<PAGE>
Registration No. 33-371
File No. 811-4410
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. 14 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
AMENDMENT NO. 16 / X /
OPPENHEIMER DISCOVERY 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.
Oppenheimer Management Corporation
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 (check appropriate
box):
/ / Immediately upon filing pursuant to paragraph (b)
/ / On ________, pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ X / On April 1, 1994 pursuant to paragraph (a)
of Rule 485
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The Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 promulgated under the
Investment Company Act of 1940. A Rule 24f-2 Notice for the Registrant's
fiscal year ended September 30, 1993 was filed on November 23, 1993.
<PAGE>
FORM N-1A
OPPENHEIMER DISCOVERY FUND
Cross Reference Sheet
Part A of
Form N-1A
Item No. Prospectus Heading
1 Cover Page
2 Fund Expenses
3 Financial Highlights; Total Return Information
4 Cover Page; The Fund and Its Investment Policies; Special
Investment Methods; Investment Restrictions
5 Fund Expenses; Management of the Fund; Back Cover; Additional
Information - The Custodian and the Transfer Agent
6 Dividends, Distributions and Taxes; Additional Information;
Management of the Fund
7 How to Buy Shares; How to Redeem Shares; Exchanges of Shares
and Retirement Plans; Distribution and Service Plans
8 How to Redeem Shares
9 *
Part B of
Form N-1A
Item No. Statement of Additional Information Heading
10 Cover Page
11 Cover Page
12 Investment Objective and Policies
13 Investment Objective and Policies; Investment Restrictions
14 Trustees and Officers; Investment Management Services
15 Trustees and Officers - Major Shareholders
16 Investment Management Services; Distribution and Service
Plans; Additional Information; Back Cover
17 Brokerage
18 Additional Information - Description of the Fund
19 Purchase, Redemption and Pricing of Shares; Automatic
Withdrawal Plan Provisions; Letters of Intent
20 Performance, Dividend and Tax Information
21 Investment Management Services; Brokerage; Additional
Information - General Distributor's Agreement; Financial
Statements
22 Performance, Dividend and Tax Information
23 Financial Statements
_____________
*Not applicable or negative answer.
<PAGE>
Oppenheimer Discovery Fund
Two World Trade Center, New York, NY 10048-0203
Telephone 1-800-525-7048
Oppenheimer Discovery Fund (the "Fund") is a mutual fund with the
investment objective of capital appreciation. Current income is not an
objective. In seeking its objective, the Fund emphasizes investments in
securities of "growth-type" companies, including common stocks, preferred
stocks, convertible securities, rights, warrants and options, in
proportions which may vary from time to time. The selection of securities
for their appreciation possibilities will use the methods described in
this Prospectus under "Special Investment Methods," some of which involve
speculative techniques. The Fund may also use certain hedging
instruments. In an uncertain environment, temporary defensive investment
methods may be stressed. See "The Fund and Its Investment Policies."
The Fund offers two classes of shares which may be purchased at a
price equal to their respective net asset value per share, plus a sales
charge. The investor may elect to purchase shares with a sales charge
imposed (i) at the time of purchase (the "Class A shares"), or (ii) on a
contingent deferred basis (the "Class B shares"). Class B shares are also
subject to an asset-based sales charge. The contingent deferred sales
charge (the "CDSC") will be imposed on most redemptions of Class B shares
within six years of purchase. These alternatives permit an investor to
choose the method of purchasing shares that is more beneficial to that
investor depending on the amount of the purchase, the length of time the
investor expects to hold the shares and other circumstances. In addition,
Class Y shares of the Fund may be purchased at net asset value by certain
tax qualified institutional investors. See"How To Buy Shares -
Alternative Sales Arrangements" below for further details.
This Prospectus sets forth concisely information about the Fund that
a prospective investor should know before investing. A Statement of
Additional Information about the Fund (the "Additional Statement") dated
April 1, 1994, has been filed with the Securities and Exchange Commission
("SEC") and is available without charge upon written request to
Oppenheimer Shareholder Services (the "Transfer Agent"), P.O. Box 5270,
Denver, Colorado 80217, or by calling the toll-free number above. The
Additional Statement (which is incorporated in its entirety by reference
in this Prospectus) contains more detailed information about the Fund and
its management, including more complete information about certain risk
factors.
Investors are advised to read and retain this Prospectus for future
reference. These securities may be considered to be speculative. Shares
of the Fund are not deposits of any bank, are not guaranteed by any bank,
are not insured by the FDIC or any other agency, and involve investment
risks, including the possible loss of principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus is effective April 1, 1994.
<PAGE>
Table of Contents
Page
Fund Expenses
Financial Highlights
The Fund and Its Investment Policies
Special Investment Methods
Investment Restrictions
Management of the Fund
How to Buy Shares
Alternative Sales Arrangements
Class A Shares
Class A Sales Charge Table
Class A Contingent Deferred Sales Charge
Reduced Sales Charges for Class A Purchases
Class A Service Plan
Class B Shares
Class B Contingent Deferred Sales Charge
Class B Conversion Feature
Class B Distribution and Service Plan
Purchase Programs for Class A and Class B Shares
AccountLink
PhoneLink
Asset Builder Plans
Group Programs
Class Y Shares
How to Redeem Shares
Regular Redemption Procedures
Telephone Redemptions
Distributions from Retirement Plans
Automatic Withdrawal and Exchange Plans
Repurchase
Reinvestment Privilege
General Information on Redemptions
Exchanges of Shares and Retirement Plans
Dividends, Distributions and Taxes
Fund Performance Information
Additional Information
<PAGE>
Fund Expenses
The following table sets forth the fees that an investor in the Fund
might pay and the expenses paid by the Fund in its fiscal year ended
September 30, 1993.
Shareholder Transaction Expenses
Class A Class B Class Y
Shares Shares Shares(4)
Maximum Sales Charge on
Purchases (as a percentage
of offering price) 4.75% None None
Sales Charge on Reinvested
Dividends None None None
Maximum Contingent Deferred
Sales Charge on Redemptions None(1) 5.0%(2) None
Redemption Fees None(3) 5.0%(3) None
Exchange Fee $5.00 $5.00 $5.00
Annual Fund Operating Expenses (estimated
as to Class B shares) (as a percentage
of average net assets)
Class A Class B Class Y
Shares Shares Shares
Management Fees (restated) 0.73% .73% .73%
12b-1 (Distribution and/or
Service Plan) Fees 0.24% 1.00% None
Other Expenses 0.30% .30% ___%
Total Fund Operating Expenses 1.27% 2.03% ___%
____________
(1) Certain Class A share purchases of $1 million or more are not subject
to front-end sales charges, but a contingent deferred sales charge
(maximum of 1.0%) is imposed on the proceeds of such shares redeemed
within 18 months of the end of the calendar month of their purchase,
subject to certain conditions. See "How to Buy Shares - Class A
Contingent Deferred Sales Charge," below.
(2) A contingent deferred sales charge is imposed on the proceeds of
Class B shares redeemed within six years of their purchase, subject
to certain exceptions. That charge is imposed as a percentage of net
asset value at the time of purchase or redemption, whichever is less,
and declines from 5.0% in the first year that shares are held, to
4.0% in the second year, 3.0% in the third and fourth years, 2.0% in
the fifth year, 1.0% in the sixth year and eliminated thereafter.
There is no charge on Class B shares held for more than six years.
See "How to Buy Shares - Class B Contingent Deferred Sales Charge,"
below.
(3) There is a $15 transaction fee for redemptions paid by Federal Funds
wire, but not for redemptions paid by check or by Automated Clearing
House ("ACH") wire through AccountLink, or for which check writing
privileges are used (see "How to Redeem Shares").
(4) Class Y shares are available for sale at net asset value to certain
tax qualified institutional investors. See "How to Buy Shares -
Alternative Sales Arrangements - Class Y Shares" herein for further
details.
The purpose of this table is to assist an investor in understanding
the various costs and expenses that an investor in shares of the Fund will
bear directly (shareholder transaction expenses) or indirectly (annual
fund operating expenses). The sales charge rate shown for Class A shares
is the current maximum rate applicable to purchases of Class A shares of
the Fund. Investors in Class A shares may be entitled to reduced sales
charges based on the amount purchased or the value of shares already owned
and may be subject to a contingent deferred sales charge in limited
circumstances (see "How to Buy Shares - Class A Contingent Deferred Sales
Charge"). Neither Class B nor Class Y shares were publicly offered prior
to April 1, 1994. The "Annual Fund Operating Expenses" as to Class B and
Class Y shares are estimates based on amounts that would have been payable
during the fiscal year ended September 30, 1993, assuming that Class B and
Class Y shares were outstanding during the entire fiscal year. The actual
amount of such fees and expenses in the current and future years will
depend on a number of factors, including the actual average net assets of
Class B and Class Y shares, respectively, during such years. "Other
Expenses" includes such expenses as custodial and transfer agent fees,
audit, legal and other business operating expenses, but excludes
extraordinary expenses. For further details, see "Purchase, Redemption
and Pricing of Shares--Multiple Class Methodology" and the Fund's
financial statements, both included in the Additional Statement.
The following example applies the restated total Fund operating
expenses in the chart above and the current maximum sales charges to a
hypothetical $1,000 investment in shares of the Fund over the time periods
shown below, assuming a 5% annual rate of return on the investment. The
amounts shown below are the cumulative costs of such hypothetical $1,000
investment for the periods shown, and except as indicated in lines 3 and
4, assume that the shares are redeemed at the end of such stated
period.
1 year 3 years 5 years10 years(1)
1. Class A Shares $70 $95 $123 $202
2. Class A Shares,
assuming no
redemption $70 $95 $123 $202
3. Class B Shares $ $ $ $
4. Class B Shares,
assuming no
redemption $ $ $ $
5. Class Y Shares
6. Class Y Shares,
assuming no
redemption $ $ $ $
_______________
(1) Class B shares convert to Class A shares under the terms and
conditions described under "How to Buy Shares - Class B Conversion
Feature." Therefore, years 7 through 10 reflect the Class A expenses
shown above. Long-term shareholders of Class B shares could pay the
economic equivalent, through the asset-based sales charge and
contingent deferred sales charge imposed on Class B shares, of more
than the maximum front-end sales charges permitted under applicable
regulatory requirements. The Class B Conversion Feature is intended
to minimize the likelihood that this will occur.
This example should not be considered a representation of past or
future expenses or performance. Expenses are subject to change and actual
performance and expenses may be less or greater than those illustrated
above.
<PAGE>
Financial Highlights
Selected data for a Class A share of the Fund outstanding throughout each
period
The information in the table below has been audited by KPMG Peat
Marwick, independent auditors, whose report on the financial statements
of the Fund for the fiscal year ended September 30, 1993, is included in
the Additional Statement. Class B and Class Y shares were not publicly
offered during that period. Accordingly, no information on either Class
B or Class Y shares is reflected in the table below or in the Fund's other
financial statements.
<PAGE>
The Fund And Its Investment Policies
The Fund is an open-end, diversified management investment company
organized as a Massachusetts business trust in 1985. In seeking its
objective of capital appreciation, the Fund will emphasize investment in
securities considered by the Fund's investment adviser, Oppenheimer
Management Corporation (the "Manager"), to have appreciation
possibilities. Such securities may either be listed on securities
exchanges or traded in the over-the-counter market. The over-the-counter
market is a negotiated marketplace, with no centralized trading floor, but
in which transactions are conducted through telephone and computer
networks among dealers and brokers. There are over-the-counter markets
in the U.S. and foreign countries, and the Fund may trade in both domestic
and foreign markets. See "Over-the-Counter" Securities in the Additional
Statement for further information on securities traded in the over-the-
counter market, including a discussion of the possibility of less
liquidity in trading such securities and the possibility of greater price
volatility than for securities listed on exchanges.
The Fund emphasizes investment in securities of growth-type issuers,
including emerging growth companies, described below, primarily common
stocks of such issuers or securities having investment characteristics of
common stocks (for example, securities convertible into common stocks).
The Fund fully expects a substantial portion of its assets to continue to
be invested in over-the-counter securities. The Fund is designed for
investors who are willing to accept greater risks of loss in the hopes of
greater gains, and is not intended for those who desire assured income and
conservation of capital. The Fund's investment policies and practices are
not "fundamental" policies (as defined below) unless a particular policy
is identified as fundamental. The Board may change non-fundamental
investment policies without shareholder approval.
The fact that a security selected for possible appreciation has a low
yield or negligible yield will not be an adverse factor in its selection
(unless such lack of yield might adversely affect appreciation
possibilities), nor will yield be a consideration in choosing defensive
investments, described below. The Fund's investment policies are
speculative and involve substantial risks. Since market risks are
inherent in all securities to varying degrees, assurance cannot be given
that the Fund's investment objective will be met.
Growth-Type Issuers and Emerging Growth Companies
Typically, growth-type issuers are those whose goods or services have
relatively favorable long-term prospects for increasing demand, 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 also include companies in the
natural resources fields or those developing industrial applications for
new scientific knowledge having a potential for technological innovation,
such as nuclear energy, oceanography, business services and new consumer
products. The Fund may also invest from time to time in cyclical
industries such as insurance and forest products, when the Manager
believes that they present opportunities for capital growth.
Investment opportunities will be sought usually among smaller, less
well-known companies, but securities of large, well-known companies (not
generally included in the definition of growth-type companies) also may
be purchased, particularly at times when the Manager believes that the
amounts of securities of smaller companies available at prices which may
be expected to appreciate are insufficient to affect substantially the
performance of the Fund.
Growth-type issuers in which the Fund may invest include emerging
growth companies. Emerging growth companies are beyond their initial
start-up periods but have not yet reached a state of established growth
or maturity. The rate of growth of such companies at times may be
dramatic. However investments of this type generally involve greater risk
than is customarily associated with large, more seasoned companies.
Emerging growth companies often have products and management personnel
that have not been thoroughly tested by time or the marketplace; their
financial resources may not be as substantial as those of more established
companies. On the other hand, such companies often provide new products
or services that enable them to capture a dominant or important market
position, or have a special area of expertise, or are able to take
advantage of changes in demographic factors in a way that is more
profitable than that of other companies.
Foreign Securities
The Fund may purchase foreign securities that are listed on a
domestic or foreign securities exchange or are represented by American
Depository Receipts listed on a domestic securities exchange, or traded
in the U.S. over-the-counter market. The Fund has no restrictions on the
amount of its assets that may be invested in foreign securities, and may
purchase securities issued by issuers in any country, developed or
underdeveloped. If the Fund's securities are held abroad, the countries
in which such securities may be held and the sub-custodians holding them
in most cases must be approved by the Fund's Board of Trustees under
applicable SEC rules. 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. See "Foreign
Securities" in the Additional Statement for more information about the
possible rewards and risks of investing in foreign securities. In
summary, such risks may include foreign taxation, changes in currency
rates or currency blockage, currency exchange costs, greater volatility
and less liquidity than investments in domestic securities, and
differences between domestic and foreign legal, auditing, brokerage and
economic standards.
Small, Unseasoned Companies
The Fund may invest in securities of small, unseasoned companies
(which are issuers that, together with any predecessors, have been in
operation for less than three years), as well as in securities of more
established companies. In view of the volatility of price movements of
the former, the Fund currently intends to invest no more than 10% of its
total assets in securities of small, unseasoned issuers, while reserving
the right to invest up to 20% of its assets in such issuers. The
securities of small, unseasoned companies may have a limited trading
market, which might adversely affect the Fund's ability to dispose of such
securities and can result in lower prices for such securities than might
otherwise be the case. If other investors holding the same securities as
the Fund sell them when the Fund attempts to dispose of its holdings, the
Fund might receive lower prices than might otherwise be obtained, because
of the thinner market for such securities.
Temporary Defensive Investments
In an uncertain investment environment, temporary defensive
investment methods may be stressed, such as debt securities, including
rated or unrated bonds and debentures, and preferred stocks or cash or
cash equivalents. The securities selected for such temporary defensive
purposes may include U.S. Treasury bills and other short-term obligations
of the U.S. Government, its agencies or instrumentalities, and commercial
paper rated at least "A-1" by Standard & Poor's Corporation ("Standard &
Poor's") or "Prime-1" by Moody's Investors Service, Inc. ("Moody's"). It
is expected that the emphasis of defensive security selection will be on
short-term debt securities (i.e., those maturing in one year or less from
the date of purchase), since such securities usually may be disposed of
quickly at prices not involving significant gains or losses. If any bonds
or debentures are purchased for defensive purposes, they will be rated at
least "A" by Standard & Poor's or Moody's, or, if unrated, will be of
equivalent quality in the opinion of the Manager.
Portfolio Turnover
The Fund may engage frequently in short-term trading. High portfolio
turnover and short-term trading involve correspondingly greater commission
expenses and transaction costs. See "Financial Highlights" for data about
the Fund's portfolio turnover rate. Also, see "Dividends, Distributions
and Taxes" in this Prospectus and "Tax Aspects of Covered Calls and
Hedging Instruments" under "Investment Objective and Policies" in the
Additional Statement for a further discussion of the tax effects of short-
term trading.
Special Investment Methods
Special Risk Considerations - Borrowing
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 (on which the Fund will pay interest), subject to the 300% asset
coverage requirement as to such loans under the Investment Company Act of
1940, as amended (the "Investment Company Act"). Purchasing securities
with borrowed funds is a speculative investment method known as
"leverage." There are risks associated with leveraging purchases of
portfolio securities by borrowing, including possible reduction of income
and increased fluctuation of net asset value per share. For further
discussion of such risks and other details, see "Investment Objective and
Policies - Borrowing" in the Additional Statement.
Warrants
The Fund may invest up to 5% of its total assets in warrants (other
than those that have been acquired in units or attached to other
securities). No more than 2% of the Fund's assets may be invested in
warrants that are not listed on the New York or American Stock Exchanges.
Warrants are options to purchase equity securities at specific prices
valid for a specific period of time. Those prices do not necessarily move
in a manner parallel to the prices of the underlying securities. The
price paid for a warrant will be foregone unless the warrant is exercised
prior to its expiration. Warrants have no voting rights, receive no
dividends and have no rights with respect to the assets of the issuer.
Special Situations
The Fund may invest without limit in "special situations" that the
Manager believes present opportunities for capital growth. A "special
situation" exists when a merger, reorganization, or other unusual
development is expected to occur which, in the opinion of the Manager, may
prompt an increase in the value of a company's securities regardless of
general business conditions or the movement of the market as a whole.
There is a risk that the price of the security may decline if the
anticipated development fails to occur.
Illiquid and Restricted Securities
The Fund will not purchase or otherwise acquire any security that may
be illiquid by virtue of the absence of a readily available market or
because its disposition would be subject to legal or contractual
restrictions on resale ("restricted securities") if, as a result, more
than 15% of its net assets would be invested in illiquid securities
(including repurchase agreements maturing in more than seven days, over-
the-counter options held by the Fund, and that portion of Fund assets used
to cover such options). This policy does not limit purchases of
restricted securities eligible for resale to qualified institutional
purchasers pursuant to Rule 144A under the Securities Act of 1933 that are
determined to be liquid by the Board of Trustees, or by the Manager under
Board-approved guidelines. Such guidelines take into account trading
activity for such securities and the availability of reliable pricing
information, among other factors. If there is a lack of trading interest
in particular Rule 144A securities, the Fund's holdings of those
securities may be illiquid. There may be undesirable delays in selling
such securities at prices representing their fair value. See "Illiquid
and Restricted Securities" in the Additional Statement for further
details. The Fund currently intends to invest no more than 10% of its net
assets in illiquid and restricted securities, excluding securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933
that are determined to be liquid by the Board of Trustees or by the
Manager under Board-approved guidelines.
Loans of Portfolio Securities
To attempt to increase its income for liquidity purposes, the Fund
may lend its portfolio securities (other than in repurchase transactions)
to qualified borrowers if the loan is collateralized in accordance with
applicable regulatory requirements and if, after any loan, the value of
the securities loaned does not exceed 25% of the value of the Fund's total
assets. In connection with securities lending, the Fund might experience
risks of delay in receiving additional collateral, or risks of delay in
recovery of the loaned securities, or loss of rights in the collateral
should the borrower fail financially. The Fund presently does not intend
that the value of securities loaned will exceed 5% of the value of the
Fund's total assets in the coming year. See "Loans of Portfolio
Securities" in the Additional Statement for further information on
securities loans.
Repurchase Agreements
The Fund may acquire securities subject to repurchase agreements to
generate income for liquidity purposes to meet anticipated redemptions,
or pending the investment of proceeds from sales of Fund shares or
settlement of purchases of portfolio investments. 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 purchase
price to fully collateralize the repayment obligation. However, if the
seller of the securities fails to pay the agreed-upon repurchase price on
the delivery date, the Fund's risks may include the costs of disposing
of collateral, and losses that might result from any delay in foreclosing
on the collateral. There is no limit on the amount of the Fund's net
assets that may be subject to repurchase agreements having a maturity of
seven days or less. The Fund will not enter into a repurchase transaction
which will cause more than 10% of the Fund's net assets to be subject to
repurchase agreements having a maturity of more than seven days. See
"Repurchase Agreements" in the Additional Statement for further
information.
Covered Call Options and Hedging
The Fund may write (i.e., sell) covered call options to generate
income for liquidity or defensive reasons. For hedging purposes, the Fund
may purchase certain put and call options, Stock Index Futures (described
below), and options on Stock Index Futures and broadly-based stock
indices, all of which are referred to as "Hedging Instruments." In
general, the Fund may use Hedging Instruments: (1) to attempt to protect
against declines in the market value of the Fund's portfolio securities
or Stock Index Futures, and thus protect the Fund's net asset value per
share against downward market trends, or (2) to establish a position in
the equity securities markets as a temporary substitute for purchasing
particular equity securities. The Fund will not use Hedging Instruments
for speculation. The covered calls and Hedging Instruments the Fund may
use are described below and in greater detail under "Covered Calls and
Hedging" in the Additional Statement.
-- Writing Covered Call Options. The Fund may write call options
("calls") if: (i) the calls are listed on a domestic securities or
commodities exchange or quoted on the Automated Quotation System of the
National Association of Securities Dealers, Inc. ("NASDAQ"), and (ii) the
calls are "covered" (i.e., the Fund owns the securities or Futures subject
to the call or other securities acceptable for applicable escrow
arrangements) while the call is outstanding. A call written on a Stock
Index Future must be covered by deliverable securities or segregated
liquid assets to satisfy the Futures Contract.
-- Purchasing Puts and Calls. The Fund may purchase put options
("puts") which relate to securities or Stock Index Futures (whether or not
it holds such securities or Stock Index Futures in its portfolio), or
broadly-based stock indices. The Fund may purchase calls as to
securities, securities indices or Stock Index Futures, or to effect a
"closing purchase transaction" to terminate its obligation as to a call
it has previously written. A call or put may be purchased only if, after
such purchase, the value of all put and call options held by the Fund
would not exceed 5% of the Fund's total assets.
-- Writing Puts. The Fund may write puts on securities, securities
indices or Futures only if such puts are covered by segregated liquid
assets. The Fund may not write puts if, as a result, more than 50% of the
Fund's net assets would be required to be segregated liquid assets.
-- Foreign Currency Options. The Fund may purchase and write puts
and calls on foreign currencies that are traded on a securities or
commodities exchange or an over-the-counter market or quoted by major
recognized dealers in such options, for the purpose of protecting against
declines in the dollar value of foreign securities and against increases
in the dollar cost of foreign securities to be acquired. If a rise is
anticipated 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 incur transactions costs.
-- 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. 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 will not speculate in foreign currency exchange contracts.
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 portfolio
securities 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" in the Additional
Statement for a discussion of the tax treatment of foreign currency
exchange contracts.
-- Stock Index Futures. The Fund may buy and sell futures contracts
only if they relate to broadly-based stock indices ("Stock Index
Futures"). A stock index is "broadly-based" if it includes stocks that
are not limited to issuers in any particular industry or group of
industries. Stock Index Futures 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 underlying
stocks in the index is made.
-- Interest Rate Swap Transactions. The Fund may enter into interest
rate swaps. In an interest rate swap, the Fund and another party exchange
their respective commitments to pay or receive interest on a security,
(e.g., an exchange of floating rate payments for fixed rate payments).
The Fund will not use interest rate swaps for leverage. Swap transactions
will be entered into only as to security positions held by the Fund. The
Fund may not enter into swap transactions with respect to more than 50%
of its total assets.
The Fund will segregate liquid assets (e.g., cash, U.S. Government
securities or other appropriate high grade debt obligations) equal to the
net excess, if any, of its obligations over its entitlements under the
swap and will mark to market that amount daily. See "Covered Calls and
Hedging -- Interest Rate Swap Transactions" in the Additional Statement
for details.
-- Risks of Options and Futures Trading. "Covered Calls and Hedging"
in the Additional Statement contains more information about options and
Futures, including the payment of premiums for options trades, and on the
tax effects, risks and possible benefits to the Fund from options trading,
and information as to the Fund's other limitations on investment in
Futures and options thereon. The principal risks of Futures trading are:
(a) possible imperfect correlation between the prices of the Futures and
the market value of the Fund's portfolio securities; (b) possible lack of
a liquid secondary market for closing out a Futures position; (c) the need
for additional skills and techniques beyond those required for normal
portfolio management; and (d) losses resulting from market movements not
anticipated by the Manager. There are certain risks in writing calls.
If a call written by the Fund is exercised, the Fund forgoes any profit
from any increase in the market price above the call price of the
underlying investment on which the call was written.
Short Sales Against-the-Box
The Fund may not sell securities short except in "short sales
against-the-box." Such short sales are subject to the limits described
in "Investment Restrictions," below. See "Short Sales Against-the-Box"
in the Additional Statement for further details.
Investment Restrictions
The Fund has certain investment restrictions which, together with its
investment objective, are fundamental policies changeable only by the vote
of a "majority," as defined in the Investment Company Act, of the Fund's
outstanding voting securities. Under some of those restrictions the Fund
cannot: (1) invest in securities (except those of the U.S. Government or
its agencies or instrumentalities) of any issuer if immediately thereafter
(a) more than 5% of the Fund's total assets would be invested in
securities of that issuer, or (b) the Fund would then own more than 10%
of that issuer's voting securities; (2) make short sales of securities
except "short sales against-the-box"; in such short sales, at all times
during which a short position is open, the Fund must own an equal amount
of such securities, or by virtue of ownership of securities have the
right, without payment of further consideration, to obtain an equal amount
of the securities sold short; no more than 15% of the Fund's net assets
will be held as collateral for such short sales at any one time; (3)
concentrate investments in any particular industry; therefore the Fund
will not purchase the securities of companies in any one industry if,
thereafter, more than 25% of the value of the Fund's assets would consist
of securities of companies in that industry; or (4) deviate from the
percentage requirements listed under "Special Investment Methods" (other
than those applicable to illiquid securities), from the limitations as to
the type of calls the Fund may write in "Writing Covered Call Options,"
or from the restrictions as to what foreign securities may be purchased
as described in "Foreign Securities." The percentage restrictions
described above and in the Additional Statement apply only at the time of
investment and require no action by the Fund as a result of subsequent
changes in value of an investment or the size of the Fund. A
supplementary list of investment restrictions is contained in the
Additional Statement.
Management Of The Fund
The Fund's Board of Trustees has overall responsibility for the
management of the Fund under the laws of Massachusetts governing the
responsibilities of trustees of business trusts. Subject to the authority
of the Board of Trustees, the Manager is responsible for day-to-day
management of the Fund's business, supervises the investment operations
of the Fund and the composition of its portfolio and furnishes advice and
recommendations with respect to investments, investment policies and the
purchase and sale of securities, pursuant to an investment advisory
agreement (the "Agreement") with the Fund.
Under the Agreement, the Fund pays a monthly management fee to the
Manager at the following annual rates, which are higher than those paid
by most other investment companies: 0.75% of the first $200 million of net
assets, 0.72% of the next $200 million; 0.69% of the next $200 million;
0.66% of the next $200 million; and 0.60% of average net assets over $800
million.
The Agreement contains provisions relating to the selection of
brokers and dealers ("brokers") for the Fund's portfolio transactions.
Subject to the Agreement, the Manager may consider sales of shares of the
Fund and of the other investment companies advised by the Manager and its
affiliates as a factor in the selection of brokers for the Fund's
portfolio transactions. "Investment Management Services" in the
Additional Statement contains more information about the Agreement,
including a description of expense assumption arrangements, exculpation
provisions and brokerage practices.
Jay Tracey is a Vice President of the Manager who serves as the
Portfolio Manager and a Vice President of the Fund. Since October, 1991,
he has been the person principally responsible for the day-to-day
management of the Fund's portfolio. During the past five years, Mr.
Tracey has also served as an officer of other OppenheimerFunds, prior to
which he was Senior Vice President of Founders Asset Management, Inc.
(mutual fund adviser), prior to which he was a securities analyst and
portfolio manager of Berger Associates, Inc. (investment adviser). For
more information, see "Trustees and Officers" in the Additional Statement.
The Manager has operated as an investment adviser since April 30,
1959. The Manager and its affiliates currently advise U.S. investment
companies with assets aggregating over $25 billion as of September 30,
1993, and having more than 1.8 million shareholder accounts. The Manager
is owned by Oppenheimer Acquisition Corp., a holding company owned in part
by senior management of the Manager and ultimately controlled by
Massachusetts Mutual Life Insurance Company, a mutual life insurance
company that also advises pension plans and investment companies.
How To Buy Shares
Alternative Sales Arrangements
Three classes of shares of the Fund are offered under the Fund's
"Alternative Sales Arrangements." The investor may elect to purchase
shares with a sales charge imposed (1) at the time of purchase or on a
contingent deferred basis on redemption of shares purchased in amounts
over $1 million (the "Class A shares"), or (2) on a contingent deferred
basis (the "Class B shares"). Certain institutional investors may elect
to purchase shares at net asset value (the "Class Y shares"). The
contingent deferred sales charge will be imposed on most redemptions of
Class B shares within six years of purchase. The Alternative Sales
Arrangements permit an investor to choose the method of purchasing shares
that is more beneficial to that investor depending on the amount of the
purchase, the length of time the investor expects to hold the shares and
other relevant circumstances. The Fund's distributor, Oppenheimer Funds
Distributor, Inc. (the "Distributor"), will not knowingly accept any order
for $1 million or more of Class B shares of one or more of the "Eligible
Funds" listed in "Right of Accumulation" below on behalf of a single
investor (not including dealer "street name" or omnibus accounts) because
it generally will be more advantageous for such investor to purchase Class
A shares of such Eligible Fund(s) instead. Investors should understand
that the purpose and function of the deferred sales charge and asset-based
sales charges with respect to Class B shares are the same as those of the
initial sales charge with respect to Class A shares. Any financial
intermediary of other person entitled to receive compensation for selling
or servicing Fund shares may receive different compensation with respect
to one class of shares than the other.
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, as described in this
Prospectus, each class has different shareholder privileges and features.
The net income attributable to Class B shares and the dividends payable
on Class B shares will be reduced by incremental expenses borne solely by
that class, including the asset-based sales charge to which Class B shares
are subject. For further information, see "Purchase, Redemption and
Pricing of Shares" in the Additional Statement.
The Fund's Class A and Class B shares may be purchased through any
dealer or broker which has a sales agreement with the Distributor, a
subsidiary of the Manager. There are two ways to make an initial
investment in Class A and Class B shares: either (1) complete an
OppenheimerFunds New Account Application and mail it with payment to the
Distributor at P.O. Box 5270, Denver, Colorado 80217 (if no dealer or
broker is named in the Application, the Distributor will be listed as the
dealer of record), or (2) order the shares through your dealer or broker.
Be certain to specify whether you wish to purchase Class A shares or Class
B shares. If no such instructions are provided, initial investments will
be made in Class A shares and subsequent investments will be made in the
same class as the most recent previous investment.
The minimum initial investment in Class A or Class B shares is
$1,000, except as otherwise described in this Prospectus. Subsequent
purchases must be at least $25 and may be made (1) through authorized
dealers or brokers, (2) by forwarding payment to the Distributor at the
above address with the names of all account owners, the account number and
the name of the Fund, (3) automatically through Asset Builder Plans or by
telephone using AccountLink or PhoneLink, described below, or (4) by
telephone using AccountLink, described below. Under an Asset Builder
Plan, Automatic Exchange Plan, military allotment plan or 403(b)(7)
custodial plan, initial and subsequent investments must be at least $25.
The minimum initial and subsequent purchase requirements are waived on
purchases made by reinvesting dividends from any of the "Eligible Funds"
listed in "Right of Accumulation," below, or by reinvesting distributions
from unit investment trusts for which reinvestment arrangements have been
made with the Distributor. No share certificates will be issued for Class
B or Class Y shares, and no share certificates will be issued for Class
A shares unless specifically requested in writing by an investor or the
dealer or broker.
The net asset value per share of each class is determined as of 4:00
P.M. (all references to time in this Prospectus mean New York time) each
day the New York Stock Exchange is open (a "regular business day") by
dividing the value of the Fund's net assets attributable to that class by
the number of shares of that class outstanding. The Fund's Board of
Trustees has established procedures for valuing the Fund's securities.
In general, those valuations are based on market value, with special
provisions for: (i) securities not having readily-available market
quotations; (ii) short-term debt securities; and (iii) covered calls and
Hedging Instruments. Further details are in "Purchase, Redemption and
Pricing of Shares" in the Additional Statement. The net asset values per
share of Class A, Class B and Class Y shares will differ due to
differences in expenses borne by each class, as discussed under "Purchase,
Redemption and Pricing of Shares - Multiple Class Methodology" in the
Additional Statement.
All purchase orders received by the Distributor at its address in
Denver, Colorado, prior to 4:00 P.M. on a regular business day are
processed at that day's offering price. However, an order received by the
Distributor from a dealer or broker after the offering price is determined
that day will receive such offering price if the order was received by
the dealer or broker from its customer prior to 4:00 P.M. and was
transmitted to and received by the Distributor prior to its close of
business that day (normally 5:00 P.M.). Purchase orders received on other
than a regular business day will be executed on the next succeeding
regular business day. The Distributor, in its sole discretion, may accept
or reject any order for the purchase of the Fund's shares. The sale of
shares will be suspended during any period in which the determination of
net asset value is suspended and may be suspended by the Board of Trustees
whenever the Board judges it in the best interest of the Fund to do
so.
Class A Shares
Class A shares are sold at their offering price, which (as that term
is used in this Prospectus and the Additional Statement) is net asset
value plus a front-end sales charge, except that as to certain purchases
described below that are not subject a front-end sales charge, the
offering price is net asset value. The offering price is determined as
of 4:00 P.M. each regular business day. Class A shares may not be
converted into Class B or Class Y shares.
The following table shows the regular front-end sales charge rates
for Class A shares for a "single purchaser" (defined below), together
with the dealer discounts paid to authorized dealers and the agency
commissions paid to authorized brokers (collectively, "commissions"):
- ------------------------------------------------------------------
Front-End
Front-End Sales
Sales Charge as
Charge as Approximate
Percentage Percentage Commission as
of Offering of Amount Percentage of
Amount of Purchase Price Invested Offering Price
- ------------------ ----------- ----------- --------------
Less than $50,000 4.75% 4.98% 4.00%
- ------------------------------------------------------------------
$50,000 or more but
less than $100,000 4.50% 4.71% 4.00%
- ------------------------------------------------------------------
$100,000 or more but
less than $250,000 3.50% 3.63% 3.00%
- ------------------------------------------------------------------
$250,000 or more but
less than $500,000 2.50% 2.56% 2.25%
- ------------------------------------------------------------------
$500,000 or more but
less than $1 million 2.00% 2.04% 1.80%
- ------------------------------------------------------------------
$1 million or more None* None* None*
- ------------------------------------------------------------------
* See, "Class A Contingent Deferred Sales Charge" below.
Under certain circumstances, commissions up to the amount of the
entire sales charge may be paid to dealers or brokers, who might then be
deemed to be "underwriters" as defined in the Securities Act of 1933.
Commission rates may vary among the funds for which the Manager and its
affiliates act as investment advisers.
The Distributor may advance up to 13 months' commissions to dealers
that have entered into special arrangements with the Distributor as to
purchases made by their clients under Oppenheimer Asset Builder Plans.
If a registered representative of a securities dealer sells more than $2.5
million of Class A shares of "Eligible Funds" other than "Money Market
Funds" (each as defined below) in a calendar year, the dealer firm is
eligible to send such representative, with a guest, to a three-day sales
conference (generally held in a resort), if one is sponsored and held by
the Distributor; or in lieu of sending such representative, that firm may,
at its option, receive the equivalent cash value of such award as
additional commission. The Distributor may, from time to time, enter into
arrangements with specific dealers whereby the Distributor may make
additional payments to that dealer based, in part, on that dealer meeting
certain sales criteria. Such additional payments may be based on sales
for a specific period of time, shares of certain or all of the "Eligible
Funds" held by the dealer and/or its customers or some combination
thereof.
-- Class A Contingent Deferred Sales Charge. On purchases of Class
A shares of any one or more of the "Eligible Funds" by a "single
purchaser" (defined below in "Right of Accumulation") aggregating $1
million or more, the Distributor will pay authorized dealers an amount
equal to 1.0% of the first $2.5 million of such purchases, plus 0.50% of
the next $2.5 million, plus 0.25% of such purchases in excess of $5
million. A contingent deferred sales charge (the "Class A CDSC") will be
deducted from the redemption proceeds of shares as to whose purchase the
Distributor has made such payments to dealers if the shares are redeemed
within 18 months of the end of the calendar month of their purchase. The
Class A CDSC shall be an amount equal to 1.0% of the lesser of the
aggregate net asset value of the redeemed shares (not including shares
purchased by reinvestment of dividends or capital gains) or the original
cost of such shares. However, the total Class A CDSC paid on such shares
will not exceed the aggregate commissions paid to dealers on all Class A
shares of "Eligible Funds" purchased subject to a Class A CDSC by that
"single purchaser."
The Class A CDSC does not apply to purchases at net asset value
described in "Other Circumstances" below and will be waived in the case
of redemptions of shares made for: (i) Automatic Withdrawal Plan payments
limited to no more than 12% of the original account value annually; and
(ii) involuntary redemptions of shares by operation of law or under
procedures set forth in the Trust's Declaration of Trust or as adopted by
the Board of Trustees (collectively, "Involuntary Redemptions"). See
"Transfers" in "Purchase, Redemption and Pricing of Shares" in the
Additional Statement for further details.
Some or all of the proceeds of redeemed shares on which a Class A
CDSC was paid at the time of redemption and which are subsequently
reinvested under the "Reinvestment Privilege" (described below) may be
reinvested within six months of redemption without sales charge at net
asset value on the reinvestment date if the investor notifies the
Distributor that the privilege applies. Additionally, no Class A CDSC is
charged on exchanges, pursuant to the Fund's Exchange Privilege
(described below), of shares purchased subject to a Class A CDSC, except
that if the Class A shares acquired by exchange are redeemed within 18
months of the end of the calendar month of the initial purchase of the
exchanged shares, the Class A CDSC will apply. In determining whether a
Class A CDSC is payable, and the amount of any such Class A CDSC, shares
not subject to a Class A CDSC are redeemed first, including shares
purchased by reinvestment of dividends and capital gains distributions,
and then other shares are redeemed in the order of purchase.
Reduced Sales Charges for Class A Purchases
The Class A sales charge rates in the table above may be reduced as
follows:
-- Right of Accumulation. In calculating the sales charge rate
applicable to current purchases of Class A shares, a "single purchaser"
(defined below) is entitled to cumulate current purchases with the greater
of: (1) amounts previously paid for or (2) the current value (at offering
price) of, Class A shares of the Fund and certain other "Eligible Funds"
if sold subject to an initial sales charge and if the investment is still
held in one of the Eligible Funds. The Eligible Funds are those for which
the Distributor or an affiliate acts as the distributor and include the
following: (i) the Fund, Oppenheimer Tax-Free Bond Fund, Oppenheimer New
York Tax-Exempt Fund, Oppenheimer California Tax-Exempt Fund, Oppenheimer
Pennsylvania Tax-Exempt Fund, Oppenheimer Florida Tax-Exempt Fund,
Oppenheimer Insured Tax-Exempt Bond Fund, Oppenheimer Intermediate Tax-
Exempt Bond Fund, Oppenheimer Champion High Yield Fund, Oppenheimer High
Yield Fund, Oppenheimer Total Return Fund, Inc., Oppenheimer Asset
Allocation Fund, Oppenheimer U.S. Government Trust, Oppenheimer Mortgage
Income Fund, Oppenheimer Government Securities Fund, Oppenheimer Global
Bio-Tech Fund, Oppenheimer Global Environment Fund, Oppenheimer Global
Growth & Income Fund, Oppenheimer Global Fund, Oppenheimer Fund,
Oppenheimer Time Fund, Oppenheimer Target Fund, Oppenheimer Special Fund,
Oppenheimer Equity Income Fund, Oppenheimer Main Street Income & Growth
Fund, Oppenheimer Main Street California Tax-Exempt Fund, Oppenheimer Gold
& Special Minerals Fund, Oppenheimer Value Stock Fund, Oppenheimer
Investment Grade Bond, Oppenheimer Strategic Income Fund, Oppenheimer
Strategic Income & Growth Fund, Oppenheimer Strategic Investment Grade
Bond Fund and Oppenheimer Strategic Short-Term Income Fund and (ii) the
following "Money Market Funds": Centennial Tax Exempt Trust, Centennial
Government Trust, Centennial Money Market Trust, Centennial New York Tax
Exempt Trust, Centennial California Tax Exempt Trust, Centennial America
Fund, L.P., Oppenheimer Money Market Fund, Inc., Daily Cash Accumulation
Fund, Inc., Oppenheimer Cash Reserves and Oppenheimer Tax-Exempt Cash
Reserves. There is an initial sales charge on the purchase of shares of
each Eligible Fund except the Money Market Funds (under certain
circumstances described above, redemption proceeds of Money Market Fund
shares may be subject to a CDSC). The reduced sales charge applies only
to current purchases.
The term "single purchaser" refers to: (i) an individual, (ii) an
individual and spouse purchasing shares of the Fund for their own account
or for trust or custodial accounts for their minor children, or (iii) a
trustee or other fiduciary purchasing for any one trust, estate or other
fiduciary account, including employee benefit plans created under Sections
401 or 457 of the Internal Revenue Code, including related plans of the
same employer. To be entitled to a reduced sales charge under the Right
of Accumulation, at the time of purchase the purchaser must ask the
Distributor for such entitlement and provide the account number(s) for
shares of Eligible Funds owned by the "single purchaser," and the age of
any minor children for whom shares are held.
-- Letter of Intent. By initially investing at least $1,000 and
submitting a Letter of Intent to the Distributor, a "single purchaser" may
purchase Class A shares of the Fund and other Eligible Funds (other than
Money Market Funds) during a 13-month period at the reduced sales charge
rates or at net asset value but subject to the Class A CDSC (described
above), if applicable, applying to the aggregate amount of the intended
purchases stated in the Letter. The Letter may apply to purchases made
up to 90 days before the date of the Letter. The Fund and the Distributor
reserve the right to amend or terminate such program at any time. For
further details, including escrow provisions, see "Letters of Intent" in
the Additional Statement.
-- Other Circumstances. No sales charge is imposed on Class A shares
of the Fund: (i) sold to the Manager or its affiliates, or to present and
former officers, trustees or directors and employees (and their "immediate
families," as defined in "Reduced Sales Charges" in the Additional
Statement) of the Fund, the Manager and its affiliates, and to retirement
plans established by them for employees; (ii) issued in plans of
reorganization, such as mergers, asset acquisitions and exchange offers,
to which the Fund is a party; (iii) sold to registered investment
companies or to separate accounts of insurance companies having an
agreement with the Manager or the Distributor; (iv) sold to dealers or
brokers that have a sales agreement with the Distributor, for their own
account or for retirement plans for their employees, or sold to employees
(and their spouses) of such dealers or brokers or of banks, savings and
loan associations or credit unions that have entered into a sales
arrangement with such dealer or broker or the Distributor (and are
identified to the Distributor by such dealer or broker); the purchaser
must certify to the Distributor at the time of purchase that such purchase
is for its own account (or for the benefit of such employees' spouses or
minor children); (v) purchased by the reinvestment of (a) loan repayments
by a participant in a retirement plan for which the Manager or an
affiliate acts as sponsor, or (b) dividends or other distributions
reinvested from the Fund or other "Eligible Funds" (other than the Cash
Reserves Funds) or unit investment trusts for which reinvestment
arrangements have been made with the Distributor; or (vi) sold to dealers,
brokers or registered investment advisers that have entered into an
agreement with the Distributor providing specifically for the use of Fund
shares in particular investment products made available to clients of the
dealer, broker or investment adviser. "Reduced Sales Charges" in the
Additional Statement discusses this policy.
-- Class A Service Plan. The Fund has adopted a service plan (the
"Class A Plan") pursuant to Rule 12b-1 of the Investment Company Act under
which the Fund will reimburse the Distributor for all or a portion of its
costs incurred in connection with the personal service and maintenance of
accounts that hold Class A shares. The Distributor will use the fees
received from the Fund: (i) to compensate dealers, brokers, banks, or
other institutions ("Recipients") each quarter for providing personal
service and maintenance of accounts that hold Class A shares; and (ii) to
reimburse itself (to the extent authorized by the Board of Trustees) for
its other expenditures under the Plan and for its direct costs for
personal service and maintenance of accounts. The services to be provided
under the Class A Plan include, but shall not be limited to, the
following: answering routine inquiries from the Recipient's customers
concerning the Fund, providing such customers with information on their
investment in Class A shares, assisting in the establishment and
maintenance of accounts or sub-accounts in the Fund, making the Fund's
investment plans and dividend payment options available, and providing
such other information and customer liaison services and the maintenance
of accounts as the Distributor or the Fund may reasonably request.
Payments by the Distributor to Recipients will be made quarterly at an
annual rate not to exceed 0.25% of the aggregate net asset value of Class
A shares owned by the recipient or its customers.
Any unreimbursed expenses incurred during any quarter by the
Distributor may not be recovered in later periods. The Fund will not be
charged for any interest expense, carrying charges or other financial
costs, or allocation of overhead by the Distributor. The Class A Plan has
the effect of increasing annual expenses of the Fund by up to 0.25% of its
average annual net assets from what its expense would otherwise be. In
addition, the Manager and the Distributor may, under the Class A Plan,
from time to time from their own resources (which, as to the Manager, may
include profits derived from the advisory fee it receives from the Fund)
make payments to Recipients for distribution and administrative services
they perform. For further details, see "Distribution and Service Plans"
in the Additional Statement.
Class B Shares
Class B shares are sold at net asset value per share without the
imposition of a sales charge at the time of purchase.
-- Class B Contingent Deferred Sales Charge. A contingent deferred
sales charge (the "Class B CDSC") will be deducted from the redemption
proceeds of Class B shares redeemed within six years of their purchase
(not including shares purchased by reinvestment of dividends or capital
gains). The charge will be assessed on an amount equal to the lesser of
the then current net asset value or the original purchase price of the
Class B shares being redeemed. Accordingly, no Class B CDSC will be
imposed on amounts representing increases in net asset value above the
initial purchase price (including increases due to reinvestment of
dividends or capital gains). In determining whether a Class B CDSC
applies to a redemption, Class B shares are redeemed in the following
order: (1) those acquired pursuant to reinvestment of dividends or
distributions, (2) those held for over six years, and (3) those held
longest during the six year period.
Proceeds from the Class B CDSC are paid to the Distributor to
reimburse it for its expenses related to providing distribution-related
services to the Fund in connection with the sale of Class B shares. The
combination of the Class B CDSC and the distribution fee retained by the
Distributor (as described under "Class B Distribution and Service Plan")
facilitate the sale of Class B shares without a sales charge being
deducted at the time of purchase. Any Class B CDSC required to be imposed
on Class B share redemptions will be assessed according to the following
schedule:
Contingent Deferred
Years(s) Since Sales Charge in
Purchase Order That Year (as % of
Was Accepted Applicable Proceeds)
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 or more None
In the table above, a "year" is twelve months. In determining the
amount of the Class B CDSC that applies and when Class B shares convert
as described in the following paragraph, all purchases shall be considered
as having been made on the first regular business day of the month in
which the purchase was made. The Class B CDSC will be waived upon the
request of the investor in the case of redemptions of shares following the
death or disability of the shareholder(s) (as evidenced by a determination
of total disability by the U.S. Social Security Administration). In
addition, no CDSC is imposed on shares of the Fund (i) sold to the Manager
or its affiliates; (ii) sold to registered investment companies or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor; (iii) issued in plans of reorganization, such
as mergers, asset acquisitions and exchange offers to which the Fund is
a party; or (iv) redeemed in Involuntary Redemptions. See "Transfer of
Shares" in "Purchase, Redemption and Pricing of Shares" in the Additional
Statement for further details.
-- Class B Conversion Feature. At the end of seventy-two months
after investor's purchase order for Class B shares is accepted, such
"Matured Class B shares" automatically will convert to Class A shares, on
the basis of the relative net asset value of the two classes, without the
imposition of any sales load or other charge. Each time any Matured Class
B shares convert to Class A shares, any Class B shares acquired by the
reinvestment of dividends or distributions on such Matured Class B shares
that are still held will also convert to Class A shares, on the same
basis. The conversion feature is intended to relieve holders of Matured
Class B shares of the asset-based sales charge under the Class B
Distribution and Service Plan after such shares have been outstanding long
enough that the Distributor may have been compensated for distribution
expenses related to such shares.
The conversion of Matured Class B shares to Class A shares is subject
to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or a tax adviser, to
the effect that the conversion of Matured Class B shares does not
constitute a taxable event for the holder under Federal income tax law.
If such a private letter ruling or opinion is no longer available, the
automatic conversion feature may be suspended, in which event no further
conversions of Matured Class B shares would occur while such suspension
remained in effect. Although Matured Class B shares could then be
exchanged for Class A shares on the basis of the 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.
-- Class B Distribution and Service Plan. The Fund has adopted a
plan of distribution (the "Class B Plan") under Rule 12b-1 of the
Investment Company Act, pursuant to which it will compensate the
Distributor for its services and costs incurred in connection with the
distribution and service of the Fund's Class B shares. Pursuant to the
Class B Plan, the Fund will pay the Distributor an asset-based sales
charge of 0.75% per annum on Class B shares outstanding for six years or
less, plus a service fee of 0.25% per annum, each of which is computed on
the average net assets of Class B shares of the Fund computed as of the
close of each business day. Asset-based sales charges and service fees
will be paid by the Fund to the Distributor monthly and quarterly,
respectively. The Distributor will use the service fee payment to
compensate Recipients for providing personal service and the maintenance
of shareholder accounts that hold Class B shares, examples of which are
described under "Class A Service Plan."
Service fee payments by the Distributor to Recipients will be made
(i) in advance for the first year Class B shares are outstanding,
following the purchase of shares, in an amount equal to 0.25% of the net
assets of the shares purchased by the Recipient or its customers and (ii)
thereafter, on a quarterly basis, computed as of the close of each
business day at an annual rate of 0.25% of the net asset value of Class
B shares held in accounts of the Recipient or its customers. Other terms
and options under the Class B Plan for payment of the service fee by the
Distributor to Recipients, and other terms and conditions of the Class B
Plan are described under "Distribution and Service Plans" in the
Additional Statement.
The Distributor currently expects to pay sales commissions from its
own resources to authorized dealers or brokers at the time of sale equal
to 3.75% of the purchase price of Fund shares sold by such dealer or
broker, and to advance the first year service fee of 0.25%. The asset-
based sales charge payments by the Fund to the Distributor under the Class
B Plan are intended to allow it to recoup such sales commissions plus
service fees advanced. The Distributor anticipates that it will take a
number of years to recoup the sales commissions paid to authorized brokers
or dealers from the Fund's payments to the Distributor under the Class B
Plan.
Asset-based sales charge payments are designed to permit an investor
to purchase shares of the Fund without the assessment of a front-end sales
load and at the same time permit the Distributor to compensate brokers and
dealers in connection with the sale of shares of the Fund. The
Distributor's actual distribution expenses for any given year may exceed
the aggregate of payments received pursuant to the Class B Plan and
contingent deferred sales charges, and such expenses will be carried
forward and paid in future years. The Fund will be charged only for
interest expenses, carrying charges or other financial costs that are
directly related to the carry-forward of actual distribution expenses.
At September 30, 1993, the Distributor had incurred unreimbursed expenses
under the Class B Plan of $212,292 (equal to 4.16% of the Fund's Class B
net assets on that date), which have been carried over into the present
Class B Plan year.
The Class B Plan contains a provision which contractually obligates
the Fund to continue payments to the Distributor for certain expenses it
incurred for Class B shares sold prior to termination of the Class B Plan.
If the Class B Plan is terminated, the Distributor is entitled to continue
to receive the asset-based sales charge of 0.75% per annum on Class B
shares sold prior to termination until the Distributor has recovered its
Class B distribution expenses (incurred prior to termination) from such
payments and from the Class B CDSC.
The Fund believes that under current applicable accounting standards,
its obligation under the Class B Plan to pay any asset-based sales charges
in future periods is not required to be recognized as a liability. This
accounting standard is currently under review by the AICPA. In the
future, if applicable accounting standards should be deemed to require
that obligation to be recognized as a liability, a decrease in the net
asset value per share of Class B shares could result. Were that to occur,
such decrease would affect all Class B shares regardless of how long the
shares were held and the Board may consider other alternatives.
Furthermore, Class B shareholders would continue to remain subject to the
Class B CDSC.
The Class B Plan has the effect of increasing annual expenses of
Class B shares of the Fund by up to 1.00% of the class's average annual
net assets from what its expenses would otherwise be. In addition, the
Manager and the Distributor may, under the Class B Plan, from time to time
from their own resources (which, as to the Manager, may include profits
derived from the advisory fee it receives from the Fund) make payments to
Recipients for distribution and administrative services they perform. For
further details, see "Distribution and Service Plans" in the Additional
Statement.
Purchase Programs for Class A and Class B Shares
-- AccountLink. OppenheimerFunds AccountLink is a means to link a
shareholder's Fund account with an account at a U.S. bank or other
financial institution that is an ACH member. AccountLink can be used to
transmit funds by electronic funds transfers for account transactions,
including subsequent share purchases. The minimum investment by
AccountLink is $25. Purchases of up to $250,000 may be made by telephone
using AccountLink (the maximum is $100,000 if the transaction is done by
PhoneLink, described below). To speak to service operators to initiate
such purchases, call the Distributor at 1-800-852-8457. All such calls
will be recorded. To initiate such purchases automatically using
PhoneLink, call 1-800-533-3310. Shares will be purchased on the regular
business day the Distributor is instructed to initiate the ACH transfer
to buy the shares. Dividends will begin to accrue on such shares on the
day the Fund receives Federal Funds for such purchase through the ACH
system before 4:00 P.M., which is normally three days after the ACH
transfer is initiated. If such Federal Funds are received after that
time, dividends will begin to accrue on the next regular business day
after such Federal Funds are received.
AccountLink may also be used as a means of transmitting redemption
proceeds to a designated bank account (see "How to Redeem Shares") or to
transmit distributions paid by the Fund directly to a bank account (see
"Dividends and Distributions"). AccountLink privileges must be requested
on the application used to buy shares or the dealer settlement
instructions establishing the account, or on subsequent signature-
guaranteed instructions to the Transfer Agent, from all shareholders of
record for an account, and such privileges thereupon apply to each
shareholder of record and the dealer representative of record unless and
until the Transfer Agent receives written instructions from a shareholder
of record canceling such privileges. Changes of bank account information
must be made by signature-guaranteed instructions to the Transfer Agent
by all shareholders of record for an account. The Transfer Agent, the
Fund and the Distributor have adopted reasonable procedures to confirm
that telephone instructions under AccountLink (described above) and
"PhoneLink," "Telephone Redemptions" and the "Exchange Privilege"
(described below) are genuine, by requiring callers to provide the tax
identification number(s) and other account data by recording such calls
and confirming such transactions in writing. If the Transfer Agent and
the Distributor do not use such procedures, they may be liable for losses
due to unauthorized transactions, but otherwise will not be responsible
for losses of expenses arising out of telephone instructions reasonably
believed to be genuine. The Fund reserves the right to amend, suspend or
discontinue AccountLink privileges at any time without prior notice.
-- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system which enables shareholders of the Fund to initiate account
transactions automatically by telephone, including exchanges between
existing accounts (see "Exchange Privilege" below), redemptions (see "How
to Redeem Shares - Telephone Redemptions," below) and purchases (see
"AccountLink" above). PhoneLink transactions may be done automatically
using a touchtone telephone provided that the shareholder uses a Personal
Identification Number ("PIN") which may be obtained through PhoneLink by
calling 1-800-533-3310. If an account has multiple owners, the Transfer
Agent or the Distributor may rely on any instructions initiated through
PhoneLink using a PIN. The Fund reserves the right to amend, suspend or
discontinue PhoneLink privileges at any time without prior notice.
-- Asset Builder Plans. Investors may purchase shares of the Fund
(and up to four other Eligible Funds) automatically under Asset Builder
Plans. With AccountLink, Asset Builder Plans may be used to make regular
monthly investments ($25 minimum) from the investor's account at a bank
or other financial institution. See "AccountLink," above for details.
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
Redeem Shares." Asset Builder Plans also enable shareholders of
Oppenheimer Tax-Exempt Cash Reserves or Oppenheimer Cash Reserves to use
those accounts for monthly automatic purchases of shares of the Fund and
up to four other Eligible Funds.
There is a sales charge on the purchase of certain Eligible Funds,
and an application should be obtained from the Transfer Agent and
completed and a prospectus of the selected fund(s) (available from the
Distributor) should be obtained before initiating payments. The amount
of the Asset Builder investment may be changed or the automatic
investments terminated at any time by writing to the Transfer Agent. A
reasonable period (approximately 15 days) is required after 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.
Class Y Shares
Class Y Shares are sold at net asset value per share without the
imposition of a sales charge either at the time of purchase or on a
contingent deferred basis to separate accounts of insurance companies
("Class Y Sponsors") having an agreement ("Class Y Agreements") with the
Manager or the Distributor. The intent of Class Y Agreements is to allow
tax qualified institutional investors to invest indirectly (through
separate accounts of the Class Y Sponsor) in Class Y Shares of the Fund,
while being afforded services and investment advice provided by the Class
Y Sponsor. Individual investors are not permitted to invest directly in
Class Y Shares. As of the date of this Prospectus, it is anticipated that
Massachusetts Mutual Life Insurance Company (an affiliate of the Manager
and the Distributor) will act as Class Y Sponsor for all outstanding Class
Y Shares of the Fund.
None of the instructions described elsewhere in this Prospectus or
the Additional Statement for the purchase, redemption, reinvestment,
exchange or transfer of shares of the Fund or the reinvestment of
dividends apply to its Class Y shares. Clients of Class Y Sponsors must
request their Sponsor to effect all transactions in Class Y shares on
their behalf. While Class Y shares are not subject to a contingent
deferred sales charge, a service fee or asset-based sales charge, fees and
expenses may be assessed by a Class Y Sponsor against its separate
account.
How To Redeem Class A or Class B Shares
Regular Redemption Procedures
To redeem some or all shares in an account (whether or not
represented by certificates) under the Fund's regular redemption
procedures, a shareholder must send the following to the Fund's Transfer
Agent, Oppenheimer Shareholder Services, P.O. Box 5270, Denver, Colorado
80217 [send courier or Express Mail deliveries to 10200 E. Girard Avenue,
Building D, Denver, Colorado 80231]: (1) a written request for redemption
signed by all registered owners exactly as the shares are registered,
including fiduciary titles, if any, and specifying the account number and
the dollar amount or number of shares to be redeemed; (2) a guarantee of
the signatures of all registered owners on the redemption request or on
the endorsement on the share certificate or accompanying stock power, by
a U.S. bank, credit union or savings association, or a foreign bank having
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, registered securities association or
clearing agency; (3) any share certificates issued for any of the shares
to be redeemed; and (4) any additional documents which may be required by
the Transfer Agent for redemption by corporations, partnerships or other
organizations, executors, administrators, trustees, custodians, guardians
or from an OppenheimerFunds IRA or other retirement plan, or if the
redemption is requested by anyone other than the shareholder(s) of
record. Transfers of shares are subject to similar requirements.
A signature guarantee is not required for redemptions of $50,000 or
less, requested by and payable to all shareholders of record, to be sent
to the address of record for that account. To avoid delay in redemptions
or transfers, shareholders having any questions about these requirements
should contact the Transfer Agent in writing or by calling 1-800-525-7048
before submitting a request. From time to time the Transfer Agent in its
discretion may waive any or certain of the foregoing requirements in
particular cases. Redemption or transfer requests will not be honored
until the Transfer Agent receives all required documents in the proper
form. Shareholders owning shares of both classes must specify whether
they intend to redeem Class A or Class B shares.
Telephone Redemptions
To redeem shares by telephone through a service representative, call
the Transfer Agent at 1-800-852-8457. To use PhoneLink to redeem shares
automatically, without a service representative, call 1-800-533-3310.
Under either method, redemption proceeds may be paid by check or through
AccountLink as described below. The Transfer Agent may record any calls.
Telephone redemptions may not be available if all lines are busy, and
shareholders would have to use the Fund's regular redemption procedures
described above. Requests received by the Transfer Agent prior to 4:00
P.M. on a regular business day will be processed at the net asset value
per share determined that day. Telephone redemption privileges are not
available for newly-purchased (within the prior 15 days) shares, for
OppenheimerFunds-sponsored retirement plans, or for shares represented by
certificates.
Telephone redemption privileges apply automatically to each
shareholder and the dealer representative of record unless the Transfer
Agent receives cancellation instructions from a shareholder of record.
If an account has multiple owners, the Transfer Agent may rely on the
instructions of any one owner. The Transfer Agent and the Fund will not
be responsible for the authenticity of any telephone instructions or for
any loss, damage, cost or expense arising out of any telephone
instructions for an account that the Transfer Agent reasonably believes
to be authentic. Telephone redemption privileges may be amended,
suspended or discontinued by the Fund at any time without prior notice.
-- Telephone Redemptions Paid by Check. If redemption proceeds are
paid by check, up to $50,000 may be redeemed by telephone, once in every
seven-day period, and the check must be payable to the shareholder(s) of
record and sent to the address of record for the account. Telephone
redemptions paid by check are not available within 30 days of change of
the address of record.
-- Redemptions Paid through AccountLink. If AccountLink privileges
have been established for an account, any amount may be redeemed by
telephone, wire or written instructions to the Transfer Agent, and the ACH
transfer of the redemption proceeds to the designated bank account
normally will be initiated by the Transfer Agent on the next bank business
day after the redemption. There are no dollar or frequency limitations
on telephone redemptions sent to a designated bank account through
AccountLink. No dividends are paid on the proceeds of redeemed shares
awaiting transmittal by ACH transfer. See "AccountLink" under "How To Buy
Shares" for instructions on establishing this privilege.
Distributions from Retirement Plans
Requests for distributions from OppenheimerFunds-sponsored Retirement
Plans, IRAs, 403(b)(7) custodial plans, or pension or profit-sharing plans
for which the Manager or its affiliates act as sponsors should be
addressed to "First Interstate Bank of Denver, N.A., c/o Oppenheimer
Shareholder Services" at the above address, and 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 redemption requirements, above. Participants
(other than self-employed persons) in OppenheimerFunds-sponsored pension
or profit-sharing plans may not directly request redemption of their
accounts. The employer or plan administrator must sign the request.
Distributions from such plans are subject to additional 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 Distributor, the Manager, 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 penalties assessed.
Automatic Withdrawal and Exchange Plans
Investors owning shares of the Fund valued at $5,000 or more can
authorize the Transfer Agent to redeem shares (minimum $50) automatically
on a monthly, quarterly, semi-annual or annual basis under an Automatic
Withdrawal Plan. Shares will be redeemed three business days prior to the
date requested by the shareholder for receipt of the payment. Automatic
withdrawals of up to $1,500 per month may be requested by telephone if
payments are by check payable to all shareholders of record and sent to
the address of record for the account (and if the address has not been
changed within the prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on this
basis. Payments are normally made by check, but shareholders having
AccountLink privileges (see "How To Buy Shares") may arrange to have
Automatic Withdrawal Plan payments transferred to the bank account
designated on the OppenheimerFunds New Account Application or signature-
guaranteed instructions. The Fund cannot guarantee receipt of the payment
on the date requested and reserves the right to amend, suspend or
discontinue offering such plans at any time without prior notice. Because
of the sales charge assessed on Class A share purchases, shareholders
should not make regular additional Class A purchases while participating
in an Automatic Withdrawal Plan. Class B shareholders should not
establish withdrawal plans because of the imposition of the Class b CDSC
on such withdrawals (except where the Class B CDSC is waived as described
in "Class B Contingent Deferred Sales Charge"). The Fund cannot guarantee
receipt of the payment on the data requested and reserves the right to
amend, suspend or discontinue offering such plans at any time without
prior notice. For further details, refer to "Automatic Withdrawal Plan
Provisions" in the Additional Statement.
Shareholders can also authorize the Transfer Agent to exchange a pre-
determined amount of shares of the Fund for shares of up to five other
Eligible Funds (minimum $25 per fund account) automatically on a monthly,
quarterly, semi-annual or annual basis under an Automatic Exchange Plan.
Exchanges made pursuant to such plans are otherwise subject to the
conditions and terms applicable to Exchanges described in "Exchange
Privilege," below.
Repurchase
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers and brokers. The repurchase price will be the net
asset value next computed after the receipt of an order placed by such
dealer or broker, except that an order received by the Distributor from
dealers or brokers after 4:00 P.M. on a regular business day will be
processed at that day's net asset value if such order was received by the
dealer or broker from its customer prior to 4:00 P.M. and was transmitted
to and received by the Distributor prior to its close of business that day
(normally 5:00 P.M.). Payment ordinarily will be made within seven days
after the Distributor's receipt of the required documents, with
signature(s) guaranteed as described above.
Reinvestment Privilege
Within six months of a redemption, a shareholder may reinvest all or
part of the redemption proceeds of (i) Class A shares, or (ii) Class B
shares that were subject to the Class B CDSC when redeemed, in Class A
shares of the Fund or any of the Eligible Funds into which shares of the
Fund are exchangeable as described below, at the net asset value next
computed after receipt by the Transfer Agent of the reinvestment order.
The shareholder must ask the Distributor for such entitlement at the time
of reinvestment. A realized gain on the redemption is taxable, and
reinvestment will not alter any capital gains tax payable on that gain.
If there has been a loss on the redemption, some or all of the loss may
not be tax deductible, depending on the timing and amount of the
reinvestment in the Fund. Under the Internal Revenue Code, if the
redemption proceeds of shares on which sales charge was paid are
reinvested in shares of the Fund or another Eligible Fund within 90 days
of the payment of the sales charge, the shareholder's basis in the shares
redeemed may not include the amount of the sales charge paid, thereby
reducing the loss or increasing the gain recognized from the redemption.
The Fund may amend, suspend or cease offering this reinvestment privilege
at any time as to shares redeemed after the date of such amendment,
suspension or cessation.
General Information on Redemptions
The redemption price will be the Fund's net asset value per share
next determined after the Transfer Agent receives all required documents
in proper form. The market value of the securities in the Fund's
portfolio is subject to daily fluctuations and the net asset value of the
Fund's shares will fluctuate accordingly. Therefore, the redemption value
may be more or less than the investor's cost. Under certain unusual
circumstances, shares may be redeemed in kind (i.e., by payment in
portfolio securities). The Fund may involuntarily redeem small accounts
(if the account has fallen below $500 in value for reasons other than
market value fluctuations) and may redeem shares in amounts sufficient to
compensate the Distributor for any loss due to cancellation of a share
purchase order; for details, see "Purchase, Redemption and Pricing of
Shares" in the Additional Statement. Under the Internal Revenue Code, the
Fund may be required to impose "backup" withholding of Federal income tax
at the rate of 31% from dividends, distributions and redemption proceeds
(including exchanges), if the shareholder has not furnished the Fund a
certified tax identification number or has not complied with provisions
of the Code relating to reporting dividends.
Payment for redeemed shares is made ordinarily in cash and forwarded
within seven days of the Transfer Agent's receipt of redemption
instructions in proper form, except under unusual circumstances as
determined by the SEC. The Transfer Agent may delay forwarding a
redemption check for recently-purchased shares until the purchase payment
has cleared, which may take up to 15 or more days from the purchase date.
Such delay may be avoided if the shareholder arranges telephone or written
assurance satisfactory to the Transfer Agent from the bank on which the
purchase payment was drawn. The Fund makes no charge for redemption.
Dealers or brokers may charge a fee for handling redemption transactions,
but such charge can be avoided by requesting the redemption directly by
the Fund through the Transfer Agent. Under certain circumstances, the
Class A and Class B CDSCs described above under "How to Buy Shares" may
apply to the proceeds of redemptions.
Exchanges Of Shares And Retirement Plans for Class A and B Shares
Exchange Privilege
Shares of the Fund and of the other Eligible Funds listed under
"Right of Accumulation" may be exchanged at net asset value per share at
the time of exchange, without sales charge, if all of the following
conditions are met: (1) shares of the fund selected for exchange are
available for sale in the shareholder's state of residence; (2) the
respective prospectuses of the funds whose shares are to be exchanged and
acquired offer the Exchange Privilege to the shareholder; (3) newly-
purchased (by initial or subsequent investment) shares are held in an
account for at least seven days and all other shares at least one day
prior to the exchange; and (4) the aggregate net asset value of shares
surrendered for exchange is at least equal to the minimum investment
requirement of the fund whose shares are to be acquired.
In addition to the conditions stated above, shares of a particular
class of Eligible Funds having more than one class of shares may be
exchanged for shares of the same class of another Eligible Fund. If a
Fund has only one class of shares that is not otherwise denominated, its
shares shall be considered "Class A" shares for this purpose. All of the
Eligible Funds offer Class A shares, but Class B and Class Y shareholders
should be aware that only a limited number of those funds offer shares of
those classes. The names of those Eligible Funds can be obtained by
calling the Distributor at 1-800-525-7048, or by referring to "Purchase,
Redemption and Pricing of Shares" in the Additional Statement. In
addition Class A shares of Eligible Funds may be exchanged for shares of
any Money Market Fund; shares of any Money Market Fund purchased without
a sales charge may be exchanged for shares of Eligible Funds offered with
a sales charge upon payment of the sales charge (or, if applicable, may
be used to purchase shares of Eligible Funds subject to a CDSC); and
shares of this Fund acquired by reinvestment of dividends or distributions
from any other Eligible Fund 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 Eligible Fund. No CDSC is
imposed on exchanges of shares of either class subject to a CDSC.
However, when Class A shares acquired by exchange of Class A shares
purchased subject to a Class A CDSC are redeemed within 18 months of the
end of the calendar month of the initial purchase of the exchanged Class
A shares, the Class A CDSC is imposed on the redeemed shares (see "Class
A Contingent Deferred Sales Charge," above), and the Class B CDSC is
imposed on Class b shares redeemed within six years at the end of the
calendar month of this initial purchase of the exchanged Class B shares
(see "Class B Contingent Deferred Sales Charge," above).
-- How to Exchange Shares. An exchange may be made by either: (1)
submitting an OppenheimerFunds Exchange Authorization Form to the Transfer
Agent, signed by all registered owners, or (2) telephone exchange
instructions to the Transfer Agent by a shareholder or the dealer
representative of record for an account. The Fund may modify, suspend or
discontinue either of these exchange privileges at any time, and will do
so on 60 days' notice if such notice is required by regulations adopted
under the Investment Company Act. The Fund reserves the right to reject
telephone or written requests submitted in bulk on behalf of 10 or more
accounts. Telephone and written exchange requests must be received by the
Transfer Agent by 4:00 P.M. on a regular business day to be effected that
day. The number of shares exchanged may be less than the number requested
if the number requested would include shares subject to a restriction
cited above or shares covered by a certificate that is not tendered with
such request. Only the shares available for exchange without restriction
will be exchanged.
When Class B shares are redeemed to effect an exchange, the
priorities described in "How to Buy Shares" for the imposition of the
Class b CDSC will be followed in determining the order in which shares are
exchanged. shareholders should take into account the effect of any
exchange on the applicability and rate of any CDSC that may be imposed in
the subsequent redemption of remaining shares. Shareholders among shares
of both classes must specify whether they intend to exchange Class A or
Class B shares.
-- Telephone Exchanges. Telephone exchange requests may either be
placed through a service representative by calling the Transfer Agent at
1-800-852-8457 or automatically by PhoneLink, by calling 1-800-533-3310.
If all telephone exchange lines are busy (which might occur, for example,
during periods of substantial market fluctuations), shareholders might not
be able to request telephone exchanges and would have to submit written
exchange requests. Telephone exchange calls may be recorded by the
Transfer Agent. Telephone exchanges are subject to the rules described
above. By exchanging shares by telephone, the shareholder is
acknowledging receipt of a prospectus of the fund to which the exchange
is made and that for full or partial exchanges, any special account
features such as Asset Builder Plans, Automatic Withdrawal or Exchange
Plans and retirement plan contributions will be switched to the new
account unless the Transfer Agent is otherwise instructed. Telephone
exchange privileges automatically apply to each shareholder of record and
the dealer representative of record unless and until the Transfer Agent
receives written instructions from a shareholder of record canceling such
privileges. The Transfer Agent and the Fund will not be responsible for
the authenticity of telephone instructions nor for any loss, damage, cost
or expense arising out of any telephone instructions for an account that
the Transfer Agent reasonably believes to be authentic. The Transfer
Agent reserves the right to require shareholders to confirm in writing
their election of telephone exchange privileges for an account. Shares
acquired by telephone exchange must be registered exactly as the account
from which the exchange was made. Certificated shares are not eligible
for telephone exchange.
-- General Information on Exchanges. 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 in its discretion reserves the right to
refuse any exchange request that will disadvantage it (for example, if the
receipt of multiple exchange requests from a dealer might require the
disposition of securities at a time or at a price disadvantageous to the
Fund). No sales commissions are paid by the Distributor on exchanges of
shares unless a front-end sales charge is assessed on the exchange.
The Eligible Funds have different investment objectives and
policies. For complete information, including charges and expenses, a
prospectus of the fund into which the exchange is being made should be
read prior to an exchange. A $5 service charge will be deducted from the
account to which the exchange is made to help defray administrative
costs. That charge is waived for telephone exchanges made by PhoneLink.
Dealers or brokers who process exchange orders on behalf of customers may
charge for their services. Those charges may be avoided by requesting the
Fund directly to exchange shares. For Federal tax purposes, an exchange
is treated as a redemption and purchase of shares. (See "How to Redeem
Shares - Reinvestment Privilege" above, for a discussion of certain tax
effects of exchanges.)
Retirement Plans
The Distributor has available: (i) forms of pension and profit-
sharing plans for corporations and self-employed individuals; (ii)
Individual Retirement Accounts (IRAs) for salaried and self-employed
individuals, including Simplified Employee Pension Plans (SEP-IRAs); and
(iii) 403(b)(7) custodial plans for employees of qualified employers.
Loans are permitted only from OppenheimerFunds 403(b)(7) plan accounts
holding Class A shares. The minimum initial investment for pension and
profit-sharing plans is $250, and for IRAs also unless made under an Asset
Builder Plan. For further details, including the administrative fees, the
appropriate retirement plan should be requested from the Distributor. The
Fund reserves the right to discontinue offering its shares to such plans
at any time without prior notice.
Dividends, Distributions And Taxes
This discussion relates solely to Federal tax laws and is not
exhaustive; a qualified tax adviser should be consulted. The Fund's
dividends and distributions may also be subject to state and local
taxation. See "Tax Aspects of Covered Calls and Hedging Instruments" and
"Performance, Dividend and Tax Information" in the Additional Statement
for information on tax aspects of the Fund's investments in Hedging
Instruments and other tax matters.
Dividends and Distributions
The Fund intends to declare dividends separately for Class A, Class
B and Class Y shares on an annual basis in December each year, on a date
set by the Board of Trustees. As current income is not an objective of
the Fund, the amount of dividends, if any, will likely be small. In
addition, distributions may be made annually in December out of any net
short-term or long-term capital gains realized from the sale of
securities, premiums from expired calls written by the Fund, and net
profits from hedging transactions, realized in the twelve months ending
on October 31st of that year. Any difference in the net asset values of
Class A, Class B and Class Y shares will be reflected in such
distribution. The Fund may make a supplemental distribution of capital
gains and ordinary income following the end of its fiscal year. Any long-
term capital gains distributions and any non-taxable return of capital
will be separately identified when tax information is distributed by the
Fund. There is no fixed dividend rate and there can be no assurance as
to the payment of any dividends or the realization of any capital
gains.
All dividends and capital gains distributions are automatically
reinvested in Fund shares at net asset value, as of a date selected by the
Board of Trustees, unless the shareholder asks the Transfer Agent in
writing to pay dividends or capital gains distributions in cash, or to
reinvest them in another Eligible Fund, as described in "Performance,
Dividend and Tax Information" in the Additional Statement. That request
must be received prior to the record date for a dividend to be effective
as to that dividend. Under AccountLink, dividends and distributions may
be automatically transferred to a designated account at a financial
institution. See "AccountLink" in "How to Buy Shares" for more details.
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 are invested in shares of Oppenheimer Money Market Fund,
Inc., as promptly as possible after the return of such checks to the
Transfer Agent, to enable the investor to earn a return on otherwise idle
funds.
The amount of a class's distributions may vary from time to time
depending upon market conditions. The composition of the Fund's
portfolio, expenses borne by the Fund, or borne separately by that class
as described in "Purchase, Redemption and Pricing of shares - Multiple
class Methodology" in the Additional Statement. Dividends are calculated
in the same manner, at the same time, and on the same day for shares of
each class. However, dividends on Class b shares are expected to be lower
than on Class a or Class Y shares on a pro rata basis as a result of the
asset-based sales charge on Class B shares, and such dividends also will
differ in amount as a consequence of any difference between the net asset
values of Class A, Class B and Class Y shares.
Tax Status of the Fund's Dividends and Distributions
Dividends paid by the Fund derived from net investment income or net
short-term capital gains are taxable to shareholders as ordinary income,
whether received in cash or reinvested. Long-term capital gains
distributions, if any, are taxable as long-term capital gains whether
received in cash or reinvested and regardless of how long Fund shares have
been held. A shareholder purchasing Fund shares immediately prior to the
declaration of a dividend or capital gains distribution will receive a
distribution subject to income tax, and the distribution will have the
effect of reducing the Fund's net asset value per share by the amount of
the distribution. For information as to "backup" withholding on
dividends, see "How to Redeem Shares."
Tax Status of the Fund
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on
amounts paid by it as dividends and distributions. The Fund qualified
during its last fiscal year, and intends to so qualify in the current and
future years, but reserves the right not to do so. However, the Code
contains a number of complex tests relating to qualification which the
Fund might not meet in any particular year. For example, if the Fund
derives 30% or more of its gross income from the sale of securities held
less than three months, it may fail to qualify (see "Investment Objective
and Policies - Tax Aspects of Covered Calls and Hedging Instruments" in
the Additional Statement for more information). If it did not qualify,
the Fund would be treated for tax purposes as an ordinary corporation and
receive no tax deduction for dividends and distributions made to
shareholders.
Fund Performance Information
Total Return Information
From time to time the "average annual total return," "total return"
and "total return at net asset value" of the Fund may be advertised. The
Fund's "average annual total return" for a particular period is computed
by determining the average annual compounded rate of return over the
period, using the initial amount invested at the beginning of the period
and the redeemable value of the investment at the end of the period. The
"total return" of a class for a period is a cumulative rate of return over
the entire period, also using the initial amount invested and redeemable
value at the end of the period. In both cases, the payment of either the
current maximum initial sales charge applicable to Class A shares, or the
Class B CDSC applicable to the period for which the Class B shares are
outstanding, is taken into account with respect to the performance of that
class. The Fund may also quote a "total return at net asset value," which
is total return calculated without considering sales charges. The
redeemable value of the investment assumes that all dividends and capital
gains distributions have been reinvested at net asset value without sales
charge.
The Fund's "average annual total return," "total return" and "total
return at net asset value" indicate the investment results that an
investor would have experienced over the stated period from changes in
share price and reinvestment of dividends and distributions. All such
performance information is based on historical earnings and is not
intended to indicate future performance. Performance is calculated
separately for each class and will differ for shares of each class and the
higher anticipated expenses of Class B shares should result in shares of
that class having lower yields than Class A shares for the same period of
time. "Performance, Dividend and Tax Information" in the Additional
Statement contains more detailed information about calculating the Fund's
returns and other performance information.
Management's Discussion of Performance
During the Fund's fiscal year ended September 30, 1993, the Manager
emphasized investment in well-managed companies offering innovative
products and services. Major areas of investment for the Fund included
health care, specialty retailing and telecommunications. A number of
economic factors influenced the performance of the equity securities
markets during the Fund's fiscal year, including a low interest rate
environment, which the Manager believes makes smaller companies more
attractive because of the low cost of capital needed for expansion.
Comparison of Change
In Value of $10,000
Hypothetical Investment in
Oppenheimer Discovery
Fund, S&P 500 Index
and Russell 2000 Index
Average Annual Total Return of the Fund at 9/30/93
1 Year 5 Year Life
36.15% 20.78% 19.89%
Oppenheimer
Fiscal Year Discovery S&P 500 Russell
(Period Ended) Fund Index 200 Index
09/30/86* $ 9,944 $10,000 $10,000
09/30/87 14,868 14,342 12,940
09/30/88 13,987 12,565 11,541
09/30/89 19,614 16,705 14,021
09/30/90 15,625 15,162 10,215
09/30/91 23,731 19,875 14,819
09/30/92 26,407 22,070 16,144
09/30/93 38,148 24,932 21,498
Past performance is not predictive of future performance.
*The Fund began operations on 9/11/86.
The S&P 500 index is an unmanaged index of common stocks widely used
as a measure of general stock market performance, and includes
reinvestment of dividends but does not reflect initial or ongoing expenses
of such stocks. The Russell 2000 Index is an unmanaged, capitalization-
weighted index of 2000 U.S. issuers whose common stocks are traded on the
New York and American Stock Exchanges and NASDAQ, and is widely recognized
as a measure of the performance of "mid-capitalization" stocks. It
includes a factor for the reinvestment of dividends but does not reflect
expenses or taxes. The Fund's Class A return reflects deduction of the
current maximum sales charge of 5.75% and includes reinvestment of all
dividends and capital gains distributions, but does not consider taxes.
Comparable graphs are not shown for the Fund's Class A or Class Y shares
because they were not offered during these periods.
Additional Information
Description of the Fund and Its Shares
The Fund's Board of Trustees is empowered to issue full and
fractional shares of one or more series and classes of series. Shares of
one series having three classes (Class A, Class B and Class Y shares) have
been authorized, which are the shares of beneficial interest described
herein. Series have separate assets and liabilities. Classes of a series
represent an identical interest in a particular series but, as explained
in this Prospectus, each class has different dividends, distributions and
expenses, and may have different net asset values.
Shares of the Fund represent an interest in the Fund proportionately
equal to the interest of each other share of the same class and entitle
their holders to one vote per share (and a fractional vote for a
fractional share) on matters submitted to their vote. Only shareholders
of a particular class vote on matters affecting only that class. The
Trustees may divide or combine the shares of a class into a greater or
lesser number of shares without thereby changing the proportionate
beneficial interest in the Fund. The Fund's shares are transferable
without restriction and, when issued, are fully-paid (except as described
in "Additional Information" in the Additional Statement) non
assessable.
The Custodian and the Transfer Agent
The Custodian of the assets of the Fund is The Bank of New York. The
Fund's cash balances in excess of $100,000 held by the Custodian are not
protected by Federal deposit insurance. Such uninsured balances at times
may be substantial. The Manager and its affiliates presently have banking
relationships with the Custodian. See "Additional Information" in the
Additional Statement for further details.
Oppenheimer Shareholder Services, a division of the Manager, acts as
transfer agent and shareholder servicing agent on an at-cost basis for the
Fund and certain other open-end funds advised by the Manager, and acts as
transfer agent for unit investment trusts for the accumulation of shares
of one of such funds. Shareholders should direct any inquiries to the
Transfer Agent at the address or toll-free phone number shown on the back
cover.
<PAGE>
Investment Adviser Prospectus and
Oppenheimer Management Corporation New Account Application
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent O P P E N H E I M E R
Oppenheimer Shareholder Services
P.O. Box 5270 Discovery
Denver, Colorado 80217
1-800-525-7048 Fund
Custodian of Portfolio Securities
The Bank of New York Effective April 1, 1994
One Wall Street
New York, New York 10015
Independent Auditors
KPMG Peat Marwick
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 W. 47th Street
New York, NY 10036
No dealer, 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 Additional Statement, and
if given or made, such information and
representation must not be relied upon as having
been authorized by the Fund, Oppenheimer
Management Corporation, Oppenheimer Funds
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 offer
in such state.
PR500.0194.N Printed on recycled paper OppenheimerFunds
<PAGE>
Investment Adviser Prospectus and
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent O P P E N H E I M E R
Oppenheimer Shareholder Services
P.O. Box 5270 Discovery
Denver, Colorado 80217
1-800-525-7048 Fund
Custodian of Portfolio Securities
The Bank of New York Effective April 1, 1994
One Wall Street
New York, New York 10015
Independent Auditors
KPMG Peat Marwick
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 W. 47th Street
New York, NY 10036
No dealer, 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 Additional Statement, and
if given or made, such information and
representation must not be relied upon as having
been authorized by the Fund, Oppenheimer
Management Corporation, Oppenheimer Funds
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 offer
in such state.
PR500.0194.N Printed on recycled paper OppenheimerFunds
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
OPPENHEIMER DISCOVERY FUND
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
This Statement of Additional Information (the "Additional Statement")
is not a Prospectus. This Additional Statement should be read together
with the Prospectus (the "Prospectus") dated April 1, 1994, of Oppenheimer
Discovery Fund (the "Fund"), which may be obtained by written request to
Oppenheimer Shareholder Services (the "Transfer Agent"), P.O. Box 5270,
Denver, Colorado 80217 or by calling the toll-free number above.
TABLE OF CONTENTS
Page
Investment Objective and Policies. . . . . . . . . . . . .
Investment Restrictions. . . . . . . . . . . . . . . . . .
Trustees and Officers. . . . . . . . . . . . . . . . . . .
Investment Management Services . . . . . . . . . . . . . .
Brokerage. . . . . . . . . . . . . . . . . . . . . . . . .
Purchase, Redemption and Pricing of Shares . . . . . . . .
Distribution and Service Plans . . . . . . . . . . . . . .
Performance, Dividend and Tax Information. . . . . . . . .
Additional Information . . . . . . . . . . . . . . . . . .
Automatic Withdrawal Plan Provisions . . . . . . . . . . .
Letters of Intent. . . . . . . . . . . . . . . . . . . . .
Independent Auditors' Report . . . . . . . . . . . . . . .
Financial Statements . . . . . . . . . . . . . . . . . . .
This Additional Statement is effective April 1, 1994.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Fund are described in
the Prospectus. Set forth below is supplemental information about those
policies. Certain capitalized terms used in this Additional Statement are
defined in the Prospectus. Investment policies that the Fund may use to
seek the Fund's objective encompass the selection of common stocks,
preferred stocks, convertible securities, rights, warrants, and puts and
calls in proportions which may vary from time to time. That framework of
security selection is enhanced by the methods described in the Prospectus
under "Special Investment Methods," and in this and the following sections
of this Additional Statement.
Securities of "Growth-Type" Issuers and Emerging Growth Companies. Many
"growth-type" issuers, including emerging growth companies, may be small
and unseasoned. Their securities, which the Fund may purchase when they
are offered to the public for the first time, may have a limited trading
market, which may adversely affect the Fund's ability to sell them when
it wants to do so and can result in their shares being priced lower than
otherwise might be the case. While the Manager will undertake to select
promising emerging companies carefully for the Fund's investments, there
is no guarantee that such investments will achieve their potential.
"Over-the-Counter" Securities. The "over-the-counter" market is generally
defined as the market for securities that are not listed for trading on
a securities exchange. An exchange represents an auction market
consisting of competing buyers and competing sellers. There are over-the-
counter markets in the U.S. and in foreign countries. In contrast to
exchanges, the over-the-counter market is not a centralized facility but
is a negotiated market in which transactions are done by telephone or
computer link-ups among dealers and brokers. In the U.S., the over-the-
counter market is regulated by the National Association of Securities
Dealers, Inc. ("NASD"). The NASD has created an Automated Quotation
System ("NASDAQ"), an electronic quotation system for certain over-the-
counter securities, allowing subscribers to obtain data as to current bids
and offers for over-the-counter securities. A security must have at least
two market makers for initial listing on NASDAQ. Over-the-counter markets
exist apart from NASDAQ, as long as a dealer or broker is willing to make
a market in a particular security. The number of shares traded each day
may be smaller for over-the-counter securities than for securities listed
on the New York or American Stock Exchanges. As a result, the liquidity
of, or ability to sell, the over-the-counter securities which the Fund
owns may be relatively limited as compared to listed securities which it
owns. This may affect the price the Fund receives when it sells its over-
the-counter securities. Over-the-counter securities may also be subject
to greater price volatility than listed securities due to factors which
would not ordinarily affect large, well-established companies (such as
changes in key personnel, financing difficulties or problems with
products). On January 18, 1990, the Fund's shareholders approved the
change of the Fund's name from "Oppenheimer OTC Fund" to its current name,
and at the same time approved a proposal to change the Fund's fundamental
investment policies so that the Fund was no longer required to invest at
least 65% of its total assets in over-the-counter securities.
Borrowing. 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 (on which the Fund will pay interest), subject to the
restrictions 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 so computed should fail to meet the 300% asset coverage
requirement, the Fund is required within three days to reduce its bank
debt to the extent necessary to meet that requirement and may have to sell
a portion of its investments at a time when independent investment
judgment would not dictate such sale. Borrowing for investment increases
both investment opportunity and risk. Since substantially all of the
Fund's assets fluctuate in value, but borrowing obligations are fixed,
when the Fund has outstanding borrowings, the net asset value per share
of the Fund correspondingly will tend to increase and decrease more when
portfolio assets fluctuate in value than would otherwise be the case.
This speculative factor is known as "leverage."
Foreign Securities. Investments in foreign securities offer potential
benefits not available from investments solely in securities of domestic
issuers, such as the opportunity to invest in the securities of foreign
issuers that appear to offer growth potential, or to invest in foreign
countries with economic policies or business cycles different from those
of the U.S., or to seek to reduce fluctuations in portfolio value by
investing in foreign stock markets that do not move in a manner parallel
to U.S. markets. Investments in foreign securities present special
additional risks and considerations not typically associated with
investments in securities of issuers traded in the U.S. These include:
reduction of income by foreign taxes; fluctuation in value of foreign
portfolio investments due to changes in currency rates and control
regulations (e.g., currency blockage); transaction charges for currency
exchange; lack of public information about foreign issuers; lack of
uniform accounting, auditing and financial reporting standards comparable
to those applicable to domestic issuers; less volume on foreign exchanges
than on U.S. exchanges; greater volatility and less liquidity on foreign
markets than in the U.S.; less regulation of foreign issuers, stock
exchanges and brokers than in the U.S.; greater difficulties in commencing
lawsuits against foreign issuers; higher brokerage commission rates than
in the U.S.; increased risks of delays in settlement of portfolio
transactions; possibilities in some countries of expropriation or
nationalization of assets, confiscatory taxation, political, financial or
social instability or adverse diplomatic developments; and differences
(which may be favorable or unfavorable) between the U.S. economy and
foreign economies. 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. Additional costs may be incurred in connection with investments
in foreign securities because of generally higher foreign commissions and
the additional custodial costs associated with monitoring foreign
securities.
Illiquid and Restricted Securities. The expenses of registration of
restricted securities that are illiquid (excluding securities that may be
resold by the Fund pursuant to Rule 144A, as explained in the Prospectus)
may be negotiated by the Fund with the issuer at the time such securities
are purchased by the Fund. When registration is required before such
securities may be sold, a considerable period may elapse between a
decision to sell the securities and the time the Fund would be permitted
to sell them. Thus, the Fund may not be able to obtain as favorable a
price as that prevailing at the time of the decision to sell. The Fund
may also acquire securities through private placements. Such securities
may have contractual resale restrictions, which might prevent their resale
by the Fund at a time when such resale would be desirable.
Repurchase Agreements. In a repurchase transaction, the Fund acquires a
security from, and simultaneously resells it to, an approved vendor (a
U.S. commercial bank, or the U.S. branch of a foreign bank, or a broker-
dealer meeting Board-established credit guidelines, and which has been
designated a primary dealer in government securities) for delivery on an
agreed-upon future date. The repurchase price exceeds the purchase price
by an amount that reflects an agreed-upon interest rate effective for the
period during which the repurchase agreement is in effect. The majority
of these transactions run from day to day, and delivery pursuant to resale
typically will occur within one to five days of the purchase. Repurchase
agreements are considered "loans" under the Investment Company Act,
collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in
effect, the collateral's value must equal or exceed the repurchase price
to fully collateralize the repayment obligation. Additionally, the
Manager will continuously monitor the collateral's value and will impose
creditworthiness requirements to confirm that the vendor is financially
sound.
Loans of Portfolio Securities. The Fund may lend its portfolio securities
subject to the restrictions stated in the Prospectus, if the loan is
collateralized under applicable regulatory guidelines. Under the present
guidelines (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
finders' or administrative fees the Fund pays in arranging the loan. The
Fund may share the interest it receives on the collateral securities with
the borrower as long as it realizes at least the 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 applicable tests under the Internal Revenue
Code and must permit the Fund to reacquire loaned securities on five
business days' notice or in time to vote on any important matter.
Covered Calls and Hedging. As described in the Prospectus, the Fund may
write covered calls or employ one or more types of Hedging Instruments.
When hedging to attempt to protect against declines in the market value
of the Fund's portfolio, 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 Stock
Index Futures; (ii) purchase puts on such Futures or securities; or (iii)
write covered calls on securities or on Stock Index Futures. When hedging
to permit the Fund to establish a position in the equities markets as a
temporary substitute for purchasing particular equity securities (which
the Fund will normally purchase and then terminate the hedging position),
the Fund may purchase: (i) Stock Index Futures, or (ii) calls on such
Futures or on securities. The Fund's strategy of hedging with Futures and
options on Futures will be incidental to the Fund's 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, are legally permissible and are
adequately disclosed. Additional information about the Hedging
Instruments the Fund may use is provided below.
Writing Covered Call Options. 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 nine 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 written is more or less than the
price of the call subsequently purchased. A profit may also be realized
if the call lapses unexercised, because the Fund retains the underlying
investment and the premium received. Any such profits are considered
short-term capital gains for Federal income tax purposes, 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.
Purchasing Calls and Puts. When the Fund purchases a call (other
than in a closing purchase transaction), it pays a premium and, except as
to calls on stock indices and Stock Index Futures, 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. 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 plus the transaction costs and the premium paid for the
call, 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 an 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 securities or Futures
the Fund owns 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 date and the Fund will lose its premium payment and the
right to sell the underlying investment. The put may, however, be sold
prior to expiration (whether or not at a profit).
Calls and Puts on Stock Index Futures and Stock Indices. Purchasing
a put on either a stock index or on a Stock Index Future not held by the
Fund permits the Fund either to resell the put or to 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
its 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. When the
Fund purchases a put on a stock index, or on a Stock Index Future not held
by it, the put protects the Fund to the extent that the index moves in a
similar pattern to the securities held by the Fund. In the case of a put
on a stock index or Stock Index Future, settlement is in cash rather than
by the Fund's delivery of the underlying investment.
The Fund may also write calls on futures without owning a futures
contract or a deliverable bond, provided that at the time the call is
written, the Fund covers the call by segregating in escrow with its
Custodian an equivalent dollar amount of liquid assets. The Fund will
segregate additional liquid assets if the value of the escrowed assets
drops below 100% of the current value of the Future. In no circumstances
would an exercise notice on a call the Fund wrote on Futures require the
Fund to deliver a Futures contract; it would simply put the Fund in a
short futures position, which is permitted by the Fund's hedging policies.
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 in individual securities or
futures contracts. When the Fund buys a call on a stock index or Stock
Index Future, it pays a premium. During the call period, upon exercise
of a call by the Fund, a seller of a corresponding call on the same index
will pay the Fund an amount of cash to settle the call if the closing
level of the stock index or Stock Index 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 index 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 to
the Fund an amount of cash 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.
Stock Index Futures. A stock index, which cannot be purchased or
sold directly, assigns relative values to the common stocks included in
the index and fluctuates with the changes in the market value of those
stocks. No payment is made or received by the Fund upon the purchase or
sale of a Stock Index Future. Stock Index Futures 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 underlying stocks in the index is made. Generally,
contracts are closed out with offsetting transactions prior to the
expiration date of the contract. 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"). The initial margin 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 specified conditions. As the Future is "marked-to-market" 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 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 loss or gain is then
realized for tax purposes. Although Stock Index Futures by their terms
call for settlement by the delivery of cash, in most cases the 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.
Interest Rate Swap Transactions. Swap agreements entail both
interest rate risk and credit risk. There is a risk that, based on
movements of interest rates in the future, the payments made by the Fund
under a swap agreement will have been greater than those received by it.
Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap defaults, the
Fund's loss will consist of the net amount of contractual interest
payments that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap
transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements. A master netting agreement provides that all swaps done
between the Fund and that counterparty under the master agreement shall
be regarded as parts of an integral agreement. If on any date amounts are
payable in the same currency in respect of one or more swap transactions,
the net amount payable on that date in that currency shall be paid. In
addition, the master netting agreement may provide that if one party
defaults generally or on one swap, the counterparty may terminate the
swaps with that party. Under such agreements, if there is a default
resulting in a loss to one party, the measure of that party's damages is
calculated by reference to the average cost of a replacement swap with
respect to each swap (i.e., the mark-to-market value at the time of the
termination of each swap). The gains and losses on all swaps are then
netted, and the result is the counterparty's gain or loss on termination.
The termination of all swaps and the netting of gains and losses on
termination is generally referred to as "aggregation."
Additional Information About Hedging Instruments and their Use. The
Fund's Custodian, or a securities depository acting for the Custodian,
will act as the Fund's escrow agent, through the facilities of the Options
Clearing Corporation ("OCC"), as to investments on which the Fund has
written options traded on exchanges, or as to other acceptable escrow
securities, so that no margin will be required for such transactions. OCC
will release the securities on the expiration of the option or upon the
Fund's entering into a closing transaction. An option position may be
closed out only on a market which provides secondary trading for options
of the same series, and there is no assurance that a liquid secondary
market will exist for any particular option.
When the Fund writes an over-the-counter ("OTC") option, it will
enter into an arrangement with a primary U.S. Government securities
dealer, which would establish a formula price at which the Fund would have
the absolute right to repurchase that OTC option. That formula price
would generally be based on a multiple of the premium received for the
option, plus the amount by which the option is exercisable below the
market price of the underlying security (that is, the extent to which the
option is "in-the-money"). When the Fund writes an OTC option, it will
treat as illiquid (for purposes of the limit on its assets that may be
invested in illiquid securities, stated in the Prospectus) an amount of
assets used to cover written OTC options, equal to the formula price for
the repurchase of the OTC option less the amount by which the OTC option
is "in-the-money." The Fund will also treat as illiquid any OTC option
held by it. The SEC is evaluating whether OTC options should be
considered liquid securities, and the procedure described above could be
affected by the outcome of that evaluation.
The Fund's option activities may affect its turnover rate and
brokerage commissions. The exercise of calls written by the Fund may
cause the Fund to sell related portfolio securities, thus increasing its
turnover rate. The exercise by the Fund of puts on securities or Futures
may cause the sale of related investments, also increasing portfolio
turnover. Although such exercise is within the Fund's control, holding
a put might cause the Fund to sell the underlying investment for reasons
that would not exist in the absence of the put. The Fund will pay a
brokerage commission each time it buys or sells a call, buys a put or buys
or sells an underlying investment in connection with the exercise of a put
or call. Such commissions are normally higher than those which would
apply to direct purchases or sales of the underlying investments on a
relative basis. Premiums paid for options are small in relation to the
market value of such 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 investment.
Regulatory Aspects of Hedging Instruments and Covered Calls. The
Fund must operate within certain restrictions as to its long and short
positions in Futures and options thereon under a rule (the "CFTC Rule")
adopted by the Commodity Futures Trading Commission (the "CFTC") under the
Commodity Exchange Act (the "CEA"), which excludes the Fund from
registration with the CFTC as a "commodity pool operator" (as defined in
the CEA) if it complies with the CFTC Rule. Under these restrictions the
Fund will not, as to any position, whether short, long or a combination
thereof, enter into Futures and options thereon for which the aggregate
initial margins and premiums exceed 5% of the fair market value of its
total assets, with certain exclusions as described in the CFTC Rule.
Under the restrictions, the Fund also must, as to its short positions, use
Futures and options thereon solely for bona-fide hedging purposes within
the meaning and intent of the applicable provisions of the CEA.
Transactions in options by the Fund are subject to limitations
established by each of the exchanges governing the maximum number of
options which may be written or held by a single investor or group of
investors acting in concert, regardless of whether the options were
written or purchased on the same or different exchanges or are held in one
or more accounts or through one or more exchanges or 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 having an affiliated
investment adviser. Position limits also apply to Futures. An exchange
may order the liquidation of positions found to be in violation of those
limits and may impose certain other sanctions. Due to requirements of the
Investment Company Act, when the Fund purchases a Stock Index Future, the
Fund will maintain, in a segregated account or accounts with its
Custodian, cash or readily-marketable, short-term (maturing in one year
or less) debt instruments in an amount equal to the market value of the
securities underlying such Future, less the margin deposit applicable to
it.
Tax Aspects of Covered Calls and Hedging Instruments. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code. One of the tests for such qualification is that less than
30% of its gross income (irrespective of losses) must be derived from
gains realized on the sale of securities held for less than three months.
Due to this limitation, the Fund will limit the extent to which it engages
in, but will not be precluded from, the following activities: (i) selling
investments, including Stock Index Futures, held for less than three
months, whether or not they were purchased on the exercise of a call held
by the Fund; (ii) purchasing calls or puts that expire in less than three
months; (iii) effecting closing transactions with respect to calls or puts
purchased less than three months previously; (iv) exercising puts or calls
held by the Fund for less than three months; and (v) writing calls on
investments held for less than three months.
Certain foreign currency exchange contracts ("Forward Contracts") in
which the Fund may invest are treated as "section 1256 contracts." Gains
or losses relating to section 1256 contracts generally are characterized
under the Internal Revenue Code as 60% long-term and 40% short-term
capital gains or losses. However, foreign currency gains or losses
arising from certain section 1256 contracts (including Forward Contracts)
generally are treated as ordinary income or loss. In addition, section
1256 contracts held by the Fund at the end of each taxable year are
"marked-to-market" with the result that unrealized gains or losses are
treated as through they were realized. These contracts also may be
marked-to-market for purposes of the excise tax applicable to investment
company distributions and for other purposes under rules prescribed
pursuant to the Internal Revenue Code. An election can be made by the
Fund to exempt these transactions from this mark-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may
affect the character of gains (losses) realized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a position
making up a straddle is allowed only to the extent such loss exceeds any
unrecognized gain in the offsetting positions making up the straddle.
Disallowed loss is generally allowed at the point where there is no
unrecognized gain in the offsetting positions making up the straddle, or
the offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates that occur between the time the Fund
accrues interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the Fund
actually collects such receivables or pays such liabilities are generally
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 ordinary gain or loss. Currency gains and losses are
offset against market gains and losses before determining a net "Section
988" gain or loss under the Internal Revenue Code, which may increase or
decrease the amount of the Fund's investment company income available for
distribution to its shareholders.
Possible Risk Factors in Hedging. In addition to the risks with
respect to Futures and options discussed in the Prospectus and above,
there is a risk in using short hedging by selling Stock Index Futures or
purchasing puts on stock indices or Stock Index Futures that the prices
of the applicable index (thus the prices of the Hedging Instruments) 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 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 such equity securities being
hedged is more than the historical volatility of the applicable index.
It is also possible that where 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 this occurred, the Fund would
lose money on the Hedging Instruments and also experience a decline in
value in its equity 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 particular
equity securities 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 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 such equity
securities.
Short Sales Against-the-Box. After making such short sales, while the
short position is open, the Fund must own an equal amount of such
securities, or by virtue of ownership of securities have the right,
without payment of further consideration, to obtain an equal amount of the
securities sold short. Short sales against-the-box may be made to defer,
for Federal income tax purposes, recognition of gain or loss on the sale
of securities "in the box" until the short position is closed out.
INVESTMENT RESTRICTIONS
The Fund's significant investment restrictions are described in the
Prospectus. The following investment restrictions are also fundamental
policies of the Fund and, together with the fundamental policies and
investment objective described in the Prospectus, cannot be changed
without the vote of a "majority" of the Fund's outstanding shares. Under
the Investment Company Act, such a "majority" vote is defined as the vote
of the holders of the lesser of: (i) 67% or more of the shares present or
represented by proxy at such meeting, if the holders of more than 50% of
the outstanding shares are present, or (ii) more than 50% of the
outstanding shares. Under these additional restrictions, the Fund cannot:
(a) underwrite securities of other companies except insofar as the Fund
might be deemed to be an underwriter in the resale of any securities held
in its portfolio; (b) invest in commodities or commodity contracts other
than the Hedging Instruments permitted by any of its other fundamental
policies, whether or not any such Hedging Instrument is considered to be
a commodity or a commodity contract; (c) purchase securities on margin;
however, the Fund may make margin deposits in connection with any of the
Hedging Instruments permitted by any of its other fundamental policies;
(d) purchase calls, unless (i) the investments to which the call relates
are securities, broadly-based stock indices or Stock Index Futures on
broadly-based stock indices or (ii) the calls are purchased to effect
"closing purchase transactions" to terminate an obligation with respect
to a call which the Fund has previously written; the Fund may not write
puts nor purchase puts except those which relate to (1) securities held
by it, (2) Stock Index Futures, or (3) broadly-based stock indices, in
each case only to protect against a decline in value of the entire
portfolio or of specific portfolio securities or Stock Index Futures held
by the Fund, and further provided that, after any such purchase, the value
of all options (puts and calls) held by the Fund would not exceed 5% of
the Fund's total assets (at the time of purchase); the Fund may not write
puts or purchase puts on securities not held by it; (e) lend money except
in connection with the acquisition of that portion of publicly-distributed
debt securities which the Fund's investment policies and restrictions
permit it to purchase (see "Investment Policies" and "Special Investment
Methods" in the Prospectus); the Fund may also make loans of portfolio
securities (see "Loans of Portfolio Securities") and enter into repurchase
agreements (see "Repurchase Agreements" in the Prospectus); (f) mortgage,
hypothecate or pledge any of its assets; however, this does not prohibit
the escrow arrangements contemplated by the put and call activities of the
Fund or other collateral or margin arrangements in connection with any of
the Hedging Instruments permitted by any of its other fundamental
policies; (g) invest in or hold securities of any issuer if officers and
Trustees or Directors of the Fund or the Manager individually owning more
than 0.5% of the securities of such issuer together own more than 5% of
the securities of such issuer; (h) invest in other open-end investment
companies, or invest more than 5% of the value of its net assets in
closed-end investment companies, including small business investment
companies, nor make any such investments at commission rates in excess of
normal brokerage commissions; to the extent the Fund does make investments
in other investment companies, the Fund's shareholders may be subject
indirectly to that company's management fees and costs; (i) invest in
companies for the purpose of acquiring control or management thereof;
(j)invest in interests in oil, gas or other mineral exploration or
development programs; or (k) invest in real estate or in interests in real
estate, but may purchase readily marketable securities of companies
holding real estate or interests therein.
With regard to restriction (h) above, but not as a matter of
fundamental policy, the Fund will further restrict itself to open market
purchases of closed-end investment companies, except in connection with
mergers, and will not engage in arbitrage transactions.
TRUSTEES AND OFFICERS
The Fund's Trustees and officers and their principal occupations and
business affiliations during the past five years are listed below. The
address for each, except as noted, is Two World Trade Center, New York,
New York 10048-0203. Except for Mr. Tracey, each serves in similar
capacities with Oppenheimer Global Fund, Oppenheimer Time Fund,
Oppenheimer Special Fund, Oppenheimer Money Market Fund, Inc., Oppenheimer
Fund, Oppenheimer Target Fund, Oppenheimer U.S. Government Trust,
Oppenheimer Tax-Free Bond Fund, Oppenheimer New York Tax-Exempt Fund,
Oppenheimer California Tax-Exempt Fund, Oppenheimer Asset Allocation Fund,
Oppenheimer Gold & Special Minerals Fund, Oppenheimer Multi-State Tax-
Exempt Trust, Oppenheimer Mortgage Income Fund, Oppenheimer Global Bio-
Tech Fund, Oppenheimer Global Environment Fund, Oppenheimer Global Growth
& Income Fund, Oppenheimer Multi-Sector Income Trust and Oppenheimer
Multi-Government Trust (collectively the "New York-based
OppenheimerFunds"). As of December 31, 1993, all of the Trustees and
officers of the Fund as a group beneficially owned less than 1% of its
outstanding shares.
LEON LEVY, Chairman of the Board of Trustees
General Partner of Odyssey Partners, L.P. (investment partnership);
Chairman of Avatar Holdings, Inc. (real estate development).
LEO CHERNE, Trustee
386 Park Avenue South, New York, New York 10016
Chairman Emeritus of the International Rescue Committee
(philanthropic organization); formerly Executive Director of The
Research Institute of America.
EDMUND T. DELANEY, Trustee
5 Gorham Road, Chester, Connecticut 06412
Attorney-at-law; formerly a Member of the Connecticut State
Historical Commission and Counsel to Copp, Berall & Hempstead (a law
firm).
ROBERT G. GALLI, Trustee
Vice Chairman of the Manager and Vice President and Counsel of
Oppenheimer Acquisition Corp. ("OAC") the Manager's parent holding
company; formerly he held the following positions: a director of
Oppenheimer Funds Distributor, Inc. (the "Distributor"), Vice
President and a director of HarbourView Asset Management Corporation
("HarbourView") and Centennial Asset Management Corporation
("Centennial"), investment adviser subsidiaries of the Manager, a
director of Shareholder Financial Services, Inc. ("SFSI") and
Shareholder Services, Inc. ("SSI"), transfer agent subsidiaries of
the Manager, an officer of other OppenheimerFunds and Executive Vice
President and General Counsel of the Manager and the Distributor.
BENJAMIN LIPSTEIN, Trustee
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University.
ELIZABETH B. MOYNIHAN, Trustee
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the American Schools
of Oriental Research, the Freer Gallery of Art (Smithsonian
Institution), the Institute of Fine Arts (New York University) and
Preservation League of New York State; a member of the Indo-U.S.
Sub-Commission on Education and Culture.
KENNETH A. RANDALL, Trustee
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Northeast Bancorp, Inc. (bank holding company),
Dominion Resources, Inc. (electric utility holding company), and
Kemper Corporation (insurance and financial services company);
formerly Chairman of the Board of ICL Inc. (information systems).
EDWARD V. REGAN, Trustee
40 Park Avenue, New York, New York 10016
President of Jerome Levy Institute, Bard College; Member of the U.S.
Competitiveness Policy Council; formerly New York State Comptroller.
RUSSELL S. REYNOLDS, JR., Trustee
200 Park Avenue, New York, New York 10166
Founder Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directors Publication, Inc. (consulting and
publishing); a trustee of Mystic Seaport Museum, International House
and the Greenwich Historical Society and Greenwich Hospital.
SIDNEY M. ROBBINS, Trustee
50 Overlook Road, Ossining, New York 10562
Chase Manhattan Professor Emeritus of Financial Institutions,
Graduate School of Business, Columbia University; Visiting Professor
of Finance, University of Hawaii; a director of The Korea Fund, Inc.
and The Malaysia Fund, Inc. (closed-end investment companies); a
member of the Board of Advisors, Olympus Private Placement Fund,
L.P.; Professor Emeritus of Finance, Adelphi University.
DONALD W. SPIRO, President and Trustee
Chairman Emeritus and a director of the Manager; formerly Chairman
of the Manager and Oppenheimer Funds Distributor, Inc. (the
"Distributor").
PAULINE TRIGERE, Trustee
550 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
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), FMC
Corp. (chemicals and machinery), Lindsay Manufacturing Co. and Texas
Instruments Inc. (electronics); formerly (in descending chronological
order) Deputy Chairman, Bush/Quayle Presidential Campaign; Counsellor
to the President (Bush) for Domestic Policy; Chairman of the
Republican National Committee; Secretary of the U.S. Department of
Agriculture; U.S. Trade Representative, Executive Office of the
President.
ANDREW J. DONOHUE, Secretary
Executive Vice President and General Counsel of the Manager and
Distributor; an officer of other OppenheimerFunds; formerly Senior
Vice President and Associate General Counsel of the Manager and the
Distributor, Partner in Kraft & McManimon (a law firm), an officer
of First Investors Corporation (a broker-dealer) and First Investors
Management Company, Inc. (broker-dealer and investment adviser), and
a director and an officer of First Investors Family of Funds and
First Investors Life Insurance Company.
JAY TRACEY, Vice President and Portfolio Manager
Vice President of the Manager; an officer of other OppenheimerFunds;
formerly Senior Vice President of Founders Asset Management, Inc.
(mutual fund adviser), prior to which he was a Securities Analyst and
Portfolio Manager of Berger Associates, Inc.
GEORGE C. BOWEN, Treasurer
3410 South Galena Street, Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of the Distributor and Harbourview; Senior Vice
President, Treasurer, Assistant Secretary and a director of
Centennial; Vice President, Treasurer and Secretary of SSI and SFSI;
an officer of other OppenheimerFunds; formerly Senior Vice
President/Comptroller and Secretary of OAMC.
LYNN M. COLUCCY, Assistant Treasurer
3410 South Galena Street, Denver, Colorado 80231
Vice President and Assistant Treasurer of the Manager; an officer of
other OppenheimerFunds; formerly Vice President/Director of Internal
Audit of the Manager.
ROBERT G. ZACK, Assistant Secretary
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other
OppenheimerFunds.
Remuneration of Trustees. The officers of the Fund (including Mr. Spiro)
are affiliated with the Manager and receive no salary or fee from the
Fund. During the fiscal year ended September 30, 1993, the remuneration
(including expense reimbursements) paid by the Fund to all Trustees of the
Fund (excluding Messrs. Galli and Spiro) in the aggregate for services as
Trustees and as members of one or more Committees totaled $34,025. The
Fund has adopted a retirement plan that provides for payment to a retired
Trustee of up to 80% of the average compensation paid during that
Trustee's five years of service in which the highest compensation was
received. A Trustee must serve in that capacity for any of the New York-
based OppenheimerFunds for at least 15 years to be eligible for the
maximum payment. No Trustee has retired since the adoption of the plan
and no payments have been made by the Fund under the plan. In the fiscal
year ended September 30, 1993, the Fund accrued $18,386 for benefit
obligations under the plan.
Major Shareholders. As of December 31, 1993, no person owns of record or
is known by the Fund to own beneficially 5% or more of the Fund's
outstanding shares.
INVESTMENT MANAGEMENT SERVICES
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 may also serve as officers of the Fund, and two
of whom (Messrs. Spiro and Galli) serve as Trustees of the Fund.
The management fee payable to the Manager under the terms of the
investment advisory agreement between the Manager and the Fund (the
"Agreement") is payable monthly and is computed on the net assets of the
Fund as of the close of business each day. The 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
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 Agreement or by the Distributor
are paid by the Fund. The 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. During the Fund's fiscal years ended September 30,
1991, 1992 and 1993, the management fees paid by the Fund to the Manager
were $563,138, $1,624,055 and $3,286,982, respectively.
The Agreement contains no expense limitation. However, independently
of the Agreement, the Manager has undertaken that the total expenses of
the Fund in any fiscal year (including the management fee but excluding
taxes, interest, brokerage commissions, distribution assistance payments
and extraordinary expenses such as litigation costs) shall not exceed (and
the Manager undertakes to pay or refund to the Fund any amount by which
such expenses shall exceed) the most stringent state regulatory limitation
on fund expenses applicable to the Fund. The Manager reserves the right
to terminate or amend the undertaking at any time. The payment of the
management fee will be reduced so that there will not be any accrued but
unpaid liability under the expense limitation. Any assumption of the
Fund's expenses under this limitation would lower the Fund's overall
expense ratio and increase its total return during any period in which
expenses are limited.
The Agreement provides that in the absence of willful misfeasance,
bad faith, or gross negligence in the performance of its duties or
reckless disregard for its obligations thereunder, the Manager is not
liable for any loss sustained by reason of any good faith error or
omission 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 one or more additional 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.
BROKERAGE
Provisions of the Investment Advisory Agreement. One of the duties of the
Manager under the Agreement is to arrange the portfolio transactions of
the Fund. In doing so, the Manager is authorized by the Agreement to
employ broker-dealers ("brokers"), including "affiliated" brokers, as that
term is defined in the Investment Company Act, as may, in its best
judgment based on all relevant factors, implement the policy of the Fund
to obtain, at reasonable expense, the "best execution" (prompt and
reliable execution at the most favorable price obtainable) of such
transactions. The Manager need not seek competitive commission bidding
or base its selection on "posted" rates, but is expected to be aware of
the current rates of eligible brokers and to minimize the commissions paid
to the extent consistent with the provisions of the Agreement and the
interests and policies of the Fund as established by its Board of
Trustees.
Under the 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 of other funds managed by the Manager and its affiliates as a factor
in the selection of brokers for the Fund's portfolio transactions.
Description of Brokerage Practices. Subject to the provisions of the
Agreement, when brokers are used for the Fund's portfolio transactions,
allocations of the Fund's brokerage are made by portfolio managers under
the supervision of the Manager's executive officers. Transactions in
securities other than those for which an exchange is the primary market
are generally done with principals or market makers. Brokerage
commissions are paid primarily for effecting transactions in listed
securities and otherwise only if it appears likely that a better price or
execution can be obtained. When the Fund engages in an option
transaction, ordinarily the same broker will be used for the purchase or
sale of the option and any transactions in the securities to which the
option relates. 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. 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.
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 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 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, annually
reviews information furnished by the Manager as to the commissions paid
to brokers furnishing such services in an effort to ascertain that the
amount of such commissions was reasonably related to the value or the
benefit of such services.
During the Fund's fiscal years ended September 30, 1991, 1992 and
1993, total brokerage commissions paid by the Fund (not including spreads
or concessions on principal transactions on a net trade basis) were
$244,710, $347,317 and $5,701,355, respectively. During the fiscal year
ended September 30, 1993, $301,196 was paid to brokers as commissions in
return for research services (including special research, statistical
information and execution); the aggregate dollar amount of those
transactions was $53,721,740. The transactions giving rise to those
commissions were allocated in accordance with the internal allocation
procedures described above.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Determination of Net Asset Value Per Share. The net asset values per
share of the Class A, Class B and Class Y shares of Fund are determined
as of 4:00 P.M. each day The New York Stock Exchange (the "NYSE") is open
(a "regular business day"), by dividing the value of the Fund's net assets
attributable to that class by the total number of shares of that class
outstanding. The NYSE's most recent holiday schedule (which is subject
to change) states that it will close on New Year's Day, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. It may also close on other days. The Fund may invest
a substantial portion of its assets in foreign securities primarily listed
on foreign exchanges or traded in foreign over-the-counter markets which
trade on Saturdays or other customary U.S. business holidays on which the
NYSE is closed. Because the net asset values of the Fund will not be
calculated on those days, if debt securities and foreign securities held
in the Fund's portfolio are traded on those days, the net asset value per
share of Class a, Class B and Class Y shares may be significantly affected
at times when shareholders will not have the ability to purchase or redeem
shares.
The Fund's Board of Trustees has established procedures for the
valuation of its securities: (i) equity securities traded on a securities
exchange or on NASDAQ are valued at the last sale price on their primary
exchange or on NASDAQ that day (or, in the absence of sales that day, at
values based on the last sale prices of the preceding trading day or
closing bid and asked prices); (ii) NASDAQ and other unlisted equity
securities for which last sale prices are not regularly reported but for
which over-the-counter market quotations are readily available are valued
at the highest closing bid price at the time of valuation, or, if no
closing bid price is reported, on the basis of a closing bid price
obtained from a dealer who maintains an active market in that security;
(iii) securities (including restricted securities) not having readily-
available market quotations are valued at fair value under the Board's
procedures; (iv) debt securities having a maturity in excess of 60 days
are valued at the mean between the asked and bid prices determined by a
portfolio pricing service approved by the Fund's Board of Trustees or
obtained from an active market maker in that security; (v) short-term debt
securities (having a remaining maturity of 60 days or less) are valued at
cost, adjusted for amortization of premiums and accretion of discounts;
and (vi) securities traded on foreign exchanges or in foreign over-the-
counter markets are valued as determined by a portfolio pricing service
approved by the Board, based upon the last sales prices reported on a
principal exchange or, for over-the-counter securities, based on the mean
between closing bid and asked prices and, in each case, reflecting
prevailing rates of exchange to convert their values to U.S. dollars.
Trading in securities on European and Asian exchanges and over-the-
counter markets is normally completed before the close of the NYSE.
Events affecting the values of foreign securities traded in such markets
that occur between the time their prices are determined and the close of
the NYSE will not be reflected in the Fund's calculation of its net asset
value unless the Board of Trustees or the Manager, under procedures
established by the Board of Trustees, determines that the particular event
would materially affect the Fund's net asset value, in which case an
adjustment would be made. Foreign currency will be valued as close to the
time fixed for the valuation date as is reasonably practicable.
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,
or, if there are no transactions, in accordance with (i) above. When the
Fund writes an option, an amount equal to the premium received by the Fund
is included in the Fund's Statement of Assets and Liabilities as an asset,
and an equivalent deferred credit is included in the liability section.
The deferred credit is adjusted ("marked-to-market") to reflect the
current market value of the option.
Multiple-Class Methodology. The methodology for calculating the net
asset value, dividends and distributions of the Fund's Class A, Class B
and Class Y shares recognizes two types of expenses. General expenses
that do not pertain specifically to either class are allocated pro rata
to the shares of each class, based on the ratio of the net assets of such
class to the Fund's total net assets, and then equally to each outstanding
share within a given class. General expenses include (i) management fees,
(ii) legal, bookkeeping and audit fees, (iii) printing and mailing costs
of shareholder reports, Prospectuses, Additional Statements and other
materials for current shareholders, (iv) fees to 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 (a) Distribution and
Service Plan fees, (b) incremental transfer and shareholder servicing
agent fees and expenses, (c) registration fees, and (d) shareholder
meeting expenses, to the extent that such expenses pertain to a specific
class rather than to the Fund as a whole.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained under the 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. In the instances described in the Prospectus in which no sales
charge is imposed, that policy has been adopted because the Distributor,
dealer or broker incurs little or no selling expenses. The term
"immediate family" refers to one's spouse, children, grandchildren,
parents, grandparents, parents-in-law, brothers and sisters, brothers- and
sisters-in-law, and sons- and daughters-in-law.
Redemptions. Information on how to redeem shares of the Fund is stated
in the Prospectus. The Prospectus states that payment for shares tendered
for redemption is ordinarily made in cash. However, if the Board of
Trustees determines that it would be detrimental to the best interests of
the remaining shareholders of the Fund to make payment wholly in cash, the
Fund may pay the redemption proceeds in whole or in part by a distribution
in kind of securities from the portfolio of the Fund in lieu of cash, in
conformity with applicable Securities and Exchange Commission rules. 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 converting the assets to cash. The method of valuing securities used
to make redemptions in kind will be the same as the method of valuing
portfolio securities described above under "Determination of Net Asset
Value Per Share," and such valuation will be made as of the same time the
redemption price is determined.
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 such shares (taken at cost or value as determined by the Board)
is less than $500 or such lesser amount as the Board may decide. The
Board of Trustees will not cause the involuntary redemption of shares in
an account if the aggregate net asset value of such shares has fallen
below the stated minimum solely as a result of market fluctuations.
Should the Board elect to exercise this right, it may also fix, in
accordance with the Investment Company Act, the requirements for any
notice to be given to the shareholders in question (not less than 30
days), or may set requirements for permission to allow the shareholder to
increase the investment so that the shares would not be involuntarily
redeemed.
Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a check submitted to purchase shares 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 difference in net asset
value times 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 the amount by redeeming shares from any account registered
in that investor's name or the Distributor may seek other redress.
Transfers of Shares. Shareholders owning shares of both Class A and
Class B must specify whether they intend to transfer Class A or Class B
shares. Shares are not subject to the payment of a CDSC of either class
at the time of transfer (by absolute assignment, gift or bequest, not
involving, directly or indirectly, a public sale). The transferred shares
will remain subject to the CDSC, 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 not all shares in the account
would be subject to a CDSC if redeemed at the time of transfer, then
shares will be transferred in the order described in "How to Buy Shares -
Class B Contingent Deferred Sales Charge" in the Prospectus for the
imposition of the Class B CDSC on redemptions.
Exchanges of Class B and Class Y Shares. As stated in the
Prospectus, shares of a particular class of Eligible Funds having more
than one class of shares may be exchanged only for shares of the same
class or another eligible Fund. all of the Eligible Funds offer Class A
shares but only certain Eligible Funds offer Class B and Class Y shares.
The following other Eligible Funds offer Class B shares:
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Investment Grade Bond Fund
Oppenheimer Value Stock Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Government Securities Fund
Oppenheimer High Yield Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Cash Reserves
Oppenheimer Special Fund
Oppenheimer Equity Income Fund
Oppenheimer Global Fund
Oppenheimer Discovery Fund
Oppenheimer Main Street California Tax-Exempt Fund
The following other Eligible Funds offer Class Y shares:
Oppenheimer Special Fund
Oppenheimer Total Return Fund, Inc.
DISTRIBUTION AND SERVICE PLANS
The Fund has adopted a Service Plan (the "Plan") under Rule 12b-1 of
the Investment Company Act, pursuant to which the Fund will reimburse the
Distributor quarterly for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of that
class, as described in the Prospectus. No such Plan has been adopted for
Class Y shares. Each Plan has been approved by a vote of (i) the Board
of Trustees of the Fund, including a majority of the "Independent
Trustees" (trustees 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 Plans or in any agreements relating to
the Plans), cast in person at a meeting called for the purpose of voting
on the Plans, and (ii) the holders of a "majority" (as defined in the
Investment Company Act) of the Fund's shares of such class (such vote on
the Class B plan was cast by the Manager as the sole initial shareholder).
In approving each Plan, the board determined that it is likely that the
Plan will benefit the shareholders of the respective class of the
Fund.
Under the Plans, no payments will be made to any Recipient if the
value of all Fund shares held by it or its customers at the end of a
calendar quarter is less than the minimum amount, if any, set from time
to time by a majority of those Trustees who are not "interested persons"
(as defined in the Investment Company Act) and have no direct or indirect
financial interest in the operation of the Plan or in any agreements
relating to the Plan (the "Independent Trustees"). For the fiscal year
ended September 30, 1993, payments under the Class A Plan totalled
$1,084,511, of which $51,898 was paid to an affiliate of the Distributor,
as reimbursement for service-related expenses.
Each Plan, unless terminated as described below, shall continue in
effect from year to year, but only so long as such continuance is
specifically approved at least annually by the vote of the Fund's Board
of Trustees and its Independent Trustees cast in person at a meeting
called for the purpose of voting on such continuance. Either Plan may be
terminated at any time by the vote of a majority of the Independent
Trustees or by the vote of the holders of a "majority" (as defined in the
Investment Company Act) of the Fund's outstanding shares of the respective
class. Neither Plan may be amended to increase materially the amount of
payments to be made without shareholder approval, as set forth above, to
increase materially the amount of payments to be made, unless such
amendment is approved by shareholders of the Class affected by the
amendment, and all material amendments must be approved by the Board and
the Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall
provide a written report to the Fund's Board of Trustees at least
quarterly on the amount of all payments made pursuant to the Plan, the
identity of each Recipient of each such payment, and the purpose of the
payments. The report for the Class B Plan shall also include the
distribution costs for that quarter, and such costs for previous fiscal
periods that are carried forward, as explained below. Those reports,
including the allocations on which they are based, will be subject to the
review and approval of the Independent Trustees in the exercise of their
fiduciary duty. Each Plan further provides that while it is in effect,
the selection and nomination of those Trustees of the Fund who are not
"interested persons" of the Fund is committed to the discretion of the
Independent Trustees. This does not prevent the involvement of others in
such selection and nomination if the final decision as to any such
selection or nomination is approved by a majority of such Independent
Trustees.
The Glass-Steagall Act and other applicable laws and regulations,
among other things, generally prohibit Federally-chartered or supervised
banks from engaging in the business of underwriting, selling or
distributing securities as principals. Accordingly, the Distributor may
pay banks only for sales made on an agency basis or for performance of
administrative and shareholder servicing functions under the Plan. It is
the understanding of the Manager and the Distributor that the Glass-
Steagall Act and other applicable laws and regulations do not prohibit
banks and other financial institutions from providing services required
of a Recipient. However, judicial or administrative decisions or
interpretations of such laws, as well as changes in either Federal or
state statutes or regulations relating to the permissible activities of
banks or their subsidiaries or affiliates, could prevent certain banks
from continuing to perform all or a part of these services. If a bank
were so prohibited, shareholders of the Fund who were clients of such bank
would be permitted to remain as shareholders, and if a bank could no
longer provide those service functions, alternate means for continuing the
servicing of such shareholders would be sought. In such event,
shareholders serviced by such bank might no longer be able to avail
themselves of any automatic investment or other services then being
provided by such bank. The Fund's Board of Trustees will consider
appropriate modifications to the Fund's operations, including
discontinuance of payments under the Plan to such institutions, in the
event of any future change in such laws or regulations which may adversely
affect the ability of such institutions to provide these services. It is
not expected that shareholders would suffer any adverse financial
consequences as a result of any of those occurrences. In addition,
certain banks and financial institutions may be required to register as
dealers under state law.
PERFORMANCE, DIVIDEND AND TAX INFORMATION
Performance Information. As described in the Prospectus, from time to
time the "average annual total return," "total return," and "total return
at net asset value" of an investment in shares of each Class of the Fund
may be advertised. An explanation of how average annual total return,
total return at net asset value and total return are calculated and the
components of those calculations is set forth below. No yields or returns
are presented for Class B or Class Y shares because no shares of either
class were available during the Fund's fiscal year ended September 30,
1993. Class B shares and Class Y shares of the Fund were not offered
prior to April 1, 1994.
The "average annual total return" of each class of the Fund is an
average annual compounded rate of return. It is the rate of return based
on factors which include a hypothetical investment of $1,000 ("P" in the
formula below) held for a number of years ("n") with an Ending Redeemable
Value ("ERV") of that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
The "total return" uses the same factors, but does not average the
rate of return on an annual basis. Total return measures the cumulative
(rather than average) change in value of a hypothetical investment over
a stated period. Total return is determined as follows:
ERV-P
----- = Total Return
P
The formulas for average annual total return and for total return for
Class A shares assume the payment of the Fund's current maximum sales
charge of 5.75% (as a percentage of the offering price) on the initial
investment ("P"). The formulas for Class B shares assume the payment of
the contingent deferred sales charge of 5% for the first year, 4% for the
second year, 3% for the third and fourth year, 2% for the fifth year, 1%
for the sixth year and none thereafter, applied as described in "How To
Buy Shares" in the Prospectus. The formulas also assume that all
dividends and capital gains distributions during the period are reinvested
at net asset value per share, and that the investment is redeemed at the
end of the period. The "average annual total returns" on an investment
in Class A shares of the Fund (using the method described above) for the
one-year period and five-year periods ended September 30, 1993, and from
the Fund's inception (September 11, 1986) to September 30, 1993, were
36.15%, 20.78% and 19.89%, respectively. The "total return" from
inception to September 30, 1993, was 259.55%.
From time to time the Fund may also quote a "total return at net
asset value" to describe the rate of return on an investment in Class A,
Class B or Class Y shares of the Fund. It is based on the difference in
net asset values per share at the beginning and the end of the period
(without considering sales charge) and takes into consideration the
reinvestment of dividends and capital gains (as with total return,
described above). The Fund's total return at net asset value on Class a
shares for the year ended September 30, 1993, was 44.46%.
Total return information may be useful to investors in reviewing the
Fund's performance. However, certain factors should be considered before
using such information as a basis for comparison with other investments.
No adjustment is made for taxes payable on distributions. An investment
Class A, Class B or Class Y shares of the Fund is not insured; its total
return is not guaranteed and will fluctuate over time. Performance for
any given past period is not an indication or representation by the Fund
of future rates of return on its shares. The total return of the Fund's
Class A, Class B or Class Y shares of the Fund is affected by portfolio
quality, portfolio maturity, type of investments held and operating
expenses. When comparing the total return of the Fund's Class A, Class
B or Class Y shares with those of other investment instruments, investors
should understand that certain other investment alternatives such as money
market instruments, certificates of deposit, U.S. government securities
or bank accounts provide a return which remains relatively constant over
time, and also that bank accounts may be insured. Investors should also
understand, when comparing the Fund's total return and risk to capital
with that of other investment alternatives, that since the Fund is an
equity fund seeking capital appreciation, its shares are subject to
greater market risks than shares of funds having other investment
objectives.
The total return on an investment made in Class A, Class b or Class
Y shares of the Fund may be compared with performance for the same period
of the NASDAQ Composite Index of over-the-counter securities, the Standard
& Poor's 500 Index ("S&P 500") or the New York Stock Exchange Index, which
are widely-recognized indices of stock performance. Such indices consist
of unmanaged groups of common stocks. The NASDAQ Composite Index includes
the reinvestment of income dividends; the other two indices do not. None
of those indices takes sales charges or taxes into consideration, as these
items are not applicable to indices.
From time to time the Fund may publish the ranking of the performance
of its Class a, Class B or Class Y shares by Lipper Analytical Services,
Inc. ("Lipper"), a widely-recognized independent service, which 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 is ranked against
(i) all other funds, other than money market funds, (ii) all other growth
funds, and (iii) all other growth funds in a specific size category. The
Lipper performance analysis includes the reinvestment of capital gains
distributions and income dividends but does not take sales charges or
taxes into consideration.
From time to time the Fund may publish the ranking of the performance
of its Class A, Class B or Class Y shares by Morningstar, Inc., an
independent mutual fund monitoring service that ranks various mutual
funds, including the Fund, by a quantitative system based upon the fund's
three, five and ten-year average annual total returns (when available) and
a risk factor that reflects fund performance relative to three-month U.S.
Treasury bill monthly returns. Such returns are adjusted for fees and
sales loads. The ratings represent a fund's historical risk/reward ratio
relative to other funds in its class. There are five ranking categories
with a corresponding number of stars: highest (5), above average (4),
neutral (3), below average (2) and lowest (1). Morningstar ranks the
Fund's performance against all other small company equity funds.
Tax Status of the Fund's Dividends and Distributions. The Federal tax
treatment of the Fund's dividends and distributions is explained in the
Prospectus under the caption "Dividends, Distributions and Taxes."
Special provisions of the Internal Revenue Code govern the eligibility of
the Fund's dividends for the dividends-received deduction for corporate
shareholders. Long-term capital gains distributions are not eligible for
the deduction. In addition, the amount of dividends paid by the Fund
which may qualify for the deduction is limited to the aggregate amount of
qualifying dividends (generally dividends from domestic corporations) that
the Fund derives from its portfolio investments held for a minimum
period, usually 46 days. A corporate shareholder will not be eligible for
the deduction on dividends paid on shares held by the shareholder for 45
days or less. To the extent the Fund's dividends are derived from gross
income from option premiums, interest income or short-term capital gains
from the sale of securities, or dividends from foreign corporations, its
dividends will not qualify for the 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
from November 1 of the prior year through October 31 of that year, or
else the Fund must pay an excise tax on the amounts not distributed.
While it is presently anticipated that the Fund will meet those
requirements, the Fund's Board and the Manager might determine in a
particular year that it would be in the best interest of the Fund not to
make such distributions at the required levels and to pay the excise tax,
which would reduce the amount available for distribution to shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect
to reinvest all dividends and/or distributions from the Fund in shares of
the same class of any of the funds listed in the Prospectus as "Eligible
Funds," at net asset value without sales charge. Class B and Class Y
shareholders should be aware that, as of the date of this Additional
Statement, not all Eligible Funds offer Class B or Class Y shares. For
a list of the other Eligible Funds currently offering Class B and/or Class
Y shares, see "Purchase, Redemption and Pricing of Shares," above.
To elect this option, a shareholder must notify the Transfer Agent
in writing, and either must have an existing account in the fund selected
for reinvestment or must obtain a prospectus for that fund and application
from the Distributor to establish an account. The investment will be made
at net asset value per share in effect at the close of business on the
payable date of the dividend or distribution. Dividends and distributions
from other Eligible Funds may be invested in shares of either class of the
Fund on the same basis.
ADDITIONAL INFORMATION
Description of the Fund. 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 a 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 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 itself would be unable to meet the
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.
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
1% or more of the Fund's outstanding shares, whichever is less, 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 in Section 16(c) of the Investment
Company Act.
The Custodian and the Transfer Agent. 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 portfolio securities to and from the Fund. The Manager
has represented to the Fund that its banking relationships with 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.
Oppenheimer Shareholder Services, as transfer agent, is responsible
for maintaining the Fund's shareholder registry and shareholder accounting
records, and for shareholder servicing and administrative functions.
General Distributor's Agreement. Under the Distribution Agreement between
the Fund and the Distributor, the Distributor acts as the Fund's principal
underwriter in the continuous public offering of the Fund's Class A, Class
B and Class Y shares but is not required to sell a specific number of
shares. Expenses normally attributable to sales (other than those paid
under the Distribution Plan), including advertising and the cost of
printing and mailing prospectuses (other than those furnished to existing
shareholders), are borne by the Distributor. During the Fund's fiscal
years ended September 30, 1991, 1992 and 1993, the aggregate amount of
sales charges on sales of the Fund's Class A shares was $878,863,
$6,058,199 and $6,534,429, respectively, of which the Distributor and an
affiliated broker-dealer retained in the aggregate $195,661, $1,723,084
and $1,751,688 in those respective years. Class B and Class Y shares were
not available for sale prior to April 1, 1994.
Independent Auditors. The independent auditors of the Fund examine the
Fund's financial statements and perform other related audit services.
They also serve as auditors for certain other investment companies advised
by the Manager.
AUTOMATIC WITHDRAWAL PLAN PROVISIONS
By requesting an Automatic Withdrawal Plan, the Class A or Class B
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and elsewhere in the Application for such Plans, the
Prospectus and this Additional Statement as they may be amended from time
to time by the Fund and/or the Distributor. When adopted, such amendments
will automatically apply to existing Plans.
Fund shares will be redeemed as necessary to meet withdrawal
payments. Shares acquired without a sales charge will be redeemed first
and thereafter; shares acquired with reinvested dividends and
distributions followed by shares acquired with a sales charge will be
redeemed to the extent necessary to meet withdrawal payments. Depending
upon the amount withdrawn, the investor's principal may be depleted.
Payments made to shareholders under such plans should not be considered
a yield or income on an investment. Purchases of additional shares
concurrently with withdrawals are undesirable because of sales charges on
purchases. Accordingly, a shareholder may not maintain an Automatic
Withdrawal Plan while simultaneously making regular purchases.
1. Oppenheimer Shareholder Services, the Transfer Agent of the
Fund, will administer the Automatic Withdrawal Plan (the "Plan") as agent
for the person (the "Planholder") who executed the Plan authorization and
application submitted to the Transfer Agent.
2. 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 now held by the 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. Those
shares will be carried on the Planholder's Plan Statement.
3. 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 may be paid in cash or reinvested.
4. Redemptions of shares in connection with disbursement payments
will be made at the net asset value per share determined on the redemption
date.
5. Checks or ACH payments will be transmitted three business days
prior to the date selected for receipt of the monthly or quarterly payment
(the date of receipt is approximate), according to the choice specified
in writing by the Planholder.
6. The amount and the interval of disbursement payments and the
address to which checks are to be mailed may be changed at any time by the
Planholder on written notification to the Transfer Agent. The Planholder
should allow at least two weeks' time in mailing such notification before
the required change can be put in effect.
7. 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 such 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 of such redemption to the Planholder.
8. The Plan may, at any time, be terminated by the Planholder on
written notice to the Transfer Agent, or by the Transfer Agent upon
receiving directions to that effect from the Fund. the Transfer Agent
will also terminate the Plan upon receipt of evidence satisfactory to it
of the death or legal incapacity of the Planholder. Upon termination of
the Plan by the Transfer Agent or the Fund, shares remaining unredeemed
will be held in an uncertificated account 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, his executor or guardian, or as otherwise appropriate.
9. For purposes of using shares held under the Plan as collateral,
the Planholder may request issuance of a portion of his shares in
certificated form. Upon written request from the Planholder, the Transfer
Agent will determine the number of shares as to which a certificate may
be issued, so as not to cause the withdrawal checks to stop because of
exhaustion of uncertificated shares needed to continue payments. Should
such uncertificated shares become exhausted, Plan withdrawals will
terminate.
10. The Transfer Agent shall incur no liability to the Planholder
for any action taken or omitted by the Transfer Agent in good faith.
11. In the event that the Transfer Agent shall cease to act as
transfer agent for the Fund, the Planholder will be deemed to have
appointed any successor transfer agent to act as his agent in
administering the Plan.
LETTERS OF INTENT
In submitting a Letter of Intent ("Letter") to purchase shares of the
Fund and other OppenheimerFunds at a reduced sales charge, the investor
agrees to the terms of the Prospectus, the Application used to buy such
shares and the language in this Additional Statement as to Letters of
Intent, as they may be amended from time to time by the Fund. Such
amendments will apply automatically to existing Letters of Intent.
A Letter is the investor's statement of intention to purchase Class
A shares of the Fund (and other eligible OppenheimerFunds sold with a
sales charge) during the 13-month period from the investor's first
purchase pursuant to the Letter (the "Letter of Intent period"), which
may, at the investor's request, include purchases made up to 90 days prior
to the date of the Letter. The investor states the intention to make the
aggregate amount of purchases (excluding any reinvestments of dividends
or distributions or purchases made at net asset value without sales
charge), which together with the investor's holdings of such funds
(calculated at their respective public offering prices calculated on the
date of the Letter) will equal or exceed the amount specified in the
Letter to obtain the reduced sales charge rate (as set forth in "How to
Buy Shares" in the Prospectus) applicable to purchases of shares in that
amount (the "intended amount"). Each purchase under the Letter will be
made at the public offering price applicable to a single lump-sum purchase
of shares in the intended amount, as described in the applicable
prospectus.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of such fund shares on the last day of that period,
do not equal or exceed the intended amount, the investor agrees to pay the
additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow," below, as those terms may be amended from time
to time. The investor agrees that shares equal in value to 5% of the
intended amount will be held in escrow by the Fund's transfer agent
subject to the Terms of Escrow.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended amount, the commissions
previously paid to the dealer of record for the account and the amount of
sales charge retained by the Distributor will be adjusted to the rates
applicable to actual total purchases. If total eligible purchases during
the Letter of Intent period exceed the intended amount and exceed the
amount needed to qualify for the next sales charge rate reduction set
forth in the applicable prospectus, the sales charges paid will be
adjusted to the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid to the
dealer over the amount of commissions that apply to the actual amount of
purchases. The excess commissions returned to the Distributor will be
used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly
after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to refer to the Letter in placing any
purchase orders for the investor during the Letter of Intent period. All
of such purchases must be made through the Distributor.
Terms of Escrow
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in value
to 5% of the intended amount specified in the Letter shall be held in
escrow by the Fund's transfer agent. For example, if the intended amount
specified under the Letter is $50,000, the escrow shall be shares valued
in the amount of $2,500 (computed at the public offering price adjusted
for a $50,000 purchase). Any dividends and capital gains distributions
on the escrowed shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended amount
specified in the Letter, the investor must remit to the Distributor an
amount equal to the difference between the dollar amount of sales charges
actually paid and the amount of sales charges which would have been paid
if the total amount purchased had been made at a single time. Such sales
charge adjustment will apply to any shares redeemed prior to the
completion of the Letter. If such difference in sales charges is not paid
within twenty days after a request from the Distributor or the dealer,
the Distributor will, within sixty days of the expiration of the Letter,
redeem the number of escrowed shares necessary to realize such difference
in sales charges. Full and fractional shares remaining after such
redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the transfer agent his attorney-in-fact to surrender for
redemption any or all escrowed shares on the books of the Fund.
5. The funds whose shares are eligible for purchase under the
Letter (or the holding of which may be counted toward completion of the
Letter) do not include any fund whose shares are sold without a front-end
sales charge or without being subject to a Class A contingent deferred
sales charge unless (for the purpose of determining completion of the
obligation to purchase shares under the Letter) the shares were acquired
in exchange for shares of a fund (described as an "Eligible Fund" in the
Prospectus) whose shares were acquired by payment of a sales charge.
6. Shares held in escrow hereunder will automatically be exchanged
for shares of another fund to which an exchange is requested, as described
in the section of the Prospectus entitled "Exchange Privilege," and the
escrow will be transferred to that other fund.
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
48 Wall Street
New York, New York 10286
Independent Auditors
KPMG Peat Marwick
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 DISCOVERY FUND
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Financial Highlights from September 11, 1986 (commencement
of operations) thorough 9/30/93 (see Part A): To be filed by
Amendment.
(2) Independent Auditors' Report (see Part B): To be filed by
Amendment.
(3) Statement of Investments at 9/30/93 (see Part B): To be
filed by Amendment.
(4) Statement of Assets and Liabilities at 9/30/93 (see Part
B): To be filed by Amendment.
(5) Statement of Operations for the year ended 9/30/93 (see
Part B): To be filed by Amendment.
(6) Statement of Changes in Net Assets for the years ended
9/30/92 and 9/30/93 (see Part B): To be filed by Amendment.
(7) Notes to Financial Statements (see Part B): To be filed by
Amendment.
(b) Exhibits:
(1) Amended and Restated Declaration of Trust made as of
________, 1994: To be filed by Amendment.
(2) By-Laws amended as of 6/1/92: Filed with Registrant's
Post-Effective Amendment No. 12, 11/22/93, and
incorporated herein by reference. (P)
(3) Inapplicable.
(4) Specimen Share Certificate: Filed with Registrant's Post-
Effective Amendment No. 12, 11/22/93, and incorporated
herein by reference. (P)
(5) Investment Advisory Agreement dated June 1, 1992: Filed
with Registrant's Post-Effective Amendment No. 11,
1/28/93, and incorporated herein by reference.
(6) (i) General Distributor's Agreement dated December 10,
1992: Filed with Registrant's Post-Effective
Amendment No. 11, 1/28/93, and incorporated herein
by reference. (P)
(ii) Prototype Oppenheimer Fund Management, Inc. Dealer
Agreement: Filed with Post-Effective Amendment No.
12 of Oppenheimer Government Securities Fund (Reg.
No. 33-02769), 12/2/92, and incorporated herein by
reference. (P)
(iii) Prototype Oppenheimer Fund Management, Inc. Broker
Agreement: Filed with Post-Effective Amendment No.
12 of Oppenheimer Government Securities Fund (Reg.
No. 33-02769), 12/2/92, and incorporated by
reference. (P)
(iv) Prototype Oppenheimer Fund Management, Inc. Agency
Agreement: Filed with Post-Effective Amendment No.
12 of Oppenheimer Government Securities Fund (Reg.
No. 33-02769), 12/21/92, and incorporated herein by
reference. (P)
(v) Broker Agreement between Oppenheimer Fund
Management, Inc. and Newbridge Securities, Inc.
dated 10/1/86: Filed with Post-Effective Amendment
No. 25 of Oppenheimer Special Fund (Reg. No. 2-
45272), 11/1/86, and incorporated herein by
reference. (P)
(7) Retirement Plan for Non-Interested Trustees, June 7, 1990:
Filed with Post-Effective Amendment No. 34 to the
Registration Statement of Oppenheimer Special Fund (File
No. 2-45272) August 31, 1990, and incorporated herein by
reference. (P)
(8) Custody Agreement dated 6/10/92: Filed with Registrant's
Post-Effective Amendment No. 10, 12/3/92, and incorporated
herein by reference. (P)
(9) Inapplicable.
(10) Opinion and Consent of Counsel dated 8/1/86: Filed with
Registrant's Post-Effective Amendment No. 3, 1/27/88, and
incorporated herein by reference. (P)
(11) Independent Auditors' Consent: To be filed by
Amendment.
(12) Inapplicable.
(13) Investment Letter from Oppenheimer Management Corporation
to Registrant dated 8/15/86: Filed with Registrant's Post-
Effective Amendment No. 5, 12/1/89, and incorporated
herein by reference.
(14) (i) Form of Individual Retirement Account Plan (IRA)
Agreement: Previously filed with Post-Effective
Amendment No. 21 to the Registration Statement of
Oppenheimer U.S. Government Trust (File No.
2-76645), 8/25/93, and incorporated herein by
reference. (P)
(ii) Form of prototype Standardized and Non-Standardized
Profit-Sharing Plan for self-employed persons and
corporations: Filed with Post-Effective Amendment
No. 3 of Oppenheimer Global Growth & Income Fund
(File No. 33-33799), 1/30/92, and incorporated
herein reference. (P)
(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. 22 of Oppenheimer Directors
Fund (File No. 2-62240), 2/1/90, and incorporated
herein by reference. (P)
(iv) Form of Simplified Employee Pension IRA: Previously
filed with Post-Effective Amendment No. 36 of
Oppenheimer Equity Income Fund (File No. 2-33043),
10/23/91, and incorporated herein by
reference. (P)
(15) Service Plan and Agreement dated 6/10/93 under Rule 12b-1
of the Investment Company Act of 1940: Filed with
Registrant's Post-Effective Amendment No. 13, 1/20/94, and
incorporated herein by reference. (CE)
(16) Performance Calculations: Filed with Registrant's Post-
Effective Amendment No. 13, 1/20/94, and incorporated
herein by reference. (CE)
-- Powers of Attorney: Filed with Registrant's Post-Effective
Amendment No. 12, 11/22/93, and incorporated herein by
reference. (CE)
Item 25. Persons Controlled by or under Common Control with Registrant
None
Item 26. Number of Holders of Securities
Number of
Record Holders as
Title of Class of December 31, 1993
Shares of Beneficial Interest 75,609
Item 27. Indemnification
Reference is made to parts (c) through (g) of Section 7(c) of Article
SEVENTH of Registrant's Declaration of Trust.
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) Oppenheimer Management Corporation 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 hereto.
(b) For information as to the business, profession, vocation or
employment of a substantial nature of each of the directors and
principal executive officers of Oppenheimer Management
Corporation, reference is made to Part B of this Registration
Statement and to the registration on Form ADV filed by
Oppenheimer Management Corporation under the Investment Advisers
Act of 1940, which is incorporated herein by reference.
Item 29. Principal Underwriter
(a) Oppenheimer Funds Distributor, Inc. is the Distributor of
Registrant's shares. It is also the general distributor of
certain of the other open-end investment companies for which
Oppenheimer Management Corporation is the investment adviser,
as described in Parts A and B of this Registration Statement.
(b) The information contained in the registration on Form BD of
Oppenheimer Funds Distributor, Inc., filed under the Securities
Exchange Act of 1934, is incorporated herein by reference.
(c) Inapplicable.
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 and
rules promulgated thereunder are in possession of Oppenheimer Management
Corporation at its offices at 3410 South Galena Street, Denver, Colorado
80231.
Item 31. Management Services
Inapplicable.
Item 32. Undertakings
(a) Inapplicable.
(b) Inapplicable.
(c) Inapplicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York
on the 28th day of January, 1994.
OPPENHEIMER DISCOVERY FUND
By: /s/ Donald W. Spiro*
---------------------------
Donald W. Spiro, President
Attest:
/s/ Andrew J. Donohue*
- ----------------------------
Andrew J. Donohue, Secretary
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 January 28, 1994
Leon Levy
/s/ Donald W. Spiro* President, Principal
- -------------------- Executive Officer
Donald W. Spiro and Trustee January 28, 1994
/s/ George Bowen* Treasurer and
- ----------------- Principal Financial
George Bowen and Accounting
Officer January 28, 1994
/s/ Leo Cherne* Trustee January 28, 1994
- ---------------
Leo Cherne
/s/ Edmund T. Delaney* Trustee January 28, 1994
- ----------------------
Edmund T. Delaney
/s/ Robert G. Galli* Trustee January 28, 1994
- -------------------
Robert G. Galli
/s/ Benjamin Lipstein* Trustee January 28, 1994
- ----------------------
Benjamin Lipstein
/s/ Kenneth A. Randall* Trustee January 28, 1994
- -----------------------
Kenneth A. Randall
/s/ Sidney M. Robbins* Trustee January 28, 1994
- ----------------------
Sidney M. Robbins
/s/ Russell S. Reynolds, Jr.* Trustee January 28, 1994
- -----------------------------
Russell S. Reynolds, Jr.
/s/ Pauline Trigere* Trustee January 28, 1994
- --------------------
Pauline Trigere
/s/ Elizabeth B. Moynihan* Trustee January 28, 1994
- --------------------------
Elizabeth B. Moynihan
/s/ Clayton K. Yeutter* Trustee January 28, 1994
- -----------------------
Clayton K. Yeutter
/s/ Edward V. Regan* Trustee January 28, 1994
- --------------------
Edward V. Regan
*By: /s/ Robert G. Zack
- --------------------------------
Robert G. Zack, Attorney-in-Fact
