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. 13 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
AMENDMENT NO. 15 / X /
OPPENHEIMER DISCOVERY FUND
--------------------------------
(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
-------------------------------------------------
(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)
/ X / On January 20, 1994, pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / On ___________________ pursuant to paragraph (a)
of Rule 485
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; Service Plan
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;
Service Plan; 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."
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
January 20, 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 January 20, 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
Minimum Investment
Sales Charge Table
Contingent Deferred Sales Charge
AccountLink
PhoneLink
Reduced Sales Charges
Right of Accumulation
Letter of Intent
Other Circumstances
Asset Builder Plans
Service Plan
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
Maximum Sales Charge on Purchases
(as a percentage of offering price) 5.75%
Sales Charge on Reinvested Dividends None
Redemption Fee None
Deferred Sales Load None*
Exchange Fee $5.00
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees .73%
12b-1 (Service Plan) Fees .24%
Other Expenses .30%
--------
Total Fund Operating Expenses 1.27%
- ----------------------------
* Certain 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 "Contingent Deferred Sales Charge," below.
The purpose of this table is to assist an investor in understanding
the various costs and expenses that an investor in the Fund will bear
directly (shareholder transaction expenses) or indirectly (annual fund
operating expenses). The sales charge rate in the table is the current
maximum rate applicable to purchases of Fund shares. Investors 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"). "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 the Fund's Financial
Statements included in the Additional Statement.
The following example applies the above-stated expenses and the
current maximum sales charge 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 and also assuming that the shares are redeemed
at the end of each stated period. The amounts shown below are the
cumulative costs of such hypothetical $1,000 investment for the periods
shown.
1 year 3 years 5 years 10 years
- ------ -------- -------- ---------
$70 $95 $123 $202
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 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.
Financial Highlights
<TABLE>
<CAPTION>
Year Ended September 30,
1993 1992+ 1991 1990 1989 1988 1987 1986++
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $ 27.62 $ 26.03 $ 17.97 $ 24.51 $ 17.62 $ 21.49 $ 14.21 $14.29
Income (loss) from investment operations:
Net investment income (loss) (.13) (.17) .06 .16 .29 .14 .02 .02
Net realized and unrealized gain (loss)
on investments and options written 12.41 3.05 8.87 (4.84) 6.74 (1.98) 7.28 (.10)
Total income (loss) from
investment operations 12.28 2.88 8.93 (4.68) 7.03 (1.84) 7.30 (.08)
Dividends and distributions to shareholders:
Dividends from net investment income -- -- (.19) (.30) (.14) (.05) (.02) --
Distributions from net realized gain on
investments and options written -- (1.29) (.68) (1.56) -- (1.98) -- --
Total dividends and
distributions to shareholders -- (1.29) (.87) (1.86) (.14) (2.03) (.02) --
Net asset value, end of period $ 39.90 $ 27.62 $ 26.03 $ 17.97 $ 24.51 $ 17.62 $ 21.49 $14.21
Total Return,
at Net Asset Value** 44.46% 11.28% 51.88% (20.34)% 40.23% (7.11)% 51.08% (.56)%
Ratios/Supplemental Data:
Net assets, end of
period (in thousands) $587,057 $294,010 $117,110 $50,357 $53,793 $33,361 $35,834 $1,353
Average net assets
(in thousands) $451,016 $218,065 $ 75,083 $54,454 $40,641 $32,089 $21,439 $1,173
Number of shares outstanding
at end of period (in thousands) 14,713 10,647 4,499 2,802 2,195 1,894 1,667 95
Ratios to average net assets:
Net investment income (loss) (.54)% (.62)% .22% .83% 1.52% .80% .19% 3.55%*
Expenses 1.27 % 1.52 % 1.42% 1.53% 1.46% 1.52% 1.74% 1.50%*
Portfolio turnover rate*** 85.2 % 67.9 % 158.1% 234.6% 132.0% 169.0% 145.4% 0.0%
<FN>
</TABLE>
*Annualized.
**Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns.
***The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term
securities) for the year ended September 30, 1993 were $478,940,105
and $354,427,899, respectively.
+Per share amounts calculated based on the weighted average number of
shares
outstanding during the year.
++For the period from September 11, 1986 (commencement of operations) to
September 30, 1986.
<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
The Fund's shares may be purchased through any dealer or broker that
has a sales agreement with the Fund's distributor, Oppenheimer Funds
Distributor, Inc. (the "Distributor"), a subsidiary of the Manager. There
are two ways to make an initial investment: 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 act as the
dealer), or (2) order the shares through your dealer or broker.
The minimum initial investment 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 or (3)
automatically through Asset Builder Plans or by telephone using
AccountLink, described below. Under an Asset Builder Plan, 403(b)(7)
custodial plan, Automatic Exchange Plan, or military allotment 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 shares of the
Fund unless specifically requested in writing by a purchaser or the dealer
or broker.
Shares are sold at their offering price, which (as used in this
Prospectus and the Additional Statement) is net asset value per share plus
a sales charge, except that as to certain purchases described below that
are not subject to a front-end sales charge, the offering price is net
asset value. The offering price (and net asset value) 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"). Net asset value per share is determined by dividing the value of
the Fund's net assets by the number of shares outstanding. The Fund's
Board of Trustees has established procedures for the valuation of 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 under
"Purchase, Redemption and Pricing of Shares" in the Additional Statement.
The following table shows the regular sales charge rates for a
"single purchaser" (defined below in "Right of Accumulation"), together
with the dealer discounts paid to dealers and the agency commissions paid
to brokers (collectively, "commissions"):
- -------------------------------------------------------------------
Front-End
Front-End Sales Charge
Sales Charge as Approximate Commission as
as Percentage of Percentage of Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
- ------------------ --------------- ------------------- ----------------
Less than $25,000 5.75% 6.10% 4.75%
$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
$100,000 or more but
less than $250,000 3.75% 3.90% 3.00%
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
$1 million or more None* None* None*
- --------------------------------------------------------------------------
* See "Contingent Deferred Sales Charge," below.
The commissions shown in the table apply to sales through authorized
dealers and brokers. Under certain circumstances, commissions up to the
amount of the entire sales charge may be reallowed to dealers or brokers,
who then might be deemed to be "underwriters" under 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.
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" (defined below)
held by the dealer and/or its customers, or some combination thereof. If
a registered representative of a securities dealer sells more than $2.5
million of shares of "Eligible Funds" other than "Money Market Funds"
(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 as additional commission.
Dealers whose sales of Class A shares of "Eligible Funds" other than
"Money Market Funds" (defined below) under OppenheimerFunds - sponsored
403(b)(7) custodial plans (which must be held in accounts registered in
the name of a custodian for such plans) exceed a rate of $5 million per
year, calculated per calendar quarter, will receive monthly one-half of
the Distributor's retained commission on such sales. Dealers whose sales
of such plans exceed a rate of $10 million per year, calculated per
calendar quarter, will receive the Distributor's entire retained
commission on such sales; such dealers also may be deemed to be
"underwriters" as described above.
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 it
judges it in the best interest of the Fund to do so.
Contingent Deferred Sales Charge
On purchases of all "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 amounts in excess of $5 million. A contingent deferred
sales charge ("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 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 CDSC paid
on such shares shall not exceed the aggregate commissions paid to dealers
on all shares of "Eligible Funds" purchased subject to a CDSC by that
"single purchaser."
The CDSC does not apply to purchases at net asset value described in
"Other Circumstances" and will be waived in the case of redemptions of
shares made for: (i) retirement distributions (or loans) to participants
or beneficiaries from retirement plans qualified under Section 401(a) of
the Internal Revenue Code of 1986, as amended (the "Internal Revenue
Code"), or from Individual Retirement Accounts ("IRAs"), 403(b)(7) plans,
deferred compensation plans created under Section 457 of the Internal
Revenue Code or other employee benefit plans (collectively, "Retirement
Plans"); (ii) returns of excess contributions to such Retirement Plans;
(iii) Automatic Withdrawal Plan payments limited to no more than 12% of
the original account value annually; and (iv) involuntary redemptions of
shares by operation of law or under procedures set forth in the Fund's
Declaration of Trust or as adopted by the Board of Trustees (collectively,
"Involuntary Redemptions").
Some or all of the proceeds of redeemed shares on which a CDSC was paid
on redemption and which are subsequently reinvested under the
"Reinvestment Privilege" (described below) may be reinvested within 6
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 CDSC is charged on exchanges,
pursuant to the Fund's Exchange Privilege (described below), of shares
purchased subject to a CDSC, except that if the 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 CDSC will apply. In
determining whether a CDSC is payable, and the amount of any such CDSC,
shares not subject to 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.
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 Automated Clearing House ("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. To initiate such
purchases automatically using PhoneLink, call 1-800-533-3310. All such
calls will be recorded. 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. The Transfer Agent, the Fund and the
Distributor have adopted reasonable procedures to confirm that telephone
instructions under AccountLink and under PhoneLink, Telephone Redemptions
and Exchange Privilege (described below) are genuine, by requiring callers
to provide tax identification number(s) and other account data and by
recording 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 they
will not be liable for losses or expenses arising out of telephone
instructions reasonably believed to be genuine. 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 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).
Certain 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 and the
Distributor may rely on any instructions through PhoneLink initiated using
a PIN. The Distributor, the Transfer Agent, and the Fund will not be
responsible for any damages, losses or expenses arising out of such
instructions. The Fund reserves the right to amend, suspend or
discontinue PhoneLink privileges at any time without prior notice.
Reduced Sales Charges
The 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 Fund 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, 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 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 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 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.
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 "Account Link," 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
under Asset Builder Plans are subject to the redemption restrictions for
recent purchases described below 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 up to five other Eligible Funds.
There is a sales charge on the purchase of shares of certain of the
Eligible Funds, and an application should be obtained 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.
Service Plan
The Fund has adopted a service plan (the "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 Fund 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 Fund 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 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 Fund 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. The Board has not authorized payments to the Distributor under
(ii), above. The Distributor will pay each Recipient a quarterly fee for
its services at a rate not to exceed .0625% (0.25% annually) of the
average net asset value of Fund 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 Plan has the effect of increasing annual Fund expenses by up to
0.25% of its average annual net assets. In addition, the Manager and the
Distributor may, under the 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 "Service Plan" in the Additional Statement.
How To Redeem 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.
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 share purchases, shareholders should not
make regular additional purchases while participating in an Automatic
Withdrawal Plan. 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 purchase is $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 in 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
CDSC described above under "Contingent Deferred Sales Charge" may apply
to the proceeds of redemptions.
Exchanges Of Shares And Retirement Plans
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 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 subject to a
CDSC, except that if the 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 CDSC will apply (see "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.
- 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. 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 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. 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.
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 gain 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
Fund's "total return" 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 initial amount invested
assumes the payment of the Fund's current maximum sales charge. 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, 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.
Oppenheimer Discovery Fund, S&P 500 Index and Russell 2000 Index
Comparison of Change in Value of $10,000 Hypothetical Investment
Average Annual Total Return at 9/30/93
1 Year 5 Year Life of Fund*
36.15% 20.78% 19.89%
*Since September 11, 1986
[Chart comparing average annual total return of Oppenheimer Discovery
Fund to performance of the S&P 500 Index and to the Russell 2000 Index
since 9/30/86 (by fiscal years ending 9/30)]
Past performance is not predictive of future performance.
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 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.
Additional Information
Description of the Fund and Its Shares
Shares of the Fund are currently of one class, are transferable
without restriction and have equal rights and privileges. Each
shareholder of the Fund is entitled to one vote per share held (and a
fractional vote for each fractional share), and to participate pro rata
in dividends and distributions and in the net distributable assets of the
Fund on liquidation. When issued, such shares are fully-paid and (except
as described in "Additional Information" in the Additional Statement)
nonassessable, and have no preemptive, subscription or cumulative voting
rights. The Fund's Board of Trustees is empowered to issue additional
"series" of shares of the Fund, which may have separate assets and
liabilities, and additional "classes" of shares, which would represent
interests in the same portfolio of investments. The Fund has been granted
exemptive relief to permit it to offer two classes of shares, and on or
about April 1, 1994, it intends to offer a second class of shares, to be
denominated "Class B shares." At that time, the existing class of shares
shall be denominated "Class A shares." The Fund does not anticipate
holding annual meetings. Under certain circumstances, shareholders of the
Fund have the right to remove a Trustee and may be held personally liable
as "partners" for the Fund's obligations; however, the risk of a
shareholder incurring any financial loss is limited to the relatively
remote circumstances in which the Fund is unable to meet its obligations.
See "Additional Information" in the Additional Statement for more details.
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>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER DISCOVERY FUND
Graphic material included in Prospectus of Oppenheimer Discovery
Fund: "Comparison of Total Return of Oppenheimer Discovery Fund, the S&P
500 Index, and the Russell 2000 Index - Change in Value of a $10,000
Hypothetical Investment"
A linear graph will be included in the Prospectus of Oppenheimer
Discovery Fund (the "Fund") depicting the initial account value and
subsequent account value of a hypothetical $10,000 investment in the Fund
since September 30, 1986 to the end of each of the Fund's most recently
completed seven fiscal years and comparing such values with the same
investments over the same time periods in the S&P 500 Index and the
Russell 2000 Index. Set forth below are the relevant data points that
will appear on the linear graph. Additional information with respect to
the foregoing, including descriptions of the S&P 500 Index and the Russell
2000 Index, is set forth in the Prospectus under "Fund Performance
Information - Management's Discussion of Performance."
Fiscal Year Oppenheimer Russell
(Period) Ended Discovery Fund S&P 500 Index 2000 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
______________________
*For the period from September 11, 1986 (commencement of operations) to
September 30, 1986.
<PAGE>
Investment Adviser Prospectus
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
Oppenheimer Shareholder Services OPPENHEIMER
P.O. Box 5270 Discovery Fund
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
KPMG Peat Marwick
707 Seventeenth Street Effective January 20, 1994
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.
OPPENHEIMERFUNDS
PR500 (2/93) Printed on recycled paper
<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 January 20, 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
Service Plan
Performance, Dividend and Tax Information
Additional Information
Automatic Withdrawal Plan Provisions
Letters of Intent
Independent Auditors' Report
Financial Statements
This Additional Statement is effective January 20, 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 which has been designated a primary dealer in government securities
and which must meet the credit requirements set by the Fund's Board of
Trustees from time to time) 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 certain 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: (i) purchase Stock Index Futures, or (ii) purchase 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 9 months) at a fixed exercise price (which may
differ from the market price of the underlying investment), regardless of
market price changes during the call period. To terminate its obligation
on a call it has written, the Fund may purchase a corresponding call in
a "closing purchase transaction." A profit or loss will be realized,
depending upon whether the net of the amount of option transaction costs
and the premium received on the call 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 positions, 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 of 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 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 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 and the Freer Gallery of Art, Smithsonian Institution;
a member of the Indo-U.S. Subcommission on Education and Culture; a
trustee of the Institute of Fine Arts, New York University, and a trustee
of the Preservation League of New York State.
- --------------------
*A Trustee who is an "interested person" of the Funds as defined in the
Investment Company Act.
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 10018
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,
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 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 order positions were most
recently held) 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, and U. S. Trade Representative, Executive Office of the
President.
ANDREW J. DONOHUE, Secretary
Executive Vice President and General Counsel of the Manager and the
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); 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. (investment adviser).
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 Oppenheimer Asset Management Corp., a former investment advisory
subsidiary of the Manager.
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 value per share
of the Fund is 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 by the total number of Fund shares
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 Fund's offering price and net asset value
will not be calculated on those days, if foreign securities held in the
Fund's portfolio are traded on those days, the Fund's net asset value may
be significantly affected on such days, 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.
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.
SERVICE PLAN
The Fund has adopted a Service Plan (the "Plan") under Rule 12b-1 of
the Investment Company Act, described in the Prospectus. The Plan
provides that the Fund may make certain continuing payments to the
Distributor for a portion of its costs incurred in the distribution of the
Fund's shares. The 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 Plan or in any agreements relating to the Plan), cast in
person at a meeting called for the purpose of voting on the Plan, and (ii)
the holders of a "majority" (as defined in the Investment Company Act) of
the Fund's shares.
Under the Plan, 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 Plan totalled $1,084,511, of
which $51,898 was paid to an affiliate of the Distributor, as
reimbursement for service-related expenses.
The 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. The 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" of the Fund's
outstanding voting securities. The Plan may not be amended without
shareholder approval, as set forth above, to increase materially the
amount of payments to be made, and all material amendments must be
approved by the Board and the Independent Trustees.
While the Plan is 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 Plan
further provides that while it is in effect, the selection or replacement
and nomination of those Trustees of the Fund who are not "interested
persons" of the Fund is committed to the discretion of the Independent
Trustees. This does not prevent the involvement of others in such
selection and nomination if the final decision on 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
Total Return 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 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.
The Fund's "average annual total return" 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:
( ERV ) 1/n
(-----) -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
Both formulas 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"). They 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 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 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 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
in 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 Fund's total return is affected by portfolio quality,
portfolio maturity, type of investments held and operating expenses. When
comparing the Fund's total return with that 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 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 its shares'
performance 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 its shares'
performance 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
any of the funds listed in the Prospectus as "Eligible Funds," at net
asset value without sales charge. 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.
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 its 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 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.
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 applicant 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 to purchase shares of the Fund and
Class A shares of 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 of Intent ("Letter") is the investor's statement of
intention to purchase shares of the Fund (and Class A shares of 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 sales charge
(including 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>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of Oppenheimer Discovery Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer Discovery Fund as of September 30, 1993, and
the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year
period then ended and the financial highlights for each of the years in
the seven-year period then ended and the period from September 11, 1986
(commencement of operations) to September 30, 1986. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and financial highlights on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our
procedures included confirmation of securities owned as of September 30,
1993, by correspondence with the custodian and brokers; and where
confirmations were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Oppenheimer Discovery Fund as of September 30, 1993, the results of its
operations for the year then ended, the changes in its net assets for each
of the years in the two-year period then ended, and the financial
highlights for each of the years in the seven-year period then ended and
the period from September 11, 1986 (commencement of operations) to
September 30, 1986, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick
Denver, Colorado
October 21, 1993
<PAGE>
Statement of Investments September 30, 1993
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
<S> <C> <C>
Repurchase Agreements -- 9.0%
Repurchase agreement with First Chicago Capital Markets, $52,500,000 $52,500,000
3.375%, dated 9/30/93 and maturing 10/1/93, collateralized
by U.S. Treasury Nts., 6.875%, 3/31/97, with a value of
$53,577,814 (Cost $52,500,000)
Corporate Bonds and Notes -- 3.9%
IntelCom Group, Inc., 8% Cv. Sub. Debs., 9/24/98(1) 2,000,000 2,192,220
Lam Research Corp., 6% Cv. Sub. Debs., 5/1/03 2,925,000 3,175,000
Medaphis Corp., 6.50% Cv. Sub. Debs., 1/1/00 (1) 2,000,000 2,290,000
Physicians Clinical Laboratory, Inc., 7.50% Cv. Sub. Debs., 3,000,000 3,225,000
8/15/00(1)
RHI Entertainment, Inc., 6.50% Cv. Sub. Debs., 6/1/03 3,250,000 3,591,250
Solectron Corp., 0%, Liq. Yld. Opt. Sub. Nts., 5/5/12 4,101,600 6,990,000
United Gaming, Inc., 7.50% Cv. Sub. Debs., 9/15/03 (1) 1,500,000 1,500,000
Total Corporate Bonds and Notes (Cost $18,993,211) 22,963,470
Units
Rights, Warrants and Certificates --.0%
Tandon Computers Wts., Exp. 11/93* 1,091 --
Windmere Corp. Wts., Exp. 1/98* 238 --
Xoma Corp. Wts., Exp. 6/95* 6,914 3,457
Total Rights, Warrants and Certificates (Cost $1,729) 3,457
Shares
Common Stocks --88.0%
Basic Materials -- 1.1%
Chemicals-Specialty -- .7% BAREFOOT, INC.* 140,000 3,885,000
Metals-Miscellaneous -- .4% Custom Chrome, Inc.* 100,000 2,312,500
Consumer Cyclicals -- 30.5%
Auto Parts - Bailey Corp.* 120,000 1,545,000
After Market -- 1.2% O'Reilly Automotive, Inc.* 120,000 2,790,000
Stant Corp.* 150,000 2,662,500
6,997,500
Broadcast Media -- 1.3% All American Communications, Inc.* 114,000 1,083,000
EZ Communications, Inc.* 160,000 2,880,000
RHI Entertainment, Inc.* 85,500 1,506,937
Spectravison, Inc.* 200,000 2,250,000
7,719,937
Entertainment -- 5.4% Autotote Corp., Cl. A* 60,000 2,790,000
Boomtown, Inc.* 118,500 2,725,500
Evergreen Media Corp., Cl. A* 71,000 1,579,750
Hollywood Park, Inc.* 120,000 3,930,000
Jackpot Enterprises, Inc. 132,880 2,109,470
Monarch Casino & Resort, Inc.* 260,000 1,917,500
Players International, Inc.* 210,000 4,830,000
President Riverboat Casinos, Inc.* 70,500 3,128,438
Primadonna Resorts, Inc. 40,000 1,400,000
RIO HOTEL & CASINO, INC.* 120,000 2,205,000
Market Value
Shares See Note 1
Entertainment (continued) Samuel Goldwyn Co.* 100,000 $ 1,312,500
WMS Industries, Inc.* 150,000 4,031,250
31,959,408
Homebuilding -- .7% Redman Industries, Inc.* 78,000 1,238,250
Schuler Homes, Inc.* 120,000 2,880,000
4,118,250
Hotels/Motels -- .6% Hospitality Franchise Systems, Inc.* 80,000 3,710,000
Household Furnishings Berjaya Singar Bhd 1,500,000 3,211,046
and Appliances -- 1.5% Rhodes, Inc.* 182,000 2,684,500
Semi-Tech Ltd. 1,494,557 2,782,656
8,678,202
Leisure Time -- 1.5% Bally Gaming International, Inc.* 135,000 2,649,375
Funco, Inc.* 118,000 1,888,000
Showboat, Inc. 100,000 2,050,000
Sodak Gaming, Inc.* 45,000 1,406,250
Swing-N-Slide Corp.* 56,000 560,000
8,553,625
Publishing -- .7% Marvel Entertainment Group, Inc.* 90,000 3,982,500
Restaurants -- 4.2% Applebee's International, Inc. 200,000 4,450,000
Apple South, Inc. 435,000 8,700,000
DF & R Restaurants, Inc.* 95,000 2,042,500
Hamburger Hamlet Restaurants, Inc.* 28,000 210,000
Landry's Seafood Restaurants, Inc.* 100,000 2,025,000
Marcus Corp. (The) 110,000 2,777,500
Outback Steakhouse, Inc.* 120,000 4,410,000
24,615,000
Retail Stores - General Damark International, Inc.* 215,000 3,708,750
Merchandise Chains -- 1.6% Stein Mart, Inc.* 157,500 3,701,250
Value City Department Stores, Inc.* 100,000 1,662,500
9,072,500
Retail - Specialty -- 8.0% Barnes & Noble, Inc.* 51,000 1,421,625
Bed Bath & Beyond, Inc.* 160,000 5,200,000
CML Group, Inc. 300,000 8,662,500
Discount Auto Parts, Inc.* 90,000 2,126,250
General Nutrition Cos., Inc.* 135,000 6,682,500
Insurance Auto Auctions, Inc.* 147,500 5,678,750
Michaels Stores, Inc.* 76,500 2,677,500
Musicland Stores Corp.* 170,900 3,054,838
Nu-Kote Holding, Inc., Cl. A* 130,000 2,405,000
PetsMart, Inc.* 80,000 2,820,000
Retail - Specialty Rex Stores Corp.* 230,000 $ 5,146,250
(continued) Smart & Final, Inc. 109,500 1,519,312
47,394,525
Shoes -- 1.0% Baker (J.), Inc. 300,000 6,112,500
Textiles - Apparel Authentic Fitness Corp.* 100,000 2,725,000
Manufacturers -- 2.8% Chic by H.I.S., Inc.* 141,200 1,341,400
Mohawk Industries, Inc.* 120,000 3,660,000
Nautica Enterprises, Inc.* 145,000 4,060,000
Phillips-Van Heusen Corp. 140,000 4,497,500
16,283,900
Consumer Non-Cyclicals -- 13.6%
Drugs -- 3.1% Copley Pharmaceutical, Inc.* 105,000 4,856,250
Ethical Holdings Ltd., ADR* 320,000 3,040,000
LifeQuest Medical, Inc.(2)* 200,000 2,300,000
Nature's Bounty, Inc.* 272,500 4,836,875
Perrigo Co.* 109,000 3,379,000
18,412,125
Food Processing -- .4% Santilippo (John B.) & Son, Inc.* 150,000 2,512,500
Healthcare - Value Health, Inc.* 75,000 2,568,750
Diversified -- .4%
Healthcare - EMPI, Inc.* 146,100 4,328,212
Miscellaneous -- 5.9% Genentech, Inc.* 50,000 2,143,750
Genesis Health Ventures, Inc.* 125,000 2,312,500
Genetic Therapy, Inc.* 130,000 2,372,500
Gilead Sciences, Inc.* 200,000 2,900,000
Health Care and Retirement Corp.* 300,000 5,775,000
Intergroup Healthcare Corp.* 90,000 3,217,500
Noven Pharmaceuticals, Inc.* 140,000 1,662,500
Perseptive Technology Corp. Units (1)* 1,000 1,218,100
PerSeptive Biosystems, Inc.* 71,300 1,568,600
Rural/Metro Corp.* 100,000 1,700,000
SciClone Pharmaceuticals, Inc.* 137,000 2,534,500
Universal Standard Medical Laboratories, Inc.* 160,000 2,320,000
34,053,162
Hospital American Medical Response* 100,000 2,587,500
Management -- 1.7% Clinicorp, Inc.* 50,000 150,000
Clinicorp, Inc.(1)* 450,000 1,100,250
Lincare Holdings, Inc.* 100,000 3,825,000
Medaphis Corp.* 80,000 2,120,000
9,782,750
Market Value
Shares See Note 1
Medical Products -- 2.1% Applied Immune Sciences, Inc.* 60,000 $ 840,000
MARQUETTE ELECTRONICS, INC., Cl. A* 130,000 2,047,500
OrthoLogic Corp.* 75,000 262,500
Ventritex, Inc.* 150,000 5,475,000
Zoll Medical Corp.* 100,000 3,625,000
12,250,000
Energy -- 4.2%
Oil - Exploration and Tipperary Corp.* 300,000 2,062,500
Production -- .4%
Oil and Gas Drilling -- 3.6% Alexander Energy Corp.* 312,500 2,109,375
Clayton Williams Energy, Inc.* 150,000 2,437,500
Cross Timbers Oil Co. 160,000 2,780,000
International Colin Energy Corp. 78,200 1,231,650
Nabors Industries, Inc.* 500,000 4,687,500
Noble Drilling Corp.* 150,000 1,368,750
St. Mary Land & Exploration Co. 250,000 3,437,500
Stone Energy Corp.* 200,000 3,050,000
21,102,275
Oil Well Services and Weatherford International, Inc.* 100,000 1,250,000
Equipment -- .2%
Financial -- 11.8%
Financial Services - American Residential Holding Corp.* 115,000 2,328,750
Miscellaneous -- 7.3% BHC Financial, Inc. 137,000 5,394,375
CMAC Investment Corp. 100,000 3,287,500
First USA, Inc. 111,600 7,449,300
Foothill Group, Inc. (The), Cl. A 350,000 4,637,500
Green Tree Financial Corp. 189,600 10,238,400
Mutual Risk Management Ltd. 35,800 1,557,300
North American Mortgage Co. 66,000 2,128,500
Olympic Financial Ltd.* 400,000 2,350,000
Servicios Financieros Quadrun SA, ADR* 200,000 3,575,000
42,946,625
Insurance - CCP Insurance, Inc. 250,000 7,812,500
Multi-Line -- 2.0% EXEL Ltd. 80,000 3,690,000
11,502,500
Insurance - Property and ACE Ltd. 90,000 2,981,250
Casualty -- 1.8% HCC Insurance Holdings, Inc.* 60,000 1,920,000
Mid Ocean Ltd.* 160,500 5,477,062
10,378,312
Major Banks - Cullen Frost Bankers, Inc.* 50,000 1,812,500
Regional -- .3%
Statement of Investments (continued)
Market Value
Shares See Note 1
Common Stocks (continued)
Financial (continued)
Savings and Metropolitan Bancorp* 150,000 $ 2,362,500
Loans/Holding Cos. -- .4%
Industrial -- 2.9%
Commercial Services -- .9% Education Alternatives, Inc.* 90,000 3,240,000
Starsight Telecast, Inc.* 100,000 2,100,000
5,340,000
Electrical AER Energy Resources, Inc.* 268,000 2,278,000
Equipment -- 1.1% Kent Electronics Corp.* 114,000 2,949,750
Megatest Corp.* 60,000 1,095,000
6,322,750
Manufacturing - Diversified Johnstown America Industries, Inc.* 50,000 1,150,000
Industrials -- .5% Stewart & Stevenson Services, Inc. 42,000 1,963,500
3,113,500
Pollution Control -- .2% Kaiser Steel Resources, Inc. 80,000 1,180,000
Transportation - Fritz Cos., Inc.* 45,000 1,316,250
Miscellaneous -- .2%
Technology -- 22.3%
Computer Software and Acxiom Corp.* 200,000 4,350,000
Services -- 18.7% America Online, Inc.* 50,000 2,850,000
Catalina Marketing Corp.* 24,000 1,059,000
Cheyenne Software, Inc.* 80,000 2,710,000
Compuware Corp.* 175,000 3,806,250
Cornerstone Imaging, Inc.* 142,000 2,059,000
CUC International, Inc.* 170,000 6,077,500
Davidson & Associates, Inc.* 121,000 2,253,625
Electronic Arts, Inc.* 160,000 5,480,000
EMC Corp.* 290,000 10,222,500
Fourth Shift Corp.* 152,000 950,000
GTECH Holdings Corp.* 88,000 3,168,000
HBO & Co. 150,000 5,550,000
Information Resources, Inc.* 100,000 3,925,000
Interlinq Software Corp.* 195,000 1,657,500
NetManage, Inc.* 77,500 2,073,125
OCTUS, Inc., Units (2)* 270,000 2,565,000
Oracle Systems Corp.* 100,000 6,137,500
Pairgain Technologies, Inc.* 126,800 2,599,400
Progress Software Corp.* 40,000 2,260,000
Pyxis Corp.* 140,000 7,770,000
QuickResponse Services, Inc.* 95,900 2,685,200
SPS Transaction Services, Inc.* 90,000 5,220,000
Shares See Note 1
Common Stocks (continued)
Technology (continued)
Computer Software and SPSS, Inc.(2)* 300,000 $ 2,400,000
Services (continued) Sapiens International Corp.* 100,000 2,575,000
Softimage, Inc.* 84,000 1,543,500
Software Spectrum, Inc.* 60,000 1,530,000
Sybase, Inc.* 70,000 4,690,000
Symantec Corp.* 250,000 4,843,750
U.S. Robotics, Inc.* 50,000 1,700,000
Wind River Systems* 72,000 828,000
Zebra Technologies Corp., Cl. A* 60,000 2,670,000
110,208,850
Computer Systems -- 1.4% BancTec, Inc.* 180,000 3,712,500
Cisco Systems, Inc.* 70,000 3,500,000
Computer Network Technology Corp.* 130,000 1,056,250
8,268,750
Electronics - Aseco Corp.* 101,000 1,212,000
Instrumentation -- .4% IEC Electronics Corp.* 75,000 900,000
2,112,000
Electronics - Mrs Technology, Inc.* 162,900 2,036,250
Semiconducters -- .3%
Office Equipment and Supermac Technology, Inc.* 120,000 1,800,000
Supplies -- .3%
Telecommunications -- 1.2% Cencall Communications Corp.* 50,000 1,500,000
Intertel Communications, Inc.(1)* 150,000 2,162,067
LCI International, Inc.* 65,000 2,307,500
WCT Communications, Inc.* 175,000 1,312,500
7,282,067
Utilities -- 1.6%
Electric Companies -- .4% Philadelphia Consolidated Holding Co.* 200,000 2,575,000
Natural Gas -- .3% Eastex Energy, Inc.* 240,000 1,530,000
Telephone (new) -- .9% Peoples Telephone Co., Inc.* 427,500 5,343,750
Total Common Stocks (Cost $350,027,507) 516,821,013
Statement of Investments (continued)
Market Value
See Note 1
Total Investments, at Value 100.9% $592,287,940
(Cost $421,522,447)
Liabilities in Excess of Other Assets (.9) (5,230,945)
Net Assets 100.0% $587,056,995
<FN>
* Non-income producing security
(1) Restricted security -- See Note 6 of notes to financial statements.
(2) Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer and is or was an affiliate, as defined in the
Investment Company Act of 1940, at or during the year ended September 30,
1993. The aggregate fair value of all securities of affiliated companies as of
September 30, 1993 amounted to $7,265,000. Transactions during the period in
which the issuer was an affiliate are as follows:
</TABLE>
<TABLE>
<CAPTION>
Balance Balance
September 30, 1992 Gross Additions Gross Reductions September 30, 1993
Shares Cost Shares Cost Shares Cost Shares Cost
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Alexander Energy Corp. -- $ -- 230,000 $ 1,074,629 230,000 $1,074,629 -- $ --
Celebrity, Inc. -- -- 300,000 3,861,408 300,000 3,861,408 -- --
CITATION Computer
Systems, Inc. -- -- 200,000 1,426,990 200,000 1,426,990 -- --
LifeQuest Medical, Inc. 200,000 2,011,250 -- -- -- -- 200,000 2,011,250
OCTUS, Inc., Units -- -- 300,000 1,925,000 30,000 259,688 270,000 1,665,312
SPSS, Inc. -- -- 300,000 2,400,000 -- -- 300,000 2,400,000
$2,011,250 $10,688,027 $6,622,715 $6,076,562
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Statement of Assets and Liabilities September 30, 1993
<TABLE>
<S> <C> <C>
Assets Investments, at value (cost $421,522,447) -- see accompanying statement $592,287,940
Cash 2,586,201
Receivables:
Investments sold 9,607,358
Shares of beneficial interest sold 1,513,972
Dividends and interest 1,136,064
Other 32,622
Total assets 607,164,157
Liabilities Payables and other liabilities:
Investments purchased 16,147,763
Shares of beneficial interest redeemed 3,303,350
Distribution assistance --Note 5 320,085
Other 335,964
Total liabilities 20,107,162
Net Assets $587,056,995
Composition of Net Assets Paid-in capital $405,790,736
Accumulated net investment loss (3,803,286)
Accumulated net realized gain from investment and written option transactions 14,304,052
Net unrealized appreciation of investments -- Note 3 170,765,493
Net Assets -- Applicable to 14,713,109 shares of beneficial interest outstanding $587,056,995
Net Asset Value and Redemption Price Per Share $39.90
Maximum Offering Price Per Share (net asset value plus sales charge of 5.75% of offering price) $42.33
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Statement of Operations For the Year Ended September 30, 1993
<TABLE>
<S> <C> <C>
Investment Income Interest $ 1,719,202
Dividends 1,608,334
Total income 3,327,536
Expenses Management fees - Note 5 3,286,982
Distribution assistance - Note 5 1,084,511
Transfer and shareholder servicing agent fees - Note 5 951,511
Shareholder reports 228,470
Trustees' fees and expenses 52,411
Registration and filing fees 43,851
Legal and auditing fees 38,627
Other 53,560
Total expenses 5,739,923
Net Investment Loss (2,412,387)
Realized and Net realized gain (loss)on investments:
Unrealized Gain (Loss) Unaffiliated companies 21,149,991
on Investments Affiliated companies (1,630,839)
and Options Written Net realized gain on closing of option contracts written - Note 4 132,200
Net realized gain 19,651,352
Net change in unrealized appreciation of investments:
Beginning of year 30,301,040
End of year - Note 3 170,765,493
Net change 140,464,453
Net Realized and Unrealized Gain on Investments and Options Written 160,115,805
Net Increase in Net Assets Resulting from Operations $157,703,418
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended September 30,
1993 1992
<S> <C> <C> <C>
Operations Net investment loss $ (2,412,387) $ (1,351,604)
Net realized gain on investments and options written 19,651,352 130,429
Net change in unrealized appreciation or depreciation of
investments and options written 140,464,453 6,482,262
Net increase in net assets resulting from operations 157,703,418 5,261,087
Distributions to Distributions from net realized gain on investments and
Shareholders options written ($1.29 per share) -- (6,676,754)
Beneficial Interest Net increase in net assets resulting from beneficial
Transactions interest transactions - Note 2 135,344,010 178,315,081
Net Assets Total increase 293,047,428 176,899,414
Beginning of year 294,009,567 117,110,153
End of year (including accumulated net investment losses
of $3,803,286 and $1,390,899, respectively) $587,056,995 $294,009,567
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Year Ended September 30,
1993 1992+ 1991 1990 1989 1988 1987 1986++
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $ 27.62 $ 26.03 $ 17.97 $ 24.51 $ 17.62 $ 21.49 $ 14.21 $14.29
Income (loss) from investment operations:
Net investment income (loss) (.13) (.17) .06 .16 .29 .14 .02 .02
Net realized and unrealized gain (loss)
on investments and options written 12.41 3.05 8.87 (4.84) 6.74 (1.98) 7.28 (.10)
Total income (loss) from
investment operations 12.28 2.88 8.93 (4.68) 7.03 (1.84) 7.30 (.08)
Dividends and distributions to shareholders:
Dividends from net investment income -- -- (.19) (.30) (.14) (.05) (.02) --
Distributions from net realized gain on
investments and options written -- (1.29) (.68) (1.56) -- (1.98) -- --
Total dividends and
distributions to shareholders -- (1.29) (.87) (1.86) (.14) (2.03) (.02) --
Net asset value, end of period $ 39.90 $ 27.62 $ 26.03 $ 17.97 $ 24.51 $ 17.62 $ 21.49 $14.21
Total Return,
at Net Asset Value** 44.46% 11.28% 51.88% (20.34)% 40.23% (7.11)% 51.08% (.56)%
Ratios/Supplemental Data:
Net assets, end of
period (in thousands) $587,057 $294,010 $117,110 $50,357 $53,793 $33,361 $35,834 $1,353
Average net assets
(in thousands) $451,016 $218,065 $ 75,083 $54,454 $40,641 $32,089 $21,439 $1,173
Number of shares outstanding
at end of period (in thousands) 14,713 10,647 4,499 2,802 2,195 1,894 1,667 95
Ratios to average net assets:
Net investment income (loss) (.54)% (.62)% .22% .83% 1.52% .80% .19% 3.55%*
Expenses 1.27 % 1.52 % 1.42% 1.53% 1.46% 1.52% 1.74% 1.50%*
Portfolio turnover rate*** 85.2 % 67.9 % 158.1% 234.6% 132.0% 169.0% 145.4% 0.0%
<FN>
*Annualized.
**Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at
the net asset value calculated on the last business day of the fiscal period.
Sales charges are not reflected in the total returns.
***The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the year ended September 30, 1993 were $478,940,105 and $354,427,899,
respectively.
+Per share amounts calculated based on the weighted average number of shares
outstanding during the year.
++For the period from September 11, 1986 (commencement of operations) to
September 30, 1986.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies
Oppenheimer Discovery Fund (the Fund) is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Fund's investment adviser is Oppenheimer
Management Corporation (the Manager). The following is a summary of
significant accounting policies consistently followed by the Fund.
Investment Valuation -- Portfolio securities are valued at 4:00 p.m. (New
York time) on each trading day. Listed and unlisted securities for which
such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid
or asked price or the last sale price on the prior trading day. Long-term
debt securities are valued by a portfolio pricing service approved by the
Board of Trustees. Long-term debt securities which cannot be valued by the
approved portfolio pricing service are valued by averaging the mean
between the bid and asked prices obtained from two active market makers
in such securities. Short-term debt securities having a remaining maturity
of 60 days or less are valued at cost (or last determined market value)
adjusted for amortization to maturity of any premium or discount.
Securities for which market quotes are not readily available are valued
under procedures established by the Board of Trustees to determine fair
value in good faith. A call option is valued based upon the last sales
price on the principal exchange on which the option is traded or,
in the absence of any transactions that day, the value is based upon the
last sale on the prior trading date if it is within the spread between the
closing bid and asked prices. If the last sale price is outside the
spread, the closing bid or asked price closest to the last reported sale
price is used.
Repurchase Agreements -- The Fund requires the custodian to take
possession, to have legally segregated in the Federal Reserve Book Entry
System or to have segregated within the custodian's vault, all securities
held as collateral for repurchase agreements. If the seller of the
agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
Call Options Written -- The Fund may write covered call options. When an
option is written, the Fund receives a premium and becomes obligated to
sell the underlying security at a fixed price, upon exercise of the
option. In writing an option, the Fund bears the market risk of an
unfavorable change in the price of the security underlying the written
option. Exercise of an option written by the Fund could result in the Fund
selling a security at a price different from the current market value. All
securities covering call options written are held in escrow by the
custodian bank.
Federal Income Taxes -- The Fund intends to continue to comply with
provisions of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income, including any net
realized gain on investments not offset by loss carryovers, to
shareholders. Therefore, no federal income tax provision is required. At
September 30, 1993, the Fund had available for federal income tax purposes
an unused capital loss carryover of approximately $1,943,000 expiring in
1995, the usage of which is subject to certain limitations.
Trustees' Fees and Expenses -- The Fund has adopted a nonfunded retirement
plan for the Fund's independent trustees. Benefits are based on years of
service and fees paid to each trustee during the years of service. During
the year ended September 30, 1993, a provision of $18,386 was made for the
Fund's projected benefit obligations, resulting in an accumulated
liability of $117,741 at September 30, 1993. No payments have been made
under the plan.
Distributions to Shareholders -- Dividends and distributions to
shareholders are recorded on the ex-dividend date.
Notes to Financial Statements (continued)
Other -- Investment transactions are accounted for on the date the
investments are purchased or sold (trade date) and dividend income is
recorded on the ex-dividend date. Discount on securities purchased is
amortized over the life of the respective securities, in accordance with
federal income tax requirements. Realized gains and losses on investments
and unrealized appreciation and depreciation are determined on an
identified cost basis, which is the same basis used for federal income tax
purposes.
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of
beneficial interest. Transactions in shares of beneficial interest were
as follows:
<TABLE>
<CAPTION>
Year Ended September 30, 1993 Year Ended September 30, 1992
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Sold 10,406,503 $ 349,688,611 9,744,248 $ 280,162,474
Distributions reinvested -- -- 238,690 6,317,605
Redeemed (6,339,986) (214,344,601) (3,834,940) (108,164,998)
Net increase 4,066,517 $ 135,344,010 6,147,998 $ 178,315,081
</TABLE>
3. Unrealized Gains and Losses on Investments
At September 30, 1993, net unrealized appreciation of investments of
$170,765,493 was composed of gross appreciation of $177,329,935, and gross
depreciation of $6,564,442.
4. Call Option Activity
Call option activity for the year ended September 30, 1993 was as follows:
<TABLE>
<CAPTION>
Number of Amount of
Options Premiums
<S> <C> <C>
Options outstanding at September 30, 1992 -- $ --
Options written 779 252,939
Options cancelled in closing purchase transactions (779) (252,939)
Options outstanding at September 30, 1993 -- $ --
</TABLE>
The cost of cancelling options in closing purchase transactions was
$120,739, resulting in a net short-term capital gain of $132,200.
5. Management Fees and Other Transactions With Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for an annual fee of .75%
on the first $200 million of net assets with a reduction of .03% on each
$200 million thereafter to $800 million, and .60% on net assets in excess
of $800 million. The Manager has agreed to reimburse the Fund if aggregate
expenses (with specified exceptions) exceed the most stringent applicable
regulatory limit on Fund expenses.
For the year ended September 30, 1993, commissions (sales charges paid by
investors) on sales of Fund shares totaled $6,534,429, of which $1,751,688
was retained by Oppenheimer Funds Distributor, Inc. (OFDI), a subsidiary
of the Manager, as general distributor, and by an affiliated broker-
dealer.
Oppenheimer Shareholder Services (OSS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund, and for other
registered investment companies. OSS's total costs of providing such
services are allocated ratably to these companies.
Under an approved plan of distribution, the Fund may expend up to .25% of
its net assets annually to reimburse OFDI for costs incurred in
distributing shares of the Fund, including amounts paid to brokers and
dealers. During the year ended September 30, 1993, OFDI paid $51,898 to
an affiliated broker-dealer as reimbursement for distribution-related
expenses.
6. Restricted Securities
The Fund owns securities purchased in private placement transactions,
without registration under the Securities Act of 1933 (the Act). The
securities are valued under methods approved by the Board of Trustees as
reflecting fair value. The Fund intends to invest no more than 10% of its
net assets (determined at the time of purchase) in restricted and illiquid
securities, excluding securities eligible for resale pursuant to Rule 144A
of the Act that are determined to be liquid by the Board of Trustees or
by the Manager under Board-approved guidelines. Restricted and illiquid
securities amount to $6,672,637, or 1.14% of the Fund's net assets, at
September 30, 1993.
<TABLE>
<CAPTION>
Valuation
Per Unit as of
Security Acquisition Date Cost Per Unit September 30, 1993
<S> <C> <C> <C>
Clinicorp, Inc. 3/23/93 $ 5.50 $ 2.45
IntelCom Group, Inc., 8%
Cv. Sub. Debs., 9/24/98 9/24/93 $ 100.00 $ 109.61
Intertel Communications, Inc. 6/9/93 $ 5.50 $ 14.41
Medaphis Corp., 6.50% Cv.
Sub. Debs., 1/1/00+ 12/22/92 $ 100.00 $ 114.50
Perseptive Technology Corp. 12/16/92 $1,000.00 $1,218.10
Physicians Clinical
Laboratory, Inc., 7.50%
Cv. Sub. Debs., 8/15/00+ 8/17/93 $ 100.00 $ 107.50
United Gaming, Inc., 7.50%
Cv. Sub. Debs., 9/15/03+ 9/14/93 $ 100.00 $ 100.00
<FN>
+Transferable under Rule 144A of the Act.
</TABLE>
<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 (see Part A): Filed
herewith.
(2) Independent Auditors' Report (see Part B):
Filed herewith.
(3) Statement of Investments (see Part B): Filed
herewith.
(4) Statement of Assets and Liabilities (see Part
B): Filed herewith.
(5) Statement of Operations (see Part B): Filed
herewith.
(6) Statement of Changes in Net Assets (see Part
B): Filed herewith.
(7) Notes to Financial Statements (see Part B):
Filed herewith.
(8) Independent Auditors' Consent: Filed herewith.
(b) Exhibits:
Exhibit
Number Description
(1) Amended and Restated Declaration of Trust made as of June 1, 1992 -
Filed with Registrant's Post-Effective Amendment No. 10, 12/3/92, and
incorporated herein by reference.
(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.
(3) Inapplicable.
(4) Specimen Share Certificate: Filed with Registrant's Post-Effective
Amendment No. 12, 11/22/93, and incorporated herein by reference.
(5) Investment Advisory Agreement dated June 1, 1992 - Filed with
Registrant's Post-Effective Amendment No. 10, 12/3/92, 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.
(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.
(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.
(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.
(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.
(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.
(8) Custody Agreement dated 6/10/92 - Filed with Registrant's Post-
Effective Amendment No. 10, 12/3/92, and incorporated herein by reference.
(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.
(11) Inapplicable.
(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 Trust Agreement: Filed with
Post-Effective Amendment No. 21 of Oppenheimer U.S. Government Trust (Reg.
No. 2-76645), 8/25/93, and incorporated herein by reference.
(ii) Form of Tax-Sheltered Retirement Plan and Custody Agreement for
employees of public schools and tax-exempt organizations: Filed with
Post-Effective Amendment No. 22 of Oppenheimer Directors Fund (File No.
2-62240), 2/1/90, and incorporated herein by reference.
(iii) Form of standardized and non-standardized Profit-Sharing Plan and
Money Purchase Pension Plan: Filed with Post-Effective Amendment No. 3
of Oppenheimer Global Growth & Income Fund (Reg. No. 33-33799), and
incorporated herein by reference.
(iv) Form of Simplified Employee Pension IRA: Filed with Post-Effective
Amendment No. 36 of Oppenheimer Equity Income Fund (Reg. No. 2-33043),
10/23/91, and incorporated herein by reference.
(15) Service Plan and Agreement dated 6/10/93 under Rule 12b-1 of the
Investment Company Act of 1940 - Filed herewith.
(16) Performance Calculations - Filed herewith.
- -- Powers of Attorney - Filed with Registrant's Post-Effective
Amendment No. 12, 11/22/93, and incorporated herein by reference.
ITEM 25. Persons Controlled by or under Common Control with Registrant
None
ITEM 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant certifies that it meets
all of the requirements for effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and
has duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 4th day of January, 1994.
OPPENHEIMER DISCOVERY FUND
By: /s/ Donald W. Spiro*
---------------------
Donald W. Spiro, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons
in the capacities and on the dates indicated:
Signatures Title Date
- ---------- ------ ------
/s/ Leon Levy* Chairman of the January 4, 1994
- ------------------------- Board of Trustees
Leon Levy
/s/ Donald W. Spiro* President, Principal January 4, 1994
- --------------------- Executive Officer
Donald W. Spiro and Trustee
/s/ George C. Bowen* Treasurer January 4, 1994
- ---------------------
George C. Bowen
/s/ Leo Cherne* Trustee January 4, 1994
- ----------------
Leo Cherne
/s/ Edmund T. Delaney* Trustee January 4, 1994
- ----------------------
Edmund T. Delaney
/s/ Benjamin Lipstein* Trustee January 4, 1994
- -----------------------
Benjamin Lipstein
/s/ Kenneth A. Randall* Trustee January 4, 1994
- ----------------------
Kenneth A. Randall
/s/ Sidney M. Robbins* Trustee January 4, 1994
- ------------------------
Sidney M. Robbins
/s/ Russell S. Reynolds, Jr.* Trustee January 4, 1994
- ------------------------------
Russell S. Reynolds, Jr.
/s/ Pauline Trigere* Trustee January 4, 1994
- -------------------------------
Pauline Trigere
/s/ Elizabeth B. Moynihan* Trustee January 4, 1994
- -------------------------------
Elizabeth B. Moynihan
/s/ Clayton K. Yeutter* Trustee January 4, 1994
- ---------------------------
Clayton K. Yeutter
/s/ Edward V. Regan* Trustee January 4, 1994
- ------------------------
Edward V. Regan
/s/ Robert G. Galli* Trustee January 4, 1994
- ----------------------
Robert G. Galli
*By: /s/ Robert G. Zack
- --------------------------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
FORM N-1A
OPPENHEIMER DISCOVERY FUND
EXHIBIT INDEX
Item No. Description
24(a)(8) Independent Auditors' Consent
24(b)(15) Service Plan and Agreement under Rule 12b-1 of the
Investment Company Act of 1940, dated 6/10/93
24(b)(16) Performance Calculations
Exhibit 24(a)(8)
Independent Auditors' Consent
The Board of Trustees
Oppenheimer Discovery Fund:
We consent to the use of our report dated October 21, 1993 included herein
and to the reference to our firm under the heading "Condensed Financial
Information" in the Prospectus.
KPMG Peat Marwick
Denver, Colorado
January 18, 1994
Exhibit 24(b)(15)
SERVICE PLAN AND AGREEMENT
BETWEEN
OPPENHEIMER DISCOVERY FUND AND
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
FOR CLASS A SHARES
SERVICE PLAN AND AGREEMENT dated the 10th day of June, 1993, by and
between OPPENHEIMER DISCOVERY FUND (the "Fund") and OPPENHEIMER FUNDS
DISTRIBUTOR, INC. (the "Distributor").
1. The Plan. This Plan is the Fund's written service plan for its Class
A Shares described in the Fund's registration statement as of the date
this Plan takes effect, contemplated by and to comply with Article III,
Section 26 of the Rules of Fair Practice of the National Association of
Securities Dealers, pursuant to which the Fund will reimburse the
Distributor for a portion of its costs incurred in connection with the
personal service and the maintenance of shareholder accounts ("Accounts")
that hold Class A Shares (the "Shares") of such series and class of the
Fund. The Fund may be deemed to be acting as distributor of securities
of which it is the issuer, pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "1940 Act"), according to the terms of this Plan.
The Distributor is authorized under the Plan to pay "Recipients," as
hereinafter defined, for rendering services and for the maintenance of
Accounts. Such Recipients are intended to have certain rights as third-
party beneficiaries under this Plan.
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other financial
institution which: (i) has rendered services in connection with the
personal service and maintenance of Accounts; (ii) shall furnish the
Distributor (on behalf of the Fund) with such information as the
Distributor shall reasonably request to answer such questions as may
arise concerning such service; and (iii) has been selected by the
Distributor to receive payments under the Plan. Notwithstanding the
foregoing, a majority of the Fund's Board of Trustees (the "Board")
who are not "interested persons" (as defined in the 1940 Act) and who
have no direct or indirect financial interest in the operation of this
Plan or in any agreements relating to this Plan (the "Independent
Trustees") may remove any broker, dealer, bank or other institution
as a Recipient, whereupon such entity's rights as a third party
beneficiary hereof shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all Shares
owned beneficially or of record by: (i) such Recipient, or (ii) such
customers, clients and/or accounts as to which such Recipient is a
fiduciary or custodian or co-fiduciary or co-custodian (collectively,
the "Customers"), but in no event shall any such Shares be deemed
owned by more than one Recipient for purposes of this Plan. In the
event that two entities would otherwise qualify as Recipients as to
the same Shares, the Recipient which is the dealer of record on the
Fund's books shall be deemed the Recipient as to such Shares for
purposes of this Plan.
3. Payments for Distribution Assistance.
(a) Under the Plan, the Fund will make payments to the Distributor,
within forty-five (45) days of the end of each calendar quarter, in
the amount of the lesser of: (i) .0625% (.25% on an annual basis) of
the average during the calendar quarter of the aggregate net asset
value of the Shares computed as of the close of each business day, or
(ii) the Distributor's actual expenses under the Plan for that quarter
of the type approved by the Board. The Distributor will use such fee
received from the Fund in its entirety to reimburse itself for
payments to Recipients and for its other expenditures and costs of the
type approved by the Board incurred in connection with the personal
service and maintenance of Accounts including, but not limited to, the
services described in the following paragraph. The Distributor may
make Plan payments to any "affiliated person" (as defined in the 1940
Act) of the Distributor if such affiliated person qualifies as a
Recipient.
The services to be rendered by the Distributor and Recipients in
connection with the personal service and the maintenance of Accounts
may include, but shall not be limited to, the following: answering
routine inquiries from the Recipient's customers concerning the Fund,
providing such customers with information on their investment in
shares, assisting in the establishment and maintenance of accounts or
sub-accounts in the Fund, making the Fund's investment plans and
dividend payment options available, and providing such other
information and customer liaison services and the maintenance of
Accounts as the Distributor or the Fund may reasonably request. It
may be presumed that a Recipient has provided services qualifying for
compensation under the Plan if it has Qualified Holdings of Shares to
entitle it to payments under the Plan. In the event that either the
Distributor or the Board should have reason to believe that,
notwithstanding the level of Qualified Holdings, a Recipient may not
be rendering appropriate services, then the Distributor, at the
request of the Board, shall require the Recipient to provide a written
report or other information to verify that said Recipient is providing
appropriate services in this regard. If the Distributor still is not
satisfied, it may take appropriate steps to terminate the Recipient's
status as such under the Plan, whereupon such entity's rights as a
third-party beneficiary hereunder shall terminate.
Payments received by the Distributor from the Fund under the Plan will
not be used to pay any interest expense, carrying charge or other
financial costs, or allocation of overhead of the Distributor, or for
any other purpose other than for the payments described in this
Section 3. The amount payable to the Distributor each quarter will
be reduced to the extent that reimbursement payments otherwise
permissible under the Plan have not been authorized by the Board of
Trustees for that quarter. Any unreimbursed expenses incurred for any
quarter by the Distributor may not be recovered in later periods.
(b) The Distributor shall make payments to any Recipient quarterly,
within forty-five (45) days of the end of each calendar quarter, at
a rate not to exceed .0625% (.25% on an annual basis) of the average
during the calendar quarter of the aggregate net asset value of the
Shares computed as of the close of each business day of Qualified
Holdings (excluding Shares acquired in reorganizations with investment
companies for which Oppenheimer Management Corporation or an affiliate
acts as investment adviser and which have not adopted a distribution
plan at the time of reorganization with the Fund). However, no such
payments shall be made to any Recipient for any such quarter in which
its Qualified Holdings do not equal or exceed, at the end of such
quarter, the minimum amount ("Minimum Qualified Holdings"), if any,
to be set from time to time by a majority of the Independent
Trustees. A majority of the Independent Trustees may at any time or
from time to time increase or decrease and thereafter adjust the rate
of fees to be paid to the Distributor or to any Recipient, but not to
exceed the rate set forth above, and/or increase or decrease the
number of shares constituting Minimum Qualified Holdings. The
Distributor shall notify all Recipients of the Minimum Qualified
Holdings and the rate of payments hereunder applicable to Recipients,
and shall provide each such Recipient with written notice within
thirty (30) days after any change in these provisions. Inclusion of
such provisions or a change in such provisions in a revised current
prospectus shall be sufficient notice.
(c) Under the Plan, payments may be made to Recipients: (i) by
Oppenheimer Management Corporation ("OMC") from its own resources
(which may include profits derived from the advisory fee it receives
from the Fund), or (ii) by the Distributor (a subsidiary of OMC), from
its own resources.
4. Selection and Nomination of Trustees. While this Plan is in effect,
the selection or replacement of Independent Trustees and the nomination
of those persons to be Trustees of the Fund who are not "interested
persons" of the Fund shall be committed to the discretion of the
Independent Trustees. Nothing herein shall prevent the Independent
Trustees from soliciting the views or the involvement of others in such
selection or nomination if the final decision on any such selection and
nomination is approved by a majority of the incumbent Independent
Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund
shall provide at least quarterly a written report to the Fund's Board for
its review, detailing the amount of all payments made pursuant to this
Plan, the identity of the Recipient of each such payment, and the purposes
for which the payments were made. The report shall state whether all
provisions of Section 3 of this Plan have been complied with. The
Distributor shall annually certify to the Board the amount of its total
expenses incurred that year with respect to the personal service and
maintenance of Accounts in conjunction with the Board's annual review of
the continuation of the Plan.
6. Related Agreements. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated at
any time, without payment of any penalty, by vote of a majority of the
Independent Trustees or by a vote of the holders of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding Shares of the Class,
on not more than sixty days written notice to any other party to the
agreement; (ii) such agreement shall automatically terminate in the event
of its "assignment" (as defined in the 1940 Act); (iii) it shall go into
effect when approved by a vote of the Board and its Independent Trustees
cast in person at a meeting called for the purpose of voting on such
agreement; and (iv) it shall, unless terminated as herein provided,
continue in effect from year to year only so long as such continuance is
specifically approved at least annually by the Board and its Independent
Trustees cast in person at a meeting called for the purpose of voting on
such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has
been approved by a vote of the Independent Trustees cast in person at a
meeting called on June 10, 1993 for the purpose of voting on this Plan,
and takes effect as of July 1, 1993. Unless terminated as hereinafter
provided, it shall continue in effect until December 31, 1993 and from
year to year thereafter or as the Board may otherwise determine only so
long as such continuance is specifically approved at least annually by the
Board and its Independent Trustees cast in person at a meeting called for
the purpose of voting on such continuance. This Plan may be terminated
at any time by vote of a majority of the Independent Trustees or by the
vote of the holders of a "majority" (as defined in the 1940 Act) of the
Fund's outstanding voting securities of the Class. This Plan may not be
amended to increase materially the amount of payments to be made without
approval of the Class A Shareholders, in the manner described above, and
all material amendments must be approved by a vote of the Board and of the
Independent Trustees.
8. Shareholder and Trustee Liability Disclaimer. The Distributor
understands and agrees that the obligations of the Fund under this Plan
are not binding upon any shareholder or Trustee of the Fund personally,
but only the Fund and the Fund's property. The Distributor represents
that it has notice of the provisions of the Declaration of Trust of the
Fund disclaiming shareholder and Trustee liability for acts or obligations
of the Fund.
OPPENHEIMER DISCOVERY FUND
By: /s/ Robert G. Zack
--------------------
Robert G. Zack, Assistant Secretary
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By: /s/ Katherine P. Feld
------------------------------
Katherine P. Feld, Vice President &
Secretary
<PAGE>
Oppenheimer Discovery Fund
Exhibit 24(b)(16) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are calculated
as described below, on the basis of the Fund's distributions, which are
as follows:
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
- ------------- ------------ ------------------- -------------
01/09/87 0.0200 0.0000 16.190
12/24/87 0.0500 1.9750 15.230
12/23/88 0.1430 0.0000 17.670
12/22/89 0.3000 1.5600 21.490
12/21/90 0.1900 0.6750 17.830
12/20/91 0.0000 1.2900 26.480
1. AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 9/30/93:
The formula for calculating average annual total return is as follows:
1 ERV n
--------------- = n (---) - 1 = average annual total return
number of years P
Where: ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period
P = hypothetical initial investment of $1,000
Examples, assuming a maximum sales charge of 5.75%:
One Year Five Year Inception
$1,361.54 1 $2,570.58 .2 $3,595.48 .1417
(---------) - 1 = 36.15% (---------) - 1 = 20.78% (---------) - 1 =
19.89%
$1,000 $1,000 $1,000
<PAGE>
Oppenheimer Discovery Fund
Page 2
October 19, 1993
2. TOTAL RETURNS FOR THE PERIODS ENDED 9/30/93:
The formula for calculating total return is as follows:
ERV - P
------- = Total Return
P
Examples:
Inception (at Maximum Sales Charge) Inception (at NAV)
$3,595.48 - $1,000 $3,814.83 - $1,000
-------------------- = 259.55% -------------------- = 281.48%
$1,000 $1,000
One Year (at NAV)
$1,444.61 - $1,000
-------------------- = 44.46%
$1,000
3. VALUES OF INVESTMENTS FOR A 10-YEAR PERIOD AT VARIOUS ASSUMED
AVERAGE ANNUAL RATES OF RETURN:
Amount of Value at
Investment Assumed Average Annual Return
- ----------- -------------------------------
5% 10% 15% 20%
-------- ------ ------ -------
Single $1,000 $1,629 $2,594 $4,046 $6,192
Annual $1,000 13,208 17,533 23,350 31,151
Values are calculated assuming investment at the beginning of the
period (each year in the case of annual $1,000 investments) and
reinvestment of earnings at the end of each year.
