As filed with the Securities and Exchange Commission on
November 3, 1997
Registration No. 333-31533
File No. 811-08297
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X/
PRE-EFFECTIVE AMENDMENT NO. 2 / X /
POST-EFFECTIVE AMENDMENT NO. ___ / /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X/
AMENDMENT NO. 2 / X /
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OPPENHEIMER MIDCAP 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)
Approximate Date of Proposed Offering: As soon as practicable after the
effective date of this Registration Statement and thereafter from day to day.
It is proposed that this filing will become effective: / / Immediately upon
filing pursuant to paragraph (b) / / On __________________, pursuant to
paragraph (b) / / 60 days after filing, pursuant to paragraph (a)(1) / /
On _______, pursuant to paragraph (a)(1) / / 75 days after filing,
pursuant to paragraph (a)(2) / / On _______, pursuant to paragraph (a)(2)
of Rule 485.
The Registrant hereby amends the Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), shall
determine.
<PAGE>
FORM N-1A
OPPENHEIMER MIDCAP FUND
Cross Reference Sheet
Part A of
Form N-1A
Item No. Prospectus Heading
1 Cover Page
2 Expenses; A Brief Overview of the Fund
3 *
4 Front Cover Page; Investment Objective and Policies
5 Expenses; How the Fund is Managed - Organization and
History; Back Cover
5A *
6 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 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 or
Prospectus
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment
Techniques and Strategies; Additional Investment
Restrictions
14 How the Fund is Managed -- Trustees and Officers of the
Fund
15 How the Fund is Managed -- Major Shareholders
16 How the Fund is Managed; Additional Information about
the Fund; Distribution and Service Plans; Back
Cover
17 How the Fund is Managed
18 Additional Information about the Fund
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 *
23 Financial Statements
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*Not applicable or negative answer.
<PAGE>
OPPENHEIMER
MidCap Fund
Prospectus dated November 17, 1997
Oppenheimer MidCap Fund is a mutual fund that seeks capital appreciation as its
investment objective. Current income is not an objective. The Fund seeks its
investment objective by emphasizing investment in equity securities of companies
with medium market capitalizations that are believed to have favorable growth
prospects. Under normal market conditions, the Fund will invest at least 65% of
its total assets in equity securities of "growth-type" companies with a market
capitalization between $1 billion and $5 billion at the time of purchase. The
Fund may use hedging instruments and derivative investments to seek to reduce
the risks of market fluctuations that affect the value of the securities the
Fund holds. In an uncertain investment environment, temporary defensive
investment methods may be stressed.
Some of the Fund's investment techniques may be considered speculative. These
techniques may increase the risks of investing in the Fund and may also increase
the Fund's operating costs. Please refer to "Investment Objectives and Policies"
for more information about the types of securities the Fund invests in and refer
to "Investment Risks" for a discussion of 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
November 17, 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).
(OppenheimerFunds logo)
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
ABOUT THE FUND
Expenses
A Brief Overview of the Fund
Investment Objective and Policies
Investment Risks
Investment Techniques and Strategies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Class Y 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
-2-
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net asset
value per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
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 expect to bear indirectly.
o Shareholder Transaction Expenses are charges you pay when you buy or sell
shares of the Fund. Please refer to "About Your Account" starting on page __ for
an explanation of how and when these charges apply.
Shareholder Transaction Expenses
<TABLE>
<CAPTION>
Class A Class B Class C Class Y
Shares Shares Shares Shares
<S> <C> <C> <C> <C>
Maximum Sales Charge on Purchases 5.75% None None None
(as a % of offering price)
Maximum Deferred Sales Charge None(1) 5% in the first 1% if shares None
(as a % of the lower of the original year, declining are redeemed
offering price or redemption proceeds) to 1% in the within 12
sixth year and months of
eliminated purchase(2)
thereafter(2)
Maximum Sales Charge on Reinvested None None None None
Dividends
Exchange Fee None None None None
Redemption Fee None None None None
</TABLE>
(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 calendar months if you
purchased Fund shares by exchanging shares of other Oppenheimer funds that were
purchased prior to May 1, 1997) from the end of the calendar month during which
you purchased those shares. See "How to Buy Shares Buying Class A Shares,"
below. (2)See "How to Buy Shares- Buying Class B Shares" and "How to Buy Shares
- - Buying Class C Shares," below for more information on the contingent deferred
sales charge.
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 adviser, 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.
Annual Fund Operating Expenses (as a Percentage of Average Net
Assets)
Class A Class B Class C Class Y
Shares Shares Shares Shares
Management Fees 0.75% 0.75% 0.75% 0.75%
12b-1 Plan Fees 0.25% 1.00% 1.00% None
Other Expenses 0.50% 0.50% 0.50% 0.50%
Total Fund
Operating Expenses 1.50% 2.25% 2.25% 1.25%
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 Plan Fees are service fees (the maximum fee is 0.25% of average net assets
of the respective class) and the asset-based sales charge of 0.75%. These plans
are described in greater detail in "How to Buy Shares". Because the Fund is a
new fund and has no operating history, the rates for the management fees and the
12b-1 Plan fees are the maximum rates that can be charged. "Other Expenses" in
the table above are estimates based on the Manager's projections of those
expenses in the Fund's current fiscal year (which ends August 31, 1998).
The actual expenses for each class of shares in the Fund's current fiscal year
and 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 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
Class A Shares $72 $102
Class B Shares $73 $100
Class C Shares $33 $70
Class Y Shares $13 $40
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years
Class A Shares $72 $102
Class B Shares $23 $70
Class C Shares $23 $70
Class Y Shares $13 $40
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 the 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.
These examples show the effect of expenses on an investment, but are not
meant to state or predict actual or expected costs or investment returns of the
Fund, all of which may be more or less than those shown.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with references
to the section of this Prospectus where more complete information can be found.
You should carefully read the entire Prospectus before making a decision about
investing in the Fund. Keep the Prospectus for reference after you invest,
particularly for information about your account, such as how to sell or exchange
shares.
o What Is The Fund's Investment Objective? The Fund's
investment objective is to seek capital appreciation.
o What Does The Fund Invest In? The Fund seeks its investment objective by
emphasizing investment in equity securities of companies with medium market
capitalizations that are believed to have favorable growth prospects. Under
normal market conditions, the Fund will invest at least 65% of its total assets
in equity securities of "growth-type" companies with a market capitalization
between $1 billion and $5 billion at the time of purchase. The Fund may use
hedging instruments and derivative investments to seek to reduce the risks of
market fluctuations that affect the value of the securities the Fund holds. In
an uncertain investment environment, temporary defensive investment methods may
be stressed. These investments and investment methods are more fully explained
in "Investment Objective and Policies" starting on page __.
o Who Manages The Fund? The Manager is OppenheimerFunds, Inc., which
(including subsidiaries) manages investment companies having over $75
billion in assets as of September 30, 1997. The Manager is paid an advisory
fee by the Fund, based on its net assets. The Fund has a portfolio manager, Mr.
Paul LaRocco, who is employed by the Manager and is primarily responsible for
the selection of the Fund's securities. The Fund's Board of Trustees, elected by
shareholders, oversees the investment adviser and the portfolio manager. 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 designed for long-term investors. The
Fund's investments in stocks are subject to changes in their value from a number
of factors such as changes in general stock market movements or changes in value
of particular stocks from an event affecting the issuer. The Fund emphasizes
investment in medium market capitalization companies, which investments are
generally more volatile and may involve greater risks than investments in larger
capitalized companies. 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. These changes affect the value of the
Fund's investments and its share prices for each class of its shares. The Fund's
ability to borrow for investment purposes is a speculative investment technique
known as "leveraging". Hedging instruments and derivative investments involve
certain risks, as discussed below.
The Fund may be viewed as an aggressive growth fund, and is generally expected
to be more volatile than the other stock funds, the income and growth funds and
the more conservative income funds in the Oppenheimer funds spectrum. While the
Manager tries to reduce risks by diversifying investments, by carefully
researching securities before they are purchased for the portfolio, and in some
cases by using hedging techniques, there is no guarantee of success in achieving
the Fund's 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" on page __ for more
details.
o Will I Pay a Sales Charge to Buy Shares? The Fund has four classes of
shares. Each class of shares 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 shares 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 shares and
Class C shares. Class Y shares are offered at net asset value without sales
charge only to certain institutional investors. 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 of shares 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. Please
refer to "How to Sell Shares" on page __. The Fund also offers exchange
privileges to other Oppenheimer funds, described in "How to Exchange Shares" on
page __.
Investment Objective and Policies
Objective. The Fund invests its assets to seek capital appreciation for
shareholders. The Fund does not invest to seek current income to pay
shareholders.
Investment Policies and Strategies. The Fund seeks its investment objective by
emphasizing investment in equity securities, such as common and preferred stock
and securities having investment characteristics of equity securities (for
example, securities convertible into common stock), of companies with medium
market capitalizations, as described below, that are believed to have favorable
growth prospects.
Under normal market conditions, as a matter of non-fundamental policy, the
Fund will invest at least 65% of its total assets in equity securities of
"growth-type" companies with a market capitalization between $1 billion and $5
billion ("mid-cap" companies) at the time of purchase. Market capitalization is
generally defined as the value of a company as determined by the total current
market value of its issued and outstanding common stock. The balance of the
Fund's assets may be invested in other market capitalizations and security
types. When market conditions are unstable, as a temporary defensive measure,
the Fund can hold cash and invest all or a portion of its assets in money market
instruments.
In selecting investments for the Fund, the Manager will emphasize mid-cap
companies that it believes will have the potential to achieve long-term earnings
growth rates in excess of the growth of earnings of other companies. Growth
companies tend to be companies whose goods or services have relatively favorable
long-term prospects for increasing demand, or ones which develop new products,
services or markets. They may also include companies in the natural resources
fields or those developing commercial applications for new scientific knowledge
having a potential for technological innovation, such as computer software,
telecommunications equipment and services, biotechnology, and new consumer
products. The Fund may also invest from time to time in cyclical industries such
as insurance and forest products, when the Manager believes that they present
opportunities for capital appreciation.
While mid-cap growth companies may offer greater opportunities for capital
appreciation than larger, more established companies, they may also present
greater risks. The Fund is designed for investors who are willing to accept
greater risks of loss in the hopes of greater gains, and is not intended for
those who seek assured income and conservation of capital. Certain risks of
investing in the Fund are described below.
o Can the Fund's Investment Objective and Policies Change? The Fund has an
investment objective, described above, as well as
investment policies it follows to try to achieve its objective. Additionally,
the Fund uses certain investment techniques and strategies in carrying out those
policies. The Fund's investment policies and practices are not "fundamental"
unless this Prospectus or the Statement of Additional Information states that
a particular policy is "fundamental". The Fund's investment objective is a
fundamental policy.
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 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 Portfolio Turnover. A change in the securities held by the Fund is known
as "portfolio turnover". The Fund may engage in short-term trading to try to
achieve its objective. As a result, the Fund's annual portfolio turnover rate
may be expected to exceed 100% in any given year.
High turnover and short-term trading may cause the Fund to have relatively
larger commission expenses and transaction costs than funds that do not engage
in short-term trading, and result in the Fund's realization of capital gains or
losses for tax purposes.
Investment Risks
All investments carry risks to some degree, whether they are risks that market
prices of the investment will fluctuate (this is known as "market risk") or that
the underlying issuer will experience financial difficulties and may default on
its obligations 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 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 investment
techniques the Fund uses, the Fund is designed for investors who are investing
for the long term. It is not intended for investors 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, and 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 Stock Investment Risks. Because the Fund normally invests most of its
assets in stocks, the value of the Fund's portfolio will be affected by changes
in the stock markets. At times, the stock markets can be volatile, and stock
prices can change substantially. This market risk will affect the Fund's net
asset 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, and not all stock markets move in the same direction at the same
time. Other factors can affect a particular stock's prices (for example, poor
earnings reports by an issuer, loss of major customers, major litigation against
an issuer and changes in government regulations affecting an industry). Not all
of these factors can be predicted. The Fund attempts to limit 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 company.
o Mid-Cap Stocks. While mid-cap company securities may offer a greater
capital appreciation potential than investments in large capitalization company
securities due to their higher growth rates, they may also present greater
risks. Mid-cap company securities tend to be more sensitive to changes in
earnings expectations and have lower trading volumes than large capitalization
company securities; as a result, they may experience more abrupt and erratic
price movements. Further, since mid-cap companies usually reinvest a high
portion of earnings in their own businesses, they may lack the dividend yield
associated with value stocks that can cushion total return in a declining
market.
o Foreign Securities Have Special Risks. The Fund limits its investments
in foreign securities to no more than 10% of its total assets. While foreign
securities offer special investment opportunities, there are also special risks.
The change in value of a foreign currency against the U.S. dollar will result in
a change in the U.S. dollar value of securities denominated in that foreign
currency. Foreign issuers are not subject to the same accounting and disclosure
requirements that U.S. companies are subject to. The value of foreign
investments may be affected by exchange control regulations, expropriation or
nationalization of a company's assets, foreign taxes, delays in settlement of
transactions, changes in governmental, economic or monetary policy in the U.S.
or abroad, or other political and economic factors. More information about the
risks and potential rewards of investing in foreign securities is contained in
the Statement of Additional Information.
o Borrowing for Leverage. The Fund may borrow up to 10% of the value of
its net assets from banks on an unsecured basis to buy portfolio securities. The
foregoing percentage limit is a fundamental policy. This investing technique is
a speculative investment method known as "leverage" and may subject the Fund to
greater risks and costs than funds that do not borrow. The Fund can borrow only
if it maintains a 300% ratio of net assets to borrowing at all times in the
manner set forth in the Investment Company Act. More detail is provided in
"Borrowing for Leverage" in the Statement of Additional Information.
o Special Risks of Hedging Instruments. The Fund can invest in certain
hedging instruments, as described below. The use of hedging instruments requires
special skills and knowledge of investment techniques that are different than
what is required for normal portfolio management. If the Manager uses a hedging
instrument at the wrong time or judges market conditions incorrectly, hedging
strategies may reduce the Fund's return. The Fund could also experience losses
if the prices of its futures and options positions were not correlated with its
other investments or if it could not close out a position because the market for
the future or option was illiquid.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. 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 security has
increased in value above the call price. In writing puts, there is a risk that
the Fund may be required to buy the underlying security at a disadvantageous
price. The use of forward contracts may reduce the gain that would otherwise
result from a change in the relationship between the U.S. dollar and a foreign
currency. These risks are described in greater detail in the Statement of
Additional Information.
o Special Risks of Derivative Investments. The Fund can invest in a number
of different kinds of derivative investments, as described below. 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,
and the derivative itself, 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 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. Please refer to "Illiquid and
Restricted Securities" for an explanation.
Investment Techniques and Strategies
The Fund may also use the investment techniques and strategies described below,
which involve certain risks. The Statement of Additional Information contains
more information about these practices, including limitations on their use that
are designed to
reduce some of the risks.
o Investing In Small, Unseasoned Companies. The Fund may invest in
securities of small, unseasoned companies. These are companies that, together
with the operations of predecessors, have been in operation for less than three
years. Securities of these companies may have limited liquidity (which means
that the Fund may have difficulty selling them at an acceptable price when it
wants to) and the prices of these securities may be volatile.
o Investing In Foreign Securities. The Fund may purchase equity securities
issued or guaranteed by foreign companies or foreign governments or their
agencies. The Fund limits its investments in foreign securities to no more than
10% of its total assets. The Fund may buy securities in any country, developed
or underdeveloped . Investments in securities of issuers in underdeveloped
countries generally involve more risk and may be considered highly speculative.
o Temporary Defensive Measures. When market conditions are considered by
the Manager to be unstable, as a temporary defensive measure, the Fund can hold
cash and invest without limit in money market instruments. The Fund will
invest in high quality, short-term money market instruments such as U.S.
Treasury and agency obligations; commercial paper (short-term, unsecured,
negotiable promissory notes of a domestic or foreign company); short-term debt
obligations of corporate issuers; and certificates of deposit and bankers'
acceptances (time drafts drawn on commercial banks usually in connection with
international transactions) of domestic or foreign banks and savings and loan
associations.
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 that cannot be sold
publicly until it is registered under the Securities Act of 1933. The Fund will
not invest more than 15% of its net assets in illiquid or restricted securities.
Illiquid securities include repurchase agreements maturing in more than seven
days, certain futures or certain participation interests other than those with
puts exercisable within seven days. The Manager monitors holdings of illiquid
securities on an ongoing basis to determine whether to sell any holdings to
maintain adequate liquidity.
The 15% restriction does not limit purchases of restricted securities that
are eligible for sale to qualified institutional purchasers pursuant to Rule
144A under the Securities Act of 1933, provided that those securities have been
determined to be liquid by the 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 (for example, if
qualified institutional buyers become, for a time, uninterested in purchasing
the security), the Fund's holding of that security may be deemed to be illiquid
and the level of Fund illiquidity could increase.
o Loans of Portfolio Securities. To raise cash for liquidity purposes, the
Fund may lend its portfolio securities to brokers, dealers and other financial
institutions. The Fund must receive collateral for a loan. These loans are
limited to not more than 25% of the value of the Fund's total assets and are
subject to the conditions described in the Statement of Additional Information.
The Fund presently does not intend to engage in loans of portfolio securities
that will exceed 5% of the value of the Fund's net assets in the coming year. o
Repurchase Agreements. To maintain liquidity to meet shareholder redemption
requests or to settle portfolio trades, the Fund may enter into repurchase
agreements. In a repurchase transaction, the Fund buys a security and
simultaneously sells it to the vendor for delivery at a future date.
Repurchase agreements must be fully collateralized. However, if the vendor
fails to pay the resale price on the delivery date, the Fund may incur costs in
disposing of the collateral and may experience losses if there is any delay in
its ability to do so. The Fund will not enter into a repurchase agreement that
causes more than 15% of its net assets to be subject to repurchase agreements
having a maturity beyond seven days. There is no limit on the amount of the
Fund's net assets that may be subject to repurchase agreements of seven days or
less.
o Investment in Other Investment 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
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 Warrants and 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. The Fund may invest up to 5% of its net assets in
warrants or rights. That 5% limitation does not apply to warrants the Fund has
acquired as part of units with other securities or that are attached to
securities. For further details, see "Warrants and Rights" in the Statement of
Additional Information.
o Convertible Securities. Although most of the Fund's investments will be
in stocks, the Fund may invest in convertible securities. Convertible securities
are bonds, preferred stocks and other securities that normally pay a fixed rate
of interest or dividends and give the owner the option to convert the security
into common stock. While the value of convertible securities depends in part on
interest rate changes and the credit quality of the issuer, the price will also
change based on the price of the underlying stock. Although convertible
securities generally have less potential for gain than common stock, their
income provides a cushion against stock price declines. The Manager generally
analyzes these investments from the perspective of the growth potential of the
underlying stock and treats them as "equity substitutes." The Fund will not
invest more than 5% of its net assets in convertible debt securities that are
rated below "investment grade" by Moody's Investors Service, Inc., Standard
& Poor's Corporation, Duff & Phelps, Inc. or another nationally recognized
statistical rating organization; such securities often have speculative
characteristics and special risks that make them riskier investments than
investment grade securities.
o Hedging. As described below, the Fund may purchase and sell certain
kinds of futures contracts, put and call options{,} and forward contracts.
These are all referred to as "hedging instruments." The Fund does not use
hedging instruments for speculative purposes, and has limits on their use,
described below. The types of hedging instruments the Fund may use are described
in greater detail in "Other Investment Techniques and Strategies" in the
Statement of Additional Information.
The Fund may buy and sell options, and 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, 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 are used to try to protect against declines in the
dollar value of foreign securities the Fund owns, or to protect against an
increase in the dollar cost of buying foreign securities. Writing covered call
options may also provide income to the Fund for liquidity purposes.
o Futures. The Fund may buy and sell futures contracts that relate to (l)
stock indices (these are referred to as Stock Index Futures),(2) foreign
currencies (these are called Forward Contracts and are discussed below) and (3)
commodities (these are referred to as commodity futures).
o Put 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.
Up to 25% of the Fund's total assets may be subject to such calls.
The Fund may buy puts whether or not it holds the underlying investment in
the portfolio. 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 net
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 Fund limits its 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 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 "
generally for hedging purposes . In the broadest sense, exchange- traded options
and futures contracts (discussed in "Hedging," above) may be considered
"derivative investments."
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. Other investment
restrictions are listed in "Investment Restrictions" in the Statement of
Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized in June 1997 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
meet periodically 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 the sole initial shareholder. "Trustees and Officers of the Fund" in the
Statement of Additional Information names the Trustees and officers of the Fund
and provides more information about them. Although the Fund will not normally
hold annual meetings of its shareholders, it may hold shareholder meetings from
time to time on important matters, and shareholders have the right to call a
meeting to remove a Trustee or to take other action described in the Fund's
Declaration of Trust.
The Board of Trustees has the power, without shareholder approval, to
divide unissued shares of the Fund into two or more classes. The Board has done
so, and the Fund currently has four classes of shares, Class A, Class B, Class C
and Class Y. All classes invest in the same investment portfolio. Only certain
institutional investors may elect to purchase Class Y shares. 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 for paying to conduct its business.
The Manager has operated as an investment adviser 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 Manager. The Portfolio Manager of the Fund is Mr. Paul LaRocco,
who is employed by the Manager. He is the person principally responsible for the
day-to-day management of the Fund's portfolio. Mr. LaRocco is a Vice President
of the Manager and an officer of other Oppenheimer funds. He was formerly a
securities analyst with Columbus Circle Investors.
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: 0.75% of the first $200 million of average annual net assets;
0.72% of the next $200 million; 0.69% of the next $200 million; 0.66% of the
next $200 million; and 0.60% of average annual net assets over $800 million.
The Fund pays expenses related to its daily operations, such as custodian
fees, Trustees' fees, transfer agency fees, legal and auditing costs. Those
expenses are paid out of the Fund's assets and are not paid directly by
shareholders. However, those expenses reduce the net asset value of shares, and
therefore are indirectly borne by shareholders through their investment. More
information about the Investment Advisory Agreement and the other expenses paid
by the Fund is contained in the Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of Additional
Information. That section discusses how brokers and dealers are selected for the
Fund's portfolio transactions. 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 adviser.
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 the other
"Oppenheimer funds" managed by the Manager 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. It also acts as the shareholder servicing
agent for the Fund and other Oppenheimer funds. Shareholders should direct
inquiries about their account to the Transfer Agent at the address and toll-free
numbers shown below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses 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 (if any) are received
in cash or shares are sold or purchased). The Fund's performance data 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 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 either the front-end or the appropriate contingent
deferred sales charge, as applicable, and those returns would be less if sales
charges were deducted.
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors four different classes of
shares. Three classes, Class A, Class B and Class C, are available to
non-institutional investors. The fourth class, Class Y, is offered only to
certain institutional investors. 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 calendar months if you purchased Fund
shares by exchanging shares of other Oppenheimer funds that 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 deferred sales charge of 1%, as
discussed in "Buying Class C Shares" below.
o Class Y Shares. Class Y shares are offered only to certain
institutional investors that have special agreements with the Distributor.
Which Class of Shares Should You Choose? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
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 assumed you are an
individual investor, and therefore ineligible to purchase Class Y shares. 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 for your account), compared to the
effect over time of higher class-based expenses on Class B or Class C shares for
which no initial sales charge is paid.
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 6 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 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 held 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.
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 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. In most cases, to enable you to receive that day's offering
price, the Distributor or its designated agent must receive your order by the
time of day The New York Stock Exchange closes, which is normally 4:00 P.M., New
York time, but may be earlier on some days (all references to time in this
Prospectus mean "New York time"). The net asset value of each class of shares is
determined as of that time on each day The New York Stock Exchange is open
(which is a "regular business day").
If you buy shares through a dealer, the dealer must receive your order by
the close of The New York Stock Exchange, on a regular business day and transmit
it to the Distributor so that it is received before the Distributor's close of
business that day, which is normally 5:00 P.M. The Distributor may reject any
purchase order for the Fund's shares, in its sole discretion.
Special Sales Charge Arrangements for Certain Persons. Appendix 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:
<TABLE>
<CAPTION>
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
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
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%
- ---------------------
</TABLE>
The Distributor reserves the right to reallow the entire commission to dealers.
If that occurs, the dealer may be considered an "underwriter" under Federal
securities laws.
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) of the
Internal Revenue Code 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 employees'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;
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 an investment option under a special arrangement
with the Distributor if the purchase occurs more than 30 days after the addition
of the Oppenheimer funds as an investment option to the Retirement Plan.
If you redeem any shares of the Oppenheimer funds purchased prior to May
1, 1997 (which would include shares of the Fund purchased by exchange of shares
of other Oppenheimer funds purchased prior to such date), 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 shares of the Oppenheimer funds
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:
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 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 a
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 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 who have entered into an agreement for this purpose with the
Distributor and 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 Class 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 commence by December 31, 1996.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following transactions
are not subject to Class A sales charges:
o shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
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 in
the prior 30 days from a mutual fund (other than a fund managed by the Manager
or any of its subsidiaries) on which an initial sales charge or contingent
deferred sales charge was paid (this waiver also applies to shares purchased by
exchange of shares of Oppenheimer Money Market Fund, Inc. that were purchased
and paid for in this manner); this waiver must be requested when the purchase
order is placed for 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 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 TRAC-2000 401(k) plans sponsored by the
Distributor due to the termination of the TRAC-2000 program;
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; and
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 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
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 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 Class C
shares and servicing accounts. Under the Plans, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B shares 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 up to 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
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. If a dealer has a special agreement with the Distributor, 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. If a dealer has a special agreement with the
Distributor, 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 or less 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. If the Fund terminates either
of its Plans, the Board of Trustees may allow the Fund to continue payments of
the asset-based sales charge to the Distributor for distributing shares before
the Plan was terminated.
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 discussed in "Reduced Sales Charges" in the Statement of Additional
Information. In order to receive a waiver of the Class B 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 redemption}:
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 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; or(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; and o shares issued in plans of reorganization to
which the Fund is a party.
Buying Class Y Shares. Class Y shares are sold at net asset value per share
without sales charge directly to certain institutional investors, such as
insurance companies, registered investment companies and employee benefit plans,
that have special agreements with the Distributor for this purpose. These
include Massachusetts Mutual Life Insurance Company, an affiliate of the
Manager, which may purchase Class Y shares of the Fund and other Oppenheimer
funds (as well as Class Y shares of funds advised by MassMutual) for asset
allocation programs, investment companies or separate investment accounts it
sponsors and offers to its customers. Individual investors are not able to
invest in Class Y shares directly.
While Class Y shares are not subject to initial or contingent deferred
sales charges or asset-based sales charges, an institutional investor buying the
shares for its customers' accounts may impose charges on those accounts. The
procedures for purchasing, redeeming, exchanging or transferring the Fund's
other classes of shares (other than the time those orders must be received by
the Distributor or Transfer Agent in Denver), and the special account features
available to purchasers of those other classes of shares described elsewhere in
this Prospectus do not apply to Class Y shares. Instructions for purchasing,
redeeming, exchanging or transferring Class Y shares must be submitted by the
institutional investor, not by its customers for whose benefit the shares are
held.
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 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 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
o 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
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
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
brokerin 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.
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 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 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.
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.
The Distributor has entered into agreements with certain dealers and
investment advisors permitting them to exchange their clients' shares by
telephone. These privileges are limited under those agreements and the
Distributor has the right to reject or suspend those privileges. As a result,
those exchanges may be subject to notice requirements, delays and other
limitations that do not apply to shareholders who exchange their shares directly
by calling or writing to the Transfer Agent.
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 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, Class C and Class Y 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 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 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, Class C
and Class Y 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 and Class Y 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. There is no fixed dividend rate and there can be no assurance that
the Fund will pay any dividends.
Capital Gains. The Fund may make distributions annually in December out of any
net short-term or long-term capital gains, and the Fund may make supplemental
distributions of 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.
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.
-3-
<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 single
employer.
A-1
<PAGE>
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% l.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 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
exchange from an Oppenheimer fund that was a Former Quest for Value Fund or
into which such fund merged, if those shares were purchased prior to March 6,
1995: in connection with (i) distributions to participants or beneficiaries of
plans qualified under Section 401(a) of the Internal Revenue Code or from
custodial accounts under Section 403(b)(7) of the Code, Individual Retirement
Accounts, deferred compensation plans under Section 457 of the Code, and other
employee benefit plans, and returns of excess contributions made to each type of
plan, (ii) withdrawals under an automatic withdrawal plan holding only either
Class B or Class C shares if the annual withdrawal does not exceed 10% of the
initial value of the account, and (iii) liquidation of a shareholder's account
if the aggregate net asset value of shares held in the account is less than the
required minimum value of such accounts.
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 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 Class 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-2
<PAGE>
Oppenheimer MidCap 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 Accountants
Price Waterhouse LLP
950 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.
psp0745.001.1197
prosp\745psp# 2
<PAGE>
Oppenheimer MidCap Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated November
17, 1997
This Statement of Additional Information of Oppenheimer MidCap Fund is not
a Prospectus. This document contains additional information about the Fund and
supplements information in the
Prospectus dated November 17, 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 and History....................................
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
Report of Independent Accountants
Statement of Assets & Liabilities..............................
Appendix: Corporate Industry Classifications................... A-1
-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. Certain 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, the Fund's investment
advisor, OppenheimerFunds, Inc. (referred to as the "Manager"), evaluates the
merits of securities primarily through the exercise of its own investment
analysis. This may include, among other things, evaluation of the history of the
issuer's operations, prospects for the industry of which the issuer is part, 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 legislative proposals or new laws that
might affect the issuer.
Current income is not a consideration in the selection of portfolio
securities for the Fund, whether for appreciation, defensive or liquidity
purposes. 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.
The portion of the Fund's assets allocated to securities and methods
selected for capital appreciation will depend upon the judgment of the 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 will be emphasized.
o Foreign Securities. As noted in the Prospectus, the
Fund may invest in securities (which may be denominated in U.S.
dollars or non-U.S. currencies) issued or guaranteed by foreign
corporations, certain supranational entities (described below)
and foreign governments or their
agencies or instrumentalities and in securities issued by U.S.
corporations denominated in non-U.S.
currencies. The types of foreign debt obligations and other securities in which
the Fund may invest are the same types of debt and equity securities identified
above. Foreign securities are subject, however, to additional risks not
associated with domestic securities, as discussed below. These additional risks
may be more pronounced as to investments in securities issued by emerging market
countries or by companies located in emerging market countries.
"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 that 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 that are listed
on a U.S. securities exchange or traded in the U.S. over-the-counter markets are
not considered "foreign securities" for the purpose of the Fund's investment
allocations, because they are not subject to many of the special considerations
and risks, discussed below, that apply to foreign securities traded and held
abroad.
Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers, including the
opportunity to invest in foreign issuers that appear to offer growth potential,
or in foreign countries with economic policies or business cycles different from
those of the U.S., or to reduce fluctuations in portfolio value by taking
advantage of foreign stock markets that do not move in a manner parallel to U.S.
markets. In buying foreign securities, the Fund may convert U.S. dollars into
foreign currency, but only to effect securities transactions on foreign
securities exchanges and not to hold such currency as an investment. If the
Fund's portfolio securities are held abroad, the countries in which such
securities may be held will be approved by the Fund's Board of Trustees and the
sub-custodians or depositories holding such securities will be selected by the
Fund's foreign custody manager.
o Risks of Foreign Investing. 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: reduction of income by foreign taxes, 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,
greater volatility and less liquidity on foreign markets than in the U.S.; less
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 because of the lesser speed and reliability of mail service between
the U.S. and foreign countries than within the U.S.; possibilities in some
countries of expropriation or nationalization of assets, confiscatory taxation,
political, financial or social instability or adverse diplomatic developments;
and differences (which may be favorable or unfavorable) between the U.S. economy
and foreign economies. From time to time, U.S. Government policies have
discouraged certain investments abroad by U.S. investors, through taxation or
other restrictions, and it is possible that such restrictions could be
re-imposed.
o Borrowing For Leverage. From time to time, the Fund may borrow from
banks on an unsecured basis subject to the restrictions stated in the
Prospectus. Any such borrowing will be made only from banks, and, pursuant to
the requirements of the Investment Company Act of 1940, will only be made to the
extent that the value of the Fund's assets, less its liabilities other than
borrowing, is equal to at least 300% of all borrowing including the proposed
borrowing. If the value of the Fund's assets, when computed in that manner,
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
requirement. To do so, the Fund may have to sell a portion of its investments at
a time when independent investment judgment would not dictate such sale.
Interest on money borrowed is an expense the Fund would not otherwise incur, so
that during periods of substantial borrowing, its expenses may increase more
than funds that do not borrow.
Other Investment Techniques and Strategies
o Investing in Small, Unseasoned, Companies. The securities of small,
unseasoned companies may have a limited trading market, which may adversely
affect the Fund's ability to dispose of them and can reduce the price the Fund
might be able to obtain for them. If other investment companies and investors
that invest in these types of securities trade the same securities when the Fund
attempts to dispose of its holdings, the Fund may receive lower prices than
might be obtained, because of the thinner market for such securities.
o Illiquid and Restricted Securities. To enable the Fund
to sell restricted securities not registered under the
Securities Act of 1933, the Fund may have to cause those
securities to be
registered. The expenses of registration of restricted
securities may be negotiated by the Fund with
the issuer at the time such securities are purchased by the Fund, if such
registration is required before such securities may be sold publicly. When
registration must be arranged because the Fund wishes to sell the security, a
considerable period may elapse between the time the decision is made to sell the
securities and the time the Fund would be permitted to sell them. The Fund 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 restricted
securities, as stated in the Prospectus. Those percentage restrictions do not
limit purchases of restricted securities that are eligible for sale to qualified
institutional purchasers pursuant to Rule 144A under the Securities Act of 1933,
provided that those securities have been determined to be liquid by the Manager
under Board-approved guidelines. Those guidelines take into account the trading
activity for such securities and the availability of reliable pricing
information, among other factors. If there is a lack of trading interest in a
particular Rule 144A security, the Fund's holding of that security may be deemed
to be illiquid.
o Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Repurchase
transactions are not considered "loans" for the purpose of the Fund's limit on
the percentage of its assets that can be loaned. Under applicable regulatory
requirements (which are subject to change), the loan collateral on each business
day must at least equal the value of the loaned securities and must consist of
cash, bank letters of credit or securities of the U.S. Government (or its
agencies or instrumentalities). To be acceptable as collateral, letters of
credit must obligate a bank to pay amounts demanded by the Fund if the demand
meets the terms of the letter. Such terms and the issuing bank must be
satisfactory to the Fund. In a portfolio securities lending transaction, the
Fund receives from the borrower an amount equal to the interest paid or the
dividends declared on the loaned securities during the term of the loan as well
as the interest on the collateral securities, less any finders', administrative
or other fees the Fund pays in connection with the loan. The terms of the Fund's
loans must meet applicable tests under the Internal Revenue Code and must permit
the Fund to reacquire loaned securities on five days' notice or in time to vote
on any important matter.
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. In a repurchase transaction,
the Fund acquires a security from, and simultaneously resells it to, an approved
vendor. An "approved vendor" is a U.S. 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. The repurchase 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, 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 Manager will impose creditworthiness requirements
to confirm that the vendor is financially sound and will continuously monitor
the collateral's value.
o Hedging. 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 Stock Index 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. As described in the Prospectus, the Fund may invest
in Stock Index Futures . Such futures contracts may relate to broadly-based
stock indices (i.e., it includes stocks that are not limited to issuers in any
particular industry or group of industries) or narrowly-based stock indices
(i.e., it includes stocks that are limited to issuers in a single industry or
group of related 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.
Stock index futures are contracts based on the future value of the basket
of securities that comprise the underlying stock 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
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 Stock Index 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 clearing house 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 of any type, including equity and debt
securities. 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.
o Writing Put Options. A put option on securities gives the purchaser
the right to sell, and the writer the obligation to buy, the underlying
investment at the exercise price during the option
period. Writing a put covered by segregated liquid assets equal to the exercise
price of the put has the same economic effect to the Fund as writing a covered
call. The premium the Fund receives from writing a put option represents a
profit, as long as the price of the underlying investment remains above the
exercise price. However, the Fund has also assumed the obligation during the
option period to buy the underlying investment from the buyer of the put at the
exercise price, even though the value of the investment may fall below the
exercise price. If the put expires unexercised, the Fund (as the writer of the
put) realizes a gain in the amount of the premium less transaction costs. If the
put is exercised, the Fund must fulfill its obligation to purchase the
underlying investment at the exercise price, which will usually exceed the
market value of the investment at that time. In that case, the Fund may incur a
loss, equal to the sum of the sale price of the underlying investment and the
premium received minus the sum of the exercise price and any transaction costs
incurred.
When writing put options on securities, to secure its obligation to pay
for the underlying security, the Fund will deposit in escrow liquid assets with
a value equal to or greater than the exercise price of the underlying
securities. The Fund therefore forgoes the opportunity of investing the
segregated assets or writing calls against those assets. As long as the
obligation of the Fund as the put writer continues, it may be assigned an
exercise notice by the exchange or broker-dealer through whom such option was
sold, requiring the Fund to exchange currency at the specified rate of exchange
or to take delivery of the underlying security against payment of the exercise
price. The Fund may have no control over when it may be required to purchase the
underlying security, since it may be assigned an exercise notice at any time
prior to the termination of its obligation as the writer of the put. This
obligation terminates upon expiration of the put, or such earlier time at which
the Fund effects a closing purchase transaction by purchasing a put of the same
series as that previously sold. Once the Fund has been assigned an exercise
notice, it is thereafter not allowed to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a profit on
an outstanding put option it has written or to prevent an underlying security
from being put. Furthermore, effecting such a closing purchase transaction will
permit the Fund to write another put option to the extent that the exercise
price thereof is secured by the deposited assets, or to utilize the proceeds
from the sale of such assets for other investments by the Fund. The Fund will
realize a profit or loss from a closing purchase transaction if the cost of the
transaction is less or more than the premium received from writing the option.
As above for writing covered calls, any and all such profits described herein
from writing puts are considered short-term capital gains for Federal tax
purposes, and when distributed by the Fund, are taxable as ordinary income.
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 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 purchase 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 Currency. 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
dealer in such options. It does so to protect against declines in the dollar
value of foreign securities and against increases in the dollar cost of foreign
securities to be acquired. If the Manager anticipates a rise in the dollar value
of a foreign currency in which securities to be acquired are denominated, the
increased cost of such securities may be partially offset by purchasing calls or
writing puts on that foreign currency. If a decline in the dollar value of a
foreign currency is anticipated, the decline in value of portfolio securities
denominated in that currency may be partially offset by writing calls or
purchasing puts on that foreign currency. However, in the event of currency rate
fluctuations adverse to the Fund's position, it would lose the premium it paid
and transaction costs.
A call written on a foreign currency by the Fund is covered if the Fund
owns the underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a segregated account
by its custodian) upon conversion or exchange of other foreign currency held in
its portfolio. A call may be written by the Fund on a foreign currency to
provide a hedge against a decline 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 maintaining in a segregated account with the Fund's
Custodian, cash or U.S. Government Securities in an amount not less than the
value of the underlying foreign currency in U.S. dollars marked-to-market daily.
o Foreign 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 dividend
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 seek 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's Custodian will place liquid assets of any types, in a separate
account of the Fund having a value equal to the aggregate amount of the Fund's
commitments under forward contracts to cover its short positions. If the value
of the securities placed in the separate account declines, additional cash or
securities will be placed in the account on a daily basis so that the value of
the account will equal the amount of the Fund's net commitments with respect to
such contracts. As an alternative to maintaining all or part of the separate
account, 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 in 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 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 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 thereon as established by the
Commodities Futures Trading Commission ("CFTC"). In particular, the Fund is
excluded from registration as a "commodity pool operator" if it complies with
the requirements of Rule 4.5 adopted by the CFTC. Under this Rule, the Fund is
not limited regarding the percentage of its assets committed to futures margins
and related options premiums subject to a hedge position. However, under the
Rule the Fund must limit its aggregate initial futures margins and related
options premiums to 5% or less of the Fund's total assets for hedging strategies
that are considered bona fide hedging strategies under the Rule. Under the Rule
the Fund also must use short future options on futures positions solely for bona
fide hedging purposes within the meaning and intent of 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 adviser as the
Fund (or an adviser that is an affiliate of the Fund's adviser). The exchanges
also impose position limits on Futures transactions. An exchange may order the
liquidation of positions found to be in violation of those limits and may impose
certain other sanctions.
Due to requirements under the Investment Company Act, when the Fund
purchases a Future, the Fund will maintain, in a segregated account or accounts
with its Custodian, liquid assets of any type, including equity and debt
securities of any grade, in an amount equal to the market value of the
securities underlying such Future, less the margin deposit applicable to it.
o Additional Information About Hedging Instruments and Their Use. The
Fund's Custodian, or a securities depository acting for the Custodian, will
act as the Fund's escrow agent, through the
facilities of the Options Clearing Corporation ("OCC"), as to the investments on
which the Fund has written options traded on exchanges or as to other acceptable
escrow securities, so that no margin will be required for such transactions. OCC
will release the securities on the expiration of the option or upon the Fund's
entering into a closing transaction. An option position may be closed out only
on a market which provides secondary trading for options of the same series, and
there is no assurance that a liquid secondary market will exist for any
particular option.
When the Fund writes an over-the-counter("OTC") option, it will enter into
an arrangement with a primary U.S. Government securities dealer, which would
establish a formula price at which the Fund would have the absolute right to
repurchase that OTC option. That formula price would generally be based on a
multiple of the premium received for the option, plus the amount by which the
option is exercisable below the market price of the underlying security (that
is, the extent to which the option is "in-the-money"). When the Fund writes an
OTC option, it will treat as illiquid (for purposes of the limit on its assets
that may be invested in the illiquid securities, stated in the Prospectus) the
mark-to-market value of any OTC option held by it. The Securities and Exchange
Commission ("SEC") is evaluating whether OTC options should be considered liquid
securities, and the procedure described above could be affected by the outcome
of that evaluation.
The Fund's option activities may affect its turnover rate and brokerage
commissions. The exercise of calls written by the Fund may cause the Fund to
sell related portfolio securities, thus increasing its turnover rate in a manner
beyond the Fund's control. The exercise by the Fund of puts on securities will
cause the sale of related investments, increasing portfolio turnover. Although
such exercise is within the Fund's control, holding a put might cause the Fund
to sell the related investments for reasons which would not exist in the absence
of the put. The Fund will pay a brokerage commission each time it buys a put or
call, sells a call, or buys or sells an underlying investment in connection with
the exercise of a put or call. Such commissions may be higher than those which
would apply to direct purchases or sales of such underlying investments.
Premiums paid for options are small in relation to the market value of the
related investments, and consequently, put and call options offer large amounts
of leverage. The leverage offered by trading options could result in the Fund's
net asset value being more sensitive to changes in the value of the underlying
investments.
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 and timing of gains (or losses) recognized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a position making
up a straddle is allowed only to the extent such loss exceeds any unrecognized
gain in the offsetting positions making up the straddle. Disallowed loss is
generally allowed at the point where there is no unrecognized gain in the
offsetting positions making up the straddle, or the offsetting position is
disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates 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 offering transactions which could distort the
normal relationship between the cash and futures markets. Second, the liquidity
of the futures markets depends on the 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 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.
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.
Other Investment Restrictions
The Fund's most significant investment restrictions are set forth in the
Prospectus. The following are fundamental policies, and together with the Fund's
fundamental polices described in the Prospectus, cannot be changed without the
vote 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 shareholder meeting, if the holders of more than 50% of the
outstanding shares are present, or (ii) more than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot:
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; the Fund may also make loans of
portfolio securities subject to the restrictions set forth in the Prospectus and
above under the caption "Loans of Portfolio Securities";
o underwrite securities of other companies, except
insofar as 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 invest in physical commodities or physical commodity contracts; however,
the Fund may (I) buy and sell hedging instruments to the extent specified in
its Prospectus from time to time and (ii) buy and sell options, futures,
securities or other instruments backed by, or the investment return from which,
is linked to changes in the price of, physical commodities;
o invest in real estate or interests in real estate, but may purchase
readily marketable securities of companies holding real estate or interests
therein;
o issue "senior securities", but this does not prohibit it from borrowing
money subject to the provisions set forth in the Prospectus and in the section
titled "Borrowing for Leverage" or entering into margin, collateral or escrow
arrangements as permitted by its other investment policies.
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.
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 in 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 1/2 of 1% 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 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 and History. As a Massachusetts business trust, the Fund is not
required to hold, and does not plan to hold, regular annual meetings of
shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder meeting is
called by the Trustees or 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 communications
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 to 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 are listed
below, together with principal occupations and business affiliations during the
past five years. The address of each is Two World Trade Center, 34th Floor, New
York, New York 10048, except as noted. All of the Trustees are also directors or
trustees of the Oppenheimer Quest For Value Funds (consisting of the following
series: Oppenheimer Quest Growth & Income Value Fund, Oppenheimer Quest Officers
Value Fund, Oppenheimer Quest Opportunity Value Fund and Oppenheimer Quest Small
Cap Value Fund), Oppenheimer Quest Global Value Fund, Inc. and Oppenheimer Quest
Capital Value Fund, Inc. (the "Oppenheimer Quest Funds"), and Rochester Fund
Municipals, Rochester Portfolio Series - Limited Term New York Municipal Fund
and Bond Fund Series - Oppenheimer Bond Fund for Growth (the "Oppenheimer
Rochester funds"). As of the date of this Statement of Additional Information,
the Manager owned all of the outstanding shares of the Fund as its initial
shareholder and no Trustee or officer of the Fund owned of record or
beneficially any shares of the Fund.
Bridget A. Macaskill, Chairman of the Board of Trustees and President;* Age 49.
President, Chief Executive Officer and a Director of the Manager and HarbourView
Asset Management Corporation ("HarbourView"), a subsidiary of the Manager;
President and a Director of Oppenheimer Acquisition Corporation. ("OAC"), the
Manager's parent holding company, and Oppenheimer Partnership Holdings, Inc.;
Chairman and a Director of Shareholder Services, Inc. ("SSI"), and Shareholder
Financial Services, Inc. ("SFSI"), transfer agent subsidiaries of the Manager;
and a director of Oppenheimer Real Asset Management, Inc.; a director of the
NASDAQ Stock Market, Inc. and Hillsdown Holdings plc (a U.K. food company).
Paul Y. Clinton, Trustee; Age: 66 39
Blossom Avenue, Osterville, Massachusetts02655
Principal of Clinton Management Associates, a financial and venture
capital consulting firm; Trustee of Capital Cash Management Trust, a
money-market fund and Narragansett Tax-Free Fund, a tax- exempt bond fund;
Director of OCC Cash Reserves, Inc. and Trustee of OCC Accumulation Trust, both
of which are open-end investment companies. Formerly: Director, External
Affairs, Kravco Corporation, a national real estate owner and property
management corporation; President of Essex Management Corporation, a management
consulting company; a general partner of Capital Growth Fund, a venture capital
partnership; a general partner of Essex Limited Partnership, an investment
partnership; President of Geneve Corporation., a venture capital fund; Chairman
of Woodland Capital Corp., a small business investment company; and Vice
President of W.R. Grace & Company.
Thomas W. Courtney, Trustee; Age: 64
833 Wyndemere Way, Naples, Florida 34105
Principal of Courtney Associates, Inc. (venture capital firm); former General
Partner of Trivest Venture Fund (private venture capital fund); former President
of Investment Counseling Federated Investors, Inc.; Trustee of Cash Assets
Trust, a money market fund; Director of OCC Cash Reserves, Inc., and Trustee of
OCC Accumulation Trust, both of which are open-end investment companies; former
President of Boston Company Institutional Investors; Trustee of Hawaiian
Tax-Free Trust and Tax-Free Trust of Arizona, tax-exempt bond funds; Director of
several privately owned corporations; former Director of Financial Analysts
Federation.
- --------
*A Trustee who is an "interested person" as defined in the
Investment Company Act.
Lacy B. Herrmann, Trustee; Age: 68
380 Madison Avenue, Suite 2300, New York, New York 10017
Chairman and Chief Executive Officer of Aquila Management Corporation, the
sponsoring organization and Administrator and/or Sub-Adviser to the following
open-end investment companies, and Chairman of the Board of Trustees and
President of each: Churchill Cash Reserves Trust, Aquila Cascadia Equity Fund,
Pacific Capital Cash Assets Trust, Pacific Capital U.S. Treasuries Cash Assets
Trust, Pacific Capital Tax-Free Cash Assets Trust, Prime Cash Fund, Narragansett
Insured Tax-Free Income Fund, Tax-Free Fund For Utah, Churchill Tax-Free Fund of
Kentucky, Tax-Free Fund of Colorado, Tax-Free Trust of Oregon, Tax-Free Trust of
Arizona, Hawaiian Tax-Free Trust, and Aquila Rocky Mountain Equity Fund; Vice
President, Director, Secretary, and formerly Treasurer of Aquila Distributors,
Inc., distributor of the above funds; President and Chairman of the Board of
Trustees of Capital Cash Management Trust ("CCMT"), and an Officer and
Trustee/Director of its predecessors; President and Director of STCM Management
Company, Inc., sponsor and adviser to CCMT; Chairman, President and a Director
of InCap Management Corporation, formerly sub-adviser and administrator of Prime
Cash Fund and Short Term Asset Reserves; Director of OCC Cash Reserves, Inc.,
and Trustee of OCC Accumulation Trust, both of which are open-end investment
companies; Trustee Emeritus of Brown University.
George Loft, Trustee; Age: 82
51 Herrick Road, Sharon, Connecticut 06069
Private Investor; Director of OCC Cash Reserves, Inc., and Trustee of OCC
Accumulation Trust, both of which are open-end investment companies.
Paul LaRocco, Vice President and Portfolio Manager; Age: 39
Vice President of the Manager; an officer of other Oppenheimer funds;
formerly a securities analyst
with Columbus Circle Investors.
Andrew J. Donohue, Secretary; Age: 47
Executive Vice President, General Counsel and a director of the Manager,
OppenheimerFunds Distributor, Inc., (the "Distributor"), HarbourView, SSI, SFSI,
Oppenheimer Partnership Holdings, Inc., and MultiSource Services, Inc., (a
broker-dealer); President and a director of Centennial Asset Management
Corporation ("Centennial"); President and a director of Oppenheimer Real Asset
Management, Inc.; Secretary and General Counsel of OAC; an officer of other
Oppenheimer funds.
George C. Bowen, Treasurer; Age: 61
6803 South Tucson Way, Englewood, Colorado, 80112
Senior Vice President and Treasurer of the Manager; Vice President and Treasurer
of the Distributor and HarbourView; Senior Vice President, Treasurer, Assistant
Secretary and a director of Centennial; President, Treasurer and a director of
Centennial Capital Corporation; Vice President, Treasurer and Secretary of SFSI;
Senior Vice President, Treasurer and Secretary of SSI, Vice President and
Treasurer of Oppenheimer Real Asset Management, Inc.; Chief Executive Officer,
Treasurer and a director of MultiSource Services, Inc.; an officer of other
Oppenheimer funds.
Robert G. Zack, Assistant Secretary; Age: 49
Senior Vice President and Associate General Counsel of the Manager; Assistant
Secretary of SSI and
SFSI; an officer of other Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer; Age: 38
6803 South Tucson Way, Englewood, Colorado, 80112
Vice President of the Manager/Mutual Fund Accounting; an officer of other
Oppenheimer funds; formerly a Fund Controller for the Manager.
Scott Farrar, Assistant Treasurer; Age: 32
6803 South Tucson Way, Englewood, Colorado, 80112
Vice President of the Manager/Mutual Fund Accounting, an officer of other
Oppenheimer funds; previously a Fund Controller for the Manager.
o Remuneration of Trustees. All officers of the Fund and Ms. Macaskill, a
Trustee, are officers or directors of the Manager and 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 with respect to the Fund's fiscal year
ending August 31, 1998.
Aggregate Benefits
Compensation Accrued as
from the Part of the
Name of Person Fund(1) Fund
Paul Y. Clinton $6,350 None
Thomas W. Courtney $6,350 None
Lacy B. Herrmann $6,350 None
George Loft $6,350 None
(1) Estimated to be received during the current fiscal year ending August 31,
1998.
Deferred Compensation Plan. The Board of Trustees has adopted a Deferred
Compensation plan for disinterested trustees that enables them to elect to
defer receipt of all or a portion of the annual
fees they are entitled to receive from the Fund. Under the plan, the
compensation deferred by a Trustee is periodically adjusted as though an
equivalent amount had been invested in shares of one or more Oppenheimer funds
selected by the Trustee. The amount paid to the Trustee under the plan will be
determined based upon the performance of the selected funds. Deferral of
Trustees' fees under the plan will not materially affect the Fund's assets,
liabilities and net income per share. The plan will not obligate the Fund to
retain the services of any Trustee or to pay any particular level of
compensation to any Trustee. Pursuant to an Order issued by the Securities and
Exchange Commission, the Fund may invest in the funds selected by the Trustee
under the plan for the limited purpose of determining the value of the Trustee's
deferred fee account.
o Major Shareholders. As of the date of this Statement of Additional
Information, the Manager was the sole initial shareholder of the Fund's Class
A, Class B, Class C and Class Y 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 one
of whom (Ms. Macaskill) serves as an officer and Trustee 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 Manager of the Fund is Mr. Paul
LaRocco, who is principally responsible for the day-to-day management of the
Fund's portfolio. Mr. LaRocco's background is described in the Prospectus under
"Portfolio Manager." Other members of the Manager's Equity Portfolio Department
provide
the Portfolio Manager with counsel and support in
managing the Fund's portfolio.
o The Investment Advisory Agreement. The Investment Advisory Agreement
between the Manager and the Fund requires the Manager, at its expense, to
provide the Fund with adequate office space, facilities and equipment, and to
provide and supervise the activities of all administrative and clerical
personnel required to provide effective corporate administration for the Fund,
including the compilation and maintenance of records with respect to its
operations, the preparation and filing of specified reports, and composition of
proxy materials and registration statements for continuous public sale of shares
of the Fund.
Expenses not expressly assumed by the Manager under the 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.
The Investment Advisory Agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
reckless disregard for its obligations and duties thereunder, the Manager is not
liable for any loss resulting from a good faith error or omission on its part
with respect to any of its duties thereunder. The Investment Advisory Agreement
permits the Manager to act as investment adviser for any other person, firm or
corporation and to use the name "Oppenheimer" in connection with other
investment companies for which it may act as investment adviser or general
distributor. If the Manager shall no longer act as investment adviser to the
Fund, the right of the Fund to use the name "Oppenheimer" as part of its name
may be withdrawn.
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, Class C and Class Y shares but
is not obligated to sell a specific number of shares. Expenses normally
attributable to sales, 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 expenses connected with such activities, please refer to
"Distribution and Service Plans," below.
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 Investment 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 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.
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 of 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 Investment 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 and/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.
Most purchases of money market instruments and debt obligations are
principal transactions at net prices. Instead of using a broker for those
transactions, the Fund normally deals directly with the selling or purchasing
principal or market maker unless it determines that a better price or execution
can be obtained by using a broker. Purchases of these securities from
underwriters include a commission or concession paid by the issuer to the
underwriter. Purchases from dealers include a spread between the bid and asked
price. The Fund seeks to obtain prompt execution of these orders at the most
favorable net price.
The research services provided by a particular broker may be useful only
to one or more of the advisory accounts of the Manager and its affiliates, and
investment research received for the commissions of those other accounts may be
useful both to the Fund and one or more of such other accounts. Such research,
which may be supplied by a third part 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 Investment
Advisory Agreement or the Distribution and Service 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.
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 an
investment in a class of shares of the Fund may be advertised. An explanation of
how these total returns are calculated for each class and the components of
those calculations is set forth below.
The Fund's advertisements of its performance data must, under applicable
rules of the Securities and Exchange Commission, include the average annual
total returns for each advertised class of shares of the Fund for the 1, 5, and
10-year periods (or the life of the class, if less) ending as of the most
recently-ended calendar quarter prior to the publication of the advertisement.
This enables an investor to compare the Fund's performance to the performance of
other funds for the same periods. However, a number of factors should be
considered before using such information as a basis for comparison with other
investments. An investment in the Fund is not insured; its returns and share
prices are not guaranteed and normally will fluctuate on a daily basis. When
redeemed, an investor's shares may be worth more or less than their original
cost. Returns for any given past period are not a prediction or representation
by the Fund of future returns. The returns of 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 is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below) held
for a number of years ("n") to achieve an Ending Redeemable Value ("ERV") of
that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
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} over
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). In calculating total returns for Class B shares, the payment
of the contingent deferred sales charge, (5% for the first year, 4% for the
second year, 3% for the third and fourth years, 2% for the fifth year, 1% for
the sixth year and none thereafter) is applied to the investment result for the
period shown. For Class C shares, 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 at net asset value per share, and that the investment
is redeemed at the end of the period.
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, Class C or Class Y 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.
Total return information may be useful to investors in reviewing the
performance of the Fund's Class A, Class B, Class C or Class Y shares. However,
when comparing total return of an investment in Class A, Class B, Class C or
Class Y shares of the Fund with that of other alternatives, investors should
understand that as the Fund is an 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 also include in
its advertisements and sales literature performance information about the Fund
or rankings of the Fund's performance cited in newspapers or periodicals, such
as The New York Times. These articles may include quotations of performance from
other sources, such as Lipper Analytical Services, Inc. ("Lipper") or
Morningstar, Inc. Lipper is a widely-recognized independent mutual fund
monitoring service that 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 of shares is ranked against (I) all other funds and (ii) all
other capital appreciation funds. The Lipper performance rankings are based on
total returns that include the reinvestment of capital gain distributions and
income dividends but do not take sales charges or taxes in terms of
consideration.
From time to time the Fund may publish the star ranking of the performance
of its Class A, Class B, Class C and Class Y shares by Morningstar, Inc., an
independent mutual fund monitoring service. Morningstar ranks mutual funds in
broad investment categories; (domestic stock funds, international stock funds,
taxable bond funds and municipal bond funds) based on risk-adjusted total
investment returns. The Fund is ranked among domestic stock funds. Investment
return measures a fund's or class' one, three, five and ten-year average annual
total returns (depending on the inception of the fund or class) in excess of
90-day U.S. Treasury bill returns after considering the fund's sales charges and
expenses. Risk measures a fund's or class' performance below 90-day U.S.
Treasury bill returns. Risk and investment return are combined to produce star
rankings reflecting performance relative to the average fund in the fund's
category. Five stars is the "highest" ranking (top 10%), four stars is "above
average" (next 22.5%), three stars is "average" (next 35%), two stars is "below
average" (next 22.5%) and one star is "lowest" (bottom 10%). The current star
ranking is the fund's or class' 3-year ranking or its combined 3- and 5-year
ranking (weighted 60%/40%, respectively) or its combined 3-, 5- and 10-year
ranking (weighted 40%, 30% and 30%, respectively), depending on the inception of
the fund or class. Rankings are subject to change monthly.
The Fund may also compare its performance to that of other funds in its
Morningstar category. In addition to its star ranking, Morningstar also
categorizes and compares a fund's 3-year performance based on Morningstar's
classification of the fund's investments and investment style, rather than how a
fund defines its investment objective. Morningstar's four broad categories
(domestic equity, international equity, municipal bond and taxable bond) are
each further subdivided into categories based on types of investments and
investment styles. Those comparisons by Morningstar are based on the same risk
and return measurements as its star rankings but do not consider the effect of
sales charges.
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, using its
own 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 in connection with the distribution and/or servicing of the shares
of that class, as described in the Prospectus. There is no such Plan for
Class Y shares. 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 from their own resources to Recipients.
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. Each Plan may be terminated at any time by the vote of a majority
of the Independent Trustees or by the vote of the holders of a "majority" (as
defined in the Investment Company Act) of the outstanding shares of that class.
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 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 payments under the 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 for
its review, detailing the services rendered in connection with the distribution
of the Fund's shares, the amount of all payments made pursuant to each Plan and
the purpose for which payments were made. The reports shall also include the
distribution costs for that quarter. 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 does not exceed a minimum amount, if any, that may be
determined from time to time by a majority of the Fund's Independent Trustees.
Initially, the Board of Trustees has set the fee at the maximum rate and set no
minimum amount of assets to qualify for payment.
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 a pro rata portion of the advance payment for those shares to
the Distributor.
Although the Class B and Class C Plans permit the Distributor to retain
both the asset-based sales charges and the service fee 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 and the Class C Plans by the Board. Initially, the Board has
set no minimum holding period. All payments under the Class B Plan and the Class
C Plans are subject to the limitations imposed by the Conduct Rules of the
National Association of Securities Dealers, Inc. on payments of asset-based
sales charges and service fees.
The Class B and Class Plans provide for the distributor to be compensated
at a flat rate, whether the Distributor's 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)}(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 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 an investor to choose the method
of purchasing shares that is more beneficial to the investor depending on the
amount of the purchase, the length of time the investor expects to hold shares
and other relevant circumstances. Investors should understand that the purpose
and function of the deferred sales charge and asset-based sales charge with
respect to Class B and Class C shares are the same as those of the initial sales
charge with respect to Class A shares. Any sales person 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 more of Class B shares or any
order for $1 million or more of Class C shares on behalf of a single investor
(not including dealer "street name" or omnibus accounts) because generally it
will be more advantageous for that investor to purchase Class A shares of the
Fund instead. A fourth class of shares may be purchased only by certain
institutional investors at net asset value per share (the "Class Y shares").
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different shareholder
privileges and features.
The net income
attributable to Class B and Class C shares and the dividends payable on Class B
and Class C shares will be reduced by incremental expenses borne solely by that
class, including the asset-based sales charges to which Class B and Class C
shares are subject.
The conversion of Class B shares to Class A shares after six years is
subject to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of the Fund's counsel or tax adviser, to
the effect that the conversion of Class B shares does not constitute a taxable
event for the holder under Federal income tax law. If such a revenue ruling or
opinion is no longer available, the automatic conversion feature may be
suspended, in which event no further conversions of Class B shares would occur
while such suspension remained in effect. Although Class B shares could then be
exchanged for Class A shares on the basis of relative net asset value of the two
classes, without the imposition of a sales charge or fee, such exchange could
constitute a taxable event for the holder, and absent such exchange, Class B
shares might continue to be subject to the asset-based sales charge for longer
than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B, Class C and Class Y shares
recognizes two types of expenses. General expenses that do not pertain
specifically to any one 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, Class C and Class Y shares of the Fund are determined as of
the close of business of The New York Stock Exchange (the "NYSE") on each day
that the NYSE is open, by dividing the Fund's net assets attributable to a class
by the number of shares of that class that are outstanding. The NYSE normally
closes at 4:00 P.M., but may close earlier on some other days (for example, in
case of weather emergencies or days falling before a holiday). The NYSE's most
recent annual announcement (which is subject to change) states that it will
close on New Year's Day, President's Day, Martin Luther King 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 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 NYSE is closed.
Because the Fund's price and net asset value will not be calculated on those
days, the Fund's net asset values per share may be significantly affected on
such days when shareholders may not purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the valuation
of the Fund's securities, 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 (or, in the absence of sales that day, at values based on the
last sale prices of the preceding trading day or closing "bid" prices that day);
(ii) 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 at the mean between "bid" and "ask" prices
obtained from the principal exchange or two active market makers in the security
on the basis of reasonable inquiry; (iii) long-term debt securities having a
remaining maturity in excess of 60 days are valued based on the mean between the
"bid" and "ask" prices determined by a portfolio pricing service approved by the
Fund's Board of Trustees or obtained by the Manager from two active market
makers in the security on the basis of reasonable inquiry; (iv) debt instruments
having a maturity of more than 397 days when issued, and non-money market type
instruments having a maturity of 397 days or less when issued, which have a
remaining maturity of 60 days or less are valued at the mean between the "bid"
and "ask" prices determined by a pricing service approved by the Fund's Board of
Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry; (v) money market-type debt
securities held by a non-money market fund that had a maturity of less than 397
days when issued that have a remaining maturity of 60 days or less, and 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 discount; and (vi) securities (including restricted securities) not
having readily-available market quotations are valued at fair value determined
under the Board's procedures. If the Manager is unable to locate two market
makers willing to give quotes (see (ii), (iii) and (iv) above), the security may
be priced at the mean between the "bid" and "ask" prices provided by a single
active market maker (which in certain cases may be the "bid" price if no "ask"
price is available).
In the case of U.S. Government Securities and mortgage-backed securities,
where last sale information is not generally available, such pricing procedures
may include "matrix" comparisons to the prices for comparable instruments on the
basis of quality, yield, maturity and other special factors involved. The
Manager may use pricing services approved by the Board of Trustees to price U.S.
Government Securities 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 NYSE. 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 NYSE 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 markets 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 the shares. Dividends will begin to accrue on such shares on the
day the Fund receives Federal Funds for the purchase through the ACH system
before the close of the NYSE that day, which is normally three days after the
ACH transfer is initiated. The NYSE 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 NYSE, 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 three 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 Rights 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, siblings, a sibling's spouse, 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 following:
Oppenheimer Bond Fund For Growth Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund Oppenheimer Champion Income Fund
Oppenheimer Developing Markets Fund Oppenheimer Discovery Fund Oppenheimer
Enterprise Fund Oppenheimer Equity Income Fund Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund Oppenheimer High Yield Fund Oppenheimer Bond Fund
Oppenheimer Value Stock Fund Oppenheimer International Bond Fund Oppenheimer
International Growth Fund Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street California Municipal Fund Oppenheimer Main Street Income
& Growth Fund Oppenheimer MidCap Fund Oppenheimer Multiple Strategies Fund
Oppenheimer Florida Municipal Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Pennsylvania Municipal Fund Oppenheimer Municipal Bond Fund
Oppenheimer Insured Municipal Fund Oppenheimer Intermediate Municipal Fund
Oppenheimer New York Municipal Fund Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Officers Value Fund Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Real Asset Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer Disciplined Value Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Growth Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer U.S. Government Trust
Rochester Fund Municipals
Limited Term New York Municipal Fund
and 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 (referred to as a "Letter") is an
investor's statement in writing to the Distributor of the intention to purchase
Class A shares of the Fund or Class A and Class B shares of the Fund and other
Oppenheimer funds during a 13-month period (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 of shares which, when added to the investor's
holding of shares of those funds, will equal or exceed the amount specified in
the Letter. Purchases made by reinvestment of dividends or distributions of
capital gains and purchases made at net asset value without sales charge do not
count toward satisfying the amount of the Letter. A Letter enables an investor
to count the Class A and Class B shares purchased under the Letter to obtain the
reduced sales charge rate on purchases of Class A shares of the Fund (and other
Oppenheimer funds) that applies under the Right of Accumulation to current
purchases of Class A shares. Each purchase under the Letter will be made at the
public offering price applicable to a single lump-sum purchase of shares in the
intended purchase amount, as described in the Prospectus.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of Intent
period, when added to the value (at offering price) of the investor's holdings
of shares on the last day of that period, do not equal or exceed the intended
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 up to 5% of the intended
purchase amount specified in the Letter shall be held in escrow by the Transfer
Agent. For example, if the intended purchase amount is $50,000, the escrow shall
be shares valued in the amount of $2,500 (computed at the public offering price
adjusted for a $50,000 purchase). Any dividends and capital gains distributions
on the escrowed shares will be credited to the investor's account.
2. If the intended purchase amount specified under the Letter is completed
within the thirteen-month Letter of Intent period, the escrowed shares will be
promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the total
purchases pursuant to the Letter are less than the intended purchase amount
specified in the Letter, the investor must remit to the Distributor an amount
equal to the difference between the dollar amount of sales charge 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 of other Oppenheimer funds 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 redemption restrictions for recent purchases described in "How To Sell
Shares," in the Prospectus. Asset Builder Plans also enable shareholders of
Oppenheimer Cash Reserves to use those accounts for monthly automatic purchases
of shares of up to four other Oppenheimer funds. 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 transmissions.
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 declines in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is responsible for that
loss. If the investor fails to compensate the Fund for the loss, the Distributor
will do so. The Fund may reimburse the Distributor for that amount by redeeming
shares from any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
Retirement Plans. In describing certain types of employee benefit plans that may
purchase Class A shares without being subject to the Class A contingent deferred
sales charge, the term "employee benefit plan" means any plan or arrangement,
whether or not "qualified" under the Internal Revenue Code, including, medical
savings accounts, payroll deduction plans or similar plans in which Class A
shares are purchased by a fiduciary or other person for the account of
participants who are employees of a single employer or of affiliated employers,
if the Fund account is registered in the name of the fiduciary or other person
for the benefit of participants in the plan.
The term "group retirement plan" means any qualified or non-qualified
retirement plan (including 457 plans, SEPs, SARSEPs, 403(b) plans, and SIMPLE
plans) for employees of a corporation or a sole proprietorship, members and
employees of a partnership or association or other organized group of persons
(the members of which may include other groups), if the group has made special
arrangements with the Distributor and all members of the group participating in
the plan purchase Class A shares of the Fund through a single investment dealer,
broker or other financial institution designated by the group.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information
below supplements the terms and conditions for redemptions set forth in the
Prospectus.
o Involuntary Redemptions. The Fund's Board of Trustees has the right to
cause the involuntary redemption of the shares held in any account if the
aggregate net asset value of those shares is less than $200 or such lesser
amount as the Board may fix. The Board of Trustees will not cause the
involuntary redemption of shares in an account if the aggregate net asset value
of the shares has fallen below the stated minimum solely as a result of market
fluctuations. Should the Board elect to exercise this right, it may also fix, in
accordance with the Investment Company Act, the requirements for any notice to
be given to the shareholders in question (not less than 30 days), or the Board
may set requirements for granting permission to the shareholder to increase the
investment, and set other terms and conditions so that the shares would not be
involuntarily redeemed.
o 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-l under the Investment Company Act, pursuant to which
the Fund is obligated to redeem shares solely in cash up to the lesser or
$250,000 or 1% of the net assets of the Fund during any 90-day period for any
one shareholder. If shares are redeemed in kind, the redeeming shareholder might
incur brokerage or other costs in selling the securities for cash. The method of
valuing securities used to make redemptions in kind will be the same as the
method the Fund uses to value its portfolio securities described above under
"Determination of Net Asset Values Per Share" and that valuation will be made as
of the time the redemption price is determined.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of (i) Class A shares that
were purchased subject to an initial sales charge,
or (ii) Class B shares that were subject to the Class B contingent deferred
sales charge when redeemed. The reinvestment may be made without sales charge
only in Class A shares of the Fund or any of the other Oppenheimer funds into
which shares of the Fund are exchangeable as described below, at the net asset
value next computed after the Transfer Agent receives the reinvestment order.
The shareholder must ask the Distributor for that privilege at the time of
reinvestment. Any capital gain that was realized when the shares were redeemed
is taxable, and reinvestment will not alter any capital gains tax payable on
that gain. If there has been a capital loss on the redemption, some or all of
the loss may not be tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption proceeds of
Fund shares on which a sales charge was paid are reinvested in shares of the
Fund or another of the Oppenheimer funds within 90 days of payment of the sales
charge, the shareholder's basis in the shares of the Fund that were redeemed may
not include the amount of the sales charge paid. That would reduce the loss or
increase the gain recognized from the redemption. However, in that case the
sales charge would be added to the basis of the shares acquired by the
reinvestment of the redemption proceeds. The Fund may amend, suspend or cease
offering this reinvestment privilege at any time as to shares redeemed after the
date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a contingent
deferred sales charge of any class at the time of transfer to the name of
another person or entity (whether the transfer occurs by absolute assignment,
gift or bequest, not involving, directly or indirectly, a public sale). The
transferred shares will remain subject to the contingent deferred sales charge,
calculated as if the transferee shareholder had acquired the transferred shares
in the same manner and at the same time as the transferring shareholder. If less
than all shares held in an account are transferred, and some but not all shares
in the account would be subject to a contingent deferred sales charge if
redeemed at the time of transfer, the priorities described in the Prospectus
under "How to Buy Shares" for the imposition of the Class B or 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, SEP-IRAs, SAR-SEPs, 403(b)(7) custodial plans,
401(k) plans, or pension or profit-sharing plans should be addressed to
"Trustee, OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its
address listed in "How To Sell Shares" in the Prospectus or on the back cover of
this Statement of Additional Information. The request must: (i) state the reason
for the distribution; (ii) state the owner's awareness of tax penalties if the
distribution is premature; and (iii) conform to the requirements of the plan and
the Fund's other redemption requirements. Participants (other than self-employed
persons maintaining a plan account in their own name) in
OppenheimerFunds-sponsored prototype pension, profit-sharing, or 401(k) plans
may not directly redeem or exchange shares held for their account under those
plans. The employer or plan administrator must sign the request. Distributions
from pension and profit sharing plans are subject to special requirements under
the Internal Revenue Code and certain documents (available from the Transfer
Agent) must be completed before the distribution may be made. Distributions from
retirement plans are subject to withholding requirements under the Internal
Revenue Code, and IRS Form W-4P (available from the Transfer Agent) must be
submitted to the Transfer Agent with the distribution request, or the
distribution may be delayed. Unless the shareholder has provided the Transfer
Agent with a certified tax identification number, the Internal Revenue Code
requires that tax be withheld from any distribution even if the shareholder
elects not to have tax withheld. The Fund, the Manager, 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 NYSE
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 customer prior to the
time the NYSE 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 documents as
described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(minimum $50) automatically on a monthly, quarterly, semi-annual or annual basis
under an Automatic Withdrawal Plan. Shares will be redeemed three business days
prior to the date requested by the shareholder for receipt of the payment.
Automatic withdrawals of up to $1,500 per month may be requested by telephone if
payments are to be made by check payable to all shareholders of record and sent
to the address of record for the account (and if the address has not been
changed within the prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on this basis.
Payments are normally made by check, but shareholders having AccountLink
privileges (see "How To Buy Shares") may arrange to have the 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 that would require the redemption of shares held less than 6
years or 12 months, respectively, because of the imposition of the Class B or
Class C contingent deferred sales charge on such withdrawals (except where the
Class B or Class C contingent deferred sales charge is waived as described in
the Prospectus under "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 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 predetermined amount of shares of the Fund for shares (of the same
class) of other Oppenheimer funds automatically on a monthly, quarterly,
semiannual 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 (the "Plan") while simultaneously making regular
purchases of Class A shares.
The Transfer Agent will administer the investor's Plan as agent for the
investor (the "Planholder") who executed the Plan authorization and application
submitted to the Transfer Agent. Neither the Transfer Agent nor the Fund shall
incur any liability to the Planholder for any action taken or omitted by the
Transfer Agent in good faith in administering 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 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 shares held under the Plan as collateral for a debt, the Planholder
may request issuance of a portion of the shares in certificated form. Upon
written request from the Planholder, the Transfer Agent will determine the
number of shares for which a certificate may be issued without causing the
withdrawal checks to stop because of exhaustion of uncertificated shares needed
to continue payments. However, should such uncertificated shares become
exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in
administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of Oppenheimer
funds having more than one class of shares may be exchanged only for shares of
the same class of other Oppenheimer funds. Shares of Oppenheimer funds that have
a single class without a class designation are deemed "Class A" shares for this
purpose. All of the Oppenheimer funds offer Class A, Class B and Class C shares
except Oppenheimer Money Market Fund, Inc., Centennial Money Market Trust,
Centennial Tax Exempt Trust, Centennial Government Trust, Centennial New York
Tax Exempt Trust, Centennial California Tax Exempt Trust, Centennial America
Fund, L.P. and Daily Cash Accumulation Fund, Inc., which only offer Class A
shares, and Oppenheimer Main Street California Municipal Fund, which only offers
Class A and Class B shares (Class B and Class C shares of Oppenheimer Cash
Reserves are generally available only by exchange from the same class of other
Oppenheimer funds or through OppenheimerFunds sponsored 401(k) plans). A current
list showing which funds offer which classes can be obtained by calling the
Distributor at 1-800-525-7048.
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).
Shares of the Fund acquired by reinvestment of dividend 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,
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 that privilege, the investor or the
investor's dealer must notify the Distributor of eligibility for this privilege
at the time the shares of Oppenheimer Money Market Fund, Inc. are purchased,
and, if requested, must supply proof of entitlement to this privilege. 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 12 months (18 months for shares purchased prior to May 1, 1997) 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 six years of the initial purchase of the
exchanged Class B shares. The Class C contingent deferred sales charge is
imposed on Class C shares acquired by exchange if they are redeemed within 12
months of the initial purchase of the exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the imposition
of the Class B or 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 the
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 by 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
Dividends and Distributions. 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.
The amount of a class's distributions may vary from time to time depending
on market conditions, the composition of a Fund's portfolio, and expenses borne
by the Fund or borne separately by a class, as described in "Alternative Sales
Arrangements -- Class A, Class B and Class C shares" above. Dividends are
calculated in the same manner, at the same time and on the same day for shares
of each class. However, dividends on Class B and Class C shares are expected to
be lower than dividends on Class A shares as a result of the asset-based sales
charges on Class B and Class C shares, and will also differ in amount as a
consequence of any difference in net asset value between the classes.
Tax Status of the Fund's Dividends and Distributions. The Federal tax treatment
of the Fund's dividends and capital gain 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 sales of securities or dividends
from foreign corporations, those dividends will not qualify for the deduction.
If prior distributions must be re-characterized at the end of the fiscal
year as a result of the effect of the Fund's investment policies, shareholders
may have a nontaxable return of capital, which will be identified in notices to
shareholders. There is no fixed dividend rate and there can be no assurance as
to the payment of any dividends or the realization of any capital gains.
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on amounts
paid by it as dividends and distributions. The Fund intends to qualify as a
regulated investment company in its first fiscal year and intends to qualify in
future years, but reserves the right not to qualify. The Internal Revenue Code
contains a number of complex tests to determine whether a Fund will qualify, and
a Fund might not meet those tests in a particular year. If it does not qualify,
a Fund will be treated for tax purposes as an ordinary corporation and will
receive no tax deduction for payments of dividends and distributions made to
shareholders.
Under the Internal Revenue Code, by December 31 each year, the Fund must
distribute 98% of its taxable investment income earned from January 1 through
December 31 of that year and 98% of its capital gains realized in the period
from November 1 of the prior year through October 31 of the current year, or
else the Fund must pay an excise tax on the amounts not distributed. While it is
presently anticipated that the Fund will meet those requirements, the Fund's
Board 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.
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 certain of the Oppenheimer funds may be
invested in shares of the Fund on the same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities, collecting income on the portfolio securities and handling
the delivery of such securities to and from the Fund. The Manager has
represented to the Fund that the banking relationships between the Manager and
the Custodian have been and will continue to be unrelated to and unaffected by
the relationship between the Fund and the Custodian. It will be the practice of
the Fund to deal with the Custodian in a manner uninfluenced by any banking
relationship the Custodian may have with the Manager and its affiliates.
Independent Accountants. The independent accountants 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.
-2-
<PAGE>
Report of Independent Accountants
To the Shareholder and Board of Directors of Oppenheimer MidCapFund
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of Oppenheimer MidCap
Fund (the "Fund") at October 1, 1997, in conformity with generally accepted
accounting principles. This financial statement is the responsibility of the
Fund's management; our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this financial statement
in accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Denver, Colorado
October 1, 1997
prosp\745report.pw
<PAGE>
OPPENHEIMER MIDCAP FUND UPDATED
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 1, 1997
<TABLE>
<CAPTION>
ASSETS: COMPOSITE CLASS A CLASS B CLASS C CLASS Y
<S> <C> <C> <C> <C> <C>
CASH $103,000
DEFERRED ORGANIZATION COSTS - NOTE 3 14,500
--------
TOTAL ASSETS 117,500
LIABILITIES - PAYABLE TO OPPENHEIMERFUNDS, INC.
--------
- NOTE 3 14,500
--------
NET ASSETS $103,000
========
NET ASSETS - APPLICABLE TO 10,000 CLASS A
SHARES, 100 CLASS B SHARES, 100 CLASS C
SHARES AND 100 CLASS Y SHARES OF BENEFICIAL
INTEREST OUTSTANDING $103,000 $100,000 $1,000 $1,000 $1,000
NET ASSET VALUE PER SHARE (NET ASSETS DIVIDED
BY 10,000, 100, 100 AND 100 SHARES OF BENEFICIAL
INTEREST FOR CLASS A, CLASS B, CLASS C AND
CLASS Y, RESPECTIVELY) $10.00 $10.00 $10.00 $10.00
MAXIMUM OFFERING PRICE PER SHARE (NET ASSET
VALUE PER SHARE PLUS SALES CHARGE OF 5.75%
OF OFFERING PRICE FOR CLASS A SHARES) $10.61 $10.00 $10.00 $10.00
</TABLE>
NOTES:
1. OPPENHEIMER MIDCAP FUND (THE "FUND"), A DIVERSIFIED, OPEN-END MANAGEMENT
INVESTMENT COMPANY, WAS FORMED ON JUNE 18, 1997, AND HAS HAD NO OPERATIONS
THROUGH OCTOBER 1, 1997 OTHER THAN THOSE RELATING TO ORGANIZATIONAL MATTERS AND
ON THAT DATE THE SALE AND ISSUANCE OF 10,000 CLASS A SHARES, 100 CLASS B, 100
CLASS C AND 100 CLASS Y SHARES OF BENEFICIAL INTEREST TO OPPENHEIMERFUNDS, INC.
(OFI).
2. ON AUGUST 5, 1997 THE FUND'S BOARD APPROVED AN INVESTMENT ADVISORY AGREEMENT
WITH OFI WHICH PROVIDES FOR A FEE OF 0.75% ON THE FIRST $200 MILLION OF
AGGREGATE ANNUAL NET ASSETS, 0.72% OF THE NEXT $200 MILLION, 0.69% OF THE NEXT
$200 MILLION, 0.66% OF THE NEXT $200 MILLION AND 0.60% OF AGGREGATE ANNUAL NET
ASSETS IN EXCESS OF $800 MILLION.
ON AUGUST 5, 1997 THE FUND'S BOARD ALSO APPROVED A SERVICE PLAN AND AGREEMENT
FOR CLASS A SHARES AND SERVICE AND DISTRIBUTION PLANS AND AGREEMENTS FOR CLASS B
AND CLASS C SHARES OF THE FUND WITH OPPENHEIMERFUNDS DISTRIBUTOR, INC. (OFDI)
AND A GENERAL DISTRIBUTOR'S AGREEMENT WITH OFDI. THE SERVICE PLAN AND AGREEMENT
FOR CLASS A SHARES STATES THAT THE FUND WILL REIMBURSE OFDI FOR A PORTION OF ITS
COSTS INCURRED IN CONNECTION WITH THE PERSONAL SERVICE AND MAINTENANCE OF
SHAREHOLDER ACCOUNTS THAT HOLD THESE SHARES. REIMBURSEMENT IS MADE QUARTERLY AT
AN ANNUAL RATE THAT MAY NOT EXCEED 0.25% OF AVERAGE ANNUAL NET ASSETS OF CLASS A
SHARES OF THE FUND. THE SERVICE AND DISTRIBUTION PLANS AND AGREEMENTS FOR CLASS
B AND CLASS C SHARES STATE THAT THE FUND WILL PAY OFDI AN ANNUAL ASSET BASED
SALES CHARGE OF 0.75% PER YEAR AND A SERVICE FEE OF 0.25% PER YEAR. BOTH FEES
ARE COMPUTED ON THE AVERAGE ANNUAL NET ASSETS. THERE ARE NO SIMILAR PLANS
CURRENTLY IN EFFECT FOR CLASS Y 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.
3. OFI WILL ADVANCE ALL ORGANIZATIONAL COSTS OF THE FUND. SUCH EXPENSES WILL BE
CAPITALIZED AND AMORTIZED OVER A FIVE-YEAR PERIOD FROM THE DATE OF INVESTMENT
OPERATIONS. ON THE FIRST DAY THAT TOTAL ASSETS EXCEED $5 MILLION, THE FUND WILL
REIMBURSE OFI FOR ALL ORGANIZATION EXPENSES. IN THE EVENT THAT ALL OR PART OF
OFI'S INITIAL INVESTMENT IN SHARES OF THE FUND IS WITHDRAWN DURING THE
AMORTIZATION PERIOD, BY ANY HOLDER THEREOF, THE REDEMPTION PROCEEDS WILL BE
REDUCED BY THE RATIO THAT THE NUMBER OF SHARES REDEEMED BEARS TO THE NUMBER OF
INITIAL SHARES OUTSTANDING AT THE TIME OF SUCH REDEMPTION.
4. THE FUND INTENDS TO COMPLY IN ITS INITIAL FISCAL YEAR AND THEREAFTER WITH
PROVISIONS OF THE INTERNAL REVENUE CODE APPLICABLE TO REGULATED INVESTMENT
COMPANIES AND AS SUCH, WILL NOT BE SUBJECT TO FEDERAL INCOME TAXES ON OTHERWISE
TAXABLE INCOME (INCLUDING NET REALIZED CAPITAL GAINS) DISTRIBUTED TO
SHAREHOLDERS.
Appendix
Corporate Industry Classifications
Aerospace/Defense Gas Utilities*
Air Transportation Gold
Auto Parts Distribution Health Care/Drugs
Automotive Health Care/Suppliers & Services
Bank Holding Companies Homebuilders/Real Estate
Banks Hotel/Gaming
Beverages Industrial Services
Broadcasting Information Technology
Broker-Dealers Insurance
Building Materials Leasing & Factoring
Cable Television Leisure
Chemicals Manufacturing
Commercial Finance Metals/Mining
Computer Hardware Nondurable Household Goods
Computer Software Oil - Integrated
Conglomerates Paper
Consumer Finance Publishing/Printing
Containers Railroads
Convenience Stores Restaurants
Department Stores Savings & Loans
Diversified Financial Shipping
Diversified Media Special Purpose Financial
Drug Stores Specialty Retailing
Drug Wholesalers Steel
Durable Household Goods Supermarkets
Education Telecommunications - Technology
Electric Utilities Telephone - Utility
Electrical Equipment Textile/Apparel
Electronics Tobacco
Energy Services & Producers Toys
Entertainment/Film Trucking
Environmental Wireless Services
Food
- -------------------
* For purposes of the Fund's investment policy not to concentrate in securities
of issuers in the same industry, gas utilities and gas transmission utilities
each will be considered a separate industry.
A-1
<PAGE>
Oppenheimer MidCap Fund
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc
Two World Trade Center
New York, New York 10048-0203
Transfer 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 Accountants
Price Waterhouse LLP
950 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
prosp\745sai# 2
<PAGE>
OPPENHEIMER MIDCAP 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): Not applicable.
(2) Report of Independent Accountants (See Part B): Filed herewith.
(3) Statement of Investments (See Part B): Not applicable.
(4) Statement of Assets and Liabilities (See Part
B): Filed herewith.
(5) Statement of Operations (See Part B): Not applicable.
(6) Statement of Changes in Net Assets (See Part B): Not
applicable.
(7) Notes to Financial Statements (See Part B): Filed herewith.
(b) Exhibits: -------- (1) Declaration of Trust dated 6/18/97: Filed
with the Registration Statement of Registrant, 7/18/97, and incorporated
herein by reference.
(2) By-Laws dated 6/18/97: Filed with the Registration Statement of
Registrant, 7/18/97, and incorporated herein by reference.
(3) Not applicable.
(4) (i) Specimen Class A Share Certificate: Filed with the
Registration Statement of Registrant, 7/18/97, and incorporated herein by
reference.
(ii) Specimen Class B Share Certificate: Filed with the Registration
Statement of Registrant, 7/18/97, and incorporated herein by reference.
(iii) Specimen Class C Share Certificate: Filed with the Registration
Statement of Registrant, 7/18/97, and incorporated herein by reference.
(iv) Specimen Class Y Share Certificate: Filed with the Registration
Statement of Registrant, 7/18/97, and incorporated herein by reference.
(5) Investment Advisory Agreement: Filed
herewith.
(6) (i) General Distributor's Agreement: Filed herewith.
(ii) Form of Oppenheimer Funds 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 Oppenheimer Funds 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 Oppenheimer Funds 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, refiled with
Post-Effective Amendment No. 45 of Oppenheimer Growth Fund (Reg. No.
2-45272), 8/22/94, pursuant to Item 102 of Regulation S-T, and incorporated
herein by reference.
(7) Not applicable.
(8) Custody Agreement between Registrant and The Bank of New York:
Filed with Pre-Effective Amendment No. 1 of Registrant, 9/22/97, and
incorporated herein by reference.
(9) Not applicable.
(10) Opinion and Consent of Counsel: Filed herewith.
(11) Consent of Independent Accountants: Filed herewith.
(12) Not applicable.
(13) Investment Letter from OppenheimerFunds, Inc. to Registrant:
Filed herewith.
(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: Filed with
Post-Effective Amendment No. 21 of Oppenheimer U.S. Government Trust (Reg.
No. 2-76645), 8/25/93 and incorporated herein by reference.
(iii) Form of Tax Sheltered Retirement Plan and Custody Agreement for
employees of public schools and tax-exempt organizations: Previously filed
with Post-Effective Amendment No. 47 of the Registration Statement of
Oppenheimer Growth Fund (Reg. No. 2-45272), 10/21/94, and incorporated
herein by reference.
(iv) Form of simplified Employee Pension IRA: Previously filed with
Post-Effective Amendment No. 42 of Oppenheimer Strategic Income & Growth
Fund (Reg. No. 33-47378), 9/28/95, and incorporated 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) Service Plan and Agreement for Class A shares under Rule
12b-1: Filed herewith
(ii) Distribution and Service Plan and Agreement for Class B
shares under Rule 12b-1: Filed herewith.
(iii) Distribution and Service Plan and Agreement for Class
C shares under Rule 12b-1: Filed herewith.
(16) Performance Data Computation Schedule: Not
applicable.
(17) (i) Financial Data Schedule for Class A shares: Not applicable.
(ii) Financial Data Schedule for Class B
shares: Not applicable.
(iii) Financial Data Schedule for Class C shares: Not
applicable.
(iv) Financial Data Schedule for Class Y shares: Not
applicable.
(18) OppenheimerFunds Multiple Class Plan under Rule 18f- 3 dated
3/18/96: Filed with the Registration Statement of Registrant, 7/18/97, and
incorporated herein by reference.
-- Powers of Attorney: Filed with the Registration
Statement of Registrant, 7/18/97, and incorporated herein by
reference.
-- Certified Board Resolutions: Filed with
Pre-Effective Amendment No. 1 of Registrant, 9/22/97,
and incorporated
herein by reference.
Item 25. Persons Controlled by or Under Common Control with
Registrant
- -------- ---------------------------------------------
None
C-1
<PAGE>
Item 26. Number of Holders of Securities
- -------- -------------------------------
Number of
Record Holders
as of the date of
Title of Class this Registration Statement
- ----------------------------------------
Class A Shares of Beneficial Interest 1
Class B Shares of Beneficial Interest 1
Class C Shares of Beneficial Interest 1
Class Y Shares of Beneficial Interest 1
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 the Past
("OFI") 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
C-5
<PAGE>
G.R. Phelps & Co. Inc. ("G.R. Phelps"), the
Company's former
investment adviser, which was a subsidiary of
Connecticut Mutual Life
Insurance Company; was also responsible for
managing the common
stock department and common stock investments
of Connecticut Mutual
Life Insurance Co.
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds.
Formerly a Vice President and Senior Portfolio
Manager at First of
America Investment Corp.
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 & TreasuVice 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 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
C-6
<PAGE>
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.D. 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.
Robert Doll, Jr., 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 Controller for
OFI.
C-7
<PAGE>
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.
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).
C-8
<PAGE>
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.
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,
Assistant Vice President None.
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Assistant Vice President None.
Jane Ingalls,
Vice President None.
Byron Ingram,
Assistant Vice President None.
Ronald Jamison,
Vice President Formerly Vice President and Associate General
Counsel at Prudential
Securities, Inc.
Frank Jennings,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; formerly, a Managing
Director of Global Equities at Paine Webber's
Mitchell Hutchins division.
Thomas W. Keffer,
C-9
<PAGE>
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.
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
C-10
<PAGE>
Life Insurance Company.
Loretta McCarthy,
Executive Vice President None.
Kevin McNeil,
Vice President Treasurer (September, 1994 - present) for the
Martin Luther King Multi-
Purpose 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.
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,
C-11
<PAGE>
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.
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
Richard Soper,
Vice President None.
C-12
<PAGE>
Nancy Sperte,
Executive Vice President None.
Donald W. Spiro,
Chairman Emeritus and DirectorVice 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.
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 TreasuAssistant 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.
C-13
<PAGE>
Christine Wells,
Vice President None.
Joseph Welsh,
Assistant Vice President None.
Kenneth B. White,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; a
Chartered Financial Analyst; Vice President of
HarbourView; prior to
March 1996, an equity portfolio manager for
Panorama Series Fund, Inc.
and other mutual funds and pension funds
managed by G.R. Phelps.
William L. Wiley,
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.
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 Multiple Strategies Fund
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
{* 1 moved from here; text not shown} Oppenheimer Global Fund Oppenheimer Global
Growth & Income Fund Oppenheimer Gold & Special Minerals Fund Oppenheimer Growth
Fund Oppenheimer International Growth Fund Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Sector Income Trust Oppenheimer Multi-State Municipal Trust
Oppenheimer New York Municipal Fund Oppenheimer Fund Oppenheimer Series Fund,
Inc. Oppenheimer Municipal Bond Fund Oppenheimer U.S.Government Trust
Oppenheimer World Bond Fund Oppenheimer Developing Markets Fund
Quest/Rochester Funds
- ---------------------
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Bond Fund For Growth
** 1 Oppenheimer MidCap Fund
Rochester Fund Municipals
Limited Term New York Municipal Fund
Denver-based Oppenheimer Funds
- ------------------------------
Oppenheimer Cash Reserves
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.
The New York Tax-Exempt Income Fund, Inc.
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Strategic Income Fund
Oppenheimer Municipal Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
Oppenheimer Real Asset Fund
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 80012.
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
Mary Crooks(1)
E. Drew Devereaux(3) Assistant Vice President None
Rhonda Dixon-Gunner(1) Assistant Vice President None
Andrew John Donohue(2) Executive Vice Secretary
ofPresident & 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
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
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
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
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 Wa
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
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) Registrant undertakes to file a post-effective amendment,
using financial statements which need not be certified, within four to six
months from the effective date of its registration statement under the
Securities Act of 1933.
C-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York and State of New York on the 31st day of October, 1997
OPPENHEIMER MIDCAP FUND
By: /s/ Bridget A. Macaskill*
------------------------------------
Bridget A. Macaskill
Chairman of the Board and 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 and
on the dates indicated:
Signatures Title Date
- ---------- ----- ----
/s/ Bridget A Macaskill* Chairman of the Board, October 31, 1997
- ----------------------- President (Principal
Bridget A. Macaskill Executive Officer) and
Trustee
/s/ George C. Bowen* Treasurer (Principal October 31, 1997
- ----------------------- Financial and
George C. Bowen Accounting Officer)
/s/ Paul Y. Clinton* Trustee October 31, 1997
- -----------------------
Paul Y. Clinton
/s/ Thomas W. Courtney* Trustee October 31, 1997
- -----------------------
Thomas W. Courtney
/s/ Lacy B. Herrmann* Trustee October 31, 1997
- -----------------------
Lacy B. Herrmann
/s/ George Loft* Trustee October 31, 1997
- -----------------------
George Loft
By: Robert G. Zack*
-----------------
/s/ Robert G. Zack
Attorney-in-Fact
C-3
<PAGE>
OPPENHEIMER MIDCAP FUND
EXHIBIT INDEX
Form N-1A
Item No. Description
24(b)(5) Investment Advisory Agreement
24(b)(6)(i) General Distributor's Agreement
24(b)(10) Opinion and Consent of Counsel
24(b)(11) Consent of Independent Accountants
24(b)(13) Investment Letter from OppenheimerFunds, Inc.
to Registrant
24(b)(15)(i) Service Plan and Agreement for Class A shares
24(b)(15)(ii) Distribution and Service Plan and Agreement
for Class B shares
24(b)(15)(iii) Distribution and Service Plan and Agreement
for Class C shares
745ptc.#2
C-4
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 17th day of November, 1997, by and between
OPPENHEIMER MIDCAP FUND (the "Fund"), and OPPENHEIMERFUNDS, INC. ("OFI").
WHEREAS, the Fund is an open-end, diversified management investment
company registered as such with the Securities and Exchange Commission (the
"Commission") pursuant to the Investment Company Act of 1940 (the "Investment
Company Act"), and OFI is an investment adviser registered as such with the
Commission under the Investment Advisers Act of 1940;
WHEREAS, the Fund desires that OFI shall act as its investment adviser
pursuant to this
Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, it is agreed by and between the parties, as follows:
1. General Provision.
The Fund hereby employs OFI and OFI hereby undertakes to act as the
investment adviser of the Fund and to perform for the Fund such other duties and
functions as are hereinafter set forth. OFI shall, in all matters, give to the
Fund and its Board of Trustees the benefit of its best judgment, effort, advice
and recommendations and shall, at all times conform to, and use its best efforts
to enable the Fund to conform to (i) the provisions of the Investment Company
Act and any rules or regulations thereunder; (ii) any other applicable
provisions of state or federal law; (iii) the provisions of the Declaration of
Trust and By-Laws of the Fund as amended from time to time; (iv) policies and
determinations of the Board of Trustees of the Fund; (v) the fundamental
policies and investment restrictions of the Fund as reflected in its
registration statement under the Investment Company Act or as such policies may,
from time to time, be amended by the Fund's shareholders; and (vi) the
Prospectus and Statement of Additional Information of the Fund in effect from
time to time. The appropriate officers and employees of OFI shall be available
upon reasonable notice for consultation with any of the Trustees and officers of
the Fund with respect to any matters dealing with the business and affairs of
the Fund including the valuation of any of the Fund's portfolio securities which
are either not registered for public sale or not being traded on any securities
market.
2. Investment Management.
(a) OFI shall, subject to the direction and control by the Fund's Board of
Trustees, (i) regularly provide investment advice and recommendations to the
Fund with respect to its investments, investment policies and the purchase and
sale of securities; (ii) supervise continuously the investment program of the
Fund and the composition of its portfolio and determine what securities shall be
purchased or sold by the Fund; and (iii) arrange, subject to the provisions of
paragraph "7" hereof, for the purchase of securities and other investments for
the Fund and the sale of securities and other investments held in the portfolio
of the Fund.
(b) Provided that the Fund shall not be required to pay any compensation
other than as provided by the terms of this Agreement and subject to the
provisions of paragraph "7"
hereof, OFI may obtain
investment information, research or assistance from any other person, firm or
corporation to supplement, update or otherwise improve its investment management
services.
<PAGE>
(c) Provided that nothing herein shall be deemed to protect OFI from
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or reckless disregard of its obligations and duties under the Agreement,
OFI shall not be liable for any loss sustained by reason of good faith errors or
omissions in connection with any matters to which this Agreement relates.
(d) Nothing in this Agreement shall prevent OFI or any officer thereof
from acting as investment adviser for any other person, firm or corporation and
shall not in any way limit or restrict OFI or any of its directors, officers or
employees from buying, selling or trading any securities for its own account or
for the account of others for whom it or they may be acting, provided that such
activities will not adversely affect or otherwise impair the performance by OFI
of its duties and obligations under this Agreement and under the Investment
Advisers Act of 1940.
3. Other Duties of OFI.
OFI shall, at its own expense, provide and supervise the activities of all
administrative and clerical personnel as shall be required to provide effective
corporate administration for the Fund, including the compilation and maintenance
of such records with respect to its operations as may reasonably be required;
the preparation and filing of such reports with respect thereto as shall be
required by the Commission; composition of periodic reports with respect to its
operations for the shareholders of the Fund; composition of proxy materials for
meetings of the Fund's shareholders and the composition of such registration
statements as may be required by federal securities laws for continuous public
sale of shares of the Fund. OFI shall, at its own cost and expense, also provide
the Fund with adequate office space, facilities and equipment.
4. Allocation of Expenses.
All other costs and expenses not expressly assumed by OFI under this
Agreement, or to be paid by the General Distributor of the shares of the Fund,
shall be paid by the Fund, including, but not limited to (i) interest and taxes;
(ii) brokerage commissions; (iii) premiums for fidelity and other insurance
coverage requisite to its operations; (iv) the fees and expenses of its
Trustees; (v) legal and audit expenses; (vi) custodian and transfer agent fees
and expenses; (vii) expenses incident to the redemption of its shares; (viii)
expenses incident to the issuance of its shares against payment therefor by or
on behalf of the subscribers thereto; (ix) fees and expenses, other than as
hereinabove provided, incident to the registration under federal securities laws
of shares of the Fund for public sale; (x) expenses of printing and mailing
reports, notices and proxy materials to shareholders of the Fund; (xi) except as
noted above, all other expenses incidental to holding meetings of the Fund's
shareholders; and (xii) such extraordinary non-recurring expenses as may arise,
including litigation affecting the Fund and any obligation which the Fund may
have to indemnify its officers and Trustees with respect thereto. Any officers
or employees of OFI or any entity controlling, controlled by or under common
control with OFI, who may also serve as officers, Trustees or employees of the
Fund shall not receive any compensation from the Fund for their services.
2
<PAGE>
5. Compensation of OFI.
The Fund agrees to pay OFI and OFI agrees to accept as full compensation
for the performance of all functions and duties on its part to be performed
pursuant to the provisions hereof, a fee computed on the aggregate net assets of
the Fund as of the close of each business day and payable monthly at the
following annual rates:
0.75% of the first $200 million of aggregate net assets; 0.72% of the next
$200 million; 0.69% of the next $200 million; 0.66% of the next $200
million; and 0.60% of aggregate net assets in excess of $800 million.
6. Use of Name "Oppenheimer."
OFI hereby grants to the Fund a royalty-free, non-exclusive license to use
the name "Oppenheimer" in the name of the Fund for the duration of this
Agreement and any extensions or renewals thereof. Such license may, upon
termination of this Agreement, be terminated by OFI, in which event the Fund
shall promptly take whatever action may be necessary to change its name and
discontinue any further use of the name "Oppenheimer" in the name of the Fund or
otherwise. The name "Oppenheimer" may be used or licensed by OFI in connection
with any of its activities or licensed by OFI to any other party.
7. Portfolio Transactions and Brokerage.
(a) OFI is authorized, in arranging the Fund's portfolio transactions, to
employ or deal with such members of securities or commodities exchanges, brokers
or dealers, including "affiliated" broker dealers (as that term is defined in
the Investment Company Act) (hereinafter "broker-dealers"), as may, in its best
judgment, implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" (prompt and reliable execution at the most favorable security
price obtainable) of the Fund's portfolio transactions as well as to obtain,
consistent with the provisions of subparagraph "(c)" of this paragraph "7," the
benefit of such investment information or research as may be of significant
assistance to the performance by OFI of its investment management functions.
(b) OFI shall select broker-dealers to effect the Fund's portfolio
transactions on the basis of its estimate of their ability to obtain best
execution of particular and related portfolio transactions. The abilities of a
broker-dealer to obtain best execution of particular portfolio transaction(s)
will be judged by OFI on the basis of all relevant factors and considerations
including, insofar as feasible, the execution capabilities required by the
transaction or transactions; the ability and willingness of the broker-dealer to
facilitate the Fund's portfolio transactions by participating therein for its
own account; the importance to the Fund of speed, efficiency or confidentiality;
the broker-dealer's apparent familiarity with sources from or to whom particular
securities might be purchased or sold; as well as any other matters relevant to
the selection of a broker-dealer for particular and related transactions of the
Fund.
(c) OFI shall have discretion, in the interests of the Fund, to allocate
brokerage on the Fund's portfolio transactions to broker-dealers other than
affiliated broker-dealers, qualified to obtain best execution of such
transactions who provide brokerage and/or research services (as such services
are defined in Section 23(e)(3) of the Securities Exchange Act of 1934) for the
Fund and/or other accounts for which OFI and its affiliates exercise "investment
discretion" (as that term is defined in Section 3(a)(35) of the Securities
Exchange Act of 1934) and to cause the Fund to pay such broker-dealers a
commission for effecting a
3
<PAGE>
portfolio transaction for the Fund that is in excess of the amount of commission
another broker-dealer adequately qualified to effect such transaction would have
charged for effecting that transaction, if OFI determines, in good faith, that
such commission is reasonable in relation to the value of the brokerage and/or
research services provided by such broker-dealer, viewed in terms of either that
particular transaction or the overall responsibilities of OFI and its investment
advisory affiliates with respect to the accounts as to which they exercise
investment discretion. In reaching such determination, OFI will not be required
to place or attempt to place a specific dollar value on the brokerage and/or
research services provided or being provided by such broker-dealer. In
demonstrating that such determinations were made in good faith, OFI shall be
prepared to show that all commissions were allocated for the purposes
contemplated by this Agreement and that the total commissions paid by the Fund
over a representative period selected by the Fund's trustees were reasonable in
relation to the benefits to the Fund.
(d) OFI shall have no duty or obligation to seek advance competitive
bidding for the most favorable commission rate applicable to any particular
portfolio transactions or to select any broker-dealer on the basis of its
purported or "posted" commission rate but will, to the best of its ability,
endeavor to be aware of the current level of the charges of eligible
broker-dealers and to minimize the expense incurred by the Fund for effecting
its portfolio transactions to the extent consistent with the interests and
policies of the Fund as established by the determinations of its Board of
Trustees and the provisions of this paragraph "7."
(e) The Fund recognizes that an affiliated broker-dealer (i) may act as
one of the Fund's regular brokers so long as it is lawful for it so to act; (ii)
may be a major recipient of brokerage commissions paid by the Fund; and (iii)
may effect portfolio transactions for the Fund only if the commissions, fees or
other remuneration received or to be received by it are determined in accordance
with procedures contemplated by any rule, regulation or order adopted under the
Investment Company Act for determining the permissible level of such
commissions.
(f) Subject to the foregoing provisions of this paragraph "7", OFI may
also consider sales of Fund shares and shares of other investment companies
managed by OFI or its affiliates as a factor in the selection of broker-dealers
for the Fund's portfolio transactions.
8. Duration.
This Agreement will take effect on the date first set forth above. Unless
earlier terminated pursuant to paragraph 9 hereof, this Agreement shall remain
in effect until two years from the date of execution hereof, and thereafter will
continue in effect from year to year, so long as such continuance shall be
approved at least annually by the Fund's Board of Trustees, including the vote
of the majority of the trustees of the Fund who are not parties to this
Agreement or "interested persons" (as defined in the Investment Company Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, or by the holders of a "majority" (as defined in the Investment
Company Act) of the outstanding voting securities of the Fund and by such a vote
of the Fund's Board of Trustees.
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<PAGE>
9. Termination.
This Agreement may be terminated (i) by OFI at any time without penalty
upon giving the Fund sixty days' written notice (which notice may be waived by
the Fund); or (ii) by the Fund at any time without penalty upon sixty days'
written notice to OFI (which notice may be waived by OFI) provided that such
termination by the Fund shall be directed or approved by the vote of a majority
of all of the Trustees of the Fund then in office or by the vote of the holders
of a "majority" (as defined in the Investment Company Act) of the outstanding
voting securities of the Fund.
10. Assignment or Amendment.
This Agreement may not be amended without the affirmative vote or written
consent of the holders of a "majority" of the outstanding voting securities of
the Fund, and shall automatically and immediately terminate in the event of its
"assignment," as defined in the Investment Company Act.
11. Disclaimer of Shareholder Liability.
OFI understands that the obligations of the Fund under this Agreement are
not binding upon any Trustee or shareholder of the Fund personally, but bind
only the Fund and the Fund's property. OFI represents that it has notice of the
provisions of the Declaration of Trust of the Fund disclaiming shareholder
liability for acts or obligations of the Fund.
12. Definitions.
The terms and provisions of this Agreement shall be interpreted and
defined in a manner consistent with the provisions and definitions of the
Investment Company Act.
OPPENHEIMER MIDCAP FUND
By:/s/ Andrew J. Donohue
Andrew J. Donohue
Secretary
OPPENHEIMERFUNDS, INC.
By:/s/ Andrew J. Donohue
Andrew J. Donohue
Executive Vice President &
General Counsel
i:\groups\legal\advisory\745.adv
5
GENERAL DISTRIBUTOR'S AGREEMENT
BETWEEN
OPPENHEIMER MIDCAP FUND
AND
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
Date: November 17, 1997
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
Two World Trade Center, Suite 3400
New York, NY 10048
Dear Sirs:
OPPENHEIMER MIDCAP FUND, a Massachusetts business trust (the "Fund"), is
registered as an investment company under the Investment Company Act of 1940
(the "1940 Act"), and an indefinite number of one or more classes of its shares
of beneficial interest ("Shares") have been registered under the Securities Act
of 1933 (the "1933 Act") to be offered for sale to the public in a continuous
public offering in accordance with the terms and conditions set forth in the
Prospectus and Statement of Additional Information ("SAI") included in the
Fund's Registration Statement as it may be amended from time to time (the
"current Prospectus and/or SAI").
In this connection, the Fund desires that your firm (the "General
Distributor") act in a principal capacity as General Distributor for the sale
and distribution of Shares which have been registered as described above and of
any additional Shares which may become registered during the term of this
Agreement. You have advised the Fund that you are willing to act as such General
Distributor, and it is accordingly agreed by and between us as follows:
1. Appointment of the Distributor. The Fund hereby appoints you as the
sole General Distributor, pursuant to the aforesaid continuous public offering
of its Shares, and the Fund further agrees from and after the date of this
Agreement, that it will not, without your consent, sell or agree to sell any
Shares otherwise than through you, except (a) the Fund may itself sell shares
without sales charge as an investment to the officers, trustees or directors and
bona fide present and former full-time employees of the Fund, the Fund's
Investment Adviser and affiliates thereof, and to other investors who are
identified in the current Prospectus and/or SAI as having the privilege to buy
Shares at net asset value; (b) the Fund may issue shares in connection with a
merger, consolidation or acquisition of assets on such basis as may be
authorized or permitted under the 1940 Act; (c) the Fund may issue shares for
the reinvestment of dividends and other distributions of the Fund or of any
other Fund if permitted by the current Prospectus and/or SAI; and (d) the Fund
may issue shares as underlying securities of a unit investment trust if such
unit investment trust has elected to use Shares as an underlying investment;
provided that in no event as to any of the foregoing exceptions shall Shares be
issued and sold at less than the then-existing net asset value.
1
<PAGE>
2. Sale of Shares. You hereby accept such appointment and agree to use
your best efforts to sell Shares, provided, however, that when requested by the
Fund at any time because of market or other economic considerations or abnormal
circumstances of any kind, or when agreed to by mutual consent of the Fund and
the General Distributor, you will suspend such efforts. The Fund may also
withdraw the offering of Shares at any time when required by the provisions of
any statute, order, rule or regulation of any governmental body having
jurisdiction. It is understood that you do not undertake to sell all or any
specific number of Shares.
3. Sales Charge. Shares shall be sold by you at net asset value plus a
front-end sales charge not in excess of 8.5% of the offering price, but which
front-end sales charge shall be proportionately reduced or eliminated for larger
sales and under other circumstances, in each case on the basis set forth in the
Fund's current Prospectus and/or SAI. The redemption proceeds of shares offered
and sold at net asset value with or without a front-end sales charge may be
subject to a contingent deferred sales charge ("CDSC") under the circumstances
described in the current Prospectus and/or SAI. You may reallow such portion of
the front-end sales charge to dealers or cause payment (which may exceed the
front-end sales charge, if any) of commissions to brokers through which sales
are made, as you may determine, and you may pay such amounts to dealers and
brokers on sales of shares from your own resources (such dealers and brokers
shall collectively include all domestic or foreign institutions eligible to
offer and sell the Shares), and in the event the Fund has more than one class of
Shares outstanding, then you may impose a front-end sales charge and/or a CDSC
on Shares of one class that is different from the charges imposed on Shares of
the Fund's other class(es), in each case as set forth in the current Prospectus
and/or SAI, provided the front-end sales charge and CDSC to the ultimate
purchaser do not exceed the respective levels set forth for such category of
purchaser in the Fund's current Prospectus and/or SAI.
4. Purchase of Shares.
(a) As General Distributor, you shall have the right to accept or
reject orders for the purchase of Shares at your discretion.
Any consideration which you may receive in connection with a
rejected purchase order will be returned promptly.
(b) You agree promptly to issue or to cause the duly appointed
transfer or shareholder servicing agent of the Fund to issue as your
agent confirmations of all accepted purchase orders and to transmit a
copy of such confirmations to the Fund. The net asset value of all
Shares which are the subject of such confirmations, computed in
accordance with the applicable rules under the 1940 Act, shall be a
liability of the General Distributor to the Fund to be paid promptly
after receipt of payment from the originating dealer or broker (or
investor, in the case of direct purchases) and not later than eleven
business days after such confirmation even if you have not actually
received payment from the originating dealer or broker or investor. In
no event shall the General Distributor make payment to the Fund later
than permitted by applicable rules of the National Association of
Securities Dealers, Inc.
(c) If the originating dealer or broker shall fail to make timely
settlement of its purchase order in accordance with applicable rules of the
National Association of Securities Dealers, Inc., or if a direct purchaser shall
fail to make good payment for shares in a timely manner, you shall have the
right to cancel such purchase order and, at your account and risk, to hold
responsible the originating dealer or broker, or investor. You agree promptly to
reimburse the Fund for losses suffered by it that are attributable to any such
cancellation, or to errors on your part in relation to the effective date of
accepted purchase orders, limited to the amount that such losses exceed
contemporaneous gains realized by the Fund for either of such reasons with
respect to other purchase orders.
(d) In the case of a canceled purchase for the account of a directly
purchasing shareholder, the Fund agrees that if such investor fails to make you
whole for any loss you pay to the Fund on such canceled purchase order, the Fund
will reimburse you for such loss to the extent of the aggregate redemption
proceeds of any other shares of the Fund owned by such investor, on your demand
that the Fund exercise its right to claim such redemption proceeds. The Fund
shall register or cause to be registered all Shares sold to you pursuant to the
provisions hereof in such names and amounts as you may request from time to time
and the Fund shall issue or cause to be issued certificates evidencing such
Shares for delivery to you or pursuant to your direction if and to the extent
that the shareholder account in question contemplates the issuance of such
certificates. All Shares when so issued and paid for, shall be fully paid and
non-assessable by the Fund (which shall not prevent the imposition of any CDSC
that may apply) to the extent set forth in the current Prospectus and/or SAI.
5. Repurchase of Shares.
(a) In connection with the repurchase of Shares, you are appointed and
shall act as Agent of the Fund. You are authorized, for so long as you act as
General Distributor of the Fund, to repurchase, from authorized dealers,
certificated or uncertificated shares of the Fund ("Shares") on the basis of
orders received from each dealer ("authorized dealer") with which you have a
dealer agreement for the sale of Shares and permitting resales of Shares to you,
provided that such authorized dealer, at the time of placing such resale order,
shall represent (i) if such Shares are represented by certificate(s), that
certificate(s) for the Shares to be repurchased have been delivered to it by the
registered owner with a request for the redemption of such Shares executed in
the manner and with the signature guarantee required by the then-currently
effective prospectus of the Fund, or (ii) if such Shares are uncertificated,
that the registered owner(s) has delivered to the dealer a request for the
redemption of such Shares executed in the manner and with the signature
guarantee required by the then-currently effective prospectus of the Fund.
(b) You shall (a) have the right in your discretion to accept or reject
orders for the repurchase of Shares; (b) promptly transmit confirmations of all
accepted repurchase orders; and (c) transmit a copy of such confirmation to the
Fund, or, if so directed, to any duly appointed transfer or shareholder
servicing agent of the Fund. In your discretion, you may accept repurchase
requests made by a financially responsible dealer which provides you with
indemnification in form satisfactory to you in consideration of your acceptance
of such dealer's request in lieu of the written redemption request of the
3
<PAGE>
owner of the account; you agree that the Fund shall be a third
party beneficiary of such indemnification.
(c) Upon receipt by the Fund or its duly appointed transfer or shareholder
servicing agent of any certificate(s) (if any has been issued) for repurchased
Shares and a written redemption request of the registered owner(s) of such
Shares executed in the manner and bearing the signature guarantee required by
the then-currently effective Prospectus or SAI of the Fund, the Fund will pay or
cause its duly appointed transfer or shareholder servicing agent promptly to pay
to the originating authorized dealer the redemption price of the repurchased
Shares (other than repurchased Shares subject to the provisions of part (d) of
Section 5 of this Agreement) next determined after your receipt of the dealer's
repurchase order.
(d) Notwithstanding the provisions of part (c) of Section 5 of this
Agreement, repurchase orders received from an authorized dealer after the
determination of the Fund's redemption price on a regular business day will
receive that day's redemption price if the request to the dealer by its customer
to arrange such repurchase prior to the determination of the Fund's redemption
price that day complies with the requirements governing such requests as stated
in the current Prospectus and/or SAI.
(e) You will make every reasonable effort and take all reasonably available
measures to assure the accurate performance of all services to be performed by
you hereunder within the requirements of any statute, rule or regulation
pertaining to the redemption of shares of a regulated investment company and any
requirements set forth in the then-current Prospectus and/or SAI of the Fund.
You shall correct any error or omission made by you in the performance of your
duties hereunder of which you shall have received notice in writing and any
necessary substantiating data; and you shall hold the Fund harmless from the
effect of any errors or omissions which might cause an over- or under-
redemption of the Fund's Shares and/or an excess or non-payment of dividends,
capital gains distributions, or other distributions.
(f) In the event an authorized dealer initiating a repurchase order shall
fail to make delivery or otherwise settle such order in accordance with the
rules of the National Association of Securities Dealers, Inc., you shall have
the right to cancel such repurchase order and, at your account and risk, to hold
responsible the originating dealer. In the event that any cancellation of a
Share repurchase order or any error in the timing of the acceptance of a Share
repurchase order shall result in a gain or loss to the Fund, you agree promptly
to reimburse the Fund for any amount by which any loss shall exceed
then-existing gains so arising.
6. 1933 Act Registration. The Fund has delivered to you a copy of its
current Prospectus and SAI. The Fund agrees that it will use its best efforts to
continue the effectiveness of the Registration Statement under the 1933 Act. The
Fund further agrees to prepare and file any amendments to its Registration
Statement as may be necessary and any supplemental data in order to comply with
the 1933 Act. The Fund will furnish you at
4
<PAGE>
your expense with a reasonable number of copies of the Prospectus and SAI and
any amendments thereto for use in connection with the sale of Shares.
7. 1940 Act Registration. The Fund has already registered under the 1940
Act as an investment company, and it will use its best efforts to maintain such
registration and to comply with the requirements of the 1940 Act.
8. State Blue Sky Qualification. At your request, the Fund will take such
steps as may be necessary and feasible to qualify Shares for sale in states,
territories or dependencies of the United States, the District of Columbia, the
Commonwealth of Puerto Rico and in foreign countries, in accordance with the
laws thereof, and to renew or extend any such qualification; provided, however,
that the Fund shall not be required to qualify shares or to maintain the
qualification of shares in any jurisdiction where it shall deem such
qualification disadvantageous to the Fund.
9. Duties of Distributor. You agree that:
(a) Neither you nor any of your officers will take any long or
short position in the Shares, but this provision shall not
prevent you or your officers from acquiring Shares for
investment purposes only; and
(b) You shall furnish to the Fund any pertinent information
required to be inserted with respect to you as General
Distributor within the purview of the Securities Act of 1933
in any reports or registration required to be filed with any
governmental authority; and
(c) You will not make any representations inconsistent with the
information contained in the current Prospectus and/or SAI;
and
(d) You shall maintain such records as may be reasonably required
for the Fund or its transfer or shareholder servicing agent to respond
to shareholder requests or complaints, and to permit the Fund to
maintain proper accounting records, and you shall make such records
available to the Fund and its transfer agent or shareholder servicing
agent upon request; and
(e) In performing under this Agreement, you shall comply with all
requirements of the Fund's current Prospectus and/or SAI and
all applicable laws, rules and regulations with respect to the
purchase, sale and distribution of Shares.
10. Allocation of Costs. The Fund shall pay the cost of composition and
printing of sufficient copies of its Prospectus and SAI as shall be required for
periodic distribution to its shareholders and the expense of registering Shares
for sale under federal securities laws. You shall pay the expenses normally
attributable to the sale of Shares, other than as paid under the Fund's
Distribution Plan under Rule 12b-1 of the 1940 Act, including the cost of
printing and mailing of the Prospectus (other than those furnished to existing
shareholders) and any sales literature used by you in the public sale of the
Shares and for registering such shares under state blue sky laws pursuant to
paragraph 8.
5
<PAGE>
11. Duration. This Agreement shall take effect on the date first written
above, and shall supersede any and all prior General Distributor's Agreements by
and among the Fund and you. Unless earlier terminated pursuant to paragraph 12
hereof, this Agreement shall remain in effect until November 30, 1999. This
Agreement shall continue in effect from year to year thereafter, provided that
such continuance shall be specifically approved at least annually: (a) by the
Fund's Board of Trustees or by vote of a majority of the voting securities of
the Fund; and (b) by the vote of a majority of the Trustees, who are not parties
to this Agreement or "interested persons" (as defined the 1940 Act) of any such
person, cast in person at a meeting called for the purpose of voting on such
approval.
12. Termination. This Agreement may be terminated (a) by the General
Distributor at any time without penalty by giving sixty days' written notice
(which notice may be waived by the Fund); (b) by the Fund at any time without
penalty upon sixty days' written notice to the General Distributor (which notice
may be waived by the General Distributor); or (c) by mutual consent of the Fund
and the General Distributor, provided that such termination by the Fund shall be
directed or approved by the Board of Trustees of the Fund or by the vote of the
holders of a "majority" of the outstanding voting securities of the Fund.
In the event this Agreement
is terminated by the Fund, the General Distributor shall be entitled to be paid
the CDSC under paragraph 3 hereof on the redemption proceeds of Shares sold
prior to the effective date of such termination.
13. Assignment. This Agreement may not be amended or changed except in
writing and shall be binding upon and shall enure to the benefit of the parties
hereto and their respective successors; however, this Agreement shall not be
assigned by either party and shall automatically terminate upon assignment.
14. Disclaimer of Shareholder Liability. The General Distributor
understands and agrees that the obligations of the Fund under this Agreement are
not binding upon any Trustee or shareholder of the Fund personally, but bind
only the Fund and the Fund's property; the General Distributor represents that
it has notice of the provisions of the Declaration of Trust of the Fund
disclaiming Trustee and shareholder liability for acts or obligations of the
Fund.
15. Section Headings. The heading of each section is for descriptive
purposes only, and such headings are not to be construed or interpreted as part
of this Agreement.
6
<PAGE>
If the foregoing is in accordance with your understanding, so indicate by
signing in the space provided below.
OPPENHEIMER MIDCAP FUND
By: /s/ Andrew J. Donohue
Andrew J. Donohue
Secretary
Accepted:
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
By: /s/ Katherine P. Fel
Katherine P. Feld
Vice President & Secretary
i:\groups\legal\ofmi\745.dis
7
Letterhead of Gordon Altman Butowsky Weitzen Shalov & Wein
November 3, 1997
Oppenheimer Midcap Fund
Two World Trade Center
New York, NY 10048-0203
Dear Ladies and Gentlemen:
This opinion is being furnished to Oppenheimer MidCap Fund, a
Massachusetts business trust (the "Fund"), in connection with the Registration
Statement on Form N-1A (the "Registration Statement") under the Securities Act
of 1933, as amended (the "1933 Act"), and the Investment Company Act of 1940, as
amended, filed by the Fund. As counsel for the Fund, we have examined such
statutes, regulations, corporate records and other documents and reviewed such
questions of law that we deemed necessary or appropriate for the purposes of
this opinion.
As to matters of Massachusetts law contained in this opinion, we have
relied upon the opinion of Lane, Altman & Owens LLP, dated November 3, 1997.
Based upon the foregoing, we are of the opinion that the Class A, Class B,
Class C and Class Y Shares to be issued as described in the Registration
Statement have been duly authorized and, assuming receipt of the consideration
to be paid therefor, upon delivery as provided in the Registration Statement,
will be legally and validly issued, fully paid and non-assessable (except for
the potential liability of shareholders described in the Fund's Statement of
Additional Information under the caption "About the Fund - How the Fund is
Managed - Organization of the Fund").
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us in the Registration Statement
. We do not thereby admit that we are within the category of persons whose
consent is required under Section 7 of the 1933 Act or the rules and regulations
of the Securities and Exchange Commissions thereunder.
Very truly yours,
/s/ Gordon Altman Butowsky Weitzen Shalov & Wein
Gordon Altman Butowsky Weitzen Shalov & Wein
prosp\745opin.#1
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional Information
constituting part of this Pre-Effective Amendment No. 2 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
October 1, 1997, relating to the statement of assets and liabilities of
Oppenheimer MidCap Fund, which appears in such Statement of Additional
Information, and to the incorporation by reference of our report into the
Prospectus which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "Independent Accountants" in
such Statement of Additional Information and to the reference to us under the
heading "Independent Accountants" in such Prospectus.
/s/Price Waterhouse LLP
Price Waterhouse LLP
Denver, Colorado
November 3, 1997
PROSP\745CON
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
October 1, 1997
The Board of Trustees
Oppenheimer MidCap Fund
Two World Trade Center
New York, NY 10048-0203
To the Board of Trustees:
OppenheimerFunds, Inc. ("OFI") herewith purchases 10,000 Class A shares,
100 Class B shares, 100 Class C shares and 100 Class Y shares of Oppenheimer
MidCap Fund (the "Fund") at a net asset value per share of $10.00 for each such
class, for an aggregate purchase price of $103,000.
In connection with such purchase, OFI represents that such purchase is
made for investment purposes by OFI without any present intention of redeeming
or selling such shares. OFI will advance all organizational and start-up costs
of the Fund. Such expenses will be amortized over a five-year period from the
date operations commence. On the first day that total assets exceed $5 million,
the Fund will reimburse OFI for all start-up expenses. In the event that all or
part of OFI's initial investment in shares of the Fund is withdrawn during the
amortization period, by any holder thereof, the redemption proceeds will be
reduced by the proportionate amount of the unamortized organization costs
represented by the ratio that the number of shares redeemed bears to the number
of initial shares outstanding at the time of such redemption.
Very truly yours,
OppenheimerFunds, Inc.
/s/ Andrew J. Donohue
Andrew J. Donohue
Executive Vice President &
General Counsel
ADVISORY/745.LTR
SERVICE PLAN AND AGREEMENT
with
OppenheimerFunds Distributor, Inc.
For Class A Shares of
Oppenheimer MidCap Fund
SERVICE PLAN AND AGREEMENT (the "Plan") dated the 17th day of November, 1997, by
and between Oppenheimer MidCap Fund (the "Fund") and OppenheimerFunds
Distributor, Inc. (the
"Distributor").
1. The Plan. This Plan is the Fund's written service plan for its Class A Shares
described in the Fund's registration statement as of the date this Plan takes
effect, contemplated by and to comply with Rule 2830 of the Conduct Rules of the
National Association of Securities Dealers, Inc., pursuant to which the Fund
will reimburse the Distributor for a portion of its costs incurred in connection
with the personal service and maintenance of shareholder accounts ("Accounts")
that hold Class A Shares (the "Shares") of the Fund. The Fund may be deemed to
be acting as distributor of securities of which it is the issuer, pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act"), according
to the terms of this Plan. The Distributor is authorized under the Plan to pay
"Recipients," as hereinafter defined, for rendering services and for the
maintenance of Accounts. Such Recipients are intended to have certain rights as
third-party beneficiaries under this Plan.
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other institution
which: (i) has rendered services in connection with the personal service
and maintenance of Accounts; (ii) shall furnish the Distributor (on behalf
of the Fund) with such information as the Distributor shall reasonably
request to answer such questions as may arise concerning such service; and
(iii) has been selected by the Distributor to receive payments under the
Plan. Notwithstanding the foregoing, a majority of the Fund's Board of
Trustees (the "Board") who are not "interested persons" (as defined in the
1940 Act) and who have no direct or indirect financial interest in the
operation of this Plan or in any agreements relating to this Plan (the
"Independent Trustees") may remove any broker, dealer, bank or other
institution as a Recipient, whereupon such entity's rights as a
third-party beneficiary hereof shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or of record by: (i) such Recipient, or (ii) such brokerage
or other customers, or investment advisory or other clients of such
Recipient and/or accounts as to which such Recipient is a fiduciary or
custodian or co-fiduciary or co-custodian (collectively, the "Customers"),
but in no event shall any such Shares be deemed owned by more than one
Recipient for purposes of this Plan. In the event that two entities would
otherwise qualify as Recipients as to the same Shares, the Recipient which
is the dealer of record on the Fund's books shall be deemed the Recipient
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<PAGE>
as to such Shares for purposes of this Plan.
3. Payments.
(a) Under the Plan, the Fund will make payments to the Distributor, within
forty-five (45) days of the end of each calendar quarter, in the amount of
the lesser of: (i) .0625% (.25% on an annual basis) of the average during
the calendar quarter of the aggregate net asset value of the Shares,
computed as of the close of each business day, or (ii) the Distributor's
actual expenses under the Plan for that quarter of the type approved by
the Board. The Distributor will use such fee received from the Fund in its
entirety to reimburse itself for payments to Recipients and for its other
expenditures and costs of the type approved by the Board incurred in
connection with the personal service and maintenance of Accounts
including, but not limited to, the services described in the following
paragraph. The Distributor may make Plan payments to any "affiliated
person" (as defined in the 1940 Act) of the Distributor if such affiliated
person qualifies as a Recipient.
The services to be rendered by the Distributor and Recipients in
connection with the personal service and the maintenance of Accounts may
include, but shall not be limited to, the following: answering routine
inquiries from the Recipient's customers concerning the Fund, providing
such customers with information on their investment in Shares, assisting
in the establishment and maintenance of accounts or sub-accounts in the
Fund, making the Fund's investment plans and dividend payment options
available, and providing such other information and customer liaison
services and the maintenance of Accounts as the Distributor or the Fund
may reasonably request. It may be presumed that a Recipient has provided
services qualifying for compensation under the Plan if it has Qualified
Holdings of Shares to entitle it to payments under the Plan. In the event
that either the Distributor or the Board should have reason to believe
that, notwithstanding the level of Qualified Holdings, a Recipient may not
be rendering appropriate services, then the Distributor, at the request of
the Board, shall require the Recipient to provide a written report or
other information to verify that said Recipient is providing appropriate
services in this regard. If the Distributor still is not satisfied, it may
take appropriate steps to terminate the Recipient's status as such under
the Plan, whereupon such entity's rights as a third-party beneficiary
hereunder shall terminate.
Payments received by the Distributor from the Fund under the Plan
will not be used to pay any interest expense, carrying charges or other
financial costs, or allocation of overhead by the Distributor, or for any
other purpose other than for the payments described in this Section 3. The
amount payable to the Distributor each quarter will be reduced to the
extent that reimbursement payments otherwise permissible under the Plan
have not been authorized by the Board for that quarter. Any unreimbursed
expenses incurred for any quarter by the Distributor may not be recovered
in later periods.
(b) The Distributor shall make payments to any Recipient quarterly, within
forty-five (45) days of the end of each calendar quarter, at a rate not to
exceed .0625% (.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of the Shares computed as of the
close of each business day, of Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers. However, no such payments
shall be made to any Recipient for any such quarter in which its Qualified
Holdings do not equal or exceed, at the end of such quarter, the minimum
amount ("Minimum Qualified Holdings"), if any, to be set from
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<PAGE>
time to time by a majority of the Independent Trustees. A majority of the
Independent Trustees may at any time or from time to time increase or
decrease and thereafter adjust the rate of fees to be paid to the
Distributor or to any Recipient, but not to exceed
the rate set forth above,
and/or increase or decrease the number of shares constituting Minimum
Qualified Holdings. The Distributor shall notify all Recipients of the
Minimum Qualified Holdings and the rate of payments hereunder applicable
to Recipients, and shall provide each Recipient with written notice within
thirty (30) days after any change in these provisions. Inclusion of such
provisions or a change in such provisions in a revised current prospectus
shall constitute sufficient notice.
(c) Under the Plan, payments may be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include
profits derived from the advisory fee it receives from the Fund), or (ii)
by the Distributor (a subsidiary of OFI), from its own resources.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection or replacement of Independent Trustees and the nomination of those
persons to be Trustees of the Fund who are not "interested persons" of the Fund
shall be committed to the discretion of the Independent Trustees. Nothing herein
shall prevent the Independent Trustees from soliciting the views or the
involvement of others in such selection or nomination if the final decision on
any such selection and nomination is approved by a majority of the incumbent
Independent Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund shall
provide at least quarterly a written report to the Board for its review,
detailing the amount of all payments made pursuant to this Plan, the identity of
the Recipient of each such payment, and the purposes for which the payments were
made. The report shall state whether all provisions of Section 3 of this Plan
have been complied with. The Distributor shall annually certify to the Board the
amount of its total expenses incurred that year with respect to the personal
service and maintenance of Accounts in conjunction with the Board's annual
review of the continuation of the Plan.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding voting securities of the Class, on not more than
sixty days written notice to any other party to the agreement; (ii) such
agreement shall automatically terminate in the event of its "assignment" (as
defined in the 1940 Act); (iii) it shall go into effect when approved by a vote
of the Board and its Independent Trustees cast in person at a meeting called for
the purpose of voting on such agreement; and (iv) it shall, unless terminated as
herein provided, continue in effect from year to year only so long as such
continuance is specifically approved at least annually by the Board and its
Independent Trustees cast in person at a meeting called for the purpose of
voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Independent Trustees cast in person at a meeting
called on August 5, 1997 for the purpose of voting on this Plan, and shall take
effect on the date that the Fund's Registration Statement is declared effective
by the Securities and Exchange Commission. Unless terminated as hereinafter
provided, it shall continue in effect until November 30, 1998 and from year to
year thereafter or as the Board may otherwise determine only so long as such
continuance is specifically approved at least annually by the Board and its
Independent Trustees by a vote cast in person at a meeting called for the
purpose of voting on such continuance. This Plan may be terminated at any time
by vote of a majority of the Independent Trustees or by the vote of the holders
of a "majority" (as defined in the 1940 Act) of the Fund's
3
<PAGE>
outstanding voting securities of Class A. This Plan may not be amended to
increase materially the amount of payments to be made without approval of the
Class A Shareholders, in the manner described
4
<PAGE>
above, and all material amendments must be approved by a vote of
the Board and of the Independent Trustees.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands
that the obligations of the Fund under this Plan are not binding upon any
Trustee or shareholder of the Fund personally, but bind only the Fund and the
Fund's property. The Distributor represents that it has notice of the provisions
of the Declaration of Trust of the Fund disclaiming shareholder and Trustee
liability for acts or obligations of the Fund.
Oppenheimer MidCap Fund
By: /s/ Andrew J. Donohue
Andrew J. Donohue, Secretary
OppenheimerFunds Distributor, Inc.
By: /s/ Katherine P. Feld
Katherine P. Feld
Vice President & Secretary
ofmi\745.a
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
with
OppenheimerFunds Distributor, Inc.
For Class B Shares of
Oppenheimer MidCap Fund
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 17th day of
November, 1997, by and between Oppenheimer MidCap Fund (the "Fund") and
OppenheimerFunds
Distributor, Inc. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service plan for
Class B shares of the Fund (the "Shares"), contemplated by Rule 12b-1 as it may
be amended from time to time (the "Rule") under the Investment Company Act of
1940 (the "1940 Act"), pursuant to which the Fund will compensate the
Distributor for its services in connection with the distribution of Shares, and
the personal service and maintenance of shareholder accounts that hold Shares
("Accounts"). The Fund may act as distributor of securities of which it is the
issuer, pursuant to the Rule, according to the terms of this Plan. The terms and
provisions of this Plan shall be interpreted and defined in a manner consistent
with the provisions and definitions contained in (i) the 1940 Act, (ii) the
Rule, (iii) Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc., or any amendment or successor to such rule (the "NASD
Conduct Rules") and (iv) any conditions pertaining either to
distribution-related expenses or to a plan of distribution to which the Fund is
subject under any order on which the Fund relies, issued at any time by the U.S.
Securities and Exchange Commission ("SEC").
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has rendered assistance (whether direct, administrative or
both) in the distribution of Shares or has provided administrative support
services with respect to Shares held by Customers (defined below) of the
Recipient; (ii) shall furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to answer such questions
as may arise concerning the sale of Shares; and (iii) has been selected by the
Distributor to receive payments under the Plan.
(b) "Independent Trustees" shall mean the members of the Fund's Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Fund and who have no direct or indirect financial interest in the operation of
this Plan or in any agreement relating to this Plan.
(c) "Customers" shall mean such brokerage or other customers or investment
advisory or other clients of a Recipient, and/or accounts as to which such
Recipient provides administrative support services or is a custodian or other
fiduciary.
(d) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or of record by: (i) such Recipient, or (ii) such Recipient's
Customers, but in no event shall any such Shares be deemed owned by more than
one Recipient for purposes of this Plan. In the event that more than one
1
<PAGE>
person or entity would otherwise qualify as Recipients as to the same Shares,
the Recipient which is the dealer of record on the Fund's books as determined by
the Distributor shall be deemed the Recipient as to such Shares for purposes of
this Plan.
3. Payments for Distribution Assistance and Administrative Support
Services.
(a) Payments to the Distributor. In consideration of the payments made by
the Fund to the Distributor under this Plan, the Distributor shall provide
administrative support services and distribution assistance services to the
Fund. Such services include distribution assistance and administrative support
services rendered in connection with Shares (1) sold in purchase transactions,
(2) issued in exchange for shares of another investment company for which the
Distributor serves as distributor or sub-distributor, or (3) issued pursuant to
a plan of reorganization to which the Fund is a party. If the Board believes
that the Distributor may not be rendering appropriate distribution assistance or
administrative support services in connection with the sale of Shares, then the
Distributor, at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is providing
appropriate services in this regard. For such services, the Fund will make the
following payments to the Distributor:
(i) Administrative Support Services Fees. Within forty-five (45)
days of the end of each calendar quarter, the Fund will make payments in the
aggregate amount of 0.0625% (0.25% on an annual basis) of the average during
that calendar quarter of the aggregate net asset value of the Shares computed as
of the close of each business day (the "Service Fee"). Such Service Fee payments
received from the Fund will compensate the Distributor for providing
administrative support services with respect to Accounts. The administrative
support services in connection with Accounts may include, but shall not be
limited to, the administrative support services that a Recipient may render as
described in Section 3(b)(ii) below.
(ii) Distribution Assistance Fees (Asset-Based Sales Charge). Within
ten (10) days of the end of each month, the Fund will make payments in the
aggregate amount of 0.0625% (0.75% on an annual basis) of the average during the
month of the aggregate net asset value of Shares computed as of the close of
each business day (the "Asset-Based Sales Charge") outstanding for no more than
six years (the "Maximum Holding Period"). Such Asset-Based Sales Charge payments
received from the Fund will compensate the Distributor for providing
distribution assistance in connection with the sale of Shares.
The distribution assistance to be rendered by the Distributor in
connection with the Shares may include, but shall not be limited to, the
following: (i) paying sales commissions to any broker, dealer, bank or other
person or entity that sells Shares, and\or paying such persons "Advance Service
Fee Payments" (as defined below) in advance of, and\or in amounts greater than,
the amount provided for in Section 3(b) of this Agreement; (ii) paying
compensation to and expenses of personnel of the Distributor who support
distribution of Shares by Recipients; (iii) obtaining financing or providing
such financing from its own resources, or from an affiliate, for the interest
and other borrowing costs of the Distributor's unreimbursed expenses incurred in
rendering distribution assistance and administrative support services to the
Fund; and (iv) paying other direct distribution costs, including without
limitation the costs of sales literature, advertising and prospectuses (other
than those prospectuses furnished to current holders of the Fund's shares
("Shareholders")) and state "blue sky" registration expenses.
(b) Payments to Recipients. The Distributor is authorized under the Plan
to pay Recipients (1)
distribution assistance fees for rendering distribution assistance in
connection with the sale of Shares
2
<PAGE>
and/or (2) service fees for rendering administrative support services with
respect to Accounts. However, no such payments shall be made to any Recipient
for any such quarter in which its Qualified Holdings do not equal or exceed, at
the end of such quarter, the minimum amount ("Minimum Qualified Holdings"), if
any, that may be set from time to time by a majority of the Independent
Trustees. All fee payments made by the Distributor hereunder are subject to
reduction or chargeback so that the aggregate service fee payments and Advance
Service Fee Payments do not exceed the limits on payments to Recipients that
are, or may be, imposed by the NASD Conduct Rules. The Distributor may make Plan
payments to any "affiliated person" (as defined in the 1940 Act) of the
Distributor if such affiliated person qualifies as a Recipient or retain such
payments if the Distributor qualifies as a Recipient.
(i) Service Fee. In consideration of the administrative support
services provided by a Recipient during a calendar quarter, the Distributor
shall make service fee payments to that Recipient quarterly, within forty-five
(45) days of the end of each calendar quarter, at a rate not to exceed 0.0625%
(0.25% on an annual basis) of the average during the calendar quarter of the
aggregate net asset value of Shares, computed as of the close of each business
day, constituting Qualified Holdings owned beneficially or of record by the
Recipient or by its Customers for a period of more than the minimum period (the
"Minimum Holding Period"), if any, that may be set from time to time by a
majority of the Independent Trustees.
Alternatively, the Distributor may, at its sole option, make the
following service fee payments to any Recipient quarterly, within forty-five
(45) days of the end of each calendar quarter: (i) "Advance Service Fee
Payments" at a rate not to exceed 0.25% of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
business on the day such Shares are sold, constituting Qualified Holdings, sold
by the Recipient during that quarter and owned beneficially or of record by the
Recipient or by its Customers, plus (ii) service fee payments at a rate not to
exceed 0.0625% (0.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
each business day, constituting Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers for a period of more than one (1)
year. At the Distributor's sole option, the Advance Service Fee Payments may be
made more often than quarterly, and sooner than the end of the calendar quarter.
In the event Shares are redeemed less than one year after the date such Shares
were sold, the Recipient is obligated to and will repay the Distributor on
demand a pro rata portion of such Advance Service Fee Payments, based on the
ratio of the time such Shares were held to one (1) year.
The administrative support services to be rendered by Recipients in
connection with the Accounts may include, but shall not be limited to, the
following: answering routine inquiries concerning the Fund, assisting in the
establishment and maintenance of accounts or sub-accounts in the Fund and
processing Share redemption transactions, making the Fund's investment plans and
dividend payment options available, and providing such other information and
services in connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may reasonably request.
(ii) Distribution Assistance Fees (Asset-Based Sales Charge)
Payments. In its sole discretion and irrespective of whichever alternative
method of making service fee payments to Recipients is selected by the
Distributor, in addition the Distributor may make distribution assistance fee
payments to a Recipient quarterly, within forty-five (45) days after the end of
each calendar quarter, at a rate not to exceed 0.1875% (0.75% on an annual
basis) of the average during the calendar quarter of the aggregate
3
<PAGE>
net asset value of Shares computed as of the close of each business day
constituting Qualified Holdings owned beneficially or of record by the Recipient
or its Customers for no more than six years and for any minimum period that the
Distributor may establish. Distribution assistance fee payments shall be made
only to Recipients that are registered with the SEC as a broker-dealer or are
exempt from registration.
The distribution assistance to be rendered by the Recipients in
connection with the sale of Shares may include, but shall not be limited to, the
following: distributing sales literature and prospectuses other than those
furnished to current Shareholders, providing compensation to and paying expenses
of personnel of the Recipient who support the distribution of Shares by the
Recipient, and providing such other information and services in connection with
the distribution of Shares as the Distributor or the Fund may reasonably
request.
(c) A majority of the Independent Trustees may at any time or from time to
time increase or decrease the rate of fees to be paid to the Distributor or to
any Recipient, but not to exceed the rates set forth above, and/or direct the
Distributor to increase or decrease the Maximum Holding Period, any Minimum
Holding Period or any Minimum Qualified Holdings. The Distributor shall notify
all Recipients of any Minimum Qualified Holdings, Maximum Holding Period and
Minimum Holding Period that are established and the rate of payments hereunder
applicable to Recipients, and shall provide each Recipient with written notice
within thirty (30) days after any change in these provisions. Inclusion of such
provisions or a change in such provisions in a revised current prospectus shall
constitute sufficient notice.
(d) The Service Fee and the Asset-Based Sales Charge on Shares are subject
to reduction or elimination under the limits to which the Distributor is, or may
become, subject under of the NASD Conduct Rules.
(e) Under the Plan, payments may be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits
derived from the advisory fee it receives from the Fund), or (ii) by the
Distributor (a subsidiary of OFI), from its own resources, from Asset-Based
Sales Charge payments or from the proceeds of its borrowings.
(f) Recipients are intended to have certain rights as third-party
beneficiaries under this Plan, subject to the limitations set forth below. It
may be presumed that a Recipient has provided distribution assistance or
administrative support services qualifying for payment under the Plan if it has
Qualified Holdings of Shares that entitle it to payments under the Plan. In the
event that either the Distributor or the Board should have reason to believe
that, notwithstanding the level of Qualified Holdings, a Recipient may not be
rendering appropriate distribution assistance in connection with the sale of
Shares or administrative support services for Accounts, then the Distributor, at
the request of the Board, shall require the Recipient to provide a written
report or other information to verify that said Recipient is providing
appropriate distribution assistance and/or services in this regard. If the
Distributor or the Board of Trustees still is not satisfied after the receipt of
such report, either may take appropriate steps to terminate the Recipient's
status as such under the Plan, whereupon such Recipient's rights as a
third-party beneficiary hereunder shall terminate. Additionally, in their
discretion, a majority of the Fund's Independent Trustees at any time may remove
any broker, dealer, bank or other person or entity as a Recipient, where upon
such person's or entity's rights as a third-party beneficiary hereof shall
terminate. Notwithstanding any other provision of this Plan, this Plan does not
obligate or in any way make the Fund liable to make any payment whatsoever to
any person or entity other than directly to the Distributor.
4
<PAGE>
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection and nomination of persons to be Trustees of the Fund who are not
"interested persons" of the Fund ("Disinterested Trustees") shall be committed
to the discretion of the incumbent Disinterested Trustees. Nothing herein shall
prevent the incumbent Disinterested Trustees from soliciting the views or the
involvement of others in such selection or nominations as long as the final
decision on any such selection and nomination is approved by a majority of the
incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund shall
provide written reports to the Fund's Board for its review, detailing services
rendered in connection with the distribution of the Shares, the amount of all
payments made under this Plan and the purpose for which the payments were made.
The reports shall be provided quarterly, and shall state whether all provisions
of Section 3 of this Plan have been complied with.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by a vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding Class B voting shares; (ii) such termination
shall be on not more than sixty days' written notice to any other party to the
agreement; (iii) such agreement shall automatically terminate in the event of
its "assignment" (as defined in the 1940 Act); (iv) such agreement shall go into
effect when approved by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such agreement; and (v)
such agreement shall, unless terminated as herein provided, continue in effect
from year to year only so long as such continuance is specifically approved at
least annually by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Board and its Independent Trustees cast in person at a
meeting called on August 5, 1997, for the purpose of voting on this Plan, and
shall take effect on the date that the Fund's Registration Statement is declared
effective by the SEC. Unless terminated as hereinafter provided, it shall
continue in effect until November 30, 1998 and thereafter from year to year or
as the Board may otherwise determine but only so long as such continuance is
specifically approved at least annually by a vote of the Board and its
Independent Trustees cast in person at a meeting called for the purpose of
voting on such continuance.
This Plan may not be amended to increase materially the amount of payments
to be made under this Plan, without approval of the Class B Shareholders in the
manner described above, and all material amendments must be approved by a vote
of the Board and of the Independent Trustees.
This Plan may be terminated at any time by vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority" (as defined
in the 1940 Act) of the Fund's outstanding Class B voting shares. In the event
of such termination, the Board and its Independent Trustees shall determine
whether the Distributor shall be entitled to payment from the Fund of all or a
portion of the Service Fee and/or the Asset-Based Sales Charge in respect of
Shares sold prior to the effective date of such termination.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands
that the obligations of the Fund under this Plan are not binding upon any
Trustee or shareholder of the Fund personally, but bind only the Fund and the
Fund's property. The Distributor represents that it has notice of the provisions
5
<PAGE>
of the Declaration of Trust of the Fund disclaiming shareholder and Trustee
liability for acts or obligations of the Fund.
Oppenheimer MidCap Fund
By: /s/ Andrew J. Donohue
Andrew J. Donohue, Secretary
OppenheimerFunds Distributor, Inc.
By: /s/ Katherine P. Feld
Katherine P. Feld, Vice President
& Secretary
ofmi\745.b
6
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
with
OppenheimerFunds Distributor, Inc.
For Class C Shares of
Oppenheimer MidCap Fund
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 17th day of
November, 1997, by and between Oppenheimer MidCap Fund (the "Fund") and
OppenheimerFunds Distributor, Inc. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service plan for
Class C shares of the Fund (the "Shares"), contemplated by Rule 12b-1 as it may
be amended from time to time (the "Rule") under the Investment Company Act of
1940 (the "1940 Act"), pursuant to which the Fund will compensate the
Distributor for its services in connection with the distribution of Shares, and
the personal service and maintenance of shareholder accounts that hold Shares
("Accounts"). The Fund may act as distributor of securities of which it is the
issuer, pursuant to the Rule, according to the terms of this Plan. The terms and
provisions of this Plan shall be interpreted and defined in a manner consistent
with the provisions and definitions contained in (i) the 1940 Act, (ii) the
Rule, (iii) Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc., or any applicable amendment or successor to such rule
(the "NASD Conduct Rules") and (iv) any conditions pertaining either to
distribution-related expenses or to a plan of distribution to which the Fund is
subject under any order on which the Fund relies, issued at any time by the U.S.
Securities and Exchange Commission ("SEC").
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has rendered assistance (whether direct, administrative or
both) in the distribution of Shares or has provided administrative support
services with respect to Shares held by Customers (defined below) of the
Recipient; (ii) shall furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to answer such questions
as may arise concerning the sale of Shares; and (iii) has been selected by the
Distributor to receive payments under the Plan.
(b) "Independent Trustees" shall mean the members of the Fund's Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Fund and who have no direct or indirect financial interest in the operation of
this Plan or in any agreement relating
to this Plan.
(c) "Customers" shall mean such brokerage or other customers or investment
advisory or other clients of a Recipient, and/or accounts as to which such
Recipient provides administrative support services or is a custodian or other
fiduciary.
(d) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or
1
<PAGE>
of record by: (i) such Recipient, or (ii) such Recipient's Customers, but in no
event shall any such Shares be deemed owned by more than one Recipient for
purposes of this Plan. In the event that more than one person or entity would
otherwise qualify as Recipients as to the same Shares, the Recipient which is
the dealer of record on the Fund's books as determined by the Distributor shall
be deemed the Recipient as to such Shares for purposes of this Plan.
3. Payments for Distribution Assistance and Administrative Support
Services.
(a) Payments to the Distributor. In consideration of the payments made by
the Fund to the Distributor under this Plan, the Distributor shall provide
administrative support services and distribution services to the Fund. Such
services include distribution assistance and administrative support services
rendered in connection with Shares (1) sold in purchase transactions, (2) issued
in exchange for shares of another investment company for which the Distributor
serves as distributor or sub-distributor, or (3) issued pursuant to a plan of
reorganization to which the Fund is a party. If the Board believes that the
Distributor may not be rendering appropriate distribution assistance or
administrative support services in connection with the sale of Shares, then the
Distributor, at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is providing
appropriate services in this regard. For such services, the Fund will make the
following payments to the Distributor:
(i) Administrative Support Services Fees. Within forty-five (45)
days of the end of each calendar quarter, the Fund will make payments in the
aggregate amount of 0.0625% (0.25% on an annual basis) of the average during
that calendar quarter of the aggregate net asset value of the Shares computed as
of the close of each business day (the "Service Fee"). Such Service Fee payments
received from the Fund will compensate the Distributor for providing
administrative support services with respect to Accounts. The administrative
support services in connection with Accounts may include, but shall not be
limited to, the administrative support services that a Recipient may render as
described in Section 3(b)(i) below.
(ii) Distribution Assistance Fees (Asset-Based Sales Charge). Within
ten (10) days of the end of each month, the Fund will make payments in the
aggregate amount of 0.0625% (0.75% on an annual basis) of the average during the
month of the aggregate net asset value of Shares computed as of the close of
each business day (the "Asset-Based Sales Charge"). Such Asset-Based Sales
Charge payments received from the Fund will compensate the Distributor for
providing distribution assistance in connection with the sale of Shares.
The distribution assistance services to be rendered by the Distributor in
connection with the Shares may include, but shall not be limited to, the
following: (i) paying sales commissions to any broker, dealer, bank or other
person or entity that sells Shares, and/or paying such persons "Advance Service
Fee Payments" (as defined below) in advance of, and/or in amounts greater than,
the amount provided for in Section 3(b) of this Agreement; (ii) paying
compensation to and expenses of personnel of the Distributor who support
distribution of Shares by Recipients; (iii) obtaining financing or providing
such financing from its own resources, or from an affiliate, for the interest
and other borrowing costs of the Distributor's unreimbursed expenses incurred in
rendering distribution assistance and administrative support services to the
Fund; and (iv) paying other direct distribution costs, including
2
<PAGE>
without limitation the costs of sales literature, advertising and prospectuses
(other than those prospectuses furnished to current holders of the Fund's shares
("Shareholders")) and state "blue sky" registration expenses.
(b) Payments to Recipients. The Distributor is authorized under the Plan
to pay Recipients (1) distribution assistance fees for rendering distribution
assistance in connection with the sale of Shares and/or (2) service fees for
rendering administrative support services with respect to Accounts. However, no
such payments shall be made to any Recipient for any quarter in which its
Qualified Holdings do not equal or exceed, at the end of such quarter, the
minimum amount ("Minimum Qualified Holdings"), if any, that may be set from time
to time by a majority of the Independent Trustees. All fee payments made by the
Distributor hereunder are subject to reduction or chargeback so that the
aggregate service fee payments and Advance Service Fee Payments do not exceed
the limits on payments to Recipients that are, or may be, imposed by the NASD
Conduct Rules. The Distributor may make Plan payments to any "affiliated person"
(as defined in the 1940 Act) of the Distributor if such affiliated person
qualifies as a Recipient or retain such payments if the Distributor qualifies as
a Recipient.
In consideration of the services provided by Recipients, the Distributor
shall make the following payments to Recipients:
(i) Service Fee. In consideration of administrative support services
provided by a Recipient during a calendar quarter, the Distributor shall make
service fee payments to that Recipient quarterly, within forty-five (45) days of
the end of each calendar quarter, at a rate not to exceed 0.0625% (0.25% on an
annual basis) of the average during the calendar quarter of the aggregate net
asset value of Shares, computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the Recipient
or by its Customers for a period of more than the minimum period (the "Minimum
Holding Period"), if any, that may be set from time to time by a majority of the
Independent Trustees.
Alternatively, the Distributor may, at its sole option, make the following
service fee payments to any Recipient quarterly, within forty-five (45) days of
the end of each calendar quarter: (A) "Advance Service Fee Payments" at a rate
not to exceed 0.25% of the average during the calendar quarter of the aggregate
net asset value of Shares, computed as of the close of business on the day such
Shares are sold, constituting Qualified Holdings, sold by the Recipient during
that quarter and owned beneficially or of record by the Recipient or by its
Customers, plus (B) service fee payments at a rate not to exceed 0.0625% (0.25%
on an annual basis) of the average during the calendar quarter of the aggregate
net asset value of Shares, computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the Recipient
or by its Customers for a period of more than one (1) year. At the Distributor's
sole option, Advance Service Fee Payments may be made more often than quarterly,
and sooner than the end of the calendar quarter. In the event Shares are
redeemed less than one year after the date such Shares were sold, the Recipient
is obligated to and will repay the Distributor on demand a pro rata portion of
such Advance Service Fee Payments, based on the ratio of the time such Shares
were held to one (1) year.
The administrative support services to be rendered by Recipients in
connection with the Accounts may include, but shall not be limited to, the
following: answering routine inquiries concerning the Fund, assisting in the
establishment and maintenance of accounts or sub-accounts in the Fund and
processing
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Share redemption transactions, making the Fund's investment plans and dividend
payment options available, and providing such other information and services in
connection with the rendering of personal services and/or the maintenance of
Accounts, as the Distributor or the Fund may reasonably request.
(ii) Distribution Assistance Fee (Asset-Based Sales Charge)
Payments. Irrespective of whichever alternative method of making service fee
payments to Recipients is selected by the Distributor, in addition the
Distributor shall make distribution assistance fee payments to each Recipient
quarterly, within forty-five (45) days after the end of each calendar quarter,
at a rate not to exceed 0.1875% (0.75% on an annual basis) of the average during
the calendar quarter of the aggregate net asset value of Shares computed as of
the close of each business day constituting Qualified Holdings owned
beneficially or of record by the Recipient or its Customers for a period of more
than one (1) year. Alternatively, at its sole option, the Distributor may make
distribution assistance fee payments to a Recipient quarterly, at the rate
described above, on Shares constituting Qualified Holdings owned beneficially or
of record by the Recipient or its Customers without regard to the 1-year holding
period described above. Distribution assistance fee payments shall be made only
to Recipients that are registered with the SEC as a broker-dealer or are exempt
from registration.
The distribution assistance to be rendered by the Recipients in connection
with the sale of Shares may include, but shall not be limited to, the following:
distributing sales literature and prospectuses other than those furnished to
current Shareholders, providing compensation to and paying expenses of personnel
of the Recipient who support the distribution of Shares by the Recipient, and
providing such other information and services in connection with the
distribution of Shares as the Distributor or the Fund may reasonably request.
(c) A majority of the Independent Trustees may at any time or from time to
time (i) increase or decrease the rate of fees to be paid to the Distributor or
to any Recipient, but not to exceed the rates set forth above, and/or (ii)
direct the Distributor to increase or decrease any Minimum Holding Period, any
maximum period set by a majority of the Independent Trustees during which fees
will be paid on Shares constituting Qualified Holdings owned beneficially or of
record by a Recipient or by its Customers (the "Maximum Holding Period"), or
Minimum Qualified Holdings. The Distributor shall notify all Recipients of any
Minimum Qualified Holdings, Maximum Holding Period and Minimum Holding Period
that are established and the rate of payments hereunder applicable to
Recipients, and shall provide each Recipient with written notice within thirty
(30) days after any change in these provisions. Inclusion of such provisions or
a change in such provisions in a supplement or amendment to or revision of the
prospectus of the Fund shall constitute sufficient notice.
(d) The Service Fee and the Asset-Based Sales Charge on Shares are subject
to reduction or elimination under the limits to which the Distributor is, or may
become, subject under the NASD Conduct Rules.
(e) Under the Plan, payments may be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits
derived from the advisory fee it receives from the Fund), or (ii) by the
Distributor (a subsidiary of OFI), from its own resources, from Asset-Based
Sales Charge payments or from the proceeds of its borrowings.
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(f) Recipients are intended to have certain rights as third-party
beneficiaries under this Plan, subject to the limitations set forth below. It
may be presumed that a Recipient has provided distribution assistance or
administrative support services qualifying for payment under the Plan if it has
Qualified Holdings of Shares that entitle it to payments under the Plan. If
either the Distributor or the Board believe that, notwithstanding the level of
Qualified Holdings, a Recipient may not be rendering appropriate distribution
assistance in connection with the sale of Shares or administrative support
services for Accounts, then the Distributor, at the request of the Board, shall
require the Recipient to provide a written report or other information to verify
that said Recipient is providing appropriate distribution assistance and/or
services in this regard. If the Distributor or the Board of Trustees still is
not satisfied after the receipt of such report, either may take appropriate
steps to terminate the Recipient's status as a Recipient under the Plan,
whereupon such Recipient's rights as a third-party beneficiary hereunder shall
terminate. Additionally, in their discretion a majority of the Fund's
Independent Trustees at any time may remove any broker, dealer, bank or other
person or entity as a Recipient, whereupon such person's or entity's rights as a
third-party beneficiary hereof shall terminate. Notwithstanding any other
provision of this Plan, this Plan does not obligate or in any way make the Fund
liable to make any payment whatsoever to any person or entity other than
directly to the Distributor.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection and nomination of persons to be Trustees of the Fund who are not
"interested persons" of the Fund ("Disinterested Trustees") shall be committed
to the discretion of the incumbent Disinterested Trustees. Nothing herein shall
prevent the incumbent Disinterested Trustees from soliciting the views or the
involvement of others in such selection or nomination as long as the final
decision on any such selection and nomination is approved by a majority of the
incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund shall
provide written reports to the Fund's Board for its review, detailing services
rendered in connection with the distribution of the Shares, the amount of all
payments made under this Plan and the purpose for which the payments were made.
The reports shall be provided quarterly, and shall state whether all provisions
of Section 3 of this Plan have been complied with.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by a vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding voting Class C shares; (ii) such termination
shall be on not more than sixty days' written notice to any other party to the
agreement; (iii) such agreement shall automatically terminate in the event of
its "assignment" (as defined in the 1940 Act); (iv) such agreement shall go into
effect when approved by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such agreement; and (v)
such agreement shall, unless terminated as herein provided, continue in effect
from year to year only so long as such continuance is specifically approved at
least annually by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Board and its Independent Trustees cast in person at a
meeting called on August 5, 1997, for the purpose of voting on this Plan, and
shall take effect on the date that the Fund's Registration Statement is declared
effective by the SEC. Unless terminated as hereinafter provided, it shall
continue in effect
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until November 30, 1998 and thereafter from year to year or as the Board may
otherwise determine but only so long as such continuance is specifically
approved at least annually by a vote of the Board and its Independent Trustees
cast in person at a meeting called for the purpose of voting on such
continuance.
This Plan may not be amended to increase materially the amount of payments
to be made under this Plan, without approval of the Class C Shareholders in the
manner described above, and all material amendments must be approved by a vote
of the Board and of the Independent Trustees.
This Plan may be terminated at any time by vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority" (as defined
in the 1940 Act) of the Fund's outstanding Class C voting shares. In the event
of such termination, the Board and its Independent Trustees shall determine
whether the Distributor shall be entitled to payment from the Fund of all or a
portion of the Service Fee and/or the Asset-Based Sales Charge in respect of
Shares sold prior to the effective date of such termination.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands
that the obligations of the Fund under this Plan are not binding upon any
Trustee or shareholder of the Fund personally, but bind only the Fund and the
Fund's property. The Distributor represents that it has notice of the provisions
of the Declaration of Trust of the Fund disclaiming shareholder and Trustee
liability for acts or obligations of the Fund.
Oppenheimer MidCap Fund
By: /s/ Andrew J. Donohue
Andrew J. Donohue, Secretary
OppenheimerFunds Distributor, Inc.
By:
/s/ Katherine P. Feld
Katherine P. Feld, Vice President
& Secretary
ofmi/745.c
