As Filed with the Securities and Exchange Commission on
November 10, 1997
Registration No. 333-31537
File No. 811-08299
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 /
Oppenheimer International Small Company Fund
- -------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Two World Trade Center, New York, New York 10048-0203
- -------------------------------------------------------------------
(Address of Principal Executive Offices)
212-323-0200
- -------------------------------------------------------------------
(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
- -------------------------------------------------------------------
(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.
FORM N-1A
Oppenheimer International Small Company Fund
Cross Reference Sheet
Part A of
Form N-1A
Item No. Prospectus Heading
1 Front Cover Page
2 Expenses; Overview of the Fund
3 *
4 Front Cover Page; Investment Objective and
Policies; How the Fund is Managed
5 Expenses; How the Fund is Managed; Back Cover
5A *
6 Investment Objective and Policies - Portfolio
Turnover, Dividends, Capital Gains and Taxes; How
the
Fund is Managed -- Organization and History; The
Transfer Agent
7 How to Exchange Shares; Special Investor Services;
Distribution and Service Plan for Class A shares;
Distribution and Service Plan for Class B Shares;
How
to Buy Shares; How to Exchange Shares; How to Sell
Shares; Shareholder Account Rules and Policies
8 How to Sell Shares; How to Exchange Shares; Special
Investor Services
9 *
Part B of
Form N-1A
Item No. Heading in Statement of Additional Information 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 Performance of the Fund
23 Financial Statements
- -------------
*Not applicable or negative answer.
<PAGE>
OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
Prospectus dated November 17, 1997
Oppenheimer International Small Company Fund is a mutual fund with the
investment objective of long-term capital appreciation. Current income is not an
objective. The Fund invests primarily in common stocks of companies domiciled,
or with primary operations, outside the United States, with market
capitalization of $1 billion or less. The Fund may also hold preferred stock,
warrants and rights and securities convertible or exchangeable into equity
securities. At least 65% of the Fund's total assets are to be invested in small
companies in both developed and emerging markets outside the United States. A
small company is one with market capitalization of $1 billion or less. Under
normal market conditions, at least 65% of the Fund's total assets will be
invested in foreign securities. The Fund may also use "hedging" instruments to
try to reduce the risks of market and currency fluctuations that affect the
value of the securities the Fund holds.
Some of the Fund's investment techniques may be considered speculative.
Foreign investing involves special risks that do not affect investments in
domestic issuers, such as currency fluctuations. Investments in emerging markets
can be very volatile. These techniques may increase the risks of investing in
the Fund and the Fund's operating costs. You should carefully review the risks
associated with an investment in the Fund. Please refer to "Investment Policies
and Strategies" 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).
Logo OppenheimerFunds
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other agency, and
involve investment risks, including the possible loss of the principal amount
invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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
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
-1-
<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
transaction charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and the share of the Fund's
business operating expenses that you will bear indirectly.
o Shareholder Transaction Expenses are charges you pay when you buy or sell
shares of the Fund. Please refer to "About Your Account," starting on page ___,
for an explanation of how and when these charges apply.
<TABLE>
<CAPTION>
Class A Class B Class C
------ -------- --------
<S> <C> <C> <C>
Maximum Sales Charge on 5.75% None None
Purchases (as a % of
offering price)
Maximum Deferred Sales Charge None(1) 5% in the 1% if
(as a % of the lower of the 1st year, redeemed
original offering price or redemption declining to within 12
proceeds) 1% in the months of
6th year and purchase(2)
eliminated
thereafter(2)
Maximum Sales Charge on Reinvested None None None
Dividends
Exchange Fee None None None
Redemption Fee 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) For more information on contingent deferred sales charges, see "How to Buy
Shares -- Buying Class B Shares" and "How to Buy
Shares -- Buying Class C Shares" below.
o Annual Fund Operating Expenses are paid out of the Fund's assets and
represent the Fund's expenses in operating its business. For example, the Fund
pays management fees to its investment 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
Shares Shares Shares
------- ------- ---------
Management Fees 0.80% 0.80% 0.80%
12b-1 Distribution Plan 0.25% 1.00% 1.00%
Fees
Other Expenses 0.50% 0.50% 0.50%
Total Fund Operating 1.55% 2.30% 2.30%
Expenses
The 12b-1 Plan Fees for Class A shares are service fees. The maximum fee
is 0.25% of average net assets of that class. For Class B and Class C shares,
the 12b-1 Distribution Plan Fees are service fees (the maximum fee is 0.25% of
average net assets of the respective class) and the asset-based sales charge of
0.75%. Because the Fund is a new fund and has no operating history, the rates
for the management fee and the 12b-1 fees are the maximum rates that can be
charged. "Other Expenses" in the table above are estimated based on the
Manager's projections of those expenses in the Fund's first year of operations.
These plans are described in greater detail in "How to Buy Shares."
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 estimated 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 $104
Class B Shares $73 $102
Class C Shares $33 $ 72
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years
------ --------
Class A Shares $72 $104
Class B Shares $23 $ 72
Class C Shares $23 $ 72
In the first example, expenses include the Class A initial sales charge
and the applicable Class B or Class C contingent deferred sales charge. In the
second example, Class A expenses include the initial sales charge, but Class B
and Class C expenses do not include contingent deferred sales charges. Because
of the effect of the asset-based sales charge and contingent deferred sales
charge imposed on Class B and Class C shares, long-term holders of Class B and
Class C shares could pay the economic equivalent of more than the maximum
front-end sales charge allowed under applicable regulations. For Class B
shareholders, the automatic conversion of Class B shares to Class A Shares is
designed to minimize the likelihood that this will occur. Please refer to "How
to Buy Shares -- Buying Class B Shares" for more information.
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 long-term capital appreciation.
o What Does the Fund Invest In? The Fund primarily invests in common
stocks of companies domiciled or with primary operations outside the United
States with market capitalizations of $1 billion or less. At least 65% of the
Fund's total assets are invested in small companies in both developed and
emerging markets outside the U.S. Under normal conditions, at least 65% of the
Fund's total assets will be invested in foreign securities. The Fund may also
hold preferred stock, warrants and rights and securities convertible or
exchangeable into equity securities. From time to time the Fund may hold
significant cash positions until suitable investment opportunities, consistent
with the Fund's objective and policies are available. The Fund may also invest
in foreign securities through American Depository Receipts ("ADRs"). The Fund
may also use hedging instruments and some derivative investments to try to
manage investment risks. These investments are more fully explained in
"Investment Objective and Policies," starting on page ___.
o Who Manages the Fund? The Fund's investment adviser is OppenheimerFunds,
Inc., which (including subsidiaries) manages investment company portfolios
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's portfolio
manager, Nicholas Horsley, is primarily responsible for the selection of the
Fund's securities. The Fund's Board of Trustees, which is 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 are subject to changes in their value from a number of
factors such as changes in general stock market movements or the change in value
of particular stocks because of an event affecting the issuer. The Fund's
investments in foreign securities are subject to additional risks associated
with investing abroad, such as the effect of currency rate changes on stock
values, the special risks of investing in emerging markets and the Fund's
ability to borrow for leverage, which is considered a speculative investment
method. These changes affect the value of the Fund's investments and its price
per share.
In the Oppenheimer funds spectrum, the Fund is expected to be more
volatile than stock funds that do not invest primarily for capital appreciation
or in emerging markets, and funds that invest primarily in debt securities.
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" beginning on page
___ for more details.
o Will I Pay a Sales Charge to Buy Shares? The Fund has three classes of
shares. Each class has the same investment portfolio but different expenses.
Class A shares are offered with a front-end sales charge, starting at 5.75%, and
reduced for larger purchases. Class B and Class C shares are offered without a
front-end sales charge, but may be subject to a contingent deferred sales charge
if redeemed within 6 years or 12 months, respectively, of purchase. There is
also an annual asset-based sales charge on Class B and Class C shares. Please
review "How to Buy Shares" starting on page ___ for more details, including a
discussion about factors you and your financial advisor should consider in
determining which class may be appropriate for you.
o How Can I Sell My Shares? Shares can be redeemed by mail or by telephone
call to the Transfer Agent on any business day, or through your dealer. 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 long-term capital appreciation.
The Fund does not invest to seek current income to pay shareholders.
Investment Policies and Strategies. The Fund seeks long-term capital
appreciation by emphasizing investments in common stocks of companies domiciled
or with primary operations outside the United States with market capitalization
of $1 billion or less ("small cap" companies), which are described below. 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
Fund may invest in securities of smaller, less well-known companies. The Fund
may also hold preferred stock, warrants and rights and securities convertible or
exchangeable into equity securities. At least 65% of the Fund's total assets are
to be invested in small companies in both developed and emerging markets outside
the United States. Current income is not a consideration in the selection of
portfolio securities. A portion of the Fund's assets may be invested in
securities for liquidity purposes.
Under normal market conditions (when the Manager believes that the
securities markets are not in a volatile or unstable period) the Fund will
invest at least 65% of its total assets in foreign securities. The Fund may
invest up to 100% of its assets in foreign securities.
When market or economic conditions are unstable, the Fund may invest
substantial amounts of assets in debt securities, such as money market
instruments or U.S. Government securities. For temporary defensive purposes
the Fund's portfolio manager may employ the special investment techniques
described below in "Temporary Defensive Measures."
Because of the types of companies in which the Fund invests
and the investment techniques the Fund uses, some of which may
be
speculative, the Fund is designed for investors who are
investing
for the long-term and who are willing to accept greater risk of
loss of their capital in the hope of achieving greater capital
appreciation. Investing for capital appreciation entails the
risk
of loss of all or part of your investment.
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 techniques are
not "fundamental" unless this Prospectus or the Statement of Additional
Information says 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 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 What are "Growth-Type" Companies? They are companies that the Manager
believes are entering into a growth cycle in their business, with the
expectation that their stock will increase in value. Growth companies may
include larger, established companies that the Manager believes are entering a
growth phase, perhaps because of the development of new products or markets,
improved sales, technological developments, or for other reasons. Growth
companies may also include companies that generate or apply new technologies,
new or improved distribution techniques, or new services, companies that own or
develop natural resources, companies that may benefit from changing consumer
demands or lifestyles, or companies with projected earnings growth in excess of
the average. They may include newer companies that may be in new or developing
industries, or which are developing new products or services, or expanding into
new markets for their products. In any case, growth-type companies have what the
Manager believes to be favorable prospects for the long-term. Newer growth-type
companies normally retain a large part of their earnings for research,
development and investment in capital assets. Therefore, they tend not to
emphasize the payment of dividends. Since the Fund does not invest for current
income, that is not considered to be a negative factor in selecting a stock.
In selecting stocks for investment, the Manager looks for
companies with capable management, sound financial and
accounting
policies, successful product development and marketing, as well
as
other factors.
o Foreign Securities. "Foreign Securities" selected by the Fund include
equity securities issued by companies organized under the laws of a foreign
country (including convertible or exchangeable securities), and debt securities
(such as debentures or bonds) issued or guaranteed by foreign companies or by
foreign governments or their agencies. Foreign securities also include
securities that are traded primarily on a foreign securities exchange or
over-the-counter market, as well as securities of companies that derive a
significant portion of their revenue or profits from foreign business,
investments or sales or have a significant portion of their assets abroad.
Foreign securities may include securities of foreign issuers represented in the
U.S. markets by American Depository Receipts (ADRs) or other similar
arrangements. The Fund will hold foreign currency only in connection with the
purchase or sale of foreign securities.
o Factors Used in Selecting Foreign Securities. The Fund's portfolio
manager presently intends to employ an investment strategy in selecting foreign
securities that considers the effects of worldwide trends on the growth of
various business sectors.
These trends or "global themes" currently include
telecommunications expansion, emerging consumer markets,
infrastructure development, natural resource use and
development,
corporate restructuring, capital market development in foreign
countries, health care expansion, and global integration. These
trends, which may affect the growth of companies which have
businesses in these sectors or which are affected by their
development, may suggest opportunities for investing the Fund's
assets. The Manager does not invest a fixed or specific amount
of
the Fund's assets in any one sector, and these themes or this
investment strategy may change over time.
The Fund may also seek to take advantage of changes in the business cycle
by investing in companies that are sensitive to those changes as well as in
"special situations" the Manager believes present opportunities for capital
growth. For example, when a country's economy is expanding, companies in the
financial services and consumer products industries may be in a position to
benefit from changes in the business cycle and these situations may present
long-term growth opportunities.
When investing the Fund's assets, the Manager considers
many
factors, including the global themes discussed above, general
economic conditions and the trends in foreign stock markets. The
Fund may try to hedge against losses in the value of its
portfolio
of securities by using hedging strategies and derivative
investments, described below.
o Debt Securities. The Fund may invest in debt securities of foreign
companies or governments, but presently does not plan to invest more than 5% of
its net assets in debt securities other than convertible securities or other
securities exchangeable into equity securities. To the extent that the Fund does
invest in debt securities, it will primarily focus on convertible debt
securities, that is, securities that can be converted into the issuer's common
stock at the Fund's election. These securities entitle the owner to receive
interest until the security is redeemed (or converted) or matures. On maturity
the principal is repaid. The Manager considers convertible securities to be
"equity equivalents" because of the conversion feature, and the security's
rating has less impact on the investment decision than in the case of
non-convertible securities.
These securities are subject to interest rate risks (the
price
of the security will tend to decrease when interest rates rise,
and
to increase when interest rates fall). They are also subject to
"credit risk" (the risk of the issuer's default). The Fund can
invest in debt securities that are unrated or which have
ratings in
any category (including ratings below investment grade, which
involve greater risks of default), but will primarily focus on
investment grade securities to the extent it invests in debt
securities. The Fund may invest in higher-yielding lower-rated
debt securities because these securities generally offer higher
income potential than investment grade securities. Lower-rated
securities are also referred to as lower-grade securities.
"Lower-
Grade" debt securities are those rated below "investment grade," which mean they
have a rating lower than "Baa" by Moody's Investors Services, Inc. ("Moody's")
or lower than "BBB" by Standard and Poor's Corporation ("S&P") or similar rating
by other rating organizations. The Fund may invest in securities rated as low as
C or D. A discussion of the rating categories of principal rating organizations
is contained in the Statement of Additional Information.
o Domestic Securities. In general, the Fund does not
expect to hold significant amounts of securities of U.S.
issuers (that is,
more than 10% of the Fund's total invested assets). It can,
however, hold common and preferred stocks of U.S. companies and
may
hold U.S. debt securities to the same extent described in "Debt
Securities" above. However, when market conditions are unstable
it
may invest without limit in U.S. Government securities or
high-quality U.S. commercial paper for temporary defensive
purposes, as discussed below in "Temporary Defensive Measures."
o Portfolio Turnover. A change in the securities held by the Fund is known
as "portfolio turnover." The Fund ordinarily does not engage in short-term
trading to try to achieve its objective. As a result, the Fund's portfolio
turnover is not expected to be more than 100% each year. Portfolio turnover
affects brokerage costs, dealer markups and other transaction costs, and results
in the Fund's realization of capital gains or losses for tax purposes.
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 because the income earned on securities is subject to
change, 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 Special Risks of Lower-Rated Securities. The Fund may invest in
higher-yielding, lower-rated debt securities, commonly known as "junk bonds,"
because these securities generally offer higher income potential than investment
grade securities. The Fund does not presently intend to invest more than 5% of
its net assets in debt securities. Lower-rated securities are also referred to
as lower-grade securities. "Lower-grade" debt securities are those rated below
"investment grade," which means they have a rating lower than "Baa" by Moody's
or lower than "BBB" by S&P or similar ratings by other rating organizations.
The Fund may invest in securities rated as low as "C" or "D" or which may be in
default at the time the Fund buys them. While securities rated "Baa" by Moody's
or "BBB" by S&P are investment grade and are not regarded as "junk bonds," those
securities may be subject to greater market fluctuations and risks of loss of
income and principal than higher grade securities and may be considered to have
certain speculative characteristics. The Fund may invest in unrated securities
that the Manager believes offer yields and risks comparable to rated securities.
High-yield, lower-grade securities, whether rated or unrated, often have
speculative characteristics. Lower-grade securities have special risks that make
them riskier investments than investment grade securities. They may be subject
to greater market fluctuations and risk of loss of income and principal than
lower yielding, investment grade securities. There may be less of a market for
them and therefore they may be harder to sell at an acceptable price. There is a
relatively greater possibility that the issuer's earnings may be insufficient to
make the payments of interest due on the bonds. The issuer's low
creditworthiness may increase the potential for its insolvency. Further, a
decline in the high-yield bond market is likely during an economic downturn. An
economic downturn or an increase in interest rates could severely disrupt the
market for high-yield securities and adversely affect the value of outstanding
securities and the ability of issuers to repay principal and interest.
These risks mean that the Fund may not achieve the expected income from
lower-grade securities, and that the Fund's net asset value per share may be
affected by declines in value of these securities. The Fund is not obligated to
dispose of securities when issuers are in default or if the rating of the
security is reduced.
o Foreign Securities Have Special Risks. While foreign
securities offer special investment opportunities, there are
also
special risks. Because the Fund may purchase securities
denominated
in foreign currencies or traded primarily in foreign markets, a
change in the value of a foreign currency against the U.S.
dollar
will result in a change in the U.S. dollar value of those
foreign securities. Foreign issuers are not required to use
generally-accepted accounting principles that apply to U.S.
issuers. If securities of a foreign issuer are not registered
for
sale in the U.S. under U.S. securities laws, the issuer does not
have to comply with disclosure requirements that U.S. companies
are
subject to. The value of foreign investments may be affected by
other factors, including 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.
In addition, it is generally more difficult to obtain court judgments
outside the U.S. if the Fund were to sue a foreign issuer or broker. Additional
costs may be incurred because foreign brokerage commissions are generally higher
than U.S. rates, and there are additional custodial costs associated with
holding securities abroad. More information about the risks and potential
rewards of investing in foreign securities is contained in the Statement of
Additional Information.
o Emerging Market Risks. The Fund can invest in securities in any country,
developed or undeveloped, including "emerging" markets. In general, "emerging"
markets may offer special investment opportunities because their securities
markets, industries, capital structure and consumer consumption are growing
rapidly, but these countries involve special risks not present in mature foreign
markets (such as England, Germany and Japan, for example). Settlement of
securities trades may be subject to extended delays, so that the Fund may not
receive the proceeds of sales of securities on a timely basis. Emerging markets
may have smaller, less developed trading markets and exchanges, which may entail
a lack of liquidity (so that the Fund may not be able to dispose of those
securities rapidly) and greater volatility, which can affect the value of the
securities held by the Fund, and therefore its net asset value per share. There
may also be less developed legal and accounting systems and a greater
possibility of government limitations on foreign investment.
o Stock Investment Risks. Because the Fund normally invests most, or a
substantial portion, 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, not all stock markets move in the same direction
at the same time, and 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, or changes in government regulations affecting an
industry). Not all of these factors can be predicted.
As discussed below, the Fund attempts to limit market risks by
diversifying its investments, that is, by not holding a substantial amount of
stock of any one company and by not investing too great a percentage of the
Fund's assets in any one company.
Because of the types of securities the Fund invests in and the investment
techniques the Fund uses, some of which may be speculative, the Fund is designed
for investors who are investing for the long-term and who are willing to accept
greater risks of loss of their investment in the hope of achieving capital
appreciation. It is not intended for investors seeking assured income and
preservation of capital. Investing for capital appreciation entails the risk of
loss of all or part of your investment. Because changes in securities market
prices can occur at any time, there is no assurance that the Fund will achieve
its investment objective, and when you redeem your shares, they may be worth
more or less than what you paid for them.
o Hedging Instruments Can Be Volatile Investments and May
Involve Special Risks. The use of hedging instruments requires
special skills and knowledge of investment techniques that are
different from 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 of an illiquid market for the future or option.
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. 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 and the hedging strategies the Fund may
use
are described in greater detail in the Statement of Additional
Information.
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. These techniques involve certain risks. The Statement of Additional
Information contains more information about these practices, including
limitations on their use that may help to reduce some of the risks.
o Temporary Defensive Measures. When market conditions are unstable, as a
temporary defensive measure, the Fund may invest without limit in debt
securities, such as securities issued by the U.S. Government or its agencies or
instrumentalities, U.S. Treasury Bills, cash equivalents and commercial paper in
the top two rating categories of a nationally-recognized securities rating
organization such as Standard & Poor's Corporation. It is expected that in this
case the Fund would select short-term debt securities (which are securities
maturing in one year or less from date of purchase), since those securities
usually may be disposed of quickly and their prices tend not to be as volatile
as the prices of longer term debt securities.
Loans of Portfolio Securities. To raise cash for liquidity purposes, the
Fund may lend its portfolio securities, other than in repurchase transactions,
to brokers, dealers and other financial institutions. The Fund must receive
collateral for a loan. These loans are limited to not more than 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 securities that will exceed 5% of the value of the Fund's net
assets in the coming year.
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. They are
used primarily for cash liquidity purposes.
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 10% of its net assets to be subject to repurchase agreements
having a maturity beyond seven days. There is no limit on the amount of the
Fund's net assets that may be subject to repurchase agreements of seven days or
less.
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 securities. That percentage
limit is a fundamental policy. This is a speculative investment method known as
"leverage." This investing technique may subject the Fund to greater risks and
costs than funds that do not borrow. These risks may include the possibility
that the Fund's net asset value per share will fluctuate more than funds that
don't borrow. The Fund can borrow only if it maintains a 300% ratio of net
assets to borrowings 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 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 total 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 other
securities. For further details, see "Warrants and Rights" in the Statement of
Additional Information.
o Special Situations. The Fund may invest in securities
of companies that are in "special situations" that the Manager
believes may present opportunities for capital growth. A
"special
situation" may be an event such as a proposed merger,
reorganization, or other unusual development that is expected to
occur and which may result in an increase in the value of a
company's securities, regardless of general business conditions
or
the movement of prices in the securities market as a whole.
There
is a risk that the price of the security may decline if the
anticipated development fails to occur.
Investing In Small, Unseasoned Companies. The Fund may invest in
securities of small, unseasoned companies. These are companies that have been in
operation less than three years, including the operations of any predecessors.
Securities of these companies may have limited liquidity (which means that the
Fund may have difficulty selling them at an acceptable price when it wants to)
and the price of these securities may be volatile. See "Investing in Small,
Unseasoned Companies" in the Statement of Additional Information for a further
discussion of the risks involved in such investments.
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 10% of its net assets in illiquid or restricted securities
(the Board may increase that limit to 15%). The Fund's percentage limitation on
these investments does not apply to certain restricted securities that are
eligible for resale to qualified institutional purchasers pursuant to Rule 144A
under the Securities Act of 1933, provided that those securities have been
determined to be liquid by the Board of Trustees of the Fund or by the Manager
under Board- approved guidelines. Those guidelines take into account the trading
activity for such securities and the availability of reliable pricing
information, among other factors. If there is a lack of trading interest in a
particular Rule 144A security, the Fund's holding of that security may be deemed
to be illiquid. The Manager monitors holdings of illiquid securities on an
ongoing basis to determine whether to sell any holdings to maintain adequate
liquidity. Illiquid securities include repurchase agreements maturing in more
than seven days, or certain participation interests other than those with puts
exercisable within seven days. See "Restricted and Illiquid Securities" in the
Statement of Additional Information for further details.
o Hedging. As described below, the Fund may purchase and sell certain
kinds of futures contracts, put and call options, forward contracts, and options
on futures and broadly-based stock indices. 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 below and in greater detail in "Other
Investment Techniques and Strategies" in the Statement of Additional
Information.
The Fund may buy and sell options, futures and forward
contracts for a number of purposes. It may do so to try to
manage
its exposure to the possibility that the prices of its portfolio
securities may decline, or to establish a position in the
securities market as a temporary substitute for purchasing
individual securities. Some of these strategies, such as selling
futures, buying puts and writing covered calls, 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
(1) broadly-based 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 50% of the Fund's total assets may be subject to calls.
The Fund may buy puts whether or not it holds the underlying investment in
the portfolio. 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
investments." They are used in some cases for hedging purposes and in other
cases to attempt to seek increased total return. In the broadest sense,
exchange-traded options and futures contracts (discussed in "Hedging," below)
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 The Fund cannot 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; and
o The Fund cannot 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 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 "Other Investment Restrictions" in the Statement of
Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized June 23, 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
periodically meet throughout the year to oversee the Fund's activities, review
its performance, and review the actions of the Manager. The Trustees are elected
by shareholders of the Fund, the initial Board has been elected by the Manager
as sole initial shareholder. "Trustees and Officers of the Fund" in the
Statement of Additional Information names the Trustees and officers of the Fund
and provides more information about them. Although the Fund will not normally
hold annual meetings of Fund shareholders, it may hold shareholder meetings from
time to time on important matters, and shareholders have the right to call a
meeting to remove a Trustee or to take other action described in the Fund's
Declaration of Trust.
The Board of Trustees has the power, without shareholder approval, to
divide unissued shares of the Fund into two or more classes. The Board has done
so, and the Fund currently has three classes of shares, Class A, Class B and
Class C. All classes invest in the same investment portfolio. Each class has its
own dividends and distributions and pays certain expenses, which may be
different for the different classes. Each class may have a different net asset
value. Each share has one vote at shareholder meetings, with fractional shares
voting proportionally. Only shares of a particular class vote as a class on
matters that affect that class alone. Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager,
OppenheimerFunds, Inc., which is responsible for selecting the Fund's
investments and handling its day-to-day business. The Manager carries out its
duties, subject to the policies established by the Board of Trustees, under an
Investment Advisory Agreement which states the Manager's responsibilities. The
Agreement sets forth the fees paid by the Fund to the Manager and describes the
expenses that the Fund is responsible to pay to conduct its 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 Nicholas
Horsley, who has been employed by the Manager since October, 1997. He is the
person principally responsible for the day-to-day management of the Fund's
portfolio. Mr. Horsley, a Vice President of the Manager, was previously a
portfolio manager with Warburg, Pincus Counsellors, Inc., prior to which he was
an analyst and portfolio manager with BZW/Barclays Investment Management
Limited.
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: 0.80% of the first $250 million of average annual net assets, 0.77%
of the next $250 million, 0.75% of the next $500 million, 0.69% of the next $1
billion, and 0.67% of average annual net assets in excess of $2 billion.
The Fund pays expenses related to its daily operations, such as custodian
fees, Trustees' fees, transfer agency fees, legal fees and auditing costs. Those
expenses are paid out of the Fund's assets and are not paid directly by
shareholders. However, those expenses reduce the net asset value of shares, and
therefore are indirectly borne by shareholders through their investment. More
information about the Investment Advisory Agreement and the other expenses paid
by the Fund is contained in the Statement of 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 other Oppenheimer
funds and is sub-distributor for funds managed by a subsidiary of the Manager.
o The Transfer Agent. The Fund's transfer agent is OppenheimerFunds
Services, a division of the Manager, which acts as the shareholder servicing
agent for the Fund on an "at-cost" basis. It also acts as the shareholder
servicing agent for the other Oppenheimer funds. Shareholders should direct
inquiries about their accounts to the Transfer Agent at the address and
toll-free number shown below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms "total return"
and "average annual total return" to illustrate its performance. The performance
of each class of shares is shown separately, because the performance of each
class will usually be different as a result of the different kinds of expenses
each class bears. These returns measure the performance of a hypothetical
account in the Fund over various periods, and do not show the performance of
each shareholder's account (which will vary if dividends are received in cash,
or shares are sold or purchased). The Fund's performance information may help
you see how well your Fund has done over time and to compare it to other funds
or market indices.
It is important to understand that the Fund's total returns represent past
performance and should not be considered to be predictions of future returns or
performance. This performance data is described below, but more detailed
information about how total returns are calculated is contained in the Statement
of Additional Information, which also contains information about other ways to
measure and compare the Fund's performance. The Fund's investment performance
will vary over time, depending on market conditions, the composition of the
portfolio, expenses and which class of shares you purchase.
o Total Returns. There are different types of total returns used to
measure the Fund's performance. Total return is the change in value of a
hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares.
The cumulative total return measures the change in value over the entire period
(for example, ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the cumulative total
return over the entire period. However, average annual total returns do not show
the Fund's actual year-by-year performance.
When total returns are quoted for Class A shares, normally the current
maximum initial sales charge has been deducted. When total returns are shown for
Class B or Class C shares, normally the contingent deferred sales charge that
applies to the period for which total return is shown has been deducted.
However, total returns may also be quoted "at net asset value," without
considering the effect of the sales charge, and those returns would be less if
sales charges were deducted.
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors three different classes of shares:
Class A, Class B and Class C. 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.
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 are how much you plan to invest and how long you plan to hold your
investment. If your goals and objectives change over time and you plan to
purchase additional shares, you should re-evaluate those factors to see if you
should consider another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the maximum
sales charge rates that apply to each class, considering the effect of the
annual asset-based sales charge on Class B and Class C shares (which, like all
expenses, will affect your investment return). For the sake of comparison, we
have assumed that there is a 10% rate of appreciation in the investment each
year. Of course, the actual performance of your investment cannot be predicted
and will vary, based on the Fund's actual investment returns and the operating
expenses borne by the 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 7 years, as well as the effect of the Class B
asset-based sales charge on the investment return for that class in the
short-term. Class C shares might be the appropriate choice (especially for
investments of less than $100,000), because there is no initial sales charge on
Class C shares, and the contingent deferred sales charge does not apply to
amounts you sell after holding them one year.
However, if you plan to invest more than $100,000 for the shorter term,
then the more you invest and the more your investment horizon increases toward
six years, Class C shares might not be as advantageous as Class A shares. That
is because the annual asset-based sales charge on Class C shares will have a
greater impact on your account over the longer term than the reduced front-end
sales charge available for larger purchases of Class A shares. For example,
Class A might be more advantageous than Class C (as well as Class B) 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.
And for investors who invest $1 million or more, in most cases Class A
shares will be the most advantageous choice, no matter how long you intend to
hold your shares. For that reason, the Distributor normally will not accept
purchase orders of $500,000 or more of Class B shares or $1 million or more of
Class C shares from a single investor.
o Investing for the Longer Term. If you are investing 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 than for selling another
class.
It is important that investors understand that the purposes of the Class B and
Class C contingent deferred sales charges and asset-based sales charges are the
same as the purpose of the front-end sales charge on sales of Class A shares:
that is, to compensate the Distributor for commissions it pays to dealers and
financial institutions for selling shares. The Distributor may pay additional
periodic compensation from its own resources to securities dealers or financial
institutions based upon the value of shares of the Fund owned by a 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 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 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.
Please refer to "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 , in its sole
discretion, may reject any purchase order for the Fund's shares.
Special Sales Charge Arrangements for Certain Persons. Appendix A to this
Prospectus sets forth conditions for the waiver of, or exemption from, sales
charges or the special sales charge rates that apply to purchases of shares of
the Fund (including purchases by exchange) by a person who was a shareholder of
one of the Former Quest for Value Funds (as defined in that Appendix).
Buying Class A Shares. Class A shares are sold at their offering price, which is
normally net asset value plus an initial sales charge. However, in some cases,
described below, purchases are not subject to an initial sales charge, and the
offering price will be the net asset value. In some cases, reduced sales charges
may be available, as described below. Out of the amount you invest, the Fund
receives the net asset value to invest for your account. The sales charge varies
depending on the amount of your purchase. A portion of the sales charge may be
retained by the Distributor and allocated to your dealer as commission. The
current sales charge rates and commissions paid to dealers and brokers are as
follows:
Front-End Front-End
Sales Charge Sales Charge Commission
as Percentage as Percentage as Percentage
Amount of of Offering of Amount of Offering
Purchase Price Invested Price
- --------- ------------- ------------- -------------
Less than $25,000 5.75% 6.10% 4.75%
$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
$100,000 or more but
less than $250,000 3.75% 3.90% 3.00%
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
- ---------------------
The Distributor reserves the right to reallow the entire
commission
to dealers. If that occurs, the dealer may be considered an
"underwriter" under Federal securities laws.
o Class A Contingent Deferred Sales Charge. There is no
initial sales charge on purchases of Class A shares of any one
or
more of the Oppenheimer funds in the following cases:
o Purchases aggregating $1 million or more;
o Purchases by a retirement plan qualified under section 401(a) if the
retirement plan has total plan assets of $500,000 or more;
o Purchases by a retirement plan qualified under section 401(a) or 401(k)
of the Internal Revenue Code, by a non-qualified deferred compensation plan,
employee benefit plan, group retirement plan (see "How to Buy Shares -
Retirement Plans" in the Statement of Additional Information for further
details), an employee's 403(b)(7) custodial plan account, SEP IRA, SARSEP, or
SIMPLE plan (all of these plans are collectively referred to as "Retirement
Plans"); that: (1) buys shares costing $500,000 or more, or (2) has, at the time
of purchase, 100 or more eligible participants, or (3) certifies that it
projects to have annual plan purchases of $200,000 or more; or
o Purchases by an OppenheimerFunds Rollover IRA if the purchases are made
(1) through a broker, dealer, bank or registered investment adviser 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 those 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
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 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 of those shares prior to May 1, 1997, within 18 months
of the end of the calendar month of their purchase, a contingent deferred sales
charge (called the "Class A contingent deferred sales charge") may be deducted
from the redemption proceeds. A Class A contingent deferred sales charge may be
deducted from the redemption proceeds of any of those shares purchased on or
after May 1, 1997 (which includes the Fund) that are redeemed within 12 months
of the end of the calendar month of their purchase. That sales charge may be
equal to 1.0% of either (1) the aggregate net asset value of the redeemed shares
(not including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original offering price (which is the original net
asset value) of the redeemed shares. However, the Class A contingent deferred
sales charge will not exceed the aggregate amount of the 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, banks or registered investment advisers that have
entered into an agreement with the Distributor providing specifically for the
use of shares of the Fund in particular investment products or employee benefit
plans made available to their clients (those clients may be charged the
transaction fee by their dealer, broker, bank or adviser 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, and (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; (3) clients of such investment advisors or financial
planners (that have entered into an agreement for this purpose with the
Distributor) who buy shares for their own accounts may also purchase shares
without sales charge but only if their accounts are linked to a master account
of their investment advisor or financial planner on the books and records of the
broker, agent or financial intermediary with which the Distributor has made such
special arrangements (each of these investors may be charged a fee by the
broker, agent or financial intermediary for purchasing shares).
o Employee benefit plans purchasing shares through a
shareholder servicing agent which the Distributor has appointed
as
its agent to accept those purchase orders;
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 adviser (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 a TRAC-2000 401(k) plan
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
subsidiaries) 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.
o 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 not
to exceed 0.25% of the average annual net assets of the Class A shares of the
Fund. The Distributor uses the service fee 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 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
and (2) shares held the longest during the
6-year period. Class B shares held for a period greater than six years
automatically convert to Class A shares. 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:
Contingent Deferred
Sales Charge on Redemptions in
Years Since Beginning of Month In That Year (As % of Amount
Which Purchase Order Was Accepted 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.
o Distribution and Service Plan for Class B Shares. The Fund has adopted
a Distribution and Service Plan for Class B shares to compensate the Distributor
for distributing Class B shares and servicing accounts. This Plan is described
below under "Buying Class C Shares - Distribution and Service Plan for Class B
and Class C Shares."
o Waivers of Class B Sales Charges. The Class B contingent deferred sales
charge will not apply to shares purchased in certain types of transactions, nor
will it apply to shares redeemed in certain circumstances, as described below
under "Buying Class C Shares - Waivers of Class B and Class C Sales Charges."
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.
o 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 services and costs in distributing Class B
and Class C shares and servicing accounts. Under the Plans, the Fund pays the
Distributor an annual "asset-based sales charge" of 0.75% per year on Class B
shares that are outstanding for 6 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.
The Distributor uses the service fees to compensate dealers for providing
personal services for accounts that hold Class B or Class 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 will 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 shall pay the Class C service fee and 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 either Plan is terminated
by the Fund, the Board of Trustees may allow the Fund to continue payments of
the asset-based sales charge to 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 in "Reduced Sales Charges" in the Statement of Additional
Information. In order to receive a waiver of the Class B and 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 (1) 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 for
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.
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
broker
in securities, municipal securities or government securities,
or by
a U.S. national securities exchange, a registered securities
association or a clearing agency. If you are signing on behalf
of
a corporation, partnership or other business, or as a fiduciary,
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 Send courier or Express Mail
requests by mail: requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue
Denver, Colorado 80217 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.
Please call your dealer for more information about this procedure. Brokers or
dealers may charge for that service. 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. Please refer to "How to Exchange
Shares" in the Statement of Additional Information for more details.
Exchanges may be requested in writing or by telephone:
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.
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 and Class C shares. Therefore, the redemption value of your
shares may be more or less than their original cost.
o Payment for redeemed shares is made ordinarily in cash and forwarded by
check or through AccountLink (as elected by the shareholder under the redemption
procedures described above) within 7 days after the Transfer Agent receives
redemption instructions in proper form, except under unusual circumstances
determined by the Securities and Exchange Commission delaying or suspending such
payments. For accounts registered in the name of a broker/dealer, payment will
be forwarded within 3 business days. The Transfer Agent may delay forwarding a
check or processing a payment via AccountLink for recently purchased shares, but
only until the purchase payment has cleared. That delay may be as much as 10
days from the date the shares were purchased. That delay may be avoided if you
purchase shares by federal funds wire, certified check or arrange with your
bank to provide telephone or written assurance to the Transfer Agent that your
purchase payment has cleared.
o Involuntary redemptions of small accounts may be made by the Fund if the
account value has fallen below $200 for reasons other than the fact that the
market value of shares has dropped, and in some cases involuntary redemptions
may be made to repay the Distributor for losses from the cancellation of share
purchase 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.
The Fund does not charge a redemption fee, but if your dealer or broker
handles your redemption, they may charge a fee. That fee can be avoided by
redeeming your Fund shares directly through the Transfer Agent. Under the
circumstances described in "How To Buy Shares," you may be subject to a
contingent deferred sales charge when redeeming certain Class A, Class B and
Class C shares.
o To avoid sending duplicate copies of materials to households, the Fund
will mail only one copy of each annual and semi-annual report to shareholders
having the same last name and address on the Fund's records. However, each
shareholder may call the Transfer Agent at 1-800-525-7048 to ask that copies of
those materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B and Class
C shares from net investment income, if any, on an annual basis and normally
pays those dividends to shareholders in December, but the Board of Trustees can
change that date. The Board may also cause the Fund to declare dividends after
the close of the Fund's fiscal year (which ends August 31st). Because the Fund
does not have an objective of seeking current income, the amounts of dividends
it pays, if any, will likely be small. Dividends paid on Class A shares will
generally be higher than for Class B or Class C shares because expenses
allocable to Class B and Class C shares will generally be higher. 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. Distributions are subject to federal income tax and may be subject to
state or local taxes. Your distributions are taxable when paid, whether you
reinvest them in additional shares or take them in cash. Every year the Fund
will send you and the IRS a statement showing the amount of all taxable
distributions you received in the previous year. So that the Fund will not have
to pay taxes on the amounts it distributes to shareholders as dividends and
capital gains, the Fund intends to manage its investments so that it will
qualify as a "regulated investment company" under the Internal Revenue Code,
although it reserves the right not to qualify in a particular year.
When more than 50% of its assets are invested in foreign securities at the
end of any fiscal year, the Fund may elect that Section 853 of the Internal
Revenue Code will apply to it to permit shareholders to take a credit (or a
deduction) on their own federal income tax returns for foreign taxes paid by the
Fund. "Dividends, Capital Gains and Taxes" in the Statement of Additional
Information contains further information about this tax provision.
o "Buying a Dividend". When a fund goes ex-dividend, its share price is
reduced by the amount of the distribution. If you buy shares on or just before
the ex-dividend date, or just before the Fund declares a capital gains
distribution, you will pay the full price for the shares and then receive a
portion of the price back as a taxable dividend or capital gain.
o Taxes on Transactions. Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. Generally speaking, a capital gain
or loss is the difference between the price you paid for the shares and the
price you received when you sold them.
o Returns of Capital. In certain cases distributions made by the Fund may
be considered a non-taxable return of capital to shareholders. If that occurs,
it will be identified in notices to shareholders. A non-taxable return of
capital may reduce your tax basis in your Fund shares.
This information is only a summary of certain Federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax adviser
about the effect of an investment in the Fund on your particular tax situation.
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<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 and 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 adviser 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) received by such shareholder 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.
Front-End Front-End
Sales Sales Commission
Charge Charge as
as a as a Percentage
Number of Percentage Percentage of
Eligible of Offering of Amount Offering
Employees Price Invested Price
or Members
9 or fewer 2.50% 2.56% 2.00%
At least 10 but
not more than 49 2.00% 2.04% 1.60%
For purchases by Qualified Retirement plans and Associations having 50 or
more eligible employees or members, there is no initial sales charge on
purchases of Class A shares, but those shares are subject to the Class A
contingent deferred sales charge described on pages ___ and ___ 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 a former Quest for Value Fund merged, if those shares were purchased prior
to March 6, 1995 in connection with (i) distributions to participants or
beneficiaries of plans qualified under Section 401(a) of the Internal Revenue
Code or from custodial accounts under Section 403(b)(7) of the Code, Individual
Retirement Accounts, deferred compensation plans under Section 457 of the Code,
and other employee benefit plans, and returns of excess contributions made to
each type of plan, (ii) withdrawals under an automatic withdrawal plan holding
only either Class B or Class C shares if the annual withdrawal does not exceed
10% of the 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.
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Oppenheimer International Small Company 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 Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
No dealer, broker, salesperson or any other person has been
authorized to give any information or to make any
representations
other than those contained in this Prospectus or the Statement
of
Additional Information, and if given or made, such
information
and representations must not be relied upon as having been
authorized by the Fund, OppenheimerFunds, Inc.,
OppenheimerFunds
Distributor, Inc. or any affiliate thereof. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to
buy any of the securities offered hereby in any state to any
person
to whom it is unlawful to make such an offer in such state.
PR0815.001.1197 Recycled material Logo
Printed on recycled paper
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Oppenheimer International Small Company 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 International
Small Company 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.
Table of Contents
Page
About the Fund
Investment Objective and Policies.............................................
Investment Policies and Strategies..........................................
Other Investment Techniques and Strategies..................................
Other Investment Restrictions...............................................
How the Fund is Managed.......................................................
Organization of the Fund....................................................
Trustees and Officers of the Fund...........................................
The Manager and Its Affiliates..............................................
Brokerage Policies of the Fund................................................
Performance of the Fund.......................................................
Distribution and Service Plans................................................
About Your Account
How to Buy Shares...........................................................
How to Sell Shares..........................................................
How to Exchange Shares......................................................
Dividends, Capital Gains and Taxes............................................
Additional Information About the Fund.........................................
Financial Information About the Fund
Independent Auditors' Report..................................................
Financial Statements..........................................................
Appendix A: Corporate Industry Classifications............................A-1
Appendix B: Description of Ratings........................................B-1
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About the Fund
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and policies of the
Fund are described in the Prospectus. Set forth below is supplemental
information about those policies and the types of securities in which the Fund
may invest, as well as the strategies the Fund may use to try to achieve its
objective. Capitalized terms used in this Statement of Additional Information
have the same meanings as those terms have in the Prospectus.
In selecting securities for the Fund's portfolio, the Fund's investment
adviser, OppenheimerFunds, Inc. (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.
The Fund intends to spread its investments (invest risk) among the markets
of at least three foreign countries under normal market conditions. The
percentage of the Fund's assets invested in particular foreign countries will
vary from time to time based on the Manager's assessment of the appreciation
possibilities of particular issuers as well as market and economic conditions in
a particular county, balance of payments, rates of inflation, economic
self-sufficiency, and social and political factors that may affect specific
markets.
The portion of the Fund's assets allocated to securities selected for
capital appreciation and the investment techniques used will depend upon the
judgment of the Fund's Manager as to the future movement of the equity
securities markets. If the Manager believes that economic conditions favor a
rising market, the Fund will emphasize securities and investment methods
selected for high capital growth. If the Manager believes that a market decline
is likely, defensive securities and investment methods may be emphasized.
Current income is 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.
o Investing in Securities of Growth-Type Companies. The Fund emphasizes
securities of "growth-type" companies. Such issuers typically are those the
goods or services of which have relatively favorable long-term prospects for
increasing demand for their products, or increasing earnings prospects, or ones
which develop new products, services or markets and normally retain a relatively
large part of their earnings for research, development and investment in capital
assets. They may include companies in the natural resources fields or those
developing industrial applications for new scientific knowledge having potential
for technological innovation, such as information technology, biochemistry,
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communications, environmental products, oceanography, business services and new
consumer products. Growth-type companies may include relatively new businesses
as well as larger mature businesses that the Manager believes are entering a
grow phase because of the development of new products, businesses, markets or
other factors. Therefore, the Manger does not limit the selection of investments
in growth- type companies to issuers having a market capitalization within a
specific range.
o Investing in Small, Unseasoned Companies. Some growth-type companies may
be newer start-up businesses that do not have a substantial operating history.
The securities of these small, unseasoned companies may have a limited trading
market, which may adversely affect the Fund's ability to sell them and can
reduce the price the Fund might be able to obtain for them. If other investors
holding the same securities as the Fund sell them when the Fund attempts to
dispose of its holdings, the Fund may receive lower prices than might otherwise
be obtained, because of the thinner market for such securities. Additionally,
investments in these companies tend to involve greater risks then larger more
established companies, such as the risk that their securities may be subject to
more abrupt or erratic market movements. These companies also may have limited
product lines, markets or financial resources.
o Foreign Securities. "Foreign securities" include companies organized
under the laws of countries other than the United States, debt securities of
foreign governments, and equity and debt securities of U.S. corporations
denominated in non-U.S. currencies, 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 similar
depository arrangements and that are listed on a U.S. securities exchange or
traded in the U.S. over-the-counter markets are also considered "foreign
securities" for the purpose of the Fund's investment allocations, because they
are subject to some of the special considerations and risks, discussed below,
that apply to foreign securities traded and held abroad, typically because the
issuer of the security is domiciled in a foreign country, or has substantial
assets or business operations in a foreign county, or its securities are
primarily trades on a foreign securities exchange.
Investing in foreign securities offers the Fund potential benefits not
available from investing in securities of domestic issuers, such as the
opportunity to invest in foreign issuers that appear to offer growth potential,
or in foreign countries with economic policies or business cycles different from
those of the U.S. It may enable the Fund to take advantage of foreign stock
markets that do not move in a manner parallel to U.S. markets. If the Fund's
portfolio securities are held in foreign countries, the countries in which the
securities are held abroad and the sub-custodians or depositories holding them
must be approved by the Fund's Board of Trustees to the extent that approval is
required under applicable rules of the Securities and Exchange Commission. 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.
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
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foreign exchanges than on U.S. exchanges, which affects the ability to dispose
of a security; greater volatility and less liquidity in some foreign markets,
particularly emerging markets, than in the U.S.; less governmental oversight and
regulation of foreign issuers, stock exchanges and brokers than in the U.S.;
greater difficulties in commencing lawsuits against foreign issuers; higher
brokerage commission rates than in the U.S.; increased risks of delays in
settlement of portfolio transactions or loss of certificates for portfolio
securities; possibilities in some countries of expropriation or nationalization
of assets, confiscatory taxation, political, financial or social instability or
adverse diplomatic developments; unfavorable differences between the U.S.
economy and foreign economies; and the effects of foreign taxes on income and
capital gains In the past, U.S. Government policies have discouraged certain
investments abroad by U.S. investors, through taxation or other restrictions,
and it is possible that such restrictions could be re-imposed. Costs of
transactions in foreign securities are generally higher than for transactions in
U.S. securities, including higher custodial costs, which will increase the
Fund's expenses over those typically associated with funds that do not invest in
foreign securities.
A number of current significant political demographic and economic
developments may affect investments in foreign securities and in securities of
companies with operations overseas. Such developments include dramatic political
changes in government and economic policies in several Eastern European
countries, Germany and the republics comprising the former Soviet Union, as well
as unification of the European Economic Community. The course of any of one or
more of these events and the effect on trade barriers, competition and markets
for consumer goods and services is uncertain. With roughly two-thirds of all
outstanding equity securities now traded outside of the United States, the
Fund's international scope enables it to attempt to take advantage of other
world markets and companies and seek to protect itself against declines in any
single economy.
o Special Risks of "Emerging Markets." Investments in securities traded in
"emerging markets" (which are trading markets that are relatively new in
countries with developing economies) involve more risks that other foreign
securities. Emerging markets may have extended settlement periods for securities
transactions so that the Fund might not receive the repayment of principal or
income on its investments on a timely basis, which could affect its net asset
value. There may be a lack of liquidity for emerging market securities. Interest
rates and foreign currency exchange rates may be more volatile. Government
limitations on foreign investments may be more likely to be imposed than in more
developed countries. Emerging markets may respond in a more volatile manner to
economic changes than those of more developed countries.
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.
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o Special Risks of Lower-Rated Securities. The Fund may invest in
higher-yielding, lower- rated debt securities, commonly known as "junk bonds,"
because these securities generally offer higher income potential than investment
grade securities. As stated in the Prospectus, the Fund does not presently
intend to invest more than 5% of its total assets in debt securities.
Lower-rated securities are also referred to as lower-grade securities.
"Lower-grade" debt securities are those rated below "investment grade," which
means they have a rating lower than "Baa" by Moody's Investors Service, Inc.
("Moody's") or lower than "BBB" by Standard & Poor's Corporation ("S&P") or
similar ratings by other rating organizations. The Fund may invest in securities
rated as low as "C" or "D" or which may be in default at the time the Fund buys
them. While securities rated "Baa" by Moody's or "BBB" by S&P are investment
grade and are not regarded as "junk bonds," those securities may be subject to
greater market fluctuations and risks of loss of income and principal than
higher grade securities and may be considered to have certain speculative
characteristics. The Fund may invest in unrated securities that the Manager
believes offer yields and risks comparable to rated securities.
High-yield, lower-grade securities, whether rated or unrated, often have
speculative characteristics. Lower-grade securities have special risks that make
them riskier investments than investment grade securities. They may be subject
to greater market fluctuations and risk of loss of income and principal than
lower yielding, investment grade securities. There may be less of a market for
them and therefore they may be harder to sell at an acceptable price. There is a
relatively greater possibility that the issuer's earnings may be insufficient to
make the payments of interest due on the bonds. The issuer's low
creditworthiness may increase the potential for its insolvency. Further, a
decline in the high-yield bond market is likely during an economic downturn. An
economic downturn or an increase in interest rates could severely disrupt the
market for high-yield securities and adversely affect the value of outstanding
securities and the ability of issuers to repay principal and interest.
These risks mean that the Fund may not achieve the expected income from
lower-grade securities, and that the Fund's net asset value per share may be
affected by declines in value of these securities. The Fund is not obligated to
dispose of securities when issuers are in default or if the rating of the
security is reduced.
o Warrants and Rights. Warrants basically are options to purchase equity
securities at specified prices valid for a specific period of time. Their prices
do not necessarily move in a manner parallel to the prices of the underlying
securities. The price paid for a warrant will be lost unless the warrant is
exercised prior to expiration. Rights are similar to warrants, but normally have
a short duration and are distributed directly by the issuer to its shareholders.
Warrants and rights have no voting rights, receive no dividends and have no
rights with respect to the assets of the issuer.
o Illiquid and Restricted Securities. To enable the Fund to sell (in the
Unites States) restricted securities not registered under the Securities Act of
1933, the Fund may have to cause those securities to be registered. The expenses
of registration of restricted securities may be negotiated by the Fund with the
issuer at the time such securities are purchased by the Fund, if such
registration is required before such securities may be sold publicly. When
registration must be arranged because the Fund wishes to sell the security, a
considerable period may elapse between the time the decision is made to sell the
securities and the time the Fund would be permitted to sell them. The Fund would
bear the risks of any downward price fluctuation during that period. The Fund
may also acquire, through private placements, securities
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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 Board of
Trustees of the Fund or by the Manager under Board-approved guidelines. Those
guidelines take into account the trading activity for such securities and the
availability of reliable pricing information, among other factors. If there is a
lack of trading interest in a particular Rule 144A security, the Fund's holding
of that security may be deemed to be illiquid.
o Repurchase Agreements. The Fund may acquire securities subject to
repurchase agreements for liquidity purposes to meet anticipated redemptions, or
pending the investment of the proceeds from sales of Fund shares, or pending the
settlement of purchases of portfolio securities.
In a repurchase transaction, the Fund acquires a security from, and
simultaneously resells it to, an approved vendor. An "approved vendor" is a
commercial bank or the U.S.
branch of a foreign bank,
or a broker-dealer which has been designated a primary dealer in government
securities, which must meet credit requirements set by the Fund's Board of
Trustees from time to time. The resale price exceeds the purchase price by an
amount that reflects an agreed-upon interest rate effective for the period
during which the repurchase agreement is in effect. The majority of these
transactions run from day to day, and delivery pursuant to the resale typically
will occur within one to five days of the purchase. Repurchase agreements are
considered "loans" under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), collateralized by the underlying security. The Fund's
repurchase agreements require that at all times while the repurchase agreement
is in effect, the value of the collateral must equal or exceed the repurchase
price to fully collateralize the repayment obligation. Additionally, the Fund's
Manager will impose creditworthiness requirements to confirm that the vendor is
financially sound and will continuously monitor the collateral's value.
o Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, at least equal the market value of the
loaned securities and must consist of cash, bank letters of credit, U.S.
government securities, or other cash equivalents in which the Fund is permitted
to invest. To be acceptable as collateral, letters of credit must obligate a
bank to pay amounts demanded by the Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund. In a
portfolio securities lending transaction, the Fund receives from the borrower an
amount equal to the interest paid or the dividends declared on the loaned
securities during the term of the loan as well as the interest on the collateral
securities, less any finder's, administrative or other fees the Fund pays in
connection with the loan. The Fund may share the interest it receives on the
collateral securities with the borrower as long as it realizes at least a
minimum amount of interest required by the lending guidelines established by its
Board of Trustees. The Fund will not lend its portfolio securities to any
officer, trustee, employee or affiliate of the Fund or its Manager. The terms of
the Fund's loans must meet certain tests under the Internal Revenue Code and
permit the Fund to reacquire loaned securities on five business days' notice or
in time to vote on any important matter.
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o Borrowing For Leverage. From time to time, the Fund may increase its
ownership of securities by borrowing from banks on an unsecured basis and
investing the borrowed funds, 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, will be made only to the extent that
the value of the Fund's assets, less its liabilities other than borrowings, is
equal to at least 300% of all borrowings 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 coverage
requirement. To do so, the Fund may have to sell a portion of its investments at
a time when it would otherwise not want to sell the securities. Interest on
money the Fund borrows is an expense the Fund would not otherwise incur, so that
during periods of substantial borrowings, its expenses may increase more than
the expenses of funds that do not borrow.
Other Investment Techniques and Strategies
o Hedging With Options and Futures Contracts. The Fund may use hedging
instruments for the purposes described in the Prospectus. When hedging to
attempt to protect against declines in the market value of the Fund's portfolio,
or to permit the Fund to retain unrealized gains in the value of portfolio
securities which have appreciated, or to facilitate selling securities for
investment reasons, the Fund may: (i) sell Futures, (ii) buy puts on such
Futures or securities, or (iii) write covered calls on securities or on Futures.
When hedging to establish a position in the equity securities markets as a
temporary substitute for the purchase of individual equity securities the Fund
may: (i) buy Futures, or (ii) buy calls on such Futures or securities held by
it. Normally, the Fund would then purchase the equity securities and terminate
the hedging position.
The Fund's strategy of hedging with Futures and options on Futures will be
incidental to the Fund's investment activities in the underlying cash market. In
the future, the Fund may employ hedging instruments and strategies that are not
presently contemplated but which may be developed, to the extent such investment
methods are consistent with the Fund's investment objective, and are legally
permissible and disclosed in the Prospectus. Additional information about the
hedging instruments the Fund may use is provided below.
o Stock Index Futures. The Fund may buy and sell futures contracts
relating to a securities index ("Financial Futures"), including "Stock Index
Futures," a type of Financial Future for which the index used as the basis for
trading is a broadly-based stock index (including stocks that are not limited to
issuers in a particular industry or group of industries). A stock index assigns
relative values to the common stocks included in the index and fluctuates with
the changes in the market value of those stocks. Stock indices cannot be
purchased or sold directly. Financial Futures are contracts based on the future
value of the basket of securities that comprise the underlying index. The
contracts obligate the seller to deliver, and the purchaser to take, cash to
settle the futures transaction or to enter into an offsetting contract. No
physical delivery of the securities underlying the index is made on settling the
futures obligation. No monetary amount is paid or received by the Fund on the
purchase or sale of a Financial Future or Stock Index Future.
Upon entering into a Futures transaction, the Fund will be required to
deposit an initial margin payment, in cash or U.S. Treasury bills, with the
futures commission merchant (the "futures broker").
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Initial margin payments will be deposited with the Fund's Custodian in an
account registered in the futures broker's name; however, the futures broker can
gain access to that account only under certain specified conditions. As the
Future is marked to market (that is, its value on the Fund's books is changed)
to reflect changes in its market value, subsequent margin payments, called
variation margin, will be paid to or by the futures broker on a daily basis.
At any time prior to the expiration of the Future, the Fund may elect to
close out its position by taking an opposite position, at which time a final
determination of variation margin is made and additional cash is required to be
paid by or released to the Fund. Any gain or loss is then realized by the Fund
on the Future for tax purposes. Although Financial Futures by their terms call
for settlement by the delivery of cash, in most cases the settlement obligation
is fulfilled without such delivery by entering into an offsetting transaction.
All Futures transactions are effected through a clearinghouse associated with
the exchange on which the contracts are traded.
o Writing Covered Calls. As described in the Prospectus, the Fund may
write covered calls. When the Fund writes a call on an investment, it receives a
premium and agrees to sell the callable investment to a purchaser of a
corresponding call during the call period (usually not more than 9 months) at a
fixed exercise price (which may differ from the market price of the underlying
investment) regardless of market price changes during the call period. To
terminate its obligation on a call it has written, the Fund may purchase a
corresponding call in a "closing purchase transaction." A profit or loss will be
realized, depending upon whether the net of the amount of option transaction
costs and the premium received on the call the Fund has written is more or less
than the price of the call the Fund subsequently purchased. A profit may also be
realized if the call lapses unexercised, because the Fund retains the underlying
investment and the premium received. Those profits are considered short-term
capital gains for Federal income tax purposes, as are premiums on lapsed calls,
and when distributed by the Fund are taxable as ordinary income. If the Fund
could not effect a closing purchase transaction due to the lack of a market, it
would have to hold the callable investment until the call lapsed or was
exercised.
The Fund may also write calls on Futures without owning a futures contract
or deliverable securities, provided that at the time the call is written, the
Fund covers the call by segregating in escrow an equivalent dollar value of
deliverable securities or liquid assets 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.
The Fund's Custodian, or a securities depository acting for the Custodian,
will act as the Fund's escrow agent, through the facilities of the Options
Clearing Corporation ("OCC"), as to the investments on which the Fund has
written options that are traded on exchanges, or as to other acceptable escrow
securities, so that no margin will be required from the Fund for such option
transactions. OCC will release the securities covering a call on the expiration
of the call or when the Fund enters into a closing purchase transaction. Call
writing affects the Fund's turnover rate and the brokerage commissions it pays.
Commissions, normally higher than on general securities transactions, are
payable on writing or purchasing a call.
o Purchasing Puts and Calls. The Fund may purchase calls to protect
against the possibility that
the Fund's portfolio will not participate in an anticipated rise in the
securities market. When the Fund
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purchases a call, it pays a premium (other than in a closing purchase
transaction) and, except as to calls on stock indices, has the right to buy the
underlying investment from a seller of a corresponding call on the same
investment during the call period at a fixed exercise price. In purchasing a
call, the Fund benefits only if the call is sold at a profit or if, during the
call period, the market price of the underlying investment is above the sum of
the call price, transaction costs, and the premium paid, and the call is
exercised. If the call is not exercised or sold (whether or not at a profit), it
will become worthless at its expiration date and the Fund will lose its premium
payment and the right to purchase the underlying investment. When the Fund
purchases a call on a stock index, it pays a premium, but settlement is in cash
rather than by delivery of the underlying investment to the Fund.
When the Fund purchases a put, it pays a premium and, except as to puts on
stock indices, has the right to sell the underlying investment to a seller of a
corresponding put on the same investment during the put period at a fixed
exercise price. Buying a put on an investment the Fund owns (a "protective put")
enables the Fund to attempt to protect itself during the put period against a
decline in the value of the underlying investment below the exercise price by
selling the underlying investment at the exercise price to a seller of a
corresponding put. If the market price of the underlying investment is equal to
or above the exercise price and as a result the put is not exercised or resold,
the put will become worthless at its expiration and the Fund will lose the
premium payment and the right to sell the underlying investment. However, the
put may be sold prior to expiration (whether or not at a profit).
Puts and calls on broadly-based stock indices or Stock Index Futures are
similar to puts and calls on securities or futures contracts except that all
settlements are in cash and gain or loss depends on changes in the index in
question (and thus on price movements in the stock market generally) rather than
on price movements of individual securities or futures contracts. When the Fund
buys a call on a stock index or Stock Index Future, it pays a premium. If the
Fund exercises the call during the call period, a seller of a corresponding call
on the same investment will pay the Fund an amount of cash to settle the call if
the closing level of the stock index or Future upon which the call is based is
greater than the exercise price of the call. That cash payment is equal to the
difference between the closing price of the call and the exercise price of the
call times a specified multiple (the "multiplier") which determines the total
dollar value for each point of difference. When the Fund buys a put on a stock
index or Stock Index Future, it pays a premium and has the right during the put
period to require a seller of a corresponding put, upon the Fund's exercise of
its put, to deliver cash to the Fund to settle the put if the closing level of
the stock index or Stock Index Future upon which the put is based is less than
the exercise price of the put. That cash payment is determined by the
multiplier, in the same manner as described above as to calls.
When the Fund purchases a put on a stock index, or on a Stock Index Future
not owned by it, the put protects the Fund to the extent that the index moves in
a similar pattern to the securities the Fund holds. The Fund can either resell
the put or, in the case of a put on a Stock Index Future, buy the underlying
investment and sell it at the exercise price. The resale price of the put will
vary inversely with the price of the underlying investment. If the market price
of the underlying investment is above the exercise price, and as a result the
put is not exercised, the put will become worthless on the expiration date. In
the event of a decline in price of the underlying investment, the Fund could
exercise or sell the put at a profit to attempt to offset some or all of its
loss on its portfolio securities.
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The Fund's option activities may affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund may cause the
Fund to sell related portfolio securities, thus increasing its turnover rate.
The exercise by the Fund of puts on securities will cause the sale of underlying
investments, increasing portfolio turnover. Although the decision whether to
exercise a put it holds is within the Fund's control, holding a put might cause
the Fund to sell the related investments for reasons that would not exist in the
absence of the put. The Fund will pay a brokerage commission each time it buys
or sells a call, put or an underlying investment in connection with the exercise
of a put or call. Those commissions may be higher than the commissions for
direct purchases or sales of the underlying investments.
Premiums paid for options are small in relation to the market value of the
underlying investments and, consequently, put and call options offer large
amounts of leverage. The leverage offered by trading in options could result in
the Fund's net asset value being more sensitive to changes in the value of the
underlying investments.
o Options on Foreign 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 dealers in such
options. It does so to protect against declines in the dollar value of foreign
securities and against increases in the dollar cost of foreign securities to be
acquired. If the Manager anticipates a rise in the dollar value of a foreign
currency in which securities to be acquired are denominated, the increased cost
of such securities may be partially offset by purchasing calls or writing puts
on that foreign currency. If a decline in the dollar value of a foreign currency
is anticipated, the decline in value of portfolio securities denominated in that
currency may be partially offset by writing calls or purchasing puts on that
foreign currency. However, in the event of currency rate fluctuations adverse to
the Fund's position, it would lose the premium it paid and 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 Forward Contracts. The Fund may enter into foreign currency exchange
contracts ("Forward Contracts"), which obligate the seller to deliver and the
purchaser to take a specific amount of foreign currency at a specific future
date for a fixed price. A Forward Contract involves bilateral obligations of one
party to purchase, and another party to sell, a specific currency at a future
date (which may be any fixed number of days from the date of the contract agreed
upon by the parties), at a price set at the time the contract is entered into.
These contracts are generally traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers.
The Fund may enter into a Forward Contract in order to "lock in" the U.S. dollar
price of a security denominated in
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<PAGE>
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
11
<PAGE>
suffer a substantial decline against the U.S. dollar, it may enter into a
forward sale contract to sell an amount of that foreign currency approximating
the value of some or all of the Fund's portfolio securities denominated in such
foreign currency, or when the Fund believes that the U.S. dollar may suffer a
substantial decline against a foreign currency, it may enter into a forward
purchase contract to buy that foreign currency for a fixed dollar amount. In
this situation the Fund may, in the alternative, enter into a forward contract
to sell a different foreign currency for a fixed U.S. dollar amount where the
Fund believes that the U.S. dollar value of the currency to be sold pursuant to
the forward contract will fall whenever there is a decline in the U.S. dollar
value of the currency in which portfolio securities of the Fund are denominated
("cross hedge").
The Fund's Custodian will place liquid assets of any type, 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 into such contracts.
The precise matching of the Forward Contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of these securities between the date the Forward Contract
is entered into and the date it is sold. Accordingly, it may be necessary for
the Fund to purchase additional foreign currency on the spot (i.e., cash) market
(and bear the expense of such purchase), if the market value of the security is
less than the amount of foreign currency the Fund is obligated to deliver and if
a decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some of the
foreign currency received upon the sale of the portfolio security if its market
value exceeds the amount of foreign currency the Fund is obligated to deliver.
The projection of short-term currency market movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain. Forward Contracts involve the risk that anticipated currency
movements will not be accurately predicted, causing the Fund to sustain losses
on these contracts and transactions costs.
At or before the maturity of a Forward Contract requiring the Fund to sell
a currency, the Fund may either sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund may
close out a Forward Contract requiring it to purchase a specified currency by
entering into a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would realize a
gain or loss as a result of entering into such an offsetting Forward Contract
under either circumstance to the extent the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
offsetting contract.
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<PAGE>
The cost to the Fund of engaging in Forward Contracts varies with factors
such as the currencies involved, the length of the contract period and the
market conditions then prevailing. Because Forward Contracts are usually entered
into on a principal basis, no fees or commissions are involved. Because such
contracts are not traded on an exchange, the Fund must evaluate the credit and
performance risk of each particular counterparty under a Forward Contract.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert
all of its holdings of foreign currency deposits into U.S. dollars on a daily
basis. The Fund may convert
foreign currency from time to time, and investors should be aware of the
costs of currency conversion.
Foreign exchange dealers do not charge a fee for conversion, but they do seek to
realize a profit based on the difference between the prices at which they buy
and sell various currencies. Thus, a dealer may offer to sell a foreign currency
to the Fund at one rate, while offering a lesser rate of exchange should the
Fund desire to resell that currency to the dealer.
o Regulatory Aspects of Hedging Instruments. The Fund is required to
operate within certain guidelines and restrictions with respect to its use of
Futures and options on Futures established by the Commodity Futures Trading
Commission ("CFTC"). In particular the Fund is exempted from registration with
the CFTC as a "commodity pool operator" if the Fund complies with the
requirements of Rule 4.5 adopted by the CFTC. The Rule does not limit the
percentage of the Fund's assets that may be used for Futures margin and related
options premiums for a bona fide hedging position. However, under the Rule the
Fund must limit its aggregate initial Futures margin and related options
premiums to no more than 5% of the Fund's total assets for hedging purposes that
are not considered bona fide hedging strategies under the Rule. Under the Rule,
the Fund also must use short Futures and Futures options on Futures positions
solely for bona fide hedging purposes within the meaning and intent of the
applicable provisions of the Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations established
by option exchanges governing the maximum number of options that may be written
or held by a single investor or group of investors acting in concert, regardless
of whether the options were written or purchased on the same or different
exchanges or are held in one or more accounts or through one or more different
exchanges or through one or more brokers. Thus the number of options which the
Fund may write or hold may be affected by options written or held by other
entities, including other investment companies having the same 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 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
13
<PAGE>
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(s)
making up a straddle is allowed only to the extent such loss exceeds any
unrecognized gain in the offsetting positions making up the straddle. Disallowed
loss is generally allowed at the point where there is no unrecognized gain in
the offsetting positions making up the straddle, or the offsetting position is
disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates which occur between the time the Fund accrues
interest or other receivables or accrues expenses or other liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables or pays such liabilities generally are treated as ordinary income or
ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency and on disposition of foreign currency forward contracts, gains
or losses attributable to fluctuations in the value of a foreign currency
between the date of acquisition of the security or contract and the date of
disposition also are treated as an ordinary gain or loss. Currency gains and
losses are offset against market gains and losses on each trade before
determining a net "section 988" gain or loss under the Internal Revenue Code,
which may ultimately increase or decrease the amount of the Fund's investment
company income available for distribution to its shareholders.
o Risks of Hedging With Options and Futures. An option position may be
closed out only on a market that provides secondary trading for options of the
same series, and there is no assurance that a liquid secondary market will exist
for any particular option. In addition to the risks associated with hedging that
are discussed in the Prospectus and above, there is a risk in using short
hedging by (i) selling Stock Index Futures or (ii) purchasing puts on stock
indices or Stock Index Futures to attempt to protect
14
<PAGE>
against declines in the value of the Fund's equity securities. The risk is that
the prices of Stock Index Futures will correlate imperfectly with the behavior
of the cash (i.e., market value) prices of the Fund's equity securities. The
ordinary spreads between prices in the cash and futures markets are subject to
distortions, due to differences in the natures of those markets. First, all
participants in the futures markets are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close out futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures markets depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures markets could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures
markets are less onerous than margin requirements in the securities markets.
Therefore, increased participation by speculators in the futures markets may
cause temporary price distortions.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable index.
To compensate for the imperfect correlation of movements in the price of the
equity securities being hedged and movements in the price of the hedging
instruments, the Fund may use hedging instruments in a greater dollar amount
than the dollar amount of equity securities being hedged if the historical
volatility of the prices of the equity securities being hedged is more than the
historical volatility of the applicable index. It is also possible that if the
Fund has used hedging instruments in a short hedge, the market may advance and
the value of equity securities held in the Fund's portfolio may decline. If that
occurred, the Fund would lose money on the hedging instruments and also
experience a decline in value in its portfolio securities. However, while this
could occur for a very brief period or to a very small degree, over time the
value of a diversified portfolio of equity securities will tend to move in the
same direction as the indices upon which the hedging instruments are based.
If the Fund uses hedging instruments to establish a position in the
equities markets as a temporary substitute for the purchase of individual equity
securities (long hedging) by buying Stock Index Futures and/or calls on such
Futures, on securities or on stock indices, it is
possible that the market may decline.
If the Fund then concludes not to invest in equity securities at that time
because of concerns as to a possible further market decline or for other
reasons, the Fund will realize a loss on the hedging instruments that is not
offset by a reduction in the price of the equity securities purchased.
Other Investment Restrictions
The Fund's most significant investment restrictions are set forth in the
Prospectus. The following are also fundamental policies, and together with the
Fund's fundamental policies described in the
15
<PAGE>
Prospectus, cannot be changed without the approval of a "majority" of the Fund's
outstanding voting securities. Such a "majority" vote is defined in the
Investment Company Act as the vote of the holders of the lesser of: (i) 67% or
more of the shares present or represented by
proxy at a shareholders meeting,
if the holders of more than 50% of the outstanding shares are present or
represented by proxy; or (ii) more than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot do any of the
following:
o invest in commodities or in commodities contracts, other than the hedging
instruments permitted by any of its other investment policies, whether or
not any such hedging instrument is considered to be a commodity or a
commodity contract;
o lend money, but the Fund can engage in repurchase transactions and can
invest in all or a
portion of an issue of bonds, debentures, commercial paper, or other
similar corporate
obligations, whether or not publicly distributed, provided that the
Fund's purchase of obligations
that are not publicly distributed shall be subject to any applicable
percentage limitation on the
Fund's holdings of illiquid and restricted securities; the Fund may
also lend its portfolio
securities, subject to any restrictions adopted by the Board of
Trustees and set forth in the
Prospectus;
o underwrite securities of other companies, except to the extent that it
might be deemed to be an underwriter for purposes of the Securities Act
of 1933 in the resale of any securities held in its own portfolio;
o invest in real estate, but may purchase readily marketable securities of
companies holding real estate of interest therein; or
o issue "senior securities," but this does not prohibit it from borrowing
money for investment or emergency purposes, or entering into margin,
collateral or escrow arrangements as permitted by its other invest
policies.
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; or
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.
16
<PAGE>
The percentage restrictions described above and in the Prospectus 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 Appendix A to this Statement of Additional
Information. This is not a fundamental
policy.
How the Fund Is Managed
Organization of the Fund. As a Massachusetts business trust, the Fund is not
required to hold, and does not plan to hold, regular annual meetings of
shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder meeting is
called by the Trustees or upon proper request of the shareholders. Shareholders
have the right, upon the declaration in writing or vote of two-thirds of the
outstanding shares of the Fund, to remove a Trustee. The Trustees will call a
meeting of shareholders to vote on the removal of a Trustee upon the written
request of the record holders of 10% of its outstanding shares. In addition, if
the Trustees receive a request from at least 10 shareholders (who have been
shareholders for at least six months) holding shares of the Fund valued at
$25,000 or more or holding at least 1% of the Fund's outstanding shares,
whichever is less, stating that they wish to communicate with other shareholders
to request a meeting to remove a Trustee, the Trustees will then either make the
Fund's shareholder list available to the applicants or mail their communication
to all other shareholders at the applicants' expense, or the Trustees may take
such other action as set forth under Section 16(c) of the Investment Company
Act.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides for
indemnification and reimbursement of expenses out of its property for any
shareholder held personally liable for its obligations. The Declaration of Trust
also provides that the Fund shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Fund and satisfy
any judgment thereon. Thus, while Massachusetts law permits a shareholder of a
business trust (such as the Fund) to be held personally liable as a "partner"
under certain circumstances, the risk of a Fund shareholder incurring financial
loss on account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any shareholder
of the Trust, agrees under the Trust's Declaration of Trust to look solely to
the assets of the Trust for satisfaction of any claim or demand which may arise
out of any dealings with the Trust, and the Trustees shall have no personal
liability to any such person, to the extent permitted by law.
Trustees and Officers of the Fund. The Fund's Trustees and officers and their
principal occupations and business affiliations and occupations during the past
five years are set forth below. The address for each Trustee and officer is Two
World Trade Center, New York, New York 10048-0203, unless another address is
listed below. All of the Trustees are also trustees or directors of Oppenheimer
Growth Fund, Oppenheimer Municipal Bond Fund, Oppenheimer Money Market Fund,
Inc., Oppenheimer Capital Appreciation Fund, Oppenheimer U.S. Government Trust,
Oppenheimer New York Municipal Fund, Oppenheimer California Municipal Fund,
Oppenheimer Multi-State Municipal Trust, Oppenheimer Multiple Strategies Fund,
Oppenheimer Developing Markets Fund, Oppenheimer Gold & Special Minerals Fund,
Oppenheimer Discovery Fund, Oppenheimer Enterprise Fund, Oppenheimer Series
Fund, Inc., Oppenheimer International Growth Fund, Oppenheimer Global Fund,
Oppenheimer Global
17
<PAGE>
Growth & Income Fund, Oppenheimer Multi-Sector Income Trust and Oppenheimer
World Bond Fund (collectively, the "New York-based Oppenheimer funds"), except
that Ms. Macaskill is not a director of Oppenheimer Money Market Fund, Inc. Ms.
Macaskill and Messrs. Bishop, Bowen, Donohue, Farrar and Zack, respectively,
hold the same offices with the other New York-based Oppenheimer funds as with
the Fund. 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.
Leon Levy, Chairman of the Board of Trustees; Age 71
31 West 52nd Street, New York, NY 10019
General Partner of Odyssey Partners, L.P. (investment partnership)(since
1982) and Chairman of
Avatar Holdings, Inc. (real estate development).
Robert G. Galli, Trustee*; Age 64
Vice Chairman of OppenheimerFunds, Inc. (the "Manager") (since October
1995); formerly he held
the following positions: Vice President and Counsel of Oppenheimer
Acquisition Corp. ("OAC"), the
Manager's parent holding company; Executive Vice President , General
Counsel and a director of
the Manager and OppenheimerFunds Distributor, Inc. (the "Distributor"), Vice
President and a director
of HarbourView Asset Management Corporation ("HarbourView") and Centennial
Asset Management
Corporation ("Centennial"), investment adviser subsidiaries of the Manager, a
director of Shareholder
Financial Services, Inc. ("SFSI") and Shareholder Services, Inc. ("SSI"),
transfer agent subsidiaries of
the Manager and an officer of other Oppenheimer funds.
Benjamin Lipstein, Trustee; Age 74
591 Breezy Hill Road, Hillsdale, N.Y. 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York
University; a director of Sussex Publishers, Inc (Publishers of Psychology
Today and Mother Earth
News) and of Spy Magazine, L.P.
{* 1 moved from here; text not shown}
Bridget A. Macaskill, President and Trustee*; Age 49
President (since June 1991), Chief Executive Officer (since September 1995)
and a Director (since December 1994) of the Manager and 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 the Manager; a director of Oppenheimer Real Asset Management, Inc. (since
July 1996); President and a director (since October 1997) of OppenheimerFunds
International Ltd., an offshore fund manager subsidiary of the Manager ("OFIL")
and Oppenheimer Millennium Funds plc (since October 1997); President and a
director of other Oppenheimer funds; a director of the NASDAQ Stock Market,
Inc. and of Hillsdown Holdings plc (a U.K. food company); formerly an
Executive Vice President of the Manager.
18
<PAGE>
Elizabeth B. Moynihan, Trustee; Age 67
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the Freer Gallery of Art
(Smithsonian Institution), the Institute of Fine Arts (New York University),
National Building Museum; a member of the Trustees Council, Preservation League
of New York State, and of the Indo-U.S. Sub-Commission on Education and Culture.
Kenneth A. Randall, Trustee; Age 70
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding company),
Dominion Energy, Inc. (electric power and oil & gas producer), Texan
Cogeneration Company (cogeneration company), Prime Retail, Inc. (real estate
investment trust); formerly President and Chief Executive Officer of The
Conference Board, Inc. (international economic and business research) and a
director of Lumbermens Mutual Casualty Company, American Motorists Insurance
Company and American Manufacturers Mutual Insurance Company.
- -------------------
** 1 *A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Edward V. Regan, Trustee; Age 67
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New York; Senior
Fellow of Jerome Levy Economics Institute, Bard College; a member of the U.S.
Competitiveness Policy Council; a director of GranCare, Inc. (health care
provider); a director of River Bank America (real estate manager); Trustee,
Financial Accounting Foundation (FASB and GASB); formerly New York State
Comptroller and trustee, New York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Trustee; Age 65
8 Sound Shore Drive, Greenwich, Connecticut 06830
Founder Chairman of Russell Reynolds Associates, Inc. (executive recruiting);
Chairman of Directorship
Inc. (corporate governance consulting); a director of Professional Staff
Limited (U.K); a
trustee of Mystic Seaport Museum, International House and Greenwich
Historical Society.
Donald W. Spiro, Vice Chairman and Trustee*; Age 71
Chairman Emeritus (since August 1991) and a director (since January 1969) of
the Manager; formerly Chairman of the Manager and the Distributor.
Pauline Trigere, Trustee; Age 84
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and sale of
women's fashions).
{* 2 moved from here; text not shown}
Clayton K. Yeutter, Trustee; Age 66
1325 Merrie Ridge Road, McLean, Virginia 22101
19
<PAGE>
Of Counsel, Hogan & Hartson (a law firm); a director of B.A.T. Industries,
Ltd. (tobacco and financial
services), Caterpillar, Inc. (machinery), ConAgra, Inc. (food and
agricultural products), Farmers
Insurance Company (insurance), FMC Corp. (chemicals and machinery)
and Texas Instruments, Inc. (electronics); formerly (in
descending chronological order)
IMC Global Inc. (chemicals and animal feed), Counsellor to the President
(Bush) for Domestic Policy,
Chairman of the Republican National Committee, Secretary of the U.S.
Department of Agriculture, and
U.S. Trade Representative.
Andrew J. Donohue, Secretary; Age 47
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President (since September 1993), and a director (since January 1992) of the
Distributor; Executive Vice President, General Counsel and a director of
HarbourView, SSI, SFSI and Oppenheimer Partnership Holdings, Inc. since
(September 1995) and MultiSource Services, Inc. (a broker-dealer) (since
December 1995); President and a director of Centennial (since September
1995); President and a director of Oppenheimer Real Asset Management, Inc.
(since July 1996); General Counsel (since May 1996) and Secretary (since April
1997) of OAC; Vice President of OFIL and Oppenheimer Millennium Funds plc (since
October 1997); an officer of other Oppenheimer funds.
- -------------------
** 2 *A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
George C. Bowen, Treasurer; Age 60
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President (since September 1987) and Treasurer (since March 1985)
of the Manager; Vice President (since June 1983) and Treasurer (since March
1985) of the Distributor; Vice President (since October 1989) and Treasurer
(since April 1986) of HarbourView; Senior Vice President (since February 1992),
Treasurer (since July 1991)and a director (since December 1991) of Centennial;
President, Treasurer and a director of Centennial Capital Corporation (since
June 1989); Vice President and Treasurer (since August 1978) and Secretary
(since April 1981) of SSI; Vice President, Treasurer and Secretary of SFSI
(since November 1989); Treasurer of OAC (since June 1990); Treasurer of
Oppenheimer Partnership Holdings, Inc. (since November 1989); Vice President and
Treasurer of Oppenheimer Real Asset Management, Inc. (since July 1996); Chief
Executive Officer, Treasurer and a director of MultiSource Services, Inc., a
broker-dealer (since December 1995); an officer of other Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer; Age 38
6803 South Tucson Way, Englewood, Colorado 80112
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Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
Scott T. Farrar, Assistant Treasurer; Age 31
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996);
Assistant Treasurer of Oppenheimer Millennium Funds plc (since October 1997);
an officer of other Oppenheimer funds; formerly an Assistant Vice President of
the Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller
for the Manager.
Robert G. Zack, Assistant Secretary; Age 49
Senior Vice President (since May 1985) and Associate General Counsel (since
May 1981) of the Manager, Assistant Secretary of SSI (since May 1985), and
SFSI (since November 1989); Assistant Secretary of Oppenheimer Millennium Funds
plc (since October 1997); an officer of other Oppenheimer funds.
Nicholas Horsley, Vice President and Portfolio Manager; Age 38
Vice President of the Manager (since October 1997); previously a Portfolio
Manager with Warburg
, Pincus Counsellors, Inc. (September 1993 - October
1997), and an analyst
and portfolio manager at BZW/Barclays Investment Management Limited
(September 1981 - September
1993).
o Remuneration of Trustees. The officers of the Fund and certain Trustees of
the Fund (Ms. Macaskill and Messrs. Galli and Spiro; Ms. Macaskill is also an
officer) who are affiliated with the Manager receive no salary or fees from the
Fund. The remaining Trustees of the Fund received the compensation shown below
from the Fund. The compensation from all of the New York-based Oppenheimer funds
includes the Fund and is compensation received as a director, trustee or member
of a committee of the Board of those funds during the calendar year 1996.
Total Compensation
From All
New York-based
Name and Position Oppenheimer Funds1
Leon Levy, Chairman $152,750
and Trustee
Benjamin Lipstein, $ 91,350
Study Committee
Chairman, Audit Committee
Member and Trustee2
Elizabeth B. Moynihan, $ 91,350
Study Committee
Member and Trustee
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<PAGE>
Kenneth A. Randall, $ 83,450
Audit Committee Chairman
and Trustee
Edward V. Regan, $ 78,150
Proxy Committee Chairman,
Audit Committee
Member and Trustee
Russell S. Reynolds, Jr., $ 58,800
Proxy Committee Member
and Trustee
Pauline Trigere, Trustee $ 55,300
Clayton K. Yeutter, Proxy $ 58,800
Committee Member and
Trustee
- ----------------------
1 For the 1996 calendar year.
2 Committee position held during a portion of the period shown.
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.
The Fund has adopted a retirement plan that provides for payment to a
retired Trustee of up to 80% of the average compensation paid during that
Trustee's five years of service in which the highest compensation was received.
A Trustee must serve in that capacity for any of the New York-based Oppenheimer
funds for at least 15 years to be eligible for the maximum payment. Because each
Trustee's Retirement benefits will depend on the amount of the Trustee's future
compensation and length of service, the amount of those benefits cannot be
determined at this time, nor can the Fund estimate the number of years of
credited service that will be used to determine those benefits.
o Major Shareholders. As of the date of this Statement of Additional
Information, the
Manager was the sole initial shareholder of the Fund's Class A, Class B and
Class C shares.
22
<PAGE>
The Manager and Its Affiliates. The Manager is wholly-owned by Oppenheimer
Acquisition Corp.
("OAC"), a holding company controlled by Massachusetts Mutual Life Insurance
Company. OAC is
also owned in part by certain of the Manager's directors and officers, some
of whom also serve as
officers of the Fund, and three of whom (Ms. Macaskill and Messrs. Spiro and
Galli) serve as Trustees
of the Fund.
The Manager and the Fund have a Code of Ethics. It is designed to detect
and prevent improper personal trading by certain employees, including portfolio
managers, that would compete with or take advantage of the Fund's portfolio
transactions. Compliance with the Code of Ethics is carefully monitored and
strictly enforced by the Manager.
o Portfolio Management. The Portfolio Manager of the Fund is Nicholas
Horsley, who is
principally responsible for the day-to-day management of the Fund's
portfolio. Mr. Horsley's
background is described in the Prospectus under "Portfolio Manager."
o The Investment Advisory Agreement. A management fee is payable monthly
to the Manager under the terms of the investment advisory agreement between the
Manager and the Fund and is computed on the aggregate net assets of the Fund as
of the close of business each day. The investment advisory agreement requires
the Manager, at its expense, to provide the Fund with adequate office space,
facilities and equipment, and to provide and supervise the activities of all
administrative and clerical personnel required to provide effective corporate
administration for the Fund, including the compilation and maintenance of
records with respect to its operations, the preparation and filing of specified
reports, and composition of proxy materials and registration statements for
continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the advisory agreement
or by the Distributor under the General Distributor's Agreement are paid by the
Fund. The advisory agreement lists examples of expenses paid by the Fund, the
major categories of which relate to interest, taxes, brokerage commissions, fees
to certain Trustees, legal and audit expenses, custodian and transfer agent
expenses, share issuance costs, certain printing and registration costs and
non-recurring expenses, including litigation costs.
The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence in the performance of its duties, or reckless disregard
for its obligations and duties thereunder, the Manager is not liable for any
loss sustained by reason of good faith errors or omissions in connection with
any matters to which the Agreement relates. The Agreement permits the Manager to
act as investment 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 and Class C shares but is not
obligated to sell a specific number of shares. Expenses normally attributable to
sales, (excluding payments under the Distribution and Service Plans but
including advertising and the cost of printing and mailing prospectuses, other
than those furnished to existing
23
<PAGE>
shareholders), are borne by the Distributor. For additional information about
distribution of the Fund's shares and the payments made by the Fund to the
Distributor in connection with such activities, please refer to "Distribution
and Service Plans," below.
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 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 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. Purchases of securities from underwriters
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers include a spread between the bid and asked price.
Under the Investment Advisory Agreement, the Manager is authorized to
select brokers that provide brokerage and/or research services for the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher than
another qualified broker would have charged if a good faith determination is
made by the Manager that the commission is fair and reasonable in relation to
the services provided. Subject to the foregoing considerations, the Manager may
also consider sales of shares of the Fund and other investment companies managed
by the Manager or its affiliates as a factor in the selection of brokers for the
Fund's portfolio transactions.
Description of Brokerage Practices Followed by the Manager. Subject to the
provisions of the Investment Advisory Agreement, and the procedures and rules
described above, allocations of brokerage are generally made by the Manager's
portfolio traders based upon recommendations from the Manager's portfolio
managers. In certain instances, portfolio managers may directly place trades and
allocate brokerage, also subject to the provisions of the 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 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
24
<PAGE>
actually placed for each account. Option commissions may be relatively higher
than those which would apply to direct purchases and sales of portfolio
securities.
The research services provided by a particular broker may be useful only
to one or more of the advisory accounts of the Manager and its affiliates, and
investment research received for the commissions of those other accounts may be
useful both to the Fund and one or more of such other accounts. Such research,
which may be supplied by a third party at the instance of a broker, includes
information and analyses on particular companies and industries as well as
market or economic trends and portfolio strategy, receipt of market quotations
for portfolio evaluations, information systems, computer hardware and similar
products and services. If a research service also assists the Manager in a
non-research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the Manager in
the investment decision-making process may be paid for in commission dollars.
The Board of Trustees has permitted the Manager to use concessions on fixed
price offerings to obtain research, in the same manner as is permitted for
agency transactions. The Board has also permitted the Manager to use stated
commissions on secondary fixed-income agency trades to obtain research where the
broker has represented to the Manager that: (i) the trade is not from or for the
broker's own inventory, (ii) the trade was executed by the broker on an agency
basis at the stated commission, and (iii) the trade is not a riskless principal
transaction.
The research services provided by brokers broaden the scope and supplement
the research activities of the Manager, by making available additional views for
consideration and comparisons, and by enabling the Manager to obtain market
information for the valuation of securities held in the Fund's portfolio or
being considered for purchase. The Board of Trustees, including the
"independent" Trustees of the Fund (those Trustees of the Fund who are not
"interested persons" as defined in the Investment Company Act, and who have no
direct or indirect financial interest in the operation of the advisory agreement
or the Distribution Plans described below) annually reviews information
furnished by the Manager as to the commissions paid to brokers furnishing such
services so that the Board may ascertain whether the amount of such commissions
was reasonably related to the value or benefit of such services.
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
25
<PAGE>
by portfolio quality, the type of investments the Fund holds and its operating
expenses allocated to the particular class.
o Average Annual Total Returns. The "average annual total return" of each
class of shares is an average annual compounded rate of return for each year in
a specified number of years. It is the rate of return based on the change in
value of a hypothetical initial investment of $1,000 ("P" in the formula below)
held for a number of years ("n") to achieve an Ending Redeemable Value ("ERV")
of that investment, according to the following formula:
LEFT ( {~ERV~} OVER P~ right) SUP
{1/n}~-1~=~Average~Annual~Total~ Return
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: ALIGNC {ERV~-~ P~} over
P~ =~Total~ Return
In calculating total returns for Class A shares, the current maximum sales
charge of 5.75% (as a percentage of the offering price) is deducted from the
initial investment ("P") (unless the return is shown at net asset value, as
described below). For Class B shares, the payment of the applicable contingent
deferred sales charge (5.0% for the first year, 4.0% for the second year, 3.0%
for the third and fourth years, 2.0% in the fifth year, 1.0% in the sixth year
and none thereafter) is applied to the investment result for the period shown
(unless the total return is shown at net asset value, as described below). For
Class C shares, the payment of the 1.0% contingent deferred sales charge is
applied to the investment result for the one-year period (or less). Total
returns also assume that all dividends and capital gains distributions during
the period are reinvested to buy additional shares at net asset value per share,
and that the investment is redeemed at the end of the period.
o Total Returns at Net Asset Value. From time to time the Fund may also
quote an average annual total return at net asset value or a cumulative total
return at net asset value for Class A, Class B, or Class C shares. Each is based
on the difference in net asset value per share at the beginning and the end of
the period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into
consideration the reinvestment of dividends and capital gains distributions.
Total return information may be useful to investors in reviewing the
performance of the Fund's Class A, Class B or Class C shares. However, when
comparing total return of an investment in shares of the Fund with that of other
alternatives, investors should understand that as the Fund is an aggressive
equity fund seeking capital appreciation, its shares are subject to greater
market risks and volatility than shares of funds having other investment
objectives and that the Fund is designed for investors who are willing to accept
greater risk of loss in the hopes of realizing greater gains.
26
<PAGE>
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its Class A, Class B or Class C shares by Lipper Analytical Services,
Inc. ("Lipper"), a widely-recognized independent mutual fund monitoring service.
Lipper monitors the performance of regulated investment companies, including the
Fund, and ranks their performance for various periods based on categories
relating to investment objectives. The performance of the Fund's classes is
ranked against (i) all other funds, (ii) all other "international" funds and
(iii) all other "international" funds in a specific size category. The Lipper
performance rankings are based on total returns that include the reinvestment of
capital gain distributions and income dividends but do not take sales charges or
taxes into consideration.
From time to time the Fund may publish the star ranking of the performance
of its Class A, Class B and Class C 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 international 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 may include in its advertisements and sales
literature performance information about the Fund cited in other newspapers and
periodicals, such as The New York Times, which may include performance
quotations from other sources, including Lipper.
The total return on an investment in the Fund's Class A, Class B or Class
C shares may be compared with performance for the same period of the Morgan
Stanley World Index, an unmanaged index of issuers on the stock exchanges of 20
foreign countries and the United States and widely recognized as a measure of
global stock market performance. The performance of such Index includes a factor
for the reinvestment of dividends but does not reflect expenses or taxes. The
performance of the Fund's Class A, Class B or Class C shares may also be
compared in publications to (i) the performance of various market indices or to
other investments for which reliable performance data is
27
<PAGE>
available, and (ii) to averages, performance rankings or other benchmarks
prepared by recognized mutual fund statistical services.
From time to time, the Fund's Manager may publish rankings or ratings of
the Manager (or Transfer Agent) or the investor services provided by them to
shareholders of the Oppenheimer funds, other than performance rankings of the
Oppenheimer funds themselves. Those ratings or rankings of shareholder/investor
services by third parties may compare the Oppenheimer funds' services to those
of other mutual fund families selected by the rating or ranking services and may
be based upon the opinions of the rating or ranking service itself, based on its
research or judgment, or based upon surveys of investors, brokers, shareholders
or others.
Distribution and Service Plans
The Fund has adopted Distribution and Service Plans for Class A, 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. Each Plan has been approved by a vote of the
Manager as the initial shareholder of the Fund and will be submitted for
approval by 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.
In addition, under the Plans the Manager and the Distributor, in their
sole discretion, from time to time may use their own resources (which, in the
case of the Manager, may include profits from the advisory fee it receives from
the Fund) to make payments to brokers, dealers or other financial institutions
(each is referred to as a "Recipient" under the Plans) for distribution and
administrative services they perform, at no cost to the Fund. The Distributor
and the Manager may, in their sole discretion, increase or decrease the amount
of payments they make to Recipients from their own resources.
Unless terminated as described below, each Plan continues in effect from
year to year but only as long as its continuance is specifically approved at
least annually by the Fund's Board of Trustees and its Independent Trustees by a
vote cast in person at a meeting called for the purpose of voting on such
continuance. A Plan for a particular class may be terminated at any time by the
vote of a majority of the Independent Trustees or by the vote of the holders of
a "majority" (as defined in the Investment Company Act) of the outstanding
shares of that class. None of the Plans may be amended to increase materially
the amount of payments to be made unless such amendment is approved by
shareholders of the class affected by the amendment. In addition, because Class
B shares of the Fund automatically convert into Class A shares after six years,
the Fund is required by a Securities and Exchange Commission rule to obtain the
approval of Class B as well as Class A shareholders for a proposed amendment to
the Class A Plan that would materially increase the amount to be paid under the
Class A Plan. Such approval must be by a "majority" of the Class A and Class B
shares (as defined in the Investment Company Act), voting separately by class.
All material amendments must be approved by the Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall provide
separate written reports to the Fund's Board of Trustees at least quarterly on
the amount of all payments made pursuant to each Plan, the purpose for which the
payments were made and the identity of each Recipient that received any
28
<PAGE>
payment. The report for each Plan 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, did not exceed a minimum amount, if any, that may be
determined from time to time by a majority of the Fund's Independent Trustees.
Initially, the Board of Trustees has set the fees at the maximum rate and has
set no minimum amount of assets to qualify for payment.
Any unreimbursed expenses incurred by the Distributor with respect to
Class A shares for any fiscal year may not be recovered in subsequent years.
Payments received by the Distributor under the Plan for Class A shares will not
be used to pay any interest expense, carrying charge, or other financial costs,
or allocation of overhead by the Distributor.
The Class B and the Class C Plans allow the service fee payment to be paid
by the Distributor to Recipients in advance for the first year such shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. The advance payment is based on the net asset value of Class B and
Class C shares sold. An exchange of shares does not entitle the Recipient to an
advance service fee payment. In the event Class B or Class C shares are redeemed
during the first year that the shares are outstanding, the Recipient will be
obligated to repay to the Distributor a pro rata portion of the Distributor's
advance payment for those shares.
Although the Class B and Class C Plans permit the Distributor to retain
both the asset-based sales charges and the service fees on such shares, or to
pay Recipients the service fee on a quarterly basis, without payment in advance,
the Distributor presently intends to pay the service fee to Recipients in the
manner described above. A minimum holding period may be established from time to
time under the Class B Plan and the Class C Plan by the Board. Initially, the
Board has set no minimum holding period. All payments under the Class B Plan and
the Class C Plan are subject to the limitations imposed by the Conduct Rules of
the National Association of Securities Dealers, Inc., on payments of asset-based
sales charges and service fees.
The Class B and Class C Plans provide for the distributor to be
compensated at a flat rate, whether the Distributor's distribution expenses are
more or less than the amounts paid by the Fund during that period. Such payments
are made in recognition that the Distributor (i) pays sales commissions to
authorized brokers and dealers at the time of sale and pays service fees as
described in the Prospectus, (ii) may finance such commissions and/or the
advance of the service fee payment to Recipients under those Plans, or may
provide such financing from its own resources, or from an affiliate, (iii)
employs personnel to support distribution of shares, and (iv) may bear the costs
of sales literature, advertising and prospectuses (other than those furnished to
current shareholders), state "blue sky" registration fees and certain other
distribution expenses.
29
<PAGE>
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits the individual investor to
choose the method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor expects
to hold shares and other relevant circumstances. Investors should understand
that the purpose and function of the deferred sales charge and asset-based sales
charge with respect to Class B and Class C shares are the same as those of the
initial sales charge with respect to Class A shares. Any salesperson or other
person entitled to receive compensation for selling Fund shares may receive
different compensation with respect to one class of shares than the other. The
Distributor normally will not accept any order for $500,000 or $1 million or
more of Class B or Class C shares, respectively, on behalf of a single investor
(not including dealer "street name" or omnibus accounts) because generally it
will be more advantageous for that investor to purchase Class A shares of the
Fund instead.
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different shareholder
privileges and expenses.
The net income
attributable to Class A, Class B and Class C shares and the dividends payable on
such shares will be reduced by incremental expenses borne solely by those
classes, including the asset-based sales charges.
The conversion of Class B shares to Class A shares after six years is
subject to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax 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 and Class C shares recognizes two
types of expenses. General expenses that do not pertain specifically to a class
are allocated pro rata to the shares of each class, based on the percentage of
the net assets of such class to the Fund's total assets, and then equally to
each outstanding share within a given class. Such general expenses include (i)
management fees, (ii) legal, bookkeeping and audit fees, (iii) printing and
mailing costs of shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current shareholders, (iv) fees to
Independent Trustees, (v) custodian expenses, (vi) share issuance costs, (vii)
organization and start-up costs, (viii) interest, taxes and brokerage
commissions, and (ix) non-recurring expenses, such as litigation costs. Other
expenses that are directly attributable to a class are allocated equally to each
outstanding share within that class. Such expenses include (i) Distribution Plan
fees, (ii) incremental transfer and shareholder servicing agent fees and
expenses, (iii) registration fees and (iv) shareholder meeting expenses, to the
extent that such expenses pertain to a specific class rather than to the Fund as
a whole.
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Determination of Net Asset Values Per Share. The net asset values per share of
Class A, Class B and Class C shares of the Fund are determined as of the close
of business of The New York Stock Exchange (the "the Exchange") on each day that
the Exchange is open, by dividing the value of the Fund's net assets
attributable to that class by the number of shares of that class that are
outstanding. The Exchange normally closes at 4:00 P.M. New York time, but may
close earlier on some days (for example, in case of weather emergencies or on
days falling before a holiday). The Exchange's most recent annual announcement
(which is subject to change) states that it will close on New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. It may also close on other days. The Fund
may invest a substantial portion of its assets in foreign securities primarily
listed on foreign exchanges which may trade on Saturdays or customary U.S.
business holidays on which the Exchange is closed. Because the Fund's net asset
value will not be calculated on those days, the Fund's net asset values per
share of Class A, Class B and Class C shares of the Fund may be significantly
affected at times when shareholders cannot purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the valuation
of the Fund's securities, generally as follows: (i) equity securities traded on
a U.S. securities exchange or on the Automated Quotation System of the Nasdaq
Stock Market, Inc. ("NASDAQ") 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 sales 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
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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 New York Stock Exchange.
Events affecting the values of foreign securities traded in securities markets
that occur between the time their prices are determined and the close of the New
York Stock Exchange will not be reflected in the Fund's calculation of net asset
value unless the Board of Trustees or the Manager, under procedures established
by the Board of Trustees, determines that the particular event is likely to
effect a material change in the value of such security. Foreign currency,
including forward contracts, will be valued at the closing price in the London
foreign exchange market that day as provided by a reliable bank, dealer or
pricing service. The values of securities denominated in foreign currency will
be converted to U.S. dollars at the closing price in the London foreign exchange
market that day as provided by a reliable bank, dealer or pricing service.
Puts, calls and Futures are valued at the last sales price on the
principal exchange on which they are traded or on NASDAQ, as applicable, as
determined by a pricing service approved by the Board of Trustees or by the
Manager. If there were no sales that day, value shall be the last sale price on
the preceding trading day if it is within the spread of the closing "bid" and
"ask" prices on the principal exchange or on NASDAQ on the valuation date, or,
if not, value shall be the closing "bid" price on the principal exchange or on
NASDAQ on the valuation date. If the put, call or future is not traded on an
exchange or on NASDAQ, it shall be valued at the mean between "bid" and "ask"
prices obtained by the Manager from two active market makers (which in certain
cases may be the "bid" price if no "ask" price is available).
When the Fund writes an option, an amount equal to the premium received is
included in the Fund's Statement of Assets and Liabilities as an asset, and an
equivalent deferred credit is included in the liability section. The credit is
adjusted ("marked-to-market") to reflect the current market value of the call or
put. In determining the Fund's gain on investments, if a call or put written by
the Fund is exercised, the proceeds are increased by the premium received. If a
call or put written by the Fund expires, the Fund has a gain in the amount of
the premium; if the Fund enters into a closing purchase transaction, it will
have a gain or loss depending on whether the premium received was more or less
than the cost of the closing transaction. If the Fund exercises a put it holds,
the amount the Fund receives on its sale of the underlying investment is reduced
by the amount of premium paid by the Fund. In the case of foreign securities and
corporate bonds, when last sale information is not generally available, such
pricing procedures may include "matrix" comparisons to the prices for comparable
instruments on the basis of quality, yield, maturity and other special factors
involved. The Manager may use pricing services approved by the Board of Trustees
to price any of the types of securities described above. The Manager will
monitor the accuracy of such pricing services which may include by comparing
prices used for portfolio evaluation to actual sales prices of selected
securities.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25.00. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy shares. Dividends will begin to accrue on shares purchased by
the proceeds of ACH transfers on the business day the Fund receives Federal
Funds for the purchase through the ACH system before the close of the Exchange.
The Exchange normally closes at 4:00 P.M., but may close earlier on certain
days. If Federal Funds are received on a business day after the close of the
Exchange, the shares will be purchased and dividends will begin to accrue on the
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next regular business day. The proceeds of ACH transfers are normally received
by the Fund 3 days after the transfers are initiated. The Distributor and the
Fund are not responsible for any delays in purchasing shares resulting from
delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and Letters
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in the Prospectus
because the Distributor incurs little or no selling expenses. The term
"immediate family" refers to one's spouse, children, grandchildren,
grandparents, parents, parents-in-law, brothers and sisters, sons- and
daughters-in-law, aunts, uncles, nieces and nephews, a sibling's spouse and a
spouse's siblings. Relations by virtue of a remarriage (step-children,
step-parents, etc.) are included.
o The Oppenheimer Funds. The Oppenheimer funds are those mutual funds
for which the
Distributor acts as the distributor or the sub-distributor and include the
Fund and the following funds:
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer California Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Main Street California Municipal Fund Oppenheimer Florida Municipal
Fund Oppenheimer Pennsylvania Municipal Fund Oppenheimer New Jersey Municipal
Fund Oppenheimer Discovery Fund Oppenheimer Developing Markets Fund Oppenheimer
Capital Appreciation Fund Oppenheimer Growth Fund Oppenheimer Equity Income Fund
Oppenheimer MidCap Fund Oppenheimer Multiple Strategies Fund Oppenheimer Total
Return Fund, Inc. Oppenheimer Main Street Income & Growth Fund Oppenheimer High
Yield Fund Oppenheimer Champion Income Fund Oppenheimer Bond Fund Oppenheimer
Limited-Term Government Fund Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund Oppenheimer Global Fund Oppenheimer Global
Growth & Income Fund Oppenheimer U.S. Government Trust Oppenheimer International
Bond Fund Oppenheimer International Growth Fund Oppenheimer Enterprise Fund
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Oppenheimer Real Asset Fund Oppenheimer Quest Value Fund, Inc. Oppenheimer Quest
Opportunity Value Fund Oppenheimer Quest Small Cap Value Fund Oppenheimer Quest
Global Value Fund, Inc. Oppenheimer Quest Growth & Income Value Fund Oppenheimer
Quest Officers Value Fund Oppenheimer Quest Capital Value Fund, Inc. Oppenheimer
Bond Fund for Growth Oppenheimer Disciplined Value Fund Oppenheimer Disciplined
Allocation Fund Oppenheimer LifeSpan Balanced Fund Oppenheimer LifeSpan Income
Fund Oppenheimer LifeSpan Growth Fund Oppenheimer Bond Fund for Growth Limited
Term New York Municipal Fund Rochester Fund Municipals
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
o Letters of Intent. A Letter of Intent ("Letter") is the investor's
statement of intention to purchase Class A or Class A and Class B shares of the
Fund (and other eligible Oppenheimer funds) during the 13-month period from the
investor's first purchase pursuant to the Letter (the "Letter of Intent
period"), which may, at the investor's request, include purchases made up to 90
days prior to the date of the Letter. The Letter states the investor's intention
to make the aggregate amount of purchases (excluding any purchases made by
reinvestment of dividends or distributions or purchases made at net asset value
without sales charge), which together with the investor's holdings of such funds
(calculated at their respective public offering prices calculated on the date of
the Letter) will equal or exceed the amount specified in the Letter. This
enables the investor to count the shares to be purchased under the Letter of
Intent to obtain the reduced sales charge rate (as set forth in the Prospectus)
that applies under the Right of Accumulation to current purchases of Class A
shares. Each purchase of Class A shares under the Letter will be made at the
public offering price (including the sales charge) that applies to a single
lump-sum purchase of shares in the amount intended to be purchased under the
Letter.
In submitting a Letter, the investor makes no commitment to purchase shares,
but if the investor's purchases of shares within the Letter of Intent period,
when added to the value (at offering price) of the investor's holdings of shares
on the last day of that period, do not equal or exceed the intended purchase
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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.
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. 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 purchases 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 normally
will be no adjustment of commission previously paid to the broker-dealer or
financial institution of record for shares purchased for accounts held in the
name of that plan. If total eligible purchases during the Letter of Intent
period exceed the intended purchase amount and exceed the amount needed to
qualify for the next sales charge rate reduction set forth in the applicable
prospectus, the sales charges paid will be adjusted to the lower rate, but only
if and when the dealer returns to the Distributor the excess of the amount of
commissions allowed or paid to the dealer over the amount of commissions that
apply to the actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the investor's
account at the net asset value per share in effect on the date of such purchase,
promptly after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter, shares
redeemed by the investor prior to the termination of the Letter of Intent period
will be deducted. It is the responsibility of the dealer of record and/or the
investor to advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All of such
purchases must be made through the Distributor.
o Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary) made
pursuant to a Letter, shares of the Fund equal in value to 5% of the intended
purchase amount specified in the Letter shall be held in escrow by the Transfer
Agent. For example, if the intended purchase amount is $50,000, the escrow shall
be shares valued in the amount of $2,500 (computed at the public offering price
adjusted for a $50,000 purchase). Any dividends and capital gains distributions
on the escrowed shares will be credited to the investor's account.
2. If the intended purchase amount specified under the Letter is completed
within the thirteen-month Letter of Intent period, the escrowed shares will be
promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the total
purchases pursuant to the Letter are less than the intended purchase amount
specified in the Letter, the investor must remit to the Distributor an amount
equal to the difference between the dollar amount of sales charges actually paid
and the amount of sales charges which would have been paid if the total amount
purchased had been made at a single time. Such sales charge adjustment will
apply to any shares redeemed prior to the
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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 Class B shares acquired
in exchange for either (i) Class A shares of one of the other Oppenheimer funds
that were acquired subject to a Class A initial or contingent deferred sales
charge or (ii) Class B shares of one of the other Oppenheimer funds that were
acquired subject to a contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in the
section of the Prospectus entitled "How to Exchange Shares," and the escrow will
be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank account, a
check (minimum $25) for the initial purchase must accompany the application.
Shares purchased by Asset Builder Plan payments from bank accounts are subject
to the redemption restrictions for recent purchases described in "How To Sell
Shares," in the Prospectus. Asset Builder Plans also enable shareholders of
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 transactions.
There is a front-end sales charge on the purchase of certain Oppenheimer
funds, or a contingent deferred sales charge may apply to shares purchased by
Asset Builder payments. An application should be obtained from the Distributor,
completed and returned, and a prospectus of the selected fund(s) should be
obtained from the Distributor or your financial advisor before initiating Asset
Builder payments. The amount of the Asset Builder investment may be changed or
the automatic investments may be terminated at any time by writing to the
Transfer Agent. A reasonable period (approximately 15 days) is required after
the Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans at any
time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the Fund's
shares (for example, when a purchase check is returned to the Fund unpaid)
causes a loss to be incurred when the net asset value of the Fund's shares on
the cancellation date is less than on the purchase date. That loss is equal to
the amount of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is responsible for that
loss. If the investor fails to compensate the Fund for the loss, the Distributor
will do so. The Fund may reimburse the Distributor for that amount by
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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-1 under
the Investment Company Act, pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets of
the Fund during any 90-day period for any one shareholder. If shares are
redeemed in kind, the redeeming shareholder might incur brokerage or other costs
in selling the securities for cash. The method of valuing securities used to
make redemptions in kind will be the same as the method the Fund uses to value
its portfolio securities described above under the "Determination of Net Asset
Values Per Share" and that valuation will be made as of the time the redemption
price is determined.
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Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of (i) Class A shares that you
purchased subject to an initial sales charge, or (ii) Class B shares on which
you paid a contingent deferred sales charge when you redeemed them, without
sales charge. This privilege does not apply to Class C shares. The reinvestment
may be made without sales charge only in Class A shares of the Fund or any of
the other Oppenheimer funds into which shares of the Fund are exchangeable as
described below, at the net asset value next computed after the Transfer Agent
receives the reinvestment order. The shareholder must ask the Distributor for
that privilege at the time of reinvestment. Any capital gain that was realized
when the shares were redeemed is taxable, and reinvestment will not alter any
capital gains tax payable on that gain. If there has been a capital loss on the
redemption, some or all of the loss may not be tax deductible, depending on the
timing and amount of the reinvestment. Under the Internal Revenue Code, if the
redemption proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another of the Oppenheimer funds within 90
days of payment of the sales charge, the shareholder's basis in the shares of
the Fund that were redeemed may not include the amount of the sales charge paid.
That would reduce the loss or increase the gain recognized from the redemption.
However, in that case the sales charge would be added to the basis of the shares
acquired by the reinvestment of the redemption proceeds. The Fund may amend,
suspend or cease offering this reinvestment privilege at any time as to shares
redeemed after the date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a contingent
deferred sales charge of 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 the Class C
contingent deferred sales charge will be followed in determining the order in
which shares are transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 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 plans or 401(k)
plans may not directly redeem or exchange shares held for their accounts under
those plans. The employer or plan administrator must sign the request.
Distributions from pension
and profit sharing plans are subject to special requirements under the Internal
Revenue Code and certain documents (available from the Transfer Agent) must be
completed before the
distribution may be made.
Distributions from retirement plans are subject to withholding requirements
under the Internal Revenue Code, and IRS Form W-4P (available from the Transfer
Agent) must be submitted to the Transfer Agent with the distribution request, or
the distribution may be delayed. Unless the shareholder has provided the
Transfer Agent with a certified tax identification number, the Internal Revenue
Code requires that tax be withheld from any distribution even if the shareholder
elects not to have tax withheld. The Fund, the Manager, the Distributor, the
Trustee and the Transfer Agent assume no responsibility to determine
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whether a distribution satisfies the conditions of applicable tax laws and will
not be responsible for any tax penalties assessed in connection with a
distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers. The
Distributor is the
Fund's agent to repurchase its shares from authorized dealers or brokers on
behalf of their customers.
The shareholder should contact the broker or dealer to arrange this type of
redemption The repurchase price per share will be the net asset value next
computed after the Distributor receives the order placed by the dealer or
broker, except that if the Distributor receives a repurchase order from a dealer
or broker after the close of The New York Stock Exchange on a regular business
day, it will be processed at that day's net asset value if the order was
received by the dealer or broker from its customers prior to the time the
Exchange closed (normally that is 4:00 P.M., but may be earlier some days) and
the order was transmitted to and received by the Distributor prior to its close
of business that day (normally 5:00 P.M.). Ordinarily, for accounts redeemed by
a broker-dealer under this procedure, payment will be made within three business
days after the shares have been redeemed upon the Distributor's receipt of the
required redemption documents in proper form, with the signature(s) of the
registered owners guaranteed on the redemption 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 retirement plans may not be arranged on this basis. Payments
are normally made by check, but shareholders having AccountLink privileges (see
"How To Buy Shares") may arrange to have Automatic Withdrawal Plan payments
transferred to the bank account designated on the OppenheimerFunds New Account
Application or signature-guaranteed instructions. Shares are normally redeemed
pursuant to an Automatic Withdrawal Plan three business days before the date you
select in the Account Application. If a contingent deferred sales charge applies
to the redemption, the amount of the check or payment will be reduced
accordingly. The Fund cannot guarantee receipt of a payment on the date
requested and reserves the right to amend, suspend or discontinue offering such
plans at any time without prior notice. Because of the sales charge assessed on
Class A share purchases, shareholders should not make regular additional Class A
share purchases while participating in an Automatic Withdrawal Plan. Class B and
Class C shareholders should not establish withdrawal plans, because of the
imposition of the contingent deferred sales charge on such withdrawals (except
where the Class B or the Class C contingent deferred sales charge is waived as
described in the Prospectus in "Waivers of Class B and Class C Sales Charges").
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions applicable to such plans, as stated below as
well as the Prospectus. These provisions may be amended from time to time by the
Fund and/or the Distributor. When adopted, such amendments will automatically
apply to existing Plans.
o Automatic Exchange Plans. Shareholders can authorize the Transfer Agent
(on the OppenheimerFunds Application or signature-guaranteed instructions) to
exchange a pre-determined amount of shares of the Fund for shares (of the same
class) of other Oppenheimer funds automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount
that may be exchanged to each other fund account is $25. Exchanges made under
these plans
39
<PAGE>
are subject to the restrictions that apply to exchanges as set forth in "How to
Exchange Shares" in the Prospectus and below in this Statement of Additional
Information.
o Automatic Withdrawal Plans. Fund shares will be redeemed as necessary to
meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first and shares acquired with reinvested dividends and capital gains
distributions will be redeemed next, followed by shares acquired with a sales
charge, to the extent necessary to make withdrawal payments. Depending upon the
amount withdrawn, the investor's principal may be depleted. Payments made under
withdrawal plans should not be considered as a yield or income on your
investment. It may not be desirable to purchase additional Class A shares while
making automatic withdrawals because of the sales charges that apply to
purchases when made. Accordingly, a shareholder normally may not maintain an
Automatic Withdrawal Plan while simultaneously making regular purchases of Class
A shares.
The Transfer Agent will administer the investor's Automatic Withdrawal Plan
(the "Plan") as agent for the investor (the "Planholder") who executed the Plan
authorization and application submitted to the Transfer Agent. Neither the Fund
nor the Transfer Agent shall incur any liability to the Planholder for any
action taken or omitted by the Transfer Agent in good faith to administer the
Plan. Certificates will not be issued for shares of the Fund purchased for and
held under the Plan, but the Transfer Agent will credit all such shares to the
account of the Planholder on the records of the Fund. Any share certificates
held by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of capital
gains must be reinvested in shares of the Fund, which will be done at net asset
value without a sales charge. Dividends on shares held in the account may be
paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made at the
net asset value per share determined on the redemption date. Checks or
AccountLink payments of the proceeds of Plan withdrawals will normally be
transmitted three business days prior to the date selected for receipt of the
payment (receipt of payment on the date selected cannot be guaranteed),
according to the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time in mailing such notification
for the requested change to be put in effect. The Planholder may, at any time,
instruct the Transfer Agent by written notice (in proper form in accordance with
the requirements of the then-current Prospectus of the Fund) to redeem all, or
any part of, the shares held under the Plan. In that case, the Transfer Agent
will redeem the number of shares requested at the net asset value per share in
effect in accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing to the
Transfer Agent. A Plan may also be terminated at any time by the Transfer Agent
upon receiving directions to that effect from the Fund. The Transfer Agent will
also terminate a Plan upon receipt of evidence satisfactory to it of the death
or legal incapacity of the Planholder. Upon termination of a Plan by the
Transfer Agent or the Fund, shares that have not been redeemed from the account
will be held in uncertificated form in the name of the Planholder, and the
account will continue as a dividend-reinvestment, uncertificated account
40
<PAGE>
unless and until proper instructions are received from the Planholder or his or
her executor or guardian, or other authorized person.
To use Class A shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the Class A shares in
certificated form. Share certificates are not issued for Class B shares or Class
C shares. Upon written request from the Planholder, the Transfer Agent will
determine the number of Class A shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of Oppenheimer
funds having more than one class of shares may be exchanged only for shares of
the same class of other Oppenheimer funds. Shares of the Oppenheimer funds that
have a single class without a class designation are deemed "Class A" shares for
this purpose. All Oppenheimer funds offer Class A, Class B and Class C shares
except Oppenheimer Money Market Fund, Inc., Centennial Money Market Trust,
Centennial Tax-Exempt Trust, Centennial Government Trust, Centennial New York
Tax-Exempt Trust, Centennial California Tax- Exempt Trust, Centennial America
Fund, L.P. and Daily Cash Accumulation Fund, Inc, which offer only Class A
shares, and Oppenheimer Main Street California Tax-Exempt Fund which only offers
Class A and Class B shares (Class B and Class C shares of Oppenheimer Cash
Reserves are generally only available by exchange from the same class of other
Oppenheimer funds or thorough OppenheimerFunds sponsored 401(k) plans). A
current list showing which funds offer which class can be obtained by calling
the Distributor at 1-800-525-7048.
For accounts established on or before March 8, 1996 holding Class M shares
of Oppenheimer Bond Fund for Growth, Class M shares can be exchanged only for
Class A shares of
other Oppenheimer funds.
For accounts of Oppenheimer Bond Fund for Growth established after March 8,
1996, Class M shares may be exchanged for Class A shares of other Oppenheimer
funds. Exchanges to Class M shares of Oppenheimer Bond Fund for Growth are
permitted from Class A shares of Oppenheimer Money Market Fund, Inc. or
Oppenheimer Cash Reserves that were acquired by exchange from Class M shares.
Otherwise no exchanges of any class of any Oppenheimer fund into Class M shares
are permitted.
Class A shares of Oppenheimer funds may be exchanged at net asset value for
shares of any Money Market Fund. Shares of any Money Market Fund purchased
without a sales charge may be exchanged for shares of Oppenheimer funds offered
with a sales charge upon payment of the sales charge (or, if applicable, may be
used to purchase shares of Oppenheimer funds subject to a contingent deferred
sales charge). However, shares of Oppenheimer Money Market Fund, Inc., purchased
with the redemption proceeds of shares of other mutual funds (other than funds
managed by the Manager or its subsidiaries) redeemed within the 12 months prior
to that purchase may subsequently be exchanged for shares of other Oppenheimer
funds without being subject to an initial or contingent deferred sales charge,
whichever is applicable. To qualify for this privilege, the investor or the
investor's dealer must notify the Distributor of eligibility for this privilege
at the time the shares of Oppenheimer Money Market Fund, Inc., are purchased,
and, if requested, must supply proof of entitlement to this privilege.
41
<PAGE>
Shares of this Fund acquired by reinvestment of dividends or distributions
from any other of the Oppenheimer funds (except Oppenheimer Cash Reserves) or
from any unit investment trust for which reinvestment arrangements have been
made with the Distributor may be exchanged at net asset value for shares of any
of the Oppenheimer funds. No contingent deferred sales charge is imposed on
exchanges of shares of any class purchased subject to a contingent deferred
sales charge. However, when Class A shares acquired by exchange of Class A
shares of other Oppenheimer funds purchased subject to a Class A contingent
deferred sales charge are redeemed within 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 6
years of the initial purchase of the exchanged Class B shares. The Class C
contingent deferred sales charge is imposed on Class C shares acquired by
exchange if they are redeemed within 12 months of the initial purchase of the
exchanged Class C shares.
When Class B shares or Class C shares are redeemed to effect an exchange,
the priorities described in "How To Buy Shares" in the Prospectus for the
imposition of the Class B or the Class C contingent deferred sales charge will
be followed in determining the order in which the shares are exchanged.
Shareholders should take into account the effect of any exchange on the
applicability and rate of any contingent deferred sales charge that might be
imposed in the subsequent redemption of remaining shares. Shareholders owning
shares of more than one class must specify whether they intend to exchange Class
A, Class B or Class C shares.
The Fund reserves the right to reject telephone or written exchange requests
submitted in bulk by anyone on behalf of more than one account. The Fund may
accept requests for exchanges of up to 50 accounts per day from representatives
of authorized dealers that qualify for this privilege. In connection with any
exchange request, the number of shares exchanged may be less than the number
requested if the exchange or the number requested would include shares subject
to a restriction cited in the Prospectus or this Statement of Additional
Information or would include shares covered by a share certificate that is not
tendered with the request. In those cases, only the shares available for
exchange without restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either have an
existing account in, or obtain and acknowledge receipt of a prospectus of, the
fund to which the exchange is to be made. For full or partial exchanges of an
account made by telephone, any special account features such as Asset Builder
Plans, Automatic Withdrawal Plans, and retirement plan contributions will be
switched to the new account unless the Transfer Agent is instructed otherwise.
If all telephone lines are busy (which might occur, for example, during periods
of substantial market fluctuations), shareholders might not be able to request
exchanges by telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the Transfer
Agent receives an exchange request in proper form (the "Redemption Date").
Normally, shares of the fund to be acquired are purchased on the Redemption
Date, but such purchases may be delayed by either fund up to five business days
if it determines that it would be disadvantaged by an immediate transfer of the
redemption proceeds. The Fund reserves the right, in its discretion, to refuse
any exchange request that may disadvantage it (for example, if the receipt of
multiple exchange requests from a dealer might require the disposition of
portfolio securities at a time or at a price that might be disadvantageous to
the Fund).
42
<PAGE>
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure that
the Fund selected is appropriate for his or her investment and should be aware
of the tax consequences of an exchange. For federal income tax purposes, an
exchange transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above, discusses some
of the tax consequences of reinvestment of redemption proceeds in such cases.
The Fund, the Distributor, and the Transfer Agent are unable to provide
investment, tax or legal advice to a shareholder in connection with an exchange
request or any other investment transaction.
Dividends, Capital Gains and Taxes
Tax Status of the Fund's Dividends and Distributions. The Federal tax treatment
of the Fund's dividends and capital gains distributions is explained in the
Prospectus under the caption "Dividends, Capital Gains and Taxes." Special
provisions of the Internal Revenue Code govern the eligibility of the Fund's
dividends for the dividends-received deduction for corporate shareholders.
Long-term capital gains distributions are not eligible for the deduction.
Because of the Fund's emphasis on foreign securities, it is unlikely that the
Fund's dividends will qualify for this deduction.
Under the Internal Revenue Code, by December 31 each year the Fund must
distribute 98% of its taxable investment income earned from January 1 through
December 31 of that year and 98% of its capital gains realized in the period
from August 1 of the prior year through July 31 of the current year, or else the
Fund must pay an excise tax on the amounts not distributed. While it is
presently anticipated that the Fund will meet those requirements, the Fund's
Board of Trustees and the Manager might determine in a particular year that it
would be in the best interest of shareholders for the Fund not to make such
distributions at the required levels and to pay the excise tax on the
undistributed amounts. That would reduce the amount of income or capital gains
available for distribution to shareholders.
If the Fund has more than 50% of its total assets invested in foreign
securities at the end of its fiscal year, it may elect the application of
Section 853 of the Internal Revenue Code to permit shareholders to take a credit
(or, at their option, a deduction) for foreign taxes paid by the Fund. Under
Section 853, shareholders would be entitled to treat the foreign taxes withheld
from interest and dividends paid to the Fund from its foreign investments as a
credit on their federal income taxes.
As an alternative,
shareholders could, if to their advantage, treat the foreign tax withheld as a
deduction from gross income in computing taxable income rather than as a tax
credit. In substance, the Fund's election would enable shareholders to benefit
from the same foreign tax credit or deduction that would be received if they had
been the record owners of the Fund's foreign securities and had paid foreign
taxes on the income received.
If the Fund qualifies as a "regulated investment company" under the Internal
Revenue Code, it will not be liable for Federal income taxes on amounts paid by
it as dividends and distributions. The Fund intends to qualify in the current
and future fiscal years, but reserves the
right not to do so. The Internal
Revenue Code contains a number of complex tests relating to such qualification,
and a Fund might not meet those tests in any particular year. For example, if
the Fund derives 30% or more of its gross income from the sale of securities
held less than three months, it may fail to qualify (see "Tax Aspects of Covered
Calls and Hedging Instruments," above). If it did not so qualify, the Fund would
be treated for tax purposes as an ordinary corporation and receive no tax
deduction for payments made to shareholders.
43
<PAGE>
Dividends, distributions and the proceeds of the redemption of Fund shares
represented by checks returned to the Transfer Agent by the Postal Service as
undeliverable will be invested in shares of Oppenheimer Money Market Fund, Inc.,
as promptly as possible after the return of such checks to the Transfer Agent to
enable the investor to earn a return on otherwise idle funds.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the same
class of any of the other Oppenheimer funds listed in "Reduced Sales Charges,"
above, at net asset value without sales charge. To elect this option, a
shareholder must notify the Transfer Agent in writing and either have an
existing account in the fund selected for reinvestment or must obtain a
prospectus for that fund and an application from the Distributor to establish an
account. The investment will be made at the net asset value per share in effect
at the close of business on the payable date of the dividend or distribution.
Dividends and/or distributions from shares of other Oppenheimer funds may be
invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities and handling the delivery of such securities to and from
the Fund. The Manager has represented to the Fund that the banking relationships
between the Manager and the Custodian have been and will continue to be
unrelated to and unaffected by the relationship between the Fund and the
Custodian. It will be the practice of the Fund to deal with the Custodian in a
manner uninfluenced by any banking relationship the Custodian may have with the
Manager and its affiliates. The Fund's cash balances with the Custodian in
excess of $100,000 are not protected by Federal deposit insurance. Such
uninsured balances at times may be substantial.
Independent Auditors. The independent auditors of the Fund audit the Fund's
financial statements and perform other related audit services. They also act as
auditors for certain other funds advised by the Manager.
44
<PAGE>
Independent Auditors' Report
The Board of Trustees and Shareholder
Oppenheimer International Small Company Fund:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer International Small Company Fund as of October 1, 1997. 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 in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. Our procedures include
confirmation of cash in bank by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of Oppenheimer
International Small Company Fund as of October 1, 1997 in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
- -----------------------------------
KPMG Peat Marwick LLP
Denver, Colorado
October 21, 1997
45
<PAGE>
46
<PAGE>
47
<PAGE>
Oppenheimer International Small Company Fund
Statement of Assets and Liabilities
October 1, 1997
ASSETS: Composite Class A Class B Class C
Cash $102,000
Deferred Organization Costs -
Note 3 14,000
Total Assets 116,000
LIABILITIES - Payable to
OppenheimerFunds, Inc. - _______
Note 3 $ 14,000
--------
Net Assets $102,000
NET ASSETS - Applicable to 10,000 Class A shares, 100 Class B shares and 100
Class
C shares of beneficial interest outs$102,000 $100,000 $1,000 $1,000
NET ASSET VALUE PER SHARE (net assets divided by 10,000, 100 and 100 shares of
beneficial interest for Class A,
Class B and Class C, respectively) $ 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
NOTES:
1. Oppenheimer International Small Company Fund (the "Fund"), a diversified,
open-end management
investment company, was formed on June 23, 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 and 100 Class C shares of beneficial
interest to
OppenheimerFunds, Inc. (OFI).
2. On August 7, 1997, the Fund's Board approved an Investment Advisory
Agreement with OFI which provides for a fee of 0.80% on the first $250
million of average annual net assets, 0.77% of the next $250 million, 0.75%
of the next $500 million, 0.69% of the next $1 billion and 0.67% of average
annual net assets in excess of $2 billion.
On August 7, 1997, the Fund's Board also approved a Service Plan and
Agreement for Class A shares and Distribution and Service 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
48
<PAGE>
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 Distribution
and Service 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.
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.
49
<PAGE>
Appendix A
Corporate Industry Classifications
Aerospace/Defense Air Transportation Auto Parts Distribution Automotive Bank
Holding Companies Banks Beverages Broadcasting Broker-Dealers Building Materials
Cable Television Chemicals Commercial Finance Computer Hardware Computer
Software Conglomerates Consumer Finance Containers Convenience Stores Department
Stores Diversified Financial Diversified Media Drug Stores Drug Wholesalers
Durable Household Goods Education Electric Utilities Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Utilities
Gold
Health Care/Drugs Health Care/Supplies & Services Homebuilders/Real Estate
Hotel/Gaming Industrial Services Information Technology Insurance Leasing &
Factoring Leisure Manufacturing Metals/Mining Nondurable Household Goods Oil -
Integrated Paper Publishing/Printing Railroads Restaurants Savings & Loans
Shipping Special Purpose Financial Specialty Retailing Steel Supermarkets
Telecommunications - Technology Telephone - Utility Textile/Apparel Tobacco Toys
Trucking Wireless Services
A-1
<PAGE>
APPENDIX B: DESCRIPTION OF RATINGS
Categories of Rating Services
Description of Moody's Investors Service, Inc. Bond Ratings
Aaa: Bonds which are rated "Aaa" are judged to be the best quality and to
carry the smallest degree of investment risk. Interest payments are protected by
a large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, the changes that can be
expected are most unlikely to impair the fundamentally strong position of such
issues.
Aa: Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group, they comprise what are generally known
as "high-grade" bonds. They are rated lower than the best bonds because margins
of protection may not be as large as with "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than those of
"Aaa" securities.
A: Bonds which are rated "A" possess many favorable investment attributes
and are to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
The investments in which the Fund will principally invest will be in the
lower-rated categories described below.
Baa: Bonds which are rated "Baa" are considered medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and have
speculative characteristics as well.
Ba: Bonds which are rated "Ba" are judged to have speculative elements;
their future cannot be considered well-assured. Often the protection of interest
and principal payments may be very moderate and not well safeguarded during both
good and bad times over the future. Uncertainty of position characterizes bonds
in this class.
B: Bonds which are rated "B" generally lack characteristics of desirable
investment. Assurance of
interest and principal payments or of maintenance of other terms of the
contract over any long period of
time may be small.
Caa: Bonds which are rated "Caa" are of poor standing and may be in
default or there may be
present elements of danger with respect to principal or interest.
Ca: Bonds which are rated "Ca" represent obligations which are
speculative in a high degree and
are often in default or have other marked shortcomings.
C: Bonds which are rated "C" are the lowest rated class of bonds and can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.
B-1
<PAGE>
Description of Standard & Poor's Corporation Bond Ratings
AAA: "AAA" is the highest rating assigned to a debt obligation and
indicates an extremely strong
capacity to pay principal and interest.
AA: Bonds rated "AA" also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from "AAA" issues only in small degree.
A: Bonds rated "A" have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to adverse effects of change in
circumstances and economic conditions.
The investments in which the Fund will principally invest will be in the
lower-rated categories, described below.
BBB: Bonds rated "BBB" are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the "A" category.
BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the obligation.
"BB" indicates the lowest degree of speculation and "CC" the highest degree.
While such bonds will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to adverse
conditions.
C: Bonds on which no interest is being paid are rated "C".
D: Bonds rated "D" are in payment default and payment of interest and/or
repayment of principal
is in arrears.
B-2
<PAGE>
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 Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
B-3
<PAGE>
OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
(a) Financial Statements:
(1) Financial Highlights (See Part A): Not applicable
(2) Report of Independent Auditors (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 6/23/97: Filed with
Registrant's Initial Registration Statement (Reg. No.
333-31537),
7/18/97, and incorporated herein by reference.
(2) By-Laws dated 6/23/97: Filed with Registrant's
Initial Registration Statement (Reg. No. 333-31537), 7/18/97,
and
incorporated herein by reference.
(3) Not applicable.
(4) (i) Specimen Class A Share Certificate: Filed
with Registrant's Initial Registration Statement (Reg. No. 333-
31537), 7/18/97, and incorporated herein by reference.
(ii) Specimen Class B Share Certificate: Filed
with Registrant's Initial Registration Statement (Reg. No. 333-
31537), 7/18/97, and incorporated herein by reference.
(iii) Specimen Class C Share Certificate: Filed
with Registrant's Initial Registration Statement (Reg. No. 333-
31537), 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 OppenheimerFunds Distributor, Inc.
Dealer Agreement: Filed with Post-Effective Amendment No. 14 of
Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850),
9/30/94,
and incorporated herein by reference.
(iii) Form of OppenheimerFunds Distributor, Inc.
Broker Agreement: Filed with Post-Effective Amendment No. 14 of
Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850),
9/30/94,
and incorporated herein by reference.
(iv) Form of OppenheimerFunds Distributor, Inc.
Agency Agreement: Filed with Post-Effective Amendment No. 14 of
Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850),
9/30/94,
and incorporated herein by reference.
(v) Broker Agreement between Oppenheimer Fund
Management, Inc. and Newbridge Securities, Inc. dated October 1,
1986: Previously filed with Post-Effective Amendment No. 25 to
the
Registration Statement of Oppenheimer Growth Fund (Reg. No. 2-
45272), 11/1/86, and refiled with Post-Effective Amendment No.
45
of Oppenheimer Growth Fund (Reg. No. 2-45272), 8/22/94 pursuant
to
Item 102 of Regulation S-T and incorporated herein by reference.
(7) Retirement Plan for Non-Interested Trustees or
Directors
dated June 7, 1990: Filed with Post-Effective Amendment No. 97
to
the Registration Statement of Oppenheimer Fund (File No. 2-
14586),
8/30/90, refiled with Post-Effective Amendment No. 45 of
Oppenheimer Growth Fund (Reg. No. 2-45272), 8/22/94,pursuant to
Item 102 of Regulation S-T, and incorporated herein by
reference.
(8) Custodian Agreement between Registrant
and The Bank of New York: Filed
herewith.
(9) Not applicable.
(10) Opinion and Consent of Counsel:
Filed herewith.
(11) Independent Auditors' Consent:
Filed herewith.
(12) Not applicable.
(13) Investment Letter from OppenheimerFunds, Inc. to
Registrant: Filed with Registrant's Pre-Effective
Amendment No. 1,
10/14/97, and incorporated herein by reference.
(14) (i) Form of prototype Standardized and Non-
Standardized Profit-Sharing Plans and Money Purchase Plans for
self-employed persons and corporations: Filed with
Post-Effective
Amendment No. 3 to the Registration Statement of Oppenheimer
Global
Growth & Income Fund (Reg. No. 33-23799), 1/31/92, and refiled
with
Post-Effective Amendment No. 7 to the Registration Statement of
Oppenheimer Global Growth & Income Fund (Reg. No. 33-23799),
12/1/94, pursuant to Item 102 of Regulation S-T, and
incorporated
herein by reference.
(ii) Form of Individual Retirement Account Trust
Agreement: Previously filed with Post-Effective Amendment No.
21 to
the Registration Statement of Oppenheimer U.S. Government Trust
(Reg. No. 2-76645), 8/25/93 and incorporated herein by
reference.
(iii) Form of Tax Sheltered Retirement Plan and
Custody Agreement for employees of public schools and tax-exempt
organizations: Previously filed with Post-Effective Amendment
No.
47 to the Registration Statement of Oppenheimer Growth Fund
(Reg.
No. 2-45272), 10/21/94, and incorporated herein by reference.
(iv) Form of Simplified Employee Pension IRA:
Previously filed with Post-Effective Amendment No. 42 to the
Registration Statement of Oppenheimer Equity Income Fund (Reg.
No.
2-33043), 10/28/94, and incorporated herein by reference.
(v) Form of Prototype 401(k) Plan: Previously
filed with Post-Effective Amendment No. 7 to the Registration
Statement of Oppenheimer Strategic Income & Growth Fund (Reg.
No.
33-47378), 9/28/95, and incorporated herein by reference.
(15) (i) Service Plan and
Agreement for Class A shares pursuant to Rule 12b-1: Filed
herewith.
(ii) Distribution and Service
Plan and Agreement for
Class B shares pursuant to Rule 12b-1: Filed
herewith.
(iii) Distribution and Service
Plan and Agreement
for Class C shares pursuant to 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.
(18) Oppenheimer Funds Multiple Class Plan under Rule
18f-3 dated 3/18/96: Previously filed with Post-Effective
Amendment
No. 38 to the Registration Statement of Oppenheimer High Yield
Fund
(Reg. No. 2-62076), 8/13/97, and incorporated herein by
reference.
-- Powers of Attorney and Certified Board
Resolutions: Filed with Registrant's Initial Registration
Statement (Reg. No.
333-31537), 7/18/97, and incorporated herein by reference.
Item 25. Persons Controlled by or Under Common Control with
Registrant
- --------
- --------------------------------------------------------
None
Item 26. Number of Holders of Securities
- -------- -------------------------------
Number of Record Holders
as of the date of this
Title of Class Registration Statement
-------------- -----------------------
Class A Shares of Beneficial Interest 1
Class B Shares of Beneficial Interest 1
Class C 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.
<TABLE>
<CAPTION>
Name and Current Position
with OppenheimerFunds, Inc. Other Business and
Connections During
("OFI") the Past Two Years
- ---------------------------
- ------------------------------------
<S> <C>
Mark J.P. Anson,
Vice President Vice President of Oppenheimer
Real Asset Management, Inc.
("ORAMI");
formerly Vice President of
Equity
Derivatives at Salomon
Brothers, Inc.
Peter M. Antos,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; a
Chartered Financial Analyst;
Senior
Vice President of HarbourView
Asset
Management Corporation
("HarbourView"); prior to
March, 1996
he was the senior equity
portfolio
manager for the Panorama
Series Fund,
Inc. (the "Company") and other
mutual
funds and pension funds
managed by G.R. Phelps & Co.
Inc. ("G.R.
Phelps"), the Company's former
investment adviser, which was a
subsidiary of Connecticut
Mutual Life
Insurance Company; was also
responsible for managing the
common
stock department and common
stock
investments of Connecticut
Mutual
Life Insurance Co.
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
Formerly a Vice President and
Senior
Portfolio Manager at First of
America
Investment Corp.
Beichert, Kathleen None.
Rajeev Bhaman,
Assistant Vice President Formerly Vice President
(January 1992 - February,
1996) of Asian Equities
for Barclays de Zoete Wedd,
Inc.
Robert J. Bishop,
Vice President
Vice
President of Mutual Fund
Accounting (since May 1996); an
officer of other Oppenheimer
funds;
formerly an Assistant Vice
President
of OFI/Mutual Fund Accounting
(April
1994-May 1996), and a Fund
Controller
for OFI.
George C. Bowen,
Senior Vice President & Treasurer
Vice President (since
June 1983) and Treasurer
(since March 1985) of
OppenheimerFunds Distributor,
Inc.
(the "Distributor")
; Vice
President
(since October 1989) and
Treasurer
(since April 1986) of
HarbourView;
Senior Vice President
(since
February
1992), Treasurer (since July
1991)and
a director (since December
1991) of
Centennial; President,
Treasurer and
a director of Centennial
Capital
Corporation (since June 1989);
Vice
President and Treasurer (since
August
1978) and Secretary (since
April
1981) of Shareholder Services,
Inc.
("SSI"); Vice President,
Treasurer
and Secretary of Shareholder
Financial
Services, Inc. ("SFSI")
(since November 1989);
Treasurer of Oppenheimer
Acquisition Corp. ("OAC")
(since June 1990); Treasurer of
Oppenheimer Partnership
Holdings,
Inc. (since November 1989);
Vice
President and Treasurer of
ORAMI
(since July 1996);
Chief Executive
Officer, Treasurer and a
director of
MultiSource Services, Inc., a
broker-
dealer (since December 1995);
an
officer of other Oppenheimer
funds.
Scott Brooks,
Vice President None.
Susan Burton,
Assistant Vice President None.
Adele Campbell,
Assistant Vice President & Assistant
Treasurer: Rochester Division Formerly Assistant Vice
President of Rochester Fund
Services, Inc.
Michael Carbuto,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of Centennial.
Ruxandra Chivu,
Assistant Vice President None.
H.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
Funds} 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.
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).
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, None.
Assistant Vice President
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Assistant Vice President None.
Jane Ingalls,
Vice President None.
Byron Ingram,
Assistant Vice President None.
Ronald Jamison,
Vice President Formerly Vice President and
Associate General Counsel at
Prudential
Securities, Inc.
Frank Jennings,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds;
formerly, a Managing Director
of
Global Equities at Paine
Webber's
Mitchell Hutchins division.
Thomas W. Keffer,
Senior Vice President Formerly Senior Managing
Director (1994 - 1996) of Van
Eck Global.
Avram Kornberg,
Vice President None.
Joseph Krist,
Assistant Vice President None.
Paul LaRocco,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds;
formerly, a Securities Analyst
for
Columbus Circle Investors.
Michael Levine,
Assistant Vice President None.
Shanquan Li,
Assistant Vice President Director of Board (since
2/96), Chinese Finance
Society; formerly,
Chairman (11/94-2/96), Chinese
Finance Society; and Director
(6/94-
6/95), Greater China Business
Networks.
Stephen F. Libera,
Vice President An officer and/or portfolio
manager for certain
Oppenheimer funds; a
Chartered Financial Analyst; a
Vice
President of HarbourView;
prior to
March 1996, the senior bond
portfolio
manager for Panorama Series
Fund
Inc., other mutual funds and
pension
accounts managed by G.R.
Phelps; also
responsible for managing the
public
fixed-income securities
department at
Connecticut Mutual Life
Insurance Co.
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 a director of other
Oppenheimer
funds; a director of the
NASDAQ
Stock Market, Inc. and of
Hillsdown
Holdings plc (a U.K. food
company);
formerly an Executive Vice
President
of OFI.
Wesley Mayer,
Vice President Formerly Vice President
(January, 1995 - June, 1996)
of Manufacturers
Life Insurance Company.
Loretta McCarthy,
Executive Vice President None.
Kevin McNeil,
Vice President Treasurer (September, 1994 -
present) for the Martin Luther
King Multi-
Purpose 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,
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.
Nancy Sperte,
Executive Vice President None.
Donald W. Spiro,
Chairman Emeritus and Director Vice Chairman and Trustee of
the New York-based Oppenheimer
Funds;
formerly Chairman of the
Manager and
the Distributor.
Richard A. Stein,
Vice President: Rochester Division Assistant Vice President
(since 1995) of Rochester
Capitol Advisors, L.P.
Arthur Steinmetz,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Ralph Stellmacher,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
John Stoma,
Senior Vice President, Director
Retirement Plans Formerly Vice President of
U.S. Group Pension Strategy
and Marketing for
Manulife Financial.
Michael C. Strathearn,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; a
Chartered Financial Analyst; a
Vice
President of HarbourView;
prior to
March 1996, an equity portfolio
manager for Panorama Series
Fund,
Inc. and other mutual funds and
pension accounts managed by
G.R.
Phelps.
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee,
Director or Managing Partner
of the Denver-
based Oppenheimer Funds;
President
and a Director of Centennial;
formerly President and
Director of
OAMC, and Chairman of the
Board of
SSI.
James Tobin,
Vice President None.
Jay Tracey,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly Managing Director of Buckingham
Capital Management.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant Treasurer Assistant Treasurer of the
Distributor and SFSI.
Ashwin Vasan,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
Dorothy Warmack,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
Jerry Webman,
Senior Vice President Director of New York-based
tax-exempt fixed income
Oppenheimer funds;
Formerly, Managing Director
and Chief
Fixed Income Strategist at
Prudential
Mutual Funds.
Christine Wells,
Vice President None.
Joseph Welsh,
Assistant Vice President None.
Kenneth B.White,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; a
Chartered Financial Analyst;
Vice
President of HarbourView;
prior to
March 1996, an equity portfolio
manager for Panorama Series
Fund,
Inc. and other mutual funds and
pension funds managed by G.R.
Phelps.
William L. Wilby,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of HarbourView.
Carol Wolf,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; Vice
President of Centennial; Vice
President, Finance and
Accounting and
member of the Board of
Directors of
the Junior League of Denver,
Inc.;
Point of Contact: Finance
Supporters
of Children; Member of the
Oncology
Advisory Board of the Childrens
Hospital; Member of the Board
of
Directors of the Colorado
Museum of
Contemporary Art.
Caleb Wong,
Assistant Vice President None.
Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel Assistant Secretary of
SSI (since
May 1985), and SFSI (since
November
1989); Assistant Secretary of
Oppenheimer
Millennium Funds plc
(since October 1997); an
officer of
other Oppenheimer funds.
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.
</TABLE>
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 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
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:
<TABLE>
<CAPTION>
Name & Principal Positions & Offices Positions &
Offices
Business Address with Underwriter with Registrant
- ---------------- -------------------
- -------------------
<S> <C> <C>
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 of
President & Director the Oppen-heimer 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
</TABLE>
(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) Not applicable.
C-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant 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 7th day of November, 1997.
OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
By: /s/ James C. Swain*
-------------------------
James C. Swain, Chairman
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities on
the dates indicated:
<TABLE>
<CAPTION>
Signatures: Title Date
- ----------- ----- ----
<S> <C> <C>
/s/ Leon Levy* Chairman of the
- -------------- Board of Trustees
November 7, 1997
Leon Levy
/s/ Donald W. Spiro* President, Principal
- -------------------- Executive Officer
Donald W. Spiro and Trustee
November 7, 1997
/s/ George Bowen* Treasurer and
- ----------------- Principal Financial
George Bowen and Accounting
Officer
November 7, 1997
/s/ Bridget A. Macaskill* Trustee
November 7, 1997
- ------------------------
Bridget A. Macaskill
/s/ Robert G. Galli* Trustee
November 7, 1997
- -------------------
Robert G. Galli
/s/ Benjamin Lipstein* Trustee
November 7, 1997
- ----------------------
Benjamin Lipstein
/s/ Kenneth A. Randall* Trustee
November 7, 1997
- -----------------------
Kenneth A. Randall
/s/ Russell S. Reynolds, JTrustee
November 7, 1997
- -----------------------------
Russell S. Reynolds, Jr.
/s/ Pauline Trigere* Trustee
November 7, 1997
- --------------------
Pauline Trigere
/s/ Elizabeth B. Moynihan*Trustee
November 7, 1997
- --------------------------
Elizabeth B. Moynihan
/s/ Clayton K. Yeutter* Trustee
November 7, 1997
- -----------------------
Clayton K. Yeutter
/s/ Edward V. Regan* Trustee
November 7, 1997
- --------------------
Edward V. Regan
*By: /s/ Robert G. Zack
-------------------------------------
Robert G. Zack, Attorney-in-Fact
</TABLE>
C-2
<PAGE>
OPPENHEIMER INTERNATIONAL SMALL COMPANY 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) Independent Auditors' Consent
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
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 17th day of November, 1997, by and
between OPPENHEIMER
INTERNATIONAL SMALL COMPANY 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.
<PAGE>
(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.
(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:
.80% of the first $250 million of aggregate net
assets;
.77% of the next $250 million;
.75% of the next $500 million;
.69% of the next $1 billion; and
.67% of aggregate net assets over $2 billion.
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
3
<PAGE>
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 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.
4
<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 INTERNATIONAL SMALL COMPANY FUND
By: /s/ Andrew J. Donohue
Andrew J. Donohue
Secretary
OPPENHEIMERFUNDS, INC.
By: /s/ Katherine P. Feld
Katherine P. Feld
Vice President & Secretary
ADVISORY\815
5
<PAGE>
GENERAL DISTRIBUTOR'S AGREEMENT
BETWEEN
OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
AND
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
Dated: November 17, 1997
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
Two World Trade Center, Suite 3400
New York, NY 10048
Dear Sirs:
OPPENHEIMER INTERNATIONAL SMALL COMPANY 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.
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
1
<PAGE>
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
2
<PAGE>
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
owner of the account; you agree that
the Fund shall be a third party beneficiary of
such indemnification.
3
<PAGE>
(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 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.
4
<PAGE>
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.
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, 1996. This
Agreement shall continue in effect from year to year thereafter, provided that
such
5
<PAGE>
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 INTERNATIONAL SMALL COMPANY
FUND
By:/s/ Andrew J. Donohue
Andrew J. Donohue
Secretary
Accepted:
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
By: /s/ Katherine P. Feld
Katherine P. Feld
Vice President & Secretary
7
<PAGE>
Letterhead of Gordon Altman Butowsky Weitzen Shalov & Wein
November 6, 1997
Oppenheimer International Small Company Fund
Two World Trade Center
New York, New York 10048
Ladies and Gentlemen:
This opinion is being furnished to Oppenheimer International Small
Company Fund, a Massachusetts business trust (the "Trust"), 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 Trust.
As counsel for the trust, we have
examined such statutes, regulations, corporate records and other documents and
reviewed such questions of law as we deemed necessary or appropriate for the
purposes of this opinion.
To the extent the opinions expressed herein relate to the laws of the
Commonwealth of Massachusetts, we have relied exclusively, with your consent,
upon the opinion of Shafner Gilleran & Mortensen, P.C., dated November 6, 1997.
Based upon the foregoing, we are of the opinion that the 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 Trust's Statement of Additional Information under
the caption "About the Fund - How the Fund is Managed Organization and
History").
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 Commission thereunder.
Very truly yours,
/s/ Gordon Altman Butowsky Weitzen
Shalov & Wein
Gordon Altman Butowsky
Weitzen Shalov & Wein
PROSP\815OPIN.#1
<PAGE>
Independent Auditors' Consent
The Board of Trustees
Oppenheimer International Small Company Fund:
We consent to the use of our report dated October 21, 1997
included
in the Registration Statement.
/s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Denver, Colorado
November 10, 1997
PROSP\815CON
SERVICE PLAN AND AGREEMENT
BETWEEN
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
AND
OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
FOR CLASS A SHARES
SERVICE PLAN AND AGREEMENT (the "Plan") dated the 17th day of November, 1997, by
and between OPPENHEIMER INTERNATIONAL SMALL COMPANY 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 Article III, Section 26 of the Rules
of Fair Practice of the National Association of Securities Dealers, pursuant to
which the Fund will reimburse the Distributor for a portion of its costs
incurred in connection with the that hold Class A Shares (the "Shares") of such
series and class 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 customers,
clients 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
as to such Shares for purposes of this Plan.
<PAGE>
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 of Trustees 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 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
<PAGE>
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 Fund's 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 7, 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 outstanding voting
securities of the Class. 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 above, and all material amendments must be approved by a
vote of the Board and of the Independent Trustees.
<PAGE>
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 INTERNATIONAL SMALL COMPANY
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\815.A
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
FOR CLASS B SHARES OF
OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 17th day of
November, 1997, by and between Oppenheimer International Small Company 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 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.
1
<PAGE>
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 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
2
<PAGE>
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 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.
3
<PAGE>
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. 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.
4
<PAGE>
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 7, 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
of the Declaration of Trust of the Fund disclaiming shareholder and Trustee
liability for acts or obligations of the Fund.
5
<PAGE>
OPPENHEIMER INTERNATIONAL SMALL COMPANY 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\815.B
6
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
FOR CLASS C SHARES OF
OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 17th day of
November, 1997, by and between Oppenheimer International Small Company 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 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
1
<PAGE>
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
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.
2
<PAGE>
(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 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.
3
<PAGE>
(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.
(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
4
<PAGE>
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 7, 1997, for the purpose of voting on this Plan, and
shall take effect on the date that the Fund's regsitration 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 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.
5
<PAGE>
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 INTERNATIONAL SMALL COMPANY 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\815.C
6
