, as well as the strategies the Fund may use to try to achieve its
objective. Capitalized terms used in this Statement of Additional Information
have the same meanings as those terms have in the Prospectus.
In selecting securities for the Fund's portfolio, including the securities
of issuers in Developing Markets, the Fund's investment advisor,
OppenheimerFunds, Inc. (the "Manager"), evaluates the merits of securities
primarily through the exercise of its own investment analysis. These analyses
may include, among other things, evaluation of the strength of management and
the history of the issuer's operations, the soundness of the issuer's financial
and accounting policies and the issuer's financial condition, the issuer's
pending product developments and developments by competitors, the effect of
general market and economic conditions on the issuer's business and the
prospects for the industry of which the issuer is a part, and legislative
proposals which might affect the issuer. In addition, the Manager will
ordinarily look for one of the following characteristics: an above-average
earnings growth per share; high return on invested capital; effective research
and product development, pricing flexibility and general operating
characteristics which will enable the issuer to compete successfully in its
intended markets.
The Fund intends to spread its investments (invest risk) among at least
three Developing Markets under normal market conditions. In determining an
appropriate distribution of investments among the various countries and
geographic regions in which the Fund may invest, the Manager generally considers
the following factors: prospects for relative economic growth, the balance of
payments, anticipated levels of inflation, governmental policies influencing
business conditions, the outlook for currency relationships and the range of
individual investment opportunities available to international investors among
the various counties and geographic regions. The percentage of the Fund's assets
invested in particular Developing Markets will vary from time to time based on
the Manager's assessment of these factors, the appreciation possibilities of
particular issuers and social and political factors that may affect specific
markets.
The portion of the Fund's assets allocated to securities selected for
capital appreciation and the investment techniques used will depend upon the
judgment of the Fund's Manager as to the future movement of the equity
securities markets. If the Manager believes that economic conditions favor a
rising market, the Fund will emphasize securities and investment methods
selected for high capital growth. If the Manager believes that a market decline
is likely, defensive securities and investment methods may be emphasized.
Current income is an incidental consideration in the selection of
portfolio securities for the Fund. The fact that a security has a low yield or
does not pay current income will not be an adverse factor in selecting
securities to try to achieve the Fund's investment objective of capital
appreciation unless the Manager believes that the lack of yield might adversely
affect appreciation possibilities.
o Investing in Securities of Growth-Type Companies. The Fund emphasizes
securities of "growth-type" companies. Such issuers typically are those, the
goods or services of which appear to have relatively favorable long-term
prospects for increasing demand for their products, or increasing earnings
prospects, or ones which develop new products, services or markets and normally
retain a relatively large part of their earnings for research, development and
investment in capital assets. They may include companies in the natural
resources fields or those developing industrial applications for new scientific
knowledge having potential for technological innovation, such as information
technology, biochemistry, communications, environmental products, oceanography,
business services and new consumer products. Growth-type companies may include
relatively new businesses as well as larger mature businesses that the Manager
believes are entering a growth phase because of the development of new products,
businesses, markets or other factors. Therefore, the Manager does not limit the
selection of investments in growth-type companies to issuers having a market
capitalization within a specific range.
o Investing in Small, Unseasoned Companies. Many of the securities
offering the capital appreciation sought by the Fund will involve investments in
certain growth-type companies which do not have a substantial operating history.
These companies may have limited product lines, markets or financial resources.
The securities of these small, unseasoned companies may have a limited trading
market, which may adversely affect the Fund's ability to sell them and can
reduce the price the Fund might be able to obtain for them. If other investors
holding the same securities as the Fund sell them when the Fund attempts to
dispose of its holdings, the Fund may receive lower prices than might otherwise
be obtained, because of the thinner market for such securities. Additionally,
investments in these companies tend to involve greater risks than investments in
larger more established companies, such as the risk that their securities may be
subject to more abrupt or erratic market movements.
o Foreign Securities. "Foreign securities" include equity and debt
securities of companies organized under the laws of countries other than the
United States and debt securities of foreign governments. These securities are
traded on foreign securities exchanges or in the foreign over-the-counter
markets. Securities of foreign issuers that are represented by American
Depository Receipts or similar depository arrangements and that are listed on a
U.S. securities exchange or traded in the U.S. over-the-counter markets are
considered "foreign securities" for the purpose of the Fund's investment
allocations, because they are subject to some of the special considerations and
risks, discussed below, that apply to foreign securities traded and held abroad,
typically because the issuer of the security is domiciled in a foreign country,
or has substantial assets or business operations in a foreign county, or its
securities are traded primarily on a foreign securities exchange.
Investing in foreign securities offers the Fund potential benefits not
available from investing in securities of domestic issuers, such as 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. It may enable the Fund to take advantage of foreign stock
markets that do not move in a manner parallel to U.S. markets. If the Fund's
portfolio securities are held in foreign countries, the countries in which the
securities are held abroad and the sub-custodians holding them must be approved
by the Fund's Board of Trustees under applicable rules of the Securities and
Exchange Commission.
o Risks of Foreign Investing. Generally investing in foreign securities
involves special additional risks and considerations not typically associated
with investing in securities of issuers traded in the U.S. These include:
fluctuation in value of foreign portfolio investments due to changes in currency
rates and control regulations (e.g., currency blockage); transaction charges for
currency exchange; lack of public information about foreign issuers; lack of
uniform accounting, auditing and financial reporting standards comparable to
those applicable to domestic issuers; less volume on foreign exchanges than on
U.S. exchanges, which affects the ability to dispose of a security; greater
volatility and less liquidity in some foreign markets, particularly emerging
markets, than in the U.S.; less governmental oversight and regulation of foreign
issuers, stock exchanges and brokers than in the U.S.; greater difficulties in
commencing lawsuits against foreign issuers; higher brokerage commission rates
than in the U.S.; increased risks of delays in settlement of portfolio
transactions or loss of certificates for portfolio securities; possibilities in
some countries of expropriation or nationalization of assets, confiscatory
taxation, political, financial or social instability or adverse diplomatic
developments; unfavorable differences between the U.S. economy and foreign
economies; and the effects of foreign taxes on income and capital gains. In the
past, U.S. Government policies have discouraged certain investments abroad by
U.S. investors, through taxation or other restrictions, and it is possible that
such restrictions could be re-imposed. Costs of transactions in foreign
securities are generally higher than for transactions in U.S. securities,
including higher custodial costs, which will increase the Fund's expenses over
those typically associated with funds that do not invest in foreign securities.
A number of current significant political demographic and economic
developments may affect investments in foreign securities and in securities of
companies with operations overseas. Such developments include dramatic political
changes in government and economic policies in several Eastern European
countries, Germany and the republics comprising the former Soviet Union, as well
as unification of the European Economic Community. The course of any of one or
more of these events and the effect on trade barriers, competition and markets
for consumer goods and services is uncertain. With roughly two-thirds of all
outstanding equity securities now traded outside of the United States, the
Fund's international scope enables it to attempt to take advantage of other
world markets and companies and seek to protect itself against declines in any
single economy.
o Special Risks of Investing in Developing Markets. The risks of investing
in foreign securities may be intensified in the case of investments in
Developing Markets. Included are the following:
(1) Settlement of Transactions. Settlement procedures in Developing
Markets may differ from those of more established securities markets.
Settlements may also be delayed by operational problems, including those caused
by a failure to adapt computers to using four-digit years after 1999.
Securities issued by Developing Market countries and by issuers located in those
countries may be subject to extended settlement periods. Delays in settlement
could result in temporary periods during which a portion of the Fund's assets is
uninvested and no return is earned on such assets. The inability of the Fund to
make intended purchases of securities due to settlement problems could cause the
Fund to miss investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result in losses to the Fund due to
subsequent declines in the value of the portfolio security, a decrease in the
level of liquidity of the Fund's portfolio or, if the Fund has entered into a
contract to sell the security, in possible liability to the purchaser.
(2) Price Volatility. Securities prices in Developing Markets may be
significantly more volatile than is the case in more developed nations of the
world. In particular, countries with emerging markets may have relatively
unstable governments, present the risk of nationalization of businesses,
restrictions on foreign ownership or prohibitions of repatriation of assets, and
may have less protection of property rights than more developed countries. The
economies of countries in Developing Markets may be predominantly based on only
a few industries and, as such, may be highly vulnerable to changes in local or
global trade conditions.
(3) Less Developed Markets. Developing Market countries may have less
well-developed securities markets and exchanges, and consequently lower trading
volume, than the securities markets of more developed countries. These markets
may be unable to respond effectively to increases in trading volume and, thus,
prompt liquidation of substantial portfolio holdings may be difficult at times.
As a result, these markets may be substantially less liquid than those of more
developed countries and the securities of issuers located in these markets may
have limited marketability.
(4) Governmental Restrictions. In certain Developing Markets, governmental
approval for the repatriation of investment income, capital or the proceeds of
sales of securities by foreign investors may be required. In addition, if a
deterioration occurs in a Developing Market's balance of payments or for other
reasons, a country could impose temporary restrictions on foreign capital
remittances. The Fund could be adversely affected by a delay in obtaining a
grant of, or a refusal to grant, any required governmental approval for
repatriation of capital, as well as the application to the Fund of any
restrictions on investments.
o Convertible Securities. While convertible securities are a form of debt
security in many cases, their conversion feature (allowing conversion into
equity securities) causes them to be regarded more as "equity equivalents." As a
result, the rating assigned to the security has less impact on the Manager's
investment decision with respect to convertible securities than in the case of
non-convertible 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 converting the convertible securities), and (3) the extent to which
the convertible security may be a defensive "equity substitute," providing the
ability to participate in any appreciation in the price of the issuer's common
stock.
o Lower-Rated or Unrated Securities. The Fund may invest in
higher-yielding, lower- rated debt securities, commonly known as "junk bonds,"
because these securities generally offer higher income potential than investment
grade securities. As stated in the Prospectus, the Fund's investments in debt
securities which are rated in the lower rating categories and are also referred
to as "lower-grade" securities, and in unrated debt securities which, in the
opinion of the Manager, are of comparable quality, must in the aggregate, be
less than 35% of the value of the Fund's net assets. "Lower-grade" debt
securities are those rated below "investment grade," which means they have a
rating lower than "Baa" by Moody's Investors Service, Inc. ("Moody's") or lower
than "BBB" by Standard & Poor's Corporation ("S&P") or similar ratings by other
rating organizations. See Appendix B for a description of Moody's and S&P rating
categories. The Fund will not invest in debt securities, whether issued by a
domestic or foreign issuer, which have a rating by a nationally recognized
statistical rating organization ("NRSRO") of less than C or in debt securities
which are in default at the time of purchase. While securities rated "Baa" by
Moody's or "BBB" by S&P are investment grade and are not regarded as "junk
bonds," those securities may be subject to greater market fluctuations and risks
of loss of income and principal than higher grade securities and may be
considered to have certain speculative characteristics. Changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
for such securities to make principal and interest payments than is the case for
higher grade securities. Because most foreign debt securities are not rated, the
Fund's investments in such securities will be based primarily on the Manager's
credit analysis rather than reliance on published ratings.
Debt securities rated below investment grade are considered by the NRSROs
to be predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal and may involve major risk exposure to adverse
conditions. High-yield, lower-grade securities, whether rated or unrated, often
have speculative characteristics. Lower-grade securities have special risks that
make them riskier investments than investment grade securities. Such securities
are generally unsecured and are often subordinated to other creditors of the
issuer. To the extent that the Fund is required to seek recovery upon a default
in the payment of principal or interest on its portfolio holdings, it may incur
additional expenses and may have limited legal recourse in the event of a
default. The Fund may purchase debt securities which, although not rated by a
NRSRO have been determined by the Manager to be of comparable quality to rated
securities in which the Fund may invest. In the event that, due to a downgrade
of one or more debt securities, an amount in excess of 35% of the Fund's net
assets is held in securities rated below investment grade and comparable unrated
securities, the Manager will engage in an orderly disposition of such securities
to the extent necessary to reduce the Fund's holdings of these securities to
less than 35% of net assets or less.
Ratings of debt securities represent the NRSROs' opinions regarding their
quality, are not a guarantee of quality and may be reduced after a Fund has
acquired the security. The Manager would consider a reduction in the rating of a
security or default by the issuer in determining whether the Fund should
continue to hold security. The Fund is not obligated to dispose of securities
when issuers are in default or if the rating of the security is reduced. Credit
ratings attempt to evaluate the safety of principal and interest payments and do
not reflect an assessment of the volatility of the security's market value or
the liquidity of an investment in the security. Also, NRSROs may fail to make
timely changes in credit ratings in response to subsequent events, so that an
issuer's financial condition may be better or worse than the rating indicates.
See Appendix B for further information regarding S&P's and Moody's ratings.
Lower rated debt securities generally offer a higher current yield than
that available from higher grade issues, but they involve higher risks, in that
they are especially subject to adverse changes in general economic conditions
and in the industries in which the issuers are engaged, to changes in the
financial condition of the issuers and to price fluctuation in response to
changes in interest rates. During periods of economic downturn or rising
interest rates, highly leveraged issuers may experience financial stress, which
could adversely affect their ability to make payments of principal and interest
and increase the possibility of default. In addition, such issuers may not have
more traditional methods of financing available to them, and may be unable to
repay debt at maturity by refinancing. The risk of loss due to default by such
issuers is significantly greater because such securities frequently are
unsecured and subordinated to the prior payment of senior indebtedness.
The market for lower rated securities has expanded rapidly in recent
years, and its growth paralleled a long economic expansion. In the past, the
prices of many lower rated debt securities declined substantially, reflecting an
expectation that many issuers of such securities might experience financial
difficulties. As a result, the yields on lower rated debt securities rose
dramatically, However, such higher yields did not reflect the value of the
income stream that holders of such securities expected, but rather the risk that
holders of such securities could lose a substantial portion of their value as a
result of the issuers' financial restructuring or default. There can be no
assurance that such declines will not recur. The market for lower rated debt
securities generally is thinner and less active than that for higher quality
securities, which may limit the Fund's ability to sell such securities at fair
value in response to changes in the economy or the financial markets. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may also decrease the values and liquidity of lower rated securities,
especially in a thinly traded market.
Although the Manager will attempt to minimize the speculative risks
associated with the investments in such securities through diversification,
credit analysis and attention to current trends in interest rates and other
factors, investors should carefully review the objectives and policies of the
Fund and consider their ability to assume the investment risks involved before
making an investment in the Fund.
These risks mean that the Fund may not achieve the expected income from
lower-grade securities, and that the Fund's net asset value per share may be
affected by declines in value of these securities.
o When-Issued and Forward Commitment Securities. The Fund may purchase
securities on a "when-issued" basis and may purchase or sell such securities on
a "forward commitment" basis in order to hedge against anticipated changes in
interest rates and prices. 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. At the time the Funds enter into a
transaction on a when-issued or forward commitment basis, the Fund will identify
with its Custodian certain assets, which may consist of liquid assets of any
type, including equity and debt securities of any grade, at least equal to the
value of the when-issued or forward commitment securities and will such assets
be market to marked daily. When-issued and forward commitments may be sold prior
to the settlement date, but the Fund will purchase or sell when-issued
securities and forward commitments only with the intention of actually receiving
or delivering the securities, as the case may be. During the period between
commitment by the Fund and settlement (which shall not 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.
If the Fund disposes of the right to acquire a when-issued security prior to its
acquisition or disposes of its right to deliver or receive against a forward
commitment, it may incur a gain or loss.
o Warrants and Rights. Warrants basically are options to purchase equity
securities at specified prices valid for a specific period of time. Their prices
do not necessarily move in a manner parallel to the prices of the underlying
securities. The price paid for a warrant will be lost unless the warrant is
exercised prior to expiration. Rights are similar to warrants, but normally have
a short duration and are distributed directly by the issuer to its shareholders.
Warrants and rights have no voting rights, receive no dividends and have no
rights with respect to the assets of the issuer.
o Illiquid and Restricted Securities. To enable the Fund to sell (in the
United States) restricted securities not registered under the Securities Act of
1933, the Fund may have to cause those securities to be registered. The expenses
of registration of restricted securities may be negotiated by the Fund with the
issuer at the time such securities are purchased by the Fund, if such
registration is required before such securities may be sold publicly. When
registration must be arranged because the Fund wishes to sell the security, a
considerable period may elapse between the time the decision is made to sell the
securities and the time the Fund would be permitted to sell them. The Fund would
bear the risks of any downward price fluctuation during that period. The Fund
may also acquire, through private placements, securities having contractual
restrictions on their resale, which might limit the Fund's ability to dispose of
such securities and might lower the amount realizable upon the sale of such
securities.
The Fund has percentage limitations that apply to purchases of illiquid
securities, as stated in the Prospectus. Those percentage restrictions do not
limit purchases of restricted securities that are eligible for sale to qualified
institutional purchasers pursuant to Rule 144A under the Securities Act of 1933,
provided that those securities have been determined to be liquid by the Board of
Trustees of the Fund or by the Manager under Board-approved guidelines. Those
guidelines take into account the trading activity for such securities and the
availability of reliable pricing information, among other factors. If there is a
lack of trading interest in a particular Rule 144A security, the Fund's holding
of that security may be deemed to be illiquid.
o Repurchase Agreements. The Fund may acquire securities subject to
repurchase agreements for liquidity purposes to meet anticipated redemptions, or
pending the investment of the proceeds from sales of Fund shares, or pending the
settlement of purchases of portfolio securities.
Under a repurchase agreement, the Fund acquires securities subject to the
seller's agreement to repurchase the securities as a specified time and price.
If the seller becomes subject to a proceeding under the bankruptcy laws or its
assets are otherwise subject to a stay order, the Fund's right to liquidate the
securities may be restricted (during which time the value of the securities
could decline). The Fund has adopted procedures intended to minimize any such
risk. For example, the Fund will enter into repurchase agreements only with
"approved vendors". An "approved vendor" is a commercial bank or the U.S. branch
of a foreign bank, or a broker-dealer which has been designated a primary dealer
in government securities, which must meet credit requirements set by the Fund's
Board of Trustees from time to time under a repurchase agreement. The resale
price exceeds the purchase price by an amount that reflects an agreed-upon
interest rate effective for the period during which the repurchase agreement is
in effect. The majority of these transactions run from day to day, and delivery
pursuant to the resale typically will occur within one to five days of the
purchase. Repurchase agreements are considered "loans" under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), collateralized
by the underlying security. The Fund's repurchase agreements require that at all
times while the repurchase agreement is in effect, the value of the collateral
must equal or exceed the repurchase price to fully collateralize the repayment
obligation. Additionally, the Fund's Manager will impose creditworthiness
requirements to confirm that the vendor is financially sound and will
continuously monitor the collateral's value.
o Loans of Portfolio Securities. The Fund may lend its portfolio securities
subject to the restrictions stated in the Prospectus. Under applicable
regulatory requirements (which are subject to change), the loan collateral must,
on each business day, at least equal the market value of the loaned securities
and must consist of cash, bank letters of credit, U.S. government securities, or
other cash equivalents in which the Fund is permitted to invest. To be
acceptable as collateral, letters of credit must obligate a bank to pay amounts
demanded by the Fund if the demand meets the terms of the letter. Such terms and
the issuing bank must be satisfactory to the Fund. In a portfolio securities
lending transaction, the Fund receives from the borrower an amount equal to the
interest paid or the dividends declared on the loaned securities during the term
of the loan as well as the interest on the collateral securities, less any
finder's , administrative or other fees the Fund pays in connection with the
loan. The Fund may share the interest it receives on the collateral securities
with the borrower as long as it realizes at least a minimum amount of interest
required by the lending guidelines established by its Board of Trustees. The
Fund will not lend its portfolio securities to any officer, trustee, employee or
affiliate of the Fund or its Manager. The terms of the Fund's loans must meet
certain tests under the Internal Revenue Code and permit the Fund to reacquire
loaned securities on five business days' notice or in time to vote on any
important matter.
o Borrowing For Liquidity and Leverage. From time to time, the Fund may
borrow from banks on an unsecured basis for temporary or emergency purposes, for
liquidity purposes in order to meet redemption requests from shareholders, or
for investment purposes in order to increase its ownership of securities. Such
borrowings are subject to the percentage limitations stated in the Prospectus.
Any such borrowings will be made only from banks, and pursuant to the
requirements of the Investment Company Act which provides that the Fund must
maintain a 300% ratio of assets to borrowings at all times. If the value of the
Fund's assets, should fail to meet the 300% asset coverage requirement, the Fund
is required within three days to reduce its bank debt to the extent necessary to
meet that coverage requirement. To do so, the Fund may have to sell a portion of
its investments at a time when it would otherwise not want to sell the
securities. Interest on money the Fund borrows is an expense the Fund would not
otherwise incur, so that during periods of substantial borrowings, its expenses
may increase more than the expenses of funds that do not borrow.
Other Investment Techniques and Strategies
Hedging With Options and Futures Contracts. The Fund may use hedging instruments
for the purposes described in the Prospectus. When hedging to attempt to protect
against declines in the market value of the Fund's portfolio, or to permit the
Fund to retain unrealized gains in the value of portfolio securities which have
appreciated, or to facilitate selling securities for investment reasons, the
Fund may: (i) sell Futures, (ii) buy puts on such Futures or securities, or
(iii) write covered calls on securities or on Futures. When hedging to establish
a position in the equity securities markets as a temporary substitute for the
purchase of individual equity securities the Fund may: (i) buy Futures, or (ii)
buy calls on such Futures or securities held by it. Normally, the Fund would
then purchase the equity securities and terminate the hedging position.
The Fund's strategy of hedging with Futures and options on Futures will be
incidental to the Fund's investment activities in the underlying cash market. In
the future, the Fund may employ hedging instruments and strategies that are not
presently contemplated but which may be developed, to the extent such investment
methods are consistent with the Fund's investment objective, and are legally
permissible and disclosed in the Prospectus. Additional information about the
hedging instruments the Fund may use is provided below.
o Stock Index Futures. The Fund may buy and sell futures contracts
relating to a securities index ("Financial Futures"), including "Stock Index
Futures," a type of Financial Future for which the index used as the basis for
trading is a broadly-based stock index (including stocks that are not limited to
issuers in a particular industry or group of industries). A stock index assigns
relative values to the common stocks included in the index and fluctuates with
the changes in the market value of those stocks. Stock indices cannot be
purchased or sold directly. Financial Futures are contracts based on the future
value of the basket of securities that comprise the underlying index. The
contracts obligate the seller to deliver, and the purchaser to take, cash to
settle the futures transaction or to enter into an offsetting contract. No
physical delivery of the securities underlying the index is made on settling the
futures obligation. No monetary amount is paid or received by the Fund on the
purchase or sale of a Financial Future or Stock Index Future.
Upon entering into a Futures transaction, the Fund will be required to
deposit an initial margin payment, in cash or U.S. Treasury bills, with the
futures commission merchant (the "futures broker"). Initial margin payments will
be deposited with the Fund's Custodian in an account registered in the futures
broker's name; however, the futures broker can gain access to that account only
under certain specified conditions. As the Future is marked to market (that is,
its value on the Fund's books is changed) to reflect changes in its market
value, subsequent margin payments, called variation margin, will be paid to or
by the futures broker on a daily basis.
At any time prior to the expiration of the Future, the Fund may elect to
close out its position by taking an opposite position, at which time a final
determination of variation margin is made and additional cash is required to be
paid by or released to the Fund. Any gain or loss is then realized by the Fund
on the Future for tax purposes. Although Financial Futures by their terms call
for settlement by the delivery of cash, in most cases the settlement obligation
is fulfilled without such delivery by entering into an offsetting transaction.
All Futures transactions are effected through a clearinghouse associated with
the exchange on which the contracts are traded.
o Writing Covered Calls. As described in the Prospectus, the Fund may
write covered calls. When the Fund writes a call on an investment, it receives a
premium and agrees to sell the callable investment to a purchaser of a
corresponding call during the call period (usually not more than 9 months) at a
fixed exercise price (which may differ from the market price of the underlying
investment) regardless of market price changes during the call period. To
terminate its obligation on a call it has written, the Fund may purchase a
corresponding call in a "closing purchase transaction." A profit or loss will be
realized, depending upon whether the net of the amount of option transaction
costs and the premium received on the call the Fund has written is more or less
than the price of the call the Fund subsequently purchased. A profit may also be
realized if the call lapses unexercised, because the Fund retains the underlying
investment and the premium received. Those profits are considered short-term
capital gains for Federal income tax purposes, as are premiums on lapsed calls,
and when distributed by the Fund are taxable as ordinary income. If the Fund
could not effect a closing purchase transaction due to the lack of a market, it
would have to hold the callable investment until the call lapsed or was
exercised.
The Fund may also write calls on Futures without owning a futures contract
or deliverable securities, provided that at the time the call is written, the
Fund covers the call by segregating in escrow an equivalent dollar value of
deliverable securities or liquid assets. The Fund will segregate additional
liquid assets if the value of the escrowed assets drops below 100% of the
current value of the Future. In no circumstances would an exercise notice as to
a Future put the Fund in a short futures position.
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 that are traded on exchanges, or as to other acceptable escrow
securities, so that no margin will be required from the Fund for such option
transactions. OCC will release the securities covering a call on the expiration
of the call or when the Fund enters into a closing purchase transaction. Call
writing affects the Fund's turnover rate and the brokerage commissions it pays.
Commissions, normally higher than on general securities transactions, are
payable on writing or purchasing a call.
o Purchasing Puts and Calls. The Fund may purchase calls to protect
against the possibility that the Fund's portfolio will not participate in an
anticipated rise in the securities market. When the Fund purchases a call, it
pays a premium (other than in a closing purchase transaction) and, except as to
calls on stock indices, has the right to buy the underlying investment from a
seller of a corresponding call on the same investment during the call period at
a fixed exercise price. In purchasing a call, the Fund benefits only if the call
is sold at a profit or if, during the call period, the market price of the
underlying investment is above the sum of the call price, transaction costs, and
the premium paid, and the call is exercised. If the call is not exercised or
sold (whether or not at a profit), it will become worthless at its expiration
date and the Fund will lose its premium payment and the right to purchase the
underlying investment. When the Fund purchases a call on a stock index, it pays
a premium, but settlement is in cash rather than by delivery of the underlying
investment to the Fund.
When the Fund purchases a put, it pays a premium and, except as to puts on
stock indices, has the right to sell the underlying investment to a seller of a
corresponding put on the same investment during the put period at a fixed
exercise price. Buying a put on an investment the Fund owns (a "protective put")
enables the Fund to attempt to protect itself during the put period against a
decline in the value of the underlying investment below the exercise price by
selling the underlying investment at the exercise price to a seller of a
corresponding put. If the market price of the underlying investment is equal to
or above the exercise price and as a result the put is not exercised or resold,
the put will become worthless at its expiration and the Fund will lose the
premium payment and the right to sell the underlying investment. However, the
put may be sold prior to expiration (whether or not at a profit).
Puts and calls on broadly-based stock indices or Stock Index Futures are
similar to puts and calls on securities or futures contracts except that all
settlements are in cash and gain or loss depends on changes in the index in
question (and thus on price movements in the stock market generally) rather than
on price movements of individual securities or futures contracts. When the Fund
buys a call on a stock index or Stock Index Future, it pays a premium. If the
Fund exercises the call during the call period, a seller of a corresponding call
on the same investment will pay the Fund an amount of cash to settle the call if
the closing level of the stock index or Future upon which the call is based is
greater than the exercise price of the call. That cash payment is equal to the
difference between the closing price of the call and the exercise price of the
call times a specified multiple (the "multiplier") which determines the total
dollar value for each point of difference. When the Fund buys a put on a stock
index or Stock Index Future, it pays a premium and has the right during the put
period to require a seller of a corresponding put, upon the Fund's exercise of
its put, to deliver cash to the Fund to settle the put if the closing level of
the stock index or Stock Index Future upon which the put is based is less than
the exercise price of the put. That cash payment is determined by the
multiplier, in the same manner as described above as to calls.
When the Fund purchases a put on a stock index, or on a Stock Index Future
not owned by it, the put protects the Fund to the extent that the index moves in
a similar pattern to the securities the Fund holds. The Fund can either resell
the put or, in the case of a put on a Stock Index Future, buy the underlying
investment and sell it at the exercise price. The resale price of the put will
vary inversely with the price of the underlying investment. If the market price
of the underlying investment is above the exercise price, and as a result the
put is not exercised, the put will become worthless on the expiration date. In
the event of a decline in price of the underlying investment, the Fund could
exercise or sell the put at a profit to attempt to offset some or all of its
loss on its portfolio securities.
The Fund's option activities may affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund may cause the
Fund to sell related portfolio securities, thus increasing its turnover rate.
The exercise by the Fund of puts on securities will cause the sale of underlying
investments, increasing portfolio turnover. Although the decision whether to
exercise a put it holds is within the Fund's control, holding a put might cause
the Fund to sell the related investments for reasons that would not exist in the
absence of the put. The Fund will pay a brokerage commission each time it buys
or sells a call, put or an underlying investment in connection with the exercise
of a put or call. Those commissions may be higher than the commissions for
direct purchases or sales of the underlying investments.
Premiums paid for options are small in relation to the market value of the
underlying investments and, consequently, put and call options offer large
amounts of leverage. The leverage offered by trading in options could result in
the Fund's net asset value being more sensitive to changes in the value of the
underlying investments.
o Options on Foreign Currencies. The Fund may write and purchase calls on
foreign currencies. The Fund may purchase and write puts and calls on foreign
currencies that are traded on a securities or commodities exchange or
over-the-counter markets or are quoted by major recognized dealers in such
options. It does so to protect against declines in the dollar value of foreign
securities and against increases in the dollar cost of foreign securities to be
acquired. If the Manager anticipates a rise in the dollar value of a foreign
currency in which securities to be acquired are denominated, the increased cost
of such securities may be partially offset by purchasing calls or writing puts
on that foreign currency. If a decline in the dollar value of a foreign currency
is anticipated, the decline in value of portfolio securities denominated in that
currency may be partially offset by writing calls or purchasing puts on that
foreign currency. However, in the event of currency rate fluctuations adverse to
the Fund's position, it would lose the premium it paid and transactions costs.
A call written on a foreign currency by the Fund is covered if the Fund
owns the underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration resulting from liquid assets
identified to its Custodian for that purpose) upon conversion or exchange of
other foreign currency held in its portfolio. A call may be written by the Fund
on a foreign currency to provide a hedge against a decline due to an expected
adverse change in the exchange rate in the U.S. dollar value of a security which
the Fund owns or has the right to acquire and which is denominated in the
currency underlying the option. This is a cross-hedging strategy. In such
circumstances, the Fund collateralizes the option by identifying with its
Custodian certain assets, which may consist of liquid assets of any type,
including equity and debt securities of any grade in an amount not less than the
value of the underlying foreign currency in U.S. dollars. Such assets will be
marked-to- market daily.
o Forward Contracts. The Fund may enter into foreign currency exchange
contracts ("Forward Contracts"), which obligate the seller to deliver and the
purchaser to take a specific amount of foreign currency at a specific future
date for a fixed price. A Forward Contract involves bilateral obligations of one
party to purchase, and another party to sell, a specific currency at a future
date (which may be any fixed number of days from the date of the contract agreed
upon by the parties), at a price set at the time the contract is entered into.
These contracts are generally traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers.
The Fund may enter into a Forward Contract in order to "lock in" the U.S. dollar
price of a security denominated in a foreign currency which it has purchased or
sold but which has not yet settled, or to protect against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar and
a foreign currency.
There is a risk that use of Forward Contracts may reduce the gain that
would otherwise result from a change in the relationship between the U.S. dollar
and a foreign currency. Forward contracts include standardized foreign currency
futures contracts which are traded on exchanges and are subject to procedures
and regulations applicable to other Futures. The Fund may also enter into a
forward contract to sell a foreign currency denominated in a currency other than
that in which the underlying security is denominated. This is done in the
expectation that there is a greater correlation between the foreign currency of
the forward contract and the foreign currency of the underlying investment than
between the U.S. dollar and the foreign currency of the underlying investment.
This technique is referred to as "cross hedging." The success of cross hedging
is dependent on many factors, including the ability of the Manager to correctly
identify and monitor the correlation between foreign currencies and the U.S.
dollar. To the extent that the correlation is not identical, the Fund may
experience losses or gains on both the underlying security and the cross
currency hedge.
The Fund may use Forward Contracts to protect against uncertainty in the
level of future exchange rates. The use of Forward Contracts does not eliminate
fluctuations in the prices of the underlying securities the Fund owns or intends
to acquire, but it does fix a rate of exchange in advance. In addition, although
Forward Contracts limit the risk of loss due to a decline in the value of the
hedged currencies, at the same time they limit any potential gain that might
result should the value of the currencies increase.
There is no limitation as to the percentage of the Fund's assets that may
be committed to foreign currency exchange contracts. The Fund does not enter
into such forward contracts or maintain a net exposure in such contracts to the
extent that the Fund would be obligated to deliver an amount of foreign currency
in excess of the value of the Fund's assets denominated in that currency, or
enter into a "cross hedge," unless it is denominated in a currency or currencies
that the Manager believes will have price movements that tend to correlate
closely with the currency in which the investment being hedged is denominated.
See "Tax Aspects of Covered Calls and Hedging Instruments" below for a
discussion of the tax treatment of foreign currency exchange contracts.
The Fund may enter into Forward Contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the purchase
or sale of a security denominated in a foreign currency, or when the Fund
anticipates receipt of dividend payments in a foreign currency, the Fund may
desire to "lock-in" the U.S. dollar price of the security or the U.S. dollar
equivalent of such payment by entering into a Forward Contract, for a fixed
amount of U.S. dollars per unit of foreign currency, for the purchase or sale of
the amount of foreign currency involved in the underlying transaction
("transaction hedge"). The Fund will thereby be able to protect itself against a
possible loss resulting from an adverse change in the relationship between the
currency exchange rates during the period between the date on which the security
is purchased or sold, or on which the payment is declared, and the date on which
such payments are made or received.
The Fund may also use Forward Contracts to lock in the U.S. dollar value of
portfolio positions ("position hedge"). In a position hedge, for example, when
the Fund believes that foreign currency may suffer a substantial decline against
the U.S. dollar, it may enter into a forward sale contract to sell an amount of
that foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency, or when the Fund
believes that the U.S. dollar may suffer a substantial decline against a foreign
currency, it may enter into a forward purchase contract to buy that foreign
currency for a fixed dollar amount. In this situation the Fund may, in the
alternative, enter into a forward contract to sell a different foreign currency
for a fixed U.S. dollar amount where the Fund believes that the U.S. dollar
value of the currency to be sold pursuant to the forward contract will fall
whenever there is a decline in the U.S. dollar value of the currency in which
portfolio securities of the Fund are denominated ("cross hedge").
The Fund will identify with its Custodian certain assets, which may
consist of liquid assets of any type, including equity and debt securities of
any grade, having a value equal to the aggregate amount of the Fund's net
commitments under forward contracts to cover its short positions. If the value
of the securities identified for this purpose declines, additional cash or
securities will be identified on a daily basis so that the value of the
identified securities will equal the amount of the Fund's net commitments with
respect to such contracts. As an alternative, the Fund may purchase a call
option permitting the Fund to purchase the amount of foreign currency being
hedged by a forward sale contract at a price no higher than the forward contract
price, or the Fund may purchase a put option permitting the Fund to sell the
amount of foreign currency subject to a forward purchase contract at a price as
high or higher than the forward contract price. Unanticipated changes in
currency prices may result in poorer overall performance for the Fund than if it
had not entered into such contracts.
The precise matching of the Forward Contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of these securities between the date the Forward Contract
is entered into and the date it is sold. Accordingly, it may be necessary for
the Fund to purchase additional foreign currency on the spot (i.e., cash) market
(and bear the expense of such purchase), if the market value of the security is
less than the amount of foreign currency the Fund is obligated to deliver and if
a decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some of the
foreign currency received upon the sale of the portfolio security if its market
value exceeds the amount of foreign currency the Fund is obligated to deliver.
The projection of short-term currency market movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain. Forward Contracts involve the risk that anticipated currency
movements will not be accurately predicted, causing the Fund to sustain losses
on these contracts and transactions costs.
At or before the maturity of a Forward Contract requiring the Fund to sell
a currency, the Fund may either sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund may
close out a Forward Contract requiring it to purchase a specified currency by
entering into a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would realize a
gain or loss as a result of entering into such an offsetting Forward Contract
under either circumstance to the extent the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies with factors
such as the currencies involved, the length of the contract period and the
market conditions then prevailing. Because Forward Contracts are usually entered
into on a principal basis, no fees or commissions are involved. Because such
contracts are not traded on an exchange, the Fund must evaluate the credit and
performance risk of each particular counterparty under a Forward Contract.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert all of its holdings of foreign currency deposits into
U.S. dollars on a daily basis. The Fund may convert foreign currency from time
to time, and investors should be aware of the costs of currency conversion.
Foreign exchange dealers do not charge a fee for conversion, but they do seek to
realize a profit based on the difference between the prices at which they buy
and sell various currencies. Thus, a dealer may offer to sell a foreign currency
to the Fund at one rate, while offering a lesser rate of exchange should the
Fund desire to resell that currency to the dealer.
o Regulatory Aspects of Hedging Instruments. The Fund is required to
operate within certain guidelines and restrictions with respect to its use of
Futures and options on Futures established by the Commodity Futures Trading
Commission ("CFTC"). In particular the Fund is exempted from registration with
the CFTC as a "commodity pool operator" if the Fund complies with the
requirements of Rule 4.5 adopted by the CFTC. The Rule does not limit the
percentage of the Fund's assets that may be used for Futures margin and related
options premiums for a bona fide hedging position. However, under the Rule the
Fund must limit its aggregate initial Futures margin and related option premiums
to no more than 5% of the Fund's total assets for hedging strategies that are
not considered bona fide hedging strategies under the Rule. Under the Rule, the
Fund also must use short Futures and options on Futures positions solely for
"bona fide hedging purposes" within the meaning and intent of the applicable
provisions of the Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations established
by option exchanges governing the maximum number of options that may be written
or held by a single investor or group of investors acting in concert, regardless
of whether the options were written or purchased on the same or different
exchanges or are held in one or more accounts or through one or more different
exchanges or through one or more brokers. Thus the number of options which the
Fund may write or hold may be affected by options written or held by other
entities, including other investment companies having the same advisor as the
Fund (or an advisor that is an affiliate of the Fund's advisor). The exchanges
also impose position limits on Futures transactions. An exchange may order the
liquidation of positions found to be in violation of those limits and may impose
certain other sanctions.
Due to requirements under the Investment Company Act, when the Fund
purchases a Future, the Fund will identify with its Custodian certain assets
which may, consist of liquid assets of any type, including equity and debt
securities of any grade in an amount at least equal to the market value of the
securities underlying such Future, less the margin deposit applicable to it.
o Tax Aspects of Covered Calls and Hedging Instruments. The Fund intends
to qualify as a "regulated investment company" under the Internal Revenue Code
(although it reserves the right not to qualify). That qualification enables the
Fund to "pass through" its income and realized capital gains to shareholders
without having to pay tax on them. This avoids a "double tax" on that income and
capital gains, since shareholders normally will be taxed on the dividends and
capital gains they receive from the Fund (unless the Fund's shares are held in a
retirement account or the shareholder is otherwise exempt from tax).
Certain foreign currency exchange contracts (Forward Contracts) in which
the Fund may invest are treated as "section 1256 contracts." Gains or losses
relating to section 1256 contracts generally are characterized under the
Internal Revenue Code as 60% long-term and 40% short-term capital gains or
losses. However, foreign currency gains or losses arising from certain section
1256 contracts (including Forward Contracts) generally are treated as ordinary
income or loss. In addition, section 1256 contracts held by the Fund at the end
of each taxable year are "marked-to- market" with the result that unrealized
gains or losses are treated as though they were realized. These contracts also
may be marked-to-market for purposes of the excise tax applicable to investment
company distributions and for other purposes under rules prescribed pursuant to
the Internal Revenue Code. An election can be made by the Fund to exempt these
transactions from this marked-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may affect the
character of gains (or losses) realized by the Fund on straddle positions.
Generally, a loss sustained on the disposition of a position(s) making up a
straddle is allowed only to the extent such loss exceeds any unrecognized gain
in the offsetting positions making up the straddle. Disallowed loss is generally
allowed at the point where there is no unrecognized gain in the offsetting
positions making up the straddle, or the offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates which occur between the time the Fund accrues
interest or other receivables or accrues expenses or other liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables or pays such liabilities generally are treated as ordinary income or
ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency and on disposition of foreign currency forward contracts, gains
or losses attributable to fluctuations in the value of a foreign currency
between the date of acquisition of the security or contract and the date of
disposition also are treated as an ordinary gain or loss. Currency gains and
losses are offset against market gains and losses on each trade before
determining a net "section 988" gain or loss under the Internal Revenue Code,
which may ultimately increase or decrease the amount of the Fund's investment
company income available for distribution to its shareholders.
o Risks of Hedging With Options and Futures. An option position may be
closed out only on a market that provides secondary trading for options of the
same series, and there is no assurance that a liquid secondary market will exist
for any particular option. In addition to the risks associated with hedging that
are discussed in the Prospectus and above, there is a risk in using short
hedging by (i) selling Stock Index Futures or (ii) purchasing puts on stock
indices or Stock Index Futures to attempt to protect against declines in the
value of the Fund's equity securities. The risk is that the prices of Stock
Index Futures will correlate imperfectly with the behavior of the cash (i.e.,
market value) prices of the Fund's equity 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.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable index.
To compensate for the imperfect correlation of movements in the price of the
equity securities being hedged and movements in the price of the hedging
instruments, the Fund may use hedging instruments in a greater dollar amount
than the dollar amount of equity securities being hedged if the historical
volatility of the prices of the equity securities being hedged is more than the
historical volatility of the applicable index. It is also possible that if the
Fund has used hedging instruments in a short hedge, the market may advance and
the value of equity securities held in the Fund's portfolio may decline. If that
occurred, the Fund would lose money on the hedging instruments and also
experience a decline in value in its portfolio securities. However, while this
could occur for a very brief period or to a very small degree, over time the
value of a diversified portfolio of equity securities will tend to move in the
same direction as the indices upon which the hedging instruments are based.
If the Fund uses hedging instruments to establish a position in the
equities markets as a temporary substitute for the purchase of individual equity
securities (long hedging) by buying Stock Index Futures and/or calls on such
Futures, on securities or on stock indices, it is possible that the market may
decline. If the Fund then concludes not to invest in equity securities at that
time because of concerns as to a 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 equity securities purchased.
Other Investment Restrictions
Fundamental Investment Restrictions. The Fund's significant investment
restrictions are described in the Prospectus. The following are also fundamental
policies, and together with the Fund's fundamental policies described in the
Prospectus, cannot be changed without the approval of a "majority" of the Fund's
outstanding voting securities. Such a "majority" vote is defined in the
Investment Company Act as the vote of the holders of the lesser of: (i) 67% or
more of the shares present or represented by proxy at a shareholders meeting, if
the holders of more than 50% of the outstanding shares are present or
represented by proxy; or (ii) more than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot do any of the
following:
o invest in commodities or in commodities contracts, other than the
hedging instruments permitted by any of its other investment policies,
whether or not any such hedging instrument is considered to be a
commodity or a commodity contract;
o invest in real estate or in interests in real estate, but it can
purchase readily marketable securities of companies holding real
estate or interests therein;
o lend money, but the Fund can engage in repurchase transactions and can
invest in all or a portion of an issue of bonds, debentures, commercial
paper, or other similar corporate obligations, whether or not publicly
distributed, provided that the Fund's purchase of obligations that are
not publicly distributed shall be subject to any applicable percentage
limitation on the Fund's holdings of illiquid and restricted
securities; the Fund may also lend its portfolio securities, subject to
any restrictions adopted by the Board of Trustees and set forth in the
Prospectus;
o underwrite securities of other companies, except to the extent that it
might be deemed to be an underwriter for purposes of the Securities
Act of 1933 in the resale of any securities held in its own portfolio;
o issue "senior securities", but this does not prohibit it from borrowing
money for investment or emergency purposes, or entering into margin,
collateral or escrow arrangements as permitted by its other invest
policies.
The percentage restrictions described above and in the Prospectus (other
than the percentage limitations that apply on an ongoing basis) apply only at
the time of investment and require no action by the Fund as a result of
subsequent changes in relative values.
As a matter of fundamental policy, the Fund also may invest all of its
assets in the securities of a single open-end management investment company for
which the Manager or one of its subsidiaries or a successor is advisor or
sub-advisor, notwithstanding any other fundamental investment policy or
limitation. That other fund must have substantially the same fundamental
investment objective, policies and limitations as the Fund. The Fund is
permitted by this policy (but not required) to adopt a "master-feeder" structure
in which the Fund and other "feeder" funds would invest all of their assets in a
single pooled "master fund" in an effort to take advantage of potential
efficiencies. The Fund has no present intention of adopting a "master-feeder"
structure, and would be required to update its Prospectus and this Statement of
Additional Information prior to its doing so. In addition, the Fund may invest
in funds selected by a Trustee under a Deferred Compensation Plan for
disinterested Trustees, which may be adopted by the Board pursuant to an Order
issued by the Securities and Exchange Commission.
Non-Fundamental Investment Restrictions. The following operating policies of the
Fund are not fundamental policies and, as such, may be changed by vote of a
majority of the Fund's Board of Trustees without Shareholder approval. These
additional restrictions provide that the fund cannot:
o invest in companies for the primary purpose of acquiring control or
management thereof;
o invest or hold securities of any issuer if those officers and trustees
of the Fund or officers and directors of its advisor owning
individually more than 0.5% of the securities of such issuer together
own more than 5% of the securities of that issuer; o purchase
securities on margin; however, the Fund can make margin deposits in
connection with any of the hedging instruments permitted by any of its
other investment policies;
o mortgage or pledge any of its assets; this prohibition does not
prohibit the escrow arrangements contemplated by the writing of covered
call options or other collateral or margin arrangements in connection
with any of the hedging instruments permitted by any of its other
investment policies;
The percentage restrictions described above and in the Prospectus (other
than the percentage limitations that apply on an ongoing basis) apply only at
the time of investment and require no action by the Fund as a result of
subsequent changes in relative values.
For purposes of the Fund's policy not to concentrate its assets, described
in "Other Investment Restrictions" in the Prospectus, the Fund has adopted the
industry classifications set forth in the Appendix to this Statement of
Additional Information. This is not a fundamental policy.
How the Fund Is Managed
Organization of the Fund. As a Massachusetts business trust, the Fund is not
required to hold, and does not plan to hold, regular annual meetings of
shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder meeting is
called by the Trustees or 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 Fund, to remove a Trustee. The Trustees will call a
meeting of shareholders to vote on the removal of a Trustee upon the written
request of the record holders of 10% of its outstanding shares. In addition, if
the Trustees receive a request from at least 10 shareholders (who have been
shareholders for at least six months) holding shares of the Fund valued at
$25,000 or more or holding at least 1% of the Fund's outstanding shares,
whichever is less, stating that they wish to communicate with other shareholders
to request a meeting to remove a Trustee, the Trustees will then either make the
Fund's shareholder list available to the applicants or mail their communication
to all other shareholders at the applicants' expense, or the Trustees may take
such other action as set forth under Section 16(c) of the Investment Company
Act.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides for
indemnification and reimbursement of expenses out of its property for any
shareholder held personally liable for its obligations. The Declaration of Trust
also provides that the Fund shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Fund and satisfy
any judgment thereon. Thus, while Massachusetts law permits a shareholder of a
business trust (such as the Fund) to be held personally liable as a "partner"
under certain circumstances, the risk of a Fund shareholder incurring financial
loss on account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any shareholder
of the Trust, agrees under the Trust's Declaration of Trust to look solely to
the assets of the Trust for satisfaction of any claim or demand which may arise
out of any dealings with the Trust, and the Trustees shall have no personal
liability to any such person, to the extent permitted by law.
Trustees and Officers of the Fund. The Fund's Trustees and officers and their
principal occupations and business affiliations and occupations during the past
five years are listed below. The address of each Trustee and officer is Two
World Trade Center, New York, New York 10048- 0203, unless another address is
listed below. Ms. Macaskill is not a director of Oppenheimer Money Market Fund,
Inc. Otherwise, all of the Trustees are also trustees or directors of
Oppenheimer California Municipal Fund, Oppenheimer Capital Appreciation Fund,
Oppenheimer Discovery Fund, Oppenheimer Enterprise Fund, Oppenheimer Global
Fund, Oppenheimer Global Growth & Income Fund, Oppenheimer Gold & Special
Minerals Fund, Oppenheimer Growth Fund, Oppenheimer International Growth Fund,
Oppenheimer International Small Company Fund, Oppenheimer Money Market Fund,
Inc., Oppenheimer Multi-Sector Income Trust, Oppenheimer Multi-State Municipal
Trust, Oppenheimer Multiple Strategies Fund, Oppenheimer Municipal Bond Fund,
Oppenheimer New York Municipal Fund, Oppenheimer Series Funds, Inc., Oppenheimer
U.S. Government Trust, and Oppenheimer World Bond Fund (the "New York-based
Oppenheimer funds"). Ms. Macaskill and Messrs. Spiro, Bishop, Bowen, Donohue,
Farrar and Zack, who are officers of the Fund, respectively hold the same
offices with the other New York-based Oppenheimer funds as with the Fund. As of
December 1, 1997, the Trustees and officers of the Fund as a group owned of
record or beneficially less than 1% of the outstanding shares, not including
shares held of record by an employee benefit plan of the Manager (for which Ms.
Macaskill and Mr. Donohue are trustees) other than shares beneficially owned
under that Plan by the officers of the Fund listed above.
LEON LEVY, Chairman of the Board of Trustees; Age 72
31 West 52nd Street, New York, NY 10019
General Partner of Odyssey Partners, L.P. (investment partnership)(since 1982)
and Chairman of Avatar Holdings, Inc. (real estate development).
ROBERT G. GALLI, Trustee*; Age 64
Vice Chairman of OppenheimerFunds, Inc. (the "Manager") (since October 1995);
formerly he held the following positions: Vice President and Counsel of
Oppenheimer Acquisition Corp. ("OAC"), the Manager's parent holding company;
Executive Vice President, General Counsel and a director of the Manager and
OppenheimerFunds Distributor, Inc. (the "Distributor"), Vice President and a
director of HarbourView Asset Management Corporation ("HarbourView") and
Centennial Asset Management Corporation ("Centennial"), investment adviser
subsidiaries of the Manager, a director of Shareholder Financial Services, Inc.
("SFSI") and Shareholder Services, Inc. ("SSI"), transfer agent subsidiaries of
the Manager and an officer of other Oppenheimer funds.
BENJAMIN LIPSTEIN, Trustee; Age 74
591 Breezy Hill Road, Hillsdale, N.Y. 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University; a director of Sussex Publishers, Inc
(Publishers of Psychology Today and Mother Earth News) and of Spy Magazine, L.P.
BRIDGET A. MACASKILL, President and a Trustee*; Age 49
President (since June 1991), Chief Executive Officer (since September 1995) and
a Director (since December 1994) of the Manager; President and director (since
June 1991) of HarbourView; Chairman and a director of SSI (since August 1994),
and SFSI (September 1995); President (since September 1995) and a director
(since October 1990) of OAC; President (since September 1995) and a director
(since November 1989) of Oppenheimer Partnership Holdings, Inc., a holding
company subsidiary of the Manager; a director of Oppenheimer Real Asset
Management, Inc. (since July 1996); President and a director (since October
1997) of OppenheimerFunds International Ltd., an offshore fund manager
subsidiary of the Manager ("OFIL") and Oppenheimer Millennium Funds plc (since
October 1997); President and a director of other Oppenheimer funds; a director
of the NASDAQ Stock Market, Inc. and of Hillsdown Holdings plc (a U.K. food
company); formerly an Executive Vice President of the Manager.
ELIZABETH B. MOYNIHAN, Trustee; Age 68
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the Freer Gallery of Art
(Smithsonian Institution), the Institute of Fine Arts (New York University),
National Building Museum; a member of the Trustees Council, Preservation League
of New York State, and of the Indo-U.S. Sub-Commission on Education and Culture.
KENNETH A. RANDALL, Trustee; Age 70
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding company),
Dominion Energy, Inc. (electric power and oil & gas producer), Texan
Cogeneration Company (cogeneration company), Prime Retail, Inc. (real estate
investment trust); formerly President and Chief Executive Officer of The
Conference Board, Inc. (international economic and business research) and a
director of Lumbermens Mutual Casualty Company, American Motorists Insurance
Company and American
Manufacturers Mutual Insurance Company.
EDWARD V. REGAN, Trustee; Age 67
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New York; Senior
Fellow of Jerome Levy Economics Institute, Bard College; a member of the U.S.
Competitiveness Policy Council; a director of GranCare, Inc. (health care
provider); a director of River Bank America (real estate manager); Trustee,
Financial Accounting Foundation (FASB and GASB); formerly New York State
Comptroller and trustee, New York State and Local Retirement Fund.
RUSSELL S. REYNOLDS, JR., Trustee; Age 65
8 Sound Shore Drive, Greenwich, Connecticut 06830
Founder Chairman of Russell Reynolds Associates, Inc. (executive recruiting);
Chairman of Directorship Inc. (corporate governance consulting); a director of
Professional Staff Limited (U.K); a trustee of Mystic Seaport Museum,
International House and Greenwich Historical Society.
DONALD W. SPIRO, Vice Chairman and Trustee*; Age 72
Chairman Emeritus (since August 1991) and a director (since January 1969) of the
Manager; formerly Chairman of the Manager and the Distributor.
PAULINE TRIGERE, Trustee; Age 85
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and sale of
women's fashions).
CLAYTON K. YEUTTER, Trustee; Age 67
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel, Hogan & Hartson (a law firm); a director of B.A.T. Industries, Ltd.
(tobacco and financial services), Caterpillar, Inc. (machinery), ConAgra, Inc.
(food and agricultural products), Farmers Insurance Company (insurance), FMC
Corp. (chemicals and machinery) and Texas Instruments, Inc. (electronics);
formerly (in descending chronological order) IMC Global Inc. (chemicals and
animal feed), Counsellor to the President (Bush) for Domestic Policy, Chairman
of the Republican National Committee, Secretary of the U.S. Department of
Agriculture, and U.S.
Trade Representative.
ANDREW J. DONOHUE, Secretary; Age 47
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President (since September 1993), and a director (since January 1992) of the
Distributor; Executive Vice President, General Counsel and a director of
HarbourView, SSI, SFSI and Oppenheimer Partnership Holdings, Inc. since
(September 1995) and MultiSource Services, Inc. (a broker-dealer) (since
December 1995); President and a director of Centennial (since September 1995);
President and a director of Oppenheimer Real Asset Management, Inc. (since July
1996); General Counsel (since May 1996) and Secretary (since April 1997) of OAC;
Vice President of OFIL and Oppenheimer Millennium Funds plc (since October
1997); an officer of other Oppenheimer funds.
GEORGE C. BOWEN, Treasurer; Age 61
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President (since September 1987) and Treasurer (since March 1985) of
the Manager; Vice President (since June 1983) and Treasurer (since March 1985)
of the Distributor; Vice President (since October 1989) and Treasurer (since
April 1986) of HarbourView; Senior Vice President (since February 1992),
Treasurer (since July 1991) and a director (since December 1991) of Centennial;
President, Treasurer and a director of Centennial Capital Corporation (since
June 1989); Vice President and Treasurer (since August 1978) and Secretary
(since April 1981) of SSI; Vice President, Treasurer and Secretary of SFSI
(since November 1989); Treasurer of OAC (since June 1990); Treasurer of
Oppenheimer Partnership Holdings, Inc. (since November 1989); Vice President and
Treasurer of Oppenheimer Real Asset Management, Inc. (since July 1996); Chief
Executive Officer, Treasurer and a director of MultiSource Services, Inc., a
broker-dealer (since December 1995); an officer of other Oppenheimer funds.
ROBERT J. BISHOP, Assistant Treasurer; Age 39
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
SCOTT T. FARRAR, Assistant Treasurer; Age 32
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
ROBERT G. ZACK, Assistant Secretary; Age 49
Senior Vice President (since May 1985) and Associate General Counsel (since May
1981) of the Manager, Assistant Secretary of SSI (since May 1985), and SFSI
(since November 1989); Assistant Secretary of Oppenheimer Millennium Funds plc
(since October 1997); an officer of other Oppenheimer funds.
RAJEEV BHAMAN, Vice President and Portfolio Manager, Age 34
Vice President of the Manager (since November, 1997); formerly Assistant Vice
President of the Manager (December, 1996 - November, 1997), Vice President for
Asian Equities of Barclays de Zoete Wedd Inc.
FRANK JENNINGS, Vice President and Portfolio Manager, Age 50
Vice President of the Manager; an officer of other Oppenheimer funds; formerly
Managing Director of Global Equities at Mitchell Hutchins Asset Management Inc.,
a subsidiary of PaineWebber Inc.
- ---------------------
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
o Remuneration of Trustees. The officers of the Fund and certain Trustees
of the Fund (Ms. Macaskill, Messrs. Galli and Spiro) who are affiliated with the
Manager receive no salary or fee from the Fund. The remaining trustees of the
Fund are expected to receive the compensation shown below from the Fund. The
compensation from the Fund was paid during its fiscal period ended August 31,
1997. The compensation from all the New York-based Oppenheimer funds includes
the Fund and is compensation received as a director, trustee or member of a
committee of the Board of those funds during the calendar year 1996.
Compensation is paid for services in the positions listed below their names:
Retirement Total
Aggregate Benefits Accrued Compensation from
Compensation as part of New York-based
Name and Position from the Fund(1) Fund Expenses Oppenheimer funds(2)
Leon Levy $1,095 $948 $152,750
Chairman and Trustee
Benjamin Lipstein $ 655 $567 $91,350
Study Committee
Chairman, Audit
Committee member
and Trustee(3)
Elizabeth B. Moynihan $ 655 $567 $91,350
Study Committee
Member and Trustee
Kenneth A. Randall $ 598 $518 $83,450
Audit Committee
Chairman and Trustee
Edward V. Regan $ 560 $485 $78,150
Proxy Committee
Chairman, Audit
Committee Member
and Trustee
Russell S. Reynolds, Jr.$ 421 $365 $58,800
Proxy Committee Member
and Trustee
Pauline Trigere $ 396 $343 $55,300
Trustee
Clayton K. Yeutter $ 421 $365 $58,800
Proxy Committee Member
and Trustee
- ----------------------
(1) Amount received during the fiscal period ended August 31, 1997.
(2) For the 1996 calendar year.
(3) Committee positions held during a portion of the period shown.
The Fund has adopted a retirement plan that provides for payment to a
retired Trustee of up to 80% of the average compensation paid during that
Trustee's five years of service in which the highest compensation was received.
A Trustee must serve in that capacity for any of the New York- based
OppenheimerFunds for at least 15 years to be eligible for the maximum payment.
Because each Trustee's retirement benefits will depend on the amount of the
Trustee's future compensation and length of service, the amount of those
benefits cannot be determined at this time, nor can the Fund estimate the number
of years of credited service that will be used to determine those benefits.
o Major Shareholders. As of December 1, 1997, no person owned of record or
was known by the Fund to own beneficially 5% or more, the Fund's outstanding
Class A, Class B or Class C shares except: (i) Prudential Securities Inc., The
Morgan Family Trust, San Diego, California 92122, which owned 21,327.257 Class C
shares (which represents 6.13% of Class C shares), Merrill Lynch Pierce Fenner &
Smith, Inc., for the sole benefit of its customers, 4800 Deer Lake Drive E.,
Florida 32246, which owned 20,063.159 Class C shares (which represents 5.76% of
Class C shares) and Donaldson, Lufkin Jenrette Securities Corporation Inc., PO
Box 2052, Jersey City, New Jersey, 07303 which owned 17,774.343 Class C shares
(which represents 5.11% Class C shares).
The Manager and Its Affiliates. The Manager is wholly-owned by Oppenheimer
Acquisition Corp. ("OAC"), a holding company controlled by Massachusetts Mutual
Life Insurance Company. OAC is also owned in part by certain of the Manager's
directors and officers, some of whom also serve as officers of the Fund, and
three of whom (Ms. Macaskill and Messrs. Spiro and Galli) also serve as Trustees
of the Fund.
The Manager and the Fund have a Code of Ethics. It is designed to detect
and prevent improper personal trading by certain employees, including portfolio
managers, that would compete with or take advantage of the Fund's portfolio
transactions. Compliance with the Code of Ethics is carefully monitored and
strictly enforced by the Manager.
o Portfolio Management. The Portfolio Managers of this Fund are Frank
Jennings and Rajeev Bhaman, who are principally responsible for the day-to-day
management of the Fund's portfolio. These managers backgrounds are described in
the Prospectus under "Portfolio Managers." Other members of the Manager's Equity
Portfolio Department, particularly William Wilby, provide the Portfolio Managers
with counsel and support in managing the Fund's portfolio.
o The Investment Advisory Agreement. A management fee is payable monthly to
the Manager under the terms of the Investment Advisory Agreement between the
Manager and the Fund and is computed on the aggregate net assets of the Fund as
of the close of business each day. The Investment Advisory Agreement 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 Investment
Advisory Agreement or by the Distributor under the General Distributor's
Agreement are paid by the Fund. The Investment Advisory Agreement lists examples
of expenses paid by the Fund, the major categories of which relate to interest,
taxes, brokerage commissions, fees to certain Trustees, legal and audit
expenses, custodian and transfer agent expenses, share issuance costs, certain
printing and registration costs and non-recurring expenses, including litigation
costs. For the Fund's fiscal period from November 18, 1996 (commencement of
operations) to August 31, 1997, the management fees paid by the Fund to the
Manager totaled $211,914.
The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence in the performance of its duties, or reckless disregard
for its obligations and duties thereunder, the Manager is not liable for any
loss sustained by reason of good faith errors or omissions in connection with
any matters to which the Agreement relates. The Agreement permits the Manager to
act as investment advisor for any other person, firm or corporation and to use
the name "Oppenheimer" in connection with other investment companies for which
it may act as investment advisor or general distributor. If the Manager shall no
longer act as investment advisor to the Fund, the right of the Fund to use the
name "Oppenheimer" as part of its name may be withdrawn.
o The Distributor. Under its General Distributor's Agreement with the
Fund, the Distributor acts as the Fund's principal underwriter in the continuous
public offering of the Fund's Class A, Class B and Class C shares but is not
obligated to sell a specific number of shares.
Expenses normally attributable to sales, (excluding payments under the
Distribution and Service Plans but including advertising and the cost of
printing and mailing prospectuses, other than those furnished to existing
shareholders), are borne by the Distributor. For additional information about
distribution of the Fund's shares and the payments made by the Fund to the
Distributor in connection with such activities, please refer to "Distribution
and Service Plans," below. During the Fund's fiscal period November 18, 1996
(commencement of operations) to August 31, 1997, the aggregate sales charges on
sales of the Fund's Class A shares were $260,494 of which the Distributor and an
affiliated broker-dealer retained in the aggregate $78,557. During this period,
no contingent deferred sales charges were collected on the Fund's Class B shares
and the contingent deferred sales charges collected on the Fund's Class C shares
were $9,165, all of which the Distributor retained for Class C.
o The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent,
is responsible for maintaining the Fund's shareholder registry and shareholder
accounting records, and for shareholder servicing and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the duties of
the Manager under the advisory agreement is to arrange the portfolio
transactions for the Fund. The Investment Advisory Agreement contains provisions
relating to the employment of broker-dealers ("brokers") to effect the Fund's
portfolio transactions. In doing so, the Manager is authorized by the Investment
Advisory Agreement to employ such broker-dealers, including "affiliated"
brokers, as that term is defined in the Investment Company Act, as may, in its
best judgment based on all relevant factors, implement the policy of the Fund to
obtain, at reasonable expense, the "best execution" (prompt and reliable
execution at the most favorable price obtainable) of such transactions. The
Manager need not seek competitive commission bidding but is expected to minimize
the commissions paid to the extent consistent with the interest and policies of
the Fund as established by its Board of Trustees. Purchases of securities from
underwriters include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers include a spread between the bid and
asked price.
Under the Investment Advisory Agreement, the Manager is authorized to
select brokers that provide brokerage and/or research services for the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher than
another qualified broker would have charged if a good faith determination is
made by the Manager that the commission is fair and reasonable in relation to
the services provided. Subject to the foregoing considerations, the Manager may
also consider sales of shares of the Fund and other investment companies managed
by the Manager or its affiliates as a factor in the selection of brokers for the
Fund's portfolio transactions.
Description of Brokerage Practices Followed by the Manager. Subject to the
provisions of the Investment Advisory Agreement, and the procedures and rules
described above, allocations of brokerage are generally made by the Manager's
portfolio traders based upon recommendations from the Manager's portfolio
managers. In certain instances, portfolio managers may directly place trades and
allocate brokerage, also subject to the provisions of the advisory agreement and
the procedures and rules described above. In either case, brokerage is allocated
under the supervision of the Manager's executive officers. Transactions in
securities other than those for which an exchange is the primary market are
generally done with principals or market makers. Brokerage commissions are paid
primarily for effecting transactions in listed securities or for certain
fixed-income agency transactions in the secondary market, and are otherwise paid
only if it appears likely that a better price or execution can be obtained. When
the Fund engages in an option transaction, ordinarily the same broker will be
used for the purchase or sale of the option and any transaction in the
securities to which the option relates. When possible, concurrent orders to
purchase or sell the same security by more than one of the accounts managed by
the Manager or its affiliates are combined. The transactions effected pursuant
to such combined orders are averaged as to price and allocated in accordance
with the purchase or sale orders actually placed for each account. Option
commissions may be relatively higher than those 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 Manager and its affiliates, and
investment research received for the commissions of those other accounts may be
useful both to the Fund and one or more of such other accounts. Such research,
which may be supplied by a third party at the instance of a broker, includes
information and analyses on particular companies and industries as well as
market or economic trends and portfolio strategy, receipt of market quotations
for portfolio evaluations, information systems, computer hardware and similar
products and services. If a research service also assists the Manager in a
non-research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the Manager in
the investment decision-making process may be paid 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 Board has also permitted the Manager to use stated
commissions on secondary fixed-income agency trades to obtain research where the
broker has represented to the Manager that: (i) the trade is not from or for the
broker's own inventory, (ii) the trade was executed by the broker on an agency
basis at the stated commission, and (iii) the trade is not a riskless principal
transaction.
The research services provided by brokers broaden the scope and supplement
the research
activities of the Manager, by making available additional views for
consideration and comparisons, and by enabling the Manager to obtain market
information for the valuation of securities held in the Fund's portfolio or
being considered for purchase. The Board of Trustees, including the
"independent" Trustees of the Fund (those Trustees of the Fund who are not
"interested persons" as defined in the Investment Company Act, and who have no
direct or indirect financial interest in the operation of the advisory agreement
or the Distribution Plans described below) annually reviews information
furnished by the Manager as to the commissions paid to brokers furnishing such
services so that the Board may ascertain whether the amount of such commissions
was reasonably related to the value or benefit of such services. During the
Fund's fiscal year ended August 31, 1997, total brokerage commissions paid by
the Fund (not including any spreads in concessions on principal transactions on
a net trade basis) were $280,213. Of that amount, during that same period,
$273,540 was paid to brokers as commissions in return for research services. The
aggregate dollar amount of these transactions was $51,873,553. The transactions
giving rise to those commissions were allocated in accordance with the Managers
internal allocation procedures.
Performance of the Fund
Total Return Information. As described in the Prospectus, from time to time the
"average annual total return," "cumulative total return," "average annual total
return at net asset value" and "total return at net asset value" of a class of
shares of the Fund may be advertised. An explanation of how these total returns
are calculated for each class and the components of those calculations is set
forth below.
The Fund's advertisements of its performance data must, under applicable
rules of the Securities and Exchange Commission, include the average annual
total returns for each advertised class of shares of the Fund for the 1, 5, and
10-year periods (or the life of the class, if less) ending as of the most
recently-ended calendar quarter prior to the publication of the advertisement.
This enables an investor to compare the Fund's performance to the performance of
other funds for the same periods. However, a number of factors should be
considered before using such information as a basis for comparison with other
investments. An investment in the Fund is not insured; its returns and share
prices are not guaranteed and normally will fluctuate on a daily basis. When
redeemed, an investor's shares may be worth more or less than their original
cost. Returns for any given past period are not a prediction or representation
by the Fund of future returns. The returns of each class of shares of the Fund
are affected by portfolio quality, the type of investments the Fund holds and
its operating expenses allocated to the particular class.
o Average Annual Total Returns. The "average annual total return" of each
class of shares is an average annual compounded rate of return for each year in
a specified number of years. It is the rate of return based on the change in
value of a hypothetical initial investment of $1,000 ("P" in the formula below)
held for a number of years ("n") to achieve an Ending Redeemable Value ("ERV")
of that investment, according to the following formula:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
-2-
<PAGE>
o Cumulative Total Returns. The cumulative "total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses some of the same factors as average
annual total return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current maximum sales
charge of 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
described 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 period shown
(unless the total return is shown at net asset value, as described below). For
Class C shares, the payment of the 1.0% contingent deferred sales charge is
applied to the investment result for the one-year period (or less). Total
returns also assume that all dividends and capital gains distributions during
the period are reinvested to buy additional shares at net asset value per share,
and that the investment is redeemed at the end of the period. The cumulative
total return on an investment in Class A, Class B and Class C shares of the Fund
for the period November 18, 1996 (commencement of operations) to August 31, 1997
were 20.83%, 22.30% and 26.40%, respectively.
o Total Returns at Net Asset Value. From time to time the Fund may also
quote an average annual total return at net asset value or a cumulative total
return at net asset value for Class A, Class B, or Class C shares. Each is based
on the difference in net asset value per share at the beginning and the end of
the period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into
consideration the reinvestment of dividends and capital gains distributions. The
cumulative total return at net asset value on an investment in Class A, Class B
and Class C shares of the Fund for the period November 18, 1996 (commencement of
operations) to August 31, 1997 were 28.20%, 27.30% and 27.40%, respectively.
Total return information may be useful to investors in reviewing the
performance of the Fund's Class A, Class B or Class C shares. However, when
comparing total return of an investment in shares of the Fund with that of other
alternatives, investors should understand that as the Fund is an aggressive
equity fund seeking capital appreciation, its shares are subject to greater
market risks and volatility than shares of funds having other investment
objectives and that the Fund is designed for investors who are willing to accept
greater risk of loss in the hopes of realizing greater gains.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its Class A, Class B or Class C shares by Lipper Analytical Services,
Inc. ("Lipper"), a widely- recognized independent mutual fund monitoring
service. Lipper monitors the performance of regulated investment companies,
including the Fund, and ranks their performance for various periods based on
categories relating to investment objectives. The performance of the Fund's
classes is ranked against (i) all other funds, (ii) all other "international"
funds and (iii) all other "international" funds in a specific size category. The
Lipper performance rankings are based on total returns that include the
reinvestment of capital gain distributions and income dividends but do not take
sales charges or taxes into consideration.
From time to time the Fund may publish the ranking of the performance of
its Class A, Class B or Class C shares by Morningstar, Inc., an independent
mutual fund monitoring service. Morningstar ranks mutual funds, including the
Fund, monthly in broad investment categories (domestic stock, international
stock, taxable bond, municipal bond and hybrid) based on risk- adjusted
investment return. Investment return measures a fund's three, five and ten-year
average annual total returns (when available) in excess of 90-day U.S. Treasury
bill returns after considering sales charges and expenses. Risk measures fund
performance below 90-day U.S. Treasury bill monthly returns. Risk and investment
return are combined to produce star rankings reflecting performance relative to
the average fund in a fund's category. Five stars is the "highest" ranking (top
10%), four stars is "above average" (next 22.5%), three stars is "average" (next
35%), two stars is "below average" (next 22.5%) and one star is "lowest" (bottom
10%). Morningstar ranks the Fund in relation to other international stock funds.
Rankings are subject to change monthly.
From time to time, the Fund may include in its advertisements and sales
literature performance information about the Fund cited in other newspapers and
periodicals, such as The New York Times, which may include performance
quotations from other sources, including Lipper.
The total return on an investment in the Fund's Class A, Class B or Class
C shares may be compared with performance for the same period of the Morgan
Stanley World Index, an unmanaged index of issuers on the stock exchanges of 20
foreign countries and the United States and widely recognized as a measure of
global stock market performance. The performance of such Index includes a factor
for the reinvestment of dividends but does not reflect expenses or taxes. The
performance of the Fund's Class A, Class B or Class C shares may also be
compared in publications to (i) the performance of various market indices or to
other investments for which reliable performance data is available, and (ii) to
averages, performance rankings or other benchmarks prepared by recognized mutual
fund statistical services.
From time to time, the Fund's Manager may publish rankings or ratings of
the Manager (or Transfer Agent) or the investor services provided by them to
shareholders of the Oppenheimer funds, other than performance rankings of the
Oppenheimer funds themselves. Those ratings or rankings of shareholder/investor
services by third parties may compare the Oppenheimer funds' services to those
of other mutual fund families selected by the rating or ranking services and may
be based upon the opinions of the rating or ranking service itself, based on its
research or judgment, or based upon surveys of investors, brokers, shareholders
or others.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A Shares and Distribution and
Service Plans for Class B and Class C shares of the Fund under Rule 12b-1 of the
Investment Company Act, pursuant to which the Fund makes payments to the
Distributor for all or a portion of its costs 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, in each instance that vote having been cast by the Manager as the sole
initial holder of shares of that class.
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, at no cost to the Fund. 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 its continuance is specifically approved at
least annually by the Fund's Board of Trustees and its Independent Trustees by a
vote cast in person at a meeting called for the purpose of voting on such
continuance. A Plan for a particular class 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. None of the Plans 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. In addition, because Class
B shares of the Fund automatically convert into Class A shares after six years,
the Fund is required by a Securities and Exchange Commission rule to obtain the
approval of Class B as well as Class A shareholders for a proposed amendment to
the Class A Plan that would materially increase the amount to be paid under the
Class A Plan. Such approval must be by a "majority" of the Class A and Class B
shares (as defined in the Investment Company Act), voting separately by class.
All material amendments must be approved by the Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall provide
separate written reports to the Fund's Board of Trustees at least quarterly on
the amount of all payments made pursuant to each Plan, the purpose for which the
payments were made and the identity of each Recipient that received any payment.
The report for the Class B Plan shall also include the Distributor's
distribution costs for that quarter, and such costs for previous fiscal periods
that have been 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 Fund who are not "interested
persons" of the Fund 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 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 fees at the maximum rate and has
set no minimum amount of assets to qualify for payment.
For the fiscal period ended August 31, 1997, payments under the Class A
Plan totaled $25,863, all of which was paid by the Distributor to Recipients,
including $1,108 paid to an affiliate of the Distributor. Payments made under
the Class B Plan during the fiscal period ended August 31, 1997 totaled $60,686,
of which $52,924 was retained by the Distributor and none was paid to an
affiliate. Payments made under the Class C Plan during that period totaled
$12,147, of which $7,886 was retained by the Distributor and none was paid to an
affiliate.
Any unreimbursed expenses incurred by the Distributor with respect to
Class A shares for any fiscal year may not be recovered in subsequent years.
Payments received by the Distributor under the Plan for Class A shares will not
be used to pay any interest expense, carrying charge, or other financial costs,
or allocation of overhead by the Distributor.
The Class B and the Class C Plans allow the service fee payment to be paid
by the Distributor to Recipients in advance for the first year such shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. The advance payment is based on the net asset value of Class B and
Class C shares sold. An exchange of shares does not entitle the Recipient to an
advance service fee payment. In the event Class B or Class C shares are redeemed
during the first year that the shares are outstanding, the Recipient will be
obligated to repay to the Distributor a pro rata portion of the Distributor's
advance payment for those shares.
Although the Class B and Class C Plans permit the Distributor to retain
both the asset-based sales charges and the service fees on such 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 and the Class C Plan by the Board. Initially, the
Board has set no minimum holding period. All payments under the Class B Plan and
the Class C Plan are subject to the limitations imposed by the Conduct Rules of
the National Association of Securities Dealers, Inc., on payments of asset-based
sales charges and service fees.
The Class B and Class C Plans provide for the Distributor to be
compensated at a flat rate, whether the Distributor's distribution expenses are
more or less than the amounts paid by the Fund during that period. Such payments
are made in recognition that the Distributor (i) pays sales commissions to
authorized brokers and dealers at the time of sale and pays service fees as
described in the Prospectus, (ii) may finance such commissions and/or the
advance of the service fee payment to Recipients under those Plans, or may
provide such financing from its own resources, or from an affiliate, (iii)
employs personnel to support distribution of shares, and (iv) may bear the costs
of sales literature, advertising and prospectuses (other than those furnished to
current shareholders), state "blue sky" registration fees and certain other
distribution expenses.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits the individual investor to
choose the method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor expects
to hold shares and other relevant circumstances. Investors should understand
that the purpose and function of the deferred sales charge and asset-based sales
charge with respect to Class B and Class C shares are the same as those of the
initial sales charge with respect to Class A shares. Any salesperson or other
person entitled to receive compensation for selling Fund shares may receive
different compensation with respect to one class of shares than the other. The
Distributor normally will not accept any order for $500,000 or $1 million or
more of Class B or Class C shares, respectively, on behalf of a single investor
(not including dealer "street name" or omnibus accounts) because generally it
will be more advantageous for that investor to purchase Class A shares of the
Fund instead.
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different shareholder
privileges and expenses. The net income attributable to Class A, Class B and
Class C shares and the dividends payable on such shares will be reduced by
incremental expenses borne solely by those classes, including the asset-based
sales charges.
The conversion of Class B shares to Class A shares after six years is
subject to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax advisor, to the effect
that the conversion of B shares does not constitute a taxable event for the
holder under Federal income tax law. If such a revenue ruling or opinion is no
longer available, the automatic conversion feature may be suspended, in which
event no further conversions of Class B shares would occur while such suspension
remained in effect. Although Class B shares could then be exchanged for Class A
shares on the basis of relative net asset value of the two classes, without the
imposition of a sales charge or fee, such exchange could constitute a taxable
event for the holder, and absent such exchange, Class B shares might continue to
be subject to the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B and Class C shares recognizes two
types of expenses. General expenses that do not pertain specifically to a class
are allocated pro rata to the shares of each class, based on the percentage of
the net assets of such class to the Fund's total assets, and then equally to
each outstanding share within a given class. Such general expenses include (i)
management fees, (ii) legal, bookkeeping and audit fees, (iii) printing and
mailing costs of shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current shareholders, (iv) fees to
Independent Trustees, (v) custodian expenses, (vi) share issuance costs, (vii)
organization and start-up costs, (viii) interest, taxes and brokerage
commissions, and (ix) non-recurring expenses, such as litigation costs. Other
expenses that are directly attributable to a class are allocated equally to
each outstanding share within that class. Such expenses include (i) Distribution
Plan fees, (ii) incremental transfer and shareholder servicing agent fees and
expenses, (iii) registration fees and (iv) shareholder meeting expenses, to the
extent that such expenses pertain to a specific class rather than to the Fund as
a whole.
Determination of Net Asset Values Per Share. The net asset values per share of
Class A, Class B and Class C shares of the Fund are determined as of the close
of business of The New York Stock Exchange (the "Exchange") on each day that the
Exchange is open, by dividing the value of the Fund's net assets attributable to
that class by the number of shares of that class that are outstanding. The
Exchange normally closes at 4:00 P.M. New York time, but may close earlier on
some days (for example, in case of weather emergencies or on days falling before
a holiday). The Exchange's most recent annual holiday schedule (which is subject
to change) states that it will close on New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. It may also close on other days. The Fund may invest a
substantial portion of its assets in foreign securities primarily listed on
foreign exchanges which may trade on Saturdays or customary U.S. business
holidays on which the Exchange is closed. Because the Fund's net asset value
will not be calculated on those days, the Fund's net asset values per share of
Class A, Class B and Class C shares of the Fund may be significantly affected at
times when shareholders cannot purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the valuation
of the Fund's securities, generally as follows:
(i) equity securities traded on a U.S. securities exchange or on the Automated
Quotation System ("NASDAQ") of the Nasdaq Stock Market, Inc. for which last sale
information is regularly reported are valued at the last reported sale price on
their primary exchange or NASDAQ that day(the "Valuation Date") or, in the
absence of sales that day, at the last reported sale price preceding the
Valuation Date if it is within the spread of the closing "bid" and "asked"
prices on the Valuation Date, or , if not, the closing "bid" price on the
Valuation Date;
(ii) equity securities traded on a foreign securities exchange are valued
generally at the last sale price available to the pricing service approved by
the Fund's Board of Trustees or to the Manager as reported by the principal
exchange on which the security is traded at its last trading session on or
immediately preceding the Valuation Date, or, if unavailable, at the mean
between "bid" and "asked" prices obtained from the principal exchange or two
active market makers in the security on the basis of reasonable inquiry;
(iii) a non-money market fund will value (x) debt instruments that had a
maturity of more than 397 days when issued, (y) debt instruments that had a
maturity of 397 days or less when issued and have a remaining maturity in excess
of 60 days, and (z) non-money market type debt instruments that had a maturity
of 397 days or less when issued and have a remaining maturity of sixty days or
less, at the mean between the "bid" and "asked" prices determined by a portfolio
pricing service approved by the Fund's Board of Trustees or, if unavailable,
obtained by the Manager from two active market makers in the security on the
basis of reasonable inquiry;
(iv) money market-type debt securities held by a non-money market fund that had
a maturity of less than 397 days when issued and have a remaining maturity of 60
days as less, and debt instruments held by a money market fund that have a
remaining maturity of 397 days or less shall be valued at cost, adjusted for
amortization of premiums and accretion of discounts; and
(vi) securities (including restricted securities) not having readily-available
market quotations are valued at fair value determined under the Board's
procedures.
If the Manager is unable to locate two market makers willing to give
quotes (see (ii) and (iii) above), the security may be priced at the mean
between the "bid " and "asked " prices provided by a single active market maker
(which in certain cases may be the "bid" price if no "asked" price is available)
provided that the Manager is satisfied that the firm rendering the quotes is
reliable and that the quotes reflect the current market value.
In the case of U.S. Government Securities and mortgage-backed securities,
where as sale information is not generally available, such pricing procedures
may include "matrix" comparisons to the prices for comparable instruments on the
basis of quality, yield, maturity and other special factors involved. The
Manager may use pricing services approved by the Board of Trustees to price U.S.
Government Securities or mortgage-backed securities for which last sale
information is not generally available. The Manager will monitor the accuracy of
such pricing services, which may include comparing prices used for portfolio
evaluation to actual sales prices of selected securities.
Trading in securities on European and Asian exchanges and over-the-counter
markets is normally completed before the close of the Exchange. Events affecting
the values of foreign securities traded in securities markets that occur between
the time their prices are determined and the close of the Exchange will not be
reflected in the Fund's calculation of net asset value unless the Board of
Trustees or the Manager, under procedures established by the Board of Trustees,
determines that the particular event is likely to effect a material change in
the value of such security. Foreign currency, including forward contracts, will
be valued at the closing price in the London foreign exchange market that day as
provided by a reliable bank, dealer or pricing service. The values of securities
denominated in foreign currency will be converted to U.S. dollars at the closing
price in the London foreign exchange market that day as provided by a reliable
bank, dealer or pricing service.
Puts, calls and futures are valued at the last sales price on the
principal exchange on which they are traded, or on NASDAQ, as applicable, as
determined by a pricing service approved by the Board of Trustees or by the
Manager, If there were no sales that day, value shall be the last sale price on
the preceding trading day if it is within the spread of the closing "bid" and
"ask" prices on the principal exchange or on NASDAQ on the valuation date, or,
if not, value shall be the closing "bid" price on the principal exchange or on
NASDAQ, on the valuation date. If the put, call or future is not traded on an
exchange or on NASDAQ, it shall be valued at the mean between "bid" and "ask"
prices obtained by the Manager from two active market makers (which in certain
cases may be the "bid" price if no "ask" price is available).
When the Fund writes an option, an amount equal to the premium received is
included in the Fund's Statement of Assets and Liabilities as an asset, and an
equivalent deferred credit is included in the liability section. The credit is
adjusted ("marked-to-market") to reflect the current market value of the call or
put. In determining the Fund's gain on investments, if a call or put written by
the Fund is exercised, the proceeds are increased by the premium received. If a
call or put written by the Fund expires, the Fund has a gain in the amount of
the premium; if the Fund enters into a closing purchase transaction, it will
have a gain or loss depending on whether the premium received was more or less
than the cost of the closing transaction. If the Fund exercises a put it holds,
the amount the Fund receives on its sale of the underlying investment is reduced
by the amount of premium paid by the Fund. In the case of foreign 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 Manager may use pricing services approved by the Board of Trustees
to price any of the types of securities described above. The Manager will
monitor the accuracy of such pricing services, which may include comparing
prices used for portfolio evaluation to actual sales prices of selected
securities.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25.00. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy shares. Dividends will begin to accrue on shares purchased by
the proceeds of ACH transfers on the business day the Fund receives Federal
Funds for the purchase through the ACH system before the close of the Exchange.
The Exchange normally closes at 4:00 P.M., but may close earlier on certain
days. If Federal Funds are received on a business day after the close of the
Exchange, the shares will be purchased and dividends will begin to accrue on the
next regular business day. The proceeds of ACH transfers are normally received
by the Fund 3 days after the transfers are initiated. The Distributor and the
Fund are not responsible for any delays in purchasing shares resulting from
delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and Letters
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in the Prospectus
because the Distributor incurs little or no selling expenses. The term
"immediate family" refers to one's spouse, children, grandchildren,
grandparents, parents, parents-in-law, brothers and sisters, sons- and
daughters-in-law, a sibling's spouse and a spouse's siblings, aunts, uncles,
nieces and nephews. Relations by virtue of a remarriage (step-children,
step-parents, etc.) are included.
o The Oppenheimer Funds. The Oppenheimer funds are those mutual funds
for which the Distributor acts as the distributor or the sub-distributor
and include the Fund and the following funds:
Limited Term New York Municipal Fund
Oppenheimer Bond Fund
Oppenheimer Bond Fund for Growth
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Champion Income Fund
Oppenheimer Developing Markets Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer Disciplined Value Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Equity Income Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Global Securities Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer Growth & Income Fund
Oppenheimer High Income Fund
Oppenheimer High Yield Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer International Bond Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Growth Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street California Municipal Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer MidCap Fund
Oppenheimer Money Fund
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer New York Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Real Asset Fund
Oppenheimer Strategic Bond Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
Panorama Series Fund Inc.
Rochester Fund Municipals
The New York Tax-Exempt Income Fund, Inc.
the following "Money Market Funds":
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Daily Cash Accumulation Fund, Inc.
Oppenheimer Cash Reserves
Oppenheimer Money Market Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of each
of the Oppenheimer funds except Money Market Funds (under certain circumstances
described herein, redemption proceeds of Money Market Fund shares may be subject
to a contingent deferred sales charge).
o Letters of Intent. A Letter of Intent ("Letter") is the investor's
statement of intention to purchase Class A or Class A and Class B shares of the
Fund (and other eligible Oppenheimer funds) during the 13-month period from the
investor's first purchase 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
reinvestment of dividends or distributions or purchases made at net asset value
without sales charge), which together with the investor's holdings of such funds
(calculated at their respective public offering prices calculated on the date of
the Letter) will equal or exceed the amount specified in the Letter. This
enables the investor to count the shares to be purchased under the Letter of
Intent to obtain the reduced sales charge rate (as set forth in the Prospectus)
that applies under the Right of Accumulation to current purchases of Class A
shares. Each purchase of Class A shares under the Letter will be made at the
public offering price (including the sales charge) that applies to a single
lump-sum purchase of shares in the amount intended to be purchased under the
Letter.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of Intent
period, when added to the value (at offering price) of the investor's holdings
of shares on the last day of that period, do not equal or exceed the intended
purchase amount, the investor agrees to pay the additional amount of sales
charge applicable to such purchases, as set forth in "Terms of Escrow," below
(as those terms may be amended from time to time). The investor agrees that
shares equal in value to 5% of the intended purchase amount will be held in
escrow by the Transfer Agent subject to the Terms of Escrow. Also, the investor
agrees to be bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and if such
terms are amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer funds by
OppenheimerFunds prototype 401(k) plans under a Letter of Intent, the Transfer
Agent will not hold shares in escrow. If the intended purchase amount under the
Letter entered into by an OppenheimerFunds prototype 401(k) plan is not
purchased by the plan by the end of the Letter of Intent period, there will be
no adjustment of commissions paid to the broker-dealer or financial institution
of record for accounts held in the name of that plan.
If the total eligible purchases made during the Letter of Intent period do
not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
purchases. If total eligible purchases during the Letter of Intent period exceed
the intended purchase amount and exceed the amount needed to qualify for the
next sales charge rate reduction set forth in the applicable prospectus, the
sales charges paid will be adjusted to the lower rate, but only if and when the
dealer returns to the Distributor the excess of the amount of commissions
allowed or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the Distributor
will be used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly after the
Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter, shares
redeemed by the investor prior to the termination of the Letter of Intent period
will be deducted. It is the responsibility of the dealer of record and/or the
investor to advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All of such
purchases must be made through the Distributor.
o 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 purchase amount specified in the Letter shall be held in escrow by the
Transfer Agent. For example, if the intended purchase amount is $50,000, the
escrow shall be shares valued in the amount of $2,500 (computed at the public
offering price adjusted for a $50,000 purchase). Any dividends and capital gains
distributions on the escrowed shares will be credited to the investor's account.
(2) If the intended purchase amount specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed shares
will be promptly released to the investor.
(3) If, at the end of the thirteen-month Letter of Intent period the total
purchases pursuant to the Letter are less than the intended purchase amount
specified in the Letter, the investor must remit to the Distributor an amount
equal to the difference between the dollar amount of sales charges actually paid
and the amount of sales charges which would have been paid if the total amount
purchased had been made at a single time. Such sales charge adjustment will
apply to any shares redeemed prior to the completion of the Letter. If such
difference in sales charges is not paid within twenty days after a request from
the Distributor or the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares necessary to
realize such difference in sales charges. Full and fractional shares remaining
after such redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales charge, the
sales charge will be withheld from the redemption proceeds.
(4) By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for redemption any
or all escrowed shares.
(5) The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include (a) Class A shares
sold with a front-end sales charge or subject to a Class A contingent deferred
sales charge, (b) Class B shares acquired subject to a contingent deferred sales
charge, and (c) Class A or B shares acquired in exchange for either (i) Class A
shares of one of the other Oppenheimer funds that were acquired subject to a
Class A initial or contingent deferred sales charge or (ii) Class B shares of
one of the other Oppenheimer funds that were acquired subject to a contingent
deferred sales charge.
(6) Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in the
section of the Prospectus entitled "How to Exchange Shares," and the escrow will
be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank account, a
check (minimum $25) for the initial purchase must accompany the application.
Shares purchased by Asset Builder Plan payments from bank accounts are subject
to the redemption restrictions for recent purchases described in "How To Sell
Shares," in the Prospectus. Asset Builder Plans also enable shareholders of the
Fund to use those accounts for monthly automatic purchases of shares of up to
four other Oppenheimer funds. If you make payments from your bank account to
purchase shares of the Fund, your bank account will be automatically debited
normally four to five business days prior to the investment dates selected in
the Account Application. Neither the Distributor, the Transfer Agent nor the
Fund shall be responsible for any delays in purchasing shares resulting from
delays in ACH transmission.
There is a front-end sales charge on the purchase of certain Oppenheimer
funds, or a contingent deferred sales charge may apply to shares purchased by
Asset Builder payments. An application should be obtained from the Distributor,
completed and returned, and a prospectus of the selected fund(s) should be
obtained from the Distributor or your financial advisor before initiating Asset
Builder payments. The amount of the Asset Builder investment may be changed or
the automatic investments may be terminated at any time by writing to the
Transfer Agent. A reasonable period (approximately 15 days) is required after
the Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans at any
time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the Fund's
shares (for example, when a purchase check is returned to the Fund unpaid)
causes a loss to be incurred when the net asset value of the Fund's shares on
the cancellation date is less than on the purchase date. That loss is equal to
the amount of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is responsible for that
loss. If the investor fails to compensate the Fund for the loss, the Distributor
will do so. The Fund may reimburse the Distributor for that amount by redeeming
shares from any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
Retirement Plans. In describing certain types of employee benefit plans that may
purchase Class A shares without being subject to the Class A contingent differed
sales charge, the term "employee benefit plan" means any plan or arrangement,
whether or not "qualified" under the Internal Revenue Code, including, medical
savings accounts, payroll deduction plans or similar plans in which Class A
shares are purchased by a fiduciary or other person for the account of
participants who are employees of a single employer or of affiliated employers,
if the Fund account is registered in the name of the fiduciary or other person
for the benefit of participants in the plan.
The term "group retirement plan" means any qualified or non-qualified
retirement plan (including 457 plans, SEPs, SARSEPs, 403(b) plans other than
public school 403(b) plans, and SIMPLE plans) for employees of a corporation or
a sole proprietorship, members and employees of a partnership or association or
other organized group of persons (the members of which may include other
groups), if the group or association has made special arrangements with the
Distributor and all members of the group or association participating in or who
are eligible to participate in the plan(s) purchase Class A shares of the Fund
through a single investment dealer, broker, or other financial institution
designated by the group. "Group retirement plan" also include qualified
retirement plans and non-qualified deferred compensation plans and IRAs that
purchase Class A shares of the Fund through a single investment dealer, broker,
or other financial institution, if that broker-dealer has made special
arrangements with the Distributor enabling those plans to purchase Class A
shares of the Fund at net asset value but subject to a contingent deferred sales
charge.
In addition to the discussion in the Prospectus relating to the ability of
Retirement Plans to purchase Class A shares at net asset value in certain
circumstances, there is no initial sales charge on purchases of Class A shares
of any one or more of the Oppenheimer funds by a Retirement Plan in the
following cases:
(i) the recordkeeping for the Retirement Plan is performed on a daily
valuation basis by Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch")
and, on the date the plan sponsor signs the Merrill Lynch recordkeeping service
agreement, the Retirement Plan has $3 million or more in assets invested in
mutual funds other than those advised or managed by Merrill Lynch Asset
Management, L.P. ("MLAM") that are made available pursuant to a Service
Agreement between Merrill Lynch and the mutual fund's principal underwriter or
distributor and in funds advised or managed by MLAM (collectively, the
"Applicable Investments"); or
(ii) the record keeping for the Retirement Plan is performed on a daily
valuation basis by an independent record keeper whose services are provided
under a contract or arrangement between the Retirement Plan and Merrill Lynch.
On the date the plan sponsor signs the Merrill Lynch record keeping service
agreement, the Plan must have $3 million or more in assets, excluding assets
held in money market funds, invested in Applicable Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by the
Merrill Lynch plan conversion manager on the date the plan sponsor signs the
Merrill Lynch record keeping service agreement.
If a Retirement Plan's records are maintained on a daily valuation basis
by Merrill Lynch or an independent record keeper under a contract or alliance
arrangement with Merrill Lynch, and if on the date the plan sponsor signs the
Merrill Lynch record keeping service agreement the Retirement Plan has less than
$3 million in assets, excluding money market fund, invested in Applicable
Investments, then the Retirement Plan may purchase only Class B shares of one or
more of the Oppenheimer funds. Otherwise, the Retirement Plan will be permitted
to purchase Class A shares of one or more of he Oppenheimer funds. Any of those
Retirement Plans that currently invest in Class B shares of the Fund will have
their Class B shares be converted to Class A shares of the Fund once the Plan's
Applicable Investments have reached $5 million.
Any redemptions of shares of the Fund held by Retirement Plans whose
records are maintained on a daily valuation basis by Merrill Lynch or an
independent record keeper under a contract with Merrill Lynch that are currently
invested in Class B shares of the Fund shall not be subject to the Class B CDSC.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the Prospectus. The
information below supplements the terms and conditions for redemptions set forth
in the Prospectus.
Involuntary Redemptions. The Fund's Board of Trustees has the right to cause the
involuntary redemption of the shares held in any account if the aggregate net
asset value of those shares is less than $500 or such lesser amount as the Board
may fix. The Board of Trustees will not cause the involuntary redemption of
shares in an account if the aggregate net asset value of the shares has fallen
below the stated minimum solely as a result of market fluctuations. Should the
Board elect to exercise this right, it may also fix, in accordance with the
Investment Company Act, the requirements for any notice to be given to the
shareholders in question (not less than 30 days), or the Board may set
requirements for granting permission to the Shareholder to increase the
investment, and set other terms and conditions so that the shares would not be
involuntarily redeemed.
Payments "In Kind." The Prospectus states that payment for shares tendered for
redemption is ordinarily made in cash. However, the Board of Trustees of the
Fund may determine that it would be detrimental to the best interests of the
remaining shareholders of the Fund to make payment of a redemption order wholly
or partly in cash. In that case the Fund may pay the redemption proceeds in
whole or in part by a distribution "in kind" of securities from the portfolio of
the Fund, in lieu of cash, in conformity with applicable rules of the Securities
and Exchange Commission. The Fund has elected to be governed by Rule 18f-1 under
the Investment Company Act, pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets of
the Fund during any 90-day period for any one shareholder. If shares are
redeemed in kind, the redeeming shareholder might incur brokerage or other costs
in selling the securities for cash. The method of valuing securities used to
make redemptions in kind will be the same as the method the Fund uses to value
its portfolio securities described above under the "Determination of Net Asset
Values Per Share" and that valuation will be made as of the time the redemption
price is determined.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of (i) Class A shares that you
purchased subject to an initial sales charge, or (ii) Class B shares on which
you paid a contingent deferred sales charge when you redeemed them, without
sales charge. This privilege does not apply to Class C shares. The reinvestment
may be made without sales charge only in Class A shares of the Fund or any of
the other Oppenheimer funds into which shares of the Fund are exchangeable as
described below, at the net asset value next computed after the Transfer Agent
receives the reinvestment order. The shareholder must ask the Distributor for
that privilege at the time of reinvestment. Any capital gain that was realized
when the shares were redeemed is taxable, and reinvestment will not alter any
capital gains tax payable on that gain. If there has been a capital loss on the
redemption, some or all of the loss may not be tax deductible, depending on the
timing and amount of the reinvestment. Under the Internal Revenue Code, if the
redemption proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another of the Oppenheimer funds within 90
days of payment of the sales charge, the shareholder's basis in the shares of
the Fund that were redeemed may not include the amount of the sales charge paid.
That would reduce the loss or increase the gain recognized from the redemption.
However, in that case the sales charge would be added to the basis of the shares
acquired by the reinvestment of the redemption proceeds. The Fund may amend,
suspend or cease offering this reinvestment privilege at any time as to shares
redeemed after the date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a contingent
deferred sales charge of 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 or the Class C
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, 401(k) plans, or
pension or profit-sharing plans should be addressed to "Trustee, Oppenheimer
funds Retirement Plans," c/o the Transfer Agent at its address listed in "How To
Sell Shares" in the Prospectus or on the back cover of this Statement of
Additional Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if the
distribution is premature; and (iii) conform to the requirements of the plan and
the Fund's other redemption requirements. Participants (other than self-employed
persons maintaining a plan account in their own name) in
OppenheimerFunds-sponsored prototype pension, profit-sharing plans or 401(k)
plans may not directly redeem or exchange shares held for their accounts under
those plans. The employer or plan administrator must sign the request.
Distributions from pension and profit sharing plans are subject to special
requirements under the Internal Revenue Code and certain documents (available
from the Transfer Agent) must be completed before the distribution may be made.
Distributions from retirement plans are subject to withholding requirements
under the Internal Revenue Code, and IRS Form W-4P (available from the Transfer
Agent) must be submitted to the Transfer Agent with the distribution request, or
the distribution may be delayed. Unless the shareholder has provided the
Transfer Agent with a certified tax identification number, the Internal Revenue
Code requires that tax be withheld from any distribution even if the shareholder
elects not to have tax withheld. The Fund, the Manager, the Distributor, the
Trustee and the Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not be
responsible for any tax penalties assessed in connection with a distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers. The
Distributor is the Fund's agent to repurchase its shares from authorized dealers
or brokers on behalf of their customers. The shareholder should contact the
broker or dealer to arrange this type of redemption. The repurchase price per
share will be the net asset value next computed after the Distributor receives
the order placed by the dealer or broker, except that if the Distributor
receives a repurchase order from a dealer or broker after the close of The New
York Stock Exchange on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker from its
customers prior to the time the Exchange closed (normally that is 4:00 P.M., but
may be earlier some days) and the order was transmitted to and received by the
Distributor prior to its close of business that day (normally 5:00 P.M.).
Ordinarily, for accounts redeemed by a broker-dealer under this procedure,
payment will be made within three business days after the shares have been
redeemed upon the Distributor's receipt of the required redemption documents in
proper form, with the signature(s) of the registered owners guaranteed on the
redemption document as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(minimum $50) automatically on a monthly, quarterly, semi-annual or annual basis
under an Automatic Withdrawal Plan. Shares will be redeemed three business days
prior to the date requested by the shareholder for receipt of the payment.
Automatic withdrawals of up to $1,500 per month may be requested by telephone if
payments are to be made by check payable to all shareholders of record and sent
to the address of record for the account (and if the address has not been
changed within the prior 30 days). Required minimum distributions from
OppenheimerFunds 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. Shares are normally redeemed
pursuant to an Automatic Withdrawal Plan three business days before the date you
select in the Account Application. If a contingent deferred sales charge applies
to the redemption, the amount of the check or payment will be reduced
accordingly. The Fund cannot guarantee receipt of a payment on the date
requested and reserves the right to amend, suspend or discontinue offering such
plans at any time without prior notice. Because of the sales charge assessed on
Class A share purchases, shareholders should not make regular additional Class A
share purchases while participating in an Automatic Withdrawal Plan. Class B and
Class C shareholders should not establish withdrawal plans, because of the
imposition of the contingent deferred sales charge on such withdrawals (except
where the Class B or the Class C contingent deferred sales charge is waived as
described in the Prospectus in "Waivers of Class B and Class C Sales Charges").
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions applicable to such plans, as stated below 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.
o Automatic Exchange Plans. Shareholders can authorize the Transfer Agent
(on the OppenheimerFunds Application or signature-guaranteed instructions) to
exchange a pre-determined amount of shares of the Fund for shares (of the same
class) of other Oppenheimer funds automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount
that may be exchanged to each other fund account is $25. Exchanges made under
these plans are subject to the restrictions that apply to exchanges as set forth
in "How to Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
o Automatic Withdrawal Plans. Fund shares will be redeemed as necessary to
meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first and shares acquired with reinvested dividends and capital gains
distributions will be redeemed next, followed by shares acquired with a sales
charge, to the extent necessary to make withdrawal payments. Depending upon the
amount withdrawn, the investor's principal may be depleted. Payments made under
withdrawal plans should not be considered as a yield or income on your
investment. It may not be desirable to purchase additional Class A shares while
making automatic withdrawals because of the sales charges that apply to
purchases when made. Accordingly, a shareholder normally may not maintain an
Automatic Withdrawal Plan while simultaneously making regular purchases of Class
A shares.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan (the "Plan") as agent for the investor (the "Planholder") who executed the
Plan authorization and application submitted to the Transfer Agent. Neither the
Fund nor the Transfer Agent shall incur any liability to the Planholder for any
action taken or omitted by the Transfer Agent in good faith to administer the
Plan. Certificates will not be issued for shares of the Fund purchased for and
held under the Plan, but the Transfer Agent will credit all such shares to the
account of the Planholder on the records of the Fund. Any share certificates
held by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the account
may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made at
the net asset value per share determined on the redemption date. Checks or
AccountLink payments of the proceeds of Plan withdrawals will normally be
transmitted three business days prior to the date selected for receipt of the
payment (receipt of payment on the date selected cannot be guaranteed),
according to the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time in mailing such notification
for the requested change to be put in effect. The Planholder may, at any time,
instruct the Transfer Agent by written notice (in proper form in accordance with
the requirements of the then-current Prospectus of the Fund) to redeem all, or
any part of, the shares held under the Plan. In that case, the Transfer Agent
will redeem the number of shares requested at the net asset value per share in
effect in accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing to the
Transfer Agent. A Plan may also be terminated at any time by the Transfer Agent
upon receiving directions to that effect from the Fund. The Transfer Agent will
also terminate a Plan upon receipt of evidence satisfactory to it of the death
or legal incapacity of the Planholder. Upon termination of a Plan by the
Transfer Agent or the Fund, shares that have not been redeemed from the account
will be held in uncertificated form in the name of the Planholder, and the
account will continue as a dividend- reinvestment, uncertificated account unless
and until proper instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use Class A shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the Class A shares in
certificated form. Share certificates are not issued for Class B shares or Class
C shares. Upon written request from the Planholder, the Transfer Agent will
determine the number of Class A shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of Oppenheimer funds
having more than one class of shares may be exchanged only for shares of the
same class of other Oppenheimer funds. Shares of the Oppenheimer funds that have
a single class without a class designation are deemed "Class A" shares for this
purpose. All Oppenheimer funds offer Class A, Class B and Class C shares except
Oppenheimer Money Market Fund, Inc., Centennial Money Market Trust, Centennial
Tax- Exempt Trust, Centennial Government Trust, Centennial New York Tax-Exempt
Trust, Centennial California Tax-Exempt Trust, Centennial America Fund, L.P. and
Daily Cash Accumulation Fund, Inc, which offer only Class A shares, and
Oppenheimer Main Street California Tax-Exempt Fund which only offers Class A and
Class B shares, (Class B and Class C shares of Oppenheimer Cash Reserves are
generally only available by exchange from the same class of other Oppenheimer
funds or thorough OppenheimerFunds sponsored 401(k) plans). A current list
showing which funds offer which class can be obtained by calling the Distributor
at 1-800-525-7048.
For accounts established on or before March 8, 1996 holding Class M shares
of Oppenheimer Bond Fund for Growth, Class M shares can be exchanged only for
Class A shares of other Oppenheimer funds. Exchanges to Class M shares of
Oppenheimer Bond Fund for Growth are permitted from Class A shares of
Oppenheimer Money Market Fund, Inc. or Oppenheimer Cash Reserves that were
acquired by exchange from Class M shares. Otherwise no exchanges of any class of
any Oppenheimer fund into Class M shares are permitted.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any Money Market Fund. Shares of any Money Market Fund purchased
without a sales charge may be exchanged for shares of Oppenheimer funds offered
with a sales charge upon payment of the sales charge (or, if applicable, may be
used to purchase shares of Oppenheimer funds subject to a contingent deferred
sales charge). However, shares of Oppenheimer Money Market Fund, Inc., purchased
with the redemption proceeds of shares of other mutual funds (other than funds
managed by the Manager or its subsidiaries) redeemed within the 12 months prior
to that purchase may subsequently be exchanged for shares of other Oppenheimer
funds without being subject to an initial or contingent deferred sales charge,
whichever is applicable. To qualify for this privilege, the investor or the
investor's dealer must notify the Distributor of eligibility for this privilege
at the time the shares of Oppenheimer Money Market Fund, Inc., are purchased,
and, if requested, must supply proof of entitlement to this privilege.
Shares of this Fund acquired by reinvestment of dividends or distributions
from any other of the Oppenheimer funds (except Oppenheimer Cash Reserves) or
from any unit investment trust for which reinvestment arrangements have been
made with the Distributor may be exchanged at net asset value for shares of any
of the Oppenheimer funds. No contingent deferred sales charge is imposed on
exchanges of shares of any class purchased subject to a contingent deferred
sales charge. However, when Class A shares acquired by exchange of Class A
shares of other Oppenheimer funds purchased subject to a Class A contingent
deferred sales charge are redeemed within 18 months of the end of the calendar
month of the initial purchase of the exchanged Class A shares, the Class A
contingent deferred sales charge is imposed on the redeemed shares (see "Class A
Contingent Deferred Sales Charge" in the Prospectus). The Class B contingent
deferred sales charge is imposed on Class B shares acquired by exchange if they
are redeemed within 6 years of the initial purchase of the exchanged Class B
shares. The Class C contingent deferred sales charge is imposed on Class C
shares acquired by exchange if they are redeemed within 12 months of the initial
purchase of the exchanged Class C shares.
When Class B shares or Class C shares are redeemed to effect an exchange,
the priorities described in "How To Buy Shares" in the Prospectus for the
imposition of the Class B or the Class C contingent deferred sales charge will
be followed in determining the order in which the shares are exchanged.
Shareholders should take into account the effect of any exchange on the
applicability and rate of any contingent deferred sales charge that might be
imposed in the subsequent redemption of remaining shares. Shareholders owning
shares of more than one class must specify whether they intend to exchange Class
A, Class B or Class C shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of more than one account. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may be less
than the number requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this Statement of
Additional Information or would include shares covered by a share certificate
that is not tendered with the request. In those cases, only the shares available
for exchange without restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either have an
existing account in, or obtain and acknowledge receipt of a prospectus of, the
fund to which the exchange is to be made. For full or partial exchanges of an
account made by telephone, any special account features such as Asset Builder
Plans, Automatic Withdrawal Plans, and retirement plan contributions will be
switched to the new account unless the Transfer Agent is instructed otherwise.
If all telephone lines are busy (which might occur, for example, during periods
of substantial market fluctuations), shareholders might not be able to request
exchanges by telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the "Redemption
Date"). Normally, shares of the fund to be acquired are purchased on the
Redemption Date, but such purchases may be delayed by either fund up to five
business days if it determines that it would be disadvantaged by an immediate
transfer of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it (for
example, if the receipt of multiple exchange requests from a dealer might
require the disposition of portfolio securities at a time or at a price that
might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure that
the Fund selected is appropriate for his or her investment and should be aware
of the tax consequences of an exchange. For federal income tax purposes, an
exchange transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above, discusses some
of the tax consequences of reinvestment of redemption proceeds in such cases.
The Fund, the Distributor, and the Transfer Agent are unable to provide
investment, tax or legal advice to a shareholder in connection with an exchange
request or any other investment transaction.
Dividends, Capital Gains and Taxes
Tax Status of the Fund's Dividends and Distributions. The Federal tax treatment
of the Fund's dividends and capital gains distributions is explained in the
Prospectus under the caption "Dividends, Capital Gains and Taxes." Special
provisions of the Internal Revenue Code govern the eligibility of the Fund's
dividends for the dividends-received deduction for corporate shareholders.
Long-term capital gains distributions are not eligible for the deduction. In
addition, the amount of dividends paid by the Fund which may qualify for the
deduction is limited to the aggregate amount of qualifying dividends that the
Fund derives from its portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not be eligible for the
deduction on dividends paid on Fund shares held for 45 days or less. To the
extent the Fund's dividends are derived from gross income from option premiums,
interest income or short-term gains from the sale of securities or dividends
from foreign corporations, those dividends will not qualify for the deduction.
Because of the Fund's emphasis on foreign securities, it is unlikely that the
Fund's dividends will qualify for this deduction.
Under the Internal Revenue Code, by December 31 each year the Fund must
distribute 98% of its taxable investment income earned from January 1 through
December 31 of that year and 98% of its capital gains realized in the period
from November 1 of the prior year through October 31 of the current year, or
else the Fund must pay an excise tax on the amounts not distributed. While it is
presently anticipated that the Fund will meet those requirements, the Fund's
Board of Trustees and the Manager might determine in a particular year that it
would be in the best interest of shareholders for the Fund not to make such
distributions at the required levels and to pay the excise tax on the
undistributed amounts. That would reduce the amount of income or capital gains
available for distribution to shareholders.
If the Fund has more than 50% of its total assets invested in foreign
securities at the end of its fiscal year, it may elect the application of
Section 853 of the Internal Revenue Code to permit shareholders to take a credit
(or, at their option, a deduction) for foreign taxes paid by the Fund. Under
Section 853, shareholders would be entitled to treat the foreign taxes withheld
from interest and dividends paid to the Fund from its foreign investments as a
credit on their federal income taxes. As an alternative, shareholders could, if
to their advantage, treat the foreign tax withheld as a deduction from gross
income in computing taxable income rather than as a tax credit. In substance,
the Fund's election would enable shareholders to benefit from the same foreign
tax credit or deduction that would be received if they had been the record
owners of the Fund's foreign securities and had paid foreign taxes on the income
received.
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 intends to qualify in the
current and future fiscal years, but reserves the right not to do so. The
Internal Revenue Code contains a number of complex tests relating to such
qualification in which 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 did not so
qualify, the Fund would be treated for tax purposes as an ordinary corporation
and receive no tax deduction for payments made to shareholders.
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.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the same
class of any of the other Oppenheimer funds listed in "Reduced Sales Charges,"
above, at net asset value without sales charge. To elect this option, a
shareholder must notify the Transfer Agent in writing and either have an
existing account in the fund selected for reinvestment or must obtain a
prospectus for that fund and an application from the Distributor to establish an
account. The investment will be made at the net asset value per share in effect
at the close of business on the payable date of the dividend or distribution.
Dividends and/or distributions from shares of other Oppenheimer funds may be
invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities and handling the delivery of such securities to and from
the Fund. The Manager has represented to the Fund that the banking relationships
between the Manager and the Custodian have been and will continue to be
unrelated to and unaffected by the relationship between the Fund and the
Custodian. It will be the practice of the Fund to deal with the Custodian in a
manner uninfluenced by any banking relationship the Custodian may have with the
Manager and its affiliates. The Fund's cash balances with the Custodian in
excess of $100,000 are not protected by Federal deposit insurance. Such
uninsured balances at times may be substantial.
Independent Auditors. The independent auditors of the Fund audit the Fund's
financial statements and perform other related audit services. They also act as
auditors for certain other funds advised by the Manager and its affiliates.
-3-
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
The Board of Trustees and Shareholders of
Oppenheimer Developing Markets Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer Developing Markets Fund as of August 31, 1997, and
the related statement of operations, statement of changes in net assets and the
financial highlights for the period from November 18, 1996 (commencement of
operations) to August 31, 1997. 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 audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of August 31, 1997, by correspondence with
the custodian and brokers; and where confirmations were not received from
brokers, we performed other auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Oppenheimer Developing Markets Fund as of August 31, 1997, and the
results of its operations, changes in net assets and financial highlights for
the period from November 18, 1996 (commencement of operations) to August 31,
1997, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Denver, Colorado
September 22, 1997
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments August 31, 1997
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
================================================================================
Common Stocks--91.6%
- --------------------------------------------------------------------------------
Consumer Cyclicals--18.6%
- --------------------------------------------------------------------------------
Autos & Housing--5.5%
Brazil Realty SA, GDR(1) 33,800 $ 922,382
- --------------------------------------------------------------------------------
IRSA Inversiones y Representaciones SA, Sponsored GDR 25,000 1,110,937
- --------------------------------------------------------------------------------
Solidere, GDR 80,000 1,350,000
----------
3,383,319
- --------------------------------------------------------------------------------
Leisure & Entertainment--1.6%
Beijing Enterprises Holdings Ltd., Cl. H(2) 134,000 1,011,609
- --------------------------------------------------------------------------------
Media--7.4%
Grupo Radio Centro SA de CV, Sponsored ADR 31,600 458,200
- --------------------------------------------------------------------------------
Grupo Televisa SA, Sponsored ADR(1)(2) 58,700 1,915,087
- --------------------------------------------------------------------------------
Lusomundo SGPS SA 138,000 1,038,474
- --------------------------------------------------------------------------------
Times Publishing Ltd. 550,000 1,163,624
----------
4,575,385
- --------------------------------------------------------------------------------
Retail: General--0.2%
PT Matahari Putra Prima 270,000 143,322
- --------------------------------------------------------------------------------
Retail: Specialty--3.9%
Courts (Singapore) Ltd. 755,000 574,044
- --------------------------------------------------------------------------------
Ellerine Holdings Ltd. 75,000 621,867
- --------------------------------------------------------------------------------
Giordano International Ltd. 1,700,000 1,206,600
----------
2,402,511
- --------------------------------------------------------------------------------
Consumer Non-Cyclicals--19.0%
- --------------------------------------------------------------------------------
Beverages--5.1%
Al-Ahram Beverages Co., GDR(1)(2) 20,400 520,200
- --------------------------------------------------------------------------------
Cia Cervejaria Brahma, Preference 777,000 519,425
- --------------------------------------------------------------------------------
Fomento Economico Mexicano SA de CV, Cl. B,
Sponsored ADR 44,000 301,475
- --------------------------------------------------------------------------------
Hellenic Bottling Co., SA 10,000 362,227
- --------------------------------------------------------------------------------
Serm Suk Public Co. Ltd. 21,800 374,916
- --------------------------------------------------------------------------------
Vina Concha y Toro SA, ADR 40,000 1,085,000
- --------------------------------------------------------------------------------
3,163,243
- --------------------------------------------------------------------------------
Food--4.9%
Cresud SA(2) 450,000 1,057,696
- --------------------------------------------------------------------------------
Dairy Farm International Holdings Ltd. 1,260,000 1,058,400
- --------------------------------------------------------------------------------
Disco SA, Sponsored ADR(2) 400 17,575
- --------------------------------------------------------------------------------
Makro Atacadista SA, GDR 37,500 534,375
- --------------------------------------------------------------------------------
Rolimpex SA(2) 91,720 356,345
----------
3,024,391
10 Oppenheimer Developing Markets Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Healthcare/Drugs--6.5%
Dr. Reddy's Laboratories Ltd. 130,000 $1,008,189
- --------------------------------------------------------------------------------
Glaxo (India) Ltd. 90,000 1,011,973
- --------------------------------------------------------------------------------
Lavipharm, SA 146,300 1,090,364
- --------------------------------------------------------------------------------
Pfizer Ltd. 110,000 937,104
------------
4,047,630
- --------------------------------------------------------------------------------
Household Goods--0.8%
Pond's (India) Ltd.(2) 10,000 466,625
- --------------------------------------------------------------------------------
Tobacco--1.7%
Eastern Tobacco(2) 20,000 504,236
- --------------------------------------------------------------------------------
Papastratos Cigarettes SA 18,800 321,734
- --------------------------------------------------------------------------------
R.J. Reynolds Berhad 123,000 202,502
------------
1,028,472
- --------------------------------------------------------------------------------
Energy--5.7%
- --------------------------------------------------------------------------------
Energy Services & Producers--1.4%
Gazprom, ADR(1) 44,295 858,216
- --------------------------------------------------------------------------------
Oil-Integrated--4.3%
Elf Gabon SA 2,250 515,301
- --------------------------------------------------------------------------------
Lukoil Oil Co., Sponsored ADR 6,000 543,446
- --------------------------------------------------------------------------------
Petroleo Brasileiro SA, ADR 17,650 442,867
- --------------------------------------------------------------------------------
Petroleo Brasileiro SA, Preference 2,400,000 580,222
- --------------------------------------------------------------------------------
Surgutneftegaz, Sponsored ADR 10,500 568,011
------------
2,649,847
- --------------------------------------------------------------------------------
Financial--30.0%
- --------------------------------------------------------------------------------
Banks--18.5%
Amalgamated Banks of South Africa Ltd. 150,000 973,566
- --------------------------------------------------------------------------------
Banco Bradesco SA, Preference 99,200,000 972,018
- --------------------------------------------------------------------------------
Banco de Galicia y Buenos Aires SA de CV, Sponsored ADR 15,300 455,414
- --------------------------------------------------------------------------------
Banco Espirito Santo e Comercial de Lisboa, SA 21,000 517,185
- --------------------------------------------------------------------------------
Banco Frances del Rio de la Plata SA, Sponsored ADR 18,900 618,975
- --------------------------------------------------------------------------------
Banco Itau SA, Preference 685,000 388,921
- --------------------------------------------------------------------------------
Banco Totta & Acores, B Shares 60,000 1,080,341
- --------------------------------------------------------------------------------
Bank Handlowy W Warszawie, GDR(2) 20,000 252,102
- --------------------------------------------------------------------------------
Bank Inicjatyw Gospodarczych SA 135,000 157,348
- --------------------------------------------------------------------------------
Bank Rozwoju Eksportu SA 3,325 66,983
- --------------------------------------------------------------------------------
Banque Libanaise Pour Le Comm SAL, GDR, Cl. B(2) 18,000 424,800
- --------------------------------------------------------------------------------
Commercial International Bank, Sponsored GDR 37,000 926,850
- --------------------------------------------------------------------------------
Grupo Financiero Banorte SA de CV, Series B(2) 720,000 1,109,117
- --------------------------------------------------------------------------------
Grupo Financiero Inbursa SA de CV, Series B 119,000 488,119
11 Oppenheimer Developing Markets Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Banks (continued)
Hansabank Ltd. 9,700 $ 161,968
- --------------------------------------------------------------------------------
HSBC Holdings plc 16,982 517,193
- --------------------------------------------------------------------------------
Liu Chong Hing Bank Ltd. 215,000 572,942
- --------------------------------------------------------------------------------
Philippine National Bank(2) 46,750 202,993
- --------------------------------------------------------------------------------
PT Pan Indonesia Bank(2) 1,100,000 414,384
- --------------------------------------------------------------------------------
Public Bank Berhad 114,000 107,137
- --------------------------------------------------------------------------------
Turkiye Garanti Bankasi AS 5,311,108 212,305
- --------------------------------------------------------------------------------
Uniao de Bancos Brasileiros SA, Preference 7,470,000 265,350
- --------------------------------------------------------------------------------
Unibanco-Uniao de Bancos Brasileiros SA,
Sponsored GDR Representing 500 Units of one Preferred
Share of Unibanco and one Preferred Share of Unibanco
Holdings SA(2) 11,300 395,500
- --------------------------------------------------------------------------------
Wielkopolski Bank Kredytowy SA 27,000 147,635
----------
11,429,146
- --------------------------------------------------------------------------------
Diversified Financial--7.9%
Banco BHIF, Sponsored ADR 43,200 950,400
- --------------------------------------------------------------------------------
H.O. Sabanci Holdings, Inc.(2) 125,000 1,031,250
- --------------------------------------------------------------------------------
Industrial Credit & Investment Corp. of India Ltd. 200,000 495,458
- --------------------------------------------------------------------------------
Industrial Credit & Investment Corp. of India Ltd.,
GDR(1)(2) 76,700 1,073,800
- --------------------------------------------------------------------------------
London Forfaiting Co. plc 170,000 1,240,679
- --------------------------------------------------------------------------------
Public Finance Berhad 111,000 76,144
----------
4,867,731
- --------------------------------------------------------------------------------
Insurance--3.6%
Adamjee Insurance Co. Ltd. 277,700 756,343
- --------------------------------------------------------------------------------
Aksigorta AS 6,250,000 382,212
- --------------------------------------------------------------------------------
Liberty Life Association of Africa Ltd. 36,000 1,108,810
----------
2,247,365
- --------------------------------------------------------------------------------
Industrial--5.5%
- --------------------------------------------------------------------------------
Industrial Materials--0.3%
HI Cement Corp.(1) 1,600,000 189,473
- --------------------------------------------------------------------------------
Industrial Services--3.5%
Asian Terminals, Inc. 2,300,000 264,802
- --------------------------------------------------------------------------------
Cia de Saneamento Basico de Sao Paulo(2) 5,040,000 1,338,466
- --------------------------------------------------------------------------------
MRC Allied Industries, Inc.(2) 4,400,000 315,526
- --------------------------------------------------------------------------------
Noble Group Ltd.(2) 550,000 231,000
----------
2,149,794
- --------------------------------------------------------------------------------
Transportation--1.7%
Guangshen Railway Co. Ltd., Sponsored ADR 50,000 1,065,625
12 Oppenheimer Developing Markets Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Technology--2.0%
- --------------------------------------------------------------------------------
Telecommunications-Technology--2.0%
Ericsson Telecomunicacoes SA 9,800,000 $ 482,822
- --------------------------------------------------------------------------------
Intracom SA 5,000 207,693
- --------------------------------------------------------------------------------
SK Telecom Co. Ltd. 697 522,360
----------
1,212,875
- --------------------------------------------------------------------------------
Utilities--10.8%
- --------------------------------------------------------------------------------
Electric Utilities--3.3%
Cia Eletricidade Da Bahia(2) 9,160,000 733,977
- --------------------------------------------------------------------------------
Cia Paranaense Energia, Sponsored ADR,
Preference B Shares 37,800 543,375
- --------------------------------------------------------------------------------
Electricidade de Portugal SA 20,000 312,719
- --------------------------------------------------------------------------------
First Philippine Holdings Corp., B Shares 420,000 428,289
----------
2,018,360
- --------------------------------------------------------------------------------
Gas Utilities--0.9%
Primagaz Rt. 11,000 560,046
- --------------------------------------------------------------------------------
Telephone Utilities--6.6%
Telecomunicacoes Brasileiras SA 13,100,000 1,379,704
- --------------------------------------------------------------------------------
Telecomunicacoes do Rio de Janeiro SA, Preference 8,194,722 1,055,862
- --------------------------------------------------------------------------------
Telefonica del Peru SA, ADR 40,000 935,000
- --------------------------------------------------------------------------------
Videsh Sanchar Nigam Ltd., GDR 48,000 709,200
----------
4,079,766
----------
Total Common Stocks (Cost $55,392,624) 56,574,751
Face
Amount(3)
================================================================================
Foreign Government Obligations--0.5%
- --------------------------------------------------------------------------------
Bonos de la Tesoreria de la Federacion,
Zero Coupon:
24.49%, 11/6/97(4) MXP 726,690 89,890
24.66%, 12/4/97(4) MXP 720,000 87,618
22.90%, 2/4/98(4) MXP 962,300 112,972
----------
Total Foreign Government Obligations
(Cost $287,753) 290,480
Units
================================================================================
Rights, Warrants and Certificates--0.0%
- --------------------------------------------------------------------------------
PT Pan Indonesia Bank Wts., Exp. 6/00 (Cost $0) 94,500 6,958
13 Oppenheimer Developing Markets Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
Face Market Value
Amount(3) See Note 1
================================================================================
Repurchase Agreements--10.0%
- --------------------------------------------------------------------------------
Repurchase agreement with J.P. Morgan Securities,
Inc., 5.55%, dated 8/29/97, to be repurchased at
$6,203,823 on 9/2/97, collateralized by U.S. Treasury
Bonds, 7.25%-11.25%, 2/15/03-8/15/19, with a value of
$5,915,535 and U.S. Treasury Nts., 5.875%, 10/31/98,
with a value of $414,508 (Cost $6,200,000) $6,200,000 $6,200,000
- --------------------------------------------------------------------------------
Total Investments, at Value (Cost $61,880,377) 102.1% 63,072,189
- --------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (2.1) (1,275,601)
--------- -----------
Net Assets 100.0% $61,796,588
========= ===========
1. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities
have been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $5,479,158 or 8.87% of the Fund's net
assets at August 31, 1997.
2. Non-income producing security.
3. Face amount is reported in U.S. Dollars, except for those denoted in the
following currency:
MXP--Mexican Peso
4. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
14 Oppenheimer Developing Markets Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Distribution of investments by country of issue, as a percentage of total
investments at value, is as follows:
Country Market Value Percent
- --------------------------------------------------------------------------------
Brazil $10,555,266 16.7%
United States 6,200,000 9.8
India 5,702,350 9.1
Mexico 4,562,478 7.2
Hong Kong 3,539,344 5.6
Argentina 3,260,597 5.2
Portugal 2,948,719 4.7
Singapore 2,796,068 4.4
South Africa 2,704,244 4.3
Chile 2,035,400 3.2
Greece 1,982,018 3.1
Russia 1,969,673 3.1
Egypt 1,951,286 3.1
Lebanon 1,774,800 2.8
Turkey 1,625,767 2.6
Philippines 1,401,083 2.2
Great Britain 1,240,679 2.0
China 1,065,625 1.7
Poland 980,413 1.6
Peru 935,000 1.5
Pakistan 756,343 1.2
Indonesia 564,664 0.9
Hungary 560,046 0.9
Korea, Republic of (South) 522,360 0.8
France 515,301 0.8
Malaysia 385,783 0.6
Thailand 374,915 0.6
Finland 161,967 0.3
----------- -----
Total $63,072,189 100.0%
=========== =====
See accompanying Notes to Financial Statements.
15 Oppenheimer Developing Markets Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities August 31, 1997
- --------------------------------------------------------------------------------
===============================================================================
Assets
Investments, at value (including repurchase agreements of
$6,200,000) (cost $61,880,377)--see accompanying statement $63,072,189
- -------------------------------------------------------------------------------
Receivables:
Shares of beneficial interest sold 470,117
Investments sold 325,279
Interest 47,462
- -------------------------------------------------------------------------------
Other 15,343
------------
Total assets 63,930,390
===============================================================================
Liabilities
Bank overdraft 36,219
- -------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 1,265,885
Investments purchased 741,585
Distribution and service plan fees 21,093
Transfer and shareholder servicing agent fees 4,178
Trustees' fees--Note 1 4,122
Other 60,720
------------
Total liabilities 2,133,802
===============================================================================
Net Assets $61,796,588
============
===============================================================================
Composition of Net Assets
Paid-in capital $59,065,301
- -------------------------------------------------------------------------------
Accumulated net investment income 276,929
- -------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency
transactions 1,264,096
- -------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies 1,190,262
------------
Net assets $61,796,588
============
16 Oppenheimer Developing Markets Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based
on net assets of $37,613,291 and 2,933,407 shares of
beneficial interest outstanding) $12.82
Maximum offering price per share (net asset value plus
sales charge of 5.75% of offering price) $13.60
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $20,469,923 and 1,607,566
shares of beneficial interest outstanding) $12.73
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $3,713,374 and 291,443 shares
of beneficial interest outstanding) $12.74
See accompanying Notes to Financial Statements.
17 Oppenheimer Developing Markets Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Period Ended August 31, 1997(1)
- --------------------------------------------------------------------------------
================================================================================
Investment Income
Dividends (net of foreign withholding taxes of $24,346) $ 537,816
- --------------------------------------------------------------------------------
Interest 207,532
------------
Total income 745,348
================================================================================
Expenses
Management fees--Note 4 211,914
- --------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 25,863
Class B 60,686
Class C 12,147
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 75,095
- --------------------------------------------------------------------------------
Shareholder reports 30,825
- --------------------------------------------------------------------------------
Registration and filing fees 18,177
- --------------------------------------------------------------------------------
Legal and auditing fees 15,714
- --------------------------------------------------------------------------------
Custodian fees and expenses 14,757
- --------------------------------------------------------------------------------
Trustees' fees and expenses--Note 1 5,853
- --------------------------------------------------------------------------------
Deferred organization expenses--Note 1 2,663
- --------------------------------------------------------------------------------
Other 3,002
------------
Total expenses 476,696
Less expenses paid indirectly--Note 4 (6,757)
------------
Net expenses 469,939
================================================================================
Net Investment Income 275,409
================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain on:
Investments 311,180
Foreign currency transactions 952,916
------------
Net realized gain 1,264,096
- --------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 2,694,962
Translation of assets and liabilities denominated in
foreign currencies (1,504,700)
------------
Net change 1,190,262
------------
Net realized and unrealized gain 2,454,358
================================================================================
Net Increase in Net Assets Resulting from Operations $ 2,729,767
============
1. For the period from November 18, 1996 (commencement of operations) to August
31, 1997.
See accompanying Notes to Financial Statements.
18 Oppenheimer Developing Markets Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
Period Ended
August 31,
1997(1)
================================================================================
Operations
Net investment income $ 275,409
- --------------------------------------------------------------------------------
Net realized gain 1,264,096
- --------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 1,190,262
------------
Net increase in net assets resulting from operations 2,729,767
================================================================================
Beneficial Interest Transactions
Net increase in net assets resulting from beneficial interest
transactions--Note 2:
Class A 35,563,435
Class B 19,948,692
Class C 3,554,694
================================================================================
Net Assets
Total increase 61,796,588
- --------------------------------------------------------------------------------
Beginning of period --
------------
End of period (including accumulated net investment
income of $276,929) $61,796,588
============
1. For the period from November 18, 1996 (commencement of operations) to August
31, 1997.
See accompanying Notes to Financial Statements.
19 Oppenheimer Developing Markets Fund
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class B Class C
------------ ------------ ------------
Period Ended Period Ended Period Ended
August 31, August 31, August 31,
1997(1) 1997(1) 1997(1)
====================================================================================
<S> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $10.00 $10.00 $10.00
- ------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .07 .03 .04
Net realized and unrealized gain 2.75 2.70 2.70
------ ------ --------
Total income from investment operations 2.82 2.73 2.74
- ------------------------------------------------------------------------------------
Net asset value, end of period $12.82 $12.73 $12.74
====== ====== ========
====================================================================================
Total Return, at Net Asset Value(2) 28.20% 27.30% 27.40%
====================================================================================
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $37,613 $20,470 $3,713
- ------------------------------------------------------------------------------------
Average net assets (in thousands) $17,852 $7,802 $1,560
- ------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 1.45% 0.87% 0.98%
Expenses(4) 1.94% 2.78% 2.77%
- ------------------------------------------------------------------------------------
Portfolio turnover rate(5) 26.7% 26.7% 26.7%
Average brokerage commission rate(6) $0.0012 $0.0012 $0.0012
</TABLE>
1. For the period from November 18, 1996 (commencement of operations) to August
31, 1997.
2. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or commencement of operations), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
3. Annualized.
4. The expense ratio reflects the effect of gross expenses paid indirectly by
the Fund.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the period ended August 31, 1997 were $60,015,886 and $5,966,015,
respectively.
6. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total of related shares
purchased and sold. Generally, non-U.S. commissions are lower than U.S.
commissions when expressed as cents per share but higher when expressed as a
percentage of transactions because of the lower per-share prices of many
non-U.S. securities.
See accompanying Notes to Financial Statements.
20 Oppenheimer Developing Markets Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
Oppenheimer Developing Markets Fund (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment objective is capital
appreciation, primarily by investing in equity securities of issuers in
emerging markets throughout the world. The Fund's investment adviser is
OppenheimerFunds, Inc. (the Manager). The Fund offers Class A, Class B and
Class C shares. Class A shares are sold with a front-end sales charge. Class B
and Class C shares may be subject to a contingent deferred sales charge. All
three classes of shares have identical rights to earnings, assets and voting
privileges, except that each class has its own distribution and/or service
plan, expenses directly attributable to that class and exclusive voting rights
with respect to matters affecting that class. Class B shares will automatically
convert to Class A shares six years after the date of purchase. The following
is a summary of significant accounting policies consistently followed by the
Fund.
- --------------------------------------------------------------------------------
Investment Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Trustees. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is
reliable and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Trustees to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost
(or last determined market value) adjusted for amortization to maturity of any
premium or discount.
- --------------------------------------------------------------------------------
Foreign Currency Translation. The accounting records of the Fund are
maintained in U.S. dollars. Prices of securities denominated in foreign
currencies are translated into U.S. dollars at the closing rates of exchange.
Amounts related to the purchase and sale of foreign securities and investment
income are translated at the rates of exchange prevailing on the respective
dates of such transactions.
The effect of changes in foreign currency exchange rates on
investments is separately identified from the fluctuations arising from changes
in market values of securities held and reported with all other foreign
currency gains and losses in the Fund's Statement of Operations.
21 Oppenheimer Developing Markets Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is
required to be at least 102% of the resale price at the time of purchase. If
the seller of the agreement defaults and the value of the collateral declines,
or if the seller enters an insolvency proceeding, realization of the value of
the collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, and Gains and Losses. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
- --------------------------------------------------------------------------------
Trustees' Fees and Expenses. The Fund has adopted a nonfunded retirement plan
for the Fund's independent trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service. During the period ended
August 31, 1997, a provision of $787 was made for the Fund's projected benefit
obligations, resulting in an accumulated liability of $787 at August 31, 1997.
- --------------------------------------------------------------------------------
Distributions to Shareholders. Dividends and distributions to shareholders are
recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
Organization Costs. The Manager advanced $17,000 for organization and start-up
costs of the Fund. Such expenses are being amortized over a five-year period
from the date operations commenced. In the event that all or part of the
Manager's initial investment in shares of the Fund is withdrawn during the
amortization period, the redemption proceeds will be reduced to reimburse the
Fund for any unamortized expenses, in the same ratio as the number of shares
redeemed bears to the number of initial shares outstanding at the time of such
redemption.
22 Oppenheimer Developing Markets Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes primarily because of the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes. The character of the
distributions made during the year from net investment income or net realized
gains may differ from its ultimate characterization for federal income tax
purposes. Also, due to timing of dividend distributions, the fiscal year in
which amounts are distributed may differ from the fiscal year in which the
income or realized gain was recorded by the Fund.
During the period ended August 31, 1997, the Fund adjusted the
classification of distributions to shareholders to reflect the differences
between financial statement amounts and distributions determined in accordance
with income tax regulations. Accordingly, during the period ended August 31,
1997, amounts have been reclassified to reflect an increase in undistributed
net investment income of $1,520. Paid-in capital was decreased by the same
amount.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for on the date the investments
are purchased or sold (trade date) and dividend income is recorded on the
ex-dividend date. Discount on securities purchased is amortized over the life
of the respective securities, in accordance with federal income tax
requirements. Realized gains and losses on investments and options written and
unrealized appreciation and depreciation are determined on an identified cost
basis, which is the same basis used for federal income tax purposes.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
23 Oppenheimer Developing Markets Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
Period Ended August 31, 1997(1)
----------------------------------
Shares Amount
--------------- ----------------
Class A:
Sold 4,247,882 $ 52,288,386
Redeemed (1,314,475) (16,724,951)
----------- -------------
Net increase 2,933,407 $ 35,563,435
=========== =============
Class B:
Sold 1,782,562 $ 22,206,999
Redeemed (174,996) (2,258,307)
----------- -------------
Net increase 1,607,566 $ 19,948,692
=========== =============
Class C:
Sold 342,441 $ 4,208,237
Redeemed (50,998) (653,543)
----------- -------------
Net increase 291,443 $ 3,554,694
=========== =============
1. For the period from November 18, 1996 (commencement of operations) to August
31, 1997.
================================================================================
3. Unrealized Gains and Losses on Investments
At August 31, 1997, net unrealized appreciation on investments of $1,191,812
was composed of gross appreciation of $5,715,349, and gross depreciation of
$4,523,537.
24 Oppenheimer Developing Markets Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for an annual fee of 1.00% of
the first $250 million of average annual net assets, 0.95% of the next $250
million, 0.90% of the next $500 million and 0.85% of average annual net assets
in excess of $1 billion.
For the period ended August 31, 1997, commissions (sales charges
paid by investors) on sales of Class A shares totaled $260,494, of which $78,557
was retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by an affiliated broker/dealer. Sales
charges advanced to broker/dealers by OFDI on sales of the Fund's Class B and
Class C shares totaled $369,016 and $23,133, respectively, of which $14,225 was
paid to an affiliated broker/ dealer for Class B. During the period ended August
31, 1997, OFDI received contingent deferred charges of $9,165 upon redemption of
Class C shares as reimbursement for sales commissions advanced by OFDI at the
time of sale of such shares.
OppenheimerFunds Services (OFS), a division of the Manager, is
the transfer and shareholder servicing agent for the Fund and for other
registered investment companies. OFS's total costs of providing such services
are allocated ratably to these companies.
Expenses paid indirectly represent a reduction of custodian fees
for earnings on cash balances maintained at the custodian bank by the Fund.
25 Oppenheimer Developing Markets Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
4. Management Fees and Other Transactions with Affiliates (continued)
The Fund has adopted a Service Plan for Class A shares to reimburse OFDI for a
portion of its costs incurred in connection with the personal service and
maintenance of shareholder accounts that hold Class A shares. Reimbursement is
made quarterly at an annual rate that may not exceed 0.25% of the average
annual net assets of Class A shares of the Fund. OFDI uses the service fee to
reimburse brokers, dealers, banks and other financial institutions quarterly
for providing personal service and maintenance of accounts of their customers
that hold Class A shares. During the period ended August 31, 1997, OFDI paid
$1,108 to an affiliated broker/dealer as reimbursement for Class A personal
service and maintenance expenses.
The Fund has adopted Distribution and Service Plans for Class B
and Class C shares to compensate OFDI for its services and costs in
distributing Class B and Class C shares and servicing accounts. Under the
Plans, the Fund pays OFDI an annual asset-based sales charge of 0.75% per year
on Class B and Class C shares, as compensation for sales commissions paid from
its own resources at the time of sale and associated financing costs. OFDI also
receives a service fee of 0.25% per year as compensation for costs incurred in
connection with the personal service and maintenance of accounts that hold
shares of the Fund, including amounts paid to brokers, dealers, banks and other
financial institutions. Both fees are computed on the average annual net assets
of Class B and Class C shares, determined as of the close of each regular
business day. During the period ended August 31, 1997, OFDI retained $52,924
and $7,886, respectively, as compensation for Class B and Class C sales
commissions and service fee advances, as well as financing costs. If either
Plan is terminated by the Fund, the Board of Trustees may allow the Fund to
continue payments of the asset-based sales charge to OFDI for distributing
shares before the Plan was terminated. At August 31, 1997, OFDI had incurred
unreimbursed expenses of $355,034 for Class B and $38,902 for Class C.
26 Oppenheimer Developing Markets Fund
APPENDIX A
CORPORATE INDUSTRY CLASSIFICATIONS
Aerospace/Defense
Air Transportation
Auto Parts
Distribution
Automotive
Bank Holding Companies
Banks Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
<PAGE>
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Information Technology
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
Wireless Services
A-1
<PAGE>
APPENDIX B
DESCRIPTION OF RATINGS
Categories of Rating Services
Description of Moody's Investors Service, Inc. Bond Ratings
Aaa: Bonds which are rated "Aaa" are judged to be the best quality and to
carry the smallest degree of investment risk. Interest payments are protected by
a large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, the changes that can be
expected are most unlikely to impair the fundamentally strong position of such
issues.
Aa: Bonds 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 with "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than those of
"Aaa" securities.
A: Bonds which are rated "A" possess many favorable investment attributes
and are to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
The investments in which the Fund will principally invest will be in the
lower-rated categories described below.
Baa: Bonds which are rated "Baa" are considered 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 have
speculative characteristics as well.
Ba: Bonds which are rated "Ba" are judged to have speculative elements;
their future cannot be considered well-assured. Often the protection of interest
and principal payments may be very moderate and not well safeguarded during both
good and bad times over the future. Uncertainty of position characterizes bonds
in this class.
B: Bonds which are rated "B" generally lack characteristics of desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated "Caa" are of poor standing and may be in default
or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated "Ca" represent obligations which are speculative
in a high degree and are often in default or have other marked shortcomings.
C: Bonds which are rated "C" are the lowest rated class of bonds and can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.
Description of Standard & Poor's Corporation Bond Ratings
AAA: "AAA" is the highest rating assigned to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA: Bonds rated "AA" also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from "AAA" issues only in small degree.
A: Bonds rated "A" have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to adverse effects of change in
circumstances and economic conditions.
The investments in which the Fund will principally invest will be in the
lower-rated categories, described below.
BBB: Bonds rated "BBB" are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the "A" category.
BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the obligation.
"BB" indicates the lowest degree of speculation and "CC" the highest degree.
While such bonds will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to adverse
conditions.
C: Bonds on which no interest is being paid are rated "C".
D: Bonds rated "D" are in payment default and payment of interest and/or
repayment of principal is in arrears.
B-1
<PAGE>
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
PX0785.001.1297
<PAGE>
OPPENHEIMER DEVELOPING MARKETS FUND
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
(a) Financial Statements:
(1) Financial Highlights: (See Parts A and B): Filed
herewith
(2) Report of Independent Auditors (See Part B): Filed
herewith
(3) Statement of Investments: (See Part B): Filed
herewith
(4) Statement of Assets and Liabilities (See Part B):
Filed herewith
(5) Statement of Operations: (See Part B):Filed herewith
(6) Statement of Changes in Net Assets: (See Part B):
Filed herewith
(7) Notes to Financial Statements (See Part B): Filed
herewith
(b) Exhibits:
(1) Declaration of Trust dated 5/7/96: Previously filed with
Registrant's initial Registration Statement, 6/10/96, and
incorporated herein by reference.
(2) By-Laws dated 5/7/96: Previously filed with Registrant's
initial Registration Statement, 6/10/96, and incorporated
herein by reference.
(3) Not applicable.
(4) (i) Specimen Class A Share Certificate: Previously
filed with Registrants Pre-Effective Amendment
No. 1 , 11/8/96 and incorporated herein by
reference.
(ii) Specimen Class B Share Certificate: Previously
filed with Registrants Pre-Effective Amendment No.
1, 11/8/96 and incorporated herein by reference.
(iii) Specimen Class C Share Certificate: Previously filed
with Registrant's Pre-Effective Amendment No. 1, 11/8/96 and
incorporated herein by reference.
(5) Form of Investment Advisory Agreement: Previously filed with
Registrant's initial Registration Statement, 6/10/96, and
incorporated herein by reference.
(6) (i) Form of General Distributor's Agreement: Previously filed
with Registrant's initial Registration Statement, 6/10/96, and
incorporated herein by reference.
(ii) Form of OppenheimerFunds Distributor, Inc.
Dealer Agreement: Filed with Post-Effective
Amendment No. 14 of Oppenheimer Main Street Funds,
Inc. (Reg. No. 33- 17850), 9/30/94, and incorporated
herein by reference.
(iii)Form of OppenheimerFunds Distributor, Inc.
Broker Agreement: Filed with Post-Effective
Amendment No. 14 of Oppenheimer Main Street Funds,
Inc. (Reg. No. 33-17850) 9/30/94 and incorporated
herein by reference.
(iv) Form of OppenheimerFunds Distributor, Inc.
Agency Agreement: Filed with Post-Effective
Amendment No. 14 of Oppenheimer Main Street Funds,
Inc. (Reg. No. 33- 17850) 9/30/94 and incorporated
herein by reference.
(v) Broker Agreement between Oppenheimer Fund
Management, Inc. and Newbridge Securities, Inc.
dated October 1,1986: Previously filed with Post-
Effective Amendment No. 25 to the Registration
Statement of Oppenheimer Growth Fund (Reg. No. 2-
45272) 11/1/86 and refiled with Post-Effective
Amendment No. 45 of Oppenheimer Growth Fund (Reg.
No. 2-45272) 8/22/94 pursuant to Item 102 of
Regulation S-T and incorporated herein by
reference.
(7) Retirement Plan for Non-Interested Trustees or
Directors dated June 7, 1990: Filed with Post-
Effective Amendment No. 97 to the Registration
Statement of Oppenheimer Fund (File No. 2-14586),
8/30/90, refiled with Post-Effective Amendment No.
45 of Oppenheimer Growth Fund (Reg. No.2-45272),
8/22/94, pursuant to Item 102 and incorporated
herein by reference.
(8) Form of Custody Agreement between Registrant and The Bank of
New York: Previously filed with Registrant's initial
Registration Statement, 6/10/96, and incorporated herein by
reference.
(9) Not applicable.
(10) Opinion and Consent of Counsel: Previously filed with
Registrant's Pre-Effective Amendment No. 1, 11/8/96 and
incorporated herein by reference.
(11) Independent Auditors' Consent: Filed herewith.
(12) Not applicable.
(13) Investment Letter from OppenheimerFunds, Inc. to Registrant
dated October 18, 1996: Previously filed with Registrant's
Pre-Effective Amendment No. 1, 11/8/96 and incorporate herein
by reference.
(14) (i) Form of prototype Standardized and Non-
Standardized Profit-Sharing Plans and Money Purchase
Plans for self-employed persons and corporations:
Filed with Post-Effective Amendment No. 3 to the
Registration Statement of Oppenheimer Global Growth
& Income Fund (Reg. No. 33-23799), 1/31/92, and
refiled with Post-Effective Amendment No. 7 to the
Registration Statement of Oppenheimer Global Growth
& Income Fund (Reg. No. 33-23799), 12/1/94, pursuant
to Item 102 of Regulation S-T, and incorporated
herein by reference.
(ii) Form of Individual Retirement Account Trust
Agreement: Previously filed with Post-Effective
Amendment No. 21 to the Registration Statement of
Oppenheimer U.S. Government Trust (Reg. No. 2-
76645),8/25/93 and incorporated herein by
reference.
(iii)Form of Tax Sheltered Retirement Plan and
Custody Agreement for employees of public schools
and tax-exempt organizations: Previously filed
with Post-Effective Amendment No. 47 to the
Registration Statement of Oppenheimer Growth Fund
(Reg. No. 2- 45272), 10/21/94, and incorporated
herein by reference.
(iv) Form of Simplified Employee Pension IRA:
Previously filed with Post-Effective Amendment No.
42 to the Registration Statement of Oppenheimer
Equity Income Fund (Reg. No. 2-33043),10/28/94,
and incorporated herein by reference.
(v) Form of Prototype 401(k) Plan: Previously filed with
Post-Effective Amendment No. 7 to the Registration Statement
of Oppenheimer Strategic Income & Growth Fund (Reg. No.
33-47378),9/28/95, and incorporated herein by reference.
(15) (i) Form of Service Plan and Agreement for Class A shares
pursuant to Rule 12b-1: Previously filed with Registrant's
initial Registration Statement, 6/10/96, and incorporated
herein by
reference.
(ii) Form of Distribution and Service Plan and Agreement for
Class B shares pursuant to Rule 12b- 1: Previously filed with
Registrant's initial Registration Statement, 6/10/96, and
incorporated
herein by reference.
(iii) Form of Distribution and Service Plan and Agreement for
Class C shares pursuant to Rule 12b- 1: Previously filed with
Registrant's initial Registration Statement, 6/10/96, and
incorporated
herein by reference.
(16) Performance Data Computation Schedule: Filed
herewith.
(17) (i) Financial Data Schedule for Class A shares: Filed
herewith.
(ii) Financial Data Schedule for Class B shares: Filed
herewith.
(iii)Financial Data Schedule for Class C shares:
Filed herewith.
(18) Oppenheimer Funds Multiple Class Plan under Rule
18f-3 dated 10/24/95: Previously filed with Post-
Effective Amendment No. 12 to the Registration
Statement of O Tax-Exempt Fund (Reg. No. 33-
23566), 11/1/95, and incorporated herein by
reference.
--- Powers of Attorney and Certified Board Resolutions:
Previously filed with Registrant's initial
Registration Statement, 6/10/96, 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 as of
Title of Class December 1, 1997
- -------------- ---------------------
Class A Shares of Beneficial Interest 5,610
Class B Shares of Beneficial Interest 3,713
Class C Shares of Beneficial Interest 661
Item 27. Indemnification
- -------- ---------------
Reference is made to the provisions of Article Seventh of Registrant's
Declaration of Trust filed as Exhibit 24(b)(1) to this Registration Statement.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a trustee, officer or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person, Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
Item 28. Business and Other Connections of Investment Adviser
- -------- ----------------------------------------------------
(a) OppenheimerFunds, Inc. is the investment adviser of the Registrant; it
and certain subsidiaries and affiliates act in the same capacity to other
registered investment companies as described in Parts A and B hereof and listed
in Item 28(b) below.
(b) There is set forth below information as to any other business,
profession, vocation or employment of a substantial nature in which each officer
and director of OppenheimerFunds, Inc. is, or at any time during the past two
fiscal years has been, engaged for his/her own account or in the capacity of
director, officer, employee, partner or trustee.
Name and Current Position
with OppenheimerFunds, Inc. Other Business and Connections During
("OFI") the Past Two Years
- --------------------------- ------------------------------------
Mark J.P. Anson,
Vice President Vice President of Oppenheimer Real Asset
Management, Inc. ("ORAMI"); formerly
Vice President of Equity Derivatives at
Salomon Brothers, Inc.
Peter M. Antos,
Senior Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered
Financial Analyst; Senior Vice President
of HarbourView Asset Management
Corporation ("HarbourView"); prior to
March, 1996 he was the senior equity
portfolio manager for the Panorama
Series Fund, Inc. (the "Company") and
other mutual funds and pension funds
managed by G.R. Phelps & Co. Inc. ("G.R.
Phelps"), the Company's former
investment adviser, which was a
subsidiary of Connecticut Mutual Life
Insurance Company; was also responsible
for managing the common stock department
and common stock investments of
Connecticut Mutual Life Insurance Co.
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
C-7
<PAGE>
Bruce Bartlett,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds. Formerly a
Vice President and Senior Portfolio
Manager at First of America Investment
Corp.
Beichert, Kathleen None.
Rajeev Bhaman,
Assistant Vice President Formerly Vice President (January
1992 - February, 1996) of Asian Equities for
Barclays de Zoete Wedd, Inc.
Robert J. Bishop,
Vice President Vice President of Mutual Fund Accounting
(since May 1996); an officer of other
Oppenheimer funds; formerly an
Assistant Vice President of OFI/Mutual
Fund Accounting (April 1994-May 1996),
and a Fund Controller for OFI.
George C. Bowen,
Senior Vice President
& Treasurer Vice President (since June 1983) and
Treasurer (since March 1985) of
OppenheimerFunds Distributor, Inc. (the
"Distributor"); Vice President (since
October 1989) and Treasurer (since April
1986) of HarbourView; Senior Vice
President (since February 1992),
Treasurer (since July 1991)and a
director (since December 1991) of
Centennial; President, Treasurer and a
director of Centennial Capital
Corporation (since June 1989); Vice
President and Treasurer (since August
1978) and Secretary (since April 1981)
of Shareholder Services, Inc. ("SSI");
Vice President, Treasurer and Secretary
of Shareholder Financial Services, Inc.
("SFSI") (since November 1989);
Treasurer of Oppenheimer Acquisition
Corp. ("OAC") (since June 1990);
Treasurer of Oppenheimer Partnership
C-8
<PAGE>
Holdings, Inc. (since November 1989); Vice
President and Treasurer of ORAMI (since July
1996); Chief Executive Officer, Treasurer and a
director of MultiSource Services, Inc., a
broker-dealer (since December 1995); an officer
of other Oppenheimer funds.
Scott Brooks,
Vice President None.
Susan Burton,
Assistant Vice President None.
Adele Campbell,
Assistant Vice President
& Assistant Treasurer:
Rochester Division Formerly Assistant Vice President of
Rochester Fund Services, Inc.
Michael Carbuto,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; Vice President of
Centennial.
Ruxandra Chivu,
Assistant Vice President None.
H.C. Digby Clements,
Assistant Vice President:
Rochester Division None.
O. Leonard Darling,
Executive Vice President Trustee (1993 - present) of Awhtolia
College - Greece.
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Assistant Vice President None.
C-9
<PAGE>
Robert Doll,
Executive Vice President
& Director An officer and/or portfolio manager of
certain Oppenheimer funds.
John Doney,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Executive Vice President (since
September 1993), and a director (since
January 1992) of the Distributor;
Executive Vice President, General
Counsel and a director of HarbourView,
SSI, SFSI and Oppenheimer Partnership
Holdings, Inc. since (September 1995)
and MultiSource Services, Inc. (a
broker-dealer) (since December 1995);
President and a director of Centennial
(since September 1995); President and a
director of ORAMI (since July 1996);
General Counsel (since May 1996) and
Secretary (since April 1997) of OAC;
Vice President of OppenheimerFunds
International, Ltd. ("OFIL") and
Oppenheimer Millennium Funds plc (since
October 1997); an officer of other
Oppenheimer funds.
George Evans,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds.
Edward Everett,
Assistant Vice President None.
Scott Farrar,
Vice President Assistant Treasurer of Oppenheimer
Millennium Funds plc (since October
1997); an officer of other Oppenheimer
funds; formerly an Assistant Vice
President of OFI/Mutual Fund Accounting
(April 1994-May 1996), and a Fund
C-10
<PAGE>
Controller for OFI.
Leslie A. Falconio,
Assistant Vice President None.
Katherine P. Feld,
Vice President and Secretary Vice President and
Secretary of the Distributor; Secretary of
HarbourView, MultiSource and Centennial;
Secretary, Vice President and Director of
Centennial Capital Corporation; Vice President
and Secretary of ORAMI.
Ronald H. Fielding,
Senior Vice President;
Chairman: Rochester Division An officer, Director and/or portfolio
manager of certain Oppenheimer funds;
Presently he holds the following other
positions: Director (since 1995) of ICI
Mutual Insurance Company; Governor
(since 1994) of St. John's College;
Director (since 1994 - present) of
International Museum of Photography at
George Eastman House; Director (since
1986) of GeVa Theatre. Formerly he held
the following positions: formerly,
Chairman of the Board and Director of
Rochester Fund Distributors, Inc.
("RFD"); President and Director of
Fielding Management Company, Inc.
("FMC"); President and Director of
Rochester Capital Advisors, Inc.
("RCAI"); Managing Partner of Rochester
Capital Advisors, L.P., President and
Director of Rochester Fund Services,
Inc. ("RFS"); President and Director of
Rochester Tax Managed Fund, Inc.;
Director (1993 - 1997) of VehiCare
Corp.; Director (1993 - 1996) of
VoiceMode.
John Fortuna,
Vice President None.
C-11
<PAGE>
Patricia Foster,
Vice President Formerly she held the following
positions: An officer of certain
Oppenheimer funds (May, 1993 - January,
1996); Secretary of Rochester Capital
Advisors, Inc. and General Counsel
(June, 1993 - January 1996) of Rochester
Capital Advisors, L.P.
Jennifer Foxson,
Assistant Vice President None.
Paula C. Gabriele,
Executive Vice President Formerly, Managing Director (1990-1996)
for Bankers Trust Co.
Robert G. Galli,
Vice Chairman Trustee of the New York-based
Oppenheimer Funds. Formerly Vice
President and General Counsel of
Oppenheimer Acquisition Corp.
Linda Gardner,
Vice President None.
Jill Glazerman,
Assistant Vice President None.
Robert Grill,
Vice President Formerly Marketing Vice President for
Bankers Trust Company (1993-1996); Steering
Committee Member, Subcommittee Chairman for
American Savings Education Council (1995-1996).
Caryn Halbrecht,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; formerly Vice
President of Fixed Income Portfolio Management
at Bankers Trust.
Elaine T. Hamann,
Vice President Formerly Vice President (September, 1989
- January, 1997) of Bankers Trust
Company.
C-12
<PAGE>
Glenna Hale,
Director of
Investor Marketing Formerly, Vice President (1994-1997) of
Retirement Plans Services for
OppenheimerFunds Services.
Thomas B. Hayes,
Assistant Vice President None.
Barbara Hennigar,
Executive Vice President and
Chief Executive Officer of
OppenheimerFunds Services,
a division of the Manager President and Director of SFSI;
President and Chief executive Officer of
SSI.
Dorothy Hirshman, None.
Assistant Vice President
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Assistant Vice President None.
Jane Ingalls,
Vice President None.
Byron Ingram,
Assistant Vice President None.
Ronald Jamison,
Vice President Formerly Vice President and Associate
General Counsel at Prudential
Securities, Inc.
C-13
<PAGE>
Frank Jennings,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; formerly, a
Managing Director of Global Equities at
Paine Webber's Mitchell Hutchins
division.
Thomas W. Keffer,
Senior Vice President Formerly Senior Managing Director (1994
- 1996) of Van Eck Global.
Avram Kornberg,
Vice President None.
Joseph Krist,
Assistant Vice President None.
Paul LaRocco,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; formerly, a
Securities Analyst for Columbus Circle
Investors.
Michael Levine,
Assistant Vice President None.
Shanquan Li,
Assistant Vice President Director of Board (since 2/96),
Chinese Finance Society; formerly, Chairman
(11/94-2/96), Chinese Finance Society; and
Director (6/94-6/95), Greater China Business
Networks.
Stephen F. Libera,
Vice President An officer and/or portfolio manager for
certain Oppenheimer funds; a Chartered
Financial Analyst; a Vice President of
HarbourView; prior to March 1996, the
senior bond portfolio manager for
Panorama Series Fund Inc., other mutual
funds and pension accounts managed by
G.R. Phelps; also responsible for
managing the public fixed-income
securities department at Connecticut
Mutual Life Insurance Co.
C-14
<PAGE>
Mitchell J. Lindauer,
Vice President None.
David Mabry,
Assistant Vice President None.
Steve Macchia,
Assistant Vice President None.
Bridget Macaskill,
President, Chief Executive
Officer and Director Chief Executive Officer (since September
1995); President and director (since
June 1991) of HarbourView; Chairman and
a director of SSI (since August 1994),
and SFSI (September 1995); President
(since September 1995) and a director
(since October 1990) of OAC; President
(since September 1995) and a director
(since November 1989) of Oppenheimer
Partnership Holdings, Inc., a holding
company subsidiary of OFI; a director
of ORAMI (since July 1996) ; President
and a director (since October 1997) of
OFIL, an offshore fund manager
subsidiary of OFI and Oppenheimer
Millennium Funds plc (since October
1997); President and a director of other
Oppenheimer funds; a director of the
NASDAQ Stock Market, Inc. and of
Hillsdown Holdings plc (a U.K. food
company); formerly an Executive Vice
President of OFI.
Wesley Mayer,
Vice President Formerly Vice President (January, 1995 -
June, 1996) of Manufacturers Life
Insurance Company.
Loretta McCarthy,
Executive Vice President None.
Kevin McNeil,
Vice President Treasurer (September, 1994 - present)
for the Martin Luther King Multi-Purpose
C-15
<PAGE>
Center (non-profit community organization);
Formerly Vice President (January, 1995 - April,
1996) for Lockheed Martin IMS.
Tanya Mrva,
Assistant Vice President None.
Lisa Migan,
Assistant Vice President None.
Robert J. Milnamow,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; formerly a Portfolio
Manager (August, 1989 -August, 1995) with
Phoenix Securities Group.
Denis R. Molleur,
Vice President None.
Linda Moore,
Vice President Formerly, Marketing Manager (July 1995-
November 1996) for Chase Investment
Services Corp.
Tanya Mrva,
Assistant Vice President None.
Kenneth Nadler,
Vice President None.
David Negri,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Richard M. O'Shaugnessy,
Assistant Vice President:
Rochester Division None.
C-16
<PAGE>
Gina M. Palmieri,
Assistant Vice President None.
Robert E. Patterson,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
John Pirie,
Assistant Vice President Formerly, a Vice President with Cohane
Rafferty Securities, Inc.
Tilghman G. Pitts III,
Executive Vice President
and Director Chairman and Director of the
Distributor.
Jane Putnam,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds.
Russell Read,
Senior Vice President Formerly a consultant for Prudential
Insurance on behalf of the General
Motors Pension Plan.
Thomas Reedy,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; formerly, a
Securities Analyst for the Manager.
C-17
<PAGE>
David Robertson,
Vice President None.
Adam Rochlin,
Vice President None.
Michael S. Rosen
Vice President; President,
Rochester Division An officer and/or portfolio manager of
certain Oppenheimer funds; Formerly,
Vice President (June, 1983 - January,
1996) of RFS, President and Director of
RFD; Vice President and Director of FMC;
Vice President and director of RCAI;
General Partner of RCA; Vice President
and Director of Rochester Tax Managed
Fund Inc.
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; formerly
Vice President and Portfolio Manager/Security
Analyst for Oppenheimer Capital Corp., an
investment adviser.
Lawrence Rudnick,
Assistant Vice President None.
James Ruff,
Executive Vice President None.
Valerie Sanders,
Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Stephanie Seminara,
Vice President Formerly, Vice President of Citicorp
Investment Services
C-18
<PAGE>
Richard Soper,
Vice President None.
Nancy Sperte,
Executive Vice President None.
Donald W. Spiro,
Chairman Emeritus and Director Vice Chairman and Trustee of the New
York-based Oppenheimer Funds; formerly
Chairman of the Manager and the
Distributor.
Richard A. Stein,
Vice President:
Rochester Division Assistant Vice President (since 1995) of
Rochester Capitol Advisors, L.P.
Arthur Steinmetz,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Ralph Stellmacher,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
John Stoma,
Senior Vice President, Director
Retirement Plans Formerly Vice President of U.S. Group
Pension Strategy and Marketing for
Manulife Financial.
Michael C. Strathearn,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered
Financial Analyst; a Vice President of
HarbourView; prior to March 1996, an
equity portfolio manager for Panorama
Series Fund, Inc. and other mutual funds
and pension accounts managed by G.R.
Phelps.
C-19
<PAGE>
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee,
Director or Managing Partner of the Denver-based
Oppenheimer Funds; President and a Director of
Centennial; formerly President and Director of
OAMC, and Chairman of the Board of SSI.
James Tobin,
Vice President None.
Jay Tracey,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; formerly Managing
Director of Buckingham Capital
Management.
Gary Tyc,
Vice President, Assistant
Secretary and
Assistant Treasurer Assistant Treasurer of the Distributor
and SFSI.
Ashwin Vasan,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds.
Dorothy Warmack,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds.
Jerry Webman,
Senior Vice President Director of New York-based tax-exempt
fixed income Oppenheimer funds;
Formerly, Managing Director and Chief
Fixed Income Strategist at Prudential
Mutual Funds.
Christine Wells,
Vice President None.
Joseph Welsh,
Assistant Vice President None.
C-20
<PAGE>
Kenneth B. White,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered
Financial Analyst; Vice President of
HarbourView; prior to March 1996, an
equity portfolio manager for Panorama
Series Fund, Inc. and other mutual funds
and pension funds managed by G.R.
Phelps.
William L. Wilby,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of HarbourView.
Carol Wolf,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; Vice
President of Centennial; Vice President,
Finance and Accounting and member of the
Board of Directors of the Junior League
of Denver, Inc.; Point of Contact:
Finance Supporters of Children; Member
of the Oncology Advisory Board of the
Childrens Hospital; Member of the Board
of Directors of the Colorado Museum of
Contemporary Art.
Caleb Wong,
Assistant Vice President None.
Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel Assistant Secretary of SSI (since May
1985), and SFSI (since November 1989); Assistant
Secretary of Oppenheimer Millennium Funds plc
(since October 1997); an officer of other
Oppenheimer
funds.
C-21
<PAGE>
Jill Zachman,
Assistant Vice President:
Rochester Division None.
Arthur J. Zimmer,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of Centennial.
The Oppenheimer Funds include the New York-based Oppenheimer
Funds, the Denver-based Oppenheimer Funds and the Oppenheimer/Quest
Rochester Funds, as set forth below:
New York-based Oppenheimer Funds
- --------------------------------
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust
Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer Series Fund, Inc.
Oppenheimer U.S.Government Trust
Oppenheimer World Bond Fund
Quest/Rochester Funds
- ---------------------
Limited Term New York Municipal Fund
Oppenheimer Bond Fund For Growth
Oppenheimer MidCap Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals
C-22
<PAGE>
Denver-based Oppenheimer Funds
- ------------------------------
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Daily Cash Accumulation Fund, Inc.
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Municipal Fund Oppenheimer Real Asset Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
The address of OppenheimerFunds, Inc., the New York-based Oppenheimer
Funds, the Quest Funds, OppenheimerFunds Distributor, Inc., HarbourView Asset
Management Corp., Oppenheimer Partnership Holdings, Inc., and Oppenheimer
Acquisition Corp. is Two World
Trade Center, New York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder Financial
Services, Inc., Shareholder Services, Inc., OppenheimerFunds Services,
Centennial Asset Management Corporation, Centennial Capital Corp., and
Oppenheimer Real Asset Management, Inc. is 6803 South Tucson Way, Englewood,
Colorado 80112.
The address of MultiSource Services, Inc. is 1700 Lincoln Street, Denver,
Colorado 80203.
The address of the Rochester-based funds is 350 Linden Oaks, Rochester,
New York 14625-2807.
Item 29. Principal Underwriter
- -------- ---------------------
(a) OppenheimerFunds Distributor, Inc. is the Distributor of the
Registrant's shares. It is also the Distributor of each of the other registered
open-end investment companies for which OppenheimerFunds, Inc. is the investment
adviser, as described in Part A and B of this Registration Statement and listed
in Item 28(b) above.
(b) The directors and officers of the Registrant's principal underwriter
are:
Name & Principal Positions & Offices Positions & Offices
Business Address with Underwriter with Registrant
- ---------------- ------------------- -------------------
George C. Bowen(1) Vice President and Vice President and
Treasurer Treasurer of the
Oppenheimer funds.
Julie Bowers Vice President None
21 Dreamwold Road
Scituate, MA 02066
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Maryann Bruce(2) Senior Vice President; None
Director: Financial
Institution Division
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce de Leon Ave.
Decatur, GA 30030
William Coughlin Vice President None
542 West Surf - #2N
Chicago, IL 60657
C-24
<PAGE>
Mary Crooks(1)
Rhonda Dixon-Gunner(1) Assistant Vice President None
Andrew John Donohue(2) Executive Vice Secretary of
President & Director the Oppenheimer
funds.
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
41 Craig Place
Cranford, NJ 07016
Todd Ermenio Vice President None
11011 South Darlington
Tulsa, OK 74137
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
George Fahey Vice President None
201 E. Rund Grove Rd.
#26-22
Lewisville, TX 75067
Katherine P. Feld(2) Vice President None
& Secretary
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
C-25
<PAGE>
Ronald H. Fielding(3) Vice President None
Reed F. Finley Vice President None
1657 Graefield
Birmingham, MI 48009
Wendy Fishler(2) Vice President None
Ronald R. Foster Senior Vice President None
11339 Avant Lane
Cincinnati, OH 45249
Patricia Gadecki Vice President None
950 First St., S.
Suite 204
Winter Haven, FL 33880
Luiggino Galleto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Mark Giles Vice President None
5506 Bryn Mawr
Dallas, TX 75209
Ralph Grant(2) Vice President/National None
Sales Manager
Sharon Hamilton Vice President None
720 N. Juanita Ave.,#1
Redondo Beach, CA 90277
Byron Ingram(2) Assistant Vice President None
Mark D. Johnson Vice President None
129 Girard Place
Kirkwood, MO 63105
Michael Keogh(2) Vice President None
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Daniel Krause Vice President None
13416 Larchmere Square
C-26
<PAGE>
Shaker Heights, OH 44120
Ilene Kutno(2) Assistant Vice President None
Todd Lawson Vice President None
3333 E. Bayaud Avenue
Unit 714
Denver, CO 80209
Wayne A. LeBlang Senior Vice President None
23 Fox Trail
Lincolnshire, IL 60069
Dawn Lind Vice President None
7 Maize Court
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
Todd Marion Vice President None
21 N. Passaic Avenue
Chatham, N.J. 07928
Marie Masters Vice President None
520 E. 76th Street
New York, NY 10021
John McDonough Vice President None
P.O. Box 760
50 Riverview Road
New Castle, NH 03854
Tanya Mrva(2) Assistant Vice President None
Laura Mulhall(2) Senior Vice President None
Charles Murray Vice President None
18 Spring Lake Drive
Far Hills, NJ 07931
Wendy Murray Vice President None
32 Carolin Road
C-27
<PAGE>
Upper Montclair, NJ 07043
Chad V. Noel Vice President None
3238 W. Taro Lane
Phoenix, AZ 85027
Joseph Norton Vice President None
2518 Fillmore Street
San Francisco, CA 94115
Patrick Palmer Vice President None
958 Blue Mountain Cr.
West Lake Village, CA 91362
Kevin Parchinski Vice President None
1105 Harney St., #310
Omaha, NE 68102
Randall Payne Vice President None
3530 Providence Plantation Way
Charlotte, NC 28270
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
22 Fall Meadow Dr.
Pittsford, NY 14534
Bill Presutti Vice President None
1777 Larimer St. #807
Denver, CO 80202
Tilghman G. Pitts, III(2)Chairman & Director None
Elaine Puleo(2) Vice President None
Minnie Ra Vice President None
895 Thirty-First Ave.
San Francisco, CA 94121
Michael Raso Vice President None
16 N. Chatsworth Ave.
Apt. 301
C-28
<PAGE>
Larchmont, NY 10538
John C. Reinhardt(3) Vice President None
Douglas Rentschler Vice President None
867 Pemberton
Grosse Pointe Park, MI
48230
Ian Robertson Vice President None
4204 Summit Way
Marietta, GA 30066
Michael S. Rosen(3) Vice President None
Kenneth Rosenson Vice President None
3802 Knickerbocker Place
Apt. #3D
Indianapolis, IN 46240
James Ruff(2) President None
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Washington, DC 77479
Michael Sciortino Vice President None
785 Beau Chene Drive
Mandeville, LA 70471
Robert Shore Vice President None
26 Baroness Lane
Laguna Niguel, CA 92677
George Sweeney Vice President None
1855 O'Hara Lane
Middletown, PA 17057
C-29
<PAGE>
Andrew Sweeny Vice President None
5967 Bayberry Drive
Cincinnati, OH 45242
Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214
David G. Thomas Vice President None
8116 Arlingon Blvd.
#123
Falls Church, VA 22042
Philip St. John Trimble Vice President None
2213 West Homer
Chicago, IL 60647
Sarah Turpin Vice President None
2735 Dover Road
Atlanta, GA 30327
Gary Paul Tyc(1) Assistant Treasurer None
Mark Stephen Vandehey(1) Vice President None
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
(1) 6803 South Tucson Way, Englewood, Colorado 80112
(2) Two World Trade Center, New York, NY 10048-0203
(3) 350 Linden Oaks, Rochester, NY 14625-2807
(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 OppenheimerFunds, Inc. at
its offices at 6803 South Tucson Way, Englewood, Colorado 80112.
Item 31. Management Services
- -------- -------------------
Not applicable.
Item 32. Undertakings
- -------- ------------
(a) Not applicable.
(b) Not applicable.
C-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant certifies that it meets all the requirements
for effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York and State of New York on the 18th day of December, 1997.
OPPENHEIMER DEVELOPING MARKETS FUND
By: /s/Bridget A. Macaskill*
-----------------------------------
Bridget A. Macaskill, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities on
the dates indicated:
Signatures Title Date
- ---------- ----- ----
/s/Leon Levy* Chairman of the
- -------------- Board of Trustees December 18, 1997
Leon Levy
/s/Bridget A. Macaskill* President, Principal
- ------------------------ Executive Officer
Bridget A. Macaskill and Trustee December 18, 1997
/s/George Bowen* Treasurer and
- ----------------- Principal Financial
George Bowen and Accounting
Officer December 18, 1997
/s/Robert G. Galli* Trustee December 18, 1997
- -------------------
Robert G. Galli
/s/Benjamin Lipstein*
- ---------------------- Trustee December 18, 1997
Benjamin Lipstein
/s/Elizabeth B. Moynihan* Trustee December 18, 1997
- --------------------------
Elizabeth B. Moynihan
/s/Kenneth A. Randall* Trustee December 18, 1997
- -----------------------
Kenneth A. Randall
/s/Edward V. Regan* Trustee December 18, 1997
- --------------------
Edward V. Regan
/s/Russell S. Reynolds, Jr.* Trustee December 18, 1997
- -----------------------------
Russell S. Reynolds, Jr.
/s/Donald W. Spiro* Trustee December 18, 1997
- --------------------
Donald W. Spiro
/s/Pauline Trigere* Trustee December 18, 1997
- --------------------
Pauline Trigere
/s/Clayton K. Yeutter* Trustee December 18, 1997
- -----------------------
Clayton K. Yeutter
*By:/s/ Robert G. Zack
--------------------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
OPPENHEIMER DEVELOPING MARKETS FUND
EXHIBIT INDEX
FORM N-1A
ITEM NO. DESCRIPTION
- ---------- ------------
Item 24(b)(11) Independent Auditors Consent
Item 24(b)(16) Performance Calculation Schedule
Item 24(b)(17)(i) Financial Data Schedule for Class A Shares
Item 24(b)(17)(ii) Financial Data Schedule for Class B Shares
Item 24(b)(17)(iii) Financial Data Schedule for Class C Shares
Item 24(b)(11)
Independent Auditors' Consent
The Board of Trustees
Oppenheimer Developing Markets Fund:
We consent to the use of our report dated September 22, 1997 included in the
Registration Statement of Form N-1A of Oppenheimer Developing Markets Fund and
to the reference to our firm under the heading "Financial Highlights" appearing
in the Prospectus which is also a part of such Registration Statement.
/s/ KPMG Peat Marwick LLP
- -------------------------
KPMG Peat Marwick LLP
Denver, Colorado
December 18, 1997
Oppenheimer Developing Markets 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 No dividends declared.
Class B Shares No dividends declared.
Class C Shares No dividends delcared.
1. Cumulative Total Returns for the Periods Ended 08/31/97:
The formula for calculating cumulative total return is as follows:
(ERV - P) / P = Cumulative Total Return
Class A Shares
Examples, assuming a maximum Examples at NAV:
sales charge of 5.75%:
Inception Year Inception Year
$1,208.29 - $1,000 /$1,000 = 20.83% $1,282.00 - $1,000 /$1,000 = 28.20%
Class B Shares
Examples, assuming a maximum Examples at NAV:
contingent deferred sales charge
of 5.00% for the inception year:
Inception Year Inception Year
$1,223.00 - $1,000 /$1,000 = 22.30% $1,273.00 - $1,000 /$1,000 = 27.30%
Class C Shares
Examples, assuming a maximum Examples at NAV:
contingent deferred sales charge
of 1.00% for the inception year:
Inception Year Inception Year
$1,264.00 - $1,000 /$1,000 = 26.40% $1,274.00 - $1,000 /$1,000 = 27.40%
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<OVERDISTRIBUTION-GAINS> 0
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<DIVIDEND-INCOME> 537,816
<INTEREST-INCOME> 207,532
<OTHER-INCOME> 0
<EXPENSES-NET> 469,939
<NET-INVESTMENT-INCOME> 275,409
<REALIZED-GAINS-CURRENT> 1,264,096
<APPREC-INCREASE-CURRENT> 1,190,262
<NET-CHANGE-FROM-OPS> 2,729,767
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,782,562
<NUMBER-OF-SHARES-REDEEMED> 174,996
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 61,796,588
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 211,914
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 476,696
<AVERAGE-NET-ASSETS> 7,802,000
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 2.70
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.73
<EXPENSE-RATIO> 2.78
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<AVG-DEBT-PER-SHARE> 0.00
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<INVESTMENTS-AT-VALUE> 63,072,189
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