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. / /
POST-EFFECTIVE AMENDMENT NO. 1 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 / X /
Amendment No. 3 / X /
-----
Oppenheimer International Small Company Fund
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(Exact Name of Registrant as Specified in Charter)
Two World Trade Center, New York, New York 10048-0203
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(Address of Principal Executive Offices)
212-323-0200
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(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
/ / Immediately upon filing pursuant to paragraph (b) / X / On May 15,
1998, 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.
<PAGE>
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 Financial Highlights; Performance of the Fund
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
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*Not applicable or negative answer.
<PAGE>
OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
Prospectus dated May 15, 1998
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 May 15,
1998 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
Financial Highlights
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.
Class A Class B Class C
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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
(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 18 calendar months (prior to June 1, 1998, within 12
months, or 18 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 a limited operating history, the
rates for the management fee and the 12b-1 fees are the maximum rates that can
be charged, and "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 $85 billion in assets as of March 31, 1998. 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 ___.
o How Has the Fund Performed? The Fund measures its performance by quoting
its average annual total returns and cumulative total returns which measure
historical performance. Those returns can be compared to the returns (over
similar periods) of other funds. Of course, other funds may have different
objectives, investments and levels of risk.
Financial Highlights (Unaudited)
The table on the following page presents unaudited selected financial
information about the Fund, including per share data, expense ratios and other
data for the period from November 17, 1997 (commencement of operations) through
February 28, 1998. The Fund's unaudited Semi-Annual Report for that period
appears in the Statement of Additional Information.
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------------ ------------ ------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED
FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
1998(1) 1998(1) 1998(1)
<S> <C> <C> <C>
===============================================================================================================
PER SHARE OPERATING DATA
Net asset value, beginning of period $10.00 $10.00 $10.00
- ---------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .01 (.01) (.02)
Net realized and unrealized gain 1.14 1.14 1.15
------ ------ ------
Total income from investment
operations 1.15 1.13 1.13
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.15 $11.13 $11.13
====== ====== ======
===============================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) 8.89% 8.80% 8.80%
===============================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $4,398 $844 $464
- ---------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $3,245 $329 $285
- ---------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 0.63% (0.52)% (0.87)%
Expenses 1.37% 2.17% 2.22%
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 61.4% 61.4% 61.4%
Average brokerage commission rate(5) $0.0092 $0.0092 $0.0092
</TABLE>
1. For the period from November 17, 1997 (commencement of operations) to
February 28, 1998. 2. Assumes a hypothetical initial investment on the business
day before the first day of the fiscal period (or commencement of operations),
with all dividends and distributions reinvested in additional shares on the
reinvestment date, and redemption at the net asset value calculated on the last
business day of the fiscal period. Sales charges are not reflected in the total
returns. Total returns are not annualized for periods of less than one full
year.
3. Annualized.
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended February 28, 1998 were $6,835,010 and $1,959,429, respectively. 5. Total
brokerage commissions paid on applicable purchases and sales of portfolio
securities for the period, divided by the total number of related shares
purchased and sold. Generally, non-U.S. commissions are lower than U.S.
commissions when expressed as cents per share but higher when expressed as a
percentage of transactions because of the lower per-share prices of many
non-U.S. securities.
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 total 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.
o 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.
|X| Year 2000 Risks. Because many computer software systems in use today
cannot distinguish the year 2000 from the year 1900, the markets for securities
in which the Fund invests could be detrimentally affected by computer failures
beginning January 1, 2000. Failures of computer systems used for securities
trading could result in settlement and liquidity problems for the Fund and other
investors. Data processing errors by corporate and government issuers of
securities could result in production problems and economic uncertainties, and
those issuers may incur substantial costs in attempting to prevent or fix such
errors, all of which could have a negative effect on the Fund's investment and
returns.
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 assets of more than $85 billion as of
March 31, 1998, including investment companies with more than 4 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.
The management services provided to the Fund by the Manager, and the
services provided by the Distributor and the Transfer Agent to shareholders,
depend on the smooth functioning of their computer systems. Many computer
software systems in use today cannot distinguish the year 2000 from the year
1900 because of the way dates are encoded and calculated. That failure could
have a negative impact on handling securities trades, pricing and account
services. The Manager, Distributor and Transfer Agent have been actively working
on necessary changes to their computer systems to deal with the year 2000 and
expect that their systems will be adapted in time for that event, although there
cannot be assurance of success. Additionally, because the services they provide
depend on the interaction of their computer systems with the computer systems of
brokers, information services and other parties, any failure on the part of the
computer systems of those third parties to deal with the year 2000 may also have
a negative effect on the services provided to the Fund.
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 18 months of buying them (prior to June 1, 1998, within 12 months,
or 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 Payments by Federal Funds Wire. Shares may be purchased by Federal Funds
wire. The minimum investment is $2,500. You must first call the Distributor's
Wire Department at 1-800-424-7041 to notify the Distributor of the wire and
receive further instructions.
o Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or other
financial institution that is an Automated Clearing House (ACH) member. You can
then transmit funds electronically to purchase shares, to have the Transfer
Agent send redemption proceeds, or to transmit dividends and distributions to
your bank account.
Shares are purchased for your account on 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, or the order is received and transmitted to the Distributor by
an entity authorized by the Fund to accept purchase or redemption orders. The
Fund has authorized the Distributor, certain broker-dealers and agents or
intermediaries designated by the Distributor or those broker-dealers to accept
orders. In most cases, to enable you to receive that day's offering price, the
Distributor or 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 normally
your order must be transmitted 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 on or after June 1, 1998 or 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 between May 1, 1997 and before June 1, 1998 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. Prior to June 1, 1998, 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 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 compensate it for
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.
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. The Distributor may pay the Class B 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 currently pays sales commissions of 0.75% of the purchase
price of Class C shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class C shares is therefore
1.00% of the purchase price. The Distributor plans to pay the asset-based sales
charge as an ongoing commission to the dealer on Class C shares that have been
outstanding for a year or more. The Distributor may pay the Class C service fee
and 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. At February 28, 1998, the Distributor had incurred
unreimbursed expenses under the Plan of $11,920 and $48 (equal to 1.41% and
0.01% of the Fund's net assets represented by Class B and Class C shares,
respectively, on that date).
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:
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.
OppenheimerFunds Internet Web Site. Information about the Fund, including your
account balance, daily share prices, market and Fund portfolio information, may
be obtained by visiting the OppenheimerFunds Internet Web Site, at the following
Internet address: http://www.oppenheimerfunds.com. Additionally, certain account
transactions may be requested by any shareholder listed in the registration on
an account as well as by the dealer representative of record through a special
section of that Web Site. To access that section of the Web Site you must first
obtain a personal identification number ("PIN") by calling OppenheimerFunds
PhoneLink at 1-800-533-3310. If you do not wish to have Internet account
transactions capability for your account, please call our customer service
representatives at 1-800-525-7048. To find out more information about Internet
transactions and procedures, please visit the Web Site.
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 and SIMPLE IRAs offered by employers
o 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations 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 correct and properly certified
Social Security or Employer Identification Number when you sign your
application, or if you underreport your income to the Internal Revenue Service
.
o The Fund does not charge a redemption fee, but if your dealer or broker
handles your redemption, they may charge a fee. That fee can be avoided by
redeeming your Fund shares directly through the Transfer Agent. Under the
circumstances described in "How To Buy Shares," you may be subject to a
contingent deferred sales charge when redeeming certain Class A, Class B and
Class C shares.
o To avoid sending duplicate copies of materials to households, the Fund
will mail only one copy of each annual and semi-annual report to shareholders
having the same last name and address on the Fund's records. However, each
shareholder may call the Transfer Agent at 1-800-525-7048 to ask that copies of
those materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B and Class
C shares from net investment income, if any, on an annual basis and normally
pays those dividends to shareholders in December, but the Board of Trustees can
change that date. The Board may also cause the Fund to declare dividends after
the close of the Fund's fiscal year (which ends August 31st). Because the Fund
does not have an objective of seeking current income, the amounts of dividends
it pays, if any, will likely be small. Dividends paid on Class A shares will
generally be higher than for Class B or Class C shares because expenses
allocable to Class B and Class C shares will generally be higher. 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". 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, respectively.
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.
-2-
<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.
A-1
<PAGE>
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
OppenheimerFunds Internet WebSite:
http://www.OppenheimerFunds.com
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.
PR0815.001.0598 [Recycled material Logo]
Printed on recycled paper
<PAGE>
Oppenheimer International Small Company Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated May
15, 1998
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
May 15, 1998. 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.................................2
Investment Policies and Strategies..............................2
Other Investment Techniques and Strategies......................7
Other Investment Restrictions..................................15
How the Fund is Managed..........................................16
Organization of the Fund.......................................16
Trustees and Officers of the Fund........................... 17
The Manager and Its Affiliates.............................. 23
Brokerage Policies of the Fund................................ 24
Performance of the Fund....................................... 25
Distribution and Service Plans................................ 28
About Your Account
How to Buy Shares........................................... 30
How to Sell Shares.......................................... 38
How to Exchange Shares...................................... 42
Dividends, Capital Gains and Taxes............................ 44
Additional Information About the Fund......................... 45
Financial Information About the Fund
Independent Auditors' Report.................................. 46
Financial Statements.......................................... 47
Appendix A: Corporate Industry Classifications.................A-1
Appendix B: Description of Ratings.............................B-1
Appendix C: Major Shareholders.................................C-1
<PAGE>
About the Fund
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and policies of the
Fund are described in the Prospectus. Set forth below is supplemental
information about those policies and the types of securities in which the Fund
may invest, as well as the strategies the Fund may use to try to achieve its
objective. Capitalized terms used in this Statement of Additional Information
have the same meanings as those terms have in the Prospectus.
In selecting securities for the Fund's portfolio, 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, 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 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.
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 other than
convertible securities or other securities convertible into equity 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, or
comparable unrated debt securities. 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 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.
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"). 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
purchases a call, it pays a premium (other than in a closing
purchase transaction) and, except as to calls
on stock indices, has the right to buy the underlying investment from a seller
of a corresponding call on the same investment during the call period at a fixed
exercise price. In purchasing a call, the Fund benefits only if the call is sold
at a profit or if, during the call period, the market price of the underlying
investment is above the sum of the call price, transaction costs, and the
premium paid, and the call is exercised. If the call is not exercised or sold
(whether or not at a profit), it will become worthless at its expiration date
and the Fund will lose its premium payment and the right to purchase the
underlying investment. When the Fund purchases a call on a stock index, it pays
a premium, but settlement is in cash rather than by delivery of the underlying
investment to the Fund.
When the Fund purchases a put, it pays a premium and, except as to puts on
stock indices, has the right to sell the underlying investment to a seller of a
corresponding put on the same investment during the put period at a fixed
exercise price. Buying a put on an investment the Fund owns (a "protective put")
enables the Fund to attempt to protect itself during the put period against a
decline in the value of the underlying investment below the exercise price by
selling the underlying investment at the exercise price to a seller of a
corresponding put. If the market price of the underlying investment is equal to
or above the exercise price and as a result the put is not exercised or resold,
the put will become worthless at its expiration and the Fund will lose the
premium payment and the right to sell the underlying investment. However, the
put may be sold prior to expiration (whether or not at a profit).
Puts and calls on broadly-based stock indices or Stock Index Futures are
similar to puts and calls on securities or futures contracts except that all
settlements are in cash and gain or loss depends on changes in the index in
question (and thus on price movements in the stock market generally) rather than
on price movements of individual securities or futures contracts. When the Fund
buys a call on a stock index or Stock Index Future, it pays a premium. If the
Fund exercises the call during the call period, a seller of a corresponding call
on the same investment will pay the Fund an amount of cash to settle the call if
the closing level of the stock index or Future upon which the call is based is
greater than the exercise price of the call. That cash payment is equal to the
difference between the closing price of the call and the exercise price of the
call times a specified multiple (the "multiplier") which determines the total
dollar value for each point of difference. When the Fund buys a put on a stock
index or Stock Index Future, it pays a premium and has the right during the put
period to require a seller of a corresponding put, upon the Fund's exercise of
its put, to deliver cash to the Fund to settle the put if the closing level of
the stock index or Stock Index Future upon which the put is based is less than
the exercise price of the put. That cash payment is determined by the
multiplier, in the same manner as described above as to calls.
When the Fund purchases a put on a stock index, or on a Stock Index Future
not owned by it, the put protects the Fund to the extent that the index moves in
a similar pattern to the securities the Fund holds. The Fund can either resell
the put or, in the case of a put on a Stock Index Future, buy the underlying
investment and sell it at the exercise price. The resale price of the put will
vary inversely with the price of the underlying investment. If the market price
of the underlying investment is above the exercise price, and as a result the
put is not exercised, the put will become worthless on the expiration date. In
the event of a decline in price of the underlying investment, the Fund could
exercise or sell the put at a profit to attempt to offset some or all of its
loss on its portfolio securities.
The Fund's option activities may affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund may cause the
Fund to sell related portfolio securities, thus increasing its turnover rate.
The exercise by the Fund of puts on securities will cause the sale of underlying
investments, increasing portfolio turnover. Although the decision whether to
exercise a put it holds is within the Fund's control, holding a put might cause
the Fund to sell the related investments for reasons that would not exist in the
absence of the put. The Fund may pay a brokerage commission each time it buys a
put or call, sells a call, or buys or sells an underlying investment in
connection with the exercise of a put or call. Such commissions may be higher
than 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 the Fund) 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 , 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 a foreign currency which it has purchased or
sold but which has not yet settled, or to protect against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar and
a foreign currency.
There is a risk that use of Forward Contracts may reduce the gain that
would otherwise result from a change in the relationship between the U.S. dollar
and a foreign currency. Forward contracts include standardized foreign currency
futures contracts which are traded on exchanges and are subject to procedures
and regulations applicable to other Futures. The Fund may also enter into a
forward contract to sell a foreign currency denominated in a currency other than
that in which the underlying security is denominated. This is done in the
expectation that there is a greater correlation between the foreign currency of
the forward contract and the foreign currency of the underlying investment than
between the U.S. dollar and the foreign currency of the underlying investment.
This technique is referred to as "cross hedging." The success of cross hedging
is dependent on many factors, including the ability of the Manager to correctly
identify and monitor the correlation between foreign currencies and the U.S.
dollar. To the extent that the correlation is not identical, the Fund may
experience losses or gains on both the underlying security and the cross
currency hedge.
The Fund may use Forward Contracts to protect against uncertainty in the
level of future exchange rates. The use of Forward Contracts does not eliminate
fluctuations in the prices of the underlying securities the Fund owns or intends
to acquire, but it does fix a rate of exchange in advance. In addition, although
Forward Contracts limit the risk of loss due to a decline in the value of the
hedged currencies, at the same time they limit any potential gain that might
result should the value of the currencies increase.
There is no limitation as to the percentage of the Fund's assets that may
be committed to foreign currency exchange contracts. The Fund does not enter
into such forward contracts or maintain a net exposure in such contracts to the
extent that the Fund would be obligated to deliver an amount of foreign currency
in excess of the value of the Fund's assets denominated in that currency, or
enter into a "cross hedge," unless it is denominated in a currency or currencies
that the Manager believes will have price movements that tend to correlate
closely with the currency in which the investment being hedged is denominated.
See "Tax Aspects of Covered Calls and Hedging Instruments" below for a
discussion of the tax treatment of foreign currency exchange contracts
The Fund may enter into Forward Contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the purchase
or sale of a security denominated in a foreign currency, or when the Fund
anticipates receipt of dividend payments in a foreign currency, the Fund may
desire to "lock-in" the U.S. dollar price of the security or the U.S. dollar
equivalent of such payment by entering into a Forward Contract, for a fixed
amount of U.S. dollars per unit of foreign currency, for the purchase or sale of
the amount of foreign currency involved in the underlying transaction
("transaction hedge"). The Fund will thereby be able to protect itself against a
possible loss resulting from an adverse change in the relationship between the
currency exchange rates during the period between the date on which the security
is purchased or sold, or on which the dividend payment is declared, and the date
on which such payments are made or received.
The Fund may also use Forward Contracts to lock in the U.S. dollar value of
portfolio positions ("position hedge"). In a position hedge, for example, when
the Fund believes that foreign currency may suffer a substantial decline against
the U.S. dollar, it may enter into a forward sale contract to sell an amount of
that foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency, or when the Fund
believes that the U.S. dollar may suffer a substantial decline against a foreign
currency, it may enter into a forward purchase contract to buy that foreign
currency for a fixed dollar amount. In this situation the Fund may, in the
alternative, enter into a forward contract to 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.
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 , 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 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 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 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 or 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.
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 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
hold the same offices with the other New York-based Oppenheimer funds as with
the Fund. As of May 1, 1998, the Trustees and officers of the Fund as a group
owned less than 1% of the outstanding Class A, Class B or Class C shares of the
Fund. That statement does not include ownership of shares held of record by an
employee benefit plan for employees of the Manager (one of the Trustees of the
Fund listed below, Ms. Macaskill, and one of the officers, Mr. Donohue, are
trustees of that plan) other than the shares beneficially owned under that plan
by the officers of the Fund listed above.
Leon Levy, Chairman of the Board of Trustees; Age : 72
31 West 52nd Street, New York, NY 10019
General Partner of Odyssey Partners, L.P. (investment partnership)
(since 1982) and Chairman of Avatar
Holdings, Inc. (real estate development).
Robert G. Galli, Trustee; Age: 64
19750 Beach Road, Jupiter Island, FL 33469 Formerly he held the following
positions: Vice Chairman of the Manager (October 1995 to December 1997), Vice
President (June 1990 to March 1994) and Counsel of Oppenheimer Acquisition Corp.
("OAC"), the Manager's parent holding company; Executive Vice President
(December 1977 to October 1995), General Counsel and a director (December 1975
to October 1993) of the Manager; Executive Vice President and a director of
OppenheimerFunds Distributor, Inc. (the "Distributor") (July 1978 to October
1993); Executive Vice President and a director of HarbourView Asset Management
Corporation ("HarbourView") (April 1986 to October 1995), an investment adviser
subsidiary of the Manager; Vice President and a director (October 1988 to
October 1993) and Secretary (March 1981 to September 1988) of Centennial Asset
Management Corporation ("Centennial"), an investment adviser subsidiary of the
Manager; a director (November 1989 to October 1993) and Executive Vice President
(November 1989 to January 1990) of Shareholder Financial Services, Inc. ("SFSI")
, a transfer agent subsidiary of the Manager; a director of Shareholder
Services, Inc. ("SSI") (August 1984 to October 1993), a transfer agent
subsidiary of the Manager ; an officer of other Oppenheimer funds.
Benjamin Lipstein, Trustee; Age 75
591 Breezy Hill Road, Hillsdale, N.Y. 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University .
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 ; 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 or trustee of other Oppenheimer funds; a director of the NASDAQ Stock
Market, Inc. and of Hillsdown Holdings plc (a U.K. food company); formerly an
Executive Vice President of the Manager.
Elizabeth B. Moynihan, Trustee; Age : 68
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the Freer Gallery
of Art (Smithsonian Institution), the
Institute of Fine Arts (New York University), National Building
Museum; a member of the Trustees
Council, Preservation League of New York State, and of the
Indo-U.S. Sub-Commission on Education
and Culture.
- -------------------
* A Trustee who is an "interested person" of the Fund as defined
in the Investment Company Act.
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), Texas Cogeneration
Company (cogeneration company), Prime
Retail, Inc. (real estate investment trust); formerly President
and Chief Executive Officer of The
Conference Board, Inc. (international economic and business
research) and a director of Lumbermens
Mutual Casualty Company, American Motorists Insurance Company and
American Manufacturers
Mutual Insurance Company.
Edward V. Regan, Trustee; Age : 68
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 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 : 66
8 Sound Shore Drive, Greenwich, Connecticut 06830
Founder Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directorship
Inc. (corporate governance consulting); a director of
Professional Staff Limited (U.K); a trustee of
Mystic Seaport Museum, International House and Greenwich
Historical Society.
Donald W. Spiro, Vice Chairman and Trustee*; Age : 72
Chairman Emeritus (since August 1991) and a director (since
January 1969) of the Manager; formerly
Chairman of the Manager and the Distributor.
Pauline Trigere, Trustee; Age : 85
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and
sale of women's fashions).
Clayton K. Yeutter, Trustee; Age : 67
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel, Hogan & Hartson (a law firm); a director of B.A.T.
Industries, Ltd. (tobacco and
financial services), Caterpillar, Inc. (machinery), ConAgra, Inc.
(food and agricultural products),
Farmers Insurance Company (insurance), FMC Corp. (chemicals and
machinery) and Texas
Instruments, Inc. (electronics); formerly (in descending
chronological order) ,
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.
- -------------------
* A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
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 and General Counsel (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, General Counsel and a director of Oppenheimer Real Asset Management,
Inc. (since July 1996); General Counsel (since May 1996) and Secretary (since
April 1997) of OAC; A director of OFIL and 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).
George C. Bowen, Treasurer; Age : 61
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President (since September 1987) and Treasurer (since March 1985) of
the Manager; Vice President (since June 1983) and Treasurer (since March 1985)
of the Distributor; Vice President (since October 1989) and Treasurer (since
April 1986) of HarbourView; Senior Vice President (since February 1992),
Treasurer (since July 1991) and a director (since December 1991) of Centennial;
President, Treasurer and a director of Centennial Capital Corporation (since
June 1989); Vice President and Treasurer (since August 1978) and Secretary
(since April 1981) of SSI; Vice President, Treasurer and Secretary of SFSI
(since November 1989); Treasurer of OAC (since June 1990); Treasurer of
Oppenheimer Partnership Holdings, Inc. (since November 1989); Vice President and
Treasurer of Oppenheimer Real Asset Management, Inc. (since July 1996); Chief
Executive Officer, Treasurer and a director of MultiSource Services, Inc., a
broker-dealer (since December 1995); a trustee or director and an officer of
other Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer; Age : 39
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the
Manager.
Scott T. Farrar, Assistant Treasurer; Age : 32
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994- May 1996), and a Fund Controller for
the Manager. Robert G. Zack, Assistant Secretary; Age: 49 Senior Vice President
(since May 1985) and Associate General Counsel (since May 1981) of the Manager,
Assistant Secretary of SSI (since May 1985), and SFSI (since November 1989);
Assistant Secretary of Oppenheimer Millennium Funds plc (since October 1997); an
officer of other Oppenheimer funds.
|X| Remuneration of Trustees. The officers of the Fund and certain Trustees of
the Fund (Ms. Macaskill and Mr. Spiro) who are affiliated with the Manager
receive no salary or fee from the Fund. Mr. Galli received no salary or fee
prior to January 1, 1998. The remaining Trustees of the Fund are expected to
receive the compensation shown below from the Fund with respect to the Fund's
current fiscal year. 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 during the 1997 calendar year .
RetiremenTotal
Aggregate Benefits Compensation
Compensation Accrued as From All
From Part of Fund New York-based
Name and Position the Fund(1)Expenses
Oppenheimer Funds(2)
Leon Levy, $1,064 0
$158,500
Chairman and Trustee
Robert G. Galli $ 656 0 0
Study Committee Member
and Trustee
Benjamin Lipstein $ 864 0 $137,000
Study Committee
Chairman,
Audit Committee
Member
and Trustee
Elizabeth B. Moynihan $ 656 0 $ 96,500
Study Committee
Member
and Trustee
Kenneth A. Randall $ 592 0 $ 88,500
Audit Committee Chairman
and Trustee
Edward V. Regan $ 592 0 $ 87,500
Proxy Committee Chairman,
Audit Committee
Member
and Trustee
Retirement Total
Aggregate Benefits Compensation
Compensation Accrued as From All
From Part of Fund New York-based
Name and Position the Fund(1) Expenses Oppenheimer
Funds(2)
Russell S. Reynolds, Jr. $ 440 0 $ 65,500
Proxy Committee Member
and Trustee
Pauline Trigere, Trust$ 392 0 $ 58,500
Clayton K. Yeutter
$ 440(3) 0 $ 65,500
Proxy Committee Member
and
Trustee
- ----------------------
(1) Estimated to be received during the Fund's current fiscal year ending August
31, 1998. (2) For the 1997 calendar year. (3) Includes $41 deferred under the
Deferred Compensation Plan described below.
Deferred Compensation Plan. The Board of Trustees has adopted a Deferred
Compensation Plan for disinterested Trustees that enables a Trustee 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 or 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 May 1, 1998, no person owned of record or was
known by the Fund to own beneficially 5% or more of the Fund's outstanding Class
A, Class B or Class C shares except as indicated in Appendix C.
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company
controlled by Massachusetts Mutual Life Insurance Company. OAC is
also owned in part by certain of the Manager's directors and
officers, some of whom also serve as
officers of the Fund, and two of whom (Ms. Macaskill and
Mr. Spiro) 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." Other members of the Manager's
Equity Portfolio Department provide the Portfolio Manager with
counsel and support in managing the
Fund's portfolio.
o The Investment Advisory Agreement. 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. For the Fund's fiscal period
from November 17, 1997 (commencement of operations) to February 28, 1998, the
management fees paid by the Fund to the Manager totaled $8,665.
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 shareholders), are borne by the Distributor.
For additional information about distribution of the Fund's shares and the
payments made by the Fund to the Distributor in connection with such activities,
please refer to "Distribution and Service Plans," below. During the Fund's
fiscal period November 17, 1997 (commencement of operations) to February 28,
1998, the aggregate sales charges on sales of the Fund's Class A shares were
$5,734, of which the Distributor and an affiliated broker-dealer retained in the
aggregate $1,991. During this period, no contingent deferred sales charges were
collected on the Fund's Class B or Class C shares.
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, on an at-cost basis.
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 actually placed for
each account. Option commissions may be relatively higher than those which would
apply to direct purchases and sales of portfolio securities.
The research services provided by a particular broker may be useful only
to one or more of the advisory accounts of the Manager and its affiliates, and
investment research received for the commissions of those other accounts may be
useful both to the Fund and one or more of such other accounts. Such research,
which may be supplied by a third party at the instance of a broker, includes
information and analyses on particular companies and industries as well as
market or economic trends and portfolio strategy, receipt of market quotations
for portfolio evaluations, information systems, computer hardware and similar
products and services. If a research service also assists the Manager in a
non-research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the Manager in
the investment decision-making process may be paid for in commission dollars.
The Board of Trustees has permitted the Manager to use concessions on fixed
price offerings to obtain research, in the same manner as is permitted for
agency transactions. The Board has also permitted the Manager to use stated
commissions on secondary fixed-income agency trades to obtain research where the
broker has represented to the Manager that: (i) the trade is not from or for the
broker's own inventory, (ii) the trade was executed by the broker on an agency
basis at the stated commission, and (iii) the trade is not a riskless principal
transaction.
The research services provided by brokers broaden the scope and supplement
the research activities of the Manager, by making available additional views for
consideration and comparisons, and by enabling the Manager to obtain market
information for the valuation of securities held in the Fund's portfolio or
being considered for purchase. The Board of Trustees, including the
"independent" Trustees of the Fund (those Trustees of the Fund who are not
"interested persons" as defined in the Investment Company Act, and who have no
direct or indirect financial interest in the operation of the advisory agreement
or the Distribution Plans described below) annually reviews information
furnished by the Manager as to the commissions paid to brokers furnishing such
services so that the Board may ascertain whether the amount of such commissions
was reasonably related to the value or benefit of such services. During the
period November 17, 1997 (commencement of operations) through February 28, 1998,
total brokerage commissions paid by the Fund (not including spreads or
concessions on principal transactions on a net trade basis) were $26,882. During
such period, all of such commissions were paid for research services; the
aggregate dollar amount of those transactions was $7,211,890.
Performance of the Fund
Total Return Information. As described in the Prospectus, from time to time the
"average annual total return," "cumulative total return," "average annual total
return at net asset value" and "total return at net asset value" of an
investment in a class of shares of the Fund may be advertised. An explanation of
how these total returns are calculated for each class and the components of
those calculations is set forth below.
The Fund's advertisements of its performance data must, under applicable
rules of the Securities and Exchange Commission, include the average annual
total returns for each advertised class of shares of the Fund for the 1, 5, and
10-year periods (or the life of the class, if less) ending as of the most
recently-ended calendar quarter prior to the publication of the advertisement.
This enables an investor to compare the Fund's performance to the performance of
other funds for the same periods. However, a number of factors should be
considered before using such information as a basis for comparison with other
investments. An investment in the Fund is not insured; its returns and share
prices are not guaranteed and normally will fluctuate on a daily basis. When
redeemed, an investor's shares may be worth more or less than their original
cost. Returns for any given past period are not a prediction or representation
by the Fund of future returns. The returns of each class of shares of the Fund
are affected by portfolio quality, the type of investments the Fund holds and
its operating expenses allocated to the particular class.
o Average Annual Total Returns. The "average annual total return" of each
class 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. The cumulative
total returns on an investment in Class A, Class B and Class C shares of the
Fund for the period November 17, 1997 (commencement of operations) to February
28, 1998 were 5.09%, 6.30%, and 10.30%, respectively.
o Total Returns at Net Asset Value. From time to time the Fund may also
quote an average annual total return at net asset value or a cumulative total
return at net asset value for Class A, Class B, or Class C shares. Each is based
on the difference in net asset value per share at the beginning and the end of
the period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into
consideration the reinvestment of dividends and capital gains distributions. The
cumulative total returns at net asset value on an investment in Class A, Class B
and Class C shares of the Fund for the period November 17, 1997 (commencement of
operations) to February 28, 1998 were 11.50%, 11.30%, and 11.30%, respectively.
Total return information may be useful to investors in reviewing the
performance of the Fund's Class A, Class B or Class C shares. However, when
comparing total return of an investment in shares of the Fund with that of other
alternatives, investors should understand that as the Fund is an aggressive
equity fund seeking capital appreciation, its shares are subject to greater
market risks and volatility than shares of funds having other investment
objectives and that the Fund is designed for investors who are willing to accept
greater risk of loss in the hopes of realizing greater gains.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its Class A, Class B or Class C shares by Lipper Analytical Services,
Inc. ("Lipper"), a widely-recognized independent mutual fund monitoring service.
Lipper monitors the performance of regulated investment companies, including the
Fund, and ranks their performance for various periods based on categories
relating to investment objectives. The performance of the Fund's classes is
ranked against (i) all other funds, (ii) all other "international" funds and
(iii) all other "international" funds in a specific size category. The Lipper
performance rankings are based on total returns that include the reinvestment of
capital gain distributions and income dividends but do not take sales charges or
taxes into consideration.
From time to time the Fund may publish the 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 and/or the HSBC James Capel World excluding U.S. Smaller
Companies Index. The Morgan Stanley World Index is 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 HSBC James Capel Index is an unmanaged index of the performance of 1,200
securities with a market capitalization range of $53-$1,033 million, issued
primarily in Europe (including the U.K.), Southeast Asia, Japan, Australia and
New Zealand, and is widely recognized as a measure of performance of small
international stock performance. Index performance reflects the reinvestment of
dividends but does not consider the affect of capital gains or transaction
costs. While index comparisons may be useful to provide a benchmark for the
Fund's performance, it must be noted that the Fund's investments are not limited
to the securities in either index. Moreover, the index performance data does not
reflect any assessment of the risk of investments included in the index. The
performance of the Fund's Class A, Class B or Class C shares may also be
compared in publications to (i) the performance of various market indices or to
other investments for which reliable performance data is available, and (ii) to
averages, performance rankings or other benchmarks prepared by recognized mutual
fund statistical services.
From time to time, the Fund's Manager may publish rankings or ratings of
the Manager (or Transfer Agent) or the investor services provided by them to
shareholders of the Oppenheimer funds, other than performance rankings of the
Oppenheimer funds themselves. Those ratings or rankings of shareholder/investor
services by third parties may compare the Oppenheimer funds' services to those
of other mutual fund families selected by the rating or ranking services and may
be based upon the opinions of the rating or ranking service itself, based on its
research or judgment, or based upon surveys of investors, brokers, shareholders
or others.
Distribution and Service Plans
The Fund has adopted 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 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.
For the period November 17, 1997 (commencement of operations) to February
28, 1998, payments under the Class A Plan totaled $943, of which $200 was paid
by the Distributor to Recipients, including $4 paid to a dealer affiliated with
the Distributor. 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 charges, 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.
Payments made under the Class B Plan during the period November 17, 1997
(commencement of operations) to February 28, 1998 totaled $911, of which $714
was retained by the Distributor. Payments made under the Class C Plan during
that same period totaled $800, none of which was retained by the Distributor. No
payments were made under either Plan during the period to any dealer affiliated
with the Distributor.
Although the Class B and Class C Plans permit the Distributor to retain
both the asset-based sales charges and the service fees on such shares, or to
pay Recipients the service fee on a quarterly basis, without payment in advance,
the Distributor presently intends to pay the service fee to Recipients in the
manner described above. A minimum holding period may be established from time to
time under the Class B Plan and the Class C Plan by the Board. Initially, the
Board has set no minimum holding period. All payments under the Class B Plan and
the Class C Plan are subject to the limitations imposed by the Conduct Rules of
the National Association of Securities Dealers, Inc., on payments of asset-based
sales charges and service fees.
The Class B and Class C Plans provide for the distributor to be
compensated at a flat rate, whether the Distributor's distribution expenses are
more or less than the amounts paid by the Fund during that period. Such payments
are made in recognition that the Distributor (i) pays sales commissions to
authorized brokers and dealers at the time of sale and pays service fees as
described in the Prospectus, (ii) may finance such commissions and/or the
advance of the service fee payment to Recipients under those Plans, or may
provide such financing from its own resources, or from an affiliate, (iii)
employs personnel to support distribution of shares, and (iv) may bear the costs
of sales literature, advertising and prospectuses (other than those furnished to
current shareholders), state "blue sky" registration fees and certain other
distribution expenses.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits the individual investor to
choose the method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor expects
to hold shares and other relevant circumstances. Investors should understand
that the purpose and function of the deferred sales charge and asset-based sales
charge with respect to Class B and Class C shares are the same as those of the
initial sales charge with respect to Class A shares. Any salesperson or other
person entitled to receive compensation for selling Fund shares may receive
different compensation with respect to one class of shares than the other. The
Distributor normally will not accept any order for $500,000 or $1 million or
more of Class B or Class C shares, respectively, on behalf of a single investor
(not including dealer "street name" or omnibus accounts) because generally it
will be more advantageous for that investor to purchase Class A shares of the
Fund instead.
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different shareholder
privileges and expenses. The net income attributable to Class A, Class B and
Class C shares and the dividends payable on such shares will be reduced by
incremental expenses borne solely by those classes, including the asset-based
sales charges.
The conversion of Class B shares to Class A shares after six years is
subject to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax 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.
Determination of Net Asset Value Per Share. The net asset values per share 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 "NYSE") on each day that the NYSE
is open, by dividing the Fund's net assets attributable to a class by the number
of shares of that class that are outstanding. The NYSE normally closes at 4:00
P.M. , but may close earlier on some other days (for example, in case of weather
emergencies or days falling before a holiday). The NYSE's most recent annual
announcement (which is subject to change) states that it will close on New
Year's Day, Martin Luther King Jr. 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 portion of its assets in foreign
securities primarily listed on foreign exchanges which may trade on Saturdays or
customary U.S. business holidays on which the NYSE is closed. Because the Fund's
price and net asset value will not be calculated on those days, the Fund's net
asset values per share may be significantly affected on such days when
shareholders may not purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the valuation of the
Fund's securities, generally as follows: (i) equity securities traded on a U.S.
securities exchange or on the Automated Quotation System ("NASDAQ") of the
Nasdaq Stock Market, Inc. for which last sale information is regularly reported
are valued at the last reported sale price on the principal exchange for such
security or NASDAQ that day (the "Valuation Date") or, in the absence of sales
that day, at the last reported sale price preceding the Valuation Date if it is
within the spread of the closing "bid" and "asked" prices on the Valuation Date
or, if not, the closing "bid" price on the Valuation Date; (ii) equity
securities traded on a foreign securities exchange are valued generally at the
last 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, if unavailable, at the mean between "bid" and "asked" prices
obtained from the principal exchange or two active market makers in the security
on the basis of reasonable inquiry; (iii) a non-money market fund will value (x)
debt instruments that had a maturity of more than 397 days when issued, (y) debt
instruments that had a maturity of 397 days or less when issued and have a
remaining maturity in excess of 60 days , and (z) non-money market type debt
instruments that had a maturity of 397 days or less when issued and have a
remaining maturity of sixty days or less, at the mean between "bid" and "asked"
prices determined by a pricing service approved by the Fund's Board of Trustees
or, if unavailable, obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry; (iv) money market-type debt
securities held by a non-money market fund that had a maturity of less than 397
days when issued and have a remaining maturity of 60 days 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 (v) 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 active
market makers willing to give quotes (see (ii) and (iii) above), the security
may be priced at the mean between the "bid" and "asked" prices provided by a
single active market maker (which in certain cases may be the "bid" price if no
"asked" price is available) provided that the Manager is satisfied that the firm
rendering the quotes is reliable and that the quotes reflect the current market
value.
The Manager may use pricing services approved by the Board of Trustees to
price
U.S.
Government securities , corporate debt securities or mortgage-backed securities
for which last sale information is not generally available . The pricing
service, when valuing such securities, may use "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield, maturity and
other special factors involved. The Manager will monitor the accuracy of the
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. If the Manager is
unable to locate two active market makers willing to give quotes, the security
may be priced at the mean between the "bid" and "asked" prices provided by a
single active market maker (which in certain cases may be the "bid" price if no
"asked" price is available) provided that the Manager is satisfied that the firm
rendering the quotes is reliable and that the quotes reflect the current market
value.
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 credit is included in the liability section. The credit is adjusted
("marked-to-market") to reflect the current market value of the option. 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.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy shares.
Dividends will begin to accrue on shares
purchased by the proceeds of ACH transfers on the business day the
Fund receives Federal Funds for
the purchase through the ACH system before the close of the
Exchange. The Exchange normally closes
at 4:00 P.M., but may close earlier on certain days. If Federal
Funds are received on a business day
after the close of the Exchange, the shares will be purchased and dividends will
begin to accrue on the next regular business day. The proceeds of ACH transfers
are normally received by the Fund 3 days after the transfers are initiated. The
Distributor and the Fund are not responsible for any delays in purchasing shares
resulting from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and Letters
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor,
dealers and brokers making such sales. No
sales charge is imposed in certain other circumstances described in the
Prospectus because the Distributor incurs little or no selling expenses. The
term "immediate family" refers to one's spouse, children, grandchildren,
grandparents, parents, parents-in-law, brothers and sisters, sons- and
daughters-in-law, 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
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 Convertible Securities Fund
Limited Term New York Municipal Fund Rochester Fund Municipals Oppenheimer World
Bond Fund
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.
o Letters of Intent. A Letter of Intent ("Letter") is the investor's
statement of intention to purchase Class A or Class A and Class B shares of the
Fund (and other eligible Oppenheimer funds) during the 13-month period from the
investor's first purchase pursuant to the Letter (the "Letter of Intent
period"), which may, at the investor's request, include purchases made up to 90
days prior to the date of the Letter. The Letter states the investor's intention
to make the aggregate amount of purchases (excluding any purchases made by
reinvestment of dividends or distributions or purchases made at net asset value
without sales charge), which together with the investor's holdings of such funds
(calculated at their respective public offering prices calculated on the date of
the Letter) will equal or exceed the amount specified in the Letter. This
enables the investor to count the shares to be purchased under the Letter of
Intent to obtain the reduced sales charge rate (as set forth in the Prospectus)
that applies under the Right of Accumulation to current purchases of Class A
shares. Each purchase of Class A shares under the Letter will be made at the
public offering price (including the sales charge) that applies to a single
lump-sum purchase of shares in the amount intended to be purchased under the
Letter.
In submitting a Letter, the investor makes no commitment to purchase shares,
but if the investor's purchases of shares within the Letter of Intent period,
when added to the value (at offering price) of the investor's holdings of shares
on the last day of that period, do not equal or exceed the intended purchase
amount, the investor agrees to pay the additional amount of sales charge
applicable to such purchases, as set forth in "Terms of Escrow," below (as those
terms may be amended from time to time). The investor agrees that shares equal
in value to 5% of the intended purchase amount will be held in escrow by the
Transfer Agent subject to the Terms of Escrow. Also, the investor agrees to be
bound by the terms of the Prospectus, this Statement of Additional Information
and the Application used for such Letter of Intent, and if such terms are
amended, as they may be from time to time by the Fund, that those amendments
will apply automatically to existing Letters of Intent.
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 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 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 other than
public school 403(b) plans, and SIMPLE plans) for employees of a corporation or
a sole proprietorship, members and employees of a partnership or association or
other organized group of persons (the members of which may include other
groups), if the group or association has made special arrangements with the
Distributor and all members of the group or association participating in or who
are eligible to participate in the plan(s) purchase Class A shares of the Fund
through a single investment dealer, broker, or other financial institution
designated by the group. "Group retirement plan" also includes qualified
retirement plans and non-qualified deferred compensation plans and IRAs that
purchase Class A shares of the Fund through a single investment dealer, broker,
or other financial institution, if that broker-dealer has made special
arrangements with the Distributor enabling those plans to purchase Class A
shares of the Fund at net asset value but subject to a contingent deferred sales
charge.
In addition to the discussion in the Prospectus relating to the ability of
Retirement Plans to purchase Class A shares at net asset value in certain
circumstances, there is no initial sales charge on purchases of Class A shares
of any one or more of the Oppenheimer funds by a Retirement Plan in the
following cases: (i) the recordkeeping for the Retirement Plan is performed on a
daily valuation basis by Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill
Lynch") and, on the date the plan sponsor signs the Merrill Lynch recordkeeping
service agreement, the Retirement Plan has $3 million or more in assets invested
in mutual funds other than those advised or managed by Merrill Lynch Asset
Management, L.P. ("MLAM") that are made available pursuant to a Service
Agreement between Merrill Lynch and the mutual fund's principal underwriter or
distributor and in funds advised or managed by MLAM (collectively, the
"Applicable Investments"); (ii) the recordkeeping for the Retirement Plan is
performed on a daily valuation basis by an independent record keeper whose
services are provided under a contract or arrangement between the Retirement
Plan and Merrill Lynch. On the date the plan sponsor signs the Merrill Lynch
record keeping service agreement, the Plan must have $3 million or more in
assets, excluding assets held in money market funds, invested in Applicable
Investments; or (iii) the Plan has 500 or more eligible employees, as determined
by the Merrill Lynch plan conversion manager on the date the plan sponsor signs
the Merrill Lynch record keeping service agreement.
If a Retirement Plan's records are maintained on a daily valuation basis by
Merrill Lynch or an independent record keeper under a contract or alliance
arrangement with Merrill Lynch, and if on the date the plan sponsor signs the
Merrill Lynch record keeping service agreement the Retirement Plan has less than
$3 million in assets, excluding money market funds, invested in Applicable
Investments, then the Retirement Plan may purchase only Class B shares of one or
more of the Oppenheimer funds. Otherwise, the Retirement Plan will be permitted
to purchase Class A shares of one or more of the Oppenheimer funds. Any of those
Retirement Plans that currently invest in Class B shares of the Fund will have
their Class B shares be converted to Class A shares of the Fund once the Plan's
Applicable Investments have reached $5 million.
Any redemptions of shares of the Fund held by Retirement Plans whose records
are maintained on a daily valuation basis by Merrill Lynch or an independent
record keeper under a contract with Merrill Lynch that are currently invested in
Class B shares of the Fund shall not be subject to the Class B CDSC.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below
supplements the terms and conditions for redemptions set forth in
the Prospectus.
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.
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 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 are subject to the restrictions that apply to exchanges as set forth
in "How to Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
o Automatic Withdrawal Plans. Fund shares will be redeemed as necessary to
meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first and shares acquired with reinvested dividends and capital gains
distributions will be redeemed next, followed by shares acquired with a sales
charge, to the extent necessary to make withdrawal payments. Depending upon the
amount withdrawn, the investor's principal may be depleted. Payments made under
withdrawal plans should not be considered as a yield or income on your
investment. It may not be desirable to purchase additional Class A shares while
making automatic withdrawals because of the sales charges that apply to
purchases when made. Accordingly, a shareholder normally may not maintain an
Automatic Withdrawal Plan while simultaneously making regular purchases of Class
A shares.
The Transfer Agent will administer the investor's Automatic Withdrawal Plan
(the "Plan") as agent for the investor (the "Planholder") who executed the Plan
authorization and application submitted to the Transfer Agent. Neither the Fund
nor the Transfer Agent shall incur any liability to the Planholder for any
action taken or omitted by the Transfer Agent in good faith to administer the
Plan. Certificates will not be issued for shares of the Fund purchased for and
held under the Plan, but the Transfer Agent will credit all such shares to the
account of the Planholder on the records of the Fund. Any share certificates
held by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of capital
gains must be reinvested in shares of the Fund, which will be done at net asset
value without a sales charge. Dividends on shares held in the account may be
paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made at the
net asset value per share determined on the redemption date. Checks or
AccountLink payments of the proceeds of Plan withdrawals will normally be
transmitted three business days prior to the date selected for receipt of the
payment (receipt of payment on the date selected cannot be guaranteed),
according to the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time in mailing such notification
for the requested change to be put in effect. The Planholder may, at any time,
instruct the Transfer Agent by written notice (in proper form in accordance with
the requirements of the then-current Prospectus of the Fund) to redeem all, or
any part of, the shares held under the Plan. In that case, the Transfer Agent
will redeem the number of shares requested at the net asset value per share in
effect in accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing to the
Transfer Agent. A Plan may also be terminated at any time by the Transfer Agent
upon receiving directions to that effect from the Fund. The Transfer Agent will
also terminate a Plan upon receipt of evidence satisfactory to it of the death
or legal incapacity of the Planholder. Upon termination of a Plan by the
Transfer Agent or the Fund, shares that have not been redeemed from the account
will be held in uncertificated form in the name of the Planholder, and the
account will continue as a dividend-reinvestment, uncertificated account unless
and until proper instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use Class A shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the Class A shares in
certificated form. Share certificates are not issued for Class B shares or Class
C shares. Upon written request from the Planholder, the Transfer Agent will
determine the number of Class A shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of Oppenheimer
funds having more than one class of shares may be exchanged only for shares of
the same class of other Oppenheimer funds. Shares of the Oppenheimer funds that
have a single class without a class designation are deemed "Class A" shares for
this purpose. All Oppenheimer funds offer Class A, Class B and Class C shares
except Oppenheimer Money Market Fund, Inc., Centennial Money Market Trust,
Centennial Tax-Exempt Trust, Centennial Government Trust, Centennial New York
Tax-Exempt Trust, Centennial California Tax- Exempt Trust and Centennial America
Fund, L.P. , 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 Convertible Securities Fund, Class M shares can be exchanged only
for Class A shares of other Oppenheimer funds. For accounts of Oppenheimer
Convertible Securities Fund 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 30 days prior to
that purchase may subsequently be exchanged for shares of other Oppenheimer
funds without being subject to an initial or contingent deferred sales charge,
whichever is applicable. To qualify for this privilege, the investor or the
investor's dealer must notify the Distributor of eligibility for this privilege
at the time the shares of Oppenheimer Money Market Fund, Inc., are purchased,
and, if requested, must supply proof of entitlement to this privilege.
Shares of this Fund acquired by reinvestment of dividends or distributions
from any other of the Oppenheimer funds (except Oppenheimer Cash Reserves) or
from any unit investment trust for which reinvestment arrangements have been
made with the Distributor may be exchanged at net asset value for shares of any
of the Oppenheimer funds. No contingent deferred sales charge is imposed on
exchanges of shares of any class purchased subject to a contingent deferred
sales charge. However, when Class A shares acquired by exchange of Class A
shares of other Oppenheimer funds purchased subject to a Class A contingent
deferred sales charge are redeemed within 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).
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 November 1 of the prior year through October 31 of the current year, or
else the Fund must pay an excise tax on the amounts not distributed. While it is
presently anticipated that the Fund will meet those requirements, the Fund's
Board of Trustees and the Manager might determine in a particular year that it
would be in the best interest of shareholders for the Fund not to make such
distributions at the required levels and to pay the excise tax on the
undistributed amounts. That would reduce the amount of income or capital gains
available for distribution to shareholders.
If the Fund has more than 50% of its total assets invested in foreign
securities at the end of its fiscal year, it may elect the application of
Section 853 of the Internal Revenue Code to permit shareholders to take a credit
(or, at their option, a deduction) for foreign taxes paid by the Fund. Under
Section 853, shareholders would be entitled to treat the foreign taxes withheld
from interest and dividends paid to the Fund from its foreign investments as a
credit on their federal income taxes. As an alternative, shareholders could, if
to their advantage, treat the foreign tax withheld as a deduction from gross
income in computing taxable income rather than as a tax credit. In substance,
the Fund's election would enable shareholders to benefit from the same foreign
tax credit or deduction that would be received if they had been the record
owners of the Fund's foreign securities and had paid foreign taxes on the income
received.
If the Fund qualifies as a "regulated investment company" under the Internal
Revenue Code, it will not be liable for Federal income taxes on amounts paid by
it as dividends and distributions. The Fund intends to qualify in the current
and future fiscal years, but
reserves the right not to do so. The Internal
Revenue Code contains a number of complex tests relating to such qualification,
and a Fund might not meet those tests in any particular year. If it did not so
qualify, the Fund would be treated for tax purposes as an ordinary corporation
and receive no tax deduction for payments made to shareholders.
Dividends, distributions and the proceeds of the redemption of Fund shares
represented by checks returned to the Transfer Agent by the Postal Service as
undeliverable will be invested in shares of Oppenheimer Money Market Fund, Inc.,
as promptly as possible after the return of such checks to the Transfer Agent to
enable the investor to earn a return on otherwise idle funds.
Dividend Reinvestment in Another Fund. Shareholders of the Fund
may elect to reinvest all dividends and/or capital gains
distributions in shares of the same class of any of the other
Oppenheimer funds listed in "Reduced Sales Charges," above, at net asset value
without sales charge. To elect this option, a shareholder must notify the
Transfer Agent in writing and either have an existing account in the fund
selected for reinvestment or must obtain a prospectus for that fund and an
application from the Distributor to establish an account. The investment will be
made at the net asset value per share in effect at the close of business on the
payable date of the dividend or distribution. Dividends and/or distributions
from shares of other Oppenheimer funds may be invested in shares of this Fund on
the same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities and handling the delivery of such securities to and from
the Fund. The Manager has represented to the Fund that the banking relationships
between the Manager and the Custodian have been and will continue to be
unrelated to and unaffected by the relationship between the Fund and the
Custodian. It will be the practice of the Fund to deal with the Custodian in a
manner uninfluenced by any banking relationship the Custodian may have with the
Manager and its affiliates. The Fund's cash balances with the Custodian in
excess of $100,000 are not protected by Federal deposit insurance. Such
uninsured balances at times may be substantial.
Independent Auditors. The independent auditors of the Fund audit the Fund's
financial statements and perform other related audit services. They also act as
auditors for certain other funds advised by the Manager.
<PAGE>
STATEMENT OF INVESTMENTS FEBRUARY 28, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
<S> <C> <C> <C>
==========================================================================================================================
COMMON STOCKS - 92.5%
- --------------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS - 29.7%
- --------------------------------------------------------------------------------------------------------------------------
AUTOS & HOUSING - 9.1%
- --------------------------------------------------------------------------------------------------------------------------
AMEC plc (1) 50,440 $115,854
- --------------------------------------------------------------------------------------------------------------------------
Courts (Singapore) Ltd. 465,000 189,326
- --------------------------------------------------------------------------------------------------------------------------
Inmobiliaria Metropolitana Vasco Central SA 2,100 101,445
- --------------------------------------------------------------------------------------------------------------------------
IRSA Inversiones y Representaciones SA, Sponsored GDR 3,200 111,600
---------
518,225
- --------------------------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT - 11.2%
- --------------------------------------------------------------------------------------------------------------------------
Hoyts Cinemas Group (1) 43,300 83,829
- --------------------------------------------------------------------------------------------------------------------------
Infogrames Entertainment SA (1) 3,600 142,480
- --------------------------------------------------------------------------------------------------------------------------
Kentucky Fried Chicken Holdings (Malaysia) Berhad (1) 37,000 62,925
- --------------------------------------------------------------------------------------------------------------------------
Leon de Bruxelles SA (1) 650 59,243
- --------------------------------------------------------------------------------------------------------------------------
Pizza Public Co. (Thailand) Ltd. (1) 6,000 17,262
- --------------------------------------------------------------------------------------------------------------------------
Regent Inns plc (1) 19,800 107,582
- --------------------------------------------------------------------------------------------------------------------------
Shaw Brothers (Hong Kong) Ltd. (1) 120,000 74,782
- --------------------------------------------------------------------------------------------------------------------------
Sky City Ltd. (1) 30,500 93,043
---------
641,146
- --------------------------------------------------------------------------------------------------------------------------
MEDIA - 9.4%
- --------------------------------------------------------------------------------------------------------------------------
Bemrose Corp. plc 25,200 186,506
- --------------------------------------------------------------------------------------------------------------------------
Dauphin O.T.A. (1) 760 53,668
- --------------------------------------------------------------------------------------------------------------------------
Grupo Radio Centro SA de CV, Sponsored ADR 5,100 79,369
- --------------------------------------------------------------------------------------------------------------------------
Havas Advertising SA (1) 580 86,677
- --------------------------------------------------------------------------------------------------------------------------
Lusomundo SGPS SA (1) 2,000 21,528
- --------------------------------------------------------------------------------------------------------------------------
Publicis SA (1) 355 38,536
- --------------------------------------------------------------------------------------------------------------------------
SPIR Communication (1) 920 73,125
---------
539,409
- --------------------------------------------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS - 15.9%
- --------------------------------------------------------------------------------------------------------------------------
FOOD - 3.6%
- --------------------------------------------------------------------------------------------------------------------------
Cresud SA (1) 20,000 39,619
- --------------------------------------------------------------------------------------------------------------------------
Makro Atacadista SA 7,800 76,050
- --------------------------------------------------------------------------------------------------------------------------
Raision Tehtaat Oy (1) 525 87,464
---------
203,133
- --------------------------------------------------------------------------------------------------------------------------
HEALTHCARE/DRUGS - 10.3%
- --------------------------------------------------------------------------------------------------------------------------
Biocompatibles International plc (1) 45,000 132,129
- --------------------------------------------------------------------------------------------------------------------------
Haw Par Healthcare Ltd. 123,000 66,014
- --------------------------------------------------------------------------------------------------------------------------
Oxford Molecular Group plc (1) 35,000 122,171
- --------------------------------------------------------------------------------------------------------------------------
Rohto Pharmaceutical Co. 19,000 154,912
- --------------------------------------------------------------------------------------------------------------------------
Torii Pharmaceutical Co. Ltd. 6,300 110,211
---------
585,437
- --------------------------------------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES - 2.0%
- --------------------------------------------------------------------------------------------------------------------------
Alpha Healthcare Ltd. 30,000 19,360
- --------------------------------------------------------------------------------------------------------------------------
Ramsey Health Care Ltd. (1) 60,000 93,743
-----------
113,103
</TABLE>
5 Oppenheimer International Small Company Fund
<PAGE>
================================================================================
STATEMENT OF INVESTMENTS (UNAUDITED)(CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
FINANCIAL - 22.1%
- --------------------------------------------------------------------------------------------------------------------------
BANKS - 11.6%
- --------------------------------------------------------------------------------------------------------------------------
Banca Popolare di Bergamo Credito Varesino SpA (1) 5,000 $105,898
- --------------------------------------------------------------------------------------------------------------------------
Banca Popolare di Milano (1) 8,700 74,629
- --------------------------------------------------------------------------------------------------------------------------
Banco de Valencia SA (1) 4,500 135,571
- --------------------------------------------------------------------------------------------------------------------------
Banco Guipuzcoano SA 200 11,350
- --------------------------------------------------------------------------------------------------------------------------
Banco International do Funchal SA (1) 7,100 72,221
- --------------------------------------------------------------------------------------------------------------------------
Banco Pinto & Sotto Mayor SA (1) 6,550 119,857
- --------------------------------------------------------------------------------------------------------------------------
Credit General de Banque (1) 500 122,931
- --------------------------------------------------------------------------------------------------------------------------
Industrial Finance Corp. 30,000 20,186
---------
662,643
- --------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL - 3.3%
- --------------------------------------------------------------------------------------------------------------------------
Guinnes Peat Group plc (1) 149,000 83,915
- --------------------------------------------------------------------------------------------------------------------------
Ruam Pattana Fund II (1) 265,000 44,269
- --------------------------------------------------------------------------------------------------------------------------
Unibail (Union du Credit-Bail Immobilier) (1) 530 57,793
---------
185,977
- --------------------------------------------------------------------------------------------------------------------------
INSURANCE - 7.2%
- --------------------------------------------------------------------------------------------------------------------------
Allianz Subalpina (1) 7,250 84,272
- --------------------------------------------------------------------------------------------------------------------------
Alm. Brand A/S, Cl. B (1) 3,308 119,538
- --------------------------------------------------------------------------------------------------------------------------
Assitalia - Le Assicurazioni d'Italia (1) 4,750 28,535
- --------------------------------------------------------------------------------------------------------------------------
La Fondiaria Assicurazioni (1) 8,600 51,328
- --------------------------------------------------------------------------------------------------------------------------
Mapfre Vida SA 1,240 49,837
- --------------------------------------------------------------------------------------------------------------------------
Milano Assicurazioni (1) 7,400 27,996
- --------------------------------------------------------------------------------------------------------------------------
Schweizerische Lebensversicherungs & Rentenanstalt (1) 60 52,412
---------
413,918
- --------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL - 16.3%
- --------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 2.0%
- --------------------------------------------------------------------------------------------------------------------------
Le Carbone-Lorraine 366 112,097
- --------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL MATERIALS - 7.7%
- --------------------------------------------------------------------------------------------------------------------------
Mota e Companhia SA (1) 7,800 142,688
- --------------------------------------------------------------------------------------------------------------------------
Semapa-Sociedade de Investimento e Gestao, SPGS SA (1) 1,220 32,174
- --------------------------------------------------------------------------------------------------------------------------
Strabag Oesterreich AG (1) 1,500 75,774
- --------------------------------------------------------------------------------------------------------------------------
Tarkett AG (1) 7,380 187,066
---------
437,702
- --------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES - 3.2%
- --------------------------------------------------------------------------------------------------------------------------
BTG plc 8,000 94,839
- --------------------------------------------------------------------------------------------------------------------------
Falck A/S (1) 1,000 51,313
- --------------------------------------------------------------------------------------------------------------------------
Societe Generale d'Affichage (1) 95 36,250
---------
182,402
- --------------------------------------------------------------------------------------------------------------------------
MANUFACTURING - 2.4%
- --------------------------------------------------------------------------------------------------------------------------
Powerscreen International plc 36,000 135,441
- --------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 1.0%
- --------------------------------------------------------------------------------------------------------------------------
Smit Internationale NV, CVA (1) 2,030 58,513
</TABLE>
6 Oppenheimer International Small Company Fund
<PAGE>
================================================================================
STATEMENT OF INVESTMENTS (UNAUDITED)(CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY - 3.5%
- --------------------------------------------------------------------------------------------------------------------------
COMPUTER HARDWARE - 2.0%
- --------------------------------------------------------------------------------------------------------------------------
Eidos plc (1) 100 $ 1,828
- --------------------------------------------------------------------------------------------------------------------------
Imagineer Co. Ltd. 12,900 112,325
-----------
114,153
- --------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-TECHNOLOGY - 1.5%
- --------------------------------------------------------------------------------------------------------------------------
Tandberg Television ASA (1) 7,015 88,047
- --------------------------------------------------------------------------------------------------------------------------
UTILITIES - 5.0%
- --------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 1.3%
- --------------------------------------------------------------------------------------------------------------------------
Hidroelectrica del Cantabrico SA (1) 1,700 72,519
- --------------------------------------------------------------------------------------------------------------------------
GAS UTILITIES - 1.4%
- --------------------------------------------------------------------------------------------------------------------------
Azienda Mediterranea Gas e Acqua SpA (1) 92,000 81,849
- --------------------------------------------------------------------------------------------------------------------------
TELEPHONE UTILITIES - 2.3%
- --------------------------------------------------------------------------------------------------------------------------
Telecomunicacoes de Sao Paulo SA, Preference 470,000 129,752
-----------
Total Common Stocks (Cost $4,885,555) 5,275,466
==========================================================================================================================
PREFERRED STOCKS - 0.9%
- --------------------------------------------------------------------------------------------------------------------------
Prosieben Media AG, Preferred (Cost $50,035) (1) 975 48,891
UNITS
==========================================================================================================================
RIGHTS, WARRANTS AND CERTIFICATES - 0.1%
- --------------------------------------------------------------------------------------------------------------------------
HSBC Holdings plc Rts., Exp. 3/98 60,000 6,122
- --------------------------------------------------------------------------------------------------------------------------
PT Pan Indonesia Bank Wts., Exp. 6/00 75,000 631
-----------
Total Rights, Warrants and Certificates (Cost $2,196) 6,753
FACE
AMOUNT
==========================================================================================================================
REPURCHASE AGREEMENTS - 10.5%
- --------------------------------------------------------------------------------------------------------------------------
Repurchase agreement with J.P. Morgan Securities, Inc., 5.63%, dated 2/27/98, to
be repurchased at $600,282 on 3/2/98, collateralized by U.S. Treasury Bonds,
7.25%--12.50%, 11/15/08--5/15/16, with a value of $558,811, and U.S. Treasury
Nts., 6.75%, 4/30/00, with a value of $55,985 (Cost $600,000) $600,000 600,000
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $5,537,786) 104.0% 5,931,110
- --------------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (4.0) (225,452)
--------- -----------
NET ASSETS 100.0% $5,705,658
========= ===========
</TABLE>
1. Non-income producing security.
See accompanying Notes to Financial Statements.
7 Oppenheimer International Small Company Fund
<PAGE>
================================================================================
STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1998 (UNAUDITED)
<TABLE>
<S> <C>
=============================================================================================================================
ASSETS
Investments, at value (including repurchase agreement of $600,000)
(cost $5,537,786) --see accompanying statement $5,931,110
- -----------------------------------------------------------------------------------------------------------------------------
Cash 62,702
- -----------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation on forward foreign currency exchange contracts - Note 5 560
- -----------------------------------------------------------------------------------------------------------------------------
Receivables:
Investments sold 425,586
Shares of beneficial interest sold 38,175
Interest and dividends 319
- -----------------------------------------------------------------------------------------------------------------------------
Deferred organization costs - Note 1 14,000
- -----------------------------------------------------------------------------------------------------------------------------
Other 1,615
-----------
Total assets 6,474,067
=============================================================================================================================
LIABILITIES Payables and other liabilities:
Investments purchased 744,239
Closed forward foreign currency exchange contracts 10,803
Organization costs 8,137
Transfer and shareholder servicing agent fees 1,283
Distribution and service plan fees 1,171
Shares of beneficial interest redeemed 1,010
Trustees' fees - Note 1 595
Other 1,171
-----------
Total liabilities 768,409
=============================================================================================================================
NET ASSETS $5,705,658
==========
=============================================================================================================================
COMPOSITION OF NET ASSETS
Paid-in capital $5,261,785
- -----------------------------------------------------------------------------------------------------------------------------
Accumulated net investment income 4,613
- -----------------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 45,744
- -----------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and
liabilities denominated in foreign currencies 393,516
-----------
Net assets $5,705,658
===========
</TABLE>
<PAGE>
================================================================================
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)(CONTINUED)
<TABLE>
<S> <C>
=============================================================================================================================
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on
net assets of $4,397,788 and 394,252 shares of beneficial interest outstanding) $11.15
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $11.83
- -----------------------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price
per share (based on net assets of $843,649 and 75,770 shares of beneficial interest outstanding) $11.13
- -----------------------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price
per share (based on net assets of $464,221 and 41,704 shares of beneficial interest outstanding) $11.13
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
================================================================================
STATEMENT OF OPERATIONS FOR THE PERIOD FROM NOVEMBER 17, 1997 (COMMENCEMENT OF
OPERATIONS) TO FEBRUARY 28, 1998 (UNAUDITED)
<TABLE>
<S> <C>
=============================================================================================================================
INVESTMENT INCOME
Interest $ 18,920
- -----------------------------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $480) 2,177
---------
Total income 21,097
=============================================================================================================================
EXPENSES
Management fees - Note 4 8,665
- -----------------------------------------------------------------------------------------------------------------------------
Distribution and service plan fees - Note 4:
Class A 943
Class B 911
Class C 800
- -----------------------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees - Note 4 2,100
- -----------------------------------------------------------------------------------------------------------------------------
Shareholder reports 1,085
- -----------------------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 600
- -----------------------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 500
- -----------------------------------------------------------------------------------------------------------------------------
Registration and filing fees 360
- -----------------------------------------------------------------------------------------------------------------------------
Legal and auditing fees 300
- -----------------------------------------------------------------------------------------------------------------------------
Other 220
---------
Total expenses 16,484
=============================================================================================================================
NET INVESTMENT INCOME 4,613
=============================================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on:
Investments 86,244
Foreign currency transactions (40,500)
---------
Net realized gain 45,744
- -----------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 399,755
Translation of assets and liabilities denominated in foreign currencies (6,239)
---------
Net change 393,516
---------
Net realized and unrealized gain 439,260
=============================================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $443,873
=========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
================================================================================
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
PERIOD ENDED
FEBRUARY 28, 1998(1)
<S> <C>
============================================================================================================================
OPERATIONS
Net investment income $ 4,613
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gain 45,744
- -----------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 393,516
-----------
Net increase in net assets resulting from operations 443,873
============================================================================================================================
BENEFICIAL INTEREST TRANSACTIONS Net increase in net assets resulting from
beneficial interest transactions - Note 2:
Class A 4,029,230
Class B 804,395
Class C 428,160
=============================================================================================================================
NET ASSETS
Total increase 5,705,658
- -----------------------------------------------------------------------------------------------------------------------------
Beginning of period --
-----------
End of period (including undistributed net investment
income of $4,613 for the period ended 2/28/98) $5,705,658
===========
</TABLE>
1. For the period from November 17, 1997 (commencement of operations) to
February 28, 1998.
See accompanying Notes to Financial Statements.
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------------ ------------ ------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED
FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
1998(1) 1998(1) 1998(1)
<S> <C> <C> <C>
===============================================================================================================
PER SHARE OPERATING DATA
Net asset value, beginning of period $10.00 $10.00 $10.00
- ---------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .01 (.01) (.02)
Net realized and unrealized gain 1.14 1.14 1.15
------ ------ ------
Total income from investment
operations 1.15 1.13 1.13
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.15 $11.13 $11.13
====== ====== ======
===============================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) 8.89% 8.80% 8.80%
===============================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $4,398 $844 $464
- ---------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $3,245 $329 $285
- ---------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 0.63% (0.52)% (0.87)%
Expenses 1.37% 2.17% 2.22%
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 61.4% 61.4% 61.4%
Average brokerage commission rate(5) $0.0092 $0.0092 $0.0092
</TABLE>
1. For the period from November 17, 1997 (commencement of operations) to
February 28, 1998. 2. Assumes a hypothetical initial investment on the business
day before the first day of the fiscal period (or commencement of operations),
with all dividends and distributions reinvested in additional shares on the
reinvestment date, and redemption at the net asset value calculated on the last
business day of the fiscal period. Sales charges are not reflected in the total
returns. Total returns are not annualized for periods of less than one full
year.
3. Annualized.
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended February 28, 1998 were $6,835,010 and $1,959,429, respectively. 5. Total
brokerage commissions paid on applicable purchases and sales of portfolio
securities for the period, divided by the total number of related shares
purchased and sold. Generally, non-U.S. commissions are lower than U.S.
commissions when expressed as cents per share but higher when expressed as a
percentage of transactions because of the lower per-share prices of many
non-U.S. securities.
See accompanying Notes to Financial Statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer International Small Company Fund (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment objective is long-term
capital appreciation. The Fund's investment advisor is OppenheimerFunds, Inc.
(the Manager). The Fund offers Class A, Class B and Class C shares. Class A
shares are sold with a front-end sales charge. Class B and Class C shares may be
subject to a contingent deferred sales charge. All classes of shares have
identical rights to earnings, assets and voting privileges, except that each
class has its own distribution and/or service plan, expenses directly
attributable to that class and exclusive voting rights with respect to matters
affecting that class. Class B shares will automatically convert to Class A
shares six years after the date of purchase. The following is a summary of
significant accounting policies consistently followed by the Fund.
INVESTMENT VALUATION. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Trustees. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Trustees to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount. Forward foreign currency exchange contracts are valued
based on the closing prices of the forward currency contract rates in the London
foreign exchange markets on a daily basis as provided by a reliable bank or
dealer.
FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on investments is
separately identified from fluctuations arising from changes in market values of
securities held and reported with all other foreign currency gains and losses in
the Fund's Statement of Operations.
REPURCHASE AGREEMENTS. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
FEDERAL TAXES. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
TRUSTEES' FEES AND EXPENSES. The Fund has adopted a nonfunded retirement plan
for the Fund's independent trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders are
recorded on the ex-dividend date.
ORGANIZATION COSTS. The Manager advanced $14,000 for organization and start-up
costs of the fund. Such expenses are being amortized over a five-year period
from the date operations commenced. In the event that all or part of the
Manager's initial investment in shares of the Fund is withdrawn during the
amortization period, the redemption proceeds will be reduced to reimburse the
Fund for any unamortized expenses, in the same ratio as the number of shares
redeemed bears to the number of initial shares outstanding at the time of such
redemption.
13 Oppenheimer International Small Company Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)(Continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of the recognition of certain foreign currency gains (losses)
as ordinary income (loss) for tax purposes. The character of the distributions
made during the year from net investment income or net realized gains may differ
from its ultimate characterization for federal income tax purposes. Also, due to
timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or realized gain
was recorded by the Fund.
OTHER. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date) and dividend income is recorded on the
ex-dividend date. Realized gains and losses on investments and unrealized
appreciation and depreciation are determined on an identified cost basis, which
is the same basis used for federal income tax purposes.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of beneficial
interest for each class. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
PERIOD ENDED FEBRUARY 28, 1998 (1)
SHARES AMOUNT
<S> <C> <C>
Class A:
Sold 415,616 $4,258,843
Redeemed (21,364) (229,613)
------- ----------
Net increase 394,252 $4,029,230
======= ==========
Class B:
Sold 103,712 1,104,695
Redeemed (27,942) (300,300)
------- ----------
Net increase 75,770 $ 804,395
======= ==========
Class C:
Sold 41,729 $ 428,435
Redeemed (25) (275)
------- ----------
Net increase 41,704 $ 428,160
======= ==========
</TABLE>
1. For the period from November 17, 1997 (commencement of operations) to
February 28, 1998.
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At February 28, 1998, net unrealized appreciation on investments of $393,324 was
composed of gross appreciation of $464,082, and gross depreciation of $70,758.
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES Management fees paid
to the Manager were in accordance with the investment advisory agreement with
the Fund which provides for a fee of 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.
For the period ended February 28, 1998, commissions (sales charges paid by
investors) on sales of Class A shares totaled $5,734, of which $1,443 was
retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by an affiliated broker/dealer. Sales
charges advanced to broker/dealers by OFDI on sales of the Fund's Class B shares
totaled $11,233 of which $8,840 was paid to an affiliated broker/dealer.
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.
14 Oppenheimer International Small Company Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)(Continued)
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES (CONTINUED) The Fund
has adopted a Service Plan for Class A shares to reimburse OFDI for a portion of
its costs incurred in connection with the personal service and maintenance of
shareholder accounts that hold Class A shares. Reimbursement is made quarterly
at an annual rate that may not exceed 0.25% of the average annual net assets of
Class A shares of the Fund. OFDI uses the service fee to reimburse brokers,
dealers, banks and other financial institutions quarterly for providing personal
service and maintenance of accounts of their customers that hold Class A shares.
The Fund has adopted Distribution and Service Plans for Class B and Class C
shares to compensate OFDI for its costs in distributing Class B and Class C
shares and servicing accounts. Under the Plans, the Fund pays OFDI an annual
asset-based sales charge of 0.75% per year on Class B and Class C shares for its
services rendered in distributing Class B and Class C shares. OFDI also receives
a service fee of 0.25% per year to compensate dealers for providing personal
service for accounts that hold Class B and C shares. Each fee is computed on the
average annual net assets of Class B or Class C shares, determined as of the
close of each regular business day. During the period ended February 28, 1998,
OFDI retained $714 as compensation for Class B sales commissions and service fee
advances, as well as financing costs. If either Plan is terminated by the Fund,
the Board of Trustees may allow the Fund to continue payments of the asset-based
sales charge to OFDI for distributing shares before the Plan was terminated. As
of February 28, 1998, OFDI had incurred excess distribution and servicing costs
of $11,920 for Class B.
5. FORWARD CONTRACTS
A forward foreign currency exchange contract (forward contract) is a commitment
to purchase or sell a foreign currency at a future date, at a negotiated rate.
The Fund uses forward contracts to seek to manage foreign currency risks. They
may also be used to tactically shift portfolio currency risk. The Fund generally
enters into forward contracts as a hedge upon the purchase or sale of a security
denominated in a foreign currency. In addition, the Fund may enter into such
contracts as a hedge against changes in foreign currency exchange rates on
portfolio positions.
Forward contracts are valued based on the closing prices of the forward currency
contract rates in the London foreign exchange markets on a daily basis as
provided by a reliable bank or dealer. The Fund will realize a gain or loss upon
the closing or settlement of the forward transaction.
Securities held in segregated accounts to cover net exposure on outstanding
forward contracts are noted in the Statement of Investments where applicable.
Gains and losses on outstanding contracts (unrealized appreciation or
depreciation on forward contracts) are reported in the Statement of Assets and
Liabilities. Realized gains and losses are reported with all other foreign
currency gains and losses in the Fund's Statement of Operations.
Risks include the potential inability of the counterparty to meet the terms of
the contract and unanticipated movements in the value of a foreign currency
relative to the U.S. dollar.
At February 28, 1998, outstanding forward contracts were as follows:
<TABLE>
<CAPTION>
CONTRACT
EXPIRATION AMOUNT VALUATION AS OF UNREALIZED
DATE (000S) FEBRUARY 28, 1998 APPRECIATION
-----------------------------------------------------------------
CONTRACTS TO SELL
-----------------
<S> <C> <C> <C> <C>
Swiss Franc (CHF) 4/6/98 72 CHF $49,432 $560
</TABLE>
<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
<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$102,000ding $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 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.
57
57
<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.
Description of Standard & Poor's Corporation Bond Ratings
AAA: "AAA" is the highest rating assigned to a debt
obligation and indicates an extremely strong capacity to pay
principal and interest.
AA: Bonds rated "AA" also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from "AAA" issues only in small degree.
A: Bonds rated "A" have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to adverse effects of change in
circumstances and economic conditions.
The investments in which the Fund will principally invest will be in the
lower-rated categories, described below.
BBB: Bonds rated "BBB" are regarded as having an adequate
capacity to pay principal and interest. Whereas they normally
exhibit protection parameters, adverse economic conditions or
changing
circumstances are more likely to lead to a weakened capacity to
pay principal and interest for bonds in
this category than for bonds in the "A" category.
BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the obligation.
"BB" indicates the lowest degree of speculation and "CC" the highest degree.
While such bonds will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to adverse
conditions.
C: Bonds on which no interest is being paid are rated "C".
D: Bonds rated "D" are in payment default and payment of
interest and/or repayment of principal is in arrears.
B-1
<PAGE>
APPENDIX C: MAJOR SHAREHOLDERS
As of May 1, 1998, the following persons owned of record 5% or more of a
class of the Fund's shares:
Name and Address Number of Shares Percent of Class
OppenheimerFunds, Inc. 199,800.000 Class A Sha35.61%
6803 S. Tucson Way
Englewood, CO 80112-3924
Paul Delli Bovi 42,184.008 Class A Shar7.52%
100 Lincoln Road
Miami Beach, FL 33139-2019
NFSC FEBO Stephen Cavallo 14,419.180 Class B Shar15.13%
320 E. 95th Street
New York, NY 10128
NFSC FEBO 9891.197 Class B Shares10.38%
Thomas Colace
19 E Oregon Avenue
Philadelphia, PA 19148
RPSS Cust 403 B 9,082.652 Class B Share9.53% Northridge Hospital FBO Juanita T
Uy 8549 Aqueduct Avenue Sepulveda, CA 91343-5804
RPSS TR Rollover IRA 4,868.549 Class B Share5.10%
FBO Peter D. Graves
115 4th Avenue
New York, NY 10003-4907
RPSS TR IRA 35,786.634 Class C Shar66.22%
FBO Blaise P. Aluise
50 Greenock Road
Delmar, NY 12054-3527
Donaldson, Lufkin & Jenrette 3,172.086 Class C Share5.87%
Securities Corporation, Inc.*
P.O. Box 2052
Jersey City, NJ 07303-9998
- ---------------------
* The Manager is advised that such shares were held by Donaldson, Lufkin &
Jenrette for the benefit
of its customers.
C-1
<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
<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 Parts A and B): Filed herewith.
(2) Report of Independent Auditors (See Part B): Filed
herewith.
(3) Statement of Investments (See Part B):
Filed herewith.
(4) Statements of Assets and Liabilities
(See Part B): Filed herewith.
(5) Statement of Operations (See Part B):
Filed herewith.
(6) Statement of Changes in Net Assets (See Part B): Filed herewith.
(7) Notes to Financial Statements (See Part B): Filed
herewith.
(b) Exhibits:
(1) Declaration of Trust dated 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 with Pre-Effective
Amendment No. 2 to the Initial Registration Statement of Registrant
(Reg. No. 333-31537), 11/10/97, and incorporated herein by reference.
(6) (i) General Distributor's Agreement: Filed with Pre-Effective Amendment
No. 2 to the Initial Registration Statement of Registrant (Reg. No. 333-31537),
11/10/97, and incorporated herein by reference.
(ii) Form of OppenheimerFunds Distributor, Inc.
Dealer Agreement: Filed with
Post-Effective Amendment No. 14 of Oppenheimer Main Street Funds,
Inc. (Reg. No. 33-17850),
9/30/94, and incorporated herein by reference.
(iii) Form of OppenheimerFunds Distributor, Inc.
Broker Agreement: Filed with Post-Effective Amendment No. 14 of
Oppenheimer Main Street Funds, Inc. (Reg. No. 33-
17850), 9/30/94, and incorporated herein by reference.
(iv) Form of OppenheimerFunds Distributor, Inc. Agency
Agreement: Filed with Post-Effective Amendment No. 14 of
Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850),
9/30/94, and incorporated herein by reference.
(v) Broker Agreement between Oppenheimer Fund
Management, Inc. and Newbridge Securities, Inc. dated October 1,
1986: Previously filed with Post-Effective Amendment
No. 25 to the Registration Statement of Oppenheimer Growth Fund
(Reg. No. 2-45272), 11/1/86,
and refiled with Post-Effective Amendment No. 45 of Oppenheimer
Growth Fund (Reg. No. 2-
45272), 8/22/94 pursuant to Item 102 of Regulation S-T and
incorporated herein by reference.
(7) Retirement Plan for Non-Interested Trustees or
Directors dated June 7, 1990: Filed with
Post-Effective Amendment No. 97 to the Registration Statement of
Oppenheimer Fund (File No. 2-14586), 8/30/90, refiled with
Post-Effective Amendment No. 45 of Oppenheimer Growth Fund (Reg.
No. 2-45272), 8/22/94,pursuant to Item 102 of Regulation S-T, and
incorporated herein by reference.
(8) (i) Custodian Agreement between Registrant and The
Bank of New York: Filed with Pre-Effective Amendment No.
2 to the Initial Registration Statement of Registrant (Reg.
No. 333-31537), 11/10/97, and incorporated herein by reference.
(ii) Foreign Custody Manager Agreement between
Registrant and The Bank
of New York: Filed with Pre-Effective Amendment No. 2 to the
Registration Statement of
Oppenheimer World Bond Fund (Reg. No. 333-48973), 4/23/98, and
incorporated herein by
reference.
(9) Not applicable.
(10) Opinion and Consent of Counsel: Filed
with Pre-Effective Amendment No. 2 to the Initial Registration
Statement of Registrant (Reg. No. 333-31537), 11/10/97, and
incorporated herein by reference.
(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 with Pre-Effective
Amendment No. 2 to the Initial Registration Statement of
Registrant (Reg.
No. 333-31537), 11/10/97, and incorporated herein by reference.
(ii) Amended and Restated Distribution and Service Plan and
Agreement for Class B shares pursuant to Rule 12b-1: Filed herewith.
(iii) Amended and Restated Distribution and Service Plan and
Agreement for Class C shares pursuant to Rule 12b-1: Filed herewith.
(16) Performance Data Computation Schedule:
Filed herewith.
(17) (i) Financial Data Schedule for Class A shares: Filed herewith.
(ii) Financial Data Schedule for Class B shares: Filed herewith.
(iii) Financial Data Schedule for Class C shares: Filed
herewith.
(18) Oppenheimer Funds Multiple Class Plan under Rule
18f-3 dated 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
Title of Class
as of May 1, 1998
-------------- ------------------------
Class A Shares of Beneficial Interest 539
Class B Shares of Beneficial Interest 206
Class C Shares of Beneficial In erest 44
Item 27. Indemnification
- -------- ---------------
Reference is made to the provisions of Article Seventh of Registrant's
Declaration of Trust filed as Exhibit 24(b)(1) to this Registration Statement.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a trustee, officer or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person, Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
Item 28. Business and Other Connections of Investment Adviser
(a) OppenheimerFunds, Inc. is the investment adviser of the Registrant; it and
certain subsidiaries and affiliates act in the same capacity to other registered
investment companies as described in Parts
A and B hereof and listed in Item 28(b) below.
(b) There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each officer and
director of OppenheimerFunds, Inc. is, or at any time during the past two fiscal
years has been, engaged for his/her own account or in the capacity of director,
officer, employee, partner or trustee.
Name and Current Position
with Other
Business and Connections
OppenheimerFunds, Inc.("OFDuring the Past Two Years
Charles E. Albers,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds (since April 1998); a
Chartered
Financial Analyst; formerly, a
Vice President and
portfolio manager for Guardian
Investor Services,
the investment management
subsidiary of The
Guardian Life Insurance Company
(since 1972).
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.
John R. Blomfield, Formerly, Senior Product Manager
(November, 1996
Vice President - August, 1997) of International
Home Foods and American Home
Products (March, 1994 - October,
1996).
Kathleen Beichert,
Vice President None.
Rajeev Bhaman,
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
and Director 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,
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.
John Cardillo,
Assistant Vice President None.
Erin Cawley,
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.
William DeJianne, None.
Assistant Vice President
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Assistant Vice President None.
Craig P. Dinsell
Senior Vice President Formerly, Senior Vice President
of Human Resources for Fidelity
Investments-Retail Division
(January, 1995 - January, 1996),
Fidelity
Investments FMR Co. (January,
1996 - June, 1997)
and Fidelity Investments FTPG
(June, 1997 -January, 1998).
Robert Doll, Jr.,
Executive Vice President & DirectAn officer and/or
portfolio manager of certain Oppenheimer funds.
John Doney,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Executive Vice President (since
September 1993), and a director
(since January 1992) of the
Distributor; Executive Vice
President, General
Counsel and a director of
HarbourView, SSI, SFSI
and Oppenheimer Partnership
Holdings, Inc. since
(September 1995) and
MultiSource Services, Inc.
(a broker-dealer) (since December
1995); President
and a director of Centennial
(since September 1995);
President and a director of
ORAMI (since July
1996); General Counsel (since
May 1996) and
Secretary (since April 1997) of
OAC; Vice
President and Director of
OppenheimerFunds
International, Ltd. ("OFIL") and
Oppenheimer
Millennium Funds plc (since
October 1997); an
officer of other Oppenheimer
funds.
Patrick Dougherty, None.
Assistant Vice President
Bruce Dunbar, None.
Vice President
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
.
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
former Rochester
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,
Vice President None.
Linda Gardner,
Vice President None.
Alan Gilston,
Vice President Formerly, Vice President
(1987-1997) for Schroder Capital
Management International.
Jill Glazerman,
Assistant Vice President None.
Mikhail Goldverg
Assistant Vice President None.
Jeremy Griffiths,
Chief Financial Officer Currently a Member and Fellow of
the Institute of Chartered
Accountants; formerly, an
accountant for
Arthur Young (London, U.K.).
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 .
Elaine T. Hamann,
Vice President Formerly, Vice President
(September, 1989 -January, 1997)
of Bankers Trust Company.
Glenna Hale,
ViFormerly, Vice President
(1994-1997) of Retirement Plans
Services for OppenheimerFunds
Services.
Robert Haley
Assistant Vice PresidenFormerly, Vice President of
Information Services for Bankers Trust Company
(January, 1991 -November, 1997).
Thomas B. Hayes,
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.
Nicholas Horsley,
Vice President Formerly, a Senior Vice President
and Portfolio Manager for
Warburg, Pincus Counsellors, Inc.
(1993-1997), Co-manager of
Warburg, Pincus
Emerging Markets Fund (12/94 -
10/97), Co-
manager Warburg, Pincus Institutional Emerging
Markets Fund - Emerging Markets Portfolio (8/96
-10/97), Warburg Pincus Japan OTC Fund,
Associate Portfolio Manager of Warburg Pincus
International Equity Fund, Warburg Pincus
Institutional Fund -Intermediate Equity
Portfolio, and Warburg Pincus EAFE Fund.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Vice President None.
Jane Ingalls,
Vice President None.
Frank Jennings,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds
.
Thomas W. Keffer,
Senior Vice President
None.
Avram Kornberg,
Vice President None.
Joseph Krist,
Assistant Vice President None.
Michael Levine,
Assistant Vice President None.
Shanquan Li,
Networks. Vice President None.
Stephen F. Libera,
Vice President An officer and/or portfolio
manager for certain Oppenheimer
funds; a Chartered Financial Analyst; a Vice
President of HarbourView; prior to March 1996,
the senior bond portfolio manager for Panorama
Series Fund Inc., other mutual funds and
pension accounts managed by G.R. Phelps; also
responsible for managing the public
fixed-income securities department at
Connecticut Mutual Life Insurance Co.
Mitchell J. Lindauer,
Vice President None.
David Mabry,
Assistant Vice President None.
Steve Macchia,
Assistant Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director Chief Executive Officer (since
September 1995); President and
director (since June 1991) of
HarbourView; Chairman and a
director of SSI (since
August 1994), and SFSI (September
1995);
President (since September 1995)
and a director
(since October 1990) of OAC;
President (since
September 1995) and a director
(since November
1989) of Oppenheimer Partnership
Holdings, Inc.,
a holding company subsidiary of
OFI; a director of
ORAMI (since July 1996) ;
President and a director
(since October 1997) of OFIL, an
offshore fund
manager subsidiary of OFI and
Oppenheimer
Millennium Funds plc (since
October 1997);
President and a director of
other Oppenheimer
funds; a director of the NASDAQ
Stock Market,
Inc. and of Hillsdown Holdings
plc (a U.K. food
company); formerly, an Executive
Vice President of
OFI.
Wesley Mayer,
Vice President Formerly, Vice President
(January, 1995 - June, 1996) of
Manufacturers Life Insurance
Company.
Loretta McCarthy,
Executive Vice President None.
Kelley A. McCarthy-Kane
Assistant Vice President Formerly, Product Manager,
Assistant Vice President (June
1995- October, 1997) of Merrill
Lynch Pierce Fenner & Smith.
Beth Michnowski, Formerly, Senior Marketing
Manager (May, 1996 -
Assistant Vice President June, 1997) and Director of
Product Marketing (August, 1992 -
May, 1996) with Fidelity
Investments.
Lisa Migan,
Assistant Vice President None.
Denis R. Molleur,
Vice President None.
Nikolaos Monoyios,
Vice President A Vice President and/or portfolio
manager of certain Oppenheimer
funds (since April 1998); a
Certified
Financial Analyst; formerly, a
Vice President and
portfolio manager for Guardian
Investor Services,
the management subsidiary of The
Guardian Life
Insurance Company (since 1979).
Linda Moore,
Vice President Formerly, Marketing Manager (July
1995-November 1996) for Chase
Investment Services Corp.
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.
Ray Olson,
Assistant 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.
James Phillips
Assistant Vice President None.
Caitlin Pincus, Formerly, Manager (June, 1995 -
December, 1997)
Vice President of McKinsey & Co.
John Pirie,
Assistant Vice President Formerly, a Vice President with
Cohane Rafferty Securities, Inc.
Jane Putnam,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
Michael Quinn,
Assistant Vice President Formerly, Assistant Vice
President (April, 1995 -January,
1998) of Van Kampen American
Capital.
Russell Read,
Senior Vice President
Vice President of Oppenheimer
Real Asset Management, Inc.
(since March, 1995).
Thomas Reedy,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; formerly, a
Securities Analyst for the Manager.
Ruxandra Risko,
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
.
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds
.
Lawrence Rudnick,
Assistant Vice President None.
James Ruff,
Executive Vice President & DirectNone.
Valerie Sanders,
Vice President None.
Scott Scharer
Assistant Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Stephanie Seminara,
Vice President None.
Michelle Simone,
Assistant Vice President
None.
Richard Soper,
Vice President None.
Stuart J. Speckman
Vice President Formerly, Vice President and
Wholesaler for Prudential
Securities (December, 1990 -
July, 1997).
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 DivisioAssistant 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
None.
Michael C. Strathearn,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; a Chartered Financial
Analyst;
a Vice President of HarbourView
.
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.
Susan Torrisi,
Assistant Vice President None.
Jay Tracey,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds .
James Turner,
Assistant Vice President None.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant TreasurerAssistant Treasurer of
the Distributor and SFSI.
Ashwin Vasan,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
Teresa Ward,
Assistant Vice President None.
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
.
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
.
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 ; Point of
Contact: Finance Supporters of Children; Member
of the Oncology Advisory Board of the Childrens
Hospital .
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), SFSI (since
November 1989)
, OFIL (since 1998),
Oppenheimer Millennium Funds plc
(since October
1997); an officer of other
Oppenheimer funds.
Jill Zachman,
Assistant Vice President:
Rochester Division None.
Arthur J. Zimmer,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; Vice President of
Centennial.
The Oppenheimer Funds include the New York-based Oppenheimer
Funds, the Denver-based
Oppenheimer Funds and the Oppenheimer/Quest Rochester Funds, as
set forth below:
New York-based Oppenheimer Funds
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer MidCap Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust
Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer Series Fund, Inc.
Oppenheimer U.S. Government
Trust
Oppenheimer World Bond Fund
Quest/Rochester Funds
Limited Term New York Municipal Fund
Oppenheimer
Convertible Securities Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals
Denver-based Oppenheimer Funds
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Municipal Fund
Oppenheimer Real Asset Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The New York Tax-Exempt Income
Fund, Inc.
The address of OppenheimerFunds, Inc., the New York-based
Oppenheimer Funds, the Quest
Funds, OppenheimerFunds Distributor, Inc., HarbourView Asset
Management Corp., Oppenheimer
Partnership Holdings, Inc., and Oppenheimer Acquisition Corp. is
Two World Trade Center, New
York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds,
Shareholder Financial Services, Inc.,
Shareholder Services, Inc., OppenheimerFunds Services, Centennial
Asset Management Corporation,
Centennial Capital Corp., MultiSource Services, Inc. and
Oppenheimer Real Asset Management, Inc.
is 6803 South Tucson Way, Englewood, Colorado 80112.
The address of the Rochester-based funds is 350 Linden Oaks, Rochester,
New York 14625- 2807.
Item 29. Principal Underwriter
(a) OppenheimerFunds Distributor, Inc. is the Distributor of the Registrant's
shares. It is also the Distributor of each of the other registered open-end
investment companies for which OppenheimerFunds, Inc. is the investment adviser,
as described in Part A and B of this Registration Statement and listed in Item
28(b) above.
(b) The directors and officers of the Registrant's principal underwriter are:
Name & Principal Positions & Offices Positions &
Offices
Business Address with Underwriter with Registrant
George C. Bowen(1) Vice President and Vice President and
Treasurer Treasurer of the
Oppenheimer funds.
Julie Bowers Vice President None
21 Dreamwold Road
Scituate, MA 02066
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Maryann Bruce(2) Senior Vice President; None
Director: Financial
Institution Division
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce de Leon Ave.
Decatur, GA 30030
William Coughlin Vice President None
542 West Surf - #2N
Chicago, IL 60657
Mary Crooks(1)
Daniel Deckman Vice PresidenNone
12252 Rockledge Circle
Boca Raton, FL 33428
Christopher DeSimone Vice President None
110 W. Grant Street, #25A
Minneapolis, MN 55403
Rhonda Dixon-Gunner(1) Assistant Vice PresidentNone
Andrew John Donohue(2) Executive Vice Secretary of the
President & Director
Oppenheimer funds.
Kenneth Dorris Vice President None
4104 Harlanwood Drive
Fort Worth, TX 76109
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
412 Commons Way
Doylestown, PA 18901
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
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
L. Daniel Garrity Vice President None
2120 Brookhaven View, N.E.
Atlanta, GA 30319
Mark Giles Vice President None
5506 Bryn Mawr
Dallas, TX 75209
Ralph Grant(2) Vice President/National None
Sales Manager
Michael GVice President None
3913 Pleasent Avenue
Allentown, PA 18103
C. Webb Heidinger Vice President None
28 Cable Road
Rye, NH 03870
Byron Ingram(2) Assistant Vice PresidentNone
Eric K. Johnson Vice President None
3665 Clay Street
San Francisco, CA 94118
Mark D. Johnson Vice President None
409 Sundowner Ridge Court
Wildwood, MO 63011
Michael Keogh(2) Vice President None
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Daniel Krause Vice President None
560 Beacon Hill Drive
Orange Village, OH 44022
Ilene Kutno(2) Assistant Vice PresidentNone
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
39 Coleman Avenue
Chatham, N.J. 07928
Marie Masters Vice President None
520 E. 76th Street
New York, NY 10021
LuAnn Mascia(2) Assistant Vice PresidentNone
Theresa-Marie Maynier Vice President None
4411 Spicewood Springs, #811
Austin, TX 78759
John McDonough Vice President None
6010 Ocean Front Avenue
Virginia Beach, VA 23451
Tanya Mrva(2) Assistant Vice PresidentNone
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
Denise-Marke Nakamura Vice President None
2870 White Ridge Place, #24
Thousand Oaks, CA 91362
Chad V. Noel Vice President None
60 Myrtle Beach Drive
Henderson, NV 89014
Joseph Norton Vice President None
2518 Fillmore Street
San Francisco, CA 94115
Kevin Parchinski Vice President None
8409 West 116th Terrace
Overland Park, KS 66210
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
Steve Puckett Vice President None
2555 N. Clark, #209
Chicago, IL 60614
Elaine Puleo(2) Senior Vice President None
Minnie Ra Vice President None
100 Delores Street, #203
Carmel, CA 93923
Dustin Raring Vice President None
378 Elm Street
Denver, CO 80220
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
28214 Rey de Copas Lane
Malibu, CA 90265
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
Timothy Stegman Vice President None
749 Jackson Street
Denver, CO 80206
Brian Summe Vice President None
239 N. Colony Drive
Edgewood, KY 41017
George Sweeney Vice President None
5 Smokehouse Lane
Hummelstown, PA 17036
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
Sarah Turpin Vice President None
2201 Wolf Street, #5202
Dallas, TX 75201
Gary Paul Tyc(1) Assistant Treasurer None
Mark Stephen Vandehey(1) Vice President None
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
(1) 6803 South Tucson Way, Englewood, Colorado 80112
(2) Two World Trade Center, New York, NY 10048-0203
(3) 350 Linden Oaks, Rochester, NY 14625-2807
(c) Not applicable.
Item 30. Location of Accounts and Records
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
rules promulgated thereunder are in the possession of OppenheimerFunds, Inc. at
its offices at 6803 South Tucson Way, Englewood, Colorado 80112.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
C-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for the effectiveness of this Registration Statement pursuant to
Rule 485(b) under the
Securities Act of 1933 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York on the
11th day of May, 1998.
OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
By: /s/ Bridget A. Macaskill*
-------------------------
Bridget A.
Macaskill, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities on
the
dates indicated:
Signatures: Title Date
- ----------- ----- ----
/s/ Leon Levy* Chairman of the
- -------------- Board of Trustees
May 11, 1998
Leon Levy
/s/ Donald W. Spiro* Trustee
- --------------------
Donald W. Spiro
May 11, 1998
/s/ George Bowen* Treasurer and
- ----------------- Principal Financial
George Bowen and Accounting
Officer
May 11, 1998
/s/ Bridget A. Macaskill* President,
Principal May 11, 1998
- ------------------------ Executive Officer
Bridget A. Macaskill and Trustee
/s/ Robert G. Galli* Trustee
May 11, 1998
- -------------------
Robert G. Galli
/s/ Benjamin Lipstein* Trustee
May 11, 1998
- ----------------------
Benjamin Lipstein
/s/ Kenneth A. Randall* Trustee
May 11, 1998
- -----------------------
Kenneth A. Randall
/s/ Russell S. Reynolds, JTrustee
May 11, 1998
- -----------------------------
Russell S. Reynolds, Jr.
/s/ Pauline Trigere* Trustee
May 11, 1998
- --------------------
Pauline Trigere
/s/ Elizabeth B. Moynihan*Trustee
May 11, 1998
- --------------------------
Elizabeth B. Moynihan
/s/ Clayton K. Yeutter* Trustee
May 11, 1998
- -----------------------
Clayton K. Yeutter
/s/ Edward V. Regan* Trustee
May 11, 1998
- --------------------
Edward V. Regan
*By: /s/ Robert G. Zack
-------------------------------------
Robert G. Zack, Attorney-in-Fact
C-2
<PAGE>
OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
EXHIBIT INDEX
Form N-1A
Item No. Description
24(b)(11) Independent Auditors' Consent
24(b)(15)(ii) Amended and Restated Distribution and Service Plan
and Agreement for Class B shares
24(b)(15)(iii) Amended and Restated Distribution and Service Plan
and Agreement for Class C shares
24(b)(16) Performance Data Computation Schedule
24(b)(17)(i) Financial Data Schedule for Class A Shares
24(b)(17)(ii) Financial Data Schedule for Class B Shares
24(b)(17)(iii) Financial Data Schedule for Class C Shares
INDEPENDENT AUDITORS' CONSENT
To The Board of Trustees of
Oppenheimer International Small Company Fund:
We consent to the use in this Registration Statement of Oppenheimer
International Small Company Fund of our report dated October 21, 1997, appearing
in the Statement of Additional Information, which is a part of such Registration
Statement.
/s/ KPMG Peat Marwick LLP
- -------------------------
KPMG Peat Marwick LLP
Denver, Colorado
May 6, 1998
AMENDED AND RESTATED
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
With
OppenheimerFunds Distributor, Inc.
For Class B Shares of
Oppenheimer International Small Company Fund
This Amended and Restated Distribution and Service Plan and
Agreement (the "Plan") is dated as of the
12th day of February, 1998, 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.
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 Service 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") 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,
2
no such payments shall be made to any Recipient for any such
quarter in which its Qualified Holdings do
not equal or exceed, at the end of such quarter, the minimum
amount ("Minimum Qualified Holdings"),
if any, that may be set from time to time by a majority of the
Independent Trustees. All fee payments made
by the Distributor hereunder are subject to reduction or
chargeback so that the aggregate service fee
payments and Advance Service Fee Payments do not exceed the limits
on payments to Recipients that are,
or may be, imposed by the NASD Conduct Rules. The Distributor
may make Plan payments to any
"affiliated person" (as defined in the 1940 Act) of the
Distributor if such affiliated person qualifies as a
Recipient or retain such payments if the Distributor qualifies as
a Recipient.
(i) Service Fee. In consideration of the administrative
support services provided by a
Recipient during a calendar quarter, the Distributor shall make
service fee payments to that Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed 0.0625%
(0.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of
Shares, computed as of the close of each business day,
constituting Qualified Holdings owned beneficially
or of record by the Recipient or by its Customers for a period of
more than the minimum period (the
"Minimum Holding Period"), if any, that may be set from time to
time by a majority of the Independent
Trustees.
Alternatively, the Distributor may, at its sole option,
make the following service fee
payments to any Recipient quarterly, within forty-five (45) days
of the end of each calendar quarter: (i)
"Advance Service Fee Payments" at a rate not to exceed 0.25% of
the average during the calendar quarter
of the aggregate net asset value of Shares, computed as of the
close of business on the day such Shares are
sold, constituting Qualified Holdings, sold by the Recipient
during that quarter and owned beneficially or
of record by the Recipient or by its Customers, plus (ii) service
fee payments at a rate not to exceed
0.0625% (0.25% on an annual basis) of the average during the
calendar quarter of the aggregate net asset
value of Shares, computed as of the close of each business day,
constituting Qualified Holdings owned
beneficially or of record by the Recipient or by its Customers for
a period of more than one (1) year. At
the Distributor's sole option, the Advance Service Fee Payments
may be made more often than quarterly,
and sooner than the end of the calendar quarter. In the event
Shares are redeemed less than one year after
the date such Shares were sold, the Recipient is obligated to and
will repay the Distributor on demand a
pro rata portion of such Advance Service Fee Payments, based on
the ratio of the time such Shares were
held to one (1) year.
The administrative support services to be rendered by
Recipients in connection with the
Accounts may include, but shall not be limited to, the following:
answering routine inquiries concerning
the Fund, assisting in the establishment and maintenance of
accounts or sub-accounts in the Fund and
processing Share redemption transactions, making the Fund's
investment plans and dividend payment
options available, and providing such other information and
services in connection with the rendering of
personal services and/or the maintenance of Accounts, as the
Distributor or the Fund may reasonably
request.
(ii) Distribution Assistance Fees (Asset-Based Sales
Charge) Payments. In its sole
discretion and irrespective of whichever alternative method of
making service fee payments to Recipients
is selected by the Distributor, in addition the Distributor may
make distribution assistance fee payments to
a Recipient quarterly, within forty-five (45) days after the end
of each calendar quarter, at a rate not to
exceed 0.1875% (0.75% on an annual basis) of the average during
the calendar quarter of the aggregate
net asset value of Shares computed as of the close of each
business day constituting Qualified Holdings
3
owned beneficially or of record by the Recipient or its Customers
for no more than six years and for any
minimum period that the Distributor may establish. Distribution
assistance fee payments shall be made
only to Recipients that are registered with the SEC as a
broker-dealer or are exempt from registration.
The distribution assistance to be rendered by the
Recipients in connection with the sale of
Shares may include, but shall not be limited to, the following:
distributing sales literature and prospectuses
other than those furnished to current Shareholders, providing
compensation to and paying expenses of
personnel of the Recipient who support the distribution of Shares
by the Recipient, and providing such
other information and services in connection with the distribution
of Shares as the Distributor or the Fund
may reasonably request.
(c) A majority of the Independent Trustees may at any time
or from time to time increase or
decrease the rate of fees to be paid to the Distributor or to any
Recipient, but not to exceed the rates set
forth above, and/or direct the Distributor to increase or decrease
the Maximum Holding Period, any
Minimum Holding Period or any Minimum Qualified Holdings. The
Distributor shall notify all Recipients
of any Minimum Qualified Holdings, Maximum Holding Period and
Minimum Holding Period that are
established and the rate of payments hereunder applicable to
Recipients, and shall provide each Recipient
with written notice within thirty (30) days after any change in
these provisions. Inclusion of such provisions
or a change in such provisions in a revised current prospectus
shall constitute sufficient notice.
(d) The Service Fee and the Asset-Based Sales Charge on
Shares are subject to reduction or
elimination under the limits to which the Distributor is, or may
become, subject under the NASD Conduct
Rules.
(e) Under the Plan, payments may also 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, in either
case, in the discretion of OFI or the
Distributor, respectively.
(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.
The Distributor has no obligation to pay any
Service Fees or Distribution Assistance Fees to any Recipient if
the Distributor has not received payment
4
of Service Fees or Distribution Assistance Fees from the Fund.
4. Selection and Nomination of Trustees. While this Plan is in
effect, the selection and nomination
of persons to be Trustees of the Fund who are not "interested
persons" of the Fund ("Disinterested
Trustees") shall be committed to the discretion of the incumbent
Disinterested Trustees. Nothing herein
shall prevent the incumbent Disinterested Trustees from soliciting
the views or the involvement of others
in such selection or nominations as long as the final decision on
any such selection and nomination is
approved by a majority of the incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the
Fund shall provide written reports to the
Fund's Board for its review, detailing 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 Amended and Restated Plan has
been approved by a vote of the Board and of the Independent
Trustees and replaces the Fund's prior
Distribution and Service Plan for Class B Shares. Unless
terminated as hereinafter provided, it shall
continue in effect until renewed by the Board in accordance with
the Rule 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 at a
meeting called for that purpose, 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
5
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\815b.#3
AMENDED AND RESTATED
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
with
OppenheimerFunds Distributor, Inc.
For Class C Shares of
Oppenheimer International Small Company Fund
This Amended and Restated Distribution and Service Plan and
Agreement (the "Plan") is dated as of the
12th day of February, 1998, 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
1
person or entity would otherwise qualify as Recipients as to the
same Shares, the Recipient which is the
dealer of record on the Fund's books as determined by the
Distributor shall be deemed the Recipient as to
such Shares for purposes of this Plan.
3. Payments for Distribution Assistance and Administrative
Support Services.
(a) Payments to the Distributor. In consideration of the
payments made by the Fund to the
Distributor under this Plan, the Distributor shall provide
administrative support services and distribution
services to the Fund. Such services include distribution
assistance and administrative support services
rendered in connection with Shares (1) sold in purchase
transactions, (2) issued in exchange for shares of
another investment company for which the Distributor serves as
distributor or sub-distributor, or (3) issued
pursuant to a plan of reorganization to which the Fund is a party.
If the Board believes that the Distributor
may not be rendering appropriate distribution assistance or
administrative support services in connection
with the sale of Shares, then the Distributor, at the request of
the Board, shall provide the Board with a
written report or other information to verify that the Distributor
is providing appropriate services in this
regard. For such services, the Fund will make the following
payments to the Distributor:
(i) Administrative Support Service 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.
(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
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.
(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%
3
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 also 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, in either
case, in the discretion of OFI or the
Distributor, respectively.
(f) Recipients are intended to have certain rights as
third-party beneficiaries under this Plan,
subject to the limitations set forth below. It may be presumed
that a Recipient has provided distribution
assistance or administrative support services qualifying for
payment under the Plan if it has Qualified
Holdings of Shares that entitle it to payments under the Plan. If
either the Distributor or the Board believe
that, notwithstanding the level of Qualified Holdings, a Recipient
may not be rendering appropriate
distribution assistance in connection with the sale of Shares or
administrative support services for
Accounts, then the Distributor, at the request of the Board, shall
require the Recipient to provide a written
report or other information to verify that said Recipient is
providing appropriate distribution assistance
and/or services in this regard. If the Distributor or the Board
of Trustees still is not satisfied after the
4
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. The Distributor
has no obligation to pay any Service Fees or
Distribution Assistance Fees to any Recipient if the Distributor
has not received payment of Service Fees
or Distribution Assistance Fees from the Fund.
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 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 Amended and Restated Plan has
been approved by a vote of the Board and of the Independent
Trustees and replaces the Fund's prior
Distribution and Service Plan for Class C Shares. Unless
terminated as hereinafter provided, it shall
continue in effect until renewed by the Board in accordance with
the Rule 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 at a
meeting called for that purpose 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
5
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/815c.#3
Oppenheimer International Small Company Fund
Exhibit 24(b)(16) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are calculated
as described
below, on the basis of the Fund's distributions, for the past 10 years
which are as
follows:
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term
Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares
No dividends have been declared.
Class B Shares
No dividends have been declared.
Class C Shares
No dividends have been declared.
Class Y Shares
No dividends have been declared.
Oppenheimer International Small Company Fund
Page 2
1. Cumulative Total Returns for the Periods Ended 02/28/98:
The formula for calculating cumulative total return is as follows:
(ERV - P) / P = Cumulative Total Return
Where: ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period
P = hypothetical initial investment of $1,000
Class A Shares
Examples, assuming a maximum Examples at NAV:
sales charge of 5.75%:
Inception Year Inception Year
$ 1,050.89 - $1,000 /$1,000 = 5.09$1,115.00 - $1,000 /$1,000 = 11.50%
Class B Shares
Examples, assuming a maximum Examples at NAV:
contingent deferred sales charge
of 5.00% for the inception year:
Inception Year Inception Year
$1,063.00 - $1,000 /$1,000 = 6.30%$1,113.00 - $1,000 /$1,000 = 11.30%
Class C Shares
Examples, assuming a maximum Examples at NAV:
contingent deferred sales charge
of 1.00% for the inception year:
Inception Year Inception Year
$1,103.01 - $1,000 /$1,000 = 10.30$1,113.00 - $1,000 /$1,000 = 11.30%
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> Oppenheimer International Small Company-Class A
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> Oppenheimer International Small Company-Class B
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<NAME> Oppenheimer International Small Company-Class C
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