OPPENHEIMER
DISCOVERY FUND
PROSPECTUS DATED JANUARY 15, 1998
Oppenheimer Discovery 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 with market capitalization less than $1 billion, including common
stocks, preferred stocks, convertible securities, rights, warrants and options,
in proportions which may vary from time to time. In selecting securities for
their appreciation possibilities the Fund will use the methods described in this
Prospectus under "Investment Techniques and Strategies." The Fund may also use
certain hedging instruments. In an uncertain environment, temporary defensive
investment methods may be stressed.
SOME OF THE FUND'S INVESTMENT TECHNIQUES MAY BE CONSIDERED SPECULATIVE.
THESE TECHNIQUES MAY INCREASE THE RISKS OF INVESTING IN THE FUND AND MAY ALSO
INCREASE THE FUND'S OPERATING COSTS. YOU SHOULD CAREFULLY REVIEW THE RISKS
ASSOCIATED WITH AN INVESTMENT IN THE FUND. Please refer to "Investment Objective
and Policies" for more information about the types of securities the Fund
invests in and refer to "Investment Risks" for a discussion of the risks of
investing in the Fund.
This Prospectus explains concisely what you should know before investing
in the Fund. Please read this Prospectus carefully and keep it for future
reference. You can find more detailed information about the Fund in the January
15, 1998 Statement of Additional Information. For a free copy, call
OppenheimerFunds Services, the Fund's Transfer Agent, at 1-800-525-7048, or
write to the Transfer Agent at the address on the back cover. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission ("SEC") and is incorporated into this Prospectus by reference (which
means that it is legally part of this Prospectus).
(OppenheimerFunds logo)
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF ANY BANK, ARE NOT
GUARANTEED BY ANY BANK, ARE NOT INSURED BY THE F.D.I.C. OR ANY OTHER AGENCY, AND
INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
1
<PAGE>
CONTENTS
ABOUT THE FUND
3 EXPENSES
6 A BRIEF OVERVIEW OF THE FUND
7 FINANCIAL HIGHLIGHTS
12 INVESTMENT OBJECTIVE AND POLICIES
13 INVESTMENT RISKS
14 INVESTMENT TECHNIQUES AND STRATEGIES
19 HOW THE FUND IS MANAGED
21 PERFORMANCE OF THE FUND
ABOUT YOUR ACCOUNT
26 HOW TO BUY SHARES
Class A Shares
Class B Shares
Class C Shares
Class Y Shares
40 SPECIAL INVESTOR SERVICES
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
43 HOW TO SELL SHARES
By Mail
By Telephone
45 HOW TO EXCHANGE SHARES
46 SHAREHOLDER ACCOUNT RULES AND POLICIES
48 DIVIDENDS, CAPITAL GAINS AND TAXES
A-1 APPENDIX A: SPECIAL SALES CHARGE ARRANGEMENTS
2
<PAGE>
ABOUT THE FUND
EXPENSES
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net asset
value per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the Fund's
business operating expenses that you will bear indirectly. The numbers below are
based on the Fund's expenses during its fiscal year ended September 30, 1997.
o SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or
sell shares of the Fund. Please refer to "About Your Account," from pages 26
through 40, for an explanation of how and when these charges apply.
CLASS A CLASS B CLASS C CLASS Y
SHARES SHARES SHARES SHARES
- ------------------------------------------------------------------------------
Maximum Sales 5.75% None None None
Charge on
Purchases (as a %
of offering price)
- ------------------------------------------------------------------------------
Maximum Deferred None(1) 5% in the first 1% if None
Sales Charge year, declining shares are
(as a % of the to 1% in the redeemed
lower of the sixth year and within 12
original offering eliminated months of
price or redemption thereafter(2) purchase(2)
proceeds)
- ------------------------------------------------------------------------------
Maximum Sales None None None None
Charge on
Reinvested
Dividends
- ------------------------------------------------------------------------------
Exchange Fee None None None None
- ------------------------------------------------------------------------------
Redemption Fee None None None None
1. If you invest $1 million or more ($500,000 or more for purchases by
"Retirement Plans," as defined in "Class A Contingent Deferred Sales Charge" on
page 31) in Class A shares, you may have to pay a sales charge of up to 1% if
you sell your shares within 12 calendar months (18 months for shares purchased
prior to May 1, 1997) from the end of the calendar month during which you
purchased those shares. See "How to Buy Shares - Buying Class A Shares," below.
2. See "How to Buy Shares - Buying Class B Shares" and "How to Buy Shares Buying
Class C Shares," below, for more information on the contingent deferred sales
charges.
o ANNUAL FUND OPERATING EXPENSES are paid out of the Fund's assets and
represent the Fund's expenses in operating its business. For example, the Fund
pays management fees to its investment advisor, OppenheimerFunds, Inc. (which is
referred to in this Prospectus as the "Manager"). The rates of the Manager's
fees are set forth in "How the Fund is Managed," below. The Fund has other
regular expenses for services, such as transfer agent fees, custodial fees paid
to the bank that holds its portfolio securities, audit fees and legal expenses.
Those expenses are detailed in the Fund's Financial Statements in the Statement
of Additional Information.
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
CLASS A CLASS B CLASS C CLASS Y
SHARES SHARES SHARES SHARES
- ------------------------------------------------------------------------------
Management Fees 0.66% 0.66% 0.66% 0.66%
- ------------------------------------------------------------------------------
12b-1 Plan Fees 0.24% 1.00% 1.00% None
- ------------------------------------------------------------------------------
Other Expenses 0.32% 0.31% 0.28% 0.23%
- ------------------------------------------------------------------------------
Total Fund Operating 1.22% 1.97% 1.94% 0.89%
Expenses
The numbers for the Class A, Class B, Class C and Class Y shares in the
table above are based on the Fund's expenses in its fiscal year ended September
30, 1997. These amounts are shown as a percentage of the average net assets of
each class of the Fund's shares for that year. The 12b-1 Plan Fees for Class A
shares are service plan fees. For Class B and Class C shares, the 12b-1 Plan
Fees are the service plan fees and asset-based sales charges. The service fee
for Class A and Class B is a maximum of 0.25% of average annual net assets of
the class, and for Class C shares is 0.25% of average annual net assets of that
class. The asset-based sales charge for Class B and Class C shares is 0.75%.
These plans are described in greater detail in "How to Buy Shares."
The actual expenses for each class of shares in future years may be more
or less than the numbers in the chart, depending on a number of factors,
including the actual value of the Fund's assets represented by each class of
shares.
o EXAMPLES. To try to show the effect of these expenses on an investment
over time, we have created the hypothetical examples shown below. Assume that
you make a $1,000 investment in each class of shares of the Fund, and that the
Fund's annual return is 5%, and that its operating expenses for each class are
the ones shown in the Annual Fund Operating Expenses table above. If you were to
redeem your shares at the end of each period shown below, your investment would
incur the following expenses by the end of 1, 3, 5 and 10 years:
1 YEAR 3 YEARS 5 YEARS 10 YEARS*
- ------------------------------------------------------------------------------
Class A Shares $69 $94 $121 $197
- ------------------------------------------------------------------------------
Class B Shares $70 $92 $126 $192
- ------------------------------------------------------------------------------
Class C Shares $30 $61 $105 $226
- ------------------------------------------------------------------------------
Class Y Shares $9 $28 $49 $110
If you did not redeem your investment, it would incur the following
expenses:
1 YEAR 3 YEARS 5 YEARS 10 YEARS*
- ------------------------------------------------------------------------------
Class A Shares $69 $94 $121 $197
- ------------------------------------------------------------------------------
Class B Shares $20 $62 $106 $192
- ------------------------------------------------------------------------------
Class C Shares $20 $61 $105 $226
- ------------------------------------------------------------------------------
Class Y Shares $9 $28 $49 $110
* In the first example, expenses include the Class A initial sales charge and
the applicable Class B or Class C contingent deferred sales charge. In the
second example, Class A expenses include the initial sales charge, but Class B
and Class C expenses do not include contingent deferred sales charges. The Class
B expenses in years 7 through 10 are based on the Class A expenses shown above,
because the Fund automatically converts your Class B shares into Class A shares
after 6 years. Because of the effect of the asset-based sales charge and the
contingent deferred sales charge on Class B and Class C shares, long-term Class
B and Class C shareholders could pay the economic equivalent of more than the
maximum front-end sales charge allowed under applicable regulations. For Class B
shareholders, the automatic conversion of Class B shares to Class A shares is
designed to minimize the likelihood that this will occur. Please refer to "How
to Buy Shares - Buying Class B Shares" for more information.
THESE EXAMPLES SHOW THE EFFECT OF EXPENSES ON AN INVESTMENT, BUT ARE NOT
MEANT TO STATE OR PREDICT ACTUAL OR EXPECTED COSTS OR INVESTMENT RETURNS OF THE
FUND, ALL OF WHICH MAY BE MORE OR LESS THAN THOSE SHOWN.
A BRIEF OVERVIEW OF THE FUND
Some of the important facts about the Fund are summarized below, with references
to the section of this Prospectus where more complete information can be found.
You should carefully read the entire Prospectus before making a decision about
investing in the Fund. Keep the Prospectus for reference after you invest,
particularly for information about your account, such as how to sell or exchange
shares.
o WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund's investment
objective is capital appreciation. Current income is not an objective.
o WHAT DOES THE FUND INVEST IN? In seeking its objective, the Fund
emphasizes investments in securities of "growth-type" companies with market
capitalization less than $1 billion, including common stocks, preferred stocks,
convertible securities, rights, warrants and options, in proportions which may
vary from time to time. These investments are more fully explained in
"Investment Objective and Policies," starting on page 12.
o WHO MANAGES THE FUND? The Fund's investment advisor is OppenheimerFunds,
Inc. (the "Manager"), which (including subsidiaries) manages investment company
portfolios having over $75 billion in assets as of December 31, 1997. The Fund's
portfolio managers, who are primarily responsible for the selection of the
Fund's securities, are Jay W. Tracey, III and Alan Gilston. The Manager is paid
an advisory fee by the Fund, based on its assets. The Fund's Board of Trustees,
elected by shareholders, oversees the investment advisor and the portfolio
managers. Please refer to "How the Fund is Managed," starting on page 18 for
more information about the Manager and its fees.
o HOW RISKY IS THE FUND? All investments carry risks to some degree. 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 preservation of capital. The Fund's investments in stocks and bonds
are subject to changes in their value from a number of factors such as changes
in general bond and stock market movements, the change in value of particular
stocks or bonds because of an event affecting the issuer, or changes in interest
rates that can affect bond prices. The Fund's investments in foreign securities
are subject to additional risks associated with investing abroad, such as the
effect of currency rate changes on stock values. These changes affect the value
of the Fund's investments and its price per share. In the Oppenheimer funds
spectrum, the Fund is generally more volatile than the other stock funds and
growth and income funds because it invests for capital appreciation in common
stocks, emphasizing "growth" stocks that tend to be more volatile than other
investments. While the Manager tries to reduce risks by diversifying
investments, by carefully researching securities before they are purchased for
the portfolio, and in some cases by using hedging techniques, there is no
guarantee of success in achieving the Fund's objective and your shares may be
worth more or less than their original cost when you redeem them. Please refer
to "Investment Objective and Policies" starting on page 12 for a more complete
discussion of the Fund's investment risks.
o HOW CAN I BUY SHARES? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic Investment
Plan under AccountLink. Please refer to "How to Buy Shares" on page 26 for more
details.
o WILL I PAY A SALES CHARGE TO BUY SHARES? The Fund offers four classes of
shares. All classes have the same investment portfolio but different expenses.
Class A shares are offered with a front-end sales charge, starting at 5.75%, and
reduced for larger purchases. Class B and Class C shares are offered without a
front-end sales charge, but may be subject to a contingent deferred sales charge
if redeemed within 6 years or 12 months of purchase, respectively. There is also
an annual asset-based sales charge on Class B and Class C shares. Class Y shares
are offered at net asset value without sales charge only to certain
institutional investors. Please review "How to Buy Shares" starting on page 26
for more details, including a discussion about factors you and your financial
advisor should consider in determining which class may be appropriate for you.
o HOW CAN I SELL MY SHARES? Shares can be redeemed by mail or by telephone
call to the Transfer Agent on any business day, or through your dealer. Please
refer to "How to Sell Shares" on page 43. The Fund also offers exchange
privileges to other Oppenheimer funds, described in "How to Exchange Shares" on
page 45.
o HOW HAS THE FUND PERFORMED? The Fund measures its performance by quoting
its average annual total returns and cumulative total returns, which measure
historical performance. Those returns can be compared to the returns (over
similar periods) of other funds. Of course, other funds may have different
objectives, investments, and levels of risk. The Fund's performance can also be
compared to broad market indices, which we have done on pages 24 and 25. Please
remember that past performance does not guarantee future results.
FINANCIAL HIGHLIGHTS
The table on the following pages presents selected financial information
about the Fund, including per share data and expense ratios and other data based
on the Fund's average net assets. This information has been audited by KPMG Peat
Marwick LLP, the Fund's independent auditors, whose report on the Fund's
financial statements for the fiscal year ended September 30, 1997, is included
in the Statement of Additional Information.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS CLASS A
----------------------------------------------------------------
YEAR ENDED
SEPTEMBER 30,
1997 1996 1995 1994
======================================================================================================================
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $51.19 $43.65 $35.81 $39.90
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.08) (.13) -- (.11)
Net realized and unrealized gain (loss) 4.12 11.26 9.46 (2.98)
---------- ---------- -------- --------
Total income (loss) from
investment operations 4.04 11.13 9.46 (3.09)
- ----------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income -- -- -- --
Distributions from net realized gain (3.51) (3.59) (1.62) (1.00)
---------- ---------- ---------- --------
Total dividends and distributions
to shareholders (3.51) (3.59) (1.62) (1.00)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $51.72 $51.19 $43.65 $35.81
========== ========== ======== ========
======================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(4) 9.16% 27.76% 28.03% (7.91)%
======================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $1,330,172 $1,160,087 $798,065 $613,740
- ----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $1,119,302 $ 937,563 $650,903 $588,642
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) (0.17)% (0.32)% 0.00% (0.34)%
Expenses 1.22% 1.22% 1.33% 1.32%
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 68.7% 79.7% 105.9% 83.3%
Average brokerage commission rate(7) $0.0600 $0.0577 -- --
</TABLE>
1. For the period from June 1, 1994 (inception of offering) to September 30,
1994. 2. For the period from October 2, 1995 (inception of offering) to
September 30, 1996. 3. For the period from April 1, 1994 (inception of offering)
to September 30, 1994. 4. Assumes a hypothetical initial investment on the
business day before the first day of the fiscal period (or inception of
offering), with all dividends and distributions reinvested in additional shares
on the reinvestment date, and redemption at the net asset value calculated on
the last business day of the fiscal period. Sales charges are not reflected in
the total returns. Total returns are not annualized for periods of less than one
full year. 5. Annualized.
<PAGE>
<TABLE>
<CAPTION>
CLASS A
- -------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988
===========================================================================================
<S> <C> <C> <C> <C> <C>
$27.62 $26.03 $17.97 $24.51 $17.62 $21.49
- -------------------------------------------------------------------------------------------
(.13) (.17) .06 .16 .29 .14
12.41 3.05 8.87 (4.84) 6.74 (1.98)
- ---------- -------- -------- ------- ------- -------
12.28 2.88 8.93 (4.68) 7.03 (1.84)
- --------------------------------------------------------------------------------------------
-- -- (.19) (.30) (.14) (.05)
-- (1.29) (.68) (1.56) -- (1.98)
- ---------- -------- -------- ------- ------- -------
-- (1.29) (.87) (1.86) (.14) (2.03)
- --------------------------------------------------------------------------------------------
$39.90 $27.62 $26.03 $17.97 $24.51 $17.62
========== ======== ======== ======= ======= =======
============================================================================================
44.46% 11.28% 51.88% (20.34)% 40.23% (7.11)%
============================================================================================
$587,057 $294,010 $117,110 $50,357 $53,793 $33,361
- --------------------------------------------------------------------------------------------
$451,016 $218,065 $ 75,083 $54,454 $40,641 $32,089
- --------------------------------------------------------------------------------------------
(0.54)% (0.62)% 0.22% 0.83% 1.52% 0.80%
1.27% 1.52% 1.42% 1.53% 1.46% 1.52%
- --------------------------------------------------------------------------------------------
85.2% 67.9% 158.1% 234.6% 132.0% 169.0%
-- -- -- -- -- --
</TABLE>
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended September 30, 1997 were $1,034,041,777 and $801,420,976, respectively. 7.
Total brokerage commissions paid on applicable purchases and sales of portfolio
securities for the period, divided by the total number of related shares
purchased and sold. Generally, non-U.S. commissions are lower than U.S.
commissions when expressed as cents per share but higher when expressed as a
percentage of transactions because of the lower per-share prices of many
non-U.S. securities.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONTINUED) CLASS B
-----------------------------------------------------------------------
YEAR ENDED
SEPTEMBER 30,
1997 1996 1995 1994(3)
=========================================================================================================================
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $50.10 $43.11 $35.65 $35.65
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.23) (.23) (.21) .03
Net realized and unrealized gain (loss) 3.79 10.81 9.29 (.03)
-------- -------- ------- -------
Total income (loss) from
investment operations 3.56 10.58 9.08 --
- -------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income -- -- -- --
Distributions from net realized gain (3.51) (3.59) (1.62) --
-------- -------- ------- -------
Total dividends and distributions
to shareholders (3.51) (3.59) (1.62) --
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $50.15 $50.10 $43.11 $35.65
======== ======== ======= =======
=========================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(4) 8.33% 26.77% 27.04% (1.93)%
=========================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $322,736 $193,637 $75,062 $26,491
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $233,172 $119,895 $43,301 $12,435
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) (0.93)% (1.06)% (0.78)% (1.06)%(5)
Expenses 1.97% 1.99% 2.11% 2.36%(5)
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 68.7% 79.7% 105.9% 83.3%
Average brokerage commission rate(7) $0.0600 $0.0577 -- --
</TABLE>
1. For the period from June 1, 1994 (inception of offering) to September 30,
1994. 2. For the period from October 2, 1995 (inception of offering) to
September 30, 1996. 3. For the period from April 1, 1994 (inception of offering)
to September 30, 1994. 4. Assumes a hypothetical initial investment on the
business day before the first day of the fiscal period (or inception of
offering), with all dividends and distributions reinvested in additional shares
on the reinvestment date, and redemption at the net asset value calculated on
the last business day of the fiscal period. Sales charges are not reflected in
the total returns. Total returns are not annualized for periods of less than one
full year. 5. Annualized.
<PAGE>
<TABLE>
<CAPTION>
CLASS C CLASS Y
- -------------------------- -----------------------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996(2) 1997 1996 1995 1994(1)
=================================================================================================
<S> <C> <C> <C> <C> <C>
$50.73 $43.20 $51.44 $43.74 $35.81 $34.89
- --------------------------------------------------------------------------------------------------
(.26) (.21) .02 (.02) (.10) .11
3.90 11.33 4.22 11.31 9.65 .81
- --------- ------- ------- ------- ------ ------
3.64 11.12 4.24 11.29 9.55 .92
- --------------------------------------------------------------------------------------------------
-- -- -- -- -- --
(3.51) (3.59) (3.51) (3.59) (1.62) --
- --------- ------- ------- ------- ------ ------
(3.51) (3.59) (3.51) (3.59) (1.62) --
- --------------------------------------------------------------------------------------------------
$50.86 $50.73 $52.17 $51.44 $43.74 $35.81
========= ======= ======= ======= ====== ======
==================================================================================================
8.39% 27.96% 9.50% 28.09% 28.28% 3.20%
==================================================================================================
$41,720 $17,512 $45,112 $31,619 $9,394 $194
- --------------------------------------------------------------------------------------------------
$26,361 $ 7,109 $34,811 $18,563 $3,190 $ 39
- --------------------------------------------------------------------------------------------------
(0.92)% (1.00)%(5) 0.15% (0.04)% 0.03% (0.13)%(5)
1.94% 2.03%(5) 0.89% 0.99% 1.26% 1.41%(5)
- --------------------------------------------------------------------------------------------------
68.7% 79.7% 68.7% 79.7% 105.9% 83.3%
$0.0600 $0.0577 $0.0600 $0.0577 -- --
</TABLE>
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended September 30, 1997 were $1,034,041,777 and $801,420,976, respectively. 7.
Total brokerage commissions paid on applicable purchases and sales of portfolio
securities for the period, divided by the total number of related shares
purchased and sold. Generally, non-U.S. commissions are lower than U.S.
commissions when expressed as cents per share but higher when expressed as a
percentage of transactions because of the lower per-share prices of many
non-U.S. securities.
3
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
OBJECTIVE. The Fund seeks capital appreciation as its investment objective.
Current income is not an objective.
INVESTMENT POLICIES AND STRATEGIES. In seeking its objective, the Fund will
emphasize investment in securities considered by the Manager to have
appreciation possibilities. Such securities may either be listed on securities
exchanges or traded in the over-the-counter markets in both the United States
and foreign countries. See "Over-the-Counter Securities" in the Statement of
Additional Information for further information on securities traded on 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, with market capitalization
less than $1 billion. The Fund may continue to hold investments in issuers whose
market capitalization grows in excess of $1 billion, and may from time to time
invest in companies with market capitalization in excess of $1 billion. The Fund
invests primarily in common stocks or securities having investment
characteristics of common stocks (for example, securities convertible into
common stocks). The Fund expects a substantial portion of its assets to be
invested in over-the-counter securities. The Fund is designed for investors who
are willing to accept greater risks of loss attributed with the possibility of
realizing greater gains, and is not intended for those who desire assured income
and conservation of capital.
o CAN THE FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE? The Fund has an
investment objective, described above, as well as investment policies it follows
to try to achieve its objective. Additionally, the Fund uses certain investment
techniques and strategies in carrying out those investment policies. The Fund's
investment policies and techniques are not "fundamental" unless this Prospectus
or the Statement of Additional Information says that a particular policy is
"fundamental." The Fund's investment objective is a fundamental policy.
Fundamental policies are those that cannot be changed without the approval
of a "majority" of the Fund's outstanding voting shares. The term "majority" is
defined in the Investment Company Act to be a particular percentage of
outstanding voting shares (and this term is explained in the Statement of
Additional Information). The Fund's investment objective is a fundamental
policy. The Fund's Board of Trustees may change non-fundamental policies without
shareholder approval, although significant changes will be described in
amendments to this Prospectus.
o WHAT ARE GROWTH-TYPE ISSUERS AND EMERGING GROWTH COMPANIES? In selecting
investments for the Fund, the Manager will emphasize growth-type companies with
market capitalization less than $1 billion. 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 commercial applications for new
scientific knowledge having a potential for technological innovation, such as
computer software, telecommunications equipment and services, biotechnology, and
new consumer products. The Fund may also invest from time to time in cyclical
industries such as insurance and forest products, when the Manager believes that
they present opportunities for capital appreciation.
Growth-type issuers in which the Fund may invest include emerging growth
companies, which are companies that 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 more profitable way than other companies. The rate of
growth of such companies at times may be dramatic.
INVESTMENT RISKS
All investments carry risks to some degree, whether they are risks that market
prices of the investment will fluctuate (this is known as "market risk") or that
the underlying issuer will experience financial difficulties and may default on
its obligation under a fixed-income investment to pay interest and repay
principal (this is referred to as "credit risk"). These general investment
risks, and the special risks of certain types of investments that the Fund may
hold are described below. They affect the value of the Fund's investments, its
investment performance, and the prices of its shares. These risks collectively
form the risk profile of the Fund.
Because of the types of securities the Fund invests in and the investment
techniques the Fund uses, the Fund is designed for investors who are investing
for the long term. It is not intended for investors seeking assured income or
preservation of capital. While the Manager tries to reduce risks by diversifying
investments, by carefully researching securities before they are purchased, and
in some cases by using hedging techniques, changes in overall market prices can
occur at any time, and because the income earned on securities is subject to
change, there is no assurance that the Fund will achieve its investment
objective. When you redeem your shares, they may be worth more or less than what
you paid for them.
o STOCK INVESTMENT RISKS. Because the Fund normally invests most, or a
substantial portion, of its assets in stocks, the value of the Fund's portfolio
will be affected by changes in the stock markets. At times, the stock markets
can be volatile, and stock prices can change substantially. This market risk
will affect the Fund's net asset values per share, which will fluctuate as the
values of the Fund's portfolio securities and other assets and liabilities
change. Not all stock prices change uniformly or at the same time, and not all
stock markets move in the same direction at the same time. Other factors can
affect a particular stock's prices (for example, poor earnings reports by an
issuer, loss of major customers, major litigation against an issuer, or changes
in government regulations affecting an industry). Not all of these factors can
be predicted.
As discussed below, the Fund attempts to limit certain market risks by
diversifying its investments, that is, by not holding a substantial amount of
stock of any one company and by not investing too great a percentage of the
Fund's assets in any one company.
o FOREIGN SECURITIES HAVE SPECIAL RISKS. While foreign securities
offer special investment opportunities, there are also special risks. The
change in value of a foreign currency against the U.S.
dollar will result in a change in the U.S. dollar value of securities
denominated in that foreign currency. Foreign issuers are not subject to the
same accounting and disclosure requirements that U.S. companies are subject to.
The value of foreign investments may be affected by exchange control
regulations, expropriation or nationalization of a company's assets, foreign
taxes, delays in settlement of transactions, changes in governmental economic or
monetary policy in the U.S. or abroad, or other political and economic factors.
More information about the risks and potential rewards of investing in foreign
securities is contained in the Statement of Additional Information.
o HEDGING INSTRUMENTS CAN BE VOLATILE INVESTMENTS AND MAY INVOLVE SPECIAL
RISKS. The use of hedging instruments requires special skills and knowledge of
investment techniques that are different than what is required for normal
portfolio management. If the Manager uses a hedging instrument at the wrong time
or judges market conditions incorrectly, or if the hedging instrument does not
perform as expected, hedging strategies may reduce the Fund's return. The Fund
could also experience losses if the prices of its futures and options positions
were not correlated with its other investments or if it could not close out a
position because the market for the future or option was illiquid.
INVESTMENT TECHNIQUES AND STRATEGIES.
The Fund may also use the investment techniques and strategies described below.
These techniques involve certain risks. The Statement of Additional Information
contains more detailed information about these practices, including limitations
on their use that may help reduce some of the risks.
o INVESTING IN SMALL, UNSEASONED COMPANIES. The Fund may invest in
securities of small, unseasoned companies. These are companies that have been in
operation less than three years, including the operations of any of their
predecessors. In view of the volatility of price movements of such securities,
the Fund currently intends, as a matter of non-fundamental policy, 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 limited liquidity (which
means that the Fund might have difficulty selling them at an acceptable price
when it wants to) and the prices of these securities may be volatile.
o FOREIGN SECURITIES. As a matter of non-fundamental policy, the Fund may
invest up to 25% of its total assets in foreign securities. The Fund may
purchase securities issued by issuers in any country, whether developed or not
developed. The Fund intends to hold foreign currency only in connection with the
purchase or sale of foreign securities. See "Foreign Securities" in the
Statement of Additional Information for more information about the possible
rewards and risks of investing in foreign securities.
o CONVERTIBLE SECURITIES. Although most of the Fund's investments will be
in stocks, the Fund may invest in convertible securities. Convertible securities
are bonds, preferred stocks and other securities that normally pay a fixed rate
of interest or dividends and give the owner the option to convert the security
into common stock. While the value of convertible securities depends in part on
interest rate changes and the credit quality of the issuer, the price will also
change based on the price of the underlying stock. While convertible securities
generally have less potential for gain than common stock, their income provides
a cushion against the stock price declines. They generally pay less income than
non-convertible bonds. The Manager generally analyzes these investments from the
perspective of the growth potential of the underlying stock and treats them as
"equity substitutes."
o TEMPORARY DEFENSIVE INVESTMENTS. When stock market prices are falling or
in other unusual economic or business circumstances as determined by the
Manager, the Fund may invest a portion of its assets in defensive securities. As
a matter of non-fundamental policy, securities selected for defensive purposes
may include debt securities, such as rated or unrated bonds and debentures, and
preferred stocks, cash or cash equivalents, such as U.S. Treasury bills and
other short-term obligations of the U.S. Government, its agencies or
instrumentalities, or commercial paper rated "A-1" or better by Standard &
Poor's Corporation or "P-1" or better by Moody's Investors Service, Inc.
o PORTFOLIO TURNOVER. "Portfolio turnover" describes the rate at which the
Fund traded its portfolio securities during its last fiscal year. For example,
if a fund sold all of its securities during its last fiscal year, its portfolio
turnover rate would have been 100%. Portfolio turnover affects brokerage costs
the Fund pays. The Fund normally does not engage in substantial short-term
trading to try to achieve its objective. The Financial Highlights table above
shows the Fund's portfolio turnover rates during prior fiscal years.
o BORROWING. The Fund may borrow money in an amount up to 5% of the value
of its total assets for temporary purposes (for example, for portfolio liquidity
reasons). No assets of the Fund may be pledged, mortgaged or assigned to secure
a debt.
o WARRANTS AND RIGHTS. Warrants are options to purchase stock at set
prices that are valid for a limited period of time. Rights are similar to
warrants but normally have a short duration and are distributed directly by the
issuer to its shareholders. The Fund may invest up to 5% of its net assets in
warrants. That 5% excludes warrants the Fund has acquired in units or that are
attached to other securities. For further details, see "Warrants and Rights" in
the Statement of Additional Information.
o HEDGING. As described below, the Fund may purchase and sell certain
kinds of futures contracts, put and call options, forward contracts, and options
on futures and broadly-based stock indices. These are all referred to as
"hedging instruments." The Fund does not use hedging instruments for speculative
purposes, and has limits on the use of them, described below. The hedging
instruments the Fund may use are described below and in greater detail in "Other
Investment Techniques and Strategies" in the Statement of Additional
Information.
The Fund may buy and sell options, futures and forward contracts for a
number of purposes. It may do so to try to manage its exposure to the
possibility that the prices of its portfolio securities may decline, or to
establish a position in the securities market as a temporary substitute for
purchasing individual securities. It may do so to try to manage its exposure to
changing interest rates. Some of these strategies, such as selling futures,
buying puts and writing covered calls, may hedge the Fund's portfolio against
price fluctuations to some extent. Other hedging strategies, such as buying
futures and call options, may tend to increase the Fund's exposure to the
securities market.
Forward contracts are used to try to manage foreign currency risks on the
Fund's foreign investments. Writing covered call options may also provide income
to the Fund for liquidity purposes or defensive reasons.
FUTURES. The Fund may buy and sell futures contracts that relate to (1)
broadly-based stock indices (these are referred to as Stock Index Futures), (2)
other securities indices (these are referred to as Financial Futures) and (3)
commodities (these are referred to as commodity futures). At present, the Fund
does not intend to enter into Futures and options on Futures if, after any such
purchase or sale, the sum of margin deposits on Futures and premiums paid on
Futures options exceeds 5% of the value of the Fund's total assets. These types
of Futures are described in "Hedging With Options and Futures Contracts" in the
Statement of Additional Information.
PUT AND CALL OPTIONS. The Fund may buy and sell exchange-traded and
over-the-counter put and call options, including index options, securities
options, currency options, commodities options, and options on the other types
of futures described in "Futures," above. A call or put may be purchased only
if, after the purchase, the value of all call and put options held by the Fund
will not exceed 5% of the Fund's total assets.
If the Fund sells (that is, writes) a call option, it must be "covered."
That means the Fund must own the security subject to the call while the call is
outstanding, or, for other types of written calls, the Fund must segregate
liquid assets to enable it to satisfy its obligations if the call is exercised.
Up to[ 50%] of the Fund's total assets may be subject to calls.
The Fund may buy puts whether or not it holds the underlying investment
in the portfolio. If the Fund writes a put, the put must be covered by
segregated liquid assets. The Fund will not write puts if more than 25% of the
Fund's net assets would have to be segregated to cover put options.
FORWARD CONTRACTS. Forward contracts are foreign currency exchange
contracts. They are used to buy or sell foreign currency for future delivery at
a fixed price. The Fund uses them to try to "lock in" the U.S. dollar price of a
security denominated in a foreign currency that the Fund has bought or sold, or
to protect against possible losses from changes in the relative values of the
U.S. dollar and foreign currency.
o ILLIQUID AND RESTRICTED SECURITIES. Under the policies established by
the Fund's Board of Trustees, the Manager determines the liquidity of certain of
the Fund's investments. Investments may be illiquid because of the absence of a
trading market, making it difficult to value them or dispose of them promptly at
an acceptable price. A restricted security is one that has a contractual
restriction on its resale or that cannot be sold publicly until it is registered
under the Securities Act of 1933. The Fund currently intends to invest no more
than 10% of its net assets in illiquid or restricted securities (the Board may
increase that limit to 15%). The Manager monitors holdings of illiquid
securities on an ongoing basis to determine whether to sell any holdings to
maintain adequate liquidity. Certain restricted securities, eligible for resale
to qualified institutional purchasers, are not subject to that limit. Illiquid
securities include repurchase agreements maturing in more than seven days, or
certain participation interests other than those with puts exercisable within
seven days.
o REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements. In
a repurchase transaction, the Fund buys a security and simultaneously sells it
to the vendor for delivery at a future date. They are used primarily for cash
liquidity purposes. There is no limit on the amount of the Fund's net assets
that may be subject to repurchase agreements of seven days or less. Repurchase
agreements must be fully collateralized. However, if the vendor fails to pay the
resale price on the delivery date, the Fund may incur costs in disposing of the
collateral and may experience losses if there is any delay in its ability to do
so. The Fund will not enter into a repurchase agreement that causes more than
10% of its net assets to be subject to repurchase agreements having a maturity
beyond seven days (the Board may increase that limit to 15%).
o DERIVATIVE INVESTMENTS. In general, a "derivative investment" is a
specially-designed investment. Its performance is linked to the performance of
another investment or security, such as an option, future, index or currency.
The Fund can invest in a number of different kinds of "derivative investments."
They are used in some cases for hedging purposes, and in others because they
offer the potential for increased income and principal value. In the broadest
sense, exchange-traded options and futures contracts (please refer to "Hedging"
above) may be considered "derivative investments."
There are special risks in investing in derivative investments. The
company issuing the instrument might not pay the amount due on the maturity of
the instrument. Also, the underlying investment or security on which the
derivative is based, and the derivative itself, might not perform the way the
Manager expected it to perform. The performance of derivative investments may
also be influenced by interest rate changes in the U.S. and abroad. All of these
risks mean that the Fund might realize less income than expected from its
investments, or that it can lose part of the value of its investments, which
will affect the Fund's share price. Certain derivative investments held by the
Fund may trade in the over-the-counter markets and may be illiquid. If that is
the case, the Fund's investment in them will be limited, as discussed in
"Illiquid and Restricted Securities," above.
OTHER INVESTMENT RESTRICTIONS. The Fund has other investment restrictions which,
together with its investment objective, are fundamental policies. Under some of
these restrictions the Fund cannot do any of the following:
o The Fund cannot invest in securities of a single issuer (except the U.S.
Government 'or its agencies or instrumentalities) 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.
o The Fund cannot make short sales of securities except "short sales
against-the-box."
o The Fund cannot concentrate more than 25% of its total assets in
securities of companies in any one industry.
o The Fund cannot deviate from the percentage requirements listed under
"Investment Techniques and Strategies" (other than those applicable to illiquid
securities), from the limitations as to the type of calls the Fund may write in
"Put and Call Options," or from the restrictions as to what foreign securities
may be purchased as described in "Foreign Securities."
Unless the Prospectus states that a percentage restriction applies on an
ongoing basis, it applies only at the time the Fund makes an investment and the
Fund need not sell securities to meet the percentage limits if the value of the
investment increases in proportion to the size of the Fund. Other investment
restrictions are listed in "Investment Restrictions" in the Statement of
Additional Information.
HOW THE FUND IS MANAGED
ORGANIZATION AND HISTORY. The Fund was organized in 1985 as a Massachusetts
business trust. The Fund is an open-end, diversified management investment
company, with an unlimited number of authorized shares of beneficial interest.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The Trustees
meet periodically throughout the year to oversee the Fund's activities, review
its performance, and review the actions of the Manager. "Trustees and Officers
of the Fund" in the Statement of Additional Information names the Trustees and
provides more information about them and the officers of the Fund. Although the
Fund will not normally hold annual meetings of its shareholders, it may hold
shareholder meetings from time to time on important matters, and shareholders
have the right to call a meeting to remove a Trustee or to take other action
described in the Fund's Declaration of Trust.
The Board of Trustees has the power, without shareholder approval, to
divide unissued shares of the Fund into two or more classes. The Board has done
so, and the Fund currently has four classes of shares, Class A, Class B, Class C
and Class Y. All classes invest in the same investment portfolio. Each class has
its own dividends and distributions and pays certain expenses which may be
different for the different classes. Each class may have a different net asset
value. Each share has one vote at shareholder meetings, with fractional shares
voting proportionally. Shares of each class may have separate voting rights on
matters in which interests of one class are different from interests of another
class, and only shares of a particular class vote as a class on matters that
affect that class alone. Shares are freely transferrable.
THE MANAGER AND ITS AFFILIATES. The Fund is managed by the Manager,
OppenheimerFunds, Inc., which is responsible for selecting the Fund's
investments and handles its day-to-day business. The Manager carries out its
duties, subject to the policies established by the Board of Trustees, under an
Investment Advisory Agreement which states the Manager's responsibilities. The
Agreement sets forth the fees paid by the Fund to the Manager and describes the
expenses that the Fund is responsible to pay to conduct its business.
The Manager has operated as an investment adviser since 1959. The Manager
(including subsidiaries) currently manages investment companies, including other
Oppenheimer funds, with assets of more than $75 billion as of December 31, 1997,
and with more than 3 million shareholder accounts. The Manager is owned by
Oppenheimer Acquisition Corp., a holding company that is owned in part by senior
officers of the Manager and controlled by Massachusetts Mutual Life Insurance
Company.
o PORTFOLIO MANAGER. The portfolio managers of the Fund are Jay W. Tracey,
III and Alan Gilston. Messrs. Tracey and Gilston are the persons principally
responsible for the day-to-day management of the Fund's portfolio.
Mr. Tracey has been a portfolio manager of the Fund since September, 1994
and from October, 1991 to February 1994. In his most recent previous position,
Mr. Tracey was a managing director of Buckingham Capital Management. Prior to
initially joining the Manager, Mr. Tracey was a Senior Vice President of
Founders Asset Management, Inc. (a mutual fund adviser), prior to which he was a
securities analyst and portfolio manager for Berger Associates, Inc. (investment
adviser). During the past five years, Mr. Tracey has also served as an officer
and portfolio manager for other Oppenheimer funds.
Mr. Gilston has been a portfolio manager of the Fund since September, 1997.
Prior to joining the Manager, Mr. Gilston was a Vice President and portfolio
manager at Schroder Capital Management International, Inc.
o FEES AND EXPENSES. Under the investment advisory agreement, as amended
per a resolution of the Board of Trustees dated December 14, 1995 to reduce the
fee on assets in excess of $1.5 billion (the "Investment Advisory Agreement"),
the Fund pays the Manager a monthly fee at the following annual rates (which may
be higher than the rate paid by some other mutual fund companies), which decline
on additional assets as the Fund grows: 0.75% of the first $200 million of
average annual net assets, 0.72% of the next $200 million, 0.69% of the next
$200 million, 0.66% of the next $200 million, 0.60% of the next $700 million,
and 0.58% of average annual net assets in excess of $1.5 billion. The Fund's
management fee for its fiscal year ended September 30, 1997 was 0.66% of average
annual net assets for its Class A, Class B, Class C and Class Y shares.
The Fund pays expenses related to its daily operations, such as custodian
fees, Trustees' fees, transfer agency fees, legal fees and auditing costs. Those
expenses are paid out of the Fund's assets and are not paid directly by
shareholders. However, those expenses reduce the net asset value of shares, and
therefore are indirectly borne by shareholders through their investment. More
information about the Investment Advisory Agreement and the other expenses paid
by the Fund is contained in the Statement of Additional Information.
There is also information about the Fund's brokerage policies and practices
in "Brokerage Policies of the Fund" in the Statement of Additional Information.
That section discusses how brokers and dealers are selected for the Fund's
portfolio transactions. When deciding which brokers to use, the Manager is
permitted by the Investment Advisory Agreement to consider whether brokers have
sold shares of the Fund or any other funds for which the Manager serves as
investment adviser.
o THE DISTRIBUTOR. The Fund's shares are sold through dealers, brokers and
other financial institutions that have a sales agreement with OppenheimerFunds
Distributor, Inc., a subsidiary of the Manager that acts as the Fund's
Distributor. The Distributor also distributes the shares of the other
Oppenheimer funds and is sub-distributor for funds managed by a subsidiary of
the Manager.
o THE TRANSFER AGENT. The Fund's Transfer Agent is OppenheimerFunds
Services, a division of the Manager, which acts as the shareholder servicing
agent for the Fund on an "at-cost" basis. It also acts as the shareholder
servicing agent for other Oppenheimer funds. Shareholders should direct
inquiries about their account to the Transfer Agent at the address and toll-free
number shown below in this Prospectus and on the back cover.
PERFORMANCE OF THE FUND
EXPLANATION OF PERFORMANCE TERMINOLOGY. The Fund uses the terms "cumulative
total return" and "average annual total return" to illustrate its performance.
The performance of each class of shares is shown separately, because the
performance of each class will usually be different as a result of the different
kinds of expenses each class bears. These returns measure the performance of a
hypothetical account in the Fund over various periods, and do not show the
performance of each shareholder's account (which will vary if dividends are
received in cash or shares are sold or purchased). The Fund's performance
information may be useful to help you see how well your investment in the Fund
has done over time and to compare it to other funds or market indices, as has
been done below.
It is important to understand that the Fund's total returns represent past
performance and should not be considered to be predictions of future returns or
performance. More detailed information about how total returns are calculated is
contained in the Statement of Additional Information, which also contains
information about other ways to measure and compare the Fund's performance. The
Fund's investment performance will vary over time, depending on market
conditions, the composition of the portfolio, expenses and which class of shares
you purchase.
o TOTAL RETURNS. There are different types of total returns used to
measure the Fund's performance. Total return is the change in value of a
hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares.
The cumulative total return measures the change in value over the entire period
(for example, ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the cumulative total
return over the entire period. However, average annual total returns do not show
the Fund's actual year-by-year performance.
When total returns are quoted for Class A shares, normally the current
maximum initial sales charge has been deducted. When total returns are shown for
Class B and Class C shares, normally the contingent deferred sales charge that
applies to the period for which total return is shown has been deducted. Total
returns may also be quoted "at net asset value," without considering the effect
of sales charges, and those returns would be less if sales charges were
deducted.
HOW HAS THE FUND PERFORMED? Below is a discussion by the Manager of the Fund's
performance during its fiscal year ended September 30, 1997, followed by
graphical comparisons of the Fund's performance to a broad-based market index
and a sector index.
o MANAGEMENT'S DISCUSSION OF PERFORMANCE. During the Fund's past fiscal
year ended September 30, 1997, the Fund's positive performance was primarily
affected by economic growth in the stock markets. In particular, the Fund
realized gains on its stock holdings in the energy sector and benefited from
growth in sales and earnings of companies that supply the offshore oil drilling
industry. In addition, certain holdings in the technology sector showed stronger
than expected sales and earnings. However, certain health care stocks held by
the Fund experienced significant price declines caused in part by fears that the
federal government would drastically cut Medicare spending. During the first
seven of the twelve months ended September 30, 1997, investors' general
preference for larger, blue chip multinational corporations as opposed to
"small-cap" companies and the market's preference for value stocks as opposed to
growth stocks hindered the Fund's performance. However, from May, 1997 through
September 30, 1997, small-cap stocks generally rebounded and growth-type stocks
showed renewed vigor. The Fund's portfolio and its portfolio managers'
strategies are subject to change.
o COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs below show
the performance of a hypothetical $10,000 investment in each class of shares of
the Fund held until September 30, 1997: in the case of Class A shares,
performance is measured for the ten years ended September 30, 1997; in the case
of Class B shares, from the inception of the Class on April 1, 1994; in the case
of Class C shares, from the inception of the Class on October 2, 1995; and in
the case of Class Y shares, from the inception of the Class on June 1, 1994. The
graphs reflect the deduction of the 5.75% maximum initial sales charge on Class
A shares, the applicable contingent deferred sales charge on Class B and Class C
shares, and reinvestment of all dividends and capital gains distributions.
The Fund's performance is compared to the performance of the Standard &
Poor's ("S&P") 500 Index and the Russell 2000 Index. The S&P 500 Index is a
broad based index of equity securities widely regarded as the general measure of
the performance of the U.S. equity securities market. The Russell 2000 Index is
a capitalization-weighted index of 2,000 U.S. issuers whose common stocks are
traded on The New York Stock Exchange, the American Stock Exchange, and NASDAQ,
and is widely recognized as a measure of the performance of "mid-capitalization"
stocks.
Index performance reflects the reinvestment of dividends but does not
consider the effect of capital gains or transaction costs, and none of the data
in the graphs below shows the effect of taxes. Moreover, index performance data
does not reflect any assessment of the risk of the investments included in the
index. The Fund's performance reflects the effect of Fund business and operating
expenses. While index comparisons may be useful to provide a benchmark for the
Fund's performance, it must be noted that the Fund's investments are not limited
to the securities in the indices shown.
CLASS A SHARES
Comparison of Change in Value of $10,000 Hypothetical Investments In:
Oppenheimer Discovery Fund (Class A), S&P 500 Index and Russell 2000 Index
[Graph]
AVERAGE ANNUAL TOTAL RETURN OF CLASS A SHARES OF THE FUND AT 9/30/971
1 YEAR 5 YEARS 10 YEARS
2.88% 17.49% 14.66%
CLASS B SHARES
Comparison of Change in Value of $10,000 Hypothetical Investments In:
Oppenheimer Discovery Fund (Class B), S&P 500 Index and Russell 2000 Index
[Graph]
AVERAGE ANNUAL TOTAL RETURN OF CLASS B SHARES OF THE FUND AT 9/30/972
1 YEAR LIFE OF CLASS
3.33% 16.71%
CLASS C SHARES
Comparison of Change in Value of $10,000 Hypothetical Investments In:
Oppenheimer Discovery Fund (Class C), S&P 500 Index and Russell 2000 Index
[Graph]
AVERAGE ANNUAL TOTAL RETURN OF CLASS C SHARES OF THE FUND AT 9/30/973
1 YEAR LIFE OF CLASS
7.39% 17.82%
CLASS Y SHARES
Comparison of Change in Value of $10,000 Hypothetical Investments In:
Oppenheimer Discovery Fund (Class Y), S&P 500 Index and Russell 2000 Index
[Graph]
AVERAGE ANNUAL TOTAL RETURN OF CLASS Y SHARES OF THE FUND AT 9/30/974
1 YEAR LIFE OF CLASS
9.50% 20.42%
Total returns and ending account values in the graphs show change in share value
and include reinvestment of all dividends and capital gains distributions.
1. The inception date of the Fund (Class A shares) was 9/11/86. The average
annual total returns and the ending account value in the graph are shown net of
the current 5.75% maximum initial sales charge.
2. Class B shares of the Fund were first publicly offered on 4/1/94. The average
annual total returns are shown net of the applicable 5% and 3% contingent
deferred sales charges, respectively, for the 1-year period and the life of the
class. The ending account value in the graph is net of the applicable 3%
contingent deferred sales charge.
3. Class C shares of the Fund were first publicly offered on 10/2/95. The
one-year average annual total return is shown net of the applicable 1%
contingent deferred sales charge for the period.
4. Class Y shares of the Fund, first publicly offered on 6/1/94, are offered to
certain institutional investors at net asset value without sales charge .
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
ABOUT YOUR ACCOUNT
HOW TO BUY SHARES
CLASSES OF SHARES. The Fund offers individual investors three different classes
of shares, Class A, Class B and Class C. Only certain institutional investors
may purchase a fourth class of shares, Class Y shares. The different classes of
shares represent investments in the same portfolio of securities but are subject
to different expenses and will likely have different share prices.
o CLASS A SHARES. If you buy Class A shares, you pay an initial sales
charge on investments up to $1 million (up to $500,000 for purchases by
"Retirement Plans," as defined in "Class A Contingent Deferred Sales Charge" on
page 31). If you purchase Class A shares as part of an investment of at least $1
million ($500,000 for Retirement Plans) in shares of one or more Oppenheimer
funds, you will not pay an initial sales charge, but if you sell any of those
shares within 12 months of buying them (18 months if the shares were purchased
prior to May 1, 1997), you may pay a contingent deferred sales charge. The
amount of that sales charge will vary depending on the amount you invested.
Sales charge rates are described in "Buying Class A Shares," below.
o CLASS B SHARES. If you buy Class B shares, you pay no sales charge at
the time of purchase, but if you sell your shares within six years of buying
them, you will normally pay a contingent deferred sales charge that varies
depending on how long you own your shares, as described in"Buying Class B
Shares," below.
O CLASS C SHARES. If you buy Class C shares, you pay no sales charge at
the time of purchase, but if you sell your shares within 12 months of buying
them, you will normally pay a contingent deferred sales charge of 1%, as
described in "Buying Class C Shares," below.
o CLASS Y SHARES. Class Y shares are offered only to certain institutional
investors that have special agreements with the Distributor.
WHICH CLASS OF SHARES SHOULD YOU CHOOSE? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
better suited to your needs depends on a number of factors which you should
discuss with your financial advisor. The Fund's operating costs that apply to a
class of shares and the effect of the different types of sales charges on your
investment will vary your investment results over time. The most important
factors to consider are how much you plan to invest and how long you plan to
hold your investment. If your goals and objectives change over time and you plan
to purchase additional shares, you should re-evaluate those factors to see if
you should consider another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We assumed you are an
individual investor, and therefore ineligible to purchase Class Y shares. We
used the sales charge rates that apply to each class considering the effect of
the annual asset-based sales charges on Class B and Class C expenses (which,
like all expenses, will affect your investment return). For the sake of
comparison, we have assumed that there is a 10% rate of appreciation in the
investment each year. Of course, the actual performance of your investment
cannot be predicted and will vary, based on the Fund's actual investment returns
and the operating expenses borne by each class of shares, and which class of
shares you invest in. The factors discussed below are not intended to be
investment advice, guidelines or recommendations, because each investor's
financial considerations are different. The discussion below of the factors to
consider in purchasing a particular class of shares assumes that you will
purchase only ONE class of shares and not a combination of shares of different
classes.
o HOW LONG DO YOU EXPECT TO HOLD YOUR INVESTMENT? While future financial
needs cannot be predicted with certainty, knowing how long you expect to hold
your investment will assist you in selecting the appropriate class of shares.
Because of the effect of class-based expenses, your choice will also depend on
how much you plan to invest. For example, the reduced sales charges available
for larger purchases of Class A shares may, over time, offset the effect of
paying an initial sales charge on your investment (which reduces the amount of
your investment dollars used to buy shares for your account), compared to the
effect over time of higher class-based expenses on Class B or Class C shares for
which no initial sales charge is paid.
o INVESTING FOR THE SHORT TERM. If you have a short-term investment
horizon (that is, you plan to hold your shares for not more than six years), you
should probably consider purchasing Class A or Class C shares rather than Class
B shares, because of the effect of the Class B contingent deferred sales charge
if you redeem in less than 6 years, as well as the effect of the Class B
asset-based sales charge on the investment return for that class in the
short-term. Class C shares might be the appropriate choice (especially for
investments of less than $100,000), because there is no initial sales charge on
Class C shares, and the contingent deferred sales charge does not apply to
amounts you sell after holding them one year.
However, if you plan to invest more than $100,000 for the shorter term,
then the more you invest and the more your investment horizon increases toward
six years, Class C shares might not be as advantageous as Class A shares. That
is because the annual asset-based sales charge on Class C shares will have a
greater impact on your account over the longer term than the reduced front-end
sales charge available for larger purchases of Class A shares. For example,
Class A shares might be more advantageous than Class C (as well as Class B)
shares for investments of more than $100,000 expected to be held for 5 or 6
years (or more). For investments over $250,000 expected to be held 4 to 6 years
(or more), Class A shares may become more advantageous than Class C (and B)
shares. If investing $500,000 or more, Class A shares may be more advantageous
as your investment horizon approaches 3 years or more.
And for investors who invest $1 million or more, in most cases Class A
shares will be the most advantageous choice, no matter how long you intend to
hold your shares. For that reason, the Distributor normally will not accept
purchase orders of $500,000 or more of Class B shares or $1 million or more of
Class C shares from a single investor.
o INVESTING FOR THE LONGER TERM. If you are investing for the longer term,
for example, for retirement, and do not expect to need access to your money for
seven years or more, Class B shares may be an appropriate consideration, if you
plan to invest less than $100,000. If you plan to invest more than $100,000 over
the long term, Class A shares will likely be more advantageous than Class B or
Class C shares, as discussed above, because of the effect of the expected lower
expenses for Class A shares and the reduced initial sales charges available for
larger investments in Class A shares under the Fund's Right of Accumulation.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses on a hypothetical investment over time, using
the assumed annual performance return stated above, and therefore you should
analyze your options carefully.
o ARE THERE DIFFERENCES IN ACCOUNT FEATURES THAT MATTER TO YOU? Because
some account features may not be available to Class B or Class C shareholders,
or other features (such as Automatic Withdrawal Plans) might not be advisable
(because of the effect of the contingent deferred sales charge) for Class B and
Class C shareholders, you should carefully review how you plan to use your
investment account before deciding which class of shares to buy. For example,
share certificates are not available for Class B or Class C shares, and if you
are considering using your shares as collateral for a loan, that may be a factor
to consider. Additionally, the dividends payable to Class B and Class C
shareholders will be reduced by the additional expenses borne solely by that
class, such as the Class B and Class C asset-based sales charge described below
and in the Statement of Additional Information.
o HOW DOES IT AFFECT PAYMENTS TO MY BROKER? A salesperson, such as a
broker, or any other person who is entitled to receive compensation for selling
Fund shares may receive different compensation for selling one class than for
selling another class. It is important that investors understand that the
purpose of the Class B and Class C contingent deferred sales charge and
asset-based sales charges is the same as the purpose of the front-end sales
charge on sales of Class A shares: to compensate the Distributor for commissions
it pays to dealers and financial institutions for selling shares. The
Distributor may pay additional periodic compensation from its own resources to
securities dealers or financial institutions based upon the value of shares of
the Fund owned by the dealer or financial institution for its own account or for
its customers.
HOW MUCH MUST YOU INVEST? You can open a Fund account with a minimum initial
investment of $1,000 and make additional investments at any time with as little
as $25. There are reduced minimum investments under special investment plans.
o With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7) custodial
plans and military allotment plans, you can make initial and subsequent
investments of as little as $25; and subsequent purchases of at least $25 can be
made by telephone through AccountLink.
o Under pension, profit-sharing and 401(k)plans and Individual Retirement
Accounts (IRAs), you can make an initial investment of as little as $250 (if
your IRA is established under an Asset Builder Plan, the $25 minimum applies),
and subsequent investments may be as little as $25.
o There is no minimum investment requirement if you are buying shares by
reinvesting dividends from the Fund or other Oppenheimer funds (a list of them
appears in the Statement of Additional Information, or you can ask your dealer
or call the Transfer Agent), or by reinvesting distributions from unit
investment trusts that have made arrangements with the Distributor.
o HOW ARE SHARES PURCHASED? You can buy shares several ways -- through any
dealer, broker or financial institution that has a sales agreement with the
Distributor, directly through the Distributor, or automatically from your bank
account through an Asset Builder Plan under the OppenheimerFunds AccountLink
service. The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase (and redemption) orders. When you buy
shares, be sure to specify Class A, Class B or Class C shares. If you do not
choose, your investment will be made in Class A shares.
o BUYING SHARES THROUGH YOUR DEALER. Your dealer will place your order
with the Distributor on your behalf.
o BUYING SHARES THROUGH THE DISTRIBUTOR. Complete an OppenheimerFunds New
Account Application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you
don't list a dealer on the application, the Distributor will act as your agent
in buying the shares. However, we recommend that you discuss your investment
first with a financial advisor, to be sure that it is appropriate for you.
o PAYMENTS BY FEDERAL FUNDS WIRE. Shares may be purchased by Federal Funds
wire. The minimum investment is $2,500. You must FIRST call the Distributor's
Wire Department at 1-800-525-7041 to notify the Distributor of the wire and
receive further instructions.
o BUYING SHARES THROUGH OPPENHEIMERFUNDS ACCOUNTLINK. You can use
AccountLink to link your Fund account with an account at a U.S. bank or other
financial institution that is an Automated Clearing House (ACH) member. You can
then transmit funds electronically to PURCHASE SHARES, to have the Transfer
Agent SEND REDEMPTION PROCEEDS, or to TRANSMIT DIVIDENDS AND DISTRIBUTIONS.
Shares are purchased for your account through AccountLink the regular
business day the Distributor is instructed by you to initiate the ACH transfer
to buy shares. You can provide those instructions automatically, under an Asset
Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. You should request AccountLink
privileges on the application or dealer settlement instructions used to
establish your account. Please refer to "AccountLink" below for more details.
o ASSET BUILDER PLANS. You may purchase shares of the Fund (and up to four
other Oppenheimer funds) automatically each month from your account at a bank or
other financial institution under an Asset Builder Plan with AccountLink.
Details are in the Statement of Additional Information.
|X| AT WHAT PRICE ARE SHARES SOLD? Shares are sold at the public offering
price based on the net asset value (and any initial sales charge that applies)
that is next determined after the Distributor receives the purchase order in
Denver, Colorado, or the order is received and transmitted to the Distributor by
an entity authorized by the Fund to accept purchase or redemption orders. The
Fund has authorized the Distributor, certain broker-dealers and agents or
intermediaries designated by the Distributor or those broker-dealers to accept
orders. In most cases, to enable you to receive that day's offering price, the
Distributor or an authorized entity must receive your order by the time of day
The New York Stock Exchange closes, which is normally 4:00 P.M., New York time,
but may be earlier on some days (all references to time in this Prospectus mean
"New York time"). The net asset value of each class of shares is determined as
of that time on each day The New York Stock Exchange is open (which is a
"regular business day"). If you buy shares through a dealer, the dealer must
receive your order by the close of The New York Stock Exchange on a regular
business day and normally your order must be transmitted to the Distributor so
that it is received before the Distributor's close of business that day, which
is normally 5:00 P.M. THE DISTRIBUTOR, IN ITS SOLE DISCRETION, MAY REJECT ANY
PURCHASE ORDER FOR THE FUND'S SHARES.
SPECIAL SALES CHARGE ARRANGEMENTS FOR CERTAIN PERSONS. Appendix A to this
Prospectus sets forth conditions for the waiver of, or exemption from, sales
charges or the special sales charge rates that apply to purchases of shares of
the Fund (including purchases by exchange) by a person who was a shareholder of
one of the Former Quest for Value Funds (as defined in that Appendix).
BUYING CLASS A SHARES. Class A shares are sold at their offering price, which is
normally net asset value plus an initial sales charge. However, in some cases,
described below, purchases are not subject to an initial sales charge, and the
offering price will be the net asset value. In some cases, reduced sales charges
may be available, as described below. Out of the amount you invest, the Fund
receives the net asset value to invest for your account. The sales charge varies
depending on the amount of your purchase. A portion of the sales charge may be
retained by the Distributor and allocated to your dealer as commission. The
current sales charge rates and commissions paid to dealers and brokers are as
follows:
FRONT-END FRONT-END COMMISSION
SALES CHARGE SALES CHARGE AS PERCENTAGE
AS PERCENTAGE OF AS PERCENTAGE OF OF OFFERING
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED PRICE
- ------------------------------------------------------------------------------
Less than $25,000 5.75% 6.10% 4.75%
- ------------------------------------------------------------------------------
$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
- ------------------------------------------------------------------------------
$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
- ------------------------------------------------------------------------------
$100,000 or more but
less than $250,000 3.75% 3.90% 3.00%
- ------------------------------------------------------------------------------
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
- ------------------------------------------------------------------------------
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
The Distributor reserves the right to reallow the entire commission to dealers.
If that occurs, the dealer may be considered an "underwriter" under Federal
securities laws.
|X| CLASS A CONTINGENT DEFERRED SALES CHARGE. There is no initial
sales charge on purchases of Class A shares of any one or more of the
Oppenheimer funds in the following cases:
o Purchases aggregating $1 million or more;
o Purchases by a retirement plan qualified under section 401(a) if the
retirement plan has total plan assets of $500,000 or more.
o Purchases by a retirement plan qualified under sections 401(a) or 401(k)
of the Internal Revenue Code, by a non-qualified deferred compensation plan,
employee benefit plan, group retirement plan (see "How to Buy Shares -
Retirement Plans" in the Statement of Additional Information for further
details), an employee's 403(b)(7) custodial plan account, SEP IRA, SARSEP, or
SIMPLE plan (all of these plans are collectively referred to as "Retirement
Plans"), that: (1) buys shares costing $500,000 or more or (2) has, at the time
of purchase, 100 or more eligible participants, or (3) certifies that it
projects to have annual plan purchases of $200,000 or more; or
o Purchases by an OppenheimerFunds Rollover IRA if the purchases are made
(1) through a broker, dealer, bank or registered investment adviser that has
made special arrangements with the Distributor for these purchases, or (2) by a
direct rollover of a distribution from a qualified retirement plan if the
administrator of that plan has made special arrangements with the Distributor
for those purchases.
The Distributor pays dealers of record commissions on those purchases in
an amount equal to (i) 1.0% for non-Retirement Plan accounts, and (ii) for
Retirement Plan accounts, 1.0% of the first $2.5 million, plus 0.50% of the next
$2.5 million, plus 0.25% of purchases over $5 million, calculated on a calendar
year basis. That commission will be paid only on those purchases that were not
previously subject to a front-end sales charge and dealer commission. No sales
commission will be paid to the dealer, broker or financial institution on Class
A shares purchased with the redemption proceeds of shares of a mutual fund
offered as an investment option in a Retirement Plan in which Oppenheimer funds
are also offered as investment options under a special arrangement with the
Distributor if the purchase occurs more than 30 days after the addition of the
Oppenheimer funds as an investment option to the Retirement Plan.
If you redeem any of those shares purchased prior to May 1, 1997, within
18 months of the end of the calendar month of their purchase, a contingent
deferred sales charge (called the "Class A contingent deferred sales charge")
may be deducted from the redemption proceeds. A Class A contingent deferred
sales charge may be deducted from the proceeds of any of those shares purchased
on or after May 1, 1997 that are redeemed within 12 months of the end of the
calendar month of their purchase. That sales charge may be equal to 1.0% of the
lesser of (1) the aggregate net asset value of the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gains
distributions) or (2) the original offering price (which is the original net
asset value) of the redeemed shares. However, the Class A contingent deferred
sales charge will not exceed the aggregate amount of the commissions the
Distributor paid to your dealer on all Class A shares of all Oppenheimer funds
you purchased subject to the Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable, the
Fund will first redeem shares that are not subject to the sales charge,
including shares purchased by reinvestment of dividends and capital gains, and
then will redeem other shares in the order that you purchased them. The Class A
contingent deferred sales charge is waived in certain cases described in
"Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges of
shares under the Fund's exchange privilege (described below). However, if the
shares acquired by exchange are redeemed within 12 months (18 months for shares
purchased prior to May 1, 1997) of the end of the calendar month of the purchase
of the exchanged shares, the sales charge will apply.
|X| SPECIAL ARRANGEMENTS WITH DEALERS. The Distributor may advance up to
13 months' commissions to dealers that have established special arrangements
with the Distributor for Asset Builder Plans for their clients.
REDUCED SALES CHARGES FOR CLASS A SHARE PURCHASES. You may be eligible to buy
Class A shares at reduced sales charge rates in one or more of the following
ways:
o RIGHT OF ACCUMULATION. To qualify for the lower sales charge rates that
apply to larger purchases of Class A shares, you and your spouse can add
together Class A and Class B shares you purchase for your individual accounts,
or jointly, or for trust or custodial accounts on behalf of your children who
are minors. A fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit plans of the
same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A and Class
B shares of the Fund and other Oppenheimer funds to reduce the sales charge rate
that applies to current purchases of Class A shares. You can also include Class
A and Class B shares of Oppenheimer funds you previously purchased subject to an
initial or contingent deferred sales charge to reduce the sales charge rate for
current purchases of Class A shares, provided that you still hold your
investment in one of the Oppenheimer funds. The Distributor will add the value,
at current offering price, of the shares you previously purchased and currently
own to the value of current purchases to determine the sales charge rate that
applies. The Oppenheimer funds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Distributor. The reduced sales charge will apply only to current purchases and
must be requested when you buy your shares.
o LETTER OF INTENT. Under a Letter of Intent, if you purchase Class A
shares or Class A and Class B shares of the Fund and other Oppenheimer funds
during a 13-month period, you can reduce the sales charge rate that applies to
your purchases of Class A shares. The total amount of the intended purchases of
both Class A and Class B shares will determine your reduced sales charge rate
for the Class A shares purchased during that period. This can include purchases
made up to 90 days before the date of the Letter. More information is contained
in the Application and in "Reduced Sales Charges" in the Statement of Additional
Information.
o WAIVERS OF CLASS A SALES CHARGES. The Class A sales charges are not
imposed in the circumstances described below. There is an explanation of this
policy in "Reduced Sales Charges" in the Statement of Additional Information. In
order to receive a waiver of the Class A contingent deferred sales charge, you
must notify the Transfer Agent as to which conditions apply.
WAIVERS OF INITIAL AND CONTINGENT DEFERRED SALES CHARGES FOR CERTAIN
PURCHASERS. Class A shares purchased by the following investors are not subject
to any Class A sales charges:
o the Manager or its affiliates;
o present or former officers, directors, trustees and employees (and their
"immediate families" as defined in "Reduced Sales Charges" in the Statement of
Additional Information) of the Fund, the Manager and its affiliates, and
retirement plans established by them for their employees;
o registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose;
o dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for their
employees;
o employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered into
sales arrangements with such dealers or brokers (and are identified to the
Distributor) or with the Distributor; the purchaser must certify to the
Distributor at the time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor children);
o dealers, brokers or registered investment advisers that have entered
into an agreement with the Distributor providing specifically for the use of
shares of the Fund in particular investment products made available to their
clients (those clients may be charged a transaction fee by their dealer, broker
or adviser for the purchase or sale of Fund shares);
o employee benefit plans purchasing shares through a shareholder agent
which the Distributor has appointed as its agent to accept those purchase
orders;
o (1) investment advisors and financial planners who have entered into an
agreement for this purpose with the Distributor and who charge an advisory,
consulting or other fee for their services and buy shares for their own accounts
or the accounts of their clients, (2) Retirement Plans and deferred compensation
plans and trusts used to fund those Plans (including, for example, plans
qualified or created under sections 401(a), 403(b) or 457 of the Internal
Revenue Code), and "rabbi trusts" that buy shares for their own accounts, in
each case if those purchases are made through a broker or agent or other
financial intermediary that has made special arrangements with the Distributor
for those purchases; and (3) clients of such investment advisors or financial
planners (that have entered into an agreement for this purpose with the
Distributor) who buy shares for their own accounts may also purchase shares
without sales charge but only if their accounts are linked to a master account
of their investment advisor or financial planner on the books and records of the
broker, agent or financial intermediary with which the Distributor has made such
special arrangements (each of these investors may be charged a fee by the
broker, agent or financial intermediary for purchasing shares);
o directors, trustees, officers or full-time employees of OpCap Advisors
or its affiliates, their relatives or any trust, pension, profit sharing or
other benefit plan which beneficially owns shares for those persons;
o accounts for which Oppenheimer Capital is the investment adviser (the
Distributor must be advised of this arrangement) and persons who are directors
or trustees of the company or trust which is the beneficial owner of such
accounts;
o any unit investment trust that has entered into an appropriate
agreement with the Distributor;
o qualified retirement plans that had agreed with the former Quest for
Value Advisors to purchase shares of any of the Former Quest for Value Funds at
net asset value, with such shares to be held through DCXchange, a sub-transfer
agency mutual fund clearinghouse, provided that such arrangements are
consummated and share purchases commence by December 31, 1996.
WAIVERS OF INITIAL AND CONTINGENT DEFERRED SALES CHARGES IN CERTAIN
TRANSACTIONS. Class A shares issued or purchased in the following transactions
are not subject to Class A sales charges:
o shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
o shares purchased by the reinvestment of loan repayments by a participant
in a retirement plan for which the Manager or its affiliates acts as sponsor;
o shares purchased by the reinvestment of dividends or other distributions
reinvested from the Fund or other Oppenheimer funds (other than Oppenheimer Cash
Reserves) or unit investment trusts for which reinvestment arrangements have
been made with the Distributor;
o shares purchased and paid for with the proceeds of shares redeemed in
the past 30 days from a mutual fund (other than a fund managed by the Manager or
any of its subsidiaries) on which an initial sales charge or contingent deferred
sales charge was paid (this waiver also applies to shares purchased by exchange
of shares of Oppenheimer Money Market Fund, Inc. that were purchased and paid
for in this manner); this waiver must be requested when the purchase order is
placed for your shares of the Fund, and the Distributor may require evidence of
your qualification for this waiver; or
o shares purchased with the proceeds of maturing principal of units of any
Qualified Unit Investment Liquid Trust Series.
WAIVERS OF THE CLASS A CONTINGENT DEFERRED SALES CHARGE FOR CERTAIN
REDEMPTIONS. The Class A contingent deferred sales charge is also waived if
shares that would otherwise be subject to the contingent deferred sales charge
are redeemed in the following cases:
o to make Automatic Withdrawal Plan payments that are limited annually to
no more than 12% of the original account value;
o involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (see "Shareholder Account Rules and Policies,"
below;)
o if, at the time of purchase of shares (prior to May 1, 1997) the dealer
agreed in writing to accept the dealer's portion of the sales commission in
installments of 1/18th of the commission per month (and no further commission
will be payable if the shares are redeemed within 18 months of purchase);
o if, at the time of purchase of shares (if purchased during the period
May 1, 1997 through December 31, 1997) the dealer agrees in writing to accept
the dealer's portion of the sales commission in installments of 1/12th of the
commission per month (and no further commission will be payable if the shares
are redeemed within 12 months of purchase);
o for distributions from Retirement Plans, deferred compensation plans or
other employee benefit plans for any of the following purposes: (1) following
the death or disability (as defined in the Internal Revenue Code) of the
participant or beneficiary (the death or disability must occur after the
participant's account was established); (2) to return excess contributions; (3)
to return contributions made due to a mistake of fact; (4) hardship withdrawals,
as defined in the plan; (5) under a Qualified Domestic Relations Order, as
defined in the Internal Revenue Code; (6) to meet the minimum distribution
requirements of the Internal Revenue Code; (7) to establish "substantially equal
periodic payments" as described in Section 72(t) of the Internal Revenue Code;
(8) for retirement distributions or loans to participants or beneficiaries; (9)
separation from service; (10) participant-directed redemptions to purchase
shares of a mutual fund (other than a fund managed by the Manager or its
subsidiary) offered as an investment option in a Retirement Plan in which
Oppenheimer funds are also offered as investment options under a special
arrangement with the Distributor; or (11) plan termination or "in-service
distributions," if the redemption proceeds are rolled over directly to an
OppenheimerFunds IRA.
o for distributions from Retirement Plans having 500 or more eligible
participants, except distributions due to termination of all of the Oppenheimer
funds as an investment option under the Plan; and
o for distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing this waiver.
o SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for
Class A shares to reimburse the Distributor for a portion of its costs incurred
in connection with the personal service and maintenance of shareholder accounts
that hold Class A shares. Reimbursement is made quarterly at an annual rate that
may not exceed 0.25% of the average annual net assets of Class A shares of the
Fund. The Distributor uses all of those fees to compensate dealers, brokers,
banks and other financial institutions quarterly for providing personal service
and maintenance of accounts of their customers that hold Class A shares and to
reimburse itself (if the Fund's Board of Trustees authorizes such
reimbursements, which it has not yet done) for its other expenditures under the
Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining accounts in
the Fund, making the Fund's investment plans available and providing other
services at the request of the Fund or the Distributor. Payments are made by the
Distributor quarterly at an annual rate not to exceed 0.25% of the average
annual net assets of Class A shares held in accounts of the service provider or
its customers. The payments under the Plan increase the annual expenses of Class
A shares. For more details, please refer to "Distribution and Service Plans" in
the Statement of Additional Information.
BUYING CLASS B SHARES. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed within
6 years of their purchase, a contingent deferred sales charge will be deducted
from the redemption proceeds. That sales charge will not apply to shares
purchased by the reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge will be based on the lesser of the net asset
value of the redeemed shares at the time of redemption or the original offering
price (which is the original net asset value). The contingent deferred sales
charge is not imposed on the amount of your account value represented by the
increase in net asset value over the initial purchase price. The Class B
contingent deferred sales charge is paid to the Distributor to reimburse its
expenses of providing distribution-related services to the Fund in connection
with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 6 years, and (3) shares held the longest during the 6-year period. The
contingent deferred sales charge is not imposed in the circumstances described
in "Waivers of Class B and Class C Sales Charges," below.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
YEARS SINCE BEGINNING OF CONTINGENT DEFERRED SALES CHARGE
MONTH IN WHICH PURCHASE ON REDEMPTIONS IN THAT YEAR
ORDER WAS ACCEPTED (AS % OF AMOUNT SUBJECT TO CHANGE)
- ------------------------------------------------------------------------------
0 - 1 5.0%
- ------------------------------------------------------------------------------
1 - 2 4.0%
- ------------------------------------------------------------------------------
2 - 3 3.0%
- ------------------------------------------------------------------------------
3 - 4 3.0%
- ------------------------------------------------------------------------------
4 - 5 2.0%
- ------------------------------------------------------------------------------
5 - 6 1.0%
- ------------------------------------------------------------------------------
6 and following None
In the table, a "year" is a 12-month period. All purchases are considered
to have been made on the first regular business day of the month in which the
purchase was made.
o AUTOMATIC CONVERSION OF CLASS B SHARES. 72 months after you purchase
Class B shares, those shares will automatically convert to Class A shares. This
conversion feature relieves Class B shareholders of the asset-based sales charge
that applies to Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset value of the
two classes, and no sales load or other charge is imposed. When Class B shares
convert, any other Class B shares that were acquired by the reinvestment of
dividends and distributions on the converted shares will also convert to Class A
shares. The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A, Class B and Class
C Shares" in the Statement of Additional Information.
BUYING CLASS C SHARES. Class C shares are sold at net asset value per share
without an initial sales charge. However, if Class C shares are redeemed within
12 months of their purchase, a contingent deferred sales charge of 1.0% will be
deducted from the redemption proceeds. That sales charge will not apply to
shares purchased by the reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge will be based on the lesser
of the net asset value of the redeemed shares at the time of redemption or the
original offering price (which is the original net asset value). The contingent
deferred sales charge is not imposed on the amount of your account value
represented by the increase in net asset value over the initial purchase price.
The Class C contingent deferred sales charge is paid to the Distributor to
reimburse its expenses of providing distribution-related services to the Fund in
connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 12 months, and (3) shares held the longest during the 12- month period.
DISTRIBUTION AND SERVICE PLANS FOR CLASS B AND CLASS C SHARES. The Fund has
adopted Class B and Class C Distribution and Service Plans to reimburse the
Distributor, in the case of Class B shares, and to compensate the Distributor,
in the case of Class C shares, for distributing Class B and Class C shares and
servicing accounts. Under the Plans, the Fund pays the Distributor an annual
"asset-based sales charge" of 0.75% per year on Class B shares and on Class C
shares. The Distributor also receives an annual service fee of under each plan,
which is a maximum of 0.25% for Class B and 0.25% for Class C shares.
Under each Plan, both fees are computed on the average of the net asset
value of shares in the respective class, determined as of the close of each
regular business day during the period. The asset-based sales charge and service
fees increase Class B and Class C expenses by up to 1.00% of the net assets per
year of the respective class.
The Distributor uses the service fees to compensate dealers for providing
personal services for accounts that hold Class B or Class C shares. Those
services are similar to those provided under the Class A Service Plan, described
above. The Distributor pays the 0.25% service fees to dealers in advance for the
first year after Class B or Class C shares have been sold by the dealer and
retains the service fee paid by the Fund in that year. After the shares have
been held for a year, the Distributor pays the service fees to dealers on a
quarterly basis.
The asset-based sales charge allows investors to buy Class B or Class C
shares without a front-end sales charge while allowing the Distributor to
compensate dealers that sell those shares. The Fund pays the asset-based sales
charges to the Distributor for its services rendered in distributing Class B and
Class C shares. Those payments are at a fixed rate that is not related to the
Distributor's expenses. The services rendered by the Distributor include paying
and financing the payment of sales commissions, service fees and other costs of
distributing and selling Class B and Class C shares.
The Distributor currently pays sales commissions of 3.75% of the purchase
price of Class B shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class B shares is 4.00% of the
purchase price. If a dealer has a special agreement with the Distributor, the
Distributor may pay the Class B service fee and the asset-based sales charge to
the dealer quarterly in lieu of paying the sales commission and service fee
advance at the time of purchase.
The Distributor currently pays sales commissions of 0.75% of the purchase
price of Class C shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class C shares is 1.00% of the
purchase price. If a dealer has a special agreement with the Distributor, the
Distributor may pay the Class C service fee and the asset-based sales charge to
the dealer quarterly in lieu of paying the sales commission and service fee
advance at the time of purchase.
The Distributor's actual expenses in selling Class B and Class C shares
may be more than the payments it receives from contingent deferred sales charges
collected on redeemed shares and from the Fund under the Distribution and
Service Plans for Class B and Class C shares. If the Fund terminates either
Plan, the Board of Trustees may allow the Fund to continue payments of the
service fee or the asset-based sales charge to the Distributor for certain
expenses it incurred before the Plan was terminated. At September 30, 1997, the
end of the Class B and Class C Plan year, the Distributor had incurred
unreimbursed expenses under the Plans of $7,906,753 and $369,234, respectively
(equal to 2.45% and 0.89% of the Fund's net assets represented by Class B and
Class C shares, respectively), which, as to Class B shares, has been carried
over into the present plan years.
WAIVERS OF CLASS B AND CLASS C SALES CHARGES. The Class B and Class C contingent
deferred sales charges will not be applied to shares purchased in certain types
of transactions nor will it apply to Class B and Class C shares redeemed in
certain circumstances as described below. The reasons for this policy are in
"Reduced Sales Charges" in the Statement of Additional Information. In order to
receive a waiver of the Class B or Class C contingent deferred sales charge, you
must notify the Transfer Agent as to which conditions apply.
WAIVERS FOR REDEMPTIONS OF SHARES IN CERTAIN CASES. The Class B and Class
C contingent deferred sales charges will be waived for redemptions of shares in
the following cases:
o distributions to participants or beneficiaries from Retirement Plans, if
the distributions are made (a) under an Automatic Withdrawal Plan after the
participant reaches age 59-1/2, as long as the payments are no more than 10% of
the account value annually (measured from the date the Transfer Agent receives
the request), or (b) following the death or disability (as defined in the
Internal Revenue Code) of the participant or beneficiary (the death or
disability must have occurred after the account was established);
o redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder, including a trustee of a
"grantor" trust or revocable living trust for which the trustee is also the sole
beneficiary (the death or disability must have occurred after the account was
established, and for disability you must provide evidence of a determination of
disability by the Social Security Administration);
o returns of excess contributions to Retirement Plans;
o distributions from retirement plans to make "substantially equal
periodic payments" as permitted in Section 72(t) of the Internal Revenue Code
that do not exceed 10% of the account value annually, measured from the date the
Transfer Agent receives the request; or
o shares redeemed involuntarily, as described below.
o distributions from OppenheimerFunds prototype 401(k) plans and from
certain Massachusetts Mutual Life Insurance Company prototype 401(k) plans (1)
for hardship withdrawals; (2) under a Qualified Domestic Relations Order, as
defined in the Internal Revenue Code; (3) to meet minimum distribution
requirements as defined in the Internal Revenue Code; (4) to make "substantially
equal periodic payments" as described in Section 72(t) of the Internal Revenue
Code; (5) for separation from service; or (6) for loans to participants or
beneficiaries.
o Distributions from 401(k) plans sponsored by broker-dealers that have
entered into a special agreement with the Distributor allowing this waiver.
WAIVERS FOR SHARES SOLD OR ISSUED IN CERTAIN TRANSACTIONS. The contingent
deferred sales charge is also waived on Class B and Class C shares sold or
issued in the following cases:
o shares sold to the Manager or its affiliates;
o shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or the
Distributor for that purpose;
o shares issued in plans of reorganization to which the Fund is a
party; or
BUYING CLASS Y SHARES. Class Y shares are sold at net asset value per share
without sales charge directly to certain institutional investors, such as
insurance companies, registered investment companies and employee benefit plans,
that have special agreements with the Distributor for this purpose. These
include Massachusetts Mutual Life Insurance Company, an affiliate of the
Manager, which may purchase Class Y shares of the Fund and other Oppenheimer
funds (as well as Class Y shares of funds advised by MassMutual) for asset
allocation programs, investment companies or separate investment accounts it
sponsors and offers to its customers. Individual investors are not able to
invest in Class Y shares directly.
While Class Y shares are not subject to initial or contingent deferred
sales charges or asset-based sales charges, an institutional investor buying the
shares for its customers' accounts may impose charges on those accounts. The
procedures for purchasing, redeeming, exchanging, or transferring the Fund's
other classes of shares (other than the time those orders must be received by
the Distributor or Transfer Agent in Denver) and the special account features
available to purchasers of those other classes of shares described elsewhere in
this Prospectus do not apply to Class Y shares. Instructions for purchasing,
redeeming, exchanging or transferring Class Y shares must be submitted by the
institutional investor, not by its customers for whose benefit the shares are
held.
SPECIAL INVESTOR SERVICES
ACCOUNTLINK. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send money
electronically between those accounts to perform a number of types of account
transactions. These include purchases of shares by telephone (either through a
service representative or by PhoneLink, described below), automatic investments
under Asset Builder Plans, and sending dividends and distributions or Automatic
Withdrawal Plan payments directly to your bank account. Please call the Transfer
Agent for more information.
AccountLink privileges should be requested on your dealer's settlement
instructions if you buy your shares through your dealer. After your account is
established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent. AccountLink privileges
will apply to each shareholder listed in the registration on your account as
well as to your dealer representative of record unless and until the Transfer
Agent receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the Transfer
Agent signed by all shareholders who own the account.
o USING ACCOUNTLINK TO BUY SHARES. Purchases may be made by telephone only
after your account has been established. To purchase shares in amounts up to
$250,000 through a telephone representative, call the Distributor at
1-800-852-8457. The purchase payment will be debited from your bank account.
o PHONELINK. PhoneLink is the OppenheimerFunds automated telephone system
that enables shareholders to perform a number of account transactions
automatically using a touch-tone phone. PhoneLink may be used on
already-established Fund accounts after you obtain a Personal Identification
Number (PIN), by calling the special PhoneLink number:
1-800-533-3310.
o PURCHASING SHARES. You may purchase shares in amounts up to $100,000 by
phone, by calling 1-800-533-3310. You must have established AccountLink
privileges to link your bank account with the Fund, to pay for these purchases.
o EXCHANGING SHARES. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your Fund
account to another Oppenheimer funds account you have already established by
calling the special PhoneLink number. Please refer to "How to Exchange Shares,"
below, for details.
o SELLING SHARES. You can redeem shares by telephone automatically by
calling the PhoneLink number and the Fund will send the proceeds directly to
your AccountLink bank account. Please refer to "How to Sell Shares," below, for
details.
SHAREHOLDER TRANSACTIONS BY FAX. Requests for certain account transactions may
be sent to the Transfer Agent by fax (telecopier). Please call 1-800-525-7048
for information about which transactions are included. Transaction requests
submitted by fax are subject to the same rules and restrictions as written and
telephone requests described in this Prospectus.
OPPENHEIMERFUNDS INTERNET WEB SITE. Information about the Fund, including your
account balance, daily share prices, market and Fund portfolio information, may
be obtained by visiting the OppenheimerFunds Internet Web Site, at the following
Internet address: http://www.oppenheimerfunds.com. In 1998, the Transfer Agent
anticipates offering certain account transactions through the Internet Web Site.
To find out more information about those transactions and procedures, please
visit the Web Site.
AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The Fund has several plans that enable
you to sell shares automatically or exchange them to another Oppenheimer funds
account on a regular basis:
o AUTOMATIC WITHDRAWAL PLANS. If your Fund account is $5,000 or more,
you can establish an Automatic Withdrawal Plan to receive payments of at
least $50 on a monthly, quarterly, semi-
annual or annual basis. The checks may be sent to you or sent automatically to
your bank account on AccountLink. You may even set up certain types of
withdrawals of up to $1,500 per month by telephone. You should consult the
Statement of Additional Information for more details.
o AUTOMATIC EXCHANGE PLANS. You can authorize the Transfer Agent to
automatically exchange an amount you establish in advance for shares of up to
five other Oppenheimer funds on a monthly, quarterly, semi-annual or annual
basis under an Automatic Exchange Plan. The minimum purchase for each
Oppenheimer funds account is $25. These exchanges are subject to the terms of
the exchange privilege, described below.
REINVESTMENT PRIVILEGE. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies to Class A shares that you
purchased subject to an initial sales charge and to Class A or Class B shares on
which you paid a contingent deferred sales charge when you redeemed them. This
privilege does not apply to Class C shares. You must be sure to ask the
Distributor for this privilege when you send your payment. Please consult the
Statement of Additional Information for more details.
RETIREMENT PLANS. Fund shares are available as an investment for your retirement
plans. If you participate in a plan sponsored by your employer, the plan trustee
or administrator must make the purchase of shares for your retirement plan
account. The Distributor offers a number of different retirement plans that can
be used by individuals and employers:
o INDIVIDUAL RETIREMENT ACCOUNTS including rollover IRAs, for
individuals and their spouses
o 403(B)(7) CUSTODIAL PLANS for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
o SEP-IRAS (Simplified Employee Pension Plans) for small business owners
or people with income from self-employment, including SAR/SEP-IRAs
o PENSION AND PROFIT-SHARING PLANS for self-employed persons and other
employers
o 401(K) PROTOTYPE RETIREMENT PLANS for businesses
Please call the Distributor for the OppenheimerFunds plan documents, which
contain important information and applications.
HOW TO SELL SHARES
You can arrange to take money out of your account by selling (redeeming) some or
all of your shares on any regular business day. Your shares will be sold at the
net asset value next calculated after your order is received and accepted by the
Transfer Agent. The Fund offers you a number of ways to sell your shares: in
writing or by telephone. You can also set up Automatic Withdrawal Plans to
redeem shares on a regular basis, as described above. IF YOU HAVE QUESTIONS
ABOUT ANY OF THESE PROCEDURES, AND ESPECIALLY IF YOU ARE REDEEMING SHARES IN A
SPECIAL SITUATION, SUCH AS DUE TO THE DEATH OF THE OWNER, OR FROM A RETIREMENT
PLAN, PLEASE CALL THE TRANSFER AGENT FIRST, AT 1-800-525- 7048, FOR ASSISTANCE.
o RETIREMENT ACCOUNTS. To sell shares in an OppenheimerFunds retirement
account in your name, call the Transfer Agent for a distribution request form.
There are special income tax withholding requirements for distributions from
retirement plans and you must submit a withholding form with your request to
avoid delay. If your retirement plan account is held for you by your employer,
you must arrange for the distribution request to be sent by the plan
administrator or trustee. There are additional details in the Statement of
Additional Information.
o CERTAIN REQUESTS REQUIRE A SIGNATURE GUARANTEE. To protect you and the
Fund from fraud, certain redemption requests must be in writing and must include
a signature guarantee in the following situations (there may be other situations
also requiring a signature guarantee):
o You wish to redeem more than $50,000 worth of shares and receive a
check
o The redemption check is not payable to all shareholders listed on the
account statement
o The redemption check is not sent to the address of record on your
account statement
o Shares are being transferred to a Fund account with a different owner
or name
o Shares are redeemed by someone other than the owners (such as an
Executor)
o WHERE CAN I HAVE MY SIGNATURE GUARANTEED? The Transfer Agent will accept
a guarantee of your signature by a number of financial institutions, including:
a U.S. bank, trust company, credit union or savings association, or by a foreign
bank that has a U.S. correspondent bank, or by a U.S. registered dealer or
broker in securities, municipal securities or government securities, or by a
U.S. national securities exchange, a registered securities association or a
clearing agency. If you are signing on behalf of a corporation, partnership or
other business, or as a fiduciary, you must also include your title in the
signature.
SELLING SHARES BY MAIL. Write a "letter of instructions" that includes:
o Your name
o The Fund's name
o Your Fund account number (from your account statement)
o The dollar amount or number of shares to be redeemed
o Any special payment instructions
o Any share certificates for the shares you are selling
o The signatures of all registered owners exactly as the account is
registered
o Any special requirements or documents requested by the Transfer Agent to
assure proper authorization of the person asking to sell shares.
USE THE FOLLOWING ADDRESS FOR SEND COURIER OR EXPRESS MAIL
REQUESTS BY MAIL: REQUESTS TO:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue, Building D
Denver, Colorado 80217 Denver, Colorado 80231
SELLING SHARES BY TELEPHONE. You and your dealer representative of record may
also sell your shares by telephone. To receive the redemption price on a regular
business day, your call must be received by the Transfer Agent by the close of
The New York Stock Exchange that day, which is normally 4:00 P.M., but may be
earlier on some days. YOU MAY NOT REDEEM SHARES HELD IN AN OPPENHEIMERFUNDS
RETIREMENT PLAN OR UNDER A SHARE CERTIFICATE BY TELEPHONE.
o To redeem shares through a service representative, call 1-800-852-8457
o To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address on the
account statement, or, if you have linked your Fund account to your bank account
on AccountLink, you may have the proceeds wired to that bank account.
o TELEPHONE REDEMPTIONS PAID BY CHECK. Up to $50,000 may be redeemed by
telephone in any 7-day period. The check must be payable to all owners of record
of the shares and must be sent to the address on the account statement. This
service is not available within 30 days of changing the address on an account.
o TELEPHONE REDEMPTIONS THROUGH ACCOUNTLINK . There are no dollar limits
on telephone redemption proceeds sent to a bank account designated when you
establish AccountLink. Normally the ACH transfer to your bank is initiated on
the business day after the redemption. You do not receive dividends on the
proceeds of the shares you redeemed while they are waiting to be transferred.
SELLING SHARES THROUGH YOUR DEALER. The Distributor has made arrangements to
repurchase Fund shares from dealers and brokers on behalf of their customers.
Please call your dealer for more information about this procedure. Brokers or
dealers may charge for that service. Please refer to "Special Arrangements for
Repurchase of Shares from Dealers and Brokers" in the Statement of Additional
Information for more details.
HOW TO EXCHANGE SHARES
Shares of the Fund may be exchanged for shares of certain Oppenheimer funds at
net asset value per share at the time of exchange, without sales charge. To
exchange shares, you must meet several conditions:
o Shares of the fund selected for exchange must be available for sale
in your state of residence
o The prospectuses of this Fund and the fund whose shares you want to
buy must offer the exchange privilege
o You must hold the shares you buy when you establish your account for at
least 7 days before you can exchange them; after the account is open 7 days, you
can exchange shares every regular business day
o You must meet the minimum purchase requirements for the fund you
purchase by exchange
o Before exchanging into a fund, you should obtain and read its
prospectus
SHARES OF A PARTICULAR CLASS OF THE FUND MAY BE EXCHANGED ONLY FOR SHARES
OF THE SAME CLASS IN THE OTHER OPPENHEIMER FUNDS. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At present,
Oppenheimer Money Market Fund, Inc. offers only one class of shares, which are
considered to be Class A shares for this purpose. In some cases, sales charges
may be imposed on exchange transactions. Please refer to "How to Exchange
Shares" in the Statement of Additional Information for more details.
Exchanges may be requested in writing or by telephone:
o WRITTEN EXCHANGE REQUESTS. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the Transfer
Agent at the addresses listed in "How to Sell Shares."
o TELEPHONE EXCHANGE REQUESTS. Telephone exchange requests may be made
either by calling a service representative at 1-800-852-8457 or by using
PhoneLink for automated exchanges, by calling 1-800-533-3310. Telephone
exchanges may be made only between accounts that are registered with the same
name(s) and address. Shares held under certificates may not be exchanged by
telephone.
You can find a list of Oppenheimer funds currently available for exchanges
in the Statement of Additional Information or obtain one by calling a service
representative at 1-800-525-7048. That list can change from time to time.
There are certain exchange policies you should be aware of:
o Shares are normally redeemed from one fund and purchased from the other
fund in the exchange transaction on the same regular business day on which the
Transfer Agent receives an exchange request that is in proper form by the close
of The New York Stock Exchange that day, which is normally 4:00 P.M. but may be
earlier on some days. However, either fund may delay the purchase of shares of
the fund you are exchanging into up to 7 days if it determines it would be
disadvantaged by a same-day transfer of the proceeds to buy shares. For example,
the receipt of multiple exchange requests from a dealer in a "market-timing"
strategy might require the sale of portfolio securities at a time or price
disadvantageous to the Fund.
o Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request that
will disadvantage it, or to refuse multiple exchange requests submitted by a
shareholder or dealer.
o The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund will attempt to provide you notice whenever it is
reasonably able to do so, it may impose these changes at any time.
o For tax purposes, exchanges of shares involve a redemption of the shares
of the Fund you own and a purchase of the shares of the other fund, which may
result in a capital gain or loss. For more information about taxes affecting
exchanges, please refer to "How to Exchange Shares" in the Statement of
Additional Information.
o If the Transfer Agent cannot exchange all the shares you request because
of a restriction cited above, only the shares eligible for exchange will be
exchanged.
SHAREHOLDER ACCOUNT RULES AND POLICIES
o NET ASSET VALUE PER SHARE is determined for each class of shares as of
the close of The New York Stock Exchange, which is normally 4:00 P.M. but may be
earlier on some days, on each day the Exchange is open by dividing the value of
the Fund's net assets attributable to a class by the number of shares of that
class that are outstanding. The Fund's Board of Trustees has established
procedures to value the Fund's securities to determine net asset value. In
general, securities values are based on market value. There are special
procedures for valuing illiquid and restricted securities, and obligations for
which market values cannot be readily obtained. These procedures are described
more completely in the Statement of Additional Information.
o THE OFFERING OF SHARES may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be suspended
by the Board of Trustees at any time the Board believes it is in the Fund's best
interest to do so.
o TELEPHONE TRANSACTION PRIVILEGES for purchases, redemptions or exchanges
may be modified, suspended or terminated by the Fund at any time. If an account
has more than one owner, the Fund and the Transfer Agent may rely on the
instructions of any one owner. Telephone privileges automatically apply to each
owner of the account and the dealer representative of record for the account
unless refused on the new account Application, or, if not refused, will apply
until the Transfer Agent receives cancellation instructions from an owner of the
account.
o THE TRANSFER AGENT WILL RECORD ANY TELEPHONE CALLS to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not use
reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund will be
liable for losses or expenses arising out of telephone instructions reasonably
believed to be genuine. If you are unable to reach the Transfer Agent during
periods of unusual market activity, you may not be able to complete a telephone
transaction and should consider placing your order by mail.
o REDEMPTION OR TRANSFER REQUESTS WILL NOT BE HONORED UNTIL THE TRANSFER
AGENT RECEIVES ALL REQUIRED DOCUMENTS IN PROPER FORM. From time to time, the
Transfer Agent in its discretion may waive certain of the requirements for
redemptions stated in this Prospectus.
o DEALERS THAT CAN PERFORM ACCOUNT TRANSACTIONS FOR THEIR CLIENTS BY
PARTICIPATING IN NETWORKING through the National Securities Clearing Corporation
are responsible for obtaining their clients' permission to perform those
transactions and are responsible to their clients who are shareholders of the
Fund if the dealer performs any transaction erroneously or improperly.
o THE REDEMPTION PRICE FOR SHARES WILL VARY from day to day because the
values of the securities in the Fund's portfolio fluctuates, and the redemption
price, which is the net asset value per share, will normally be different for
Class A, Class B, Class C and Class Y shares. Therefore, the redemption value of
your shares may be more or less than their original cost.
o PAYMENT FOR REDEEMED SHARES is made ordinarily in cash and forwarded by
check or through AccountLink (as elected by the shareholder under the redemption
procedures described above) within 7 days after the Transfer Agent receives
redemption instructions in proper form, except under unusual circumstances
determined by the Securities and Exchange Commission delaying or suspending such
payments. For accounts registered in the name of a broker-dealer, payment will
be forwarded within 3 business days. THE TRANSFER AGENT MAY DELAY FORWARDING A
CHECK OR PROCESSING A PAYMENT VIA ACCOUNTLINK FOR RECENTLY PURCHASED SHARES, BUT
ONLY UNTIL THE PURCHASE PAYMENT HAS CLEARED. THAT DELAY MAY BE AS MUCH AS 10
DAYS FROM THE DATE THE SHARES WERE PURCHASED. THAT DELAY MAY BE AVOIDED IF YOU
PURCHASE SHARES BY FEDERAL FUNDS WIRE, CERTIFIED CHECK OR ARRANGE WITH YOUR BANK
TO PROVIDE TELEPHONE OR WRITTEN ASSURANCE TO THE TRANSFER AGENT THAT YOUR
PURCHASE PAYMENT HAS CLEARED.
o INVOLUNTARY REDEMPTIONS OF SMALL ACCOUNTS may be made by the Fund
subject to the power and authority of the Board of Trustees to determine whether
a minimum value should apply to accounts holding shares, to fix such minimum
value and the terms, conditions and other procedures to cause the involuntary
redemption of accounts that do not satisfy such criteria.
o UNDER UNUSUAL CIRCUMSTANCES, shares of the Fund may be redeemed "in
kind," which means that the redemption proceeds will be paid with securities
from the Fund's portfolio. Please refer to "How to Sell Shares" in the Statement
of Additional Information for
more details.
o "BACKUP WITHHOLDING" of Federal income tax may be applied at the rate of
31% from taxable dividends, distributions and redemption proceeds (including
exchanges) if you fail to furnish the Fund a correct and properly certified
Social Security or Employer Identification Number when you sign your
application, or if you underreport your income to the Internal Revenue Service.
o THE FUND DOES NOT CHARGE A REDEMPTION FEE, but if your dealer or broker
handles your redemption, they may charge a fee. That fee can be avoided by
redeeming your Fund shares directly through the Transfer Agent. Under the
circumstances described in "How to Buy Shares," you may be subject to a
contingent deferred sales charges when redeeming certain Class A, Class B and
Class C shares.
o TO AVOID SENDING DUPLICATE COPIES OF MATERIALS TO HOUSEHOLDS, the Fund
will mail only one copy of each annual and semi-annual report to shareholders
having the same last name and address on the Fund's records. However, each
shareholder may call the Transfer Agent at 1-800- 525-7048 to ask that copies of
those materials be sent personally to that shareholder.
DIVIDENDS, CAPITAL GAINS AND TAXES
DIVIDENDS. The Fund declares dividends separately for Class A, Class B, Class C
and Class Y shares from net investment income, if any, on an annual basis and
normally pays those dividends to shareholders in December, but the Board of
Trustees can change that date. The Board may also cause the Fund to declare
dividends after the close of the Fund's fiscal year (which ends September 30th).
Because the Fund does not have an objective of seeking current income, the
amounts of dividends it pays, if any, will likely be small. Dividends paid on
Class Y shares will generally be higher than for Class A shares and dividends
paid with respect to Class A shares will generally be higher than for Class B
and Class C shares because expenses allocable to Class B and Class C shares will
generally be higher than for Class A shares, and expenses allocable to Class A
shares will generally be higher than for Class Y shares.
CAPITAL GAINS. The Fund may make distributions annually in December out of any
net short-term or long-term capital gains, and the Fund may make supplemental
distributions of capital gains following the end of its fiscal year. Long-term
capital gains will be separately identified in the tax information the Fund
sends you after the end of the year. Short-term capital gains are treated as
dividends for tax purposes. There can be no assurance that the Fund will pay any
capital gains distributions in a particular year.
DISTRIBUTION OPTIONS. When you open your account, specify on your application
how you want to receive your distributions. For Oppenheimer funds retirement
accounts, all distributions are reinvested. For other accounts, you have four
options:
o REINVEST ALL DISTRIBUTIONS IN THE FUND. You can elect to reinvest all
dividends and long- term capital gains distributions in additional shares of the
Fund.
o REINVEST LONG-TERM CAPITAL GAINS ONLY. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or
sent to your bank account on AccountLink.
o RECEIVE ALL DISTRIBUTIONS IN CASH. You can elect to receive a check
for all dividends and long-term capital gains distributions or have them sent
to your bank on AccountLink.
o REINVEST YOUR DISTRIBUTIONS IN ANOTHER OPPENHEIMER FUNDS ACCOUNT.
You can reinvest all distributions in the same class of shares of another
Oppenheimer fund account you have established.
TAXES. If your account is not a tax-deferred retirement account, you should be
aware of the following tax implications of investing in the Fund. Long-term
capital gains are taxable as long-term capital gains when distributed to
shareholders. It does not matter how long you held your shares. Dividends paid
from short-term capital gains and net investment income are taxable as ordinary
income. Distributions are subject to federal income tax and may be subject to
state or local taxes. Your distributions are taxable when paid, whether you
reinvest them in additional shares or take them in cash. Every year the Fund
will send you and the IRS a statement showing the amount of each taxable
distribution you received in the previous year. So that the Fund will not have
to pay taxes on the amounts it distributes to shareholders as dividends and
capital gains, the Fund intends to manage its investments so that it will
qualify as a "regulated investment company" under the Internal Revenue Code,
although it reserves the right not to qualify in a particular year.
o "BUYING A DIVIDEND": If you buy shares on or just before the ex-dividend
date, or just before the Fund declares a capital gains distribution, you will
pay the full price for the shares and then receive a portion of the price back
as a taxable dividend or capital gain, respectively.
o TAXES ON TRANSACTIONS: Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. Generally, capital gain or loss is
the difference between the price you paid for the shares and the price you
received when you sold them.
o RETURNS OF CAPITAL: In certain cases distributions made by the Fund may
be considered a non-taxable return of capital to shareholders. If that occurs,
it will be identified in notices to shareholders. A non-taxable return of
capital may reduce your tax basis in your Fund shares.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax adviser
about the effect of an investment in the Fund on your particular tax situation.
<PAGE>
APPENDIX A
SPECIAL SALES CHARGE ARRANGEMENTS FOR SHAREHOLDERS OF THE FUND
WHO WERE SHAREHOLDERS OF THE FORMER QUEST FOR VALUE FUNDS
The initial and contingent deferred sales charge rates and waivers for Class A,
Class B and Class C shares of the Fund described elsewhere in this Prospectus
are modified as described below for those shareholders of (i) Quest for Value
Fund, Inc., Quest for Value Growth and Income Fund, Quest for Value Opportunity
Fund, Quest for Value Small Capitalization Fund and Quest for Value Global
Equity Fund, Inc. on November 24, 1995, when OppenheimerFunds, Inc. became the
investment adviser to those funds, and (ii) Quest for Value U.S. Government
Income Fund, Quest for Value Investment Quality Income Fund, Quest for Value
Global Income Fund, Quest for Value New York Tax-Exempt Fund, Quest for Value
National Tax-Exempt Fund and Quest for Value California Tax- Exempt Fund when
those funds merged into various Oppenheimer funds on November 24, 1995. The
funds listed above are referred to in this Prospectus as the "Former Quest for
Value Funds." The waivers of initial and contingent deferred sales charges
described in this Appendix apply to shares of the Fund (i) acquired by such
shareholder pursuant to an exchange of shares of one of the Oppenheimer funds
that was one of the Former Quest for Value Funds or (ii) received by such
shareholder pursuant to the merger of any of the Former Quest for Value Funds
into an Oppenheimer fund on November 24, 1995.
CLASS A SALES CHARGES
REDUCED CLASS A INITIAL SALES CHARGE RATES FOR CERTAIN FORMER QUEST
SHAREHOLDERS
o PURCHASES BY GROUPS, ASSOCIATIONS AND CERTAIN QUALIFIED RETIREMENT
PLANS. The following table sets forth the initial sales charge rates for Class A
shares purchased by a "Qualified Retirement Plan" through a single broker,
dealer or financial institution, or by members of "Associations" formed for any
purpose other than the purchase of securities if that Qualified Retirement Plan
or that Association purchased shares of any of the Former Quest for Value Funds
or received a proposal to purchase such shares from OCC Distributors prior to
November 24, 1995. For this purpose only, a "Qualified Retirement Plan" includes
any 401(k) plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a single
employer.
NUMBER OF FRONT-END FRONT-END
ELIGIBLE SALES CHARGE AS SALES CHARGE AS COMMISSION AS
EMPLOYEES A PERCENTAGE OF A PERCENTAGE OF PERCENTAGE OF
OR MEMBERS OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- ------------------------------------------------------------------------------
9 or fewer 2.50% 2.56% 2.00%
- ------------------------------------------------------------------------------
At least 10 but not 2.00% 2.04% 1.60%
more than 49
For purchases by Qualified Retirement Plans and Associations having 50 or
more eligible employees or members, there is no initial sales charge on
purchases of Class A shares, but those shares are subject to the Class A
contingent deferred sales charge described on pages to of this Prospectus.
Purchases made under this arrangement qualify for the lower of the sales
charge rate in the table based on the number of eligible employees in a
Qualified Retirement Plan or members of an Association or the sales charge rate
that applies under the Rights of Accumulation described above in the Prospectus.
In addition, purchases by 401(k) plans that are Qualified Retirement Plans
qualify for the waiver of the Class A initial sales charge if they qualified to
purchase shares of any of the Former Quest For Value Funds by virtue of
projected contributions or investments of $1 million or more each year.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations, or as eligible employees in Qualified Retirement Plans
also may purchase shares for their individual or custodial accounts at these
reduced sales charge rates, upon request to the Fund's Distributor.
O WAIVER OF CLASS A SALES CHARGES FOR CERTAIN SHAREHOLDERS. Class A shares
of the Fund purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
o Shareholders of the Fund who were shareholders of the AMA Family of Funds
on February 28, 1991 and who acquired shares of any of the Former Quest for
Value Funds by merger of a portfolio of the AMA Family of Funds.
o Shareholders of the Fund who acquired shares of any Former Quest for
Value Fund by merger of any of the portfolios of the Unified Funds.
O WAIVER OF CLASS A CONTINGENT DEFERRED SALES CHARGE IN CERTAIN
TRANSACTIONS. The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares of the Fund purchased by the following investors
who were shareholders of any Former Quest for Value Fund:
o Investors who purchased Class A shares from a dealer that is not or was
not permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship under the Employee Retirement
Income Security Act of 1974 and regulations adopted under that law.
o Participants in Qualified Retirement Plans that purchased shares of any
of the Former Quest For Value Funds pursuant to a special "strategic alliance"
with the distributor of those funds. The Fund's Distributor will pay a
commission to the dealer for purchases of Fund shares as described above in
"Class A Contingent Deferred Sales Charge."
CLASS A, CLASS B AND CLASS C CONTINGENT DEFERRED SALES CHARGE WAIVERS
O WAIVERS FOR REDEMPTIONS OF SHARES PURCHASED PRIOR TO MARCH 6, 1995. In
the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, Class B or Class C shares of the Fund acquired by merger
of a Former Quest for Value Fund into the Fund or by exchange from an
Oppenheimer fund that was a Former Quest for Value Fund or into which such fund
merged, if those shares were purchased prior to March 6, 1995: in connection
with (i) distributions to participants or beneficiaries of plans qualified under
Section 401(a) of the Internal Revenue Code or from custodial accounts under
Section 403(b)(7) of the Code, Individual Retirement Accounts, deferred
compensation plans under Section 457 of the Code, and other employee benefit
plans, and returns of excess contributions made to each type of plan, (ii)
withdrawals under an automatic withdrawal plan holding only either Class B or
Class C shares if the annual withdrawal does not exceed 10% of the initial value
of the account, and (iii) liquidation of a shareholder's account if the
aggregate net asset value of shares held in the account is less than the
required minimum value of such accounts.
O WAIVERS FOR REDEMPTIONS OF SHARES PURCHASED ON OR AFTER MARCH 6, 1995
BUT PRIOR TO NOVEMBER 24, 1995. In the following cases, the contingent deferred
sales charge will be waived for redemptions of Class A, Class B or Class C
shares of the Fund acquired by merger of a Former Quest for Value Fund into the
Fund or by exchange from an Oppenheimer fund that was a Former Quest For Value
Fund or into which such fund merged, if those shares were purchased on or after
March 6, 1995, but prior to November 24, 1995: (1) distributions to participants
or beneficiaries from Individual Retirement Accounts under Section 408(a) of the
Internal Revenue Code or retirement plans under Section 401(a), 401(k), 403(b)
and 457 of the Code, if those distributions are made either (a) to an individual
participant as a result of separation from service or (b) following the death or
disability (as defined in the Code) of the participant or beneficiary; (2)
returns of excess contributions to such retirement plans; (3) redemptions other
than from retirement plans following the death or disability of the
shareholder(s) (as evidenced by a determination of total disability by the U.S.
Social Security Administration); (4) withdrawals under an automatic withdrawal
plan (but only for Class B or Class C shares) where the annual withdrawals do
not exceed 10% of the initial value of the account; and (5) liquidation of a
shareholder's account if the aggregate net asset value of shares held in the
account is less than the required minimum account value. A shareholder's account
will be credited with the amount of any contingent deferred sales charge paid on
the redemption of any Class A, Class B or Class C shares of the Fund described
in this section if within 90 days after that redemption, the proceeds are
invested in the same Class of shares in this Fund or another Oppenheimer fund.
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER DISCOVERY FUND
Graphic material included in Prospectus of Oppenheimer Discovery Fund:
"Comparison of Change in Value of $10,000 Hypothetical Investments In:
Oppenheimer Discovery Fund, S&P 500 and Russell 2000 Index".
Linear graphs will be included in the Prospectus of Oppenheimer Discovery Fund
(the "Fund") depicting the initial account value and subsequent account values
of a hypothetical $10,000 investment in each class of shares of the Fund. In the
case of the Fund's Class A shares, that graph will cover each of the Fund's
fiscal periods from 9/30/87 through 9/30/97. In the case of the Fund's Class B
shares the graph will cover the period from the inception of the class (4/1/94)
through 9/30/97. In the case of Class C shares the graph will cover the period
from the inception of the class on 10/2/95 through 9/30/97. Class Y shares will
cover the 6/1/94 (inception date) through 9/30/97 period. Each graph will
compare such values with hypothetical $10,000 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 graphs. 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
"Performance of the Fund - Comparing the Fund's Performance to the Market."
FISCAL YEAR OPPENHEIMER S&P 500 RUSSELL 2000
(PERIOD) ENDED DISCOVERY A INDEX INDEX
09/30/87 9,425 10,000 10,000
09/30/88 8,755 8,761 8,919
09/30/89 12,277 11,648 10,835
09/30/90 9,780 10,571 7,893
09/30/91 14,854 13,858 11,452
09/30/92 16,529 15,389 12,475
09/30/93 23,879 17,384 16,612
09/30/94 21,991 18,024 17,056
09/30/95 28,154 23,379 21,041
09/30/96 35,969 28,129 23,804
09/30/97 39,262 39,501 31,709
FISCAL YEAR OPPENHEIMER S&P 500 RUSSELL 2000
(PERIOD) ENDED DISCOVERY B INDEX INDEX
04/01/94 10,000 10,000 10,000
09/30/94 10,000 10,532 10,278
09/30/95 12,705 13,661 12,679
09/30/96 16,105 16,437 14,344
09/30/97 17,147 23,081 19,107
FISCAL YEAR OPPENHEIMER S&P 500 RUSSELL 2000
(PERIOD) ENDED DISCOVERY C INDEX INDEX
10/02/95 10,000 10,000 10,000
09/30/96 12,796 12,032 11,313
09/30/97 13,869 16,896 15,070
FISCAL YEAR OPPENHEIMER S&P 500 RUSSELL 2000
(PERIOD) ENDED DISCOVERY Y INDEX INDEX
06/01/94 10,000 10,000 10,000
09/30/94 10,320 10,231 10,333
09/30/95 13,238 13,271 12,748
09/30/96 16,956 15,968 14,422
09/30/97 18,568 22,423 19,211
<PAGE>
OPPENHEIMER DISCOVERY FUND
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
INVESTMENT ADVISOR
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
DISTRIBUTOR
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
TRANSFER AND SHAREHOLDER SERVICING AGENT
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
OPPENHEIMERFUNDS INTERNET WEB SITE
http://www.oppenheimerfunds.com
CUSTODIAN OF PORTFOLIO SECURITIES
The Bank of New York
One Wall Street
New York, New York 10015
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
LEGAL COUNSEL
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
NO DEALER, BROKER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS OR THE STATEMENT OF ADDITIONAL INFORMATION, AND IF GIVEN OR
MADE, SUCH INFORMATION AND REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND, OPPENHEIMERFUNDS, INC., OPPENHEIMERFUNDS DISTRIBUTOR,
INC., OR ANY AFFILIATE THEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
IN ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
STATE.
PR0500.001.0198 Printed on recycled paper
<PAGE>
OPPENHEIMER DISCOVERY FUND
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
STATEMENT OF ADDITIONAL INFORMATION DATED JANUARY 15, 1998
This Statement of Additional Information is not a Prospectus. This document
contains additional information about the Fund and supplements information in
the Prospectus dated January 15, 1998. It should be read together with the
Prospectus, which may be obtained by writing to the Fund's Transfer Agent,
OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado 80217 or by
calling the Transfer Agent at the toll-free number shown above.
CONTENTS
PAGE
ABOUT THE FUND
Investment Objective and Policies...................................... 2
Investment Policies and Strategies............................... 2
Other Investment Techniques and Strategies........................ 3
Other Investment Restrictions..................................... 14
How the Fund is Managed ............................................... 16
Organization and History.......................................... 16
Trustees and Officers of the Fund................................. 17
The Manager and Its Affiliates.................................... 22
Brokerage Policies of the Fund......................................... 24
Performance of the Fund................................................ 26
Distribution and Service Plans......................................... 29
ABOUT YOUR ACCOUNT
How To Buy Shares...................................................... 31
How To Sell Shares..................................................... 39
How To Exchange Shares................................................. 43
Dividends, Capital Gains and Taxes..................................... 45
Additional Information About the Fund.................................. 47
Independent Auditors' Report........................................... 48
Financial Statements................................................... 49
Appendix: Industry Classifications..................................... A-1
-1-
<PAGE>
ABOUT THE FUND
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT POLICIES AND STRATEGIES. The investment objective and policies of the
Fund are described in the Prospectus. Set forth below is supplemental
information about those policies and the types of securities in which the Fund
invests, as well as strategies the Fund may use to try to achieve its objective.
Capitalized terms used in this Statement of Additional Information have the same
meanings as those terms have in the Prospectus. 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. The selection of such
securities is enhanced by the methods described in the Prospectus under "Other
Investment Techniques and Strategies," and in this Statement of Additional
Information.
o 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.
o "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, which has created an Automated
Quotation System ("NASDAQ") of the NASDAQ Stock Market, Inc., 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.
O FOREIGN SECURITIES. "Foreign securities" include equity and debt
securities of companies organized under the laws of countries other than the
United States and debt securities of foreign governments, that are traded on
foreign securities exchanges or in the foreign over-the-counter markets.
Securities of foreign issuers that are represented by American Depository
Receipts or that are listed only on a U.S. securities exchange or traded only in
the U.S. over-the-counter markets are not considered "foreign securities" for
the purpose of the Fund's investment allocations, because they are not subject
to many of the special considerations and risks, discussed below, that apply to
foreign securities traded and held abroad.
Investing in foreign securities offers the Fund potential benefits not
available from investing solely in securities of domestic issuers, such as the
opportunity to invest in foreign issuers that appear to offer growth potential,
or in foreign countries with economic policies or business cycles different from
those of the U.S., or to reduce fluctuations in portfolio value by taking
advantage of foreign stock markets that do not move in a manner parallel to U.S.
markets. If the Fund's portfolio securities are held abroad, the sub-custodians
or depositories holding them must be approved by the Fund's Board of Trustees to
the extent that the approval is required under applicable rules of the
Securities and Exchange Commission. In buying foreign securities, the Fund may
convert U.S. dollars into foreign currency, but only to effect securities
transactions on foreign securities exchanges and not to hold such currency as an
investment.
o RISKS OF FOREIGN INVESTING. Investing in foreign securities involves
special additional risks and considerations not typically associated with
investing in securities of issuers traded in the U.S. These include: reduction
of income by foreign taxes; fluctuation in value of foreign portfolio
investments due to changes in currency rates and control regulations (e.g.,
currency blockage); transaction charges for currency exchange; lack of public
information about foreign issuers; lack of uniform accounting, auditing and
financial reporting standards comparable to those applicable to domestic
issuers; less volume on foreign exchanges than on U.S. exchanges; greater
volatility and less liquidity in foreign markets than in the U.S.; less
regulation of foreign issuers, stock exchanges and brokers than in the U.S.;
greater difficulties in commencing lawsuits against foreign issuers; higher
brokerage commission rates than in the U.S.; increased risks of delays in
settlement of portfolio transactions or loss of certificates for portfolio
securities; possibilities in some countries of expropriation or nationalization
of assets, confiscatory taxation, political, financial or social instability or
adverse diplomatic developments; and unfavorable differences 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.
OTHER INVESTMENT TECHNIQUES AND STRATEGIES
o ILLIQUID AND RESTRICTED SECURITIES. To enable the Fund to sell restricted
securities not registered under the Securities Act of 1933, the Fund may have to
cause those securities to be registered. The expenses of registration of
restricted securities may be negotiated by the Fund with the issuer at the time
such securities are purchased by the Fund if such registration is required
before such securities may be sold publicly. When registration must be arranged
because the Fund wishes to sell the security, a considerable period may elapse
between the time the decision is made to sell the securities and the time the
Fund would be permitted to sell them. The Fund would bear the risks of any
downward price fluctuation during that period. The Fund may also acquire,
through private placements, securities having contractual restrictions on their
resale, which might limit the Fund's ability to dispose of such securities and
might lower the amount realizable upon the sale of such securities.
The Fund has percentage limitations that apply to purchases of restricted
securities, as stated in the Prospectus. Those percentage restrictions do not
limit purchases of restricted securities that are eligible for sale to qualified
institutional purchasers pursuant to Rule 144A under the Securities Act of 1933,
provided that those securities have been determined to be liquid by the Board of
Trustees of the Fund or by the Manager under Board-approved guidelines. Those
guidelines take into account the trading activity for such securities and the
availability of reliable pricing information, among other factors. If there is a
lack of trading interest in a particular Rule 144A security, the Fund's holding
of that security may be deemed to be illiquid.
o REPURCHASE AGREEMENTS. The Fund may acquire securities subject to
repurchase agreements for liquidity purposes to meet anticipated redemptions, or
pending the investment of the proceeds from sales of Fund shares, or pending the
settlement of purchases of portfolio securities.
In a repurchase transaction, the Fund acquires a security from, and
simultaneously resells it to, an approved vendor. An "approved vendor" is a 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. The repurchase price exceeds the purchase price by an amount that reflects
an agreed-upon interest rate effective for the period during which the
repurchase agreement is in effect. The majority of these transactions run from
day to day, and delivery pursuant to the resale typically will occur within one
to five days of the purchase. Repurchase agreements are considered "loans" under
the Investment Company Act, collateralized by the underlying security. The
Fund's repurchase agreements require that at all times while the repurchase
agreement is in effect, the value of the collateral must equal or exceed the
repurchase price to fully collateralize the repayment obligation. Additionally,
the Manager will impose creditworthiness requirements to confirm that the vendor
is financially sound and will continuously monitor the collateral's value.
o HEDGING. The Fund may use hedging instruments for the purposes described
in the Prospectus. When hedging to attempt to protect against declines in the
market value of the Fund's portfolio, or to permit the Fund to retain unrealized
gains in the value of portfolio securities which have appreciated, or to
facilitate selling securities for investment reasons, the Fund may: (1) sell
Futures, (2) buy puts or such Futures or securities, or (3) write covered calls
on securities or on Futures. When hedging to establish a position in the equity
securities markets as a temporary substitute for the purchase of individual
equity securities the Fund may: (1) buy Futures, or (2) buy calls on such
Futures or securities held by it. Normally, the Fund would then purchase the
equity securities and terminate the hedging position.
The Fund's strategy of hedging with Futures and options on Futures will be
incidental to the Fund's investment activities in the underlying cash market. In
the future, the Fund may employ hedging instruments and strategies that are not
presently contemplated but which may be developed, to the extent such investment
methods are consistent with the Fund's investment objective, and are legally
permissible and disclosed in the Prospectus. Additional information about the
hedging instruments the Fund may use is provided below.
o WRITING COVERED CALLS. As described in the Prospectus, the Fund may
write covered calls. When the Fund writes a call on an investment, it receives a
premium and agrees to sell the callable investment to a purchaser of a
corresponding call during the call period (usually not more than 9 months) at a
fixed exercise price (which may differ from the market price of the underlying
investment) regardless of market price changes during the call period. To
terminate its obligation on a call it has written, the Fund may purchase a
corresponding call in a "closing purchase transaction." A profit or loss will be
realized, depending upon whether the net of the amount of option transaction
costs and the premium received on the call the Fund has written is more or less
than the price of the call the Fund subsequently purchased. A profit may also be
realized if the call lapses unexercised, because the Fund retains the underlying
investment and the premium received. Those profits are considered short-term
capital gains for Federal income tax purposes, as are premiums on lapsed calls,
and when distributed by the Fund are taxable as ordinary income. If the Fund
could not effect a closing purchase transaction due to the lack of a market, it
would have to hold the callable investment until the call lapsed or was
exercised.
The Fund may also write calls on Futures without owning a futures contract
or deliverable securities, provided that at the time the call is written, the
Fund covers the call by identifying to the Custodian Bank an equivalent dollar
value of deliverable securities or liquid assets. The Fund will identify to the
Custodian Bank additional liquid assets if the value of those segregated assets
drops below 100% of the current value of the Future. In no circumstances would
an exercise notice as to a Future put the Fund in a short futures position.
The Fund's Custodian, or a securities depository acting for the Custodian,
will act as the Fund's escrow agent, through the facilities of the Options
Clearing Corporation ("OCC"), as to the investments on which the Fund has
written options that are traded on exchanges, or as to other acceptable escrow
securities, so that no margin will be required from the Fund for such option
transactions. OCC will release the securities covering a call on the expiration
of the call or when the Fund enters into a closing purchase transaction. Call
writing affects the Fund's turnover rate and the brokerage commissions it pays.
Commissions, normally higher than on general securities transactions, are
payable on writing or purchasing a call.
o STOCK INDEX FUTURES AND FINANCIAL FUTURES. The Fund may buy and sell
futures contracts relating to a securities index ("Financial Futures"),
including "Stock Index Futures," a type of Financial Future for which the index
used as the basis for trading is a broadly-based stock index (including stocks
that are not limited to issuers in a particular industry or group of
industries). A stock index assigns relative values to the common stocks included
in the index and fluctuates with the changes in the market value of those
stocks. Stock indices cannot be purchased or sold directly. Financial futures
are contracts based on the future value of the basket of securities that
comprise the underlying index. The contracts obligate the seller to deliver, and
the purchaser to take, cash to settle the futures transaction or to enter into
an offsetting contract. No physical delivery of the securities underlying the
index is made on settling the futures obligation. No monetary amount is paid or
received by the Fund on the purchase or sale of a Financial Future or Stock
Index Future.
Upon entering into a Futures transaction, the Fund will be required to
deposit an initial margin payment, in cash or U.S. Treasury bills, with the
futures commission merchant (the "futures broker"). Initial margin payments will
be deposited with the Fund's Custodian in an account registered in the futures
broker's name; however, the futures broker can gain access to that account only
under certain specified conditions. As the Future is marked to market (that is,
its value on the Fund's books is changed) to reflect changes in its market
value, subsequent margin payments, called variation margin, will be paid to or
by the futures broker on a daily basis.
At any time prior to the expiration of the Future, the Fund may elect to
close out its position by taking an opposite position, at which time a final
determination of variation margin is made and additional cash is required to be
paid by or released to the Fund. Any gain or loss is then realized by the Fund
on the Future for tax purposes. Although Financial Futures and Stock Index
Futures by their terms call for settlement by the delivery of cash, in most
cases the settlement obligation is fulfilled without such delivery by entering
into an offsetting transaction. All Futures transactions are effected through a
clearing house associated with the exchange on which the contracts are traded.
o COMMODITY FUTURES CONTRACTS. The Fund intends to invest a portion of its
assets in commodity futures contracts (referred to as commodity futures).
Commodity futures may be linked to any of five main commodity groups: (1)
energy, which includes crude oil, natural gas, gasoline and heating oil; (2)
livestock, which includes cattle and hogs; (3) agriculture, which includes
wheat, corn, soybeans, cotton, coffee, sugar and cocoa; (4) industrial metals,
which includes aluminum, copper, lead, nickel, tin and zinc; and (5) precious
metals, which includes gold, platinum and silver. The Fund may purchase and sell
commodity futures contracts, options on futures contracts and options and
futures on commodity indices with respect to these five main commodity groups
and the individual commodities within each group, as well as other types of
commodities.
COMPARISON TO FORWARD CONTRACTS. Futures contracts and forward contracts achieve
the same economic effect: both are an agreement to purchase a specified amount
of a specified commodity at a specified future date for a price agreed upon
today. However, there are significant differences in the operation of the two
contracts. Forward contracts are individually negotiated transactions and are
not exchange traded. Therefore, with a forward contract, the Fund would make a
commitment to carry out the purchase or sale of the underlying commodity at
expiration.
STORAGE COSTS. Similar to the financial futures markets, there are hedgers and
speculators in the commodity futures markets. However, unlike financial
instruments, there are costs of physical storage associated with purchasing the
underlying commodity. For instance, a large manufacturer of baked goods that
wishes to hedge against a rise in the price of wheat has two choices: (i) it can
purchase the wheat today in the cash market and store the commodity at a cost
until it needs the wheat for its manufacturing process, or (ii) it can buy
commodity futures contracts. The price of the commodity futures contract will
reflect the storage costs of purchasing the physical commodity. These storage
costs include the time value of money invested in the physical commodity plus
the actual costs of storing the commodity less any benefits from ownership of
the physical commodity that are not obtained by the holder of a futures contract
(this is sometimes referred to as the "convenience yield"). To the extent that
these storage costs change for an underlying commodity while the Fund is long
futures contracts on that commodity, the value of the futures contract may
change commensurately.
REINVESTMENT RISK. In the commodity futures markets, if producers of the
underlying commodity wish to hedge the price risk of selling the commodity, they
will sell futures contracts today to lock in the price of the commodity at
delivery tomorrow. In order to induce speculators to take the corresponding long
side of the same futures contract, the commodity producer must be willing to
sell the futures contract at a price which is below the expected future spot
price. Conversely, if the predominate hedgers in the futures market are the
purchasers of the underlying commodity who purchase futures contracts to hedge
against a rise in prices, then speculators will only take the short side of the
futures contract if the futures price is greater than the expected future spot
price of the commodity.
The changing nature of the hedgers and speculators in the commodity
markets can determine whether futures prices are above or below the expected
future spot price. This can have significant implications for the Fund when it
is time to reinvest the proceeds from a maturing futures contract into a new
futures contract. If the nature of hedgers and speculators in futures markets
has shifted such that commodity purchasers are the predominate hedgers in the
market, the Fund might reinvest at higher futures prices or choose other related
commodity investments.
ADDITIONAL ECONOMIC FACTORS. The values of commodities which underlie commodity
futures contracts are subject to additional variables which may be less
significant to the values of traditional securities such as stocks and bonds.
Variables such as drought, floods, weather, livestock disease, embargoes and
tariffs may have a larger impact on commodity prices and commodity-linked
instruments, including futures contracts, Hybrid Instruments, commodity options
and commodity swaps, than on traditional securities. These additional variables
may create additional investment risks which subject the Fund's investments to
greater volatility than investments in traditional securities.
LEVERAGE. There is much greater leverage in futures trading than in stocks. As a
registered investment company, the Fund must pay in full for all securities it
purchases. In other words, the Fund is not allowed to purchase securities on
margin. However, the Fund is allowed to purchase futures contracts on margin
where the initial margin requirements are typically between 3 and 6 percent of
the face value of the contract. That is, the Fund is only required to pay up
front between 3 to 6 percent of the face value of the futures contract.
Therefore, the Fund has a higher degree of leverage in its futures contract
purchases than in its stock purchases. As a result there may be differences in
the volatility of rates of return between securities purchases and futures
contract purchases, with the returns from futures contracts being more volatile.
PRICE VOLATILITY. Despite the daily price limits on the futures exchanges, the
price volatility of commodity futures contracts has been historically greater
than that for traditional securities such as stocks and bonds. To the extent
that the Fund invests in commodity futures contracts, the assets of the Fund,
and hence the Net Asset Value of Fund shares, may be subject to greater
volatility. MARK-TO-MARKET OF FUTURES POSITIONS. The futures clearinghouse marks
every futures contract to market at the end of each trading day, to ensure that
the outstanding futures obligations are limited by the maximum daily permissible
price movement. This process of marking-to-market is designed to prevent losses
from accumulating in any futures account. Therefore, if the Fund's futures
positions have declined in value, the Fund may be required to post additional
margin to cover this decline. Alternatively, if the Fund's futures positions
have increased in value, this increase will be credited to the Fund's account.
CHARACTERISTICS OF THE COMMODITY FUTURES MARKETS. Commodity futures contracts
are an agreement between two parties for one party to buy an asset from the
other party at a later date at a price and quantity agreed upon today. Commodity
futures contracts are traded on futures exchanges. These futures exchanges offer
a central marketplace in which to transact futures contracts, a clearing
corporation to process trades, a standardization of expiration dates and
contract sizes, and the availability of a secondary market. Futures markets also
specify the terms and conditions of delivery as well as the maximum permissible
price movement during a trading session. Additionally, the commodity futures
exchanges have position limit rules which limit the amount of futures contracts
that any one party may hold in a particular commodity at any point in time.
These position limit rules are designed to prevent any one participant from
controlling a significant portion of the market.
o PURCHASING PUTS AND CALLS. The Fund may purchase calls to protect against
the possibility that the Fund's portfolio will not participate in an anticipated
rise in the securities market. When the Fund purchases a call, it pays a premium
(other than in a closing purchase transaction) and, except as to calls on stock
indices, has the right to buy the underlying investment from a seller of a
corresponding call on the same investment during the call period at a fixed
exercise price. In purchasing a call, the Fund benefits only if the call is sold
at a profit or if, during the call period, the market price of the underlying
investment is above the sum of the call price, transaction costs, and the
premium paid, and the call is exercised. If the call is not exercised or sold
(whether or not at a profit), it will become worthless at its expiration date
and the Fund will lose its premium payment and the right to purchase the
underlying investment. When the Fund purchases a call on a stock index, it pays
a premium, but settlement is in cash rather than by delivery of the underlying
investment to the Fund.
When the Fund purchases a put, it pays a premium and, except as to puts on
stock indices, has the right to sell the underlying investment to a seller of a
corresponding put on the same investment during the put period at a fixed
exercise price. Buying a put on an investment the Fund owns (a "protective put")
enables the Fund to attempt to protect itself during the put period against a
decline in the value of the underlying investment below the exercise price by
selling the underlying investment at the exercise price to a seller of a
corresponding put. If the market price of the underlying investment is equal to
or above the exercise price and as a result the put is not exercised or resold,
the put will become worthless at its expiration and the Fund will lose the
premium payment and the right to sell the underlying investment. However, the
put may be sold prior to expiration (whether or not at a profit).
Puts and calls on broadly-based stock indices or on Stock Index Futures on
broadly-based stock indices are similar to puts and calls on securities or
futures contracts except that all settlements are in cash and gain or loss
depends on changes in the index in question (and thus on price movements in the
stock market generally) rather than on price movements of individual securities
or futures contracts. When the Fund buys a call on a stock index or Stock Index
Future, it pays a premium. If the Fund exercises the call during the call
period, a seller of a corresponding call on the same investment will pay the
Fund an amount of cash to settle the call if the closing level of the stock
index or Future upon which the call is based is greater than the exercise price
of the call. That cash payment is equal to the difference between the closing
price of the call and the exercise price of the call times a specified multiple
(the "multiplier") which determines the total dollar value for each point of
difference. When the Fund buys a put on a stock index or Stock Index Future, it
pays a premium and has the right during the put period to require a seller of a
corresponding put, upon the Fund's exercise of its put, to deliver cash to the
Fund to settle the put if the closing level of the stock index or Stock Index
Future upon which the put is based is less than the exercise price of the put.
That cash payment is determined by the multiplier, in the same manner as
described above as to calls.
When the Fund purchases a put on a stock index, or on a Stock Index Future
not owned by it, the put protects the Fund to the extent that the index moves in
a similar pattern to the securities the Fund holds. The Fund can either resell
the put or, in the case of a put on a Stock Index Future, buy the underlying
investment and sell it at the exercise price. The resale price of the put will
vary inversely with the price of the underlying investment. If the market price
of the underlying investment is above the exercise price, and as a result the
put is not exercised, the put will become worthless on the expiration date. In
the event of a decline in price of the underlying investment, the Fund could
exercise or sell the put at a profit to attempt to offset some or all of its
loss on its portfolio securities.
The Fund's option activities may affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund may cause the
Fund to sell related portfolio securities, thus increasing its turnover rate.
The exercise by the Fund of puts on securities will cause the sale of underlying
investments, increasing portfolio turnover. Although the decision whether to
exercise a put it holds is within the Fund's control, holding a put might cause
the Fund to sell the related investments for reasons that would not exist in the
absence of the put. The Fund will pay a brokerage commission each time it buys
or sells a call, put or an underlying investment in connection with the exercise
of a put or call. Those commissions may be higher than the commissions for
direct purchases or sales of the underlying investments.
Premiums paid for options are small in relation to the market value of the
underlying investments and, consequently, put and call options offer large
amounts of leverage. The leverage offered by trading in options could result in
the Fund's net asset value being more sensitive to changes in the value of the
underlying investments.
o FORWARD CONTRACTS. The Fund may enter into foreign currency exchange
contracts ("Forward Contracts"), which obligate the seller to deliver and the
purchaser to take a specific amount of foreign currency at a specific future
date for a fixed price. A Forward Contract involves bilateral obligations of one
party to purchase, and another party to sell, a specific currency at a future
date (which may be any fixed number of days from the date of the contract agreed
upon by the parties), at a price set at the time the contract is entered into.
These contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. The Fund
may enter into a Forward Contract in order to "lock in" the U.S. dollar price of
a security denominated in a foreign currency which it has purchased or sold but
which has not yet settled, or to protect against a possible loss resulting from
an adverse change in the relationship between the U.S. dollar and a foreign
currency.
There is a risk that use of Forward Contracts may reduce the gain that
would otherwise result from a change in the relationship between the U.S. dollar
and a foreign currency. To attempt to limit its exposure to loss under Forward
Contracts in a particular foreign currency, the Fund limits its use of these
contracts to the amount of its net assets denominated in that currency or
denominated in a closely-correlated foreign currency. Forward contracts include
standardized foreign currency futures contracts which are traded on exchanges
and are subject to procedures and regulations applicable to other Futures. The
Fund may also enter into a forward contract to sell a foreign currency
denominated in a currency other than that in which the underlying security is
denominated. This is done in the expectation that there is a greater correlation
between the foreign currency of the forward contract and the foreign currency of
the underlying investment than between the U.S. dollar and the foreign currency
of the underlying investment. This technique is referred to as "cross hedging."
The success of cross hedging is dependent on many factors, including the ability
of the Manager to correctly identify and monitor the correlation between foreign
currencies and the U.S. dollar. To the extent that the correlation is not
identical, the Fund may experience losses or gains on both the underlying
security and the cross currency hedge.
The Fund may use Forward Contracts to protect against uncertainty in the
level of future exchange rates. The use of Forward Contracts does not eliminate
fluctuations in the prices of the underlying securities the Fund owns or intends
to acquire, but it does fix a rate of exchange in advance. In addition, although
Forward Contracts limit the risk of loss due to a decline in the value of the
hedged currencies, at the same time they limit any potential gain that might
result should the value of the currencies increase.
There is no limitation as to the percentage of the Fund's assets that may
be committed to foreign currency exchange contracts. The Fund does not enter
into such forward contracts or maintain a net exposure in such contracts to the
extent that the Fund would be obligated to deliver an amount of foreign currency
in excess of the value of the Fund's assets denominated in that currency (or
another currency that is also the subject of the hedge), or enter into a "cross
hedge," unless it is denominated in a currency or currencies that the Manager
believes will have price movements that tend to correlate closely with the
currency in which the investment being hedged is denominated. See "Tax Aspects
of Covered Calls and Hedging Instruments" below for a discussion of the tax
treatment of foreign currency exchange contracts.
The Fund may enter into Forward Contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the purchase
or sale of a security denominated in a foreign currency, or when the Fund
anticipates receipt of dividend payments in a foreign currency, the Fund may
desire to "lock-in" the U.S. dollar price of the security or the U.S. dollar
equivalent of such payment by entering into a Forward Contract, for a fixed
amount of U.S. dollars per unit of foreign currency, for the purchase or sale of
the amount of foreign currency involved in the underlying transaction
("transaction hedge"). The Fund will thereby be able to protect itself against a
possible loss resulting from an adverse change in the relationship between the
currency exchange rates during the period between the date on which the security
is purchased or sold, or on which the payment is declared, and the date on which
such payments are made or received.
The Fund may also use Forward Contracts to lock in the U.S. dollar value
of portfolio positions ("position hedge"). In a position hedge, for example,
when the Fund believes that foreign currency may suffer a substantial decline
against the U.S. dollar, it may enter into a forward sale contract to sell an
amount of that foreign currency approximating the value of some or all of the
Fund's portfolio securities denominated in such foreign currency, or when the
Fund believes that the U.S. dollar may suffer a substantial decline against a
foreign currency, it may enter into a forward purchase contract to buy that
foreign currency for a fixed dollar amount. In this situation the Fund may, in
the alternative, enter into a forward contract to sell a different foreign
currency for a fixed U.S. dollar amount where the Fund believes that the U.S.
dollar value of the currency to be sold pursuant to the forward contract will
fall whenever there is a decline in the U.S. dollar value of the currency in
which portfolio securities of the Fund are denominated ("cross hedge").
The Fund's Custodian will earmark liquid assets of the Fund, including
debt securities of any grade and equity securities, having a value equal to the
aggregate amount of the Fund's commitments under forward contracts to cover its
short positions. If the value of the securities placed in the separate account
declines, additional liquid assets will be segregated on a daily basis so that
the value of such liquid assets will equal the amount of the Fund's commitments
with respect to such contracts. Unanticipated changes in currency prices may
result in poorer overall performance for the Fund than if it had not entered
into such contracts.
The precise matching of the Forward Contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of these securities between the date the Forward Contract
is entered into and the date it is sold. Accordingly, it may be necessary for
the Fund to purchase additional foreign currency on the spot (i.e., cash) market
(and bear the expense of such purchase), if the market value of the security is
less than the amount of foreign currency the Fund is obligated to deliver and if
a decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some of the
foreign currency received upon the sale of the portfolio security if its market
value exceeds the amount of foreign currency the Fund is obligated to deliver.
The projection of short-term currency market movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain. Forward Contracts involve the risk that anticipated currency
movements will not be accurately predicted, causing the Fund to sustain losses
on these contracts and transactions costs.
At or before the maturity of a Forward Contract requiring the Fund to sell
a currency, the Fund may either sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund may
close out a Forward Contract requiring it to purchase a specified currency by
entering into a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would realize a
gain or loss as a result of entering into such an offsetting Forward Contract
under either circumstance to the extent the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies with factors
such as the currencies involved, the length of the contract period and the
market conditions then prevailing. Because Forward Contracts are usually entered
into on a principal basis, no fees or commissions are involved. Because such
contracts are not traded on an exchange, the Fund must evaluate the credit and
performance risk of each particular counterparty under a Forward Contract.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund may convert foreign currency from time to time, and
investors should be aware of the costs of currency conversion. Foreign exchange
dealers do not charge a fee for conversion, but they do seek to realize a profit
based on the difference between the prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.
o REGULATORY ASPECTS OF HEDGING INSTRUMENTS. The Fund is required to
operate within certain guidelines and restrictions with respect to its use of
Futures and options on Futures established by the Commodity Futures Trading
Commission ("CFTC"). In particular the Fund is exempted from registration with
the CFTC as a "commodity pool operator" if the Fund complies with the
requirements of Rule 4.5 adopted by the CFTC. The Rule does not limit the
percentage of the Fund's assets that may be used for Futures margin and related
options premiums for a bona fide hedging position. However, under the Rule the
Fund must limit its aggregate initial futures margin and related option premiums
to no more than 5% of the Fund's total assets for hedging strategies that are
not considered bona fide hedging strategies under the Rule. Under the Rule, the
Fund also must use short Futures and Futures options positions solely for "bona
fide hedging purposes" within the meaning and intent of the applicable
provisions of the Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations established
by option exchanges governing the maximum number of options that may be written
or held by a single investor or group of investors acting in concert, regardless
of whether the options were written or purchased on the same or different
exchanges or are held in one or more accounts or through one or more different
exchanges or through one or more brokers. Thus the number of options which the
Fund may write or hold may be affected by options written or held by other
entities, including other investment companies having the same adviser as the
Fund (or an adviser that is an affiliate of the Fund's adviser). The exchanges
also impose position limits on Futures transactions. An exchange may order the
liquidation of positions found to be in violation of those limits and may impose
certain other sanctions.
Due to requirements under the Investment Company Act, when the Fund
purchases a Future, the Fund will maintain, in a segregated account or accounts
with its Custodian, liquid assets equal to the market value of the securities
underlying such Future, less the margin deposit applicable to it.
o TAX ASPECTS OF COVERED CALLS AND HEDGING INSTRUMENTS. The Fund intends to
qualify as a "regulated investment company" under the Internal Revenue Code
(although it reserves the right not to qualify). That qualification enables the
Fund to "pass through" its income and realized capital gains to shareholders
without having to pay tax on them. This avoids a "double tax" on that income and
capital gains, since shareholders normally will be taxed on the dividends and
capital gains they receive from the Fund (unless the Fund's shares are held in a
retirement account or the shareholder is otherwise exempt from tax).
Certain foreign currency exchange contracts (Forward Contracts) in which
the Fund may invest are treated as "section 1256 contracts." Gains or losses
relating to section 1256 contracts generally are characterized under the
Internal Revenue Code as 60% long-term and 40% short-term capital gains or
losses. However, foreign currency gains or losses arising from certain section
1256 contracts (including Forward Contracts) generally are treated as ordinary
income or loss. In addition, section 1256 contracts held by the Fund at the end
of each taxable year are "marked-to- market" with the result that unrealized
gains or losses are treated as though they were realized. These contracts also
may be marked-to-market for purposes of the excise tax applicable to investment
company distributions and for other purposes under rules prescribed pursuant to
the Internal Revenue Code. An election can be made by the Fund to exempt these
transactions from this marked-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may affect the
character and timing of gains (or losses) recognized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a position(s)
making up a straddle is allowed only to the extent such loss exceeds any
unrecognized gain in the offsetting positions making up the straddle. Disallowed
loss is generally allowed at the point where there is no unrecognized gain in
the offsetting positions making up the straddle, or the offsetting position is
disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates which occur between the time the Fund accrues
interest or other receivables or accrues expenses or other liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables or pays such liabilities generally are treated as ordinary income or
ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency and on disposition of foreign currency forward contracts, gains
or losses attributable to fluctuations in the value of a foreign currency
between the date of acquisition of the security or contract and the date of
disposition also are treated as an ordinary gain or loss. Currency gains and
losses are offset against market gains and losses 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.
o RISKS OF HEDGING WITH OPTIONS AND FUTURES. An option position may be
closed out only on a market that provides secondary trading for options of the
same series, and there is no assurance that a liquid secondary market will exist
for any particular option. In addition to the risks associated with hedging that
are discussed in the Prospectus and above, there is a risk in using short
hedging by (i) selling Stock Index Futures or (ii) purchasing puts on stock
indices or Stock Index Futures to attempt to protect against declines in the
value of the Fund's equity securities. The risk is that the prices of Stock
Index Futures will correlate imperfectly with the behavior of the cash (i.e.,
market value) prices of the Fund's equity securities. The ordinary spreads
between prices in the cash and futures markets are subject to distortions, due
to differences in the natures of those markets. First, all participants in the
futures markets are subject to margin deposit and maintenance requirements.
Rather than meeting additional margin deposit requirements, investors may close
out futures contracts through offsetting transactions which could distort the
normal relationship between the cash and futures markets. Second, the liquidity
of the futures markets depends on participants entering into offsetting
transactions rather than making or taking delivery. To the extent participants
decide to make or take delivery, liquidity in the futures markets could be
reduced, thus producing distortion. Third, from the point of view of
speculators, the deposit requirements in the futures markets are less onerous
than margin requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause temporary price
distortions.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable index.
To compensate for the imperfect correlation of movements in the price of the
equity securities being hedged and movements in the price of the hedging
instruments, the Fund may use hedging instruments in a greater dollar amount
than the dollar amount of equity securities being hedged if the historical
volatility of the prices of the equity securities being hedged is more than the
historical volatility of the applicable index. It is also possible that if the
Fund has used hedging instruments in a short hedge, the market may advance and
the value of equity securities held in the Fund's portfolio may decline. If that
occurred, the Fund would lose money on the hedging instruments and also
experience a decline in value in its portfolio securities. However, while this
could occur for a very brief period or to a very small degree, over time the
value of a diversified portfolio of equity securities will tend to move in the
same direction as the indices upon which the hedging instruments are based.
If the Fund uses hedging instruments to establish a position in the
equities markets as a temporary substitute for the purchase of individual equity
securities (long hedging) by buying Stock Index Futures and/or calls on such
Futures, on securities or on stock indices, it is possible that the market may
decline. If the Fund then concludes not to invest in equity securities at that
time because of concerns as to a possible further market decline or for other
reasons, the Fund will realize a loss on the hedging instruments that is not
offset by a reduction in the price of the equity securities purchased.
OTHER INVESTMENT RESTRICTIONS
The Fund's most significant investment restrictions are described in the
Prospectus. The following are fundamental policies, and together with the Fund's
fundamental policies described in the Prospectus cannot be changed without the
vote of a "majority" of the Fund's outstanding voting securities. 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 a shareholder meeting, if the holders of more than 50% of the
outstanding shares are present, or (ii) more than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot:
o 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;
o 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;
o 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;
o 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;
o 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 and enter into repurchase agreements (see "Loans of
Portfolio Securities" and "Repurchase Agreements" in the Prospectus);
o 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;
o 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;
o 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;
o invest in companies for the purpose of acquiring control or
management thereof;
o invest in interests in oil, gas or other mineral exploration or
development programs; or
o 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 the eighth restriction 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.
For purposes of the Fund's policy not to concentrate its assets described
under the third investment restriction in the Prospectus, the Fund has adopted
the industry classifications set forth in the Appendix to this Statement of
Additional Information. This is not a fundamental policy.
HOW THE FUND IS MANAGED
ORGANIZATION AND HISTORY. As a Massachusetts business trust, the Fund is not
required to hold, and does not plan to hold, regular annual meetings of
shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder meeting is
called by the Trustees or upon proper request of the shareholders. Shareholders
have the right, upon the declaration in writing or vote of two-thirds of the
outstanding shares of the Fund, to remove a Trustee. The Trustees will call a
meeting of shareholders to vote on the removal of a Trustee upon the written
request of the record holders of 10% of its outstanding shares. In addition, if
the Trustees receive a request from at least 10 shareholders (who have been
shareholders for at least six months) holding shares of the Fund valued at
$25,000 or more or holding at least 1% of the Fund's outstanding shares,
whichever is less, stating that they wish to communicate with other shareholders
to request a meeting to remove a Trustee, the Trustees will then either make the
Fund's shareholder list available to the applicants or mail their communication
to all other shareholders at the applicants' expense, or the Trustees may take
such other action as set forth under Section 16(c) of the Investment Company
Act.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides for
indemnification and reimbursement of expenses out of its property for any
shareholder held personally liable for its obligations. The Declaration of Trust
also provides that the Fund shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Fund and satisfy
any judgment thereon. Thus, while Massachusetts law permits a shareholder of a
business trust (such as the Fund) to be held personally liable as a "partner"
under certain circumstances, the risk of a Fund shareholder incurring financial
loss on account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any shareholder
of the Trust, agrees under the Trust's Declaration of Trust to look solely to
the assets of the Trust for satisfaction of any claim or demand which may arise
out of any dealings with the Trust, and the Trustees shall have no personal
liability to any such person, to the extent permitted by law.
TRUSTEES AND OFFICERS OF THE FUND. The Fund's Trustees and officers and their
principal occupations and business affiliations during the past five years are
set forth below. The address for each Trustee and officer is Two World Trade
Center, New York, New York 10048-0203, unless another address is listed below.
All of the Trustees are also trustees or directors of Oppenheimer Enterprise
Fund, Oppenheimer Growth Fund, Oppenheimer Municipal Bond Fund, Oppenheimer
Money Market Fund, Inc., Oppenheimer Capital Appreciation Fund, Oppenheimer U.S.
Government Trust, Oppenheimer New York Municipal Fund, Oppenheimer California
Municipal Fund, Oppenheimer Multi-State Municipal Trust, Oppenheimer Multiple
Strategies Fund, Oppenheimer Gold & Special Minerals Fund, Oppenheimer Global
Fund, Oppenheimer Global Growth & Income Fund, Oppenheimer International Small
Company Fund, Oppenheimer International Growth Fund, Oppenheimer Developing
Markets Fund, Oppenheimer Series Fund, Inc., Oppenheimer Multi- Sector Income
Trust, and Oppenheimer World Bond Fund (collectively, the "New York-based
Oppenheimer funds"), except that Ms. Macaskill is not a director of Oppenheimer
Money Market Fund, Inc. Ms. Macaskill and Messrs. Spiro, Donohue, Bishop, Bowen,
Farrar and Zack hold the same respective offices with the New York-based
Oppenheimer funds as with the Fund. As of January 2, 1998, the Trustees and
officers of the Fund as a group owned less than 1% of the outstanding Class A,
Class B, Class C or Class Y shares of the Fund. That statement does not include
ownership of shares held of record by an employee benefit plan for employees of
the Manager (one of the Trustees of the Fund listed below, Ms. Macaskill, and
one of the officers, Mr. Donohue, are trustees of that plan) other than the
shares beneficially owned under that plan by the officers of the Fund listed
above.
LEON LEVY, CHAIRMAN OF THE BOARD OF TRUSTEES; AGE: 72
31 West 52nd Street, New York, NY 10019
General Partner of Odyssey Partners, L.P. (investment partnership)(since 1982)
and Chairman of Avatar Holdings, Inc. (real estate development).
ROBERT G. GALLI, TRUSTEE; AGE: 64
19750 Beach Road, Jupiter Island, FL 33469
Formerly he held the following positions: Vice Chairman of OppenheimerFunds,
Inc. (the "Manager") (October 1995-December 1997); Vice President and Counsel of
Oppenheimer Acquisition Corp. ("OAC"), the Manager's parent holding company;
Executive Vice President , General Counsel and a director of the Manager and
OppenheimerFunds Distributor, Inc. (the "Distributor"), Vice President and a
director of HarbourView Asset Management Corporation ("HarbourView") and
Centennial Asset Management Corporation ("Centennial"), investment adviser
subsidiaries of the Manager, a director of Shareholder Financial Services, Inc.
("SFSI") and Shareholder Services, Inc. ("SSI"), transfer agent subsidiaries of
the Manager and an officer of other Oppenheimer funds.
BENJAMIN LIPSTEIN, TRUSTEE; AGE: 74
591 Breezy Hill Road, Hillsdale, N.Y. 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University; a director of Sussex Publishers, Inc
(Publishers of Psychology Today and Mother Earth News) and of Spy Magazine, L.P.
BRIDGET A. MACASKILL, PRESIDENT AND TRUSTEE;* Age: 49
President (since June 1991), Chief Executive Officer (since September 1995) and
a Director (since December 1994) of the Manager; President and director (since
June 1991) of HarbourView; Chairman and a director of SSI (since August 1994),
and SFSI (September 1995); President (since September 1995) and a director
(since October 1990) of OAC; President (since September 1995) and a director
(since November 1989) of Oppenheimer Partnership Holdings, Inc., a holding
company subsidiary of the Manager; a director of Oppenheimer Real Asset
Management, Inc. (since July 1996); President and a director (since October
1997) of OppenheimerFunds International Ltd., an offshore fund manager
subsidiary of the Manager ("OFIL") and Oppenheimer Millennium Funds plc (since
October 1997); President and a director of other Oppenheimer funds; a director
of the NASDAQ Stock Market, Inc. and of Hillsdown Holdings plc (a U.K. food
company); formerly an Executive Vice President of the Manager.
ELIZABETH B. MOYNIHAN, TRUSTEE; AGE: 68
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the Freer Gallery of Art
(Smithsonian Institution), the Institute of Fine Arts (New York University),
National Building Museum; a member of the Trustees Council, Preservation League
of New York State, and of the Indo-U.S. Sub-Commission on Education and Culture.
KENNETH A. RANDALL, TRUSTEE; AGE: 70
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding company),
Dominion Energy, Inc. (electric power and oil & gas producer), Texan
Cogeneration Company (cogeneration company), Prime Retail, Inc. (real estate
investment trust); formerly President and Chief Executive Officer of The
Conference Board, Inc. (international economic and business research) and a
director of Lumbermens Mutual Casualty Company, American Motorists Insurance
Company and American Manufacturers Mutual Insurance Company.
EDWARD V. REGAN, TRUSTEE; AGE: 67
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New York; Senior
Fellow of Jerome Levy Economics Institute, Bard College; a member of the U.S.
Competitiveness Policy Council; a director of River Bank America (real estate
manager); Trustee, Financial Accounting Foundation (FASB and GASB); formerly New
York State Comptroller and trustee, New York State and Local Retirement Fund.
RUSSELL S. REYNOLDS, JR., TRUSTEE; AGE: 66
8 Sound Shore Drive, Greenwich, Connecticut 06830
Founder Chairman of Russell Reynolds Associates, Inc. (executive recruiting);
Chairman of Directorship Inc. (corporate governance consulting); a director of
Professional Staff Limited (U.K.); a trustee of Mystic Seaport Museum,
International House and Greenwich Historical Society.
DONALD W. SPIRO, VICE CHAIRMAN AND TRUSTEE;* Age: 72
Chairman Emeritus (since August 1991) and a director (since January 1969) of the
Manager; formerly Chairman of the Manager and the Distributor.
PAULINE TRIGERE, TRUSTEE; AGE: 85
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and sale of
women's fashions).
CLAYTON K. YEUTTER, TRUSTEE; AGE: 67
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel, Hogan & Hartson (a law firm); a director of B.A.T. Industries, Ltd.
(tobacco and financial services), Caterpillar, Inc. (machinery), ConAgra, Inc.
(food and agricultural products), Farmers Insurance Company (insurance), FMC
Corp. (chemicals and machinery) and Texas Instruments, Inc. (electronics);
formerly (in descending chronological order), a director of IMC Global Inc.
(chemicals and animal feed), Counsellor to the President (Bush) for Domestic
Policy, Chairman of the Republican National Committee, Secretary of the U.S.
Department of Agriculture, and U.S. Trade Representative.
- --------
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
JAY W. TRACEY, III, VICE PRESIDENT AND PORTFOLIO MANAGER; AGE: 44
Vice President of the Manager (since September 1994); Vice President and
portfolio manager of other OppenheimerFunds; formerly a Managing Director of
Buckingham Capital Management (February 1994-September 1994), prior to which he
was Portfolio Manager and Vice President of the Fund and other Oppenheimer funds
and a Vice President of the Manager (July 1991-February 1994).
ALAN GILSTON, VICE PRESIDENT AND PORTFOLIO MANAGER; AGE: 39
Vice President of the Manager (since September 1997); formerly a Vice President
and portfolio manager at Schroder Capital Management International, Inc.
ANDREW J. DONOHUE, SECRETARY; AGE: 47
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager ; Executive Vice
President (since September 1993), and a director (since January 1992) of the
Distributor; Executive Vice President, General Counsel and a director of
HarbourView, SSI, SFSI and Oppenheimer Partnership Holdings, Inc. since
(September 1995) and MultiSource Services, Inc. (a broker-dealer) (since
December 1995); President and a director of Centennial (since September 1995);
President and a director of Oppenheimer Real Asset Management, Inc. (since July
1996); General Counsel (since May 1996) and Secretary (since April 1997) of OAC;
Vice President of OFIL and Oppenheimer Millennium Funds plc (since October
1997); an officer of other Oppenheimer funds.
GEORGE C. BOWEN, TREASURER; AGE: 61
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President (since September 1987) and Treasurer (since March 1985) of
the Manager; Vice President (since June 1983) and Treasurer (since March 1985)
of the Distributor ; Vice President (since October 1989) and Treasurer (since
April 1986) of HarbourView; Senior Vice President (since February 1992),
Treasurer (since July 1991)and a director (since December 1991) of Centennial;
President, Treasurer and a director of Centennial Capital Corporation (since
June 1989); Vice President and Treasurer (since August 1978) and Secretary
(since April 1981) of SSI; Vice President, Treasurer and Secretary of SFSI
(since November 1989); Treasurer of OAC (since June 1990); Treasurer of
Oppenheimer Partnership Holdings, Inc. (since November 1989); Vice President and
Treasurer of Oppenheimer Real Asset Management, Inc. (since July 1996); Chief
Executive Officer, Treasurer and a director of MultiSource Services, Inc., a
broker-dealer (since December 1995); an officer of other Oppenheimer funds.
ROBERT J. BISHOP, ASSISTANT TREASURER; AGE: 39
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
SCOTT T. FARRAR, ASSISTANT TREASURER; AGE: 32
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
ROBERT G. ZACK, ASSISTANT SECRETARY; AGE: 49
Senior Vice President (since May 1985) and Associate General Counsel (since May
1981) of the Manager, Assistant Secretary of SSI (since May 1985), and SFSI
(since November 1989); Assistant Secretary of Oppenheimer Millennium Funds plc
(since October 1997); an officer of other Oppenheimer funds.
|X| REMUNERATION OF TRUSTEES. The officers of the Fund and certain
Trustees of the Fund (Ms. Macaskill and Mr. Spiro) who are affiliated with the
Manager receive no salary or fee from the Fund. Mr. Galli received no salary or
fee prior to January 1, 1998. The remaining Trustees of the Fund received the
compensation shown below . The compensation from the Fund was paid during its
fiscal year ended September 30, 1997. The compensation from all of the New
York-based Oppenheimer funds includes the Fund and is compensation received as a
director, trustee or member of a committee of the Board during the 1997 calendar
year .
RETIREMENT TOTAL
AGGREGATE BENEFITS COMPENSATION
COMPENSATION ACCRUED AS FROM ALL
FROM PART OF FUND NEW YORK-BASED
NAME AND POSITION THE FUND(1) EXPENSES OPPENHEIMERFUNDS(3)
Leon Levy, $13,687 $8,556 $158,500
Chairman and Trustee
Benjamin Lipstein $11,831 $7,395 $137,000
Study Committee Chairman,
Audit Committee Member
and Trustee(2)
Elizabeth B. Moynihan $8,333 $5,209 $96,500
Study Committee Member
and Trustee
Kenneth A. Randall $7,642 $4,777 $88,500
Audit Committee Chairman
and Trustee
Edward V. Regan $7,556 $4,723 $87,500
Proxy Committee Chairman,
Audit Committee Member
and Trustee
Russell S. Reynolds, Jr. $5,656 $3,536 $65,500
Proxy Committee Member
and Trustee
Pauline Trigere, Trustee $5,052 $3,158 $58,500
Clayton K. Yeutter $5,656 $3,536 $65,500
Proxy Committee Member
and Trustee
- ----------------------
(1)For the fiscal year ended September 30, 1997.
(2)Committee position held during a portion of the period shown.
(3)For the 1997 calendar year.
The Fund has adopted a retirement plan that provides for payment to a
retired Trustee of up to 80% of the average compensation paid during that
Trustee's five years of service in which the highest compensation was received.
A Trustee must serve in that capacity for any of the New York- based Oppenheimer
funds for at least 15 years to be eligible for the maximum payment. Because each
Trustee's retirement benefits will depend on the amount of the Trustee's future
compensation and length of service, the amount of those benefits cannot be
determined as of this time nor can the Fund estimate the number of years of
credited service that will be used to determine those benefits. During the
Fund's fiscal year ended September 30, 1997, a provision of $25,631 was made for
the Fund's projected retirement benefit obligations, and payments of $10,708
were made to retired Trustees, resulting in an accumulated liability of $211,870
at September 30, 1997.
DEFERRED COMPENSATION PLAN. The Board of Trustees has adopted a Deferred
Compensation Plan for disinterested trustees that enables them to elect to defer
receipt of all or a portion of the annual fees they are entitled to receive from
the Fund. Under the plan, the compensation deferred by a Trustee is periodically
adjusted as though an equivalent amount had been invested in shares of one or
more Oppenheimer funds selected by the Trustee. The amount paid to the Trustee
under the plan will be determined based upon the performance of the selected
funds. Deferral of Trustees' fees under the plan will not materially affect the
Fund's assets, liabilities and net income per share. The plan will not obligate
the Fund to retain the services of any Trustee or to pay any particular level of
compensation to any Trustee. Pursuant to an Order issued by the Securities and
Exchange Commission, the Fund may invest in the funds selected by the Trustee
under the plan without shareholder approval for the limited purpose of
determining the value of the Trustee's deferred fee account.
O MAJOR SHAREHOLDERS. As of January 2, 1998, no person owned of
record or was known by the Fund to own beneficially 5% or more of the Fund's
outstanding Class A, Class B, Class C or
Class Y shares except the following: (1) Merrill Lynch Pierce Fenner & Smith
Inc. ("Merrill Lynch"), 4800 Deer Lake Drive East, 3rd Floor, Jacksonville,
Florida 32246-6484, which was the record owner of 74,227.889 Class C shares
(equal to 8.56% of the Class C shares then outstanding), and (2) Massachusetts
Mutual Life Insurance Company ("MassMutual"), 1295 State Street, Springfield,
Massachusetts 01111-0001; whose Separate Investment Account N3 was the record
owner of 882,626.704 Class Y shares (equal to 100% of the Class Y shares then
outstanding). The Manager has been advised that Merrill Lynch holds such Class C
shares of the Fund for the benefit of its customers.
THE MANAGER AND ITS AFFILIATES. The Manager is wholly-owned by Oppenheimer
Acquisition Corp. ("OAC"), a holding company controlled by Massachusetts
Mutual Life Insurance Company.
OAC is also owned in part by certain of the Manager's directors and officers,
some of whom also serve as officers of the Fund, and two of whom (Ms. Macaskill
and Mr. Spiro) serve as Trustees of the Fund.
The Manager and the Fund have a Code of Ethics. It is designed to detect
and prevent improper personal trading by certain employees, including portfolio
managers, that would compete with or take advantage of the Fund's portfolio
transactions. Compliance with the Code of Ethics is carefully monitored and
strictly enforced by the Manager.
o PORTFOLIO MANAGEMENT. The Portfolio Managers of the Fund are Jay W.
Tracey, III and Alan Gilston, who are principally responsible for the day-to-day
management of the Fund's portfolio. Messrs. Tracey and Gilston's background is
described in the Prospectus under "Portfolio Managers." Other members of the
Manager's Equity Portfolio Department, particularly Paul LaRocco, provide the
portfolio managers with counsel and support in managing the Fund's portfolio.
o THE INVESTMENT ADVISORY AGREEMENT. The investment advisory agreement
between the Manager and the Fund requires the Manager, at its expense, to
provide the Fund with adequate office space, facilities and equipment, and to
provide and supervise the activities of all administrative and clerical
personnel required to provide effective corporate administration for the Fund,
including the compilation and maintenance of records with respect to its
operations, the preparation and filing of specified reports, and composition of
proxy materials and registration statements for continuous public sale of shares
of the Fund.
Expenses not expressly assumed by the Manager under the Investment
Advisory Agreement or by the Distributor under the General Distributor's
Agreement are paid by the Fund. The Investment Advisory Agreement lists examples
of expenses paid by the Fund, the major categories of which relate to interest,
taxes, brokerage commissions, fees to certain Trustees, legal and audit
expenses, custodian and transfer agent expenses, share issuance costs, certain
printing and registration costs and non-recurring expenses, including litigation
costs. For the Fund's fiscal years ended September 30, 1995 , 1996 and 1997, the
management fees paid by the Fund to the Manager were $4,952,525 , $7,334,344 and
$9,305,515, respectively.
The Investment Advisory Agreement contains no expense limitation. However,
because of state regulations limiting fund expenses that previously applied, the
Manager had voluntarily undertaken that the Fund's total expenses in any fiscal
year (including the investment advisory fee but exclusive of taxes, interest,
brokerage commissions, distribution plan payments and any extraordinary
non-recurring expenses, including litigation) would not exceed the most
stringent state regulatory limitation applicable to the Fund. Due to changes in
federal securities laws, such state regulations no longer apply and the
Manager's undertaking is therefore inapplicable and has been withdrawn. During
the Fund's last fiscal year, the Fund's expenses did not exceed the most
stringent state regulatory limit and the voluntary undertaking was not invoked.
The Investment Advisory Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties, or
reckless disregard for its obligations and duties thereunder, the Manager is not
liable for any loss sustained by reason of good faith errors or omissions in
connection with any matters to which the Agreement relates. The Investment
Advisory Agreement permits the Manager to act as investment adviser for any
other person, firm or corporation and to use the name "Oppenheimer" in
connection with other investment companies for which it may act as investment
adviser or general distributor. If the Manager shall no longer act as investment
adviser to the Fund, the right of the Fund to use the name "Oppenheimer" as part
of its name may be withdrawn.
o THE DISTRIBUTOR. Under its General Distributor's Agreement with the
Fund, the Distributor acts as the Fund's principal underwriter in the continuous
public offering of the Fund's Class A, Class B, Class C and Class Y shares but
is not obligated to sell a specific number of shares. Expenses normally
attributable to sales (excluding payments under the Distribution and Service
Plans but including advertising and the cost of printing and mailing
prospectuses, other than those furnished to existing shareholders), are borne by
the Distributor. During the Fund's fiscal years ended September 30, 1995 , 1996
and 1997, the aggregate sales charges on sales of the Fund's Class A shares were
$2,754,960 , $4,301,367 and $4,882,365, respectively, of which the Distributor
and an affiliated broker-dealer retained in the aggregate $876,712 , $1,402,167
and $1,597,976 in those respective years. During the Fund's fiscal years ended
September 30, 1995 , 1996 and 1997, the contingent deferred sales charges
collected on the Fund's Class B shares totaled $85,390 , $168,972 and $488,384,
respectively, all of which the Distributor retained. During the Fund's fiscal
year ended September 30, 1996 and 1997, contingent deferred sales charges
collected on the Fund's Class C shares totaled $2,383 and $18,559, all of which
the Distributor retained. For additional information about distribution of the
Fund's shares and the expenses connected with such activities, please refer to
"Distribution and Service Plans," below. No sales charges are assessed by OFDI
on Class Y shares.
o THE TRANSFER AGENT. OppenheimerFunds Services, the Fund's Transfer Agent,
is responsible for maintaining the Fund's shareholder registry and shareholder
accounting records, and for shareholder servicing and administrative functions.
BROKERAGE POLICIES OF THE FUND
BROKERAGE PROVISIONS OF THE INVESTMENT ADVISORY AGREEMENT. One of the duties of
the Manager under the Investment Advisory Agreement is to arrange the portfolio
transactions for the Fund. The Investment Advisory Agreement contains provisions
relating to the employment of broker-dealers ("brokers") to effect the Fund's
portfolio transactions. In doing so, the Manager is authorized by the Investment
Advisory Agreement to employ broker-dealers, including "affiliated" brokers, as
that term is defined in the Investment Company Act, as may, in its best judgment
based on all relevant factors, implement the policy of the Fund to obtain, at
reasonable expense, the "best execution" (prompt and reliable execution at the
most favorable price obtainable) of such transactions. The Manager need not seek
competitive commission bidding but is expected to minimize the commissions paid
to the extent consistent with the interest and policies of the Fund as
established by its Board of Trustees. Purchases of securities from underwriters
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers include a spread between the bid and asked price.
Under the Investment Advisory Agreement, the Manager is authorized to
select brokers that provide brokerage and/or research services for the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher than
another qualified broker would have charged if a good faith determination is
made by the Manager that the commission is fair and reasonable in relation to
the services provided. Subject to the foregoing considerations, the Manager may
also consider sales of shares of the Fund and other investment companies managed
by the Manager or its affiliates as a factor in the selection of brokers for the
Fund's portfolio transactions.
DESCRIPTION OF BROKERAGE PRACTICES FOLLOWED BY THE MANAGER. Subject to the
provisions of the Investment Advisory Agreement, and the procedures and rules
described above, allocations of brokerage are generally made by the Manager's
portfolio traders based upon recommendations from the Manager's portfolio
managers. In certain instances, portfolio managers may directly place trades and
allocate brokerage, also subject to the provisions of the advisory agreement and
the procedures and rules described above. In either case, brokerage is allocated
under the supervision of the Manager's executive officers. Transactions in
securities other than those for which an exchange is the primary market are
generally done with principals or market makers. Brokerage commissions are paid
primarily for effecting transactions in listed securities or for certain
fixed-income agency transactions in the secondary market, and are otherwise paid
only if it appears likely that a better price or execution can be obtained. When
the Fund engages in an option transaction, ordinarily the same broker will be
used for the purchase or sale of the option and any transaction in the
securities to which the option relates. When possible, concurrent orders to
purchase or sell the same security by more than one of the accounts managed by
the Manager or its affiliates are combined. The transactions effected pursuant
to such combined orders are averaged as to price and allocated in accordance
with the purchase or sale orders actually placed for each account.
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 in commission dollars. The
Board of Trustees has permitted the Manager to use concessions on fixed price
offerings to obtain research, in the same manner as is permitted for agency
transactions. The Board has also permitted the Manager to use stated commissions
on secondary fixed-income agency trades to obtain research where the broker has
represented to the Manager that (1) the trade is not from or for the broker's
own inventory, (2) the trade was executed by the broker on an agency basis at
the stated commission, and (3) the trade is not a riskless principal
transaction.
The research services provided by brokers broaden the scope and supplement
the research activities of the Manager, by making available additional views for
consideration and comparisons, and by enabling the Manager to obtain market
information for the valuation of securities held in the Fund's portfolio or
being considered for purchase. The Board of Trustees, including the
"independent" Trustees of the Fund (those Trustees of the Fund who are not
"interested persons" as defined in the Investment Company Act, and who have no
direct or indirect financial interest in the operation of the Investment
Advisory Agreement or the Distribution Plans described below) annually reviews
information furnished by the Manager as to the commissions paid to brokers
furnishing such services so that the Board may ascertain whether the amount of
such commissions was reasonably related to the value or benefit of such
services.
During the Fund's fiscal years ended September 30, 1995 , 1996 and 1997,
total brokerage commissions paid by the Fund (not including spreads or
concessions on principal transactions on a net trade basis) were $9,234,871 ,
$801,028 and $802,536, respectively. Of that amount, during the same period,
$67,386 was paid to brokers as commissions in return for research services; the
aggregate dollar amount of those transactions was $36,315,906. The transactions
giving rise to those commissions were allocated in accordance with the Manager's
internal allocation procedures.
PERFORMANCE OF THE FUND
TOTAL RETURN INFORMATION. As described in the Prospectus, from time to time the
"average annual total return," "cumulative total return," "average annual total
return at net asset value" and "total return at net asset value" of an
investment in a class of shares of the Fund may be advertised. An explanation of
how these total returns are calculated for each class and the components of
those calculations is set forth below.
The Fund's advertisements of its performance data must, under applicable
rules of the Securities and Exchange Commission, include the average annual
total returns for each class of shares of the Fund for the 1, 5, and 10-year
periods (or the life of the class, if less) ending as of the most recently-ended
calendar quarter prior to the publication of the advertisement. This enables an
investor to compare the Fund's performance to the performance of other funds for
the same periods. However, a number of factors should be considered before using
such information as a basis for comparison with other investments. An investment
in the Fund is not insured; its returns and share prices are not guaranteed and
normally will fluctuate on a daily basis. When redeemed, an investor's shares
may be worth more or less than their original cost. Returns for any given past
period are not a prediction or representation by the Fund of future returns. The
returns of each class of shares of the Fund are affected by portfolio quality,
the type of investments the Fund holds and its operating expenses allocated to
the particular class.
o AVERAGE ANNUAL TOTAL RETURNS. The "average annual total return" of each
class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below) held
for a number of years ("n") to achieve an Ending Redeemable Value ("ERV") of
that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
o CUMULATIVE TOTAL RETURNS. The cumulative "total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses some of the same factors as average
annual total return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current maximum sales
charge of 5.75% (as a percentage of the offering price) is deducted from the
initial investment ("P") (unless the return is shown at net asset value, as
described below). For Class B shares, the payment of the applicable contingent
deferred sales charge (5.0% for the first year, 4.0% for the second year, 3.0%
for the third and fourth years, 2.0% in the fifth year, 1.0% in the sixth year
and none thereafter) is applied to the investment result for the period shown
(unless the total return is shown at net asset value, as described below). For
Class C shares, a 1.0% contingent deferred sales charge is applied to the
investment result for the one-year period (or less). Total returns also assume
that all dividends and capital gains distributions during the period are
reinvested to buy additional shares at net asset value per share, and that the
investment is redeemed at the end of the period.
The "average annual total return" on an investment in Class A shares of
the Fund for the one-year, five-year and ten-year periods ending September 30,
1997 were 2.88%, 17.49% and 14.66%, respectively. The cumulative "total return"
on Class A shares from September 30, 1987 to September 30, 1997 was 292.62%. The
average annual total returns on an investment in Class B shares of the Fund for
the one-year period ended September 30, 1997 and for the period from April 1,
1994 (the inception of the Class) to September 30, 1997 were 3.33% and 16.71%,
respectively. The cumulative total return on Class B shares for the period from
April 1, 1994 through September 30, 1997 was 71.46%. The average annual total
return on Class C shares of the Fund for the one-year period ended September 30,
1997 and for the period from October 2, 1995 (commencement of offering of the
Class) to September 30, 1997 were 7.39% and 17.82%, respectively. The cumulative
total return on Class C shares from the period from October 2, 1995 (inception
of the Class) to September 30, 1997 was 38.69%. The Fund's Class Y shares are
not subject to a sales charge. The average annual total return on an investment
in Class Y shares of the Fund for the one-year period ended September 30, 1997
and for the period from June 1, 1994 (the commencement of the Class) were 9.50%
and 20.42%, respectively. The cumulative total return on Class Y shares for the
period from June 1, 1994 to September 30, 1997 was 85.68%.
o TOTAL RETURNS AT NET ASSET VALUE. From time to time the Fund may also
quote an average annual total return at net asset value or a cumulative total
return at net asset value for Class A, Class B or Class C shares. Each is based
on the difference in net asset value per share at the beginning and the end of
the period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into
consideration the reinvestment of dividends and capital gains distributions. The
cumulative total return at net asset value of the Fund's Class A shares for the
period from September 30, 1987 to September 30, 1997 was 316.57%. The average
annual total returns at net asset value for Class A shares for the one, five and
ten-year periods ended September 30, 1997 were 9.16%, 18.89% and 15.34%,
respectively. The cumulative total return at net asset value for the Fund's
Class B shares for the period from April 1, 1994 through September 30, 1997 was
74.46%. The average annual returns for Class B shares at net asset value for the
one-year period ended September 30, 1997 and from April 1, 1994 to September 30,
1997 were 8.33% and 17.29%, respectively. The average annual total returns at
net asset value for the Fund's Class C shares for the one-year period ended
September 30, 1997 and for the period beginning October 2, 1995 (inception of
the Class) through September 30, 1997 were 8.39% and 17.82%, respectively. The
cumulative total return at net asset value for Class C shares for the period
from October 2, 1995 through September 30, 1997 was 38.69%. The average annual
total returns at net asset value for the Fund's Class Y shares for the one-year
period ended September 30, 1997 and for the period beginning June 1, 1994
(inception of the Class) through September 30, 1997 were 9.50% and 20.42%,
respectively. The cumulative total return at net asset value for Class Y shares
for the period from June 1, 1994 through September 30, 1997 was 85.68%.
Total return information may be useful to investors in reviewing the
performance of the various classes of the Fund's shares. However, when comparing
total return of an investment in the Fund with that of other alternatives,
investors should understand that as the Fund is an aggressive equity fund
seeking capital appreciation, its shares are subject to greater market risks and
volatility than shares of funds having other investment objectives and that the
Fund is designed for investors who are willing to accept greater risk of loss in
the hopes of realizing greater gains.
OTHER PERFORMANCE COMPARISONS. From time to time the Fund may publish the
ranking of its Class A, Class B, Class C or Class Y shares by Lipper Analytical
Services, Inc. ("Lipper"), a widely- recognized independent mutual fund
monitoring service. Lipper monitors the performance of regulated investment
companies, including the Fund, and ranks their performance for various periods
based on categories relating to investment objectives. The performance of the
Fund is ranked against (i) all other funds, (ii) all other small company growth
funds and (iii) all other growth funds in a specific size category. The Lipper
performance rankings are based on total returns that include the reinvestment of
capital gain distributions and income dividends but do not take sales charges or
taxes into consideration.
From time to time the Fund may publish the star ranking of the performance
of its Class A, Class B , Class C or Class Y shares by Morningstar, Inc., an
independent mutual fund monitoring service. Morningstar ranks mutual funds in
broad investment categories: domestic stock funds, international stock funds,
taxable bond funds and municipal bond funds, based on risk-adjusted total
investment returns. The Fund is ranked among international stock funds.
Investment return measures a fund's or class' one, three, five and ten-year
average annual total returns (depending on the inception of the fund or class)
in excess of 90-day U.S. Treasury bill returns after considering the fund's
sales charges and expenses. Risk measures a fund's or class' performance below
90-day U.S. Treasury bill returns. Risk and investment return are combined to
produce star rankings reflecting performance relative to the average fund in the
fund's category.
Five stars is the "highest" ranking (top 10%), four stars is "above average"
(next 22.5%), three stars is "average" (next 35%), two stars is "below average"
(next 22.5%) and one star is "lowest" (bottom 10%). The current star ranking is
the fund's or class' 3-year ranking or its combined 3- and 5-year ranking
(weighted 60%/40%, respectively, or its combined 3-, 5- and 10-year ranking
(weighted 40%, 30% and 30%, respectively), depending on the inception of the
fund or class. Rankings are subject to change monthly.
The Fund may also compare its performance to that of other funds in its
Morningstar Category. In addition to its star ranking, Morningstar also
categorizes and compares a fund's 3-year performance based on Morningstar's
classification of the fund's investments and investment style, rather than how a
fund defines its investment objective. Morningstar's four broad categories
(domestic equity, international equity, municipal bond and taxable bond) are
each further subdivided into categories based on types of investments and
investment styles. Those comparisons by Morningstar are based on the same risk
and return measurements as its star rankings but do not consider the effect of
sales charges.
From time to time, the Fund may include in its advertisements and sales
literature performance information about the Fund cited in other newspapers and
periodicals, such as the NEW YORK TIMES, which may include performance
quotations from other sources, including the Lipper.
From time to time, the Fund's Manager may publish rankings or ratings of
the Manager (or Transfer Agent) or the investor services provided by them to
shareholders of the Oppenheimer funds, other than performance rankings of the
Oppenheimer funds themselves. Those ratings or ranking of shareholder/investor
services by third parties may compare the Oppenheimer funds' services to those
of other mutual fund families selected by the rating or ranking services and may
be based upon the opinions of the rating or ranking service itself, based on its
research or judgement, or based upon surveys of investors, brokers, shareholders
or others.
DISTRIBUTION AND SERVICE PLANS
The Fund has adopted a Service Plan for Class A shares and a Distribution
and Service Plans for Class B and Class C shares under Rule 12b-1 of the
Investment Company Act pursuant to which the Fund will make payments to the
Distributor in connection with the distribution and/or servicing of the shares
of that class, as described in the Prospectus. No such Plan has been adopted for
Class Y shares. Each Plan has been approved by a vote of (i) the Board of
Trustees of the Fund, including a majority of the Independent Trustees, cast in
person at a meeting called for the purpose of voting on that Plan, and (ii) the
holders of a "majority" (as defined in the Investment Company Act) of the shares
of each class. For the Distribution and Service Plan for Class B and Class C
shares, that vote was cast by the Manager as the sole initial holder of Class B
and Class C shares of the Fund.
In addition, under the Plans the Manager and the Distributor, in their
sole discretion, from time to time may use their own resources (which, in the
case of the Manager, may include profits from the advisory fee it receives from
the Fund) to make payments to brokers, dealers or other financial institutions
(each is referred to as a "Recipient" under the Plans) for distribution and
administrative services they perform at no cost to the Fund. The Distributor and
the Manager may, in their sole discretion, increase or decrease the amount of
payments they make from their own resources to Recipients.
Unless terminated as described below, each Plan continues in effect from
year to year but only as long as its continuance is specifically approved at
least annually by the Fund's Board of Trustees and its Independent Trustees by a
vote cast in person at a meeting called for the purpose of voting on such
continuance. Each Plan may be terminated at any time by the vote of a majority
of the Independent Trustees or by the vote of the holders of a "majority" (as
defined in the Investment Company Act) of the outstanding shares of that class.
None of the Plans may be amended to increase materially the amount of payments
to be made unless such amendment is approved by shareholders of the Class
affected by the amendment. In addition, because Class B shares of the Fund
automatically convert into Class A shares after six years, the Fund is required
by a Securities and Exchange Commission rule to obtain the approval of Class B
as well as Class A shareholders for a proposed amendment to the Class A Plan
that would materially increase the amount to be paid by Class A shareholders
under the Class A Plan. Such approval must be by a "majority" of the Class A and
Class B shares (as defined in the Investment Company Act), voting separately by
class. All material amendments must be approved by the Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall provide
separate written reports to the Fund's Board of Trustees at least quarterly on
the amount of all payments made pursuant to each Plan, the purpose for which
payments were made and the identity of each Recipient that received any payment.
Each Plan further provides that while it is in effect, the selection and
nomination of those Trustees of the Fund who are not "interested persons" of the
Fund is committed to the discretion of the Independent Trustees. This does not
prevent the involvement of others in such selection and nomination if the final
decision as to any such selection or nomination is approved by a majority of the
Board and the Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any quarter
if the aggregate net asset value of all Fund shares held by the Recipient for
itself and its customers, did not exceed a minimum amount, if any, that may be
determined from time to time by a majority of the Fund's Independent Trustees.
Initially, the Board of Trustees has set the fees at the maximum rate and set no
requirement for a minimum amount of assets.
For the fiscal year ended September 30, 1997, payments under the Class A
Plan totalled $2,724,209, of which $212,124 was paid to an affiliate of the
Distributor. Any unreimbursed expenses incurred by the Distributor with respect
to Class A shares for any fiscal year may not be recovered in subsequent years.
Payments received by the Distributor under the Plan for Class A shares will not
be used to pay any interest expense, carrying charge, or other financial costs,
or allocation of overhead by the Distributor.
The Class B and Class C Plans allow the service fee payment to be paid by
the Distributor to Recipients in advance for the first year such shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. The advance payment is based on the net asset value of the shares
sold. An exchange of shares does not entitle the Recipient to an advance service
fee payment. In the event shares are redeemed during the first year that the
shares are outstanding, the Recipient will be obligated to repay a pro rata
portion of the advance payment for those shares to the Distributor. Payments
made under the Class B Plan during the fiscal period ended September 30, 1997
totaled $2,327,943, of which the Distributor retained $2,023,085 and paid
$26,037 to an affiliated dealer. Payments made under the Class C Plan for the
fiscal year ended September 30, 1997 totaled $262,815, of which the Distributor
retained $195,923.
Although the Class B Plan and the Class C Plan permit the Distributor to
retain both the asset-based sales charges and the service fee, or to pay
Recipients the service fee on a quarterly basis, without payment in advance, the
Distributor intends to pay the service fee to Recipients in the manner described
above. A minimum holding period may be established from time to time under the
Class B and the Class C Plan by the Board. Initially, the Board has set no
minimum holding period. All payments under the Class B and the Class C Plan are
subject to the limitations imposed by the Conduct Rules of the National
Association of Securities Dealers, Inc. on payments of asset-based sales charges
and service fees.
The Class B Plan allows for the carry-forward of distribution expenses to
be recovered from asset-based sales charges in subsequent fiscal periods. The
Class C Plan provides for the Distributor to be compensated at a flat rate,
whether the Distributor's distribution expenses are more or less than the
amounts paid by the Fund during that period.
Asset-based sales charge payments are designed to permit an investor to
purchase shares of the Fund without the assessment of a front-end sales load and
at the same time permit the Distributor to compensate brokers and dealers in
connection with the sale of Class B and Class C shares of the Fund. Such
payments are made in recognition that the Distributor (i) pays sales commissions
to authorized brokers and dealers at the time of sale, as described in the
Prospectus, (ii) may finance such commissions and/or the advance of the service
fee payment to Recipients under those Plans, (iii) employs personnel to support
distribution of shares, and (iv) may bear the costs of sales literature,
advertising and prospectuses (other than those furnished to current
shareholders) and state "blue sky" registration fees.
ABOUT YOUR ACCOUNT
HOW TO BUY SHARES
ALTERNATIVE SALES ARRANGEMENTS - CLASS A, CLASS B , CLASS C AND CLASS Y Shares.
The availability of four classes of shares permits the individual investor to
choose the method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor expects
to hold shares and other relevant circumstances. Investors should understand
that the purpose and function of the deferred sales charge and asset-based sales
charge with respect to Class B and Class C shares are the same as those of the
initial sales charge with respect to Class A shares. Any salesperson or other
person entitled to receive compensation for selling Fund shares may receive
different compensation with respect to one class of shares than the other. The
Distributor will not accept any order for $500,000 or more of Class B shares or
$1 million or more of Class C shares on behalf of a single investor (not
including dealer "street name" or omnibus accounts) because generally it will be
more advantageous for that investor to purchase Class A shares of the Fund
instead. A fourth class of shares may be purchased only by certain institutional
investors; such shares are sold at net asset value per share (the "Class Y
shares").
The four classes of shares each represent an interest in the same portfolio
investments of the Fund. However, each class has different shareholder
privileges and features. The net income attributable to Class B and Class C
shares and the dividends payable on Class B and Class C shares will be reduced
by incremental expenses borne solely by that class, including the asset-based
sales charge to which Class B and Class C shares are subject.
The conversion of Class B shares to Class A shares after six years is
subject to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax adviser, to the effect
that the conversion of Class B shares does not constitute a taxable event for
the holder under Federal income tax law. If such a revenue ruling or opinion is
no longer available, the automatic conversion feature may be suspended, in which
event no further conversions of Class B shares would occur while such suspension
remained in effect. Although Class B shares could then be exchanged for Class A
shares on the basis of relative net asset value of the two classes, without the
imposition of a sales charge or fee, such exchange could constitute a taxable
event for the holder, and absent such exchange, Class B shares might continue to
be subject to the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B, Class C and Class Y shares
recognizes two types of expenses. General expenses that do not pertain
specifically to any class are allocated pro rata to the shares of each class,
based on the percentage of the net assets of such class to the Fund's total
assets, and then equally to each outstanding share within a given class. Such
general expenses include (i) management fees, (ii) legal, bookkeeping and audit
fees, (iii) printing and mailing costs of shareholder reports, Prospectuses,
Statements of Additional Information and other materials for current
shareholders, (iv) fees to Independent Trustees, (v) custodian expenses, (vi)
share issuance costs, (vii) organization and start-up costs, (viii) interest,
taxes and brokerage commissions, and (ix) non-recurring expenses, such as
litigation costs. Other expenses that are directly attributable to a class are
allocated equally to each outstanding share within that class. Such expenses
include (i) Distribution Plan fees, (ii) incremental transfer and shareholder
servicing agent fees and expenses, (iii) registration fees and (iv) shareholder
meeting expenses, to the extent that such expenses pertain to a specific class
rather than to the Fund as a whole.
DETERMINATION OF NET ASSET VALUES PER SHARE. The net asset values per share of
Class A, Class B, Class C and Class Y shares of the Fund are determined as of
the close of business of The New York Stock Exchange (the "Exchange") on each
day that the Exchange is open, by dividing the value of the Fund's net assets
attributable to that class by the number of shares of that class outstanding.
The Exchange normally closes at 4:00 P.M. New York time, but may close earlier
on some days (for example, in case of weather emergencies or on days falling
before a holiday). The Exchange's most recent annual holiday schedule (which is
subject to change) states that it will close on New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. It may also close on other days. Trading may occur in debt
securities and in foreign securities when the Exchange is closed (including
weekends and holidays). Because the Fund's net asset value will not be
calculated at those times, if securities held in the Fund's portfolio are traded
at such time, the net asset values per share of Class A, Class B and Class C
shares of the Fund may be significantly affected at times when shareholders may
not purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the valuation
of the Fund's securities, generally as follows: (i) equity securities traded on
a securities exchange or on the Automated Quotation System ("NASDAQ") of the
Nasdaq Stock Market, Inc. for which last sale information is regularly reported
are valued at the last reported sale price on their primary exchange or NASDAQ
that day (or, in the absence of sales that day, at values based on the last sale
price of the preceding trading day, or closing "bid" prices that day); (ii)
securities traded on a foreign securities exchange are generally valued at the
last sale price available to the pricing service approved by the Fund's Board of
Trustees or to the Manager as reported by the principal exchange on which the
security is traded at its last trading session on or immediately preceding the
valuation date, or at the mean between "bid" and "ask" prices obtained from the
principal exchange or two active market makers in the security on the basis of
reasonable inquiry; (iii) long-term debt securities having a remaining maturity
in excess of 60 days are valued based on the mean between the "bid" and "ask"
prices determined by a portfolio pricing service approved by the Fund's Board of
Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry; (iv) debt instruments having a
maturity of more than 397 days when issued, and non-money market type
instruments having a maturity of 397 days or less when issued, which have a
remaining maturity of 60 days or less are valued at the mean between "bid" and
"ask" prices determined by a pricing service approved by the Fund's Board of
Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry; (v) money market-type debt
securities held by a non-money market fund that had a maturity of less than 397
days when issued that have a remaining maturity of 60 days or less , and debt
instruments held by a money market fund that have a remaining maturity of 397
days or less, shall be valued at cost, adjusted for amortization of premiums and
accretion of discount; and (vi) securities (including restricted securities) not
having readily-available market quotations are valued at fair value determined
under the Board's procedures. If the Manager is unable to locate two market
makers willing to give quotes (see (ii), (iii) and (iv) above), the security may
be priced at the mean between the "bid" and "ask" prices provided by a single
active market maker (which in certain cases may be in "bid" price if no "ask"
price is available).
In the case of U.S. Government Securities and mortgage-backed securities,
where last sale information is not generally available, such pricing procedures
may include "matrix" comparisons to the prices for comparable instruments on the
basis of quality, yield, maturity and other special factors involved. The
Manager may use pricing services approved by the Board of Trustees to price U.S.
Government Securities, or mortgage-backed securities for which last sale
information is not generally available. The Manager will monitor the accuracy of
such pricing services, which may include comparing prices used for portfolio
evaluation to actual sales prices of selected securities.
Trading in securities on European and Asian exchanges and over-the-counter
markets is normally completed before the close of the New York Stock Exchange.
Events affecting the values of foreign securities traded in securities markets
that occur between the time their prices are determined and the close of the New
York Stock Exchange will not be reflected in the Fund's calculation of net asset
value unless the Board of Trustees or the Manager, under procedures established
by the Board of Trustees, determines that the particular event is likely to
effect a material change in the value of such security. Foreign currency,
including forward contracts, will be valued at the closing price in the London
foreign exchange market that day as provided by a reliable bank, dealer or
pricing service. The values of securities denominated in foreign currency will
be converted to U.S. dollars at the closing price in the London foreign exchange
market that day as provided by a reliable bank, dealer or pricing service.
Puts, calls and Futures are valued at the last sales price on the
principal exchange on which they are traded, or on NASDAQ, as applicable, as
determined by a pricing service approved by the Board of Trustees or by the
Manager. If there were no sales that day, value shall be the last sale price on
the preceding trading day if it is within the spread of the closing "bid" and
"ask" prices on the principal exchange or on NASDAQ on the valuation date, or,
if not, value shall be the closing "bid" price on the principal exchange or on
NASDAQ on the valuation date. If the put, call or future is not traded on an
exchange or on NASDAQ, it shall be valued at the mean between "bid" and "ask"
prices obtained by the Manager from two active market makers (which in certain
cases may be the "bid" price if no "ask" price is available).
When the Fund writes an option, an amount equal to the premium received is
included in the Fund's Statement of Assets and Liabilities as an asset, and an
equivalent credit is included in the liability section. The credit is adjusted
("marked-to-market") to reflect the current market value of the option. In
determining the Fund's gain on investments, if a call or put written by the Fund
is exercised, the proceeds are increased by the premium received. If a call or
put written by the Fund expires, the Fund has a gain in the amount of the
premium; if the Fund enters into a closing purchase transaction, it will have a
gain or loss depending on whether the premium received was more or less than the
cost of the closing transaction. If the Fund exercises a put it holds, the
amount the Fund receives on its sale of the underlying investment is reduced by
the amount of premium paid by the Fund.
ACCOUNTLINK. When shares are purchased through AccountLink, each purchase must
be at least $25. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy the shares. Dividends will begin to accrue on shares purchased
by the proceeds of ACH transfers on the business day the Fund receives Federal
Funds for the purchase through the ACH system before the close of The New York
Stock Exchange. The Exchange normally closes at 4:00 P.M., but may close earlier
on certain days. If Federal Funds are received on a business day after the close
of the Exchange, the shares will be purchased and dividends will begin to accrue
on the next regular business day. The proceeds of ACH transfers are normally
received by the Fund 3 days after the ACH transfer is initiated. The Distributor
and the Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
REDUCED SALES CHARGES. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and Letters
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in the Prospectus
because the Distributor or dealer or broker incurs little or no selling
expenses. The term "immediate family" refers to one's spouse, children,
grandchildren, grandparents, parents, aunts, uncles, nieces and nephews,
parents-in-law, brothers and sisters, sons- and daughters-in-law, a sibling's
spouse and a spouse's siblings. Relations by virtue of a remarriage
(step-children, step- parents, etc.) are included.
o THE OPPENHEIMER FUNDS. The Oppenheimer funds are those mutual funds
for which the Distributor acts as the distributor or the sub-distributor and
include the following:
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer California Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Main Street California
Municipal Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer Discovery Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth
Fund
Rochester Fund Municipals
Oppenheimer Bond Fund for Growth
Oppenheimer MidCap Fund
Limited Term New York Municipal Fund
Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government
Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer International Bond Fund
Oppenheimer International Small Company
Fund
Oppenheimer Real Asset Fund
Oppenheimer Enterprise Fund
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Growth & Income Value
Fund
Oppenheimer Quest Capital Valued Fund,
Inc.
Oppenheimer International Growth Fund
Oppenheimer Developing Markets Fund
Oppenheimer Disciplined Value Fund
Oppenheimer Bond Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer LifeSpan Growth Fund
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
There is an initial sales charge on the purchase of Class A shares of each
of the Oppenheimer funds except Money Market Funds (under certain circumstances
described herein, redemption proceeds of Money Market Fund shares may be subject
to a contingent deferred sales charge).
o LETTERS OF INTENT. A Letter of Intent (referred to as a "Letter") is an
investor's statement in writing to the Distributor of the intention to purchase
Class A shares or Class A and Class B shares of the Fund and other Oppenheimer
funds during a 13-month period (the "Letter of Intent period"), which may, at
the investor's request, include purchases made up to 90 days prior to the date
of the Letter. The Letter states the investor's intention to make the aggregate
amount of purchases of shares which, when added to the investor's holdings of
shares of those funds, will equal or exceed the amount specified in the Letter.
Purchases made by reinvestment of dividends or distributions of capital gains
and purchases made at net asset value without sales charge do not count toward
satisfying the amount of the Letter. A letter enables an investor to count the
Class A and Class B shares purchased under the Letter to obtain the reduced
sales charge rate on purchases of Class A shares of the Fund (and other
Oppenheimer funds) that applies under the Right of Accumulation to current
purchases of Class A shares. Each purchase of Class A shares under the Letter
will be made at the public offering price (including the sales charge) that
applies to a single lump-sum purchase of shares in the amount intended to be
purchased under the Letter.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of Intent
period, when added to the value (at offering price) of the investor's holdings
of shares on the last day of that period, do not equal or exceed the intended
purchase amount, the investor agrees to pay the additional amount of sales
charge applicable to such purchases, as set forth in "Terms of Escrow," below
(as those terms may be amended from time to time). The investor agrees that
shares equal in value to 5% of the intended purchase amount will be held in
escrow by the Transfer Agent subject to the Terms of Escrow. Also, the investor
agrees to be bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and if such
terms are amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer funds by
OppenheimerFunds prototype 401(k) plans under a Letter of Intent, the Transfer
Agent will not hold shares in escrow. If the intended purchase amount under the
Letter entered into by an OppenheimerFunds prototype 401(k) plan is not
purchased by the plan by the end of the Letter of Intent period, there will be
no adjustment of commissions paid to the broker-dealer or financial institution
of record for accounts held in the name of that plan.
If the total eligible purchases made during the Letter of Intent period do
not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
purchases. If total eligible purchases during the Letter of Intent period exceed
the intended purchase amount and exceed the amount needed to qualify for the
next sales charge rate reduction set forth in the applicable prospectus, the
sales charges paid will be adjusted to the lower rate, but only if and when the
dealer returns to the Distributor the excess of the amount of commissions
allowed or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the Distributor
will be used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly after the
Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter, shares
redeemed by the investor prior to the termination of the Letter of Intent period
will be deducted. It is the responsibility of the dealer of record and/or the
investor to advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All of such
purchases must be made through the Distributor.
o TERMS OF ESCROW THAT APPLY TO LETTERS OF INTENT.
1. Out of the initial purchase (or subsequent purchases if necessary) made
pursuant to a Letter, shares of the Fund equal in value up to 5% of the intended
purchase amount specified in the Letter shall be held in escrow by the Transfer
Agent. For example, if the intended purchase amount is $50,000, the escrow shall
be shares valued in the amount of $2,500 (computed at the public offering price
adjusted for a $50,000 purchase). Any dividends and capital gains distributions
on the escrowed shares will be credited to the investor's account.
2. If the intended purchase amount specified under the Letter is completed
within the thirteen-month Letter of Intent period, the escrowed shares will be
promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the total
purchases pursuant to the Letter are less than the intended purchase amount
specified in the Letter, the investor must remit to the Distributor an amount
equal to the difference between the dollar amount of sales charges actually paid
and the amount of sales charges which would have been paid if the total amount
purchased had been made at a single time. Such sales charge adjustment will
apply to any shares redeemed prior to the completion of the Letter. If such
difference in sales charges is not paid within twenty days after a request from
the Distributor or the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares necessary to
realize such difference in sales charges. Full and fractional shares remaining
after such redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales charge, the
sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for redemption any
or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include (a) Class A shares
sold with a front-end sales charge or subject to a Class A contingent deferred
sales charge, (b) Class B shares of other Oppenheimer funds acquired subject to
a contingent deferred sales charge, and (c) Class A or B shares acquired in
exchange for either (i) Class A shares of one of the other Oppenheimer funds
that were acquired subject to a Class A initial or contingent deferred sales
charge or (ii) Class B shares of one of the other Oppenheimer funds that were
acquired subject to a contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in the
section of the Prospectus entitled "How to Exchange Shares," and the escrow will
be transferred to that other fund.
ASSET BUILDER PLANS. To establish an Asset Builder Plan from a bank account, a
check (minimum $25) for the initial purchase must accompany the application.
Shares purchased by Asset Builder Plan payments from bank accounts are subject
to the redemption restrictions for recent purchases described in "How To Sell
Shares," in the Prospectus. Asset Builder Plans also enable shareholders of
Oppenheimer Cash Reserves to use those accounts for monthly automatic purchases
of shares of up to four other Oppenheimer funds. If you make payments from your
bank account to purchase shares of the Fund, your bank account will be
automatically debited normally four to five business days prior to the
investment dates selected in the Account Application. Neither the Distributor
the Transfer Agent nor the Fund shall be responsible for any delays in
purchasing shares resulting from delays in ACH transmission.
There is a front-end sales charge on the purchase of certain Oppenheimer
funds, or a contingent deferred sales charge may apply to shares purchased by
Asset Builder payments. An application should be obtained from the Distributor,
completed and returned, and a prospectus of the selected fund(s) should be
obtained from the Distributor or your financial advisor before initiating Asset
Builder payments. The amount of the Asset Builder investment may be changed or
the automatic investments may be terminated at any time by writing to the
Transfer Agent. A reasonable period (approximately 15 days) is required after
the Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans at any
time without prior notice.
CANCELLATION OF PURCHASE ORDERS. Cancellation of purchase orders for the Fund's
shares (for example, when a purchase check is returned to the Fund unpaid)
causes a loss to be incurred when the net asset value of the Fund's shares on
the cancellation date is less than on the purchase date. That loss is equal to
the amount of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is responsible for that
loss. If the investor fails to compensate the Fund for the loss, the Distributor
will do so. The Fund may reimburse the Distributor for that amount by redeeming
shares from any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
RETIREMENT PLANS. In describing certain types of employee benefit plans that may
purchase Class A shares without being subject to the Class A contingent deferred
sales charge, the term "employee benefit plan" means any plan or arrangement,
whether or not "qualified" under the Internal Revenue Code, including medical
savings accounts, payroll deduction plans or similar plans in which Class A
shares are purchased by a fiduciary or other person for the account of
participants who are employees of a single employer or of affiliated employers,
if the Fund account is registered in the name of the fiduciary or other person
for the benefit of participants in the plan.
The term "group retirement plan" means any qualified or non-qualified
retirement plan (including 457 plans, SEPs, SARSEPs, 403(b) plans other than
public school 403(b) plans, and SIMPLE plans) for employees of a corporation or
a sole proprietorship, members and employees of a partnership or association or
other organized group of persons (the members of which may include other
groups), if the group or association has made special arrangements with the
Distributor and all members of the group or association participating in or who
are eligible to participate in the plan(s) purchase Class A shares of the Fund
through a single investment dealer, broker, or other financial institution
designated by the group. "Group retirement plan" also includes qualified
retirement plans and non-qualified deferred compensation plans and IRAs that
purchase Class A shares of the Fund through a single investment dealer, broker,
or other financial institution, if that broker-dealer has made special
arrangements with the Distributor enabling those plans to purchase Class A
shares of the Fund at net asset value but subject to a contingent deferred sales
charge.
In addition to the discussion in the Prospectus relating to the ability of
Retirement Plans to purchase Class A shares at net asset value in certain
circumstances, there is no initial sales charge on purchases of Class A shares
of any one or more of the Oppenheimer funds by a Retirement Plan in the
following cases:
(i) the recordkeeping for the Retirement Plan is performed on a daily
valuation basis by Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch")
and, on the date the plan sponsor signs the Merrill Lynch recordkeeping service
agreement, the Retirement Plan has $3 million or more in assets invested in
mutual funds other than those advised or managed by Merrill Lynch Asset
Management, L.P. ("MLAM") that are made available pursuant to a Service
Agreement between Merrill Lynch and the mutual fund's principal underwriter or
distributor and in funds advised or managed by MLAM (collectively, the
"Applicable Investments"); or
(ii) the recordkeeping for the Retirement Plan is performed on a daily
valuation basis by an independent record keeper whose services are provided
under a contract or arrangement between the Retirement Plan and Merrill Lynch.
On the date the plan sponsor signs the Merrill Lynch record keeping service
agreement, the Plan must have $3 million or more in assets, excluding assets
held in money market funds, invested in Applicable Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by the
Merrill Lynch plan conversion manager on the date the plan sponsor signs the
Merrill Lynch record keeping service
agreement.
If a Retirement Plan's records are maintained on a daily valuation basis
by Merrill Lynch or an independent record keeper under a contract or alliance
arrangement with Merrill Lynch, and if on the date the plan sponsor signs the
Merrill Lynch record keeping service agreement the Retirement Plan has less than
$3 million in assets, excluding money market funds, invested in Applicable
Investments, then the Retirement Plan may purchase only Class B shares of one or
more of the Oppenheimer funds. Otherwise, the Retirement Plan will be permitted
to purchase Class A shares of one or more of the Oppenheimer funds. Any of those
Retirement Plans that currently invest in Class B shares of the Fund will have
their Class B shares be converted to Class A shares of the Fund once the Plan's
Applicable Investments have reached $5 million.
Any redemptions of shares of the Fund held by Retirement Plans whose
records are maintained on a daily valuation basis by Merrill Lynch or an
independent record keeper under a contract with Merrill Lynch that are currently
invested in Class B shares of the Fund shall not be subject to the Class B CDSC.
HOW TO SELL SHARES
Information on how to sell shares of the Fund is stated in the Prospectus.
The information below supplements the terms and conditions for redemptions set
forth in the Prospectus.
o INVOLUNTARY REDEMPTIONS. The Fund's Board of Trustees has the right to
determine whether a minimum and/or maximum value should apply to accounts
holding shares, to fix such values and the terms, conditions and other
procedures to cause the involuntary redemption of accounts that do not satisfy
such criteria.
o PAYMENTS "IN KIND". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, the Board of
Trustees of the Fund may determine that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make payment of a
redemption order wholly or partly in cash. In that case the Fund may pay the
redemption proceeds in whole or in part by a distribution "in kind" of
securities from the portfolio of the Fund, in lieu of cash, in conformity with
applicable rules of the Securities and Exchange Commission. The Fund has elected
to be governed by Rule 18f-1 under the Investment Company Act, pursuant to which
the Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net assets of the Fund during any 90-day period for any
one shareholder. If shares are redeemed in kind, the redeeming shareholder might
incur brokerage or other costs in selling the securities for cash. The method of
valuing securities used to make redemptions in kind will be the same as the
method the Fund uses to value its portfolio securities described above under
"Determination of Net Asset Values Per Share" and that valuation will be made as
of the time the redemption price is determined.
REINVESTMENT PRIVILEGE. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of (i) Class A shares, or (ii)
Class B shares that were subject to the Class B contingent deferred sales charge
when you redeemed them. This privilege does not apply to Class C shares. The
reinvestment may be made without sales charge only in Class A shares of the Fund
or any of the other Oppenheimer funds into which shares of the Fund are
exchangeable as described below, at the net asset value next computed after the
Transfer Agent receives the reinvestment order. The shareholder must ask the
Distributor for that privilege at the time of reinvestment. Any capital gain
that was realized when the shares were redeemed is taxable, and reinvestment
will not alter any capital gains tax payable on that gain. If there has been a
capital loss on the redemption, some or all of the loss may not be tax
deductible, depending on the timing and amount of the reinvestment. Under the
Internal Revenue Code, if the redemption proceeds of Fund shares on which a
sales charge was paid are reinvested in shares of the Fund or another of the
Oppenheimer funds within 90 days of payment of the sales charge, the
shareholder's basis in the shares of the Fund that were redeemed may not include
the amount of the sales charge paid. That would reduce the loss or increase the
gain recognized from the redemption. However, in that case the sales charge
would be added to the basis of the shares acquired by the reinvestment of the
redemption proceeds. The Fund may amend, suspend or cease offering this
reinvestment privilege at any time as to shares redeemed after the date of such
amendment, suspension or cessation.
TRANSFERS OF SHARES. Shares are not subject to the payment of a contingent
deferred sales charge of any class at the time of transfer to the name of
another person or entity (whether the transfer occurs by absolute assignment,
gift or bequest, not involving, directly or indirectly, a public sale). The
transferred shares will remain subject to the contingent deferred sales charge,
calculated as if the transferee shareholder had acquired the transferred shares
in the same manner and at the same time as the transferring shareholder. If less
than all shares held in an account are transferred, and some but not all shares
in the account would be subject to a contingent deferred sales charge if
redeemed at the time of transfer, the priorities described in the Prospectus
under "How to Buy Shares" for the imposition of the Class B and Class C
contingent deferred sales charges will be followed in determining the order in
which shares are transferred.
DISTRIBUTIONS FROM RETIREMENT PLANS. Requests for distributions from
OppenheimerFunds- sponsored IRAs, 403(b)(7) custodial plans, 401(k) plans, or
pension or profit-sharing plans should be addressed to "Trustee,
OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its address listed
in "How To Sell Shares" in the Prospectus or on the back cover of this Statement
of Additional Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if the
distribution is premature; and (iii) conform to the requirements of the plan and
the Fund's other redemption requirements. Participants (other than self-
employed persons maintaining a plan account in their own name) in
OppenheimerFunds-sponsored pension, profit-sharing or 401(k) plans may not
directly redeem or exchange shares held for their account under those plans. The
employer or plan administrator must sign the request. Distributions from pension
and profit sharing plans are subject to special requirements under the Internal
Revenue Code and certain documents (available from the Transfer Agent) must be
completed before the distribution may be made. Distributions from retirement
plans are subject to withholding requirements under the Internal Revenue Code,
and IRS Form W-4P (available from the Transfer Agent) must be submitted to the
Transfer Agent with the distribution request, or the distribution may be
delayed. Unless the shareholder has provided the Transfer Agent with a certified
tax identification number, the Internal Revenue Code requires that tax be
withheld from any distribution even if the shareholder elects not to have tax
withheld. The Fund, the Manager, the Distributor, the Trustee and the Transfer
Agent assume no responsibility to determine whether a distribution satisfies the
conditions of applicable tax laws and will not be responsible for any tax
penalties assessed in connection with a distribution.
SPECIAL ARRANGEMENTS FOR REPURCHASE OF SHARES FROM DEALERS AND BROKERS. The
Distributor is the Fund's agent to repurchase its shares from authorized dealers
or brokers on behalf of their customers. The shareholder should contact the
broker or dealer to arrange this type of redemption. The repurchase price per
share will be the net asset value next computed after the Distributor receives
the order placed by the dealer or broker, except that if the Distributor
receives a repurchase order from a dealer or broker after the close of The New
York Stock Exchange on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker from its
customer prior to the time the Exchange closes (normally 4:00 P.M., but may be
earlier some days) and the order was transmitted to and received by the
Distributor prior to its close of business that day (normally 5:00 P.M.).
Ordinarily, for accounts redeemed by a broker-dealer under this procedure,
payment will be made within three business days after the shares have been
redeemed upon the Distributor's receipt of the required redemption documents in
proper form, with signature(s) of the registered owners guaranteed on the
redemption document as described in the Prospectus.
AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(minimum $50) automatically on a monthly, quarterly, semi-annual or annual basis
under an Automatic Withdrawal Plan. Shares will be redeemed three business days
prior to the date requested by the shareholder for receipt of the payment.
Automatic withdrawals of up to $1,500 per month may be requested by telephone if
payments are to be made by check payable to all shareholders of record and sent
to the address of record for the account (and if the address has not been
changed within the prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on this basis.
Payments are normally made by check, but shareholders having AccountLink
privileges (see "How to Buy Shares") may arrange to have Automatic Withdrawal
Plan payments transferred to the bank account designated on the OppenheimerFunds
New Account Application or signature-guaranteed instructions. Shares are
normally redeemed pursuant to an Automatic Withdrawal Plan three business days
before the date you select in the Account Application. If a contingent deferred
sales charge applies to the redemption, the amount of the check or payment will
be reduced accordingly. The Fund cannot guarantee receipt of a payment on the
date requested and reserves the right to amend, suspend or discontinue offering
such plans at any time without prior notice. Because of the sales charge
assessed on Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an Automatic
Withdrawal Plan. Class B and Class C shareholders should not establish
withdrawal plans because of the imposition of the contingent deferred sales
charges on such withdrawals (except where the Class B and Class C contingent
deferred sales charges are waived as described in the Prospectus under "Waivers
of Class B and Class C Contingent Deferred Sales Charges".)
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions applicable to such plans, as stated below as
well as the Prospectus. These provisions may be amended from time to time by the
Fund and/or the Distributor. When adopted, such amendments will automatically
apply to existing Plans.
o AUTOMATIC EXCHANGE PLANS. Shareholders can authorize the Transfer Agent
(on the OppenheimerFunds Application or signature-guaranteed instructions) to
exchange a pre-determined amount of shares of the Fund for shares (of the same
class) of other Oppenheimer funds automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount
that may be exchanged to each other fund account is $25. Exchanges made under
these plans are subject to the restrictions that apply to exchanges as set forth
in "How to Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
o AUTOMATIC WITHDRAWAL PLANS. Fund shares will be redeemed as necessary to
meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first and shares acquired with reinvested dividends and capital gains
distributions will be redeemed next, followed by shares acquired with a sales
charge, to the extent necessary to make withdrawal payments. Depending upon the
amount withdrawn, the investor's principal may be depleted. Payments made under
withdrawal plans should not be considered as a yield or income on your
investment. It may not be desirable to purchase additional Class A shares while
making automatic withdrawals because of the sales charges that apply to
purchases when made. Accordingly, a shareholder normally may not maintain an
Automatic Withdrawal Plan while simultaneously making regular purchases of Class
A shares.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan (the "Plan") as agent for the investor (the "Planholder") who executed the
Plan authorization and application submitted to the Transfer Agent. The Transfer
Agent and the Fund shall incur no liability to the Planholder for any action
taken or omitted by the Transfer Agent in good faith to administer the Plan.
Certificates will not be issued for shares of the Fund purchased for and held
under the Plan, but the Transfer Agent will credit all such shares to the
account of the Planholder on the records of the Fund. Any share certificates
held by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the account
may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made at
the net asset value per share determined on the redemption date. Checks or ACH
transfer payments of the proceeds of Plan withdrawals will normally be
transmitted three business days prior to the date selected for receipt of the
payment (receipt of payment on the date selected cannot be guaranteed),
according to the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time in mailing such notification
for the requested change to be put in effect. The Planholder may, at any time,
instruct the Transfer Agent by written notice (in proper form in accordance with
the requirements of the then-current Prospectus of the Fund) to redeem all, or
any part of, the shares held under the Plan. In that case, the Transfer Agent
will redeem the number of shares requested at the net asset value per share in
effect in accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing to the
Transfer Agent. A Plan may also be terminated at any time by the Transfer Agent
upon receiving directions to that effect from the Fund. The Transfer Agent will
also terminate a Plan upon receipt of evidence satisfactory to it of the death
or legal incapacity of the Planholder. Upon termination of a Plan by the
Transfer Agent or the Fund, shares that have not been redeemed from the account
will be held in uncertificated form in the name of the Planholder, and the
account will continue as a dividend- reinvestment, uncertificated account unless
and until proper instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the Planholder
may request issuance of a portion of the Class A shares in certificated form.
Share certificates are not issued for Class B or Class C shares. Upon written
request from the Planholder, the Transfer Agent will determine the number of
Class A shares for which a certificate may be issued without causing the
withdrawal checks to stop because of exhaustion of uncertificated shares needed
to continue payments. However, should such uncertificated shares become
exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in administering the Plan.
HOW TO EXCHANGE SHARES
As stated in the Prospectus, shares of a particular class of Oppenheimer
funds having more than one class of shares may be exchanged only for shares of
the same class of other Oppenheimer funds. Shares of the Oppenheimer funds that
have a single class without a class designation are deemed "Class A" shares for
this purpose. All of the Oppenheimer funds offer Class A, Class B and Class C
shares except Oppenheimer Money Market Fund, Inc., Centennial Money Market
Trust, Centennial Tax Exempt Trust, Centennial Government Trust, Centennial New
York Tax Exempt Trust, Centennial California Tax Exempt Trust and Centennial
America Fund, L.P. , which only offer Class A shares and Oppenheimer Main Street
California Municipal Fund which only offers Class A and Class B shares (Class B
and Class C shares of Oppenheimer Cash Reserves are generally available only by
exchange from the same class of shares of other Oppenheimer funds or through
OppenheimerFunds sponsored 401 (k) plans). A current list of funds showing which
funds offer which classes can be obtained by calling the Distributor at
1-800-525-7048.
For accounts established on or before March 8, 1996 holding Class M shares
of Oppenheimer Bond Fund for Growth, Class M shares can be exchanged only for
Class A shares of other Oppenheimer funds. Exchanges to Class M shares of
Oppenheimer Bond Fund for Growth are permitted from Class A shares of
Oppenheimer Money Market Fund, Inc. or Oppenheimer Cash Reserves that were
acquired by exchange from Class M shares. Otherwise no exchanges of any class of
any Oppenheimer fund into Class M shares are permitted.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any Money Market Fund. Shares of any Money Market Fund purchased
without a sales charge may be exchanged for shares of Oppenheimer funds offered
with a sales charge upon payment of the sales charge (or, if applicable, may be
used to purchase shares of Oppenheimer funds subject to a contingent deferred
sales charge). However, shares of Oppenheimer Money Market Fund, Inc. purchased
with the redemption proceeds of shares of other mutual funds (other than funds
managed by the Manager or its subsidiaries) redeemed within the 30 days prior to
that purchase may subsequently be exchanged for shares of other Oppenheimer
funds without being subject to an initial or contingent deferred sales charge,
whichever is applicable. To qualify for that privilege, the investor or the
investor's dealer must notify the Distributor of eligibility for this privilege
at the time the shares of Oppenheimer Money Market Fund, Inc. are purchased,
and, if requested, must supply proof of entitlement to this privilege.
Shares of this Fund acquired by reinvestment of dividends or distributions
from any other of the Oppenheimer funds (except by Oppenheimer Cash Reserves) or
from any unit investment trust for which reinvestment arrangements have been
made with the Distributor may be exchanged at net asset value for shares of any
of the Oppenheimer funds. No contingent deferred sales charge is imposed on
exchanges of shares of either class purchased subject to a contingent deferred
sales charge. However, when Class A shares acquired by exchange of Class A
shares of other Oppenheimer funds purchased subject to a Class A contingent
deferred sales charge are redeemed within 12 months (18 months for shares
purchased prior to May 1, 1997) of the end of the calendar month of the initial
purchase of the exchanged Class A shares, the Class A contingent deferred sales
charge is imposed on the redeemed shares (see "Class A Contingent Deferred Sales
Charge" in the Prospectus). The Class B contingent deferred sales charge is
imposed on Class B shares acquired by exchange if they are redeemed within 6
years of the initial purchase of the exchanged Class B shares. The Class C
contingent deferred sales charge is imposed on Class C shares acquired by
exchange if they are redeemed within 12 months of the initial purchase of the
exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an exchange, the
priorities described in "How to Buy Shares" in the Prospectus for the imposition
of the Class B and Class C contingent deferred sales charge will be followed in
determining the order in which the shares are exchanged. Shareholders should
take into account the effect of any exchange on the applicability and rate of
any contingent deferred sales charge that might be imposed in the subsequent
redemption of remaining shares. SHAREHOLDERS OWNING SHARES OF MORE THAN ONE
CLASS MUST SPECIFY WHETHER THEY INTEND TO EXCHANGE CLASS A, CLASS B OR CLASS C
SHARES.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of more than one account. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may be less
than the number requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this Statement of
Additional Information or would include shares covered by a share certificate
that is not tendered with the request. In those cases, only the shares available
for exchange without restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either have an
existing account in, or obtain and acknowledge receipt of a prospectus of, the
fund to which the exchange is to be made. For full or partial exchanges of an
account made by telephone, any special account features such as Asset Builder
Plans, Automatic Withdrawal Plans, Checkwriting, if available, and retirement
plan contributions will be switched to the new account unless the Transfer Agent
is instructed otherwise. If all telephone lines are busy (which might occur, for
example, during periods of substantial market fluctuations), shareholders might
not be able to request exchanges by telephone and would have to submit written
exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the "Redemption
Date"). Normally, shares of the fund to be acquired are purchased on the
Redemption Date, but such purchases may be delayed by either fund up to five
business days if it determines that it would be disadvantaged by an immediate
transfer of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it (for
example, if the receipt of multiple exchange requests from a dealer might
require the disposition of portfolio securities at a time or at a price that
might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure that
the Fund selected is appropriate for his or her investment and should be aware
of the tax consequences of an exchange. For federal income tax purposes, an
exchange transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above, discusses some
of the tax consequences of reinvestment of redemption proceeds in such cases.
The Fund, the Distributor, and the Transfer Agent are unable to provide
investment, tax or legal advice to a shareholder in connection with an exchange
request or any other investment transaction.
DIVIDENDS, CAPITAL GAINS AND TAXES
TAX STATUS OF THE FUND'S DIVIDENDS AND DISTRIBUTIONS. The Federal tax treatment
of the Fund's dividends and capital gains distributions is explained in the
Prospectus under the caption "Dividends, Capital Gains and Taxes." Special
provisions of the Internal Revenue Code govern the eligibility of the Fund's
dividends for the dividends-received deduction for corporate shareholders.
Long-term capital gains distributions are not eligible for the deduction. In
addition, the amount of dividends paid by the Fund which may qualify for the
deduction is limited to the aggregate amount of qualifying dividends that the
Fund derives from its portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not be eligible for the
deduction on dividends paid on Fund shares held for 45 days or less. To the
extent the Fund's dividends are derived from gross income from option premiums,
interest income or short-term gains from the sale of securities or dividends
from foreign corporations, those 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 in the period
from November 1 of the prior year through October 31 of the current year, or
else the Fund must pay an excise tax on the amounts not distributed. While it is
presently anticipated that the Fund will meet those requirements, the Fund's
Board of Trustees and the Manager might determine in a particular year that it
would be in the best interest of shareholders for the Fund not to make such
distributions at the required levels and to pay the excise tax on the
undistributed amounts. That would reduce the amount of income or capital gains
available for distribution to shareholders.
If the Fund 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 distribution. The Fund qualified during its last
fiscal year, and intends to qualify in current and future years, but reserves
the right not to do so. The Internal Revenue Code contains a number of complex
tests relating to such qualification , and the Fund might not meet those tests
in any particular year.
The amount of a class's distributions may vary from time to time depending
on market conditions, the composition of the Fund's portfolio, and expenses
borne by the Fund or borne separately by a class, as described in "Alternative
Sales Arrangements -- Class A, Class B , Class C and Class Y Shares," above.
Dividends are calculated in the same manner, at the same time and on the same
day for shares of each class. However, dividends on Class B and Class C shares
are expected to be lower as a result of the asset-based sales charge on Class B
and Class C shares, and Class B and Class C dividends will also differ in amount
as a consequence of any difference in net asset value between the classes.
Dividends, distributions and the proceeds of the redemption of Fund shares
represented by checks returned to the Transfer Agent by the Postal Service as
undeliverable will be invested in shares of Oppenheimer Money Market Fund, Inc.,
as promptly as possible after the return of such checks to the Transfer Agent to
enable the investor to earn a return on otherwise idle funds.
DIVIDEND REINVESTMENT IN ANOTHER FUND. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the same
class of any of the other Oppenheimer funds listed in "Reduced Sales Charges,"
above, at net asset value without sales charge. To elect this option, a
shareholder must notify the Transfer Agent in writing and either have an
existing account in the fund selected for reinvestment or must obtain a
prospectus for that fund and an application from the Distributor to establish an
account. The investment will be made at the net asset value per share in effect
at the close of business on the payable date of the dividend or distribution.
Dividends and/or distributions from shares of other Oppenheimer funds may be
invested in shares of this Fund on the same basis.
ADDITIONAL INFORMATION ABOUT THE FUND
THE CUSTODIAN. The Bank of New York is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities, collecting income on the portfolio securities and handling
the delivery of such securities to and from the Fund. The Manager has
represented to the Fund that the banking relationships between the Manager and
the Custodian have been and will continue to be unrelated to and unaffected by
the relationship between the Fund and the Custodian. It will be the practice of
the Fund to deal with the Custodian in a manner uninfluenced by any banking
relationship the Custodian may have with the Manager and its affiliates. The
Fund's cash balances in excess of $100,000 are not protected by Federal deposit
insurance. Such uninsured balances may at times be substantial.
INDEPENDENT AUDITORS. The independent auditors of the Fund audit the Fund's
financial statements and perform other related audit services. They also act as
auditors for certain other funds advised by the Manager and its affiliates.
<PAGE>
<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, 1997, 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 five-year period then
ended. 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 based 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. Our procedures included confirmation of securities
owned as of September 30, 1997, 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, 1997, 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 five-year period then ended, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick
KPMG Peat Marwick LLP
Denver, Colorado
October 21, 1997
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments September 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks--84.9%
- --------------------------------------------------------------------------------
Basic Materials--0.1%
- --------------------------------------------------------------------------------
Chemicals--0.1%
AMCOL International Corp. 7,500 $ 155,625
- --------------------------------------------------------------------------------
Minerals Technologies, Inc. 23,200 1,033,850
-------------
1,189,475
- --------------------------------------------------------------------------------
Consumer Cyclicals--13.6%
- --------------------------------------------------------------------------------
Autos & Housing--1.9%
Budget Group, Inc., Cl. A(1) 250,000 8,250,000
- --------------------------------------------------------------------------------
Fairfield Communities, Inc.(1) 450,000 16,903,125
- --------------------------------------------------------------------------------
Wilmar Industries, Inc.(1) 280,000 7,560,000
-------------
32,713,125
- --------------------------------------------------------------------------------
Leisure & Entertainment--4.2%
Action Performance Cos., Inc.(1) 320,000 9,320,000
- --------------------------------------------------------------------------------
Applebee's International, Inc. 250,000 6,250,000
- --------------------------------------------------------------------------------
Cinar Films, Inc., Cl. B(1) 465,000 17,728,125
- --------------------------------------------------------------------------------
CKE Restaurants, Inc. 368,300 15,468,600
- --------------------------------------------------------------------------------
Coach USA, Inc.(1) 300,000 9,018,750
- --------------------------------------------------------------------------------
Signature Resorts, Inc.(1) 220,000 10,450,000
- --------------------------------------------------------------------------------
Silver Diner, Inc.(1)(2)(3) 700,000 1,413,125
- --------------------------------------------------------------------------------
Sodak Gaming, Inc.(1) 200,000 2,825,000
-------------
72,473,600
- --------------------------------------------------------------------------------
Media--1.9%
Applied Graphics Technologies, Inc.(1) 250,000 14,062,500
- --------------------------------------------------------------------------------
Heftel Broadcasting Corp., A Shares(1) 200,000 15,150,000
- --------------------------------------------------------------------------------
Scientific Games Holdings Corp.(1) 200,000 4,350,000
-------------
33,562,500
- --------------------------------------------------------------------------------
Retail: General--1.2%
North Face, Inc. (The)(1) 300,000 8,062,500
- --------------------------------------------------------------------------------
Wolverine World Wide, Inc. 489,750 12,366,187
-------------
20,428,687
- --------------------------------------------------------------------------------
Retail: Specialty--4.4%
Central Garden & Pet Co.(1) 300,000 9,225,000
- --------------------------------------------------------------------------------
Children's Place Retail Stores, Inc.(1) 300,000 4,350,000
- --------------------------------------------------------------------------------
dELiA*s, Inc.(1) 175,000 3,915,625
- --------------------------------------------------------------------------------
Heilig-Meyers Co. 360,000 5,535,000
- --------------------------------------------------------------------------------
Linens 'N Things, Inc.(1) 342,800 11,483,800
<PAGE>
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Retail: Specialty (continued)
Marks Bros. Jewelers, Inc.(1) 200,000 $ 2,800,000
- --------------------------------------------------------------------------------
MSC Industrial Direct Co., Inc., Cl. A(1) 300,000 13,800,000
- --------------------------------------------------------------------------------
Petco Animal Supplies, Inc.(1) 530,000 16,628,750
- --------------------------------------------------------------------------------
Pier 1 Imports, Inc. 500,000 8,968,750
-------------
76,706,925
- --------------------------------------------------------------------------------
Consumer Non-Cyclicals--18.2%
- --------------------------------------------------------------------------------
Beverages--0.2%
Celestial Seasonings, Inc.(1) 105,000 3,255,000
- --------------------------------------------------------------------------------
Food--1.2%
JP Foodservice, Inc.(1) 500,000 15,750,000
- --------------------------------------------------------------------------------
Richfood Holdings, Inc. 200,000 5,187,500
-------------
20,937,500
- --------------------------------------------------------------------------------
Healthcare/Drugs--3.8%
Applied Analytical Industries, Inc.(1) 180,000 3,645,000
- --------------------------------------------------------------------------------
Biocompatibles International plc(1) 498,044 5,149,064
- --------------------------------------------------------------------------------
Dura Pharmaceuticals, Inc.(1) 250,000 10,906,250
- --------------------------------------------------------------------------------
Ethical Holdings plc, Sponsored ADR(1) 500,000 2,281,250
- --------------------------------------------------------------------------------
Global Pharmaceutical Corp.(1) 195,800 1,150,325
- --------------------------------------------------------------------------------
Incyte Pharmaceuticals, Inc.(1) 125,000 10,500,000
- --------------------------------------------------------------------------------
Kos Pharmaceuticals, Inc.(1) 240,000 8,580,000
- --------------------------------------------------------------------------------
Roberts Pharmaceutical Corp.(1) 100,000 1,087,500
- --------------------------------------------------------------------------------
Transkaryotic Therapies, Inc.(1) 200,000 7,850,000
- --------------------------------------------------------------------------------
Vivus, Inc.(1) 300,000 11,250,000
- --------------------------------------------------------------------------------
Warner Chilcott Laboratories, Sponsored ADR(1) 230,000 4,082,500
-------------
66,481,889
- --------------------------------------------------------------------------------
Healthcare/Supplies & Services--13.0%
AmeriSource Health Corp., Cl. A(1) 330,000 19,284,375
- --------------------------------------------------------------------------------
Arterial Vascular Engineering, Inc.(1) 150,000 8,325,000
- --------------------------------------------------------------------------------
Capstone Pharmacy Services, Inc.(1) 300,000 3,618,750
- --------------------------------------------------------------------------------
Concentra Managed Care, Inc.(1) 350,000 12,359,375
- --------------------------------------------------------------------------------
Covance, Inc.(1) 500,000 10,812,500
- --------------------------------------------------------------------------------
EndoSonics Corp. 152,500 2,239,844
- --------------------------------------------------------------------------------
EP MedSystems, Inc.(1)(3) 400,000 1,200,000
- --------------------------------------------------------------------------------
ESC Medical Systems Ltd.(1) 250,000 9,406,250
- --------------------------------------------------------------------------------
FPA Medical Management, Inc.(1) 350,000 12,031,250
- --------------------------------------------------------------------------------
Gulf South Medical Supply, Inc.(1) 300,000 8,025,000
- --------------------------------------------------------------------------------
Healthcare Recoveries, Inc.(1) 300,000 6,750,000
- --------------------------------------------------------------------------------
Henry Schein, Inc.(1) 200,000 7,150,000
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares See Note 1
- --------------------------------------------------------------------------------
Healthcare/Supplies & Services (continued)
HumaScan, Inc.(1)(3) 584,500 $ 5,991,125
- --------------------------------------------------------------------------------
Invacare Corp. 168,000 3,948,000
- --------------------------------------------------------------------------------
Lincare Holdings, Inc.(1) 180,000 9,078,750
- --------------------------------------------------------------------------------
Norland Medical Systems, Inc.(1)(3) 480,000 4,260,000
- --------------------------------------------------------------------------------
Omnicare, Inc. 300,000 9,750,000
- --------------------------------------------------------------------------------
Parexel International Corp.(1) 452,800 17,885,600
- --------------------------------------------------------------------------------
Pediatrix Medical Group, Inc.(1) 300,000 13,237,500
- --------------------------------------------------------------------------------
PhyCor, Inc.(1) 50,000 1,453,125
- --------------------------------------------------------------------------------
Renal Care Group, Inc.(1) 225,000 8,100,000
- --------------------------------------------------------------------------------
Rural/Metro Corp.(1) 118,200 3,605,100
- --------------------------------------------------------------------------------
Sabratek Corp.(1) 200,000 7,275,000
- --------------------------------------------------------------------------------
Serologicals Corp.(1) 550,000 12,512,500
- --------------------------------------------------------------------------------
Superior Consultant Holdings Corp.(1) 200,000 6,700,000
- --------------------------------------------------------------------------------
Total Renal Care Holdings, Inc.(1) 300,000 15,000,000
- --------------------------------------------------------------------------------
Ventana Medical Systems, Inc.(1) 425,000 6,853,125
--------------
226,852,169
- --------------------------------------------------------------------------------
Energy--6.5%
- --------------------------------------------------------------------------------
Energy Services & Producers--6.5%
Brown (Tom), Inc.(1) 350,000 8,662,500
- --------------------------------------------------------------------------------
Core Laboratories NV(1) 200,000 7,000,000
- --------------------------------------------------------------------------------
Cross Timbers Oil Co. 350,000 8,531,250
- --------------------------------------------------------------------------------
Diamond Offshore Drilling, Inc. 200,000 11,037,500
- --------------------------------------------------------------------------------
EVI, Inc.(1) 325,000 20,800,000
- --------------------------------------------------------------------------------
Falcon Drilling Co., Inc.(1) 320,000 11,300,000
- --------------------------------------------------------------------------------
FX Energy, Inc.(1) 500,000 3,265,625
- --------------------------------------------------------------------------------
Nabors Industries, Inc.(1) 290,000 11,291,875
- --------------------------------------------------------------------------------
Newfield Exploration Co.(1) 200,000 5,612,500
- --------------------------------------------------------------------------------
St. Mary Land & Exploration Co. 267,000 12,115,125
- --------------------------------------------------------------------------------
Stolt Comex Seaway SA(1) 207,000 12,950,437
--------------
112,566,812
- --------------------------------------------------------------------------------
Financial--5.3%
- --------------------------------------------------------------------------------
Banks--1.1%
Ocwen Financial Corp.(1) 83,500 3,517,437
- --------------------------------------------------------------------------------
TCF Financial Corp. 256,278 14,976,246
--------------
18,493,683
- --------------------------------------------------------------------------------
Diversified Financial--2.1%
First Alliance Corp.(1) 200,000 6,300,000
- --------------------------------------------------------------------------------
FIRSTPLUS Financial Group, Inc.(1) 150,000 8,418,750
<PAGE>
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Diversified Financial (continued)
Investors Financial Services Corp. 285,800 $ 11,789,250
- --------------------------------------------------------------------------------
Renters Choice, Inc.(1) 400,000 9,087,500
- --------------------------------------------------------------------------------
Rockford Industries, Inc.(1) 100,900 1,059,450
-------------
36,654,950
- --------------------------------------------------------------------------------
Insurance--2.1%
CapMAC Holdings, Inc. 550,000 17,771,875
- --------------------------------------------------------------------------------
Executive Risk, Inc. 280,000 19,145,000
- --------------------------------------------------------------------------------
Penn-America Group, Inc. 10,000 202,500
-------------
37,119,375
- --------------------------------------------------------------------------------
Industrial--18.3%
Electrical Equipment--0.2%
- --------------------------------------------------------------------------------
Vishay Intertechnology, Inc. 165,000 4,362,187
- --------------------------------------------------------------------------------
Industrial Services--15.0%
Abacus Direct Corp.(1) 300,000 9,637,500
- --------------------------------------------------------------------------------
ABR Information Services, Inc.(1) 170,000 4,696,250
- --------------------------------------------------------------------------------
Acxiom Corp.(1) 400,000 6,975,000
- --------------------------------------------------------------------------------
Affiliated Computer Services, Inc., Cl. A(1) 450,000 11,137,500
- --------------------------------------------------------------------------------
Alternative Resources Corp.(1) 142,000 3,354,750
- --------------------------------------------------------------------------------
American Business Information, Inc.(1) 200,000 5,425,000
- --------------------------------------------------------------------------------
Barnett, Inc.(1) 250,000 5,312,500
- --------------------------------------------------------------------------------
Calgon Carbon Corp. 100,000 1,306,250
- --------------------------------------------------------------------------------
CIBER, Inc.(1) 300,000 14,175,000
- --------------------------------------------------------------------------------
CORT Business Services Corp.(1) 550,000 21,965,625
- --------------------------------------------------------------------------------
Culligan Water Technologies, Inc.(1) 200,000 9,200,000
- --------------------------------------------------------------------------------
Cuno, Inc.(1) 25,000 434,375
- --------------------------------------------------------------------------------
Daisytek International Corp.(1) 275,000 12,031,250
- --------------------------------------------------------------------------------
Eagle USA Airfreight, Inc.(1) 350,000 11,725,000
- --------------------------------------------------------------------------------
Hub Group, Inc., Cl. A(1) 280,000 10,395,000
- --------------------------------------------------------------------------------
IntelliQuest Information Group, Inc.(1)(3) 490,000 10,290,000
- --------------------------------------------------------------------------------
Leap Group, Inc. (The)(1) 322,900 827,431
- --------------------------------------------------------------------------------
Maximus, Inc.(1) 200,000 5,787,500
- --------------------------------------------------------------------------------
May & Speh, Inc.(1) 395,000 5,480,625
- --------------------------------------------------------------------------------
Metzler Group, Inc.(1) 200,000 8,025,000
- --------------------------------------------------------------------------------
NCO Group, Inc.(1) 150,000 5,550,000
- --------------------------------------------------------------------------------
Newpark Resources, Inc.(1) 286,600 11,266,962
- --------------------------------------------------------------------------------
Pierce Leahy Corp.(1) 200,000 5,425,000
- --------------------------------------------------------------------------------
Precision Response Corp.(1) 137,200 1,063,300
- --------------------------------------------------------------------------------
Registry, Inc.(1) 250,000 11,531,250
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments September 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Industrial Services (continued)
Rental Service Corp.(1) 500,000 $ 11,218,750
- --------------------------------------------------------------------------------
Service Experts, Inc.(1) 310,000 8,389,375
- --------------------------------------------------------------------------------
SITEL Corp.(1) 275,000 2,887,500
- --------------------------------------------------------------------------------
StaffMark, Inc.(1) 117,500 4,479,687
- --------------------------------------------------------------------------------
Stericycle, Inc.(1) 400,000 3,800,000
- --------------------------------------------------------------------------------
Transaction Systems Architects, Inc., Cl. A(1) 230,000 9,343,750
- --------------------------------------------------------------------------------
U.S. Rentals, Inc.(1) 250,000 6,578,125
- --------------------------------------------------------------------------------
USA Waste Services, Inc.(1) 365,000 14,554,375
- --------------------------------------------------------------------------------
Wackenhut Corrections Corp.(1) 48,000 1,488,000
- --------------------------------------------------------------------------------
West TeleServices Corp.(1) 400,000 6,000,000
--------------
261,757,630
- --------------------------------------------------------------------------------
Manufacturing--2.4%
Ballantyne of Omaha, Inc.(1) 200,000 3,850,000
- --------------------------------------------------------------------------------
Chicago Miniature Lamp, Inc.(1) 300,000 9,975,000
- --------------------------------------------------------------------------------
PRI Automation, Inc.(1) 250,000 14,625,000
- --------------------------------------------------------------------------------
U.S. Filter Corp.(1) 300,000 12,918,750
--------------
41,368,750
- --------------------------------------------------------------------------------
Transportation--0.7%
Genesee & Wyoming, Inc., Cl. A(1) 217,400 6,875,275
- --------------------------------------------------------------------------------
Swift Transportation Co., Inc.(1) 200,000 6,325,000
--------------
13,200,275
- --------------------------------------------------------------------------------
Technology--19.3%
- --------------------------------------------------------------------------------
Computer Hardware--1.1%
Auspex Systems, Inc.(1) 235,000 2,908,125
- --------------------------------------------------------------------------------
MicroTouch Systems, Inc.(1) 305,000 8,501,875
- --------------------------------------------------------------------------------
Network Appliance, Inc.(1) 137,500 7,459,375
--------------
18,869,375
- --------------------------------------------------------------------------------
Computer Software--11.9%
Aspen Technologies, Inc.(1) 396,700 13,934,088
- --------------------------------------------------------------------------------
BEA Systems, Inc.(1) 192,500 3,440,938
- --------------------------------------------------------------------------------
Cambridge Technology Partners, Inc.(1) 250,000 8,953,125
- --------------------------------------------------------------------------------
Check Point Software Technologies Ltd.(1) 100,000 3,100,000
- --------------------------------------------------------------------------------
Documentum, Inc.(1) 250,000 8,312,500
- --------------------------------------------------------------------------------
Dr. Solomon's Group plc, ADR(1) 200,000 5,075,000
- --------------------------------------------------------------------------------
Engineering Animation, Inc.(1) 127,600 4,864,750
- --------------------------------------------------------------------------------
Global DirectMail Corp.(1) 320,000 7,160,000
- --------------------------------------------------------------------------------
Harbinger Corp.(1) 179,400 6,525,675
<PAGE>
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Computer Software (continued)
HBO & Co. 160,000 $ 6,040,000
- --------------------------------------------------------------------------------
Infinity Financial Technology, Inc.(1) 150,000 1,912,500
- --------------------------------------------------------------------------------
Integrated Measurement Systems, Inc.(1) 350,000 6,300,000
- --------------------------------------------------------------------------------
IONA Technologies plc, ADR(1) 300,000 4,162,500
- --------------------------------------------------------------------------------
J.D. Edwards & Co.(1) 80,000 2,680,000
- --------------------------------------------------------------------------------
JDA Software Group, Inc.(1) 300,000 10,950,000
- --------------------------------------------------------------------------------
National Instruments Corp.(1) 455,000 21,100,625
- --------------------------------------------------------------------------------
Network General Corp.(1) 325,000 6,296,875
- --------------------------------------------------------------------------------
Progress Software Corp.(1) 140,000 3,132,500
- --------------------------------------------------------------------------------
Rogue Wave Software, Inc.(1) 250,000 3,437,500
- --------------------------------------------------------------------------------
Saville Systems Ireland plc, Sponsored ADR(1) 300,000 21,075,000
- --------------------------------------------------------------------------------
Siebel Systems, Inc.(1) 150,000 6,384,375
- --------------------------------------------------------------------------------
SPSS, Inc.(1)(3) 412,500 11,807,813
- --------------------------------------------------------------------------------
Viasoft, Inc.(1) 74,000 3,663,000
- --------------------------------------------------------------------------------
Visigenic Software, Inc.(1) 379,600 2,704,650
- --------------------------------------------------------------------------------
Visio Corp.(1) 600,000 25,050,000
- --------------------------------------------------------------------------------
Zebra Technologies Corp., Cl. A(1) 250,000 8,937,500
--------------
207,000,914
- --------------------------------------------------------------------------------
Electronics--2.8%
Advanced Technology Materials, Inc.(1) 400,000 14,700,000
- --------------------------------------------------------------------------------
Lernout & Hauspie Speech Products NV(1) 107,500 4,703,125
- --------------------------------------------------------------------------------
Pittway Corp., Cl. A 300,000 19,481,250
- --------------------------------------------------------------------------------
Sawtek, Inc.(1) 200,000 9,250,000
--------------
48,134,375
- --------------------------------------------------------------------------------
Telecommunications-Technology--3.5%
Comverse Technology, Inc.(1) 400,000 21,100,000
- --------------------------------------------------------------------------------
General Cable Corp.(1) 350,000 12,425,000
- --------------------------------------------------------------------------------
ICG Communications, Inc.(1)(2) 272,500 6,342,438
- --------------------------------------------------------------------------------
Lightbridge, Inc.(1) 550,000 8,937,500
- --------------------------------------------------------------------------------
MRV Communications, Inc.(1) 65,000 2,372,500
- --------------------------------------------------------------------------------
Teledata Communications Ltd.(1) 200,000 9,025,000
--------------
60,202,438
- --------------------------------------------------------------------------------
Utilities--3.6%
- --------------------------------------------------------------------------------
Gas Utilities--0.1%
Cabot Oil & Gas Corp., Cl. A 108,400 2,499,975
- --------------------------------------------------------------------------------
Telephone Utilities--3.5%
ACC Corp.(1) 200,000 6,575,000
- --------------------------------------------------------------------------------
ICG Communications, Inc.(1) 150,000 3,675,000
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Telephone Utilities (continued)
IXC Communications, Inc.(1) 130,000 $ 4,127,500
- -------------------------------------------------------------------------------------------
LCI International, Inc.(1) 200,000 5,325,000
- -------------------------------------------------------------------------------------------
McLeodUSA, Inc., Cl. A(1) 120,000 4,732,500
- -------------------------------------------------------------------------------------------
Metrocall, Inc.(1) 400,000 2,950,000
- -------------------------------------------------------------------------------------------
NEXTLINK Communications, Inc., Cl. A(1) 150,000 3,600,000
- -------------------------------------------------------------------------------------------
Qwest Communications International, Inc.(1) 200,000 9,225,000
- -------------------------------------------------------------------------------------------
Star Telecommunications, Inc.(1) 175,000 4,025,000
- -------------------------------------------------------------------------------------------
Tel-Save Holdings, Inc.(1) 500,000 12,031,250
- -------------------------------------------------------------------------------------------
Telegroup, Inc.(1) 400,000 4,200,000
----------------
60,466,250
----------------
Total Common Stocks (Cost $962,781,544) 1,477,297,859
- -------------------------------------------------------------------------------------------
Preferred Stocks--0.9%
- -------------------------------------------------------------------------------------------
AirNet Communications Corp., Series C(1)(2) 250,000 250,000
Candescent Technologies Corp., $2.50 Cv., Series D(1)(2) 1,200,000 7,380,000
- -------------------------------------------------------------------------------------------
Candescent Technologies Corp., Series E, Preferred Stock(1)(2) 800,000 5,768,000
- -------------------------------------------------------------------------------------------
Candescent Technologies Corp., Series F, Preferred Stock(1)(2) 200,000 1,500,000
----------------
Total Preferred Stocks (Cost $10,400,000) 14,898,000
</TABLE>
<TABLE>
<CAPTION>
Units
--------
<S> <C> <C>
Rights, Warrants and Certificates--0.0%
- -----------------------------------------------------------------------------------
PerSeptive Biosystems, Inc., Cl. A Wts., Exp. 12/97 (Cost $261,332) 40,110 --
</TABLE>
<TABLE>
<CAPTION>
Face
Amount
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Convertible Corporate Bonds and Notes--0.5%
- --------------------------------------------------------------------------------------------------------
American Retirement Corp., 5.75% Cv. Sub. Debs., 10/1/02 $ 2,280,000 2,294,250
- --------------------------------------------------------------------------------------------------------
Physicians Clinical Laboratory, Inc., 7.50% Cv. Sub. Debs., 8/15/00(2)(6) 4,000,000 40,000
- --------------------------------------------------------------------------------------------------------
Sunrise Assisted Living, Inc., 5.50% Cv. Nts., 6/15/02(7) 5,059,000 6,077,124
---------------
Total Convertible Corporate Bonds and Notes (Cost $11,536,154) 8,411,374
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
<S> <C> <C>
- -------------------------------------------------------------------------------
Short-Term Notes--5.7%
- --------------------------------------------------------------------------------
CIESCO, LP, 5.54%, 10/16/97(8) 50,000,000 49,885,209
- --------------------------------------------------------------------------------
General Electric Capital Corp., 5.53%, 10/6/97(8) 50,000,000 49,961,736
---------------
Total Short-Term Notes (Cost $99,846,945) 99,846,945
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements--8.3%
==================================================================================================
Repurchase agreement with Goldman, Sachs & Co., 6.125%, dated 9/30/97, to be
repurchased at $145,024,670 on 10/1/97, collateralized by U.S. Treasury Nts.,
5.125%-9.125%, 11/15/98-
9/30/99, with a value of $148,064,127 (Cost $145,000,000) $ 145,000,000 $ 145,000,000
- -------------------------------------------------------------- ------------- --------------
Total Investments, at Value (Cost $1,229,825,975) 100.3% 1,745,454,178
- -------------------------------------------------------------- ------------- --------------
Liabilities in Excess of Other Assets (0.3) (5,715,013)
------------- --------------
Net Assets 100.0% $1,739,739,165
============= ==============
</TABLE>
1. Non-income producing security.
2. Identifies issues considered to be illiquid or restricted--See Note 5 of
Notes to Financial Statements.
3. 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 period ended September 30,
1997. The aggregate fair value of securities of affiliated companies as of
September 30, 1997 amounts to $34,962,063. Transactions during the period in
which the issuer was an affiliate are as follows:
<TABLE>
<CAPTION>
Shares Gross Gross Shares
Sept. 30, 1996 Additions Reductions Sept. 30, 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alrenco, Inc. 440,000 90,000 530,000 --
- --------------------------------------------------------------------------------------------------------
Belmont Homes, Inc. 600,000 -- 600,000 --
- --------------------------------------------------------------------------------------------------------
Dailey Petroluem Services Corp. 300,000 -- 300,000 --
- --------------------------------------------------------------------------------------------------------
Dynamex, Inc. 400,000 -- 400,000 --
- --------------------------------------------------------------------------------------------------------
EP Medsystems, Inc. 400,000 -- -- 400,000
- --------------------------------------------------------------------------------------------------------
HumaScan, Inc. 600,000 -- 15,500 584,500
- --------------------------------------------------------------------------------------------------------
Inference Corp., Cl. A 360,000 -- 360,000 --
- --------------------------------------------------------------------------------------------------------
IntelliQuest Information Group, Inc. -- 490,000 -- 490,000
- --------------------------------------------------------------------------------------------------------
Norland Medical Systems, Inc. 480,000 -- -- 480,000
- --------------------------------------------------------------------------------------------------------
Rockford Industries, Inc.(4) 350,000 150,000 399,100 100,900
- --------------------------------------------------------------------------------------------------------
SPSS, Inc.(5) 330,000 110,000 27,500 412,500
- --------------------------------------------------------------------------------------------------------
Silver Diner, Inc. 700,000 -- -- 700,000
- --------------------------------------------------------------------------------------------------------
3-D Geophysical, Inc. 380,000 -- 380,000 --
</TABLE>
4. Not an affiliate as of September 30, 1997.
5. Not an affiliate as of September 30, 1996.
6. Non-income producing--issuer is in default of interest payment.
7. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $6,077,124 or 0.35% of the Fund's net
assets, at September 30, 1997.
8. Short-term notes are generally traded on a discount basis; the interest rate
is the discount rate received by the Fund at the time of purchase.
See accompanying Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------
Assets
Investments, at value--see accompanying statement:
Unaffiliated companies (cost $1,197,058,620) $1,709,432,665
Affiliated companies (cost $32,767,355) 36,021,513
- -------------------------------------------------------------------- --------------
Cash 396,317
- -------------------------------------------------------------------- --------------
Receivables:
Investments sold 29,420,257
Shares of beneficial interest sold 3,303,242
Interest and dividends 174,440
- -------------------------------------------------------------------- --------------
Other 50,241
--------------
Total assets 1,778,798,675
- ----------------------------------------------------------------------------------------
Liabilities Payables and other liabilities:
Investments purchased 34,189,978
Shares of beneficial interest redeemed 2,969,889
Distribution and service plan fees 956,393
Shareholder reports 329,983
Trustees' fees--Note 1 214,081
Transfer and shareholder servicing agent fees 103,175
Other 296,011
--------------
Total liabilities 39,059,510
- ----------------------------------------------------------------------------------------
Net Assets $1,739,739,165
- ----------------------------------------------------------------------------------------
Composition of Net Assets
Paid-in capital $1,196,345,462
- -------------------------------------------------------------------- --------------
Accumulated net investment loss (939,479)
- -------------------------------------------------------------------- --------------
Accumulated net realized gain on investment transactions 28,704,979
- -------------------------------------------------------------------- --------------
Net unrealized appreciation on investments and translation of assets
and liabilities denominated in foreign currencies 515,628,203
--------------
Net assets $1,739,739,165
==============
</TABLE>
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$1,330,171,707 and 25,717,588 shares of beneficial interest outstanding) $51.72
Maximum offering price per share (net asset value plus sales charge of
5.75% of offering price) $54.88
- ------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $322,735,637 and
6,435,822 shares of beneficial interest outstanding) $50.15
- ------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $41,720,225 and
820,376 shares of beneficial interest outstanding) $50.86
- ------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $45,111,596 and 864,761 shares of beneficial interest outstanding)
$52.17 </TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------
Investment Income
Interest $ 14,086,279
- ----------------------------------------------------------------------------------------
Dividends 665,221
------------
Total income 14,751,500
- ----------------------------------------------------------------------------------------
Expenses
Management fees--Note 4 9,305,515
- ----------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 2,724,209
Class B 2,327,943
Class C 262,815
- ----------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4:
Class A 2,712,192
Class B 562,125
Class C 58,344
Class Y 42,539
- ----------------------------------------------------------------------------------------
Shareholder reports 711,765
- ----------------------------------------------------------------------------------------
Custodian fees and expenses 82,347
- ----------------------------------------------------------------------------------------
Registration and filing fees 81,772
- ----------------------------------------------------------------------------------------
Trustees' fees and expenses--Note 1 68,371
- ----------------------------------------------------------------------------------------
Legal and auditing fees 44,030
- ----------------------------------------------------------------------------------------
Insurance expenses 19,699
- ----------------------------------------------------------------------------------------
Other 69,446
------------
Total expenses 19,073,112
- ----------------------------------------------------------------------------------------
Net Investment Loss (4,321,612)
- ----------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) Net realized gain (loss) on:
Investments:
Unaffiliated companies 28,202,538
Affiliated companies (3,793,399)
Closing of futures contracts 11,150,835
Foreign currency transactions (742)
------------
Net realized gain 35,559,232
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 125,255,268
Translation of assets and liabilities denominated in foreign currencies (50,986)
------------
Net change 125,204,282
------------
Net realized and unrealized gain 160,763,514
- ----------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $156,441,902
============
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended September 30,
1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment loss $ (4,321,612) $ (4,391,298)
- ---------------------------------------------------------------------------------------------------
Net realized gain 35,559,232 92,875,503
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 125,204,282 178,297,200
-------------- --------------
Net increase in net assets resulting from operations 156,441,902 266,781,405
- ---------------------------------------------------------------------------------------------------
Dividends and Distributions to Shareholders Distributions from net realized
gain:
Class A (80,609,827) (65,845,405)
Class B (15,203,908) (7,032,331)
Class C (1,451,890) (197,246)
Class Y (2,352,509) (965,392)
- ---------------------------------------------------------------------------------------------------
Beneficial Interest Transactions
Net increase in net assets resulting from beneficial interest transactions--Note
2:
Class A 135,425,471 196,657,756
Class B 112,330,605 96,461,672
Class C 20,931,283 15,930,604
Class Y 11,373,727 18,542,687
- ---------------------------------------------------------------------------------------------------
Net Assets
Total increase 336,884,854 520,333,750
- ---------------------------------------------------------------------------------------------------
Beginning of period 1,402,854,311 882,520,561
-------------- --------------
End of period (including accumulated net investment losses
of $939,479 and $624,556, respectively) $1,739,739,165 $1,402,854,311
============== ==============
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------------------------------
Year Ended September 30,
1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $51.19 $43.65 $35.81 $39.90 $27.62
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.08) (.13) -- (.11) (.13)
Net realized and unrealized gain (loss) 4.12 11.26 9.46 (2.98) 12.41
------------ ------------ -------- ----------- -----------
Total income (loss) from investment
operations 4.04 11.13 9.46 (3.09) 12.28
- ----------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net
realized gain (3.51) (3.59) (1.62) (1.00) --
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $51.72 $51.19 $43.65 $35.81 $39.90
============ ============ ======== =========== ===========
- ----------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value(4) 9.16% 27.76% 28.03% (7.91)% 44.46%
- ----------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $1,330,172 $1,160,087 $798,065 $613,740 $587,057
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $1,119,302 $ 937,563 $650,903 $588,642 $451,016
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) (0.17)% (0.32)% 0.00% (0.34)% (0.54)%
Expenses 1.22% 1.22% 1.33% 1.32% 1.27%
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 68.7% 79.7% 105.9% 83.3% 85.2%
Average brokerage commission rate(7) $0.0600 $0.0577 -- -- --
</TABLE>
1. For the period from June 1, 1994 (inception of offering) to September 30,
1994.
2. For the period from October 2, 1995 (inception of offering) to September 30,
1996.
3. For the period from April 1, 1994 (inception of offering) to September 30,
1994.
4. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
5. Annualized.
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
- ---------------------------------------------------------- -------------------------------
Year Ended September 30, Year Ended September 30,
1997 1996 1995 1994(3) 1997 1996(2)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$50.10 $43.11 $35.65 $35.65 $50.73 $43.20
- ------------------------------------------------------------------------------------
(.23) (.23) (.21) .03 (.26) (.21)
3.79 10.81 9.29 (.03) 3.90 11.33
---------- ------------ ------------ ------------- ----------- -------------
3.56 10.58 9.08 -- 3.64 11.12
- ------------------------------------------------------------------------------------
(3.51) (3.59) (1.62) -- (3.51) (3.59)
- ------------------------------------------------------------------------------------
$50.15 $50.10 $43.11 $35.65 $50.86 $50.73
========== ============ ============ ============= =========== =============
- ------------------------------------------------------------------------------------
8.33% 26.77% 27.04% (1.93)% 8.39% 27.96%
$322,736 $193,637 $75,062 $26,491 $41,720 $17,512
- ------------------------------------------------------------------------------------
$233,172 $119,895 $43,301 $12,435 $26,361 $ 7,109
- ------------------------------------------------------------------------------------
(0.93)% (1.06)% (0.78)% (1.06)%(5) (0.92)% (1.00)%(5)
1.97% 1.99% 2.11% 2.36%(5) 1.94% 2.03%(5)
- ------------------------------------------------------------------------------------
68.7% 79.7% 105.9% 83.3% 68.7% 79.7%
$0.0600 $0.0577 -- -- $0.0600 $0.0577
<CAPTION>
Class Y
- ---------------------------------------------------------------------
Year Ended September 30,
1997 1996 1995 1994(1)
- ---------------------------------------------------
<S> <C> <C> <C>
$51.44 $43.74 $35.81 $34.89
- ---------------------------------------------------
.02 (.02) (.10) .11
4.22 11.31 9.65 .81
------- ------------ --------- -------------
4.24 11.29 9.55 .92
- ---------------------------------------------------
(3.51) (3.59) (1.62) --
------- ------------ --------- -------------
$52.17 $51.44 $43.74 $35.81
======= ============ ========= =============
- ---------------------------------------------------
9.50% 28.09% 28.28% 3.20%
- ---------------------------------------------------
$45,112 $31,619 $9,394 $194
- ---------------------------------------------------
$34,811 $18,563 $3,190 $39
- ---------------------------------------------------
0.15% (0.04)% 0.03% (0.13)%(5)
0.89% 0.99% 1.26% 1.41%(5)
- ---------------------------------------------------
68.7% 79.7% 105.9% 83.3%
$0.0600 $0.0577 -- --
</TABLE>
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended September 30, 1997 were $1,034,041,777 and $801,420,976, respectively.
7. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold. Generally, non-U.S. commissions are lower than U.S.
commissions when expressed as cents per share but higher when expressed as a
percentage of transactions because of the lower per-share prices of many
non-U.S. securities.
See accompanying Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 objective is 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. The Fund's
investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund offers
Class A, Class B, Class C and Class Y shares. Class A shares are sold with a
front-end sales charge. Class B and Class C shares may be subject to a
contingent deferred sales charge. All classes of shares have identical rights to
earnings, assets and voting privileges, except that each class has its own
expenses directly attributable to that class and exclusive voting rights with
respect to matters affecting that class. Classes A, B and C have separate
distribution and/or service plans. No such plan has been adopted for Class Y
shares. Class B shares will automatically convert to Class A shares six years
after the date of purchase. The following is a summary of significant accounting
policies consistently followed by the Fund.
- --------------------------------------------------------------------------------
Investment Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Trustees. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Trustees to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount.
<PAGE>
- --------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is
required to be at least 102% of the resale price at the time of purchase. If
the seller of the agreement defaults and the value of the collateral declines,
or if the seller enters an insolvency proceeding, realization of the value of
the collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, and Gains and Losses. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
- --------------------------------------------------------------------------------
Trustees' Fees and Expenses. The Fund has adopted a nonfunded retirement plan
for the Fund's independent trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service. During the year ended
September 30, 1997, a provision of $25,631 was made for the Fund's projected
benefit obligations, and payments of $10,708 were made to retired trustees,
resulting in an accumulated liability of $211,870 at September 30, 1997.
- --------------------------------------------------------------------------------
Distributions to Shareholders. Dividends and distributions to shareholders are
recorded on the ex-dividend date.
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. Significant Accounting Policies (continued)
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of the recognition of certain foreign currency gains (losses)
as ordinary income (loss) for tax purposes. The character of the distributions
made during the year from net investment income or net realized gains may differ
from its ultimate characterization for federal income tax purposes. Also, due to
timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or realized gain
was recorded by the Fund.
The Fund adjusts the classification of distributions to
shareholders to reflect the differences between financial statement amounts and
distributions determined in accordance with income tax regulations. Accordingly,
during the year ended September 30, 1997, amounts have been reclassified to
reflect a decrease in accumulated net investment loss of $4,006,689, an increase
in accumulated net realized gain on investments of $2,716,676, and a decrease in
paid-in capital of $6,723,365.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date) and dividend income is recorded on the
ex-dividend date. Realized gains and losses on investments and unrealized
appreciation and depreciation are determined on an identified cost basis, which
is the same basis used for federal income tax purposes.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
<PAGE>
- --------------------------------------------------------------------------------
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest of each class. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
Year Ended September 30, 1997 Year Ended September 30, 1996(1)
----------------------------- ----------------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------
Class A:
<S> <C> <C> <C> <C>
Sold 11,525,612 $ 516,255,667 12,519,702 $ 569,002,600
Distributions reinvested 1,804,573 78,737,385 1,596,700 64,139,185
Redeemed (10,273,804) (459,567,581) (9,738,312) (436,484,029)
------------ -------------- ----------- --------------
Net increase 3,056,381 $ 135,425,471 4,378,090 $ 196,657,756
============ ============== =========== ==============
- ------------------------------------------------------------------------------------------
Class B:
Sold 4,023,759 $ 175,948,220 2,852,250 $ 129,720,421
Distributions reinvested 348,742 14,842,538 172,972 6,841,003
Redeemed (1,801,954) (78,460,153) (901,310) (40,099,752)
------------ -------------- ----------- --------------
Net increase 2,570,547 $ 112,330,605 2,123,912 $ 96,461,672
============ ============== =========== ==============
- ------------------------------------------------------------------------------------------
Class C:
Sold 1,235,025 $ 54,325,325 760,144 $ 35,068,889
Distributions reinvested 33,285 1,434,706 4,897 196,204
Redeemed (793,137) (34,828,748) (419,838) (19,334,489)
------------ -------------- ----------- --------------
Net increase 475,173 $ 20,931,283 345,203 $ 15,930,604
============ ============== =========== ==============
- ------------------------------------------------------------------------------------------
Class Y:
Sold 646,438 $ 29,225,305 535,075 $ 24,859,892
Distributions reinvested 53,588 2,352,509 23,960 965,392
Redeemed (449,978) (20,204,087) (159,096) (7,282,597)
------------ -------------- ----------- --------------
Net increase 250,048 $ 11,373,727 399,939 $ 18,542,687
============ ============== =========== ==============
</TABLE>
1. For the year ended September 30, 1996 for Class A, Class B and Class Y
shares, and for the period from October 2, 1995 (inception of offering) to
September 30, 1996 for Class C shares.
- --------------------------------------------------------------------------------
3. Unrealized Gains and Losses on Investments
At September 30, 1997, net unrealized appreciation on investments of
$515,628,203 was composed of gross appreciation of $544,505,392, and gross
depreciation of $28,877,189.
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. Management Fees and Other Transactions with Affiliates Management fees paid
to the Manager were in accordance with the investment advisory agreement with
the Fund which provides for a fee of 0.75% on the first $200 million of average
annual net assets, 0.72% of the next $200 million, 0.69% of the next $200
million, 0.66% of the next $200 million and 0.60% of the next $700 million, and
0.58% of average annual net assets in excess of $1.5 billion.
For the year ended September 30, 1997, commissions (sales charges
paid by investors) on sales of Class A shares totaled $4,882,365, of which
$1,597,976 was retained by OppenheimerFunds Distributor, Inc. (OFDI), a
subsidiary of the Manager, as general distributor, and by an affiliated
broker/dealer. Sales charges advanced to broker/dealers by OFDI on sales of the
Fund's Class B and Class C shares totaled $4,609,293 and $221,073, respectively,
of which $518,408 and $7,469, respectively, were paid to an affiliated
broker/dealer. During the year ended September 30, 1997, OFDI received
contingent deferred sales charges of $488,384 and $18,559, respectively, upon
redemption of Class B and Class C shares, as reimbursement for sales commissions
advanced by OFDI at the time of sale of such shares.
OppenheimerFunds Services (OFS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund and for other registered
investment companies. OFS's total costs of providing such services are allocated
ratably to these companies.
The Fund has adopted a Service Plan for Class A shares to
reimburse OFDI for a portion of its costs incurred in connection with the
personal service and maintenance of shareholder accounts that hold Class A
shares. Reimbursement is made quarterly at an annual rate that may not exceed
0.25% of the average annual net assets of Class A shares of the Fund. OFDI uses
the service fee to reimburse brokers, dealers, banks and other financial
institutions quarterly for providing personal service and maintenance of their
customers' accounts that hold Class A shares. During the year ended September
30, 1997, OFDI paid $212,124 to an affiliated broker/dealer as reimbursement for
Class A personal service and maintenance expenses.
<PAGE>
- --------------------------------------------------------------------------------
The Fund has adopted a Distribution and Service Plan for Class B shares to
reimburse OFDI for its services and costs in distributing Class B shares and
servicing accounts. Under the Plan, the Fund pays OFDI an annual asset-based
sales charge of 0.75% per year on Class B shares. OFDI also receives a service
fee of 0.25% per year to reimburse dealers for providing personal services for
accounts that hold Class B shares. Both fees are computed on the average annual
net assets of Class B shares, determined as of the close of each regular
business day. During the year ended September 30, 1997, OFDI paid $26,037 to an
affiliated broker/dealer as reimbursement for Class B personal service and
maintenance expenses and retained $2,023,085 as reimbursement for Class B sales
commissions and service fee advances, as well as financing costs. If the Plan is
terminated by the Fund, the Board of Trustees may allow the Fund to continue
payments of the asset-based sales charge to OFDI for distributing shares before
the Plan was terminated. As of September 30, 1997, OFDI had incurred
unreimbursed expenses of $7,906,753 for Class B.
The Fund has adopted a Distribution and Service Plan for Class C
shares to compensate OFDI for its services and costs in distributing Class C
shares and servicing accounts. Under the Plan, the Fund pays OFDI an annual
asset-based sales charge of 0.75% per year on Class C shares. OFDI also receives
a service fee of 0.25% per year to compensate dealers for providing personal
services for accounts that hold Class C shares. Both fees are computed on the
average annual net assets of Class C shares, determined as of the close of each
regular business day. During the year ended September 30, 1997, OFDI retained
$195,923 as compensation for Class C sales commissions and service fee advances,
as well as financing costs. If the Plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based sales charge
to OFDI for certain expenses it incurred before the Plan was terminated. As of
September 30, 1997, OFDI had incurred unreimbursed expenses of $369,234 for
Class C.
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. Illiquid and Restricted Securities
At September 30, 1997, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933, may
have contractual restrictions on resale, and are valued under methods approved
by the Board of Trustees as reflecting fair value. A security may be considered
illiquid if it lacks a readily available market or if its valuation has not
changed for a certain period of time. The Fund intends to invest no more than
10% of its net assets (determined at the time of purchase and reviewed from time
to time) in illiquid or restricted securities. Certain restricted securities,
eligible for resale to qualified institutional investors, are not subject to
that limit. The aggregate value of illiquid or restricted securities subject to
this limitation at September 30, 1997 was $22,693,563, which represents 1.30% of
the Fund's net assets, of which $15,273,563 is considered restricted.
Information concerning restricted securities is as follows:
<TABLE>
<CAPTION>
Valuation
Cost Per Unit as of
Security Acquisition Date Per Unit September 30, 1997
- ------------------------------- ------------------ ------------ -------------------
<S> <C> <C> <C>
AirNet Communications Corp.,
Series C, Preferred Stock 7/6/95 $ 6.00 $ 1.00
Candescent Technologies Corp.,
Series E, Preferred Stock 4/24/96 5.50 7.21
Candescent Technologies Corp.,
Series F, Preferred Stock 6/11/97 7.50 7.50
ICG Communications, Inc. 6/9/93-5/10/95 5.50-13.89 23.28
Silver Diner, Inc. 7/10/96 5.50 2.02
</TABLE>
- --------------------------------------------------------------------------------
6. Bank Borrowings
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other OppenheimerFunds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.0575% per annum.
The Fund had no borrowings outstanding during the year ended
September 30, 1997.
<PAGE>
APPENDIX
INDUSTRY CLASSIFICATIONS
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
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INVESTMENT ADVISER
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
DISTRIBUTOR
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
TRANSFER AGENT AND SHAREHOLDER SERVICING AGENT
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
CUSTODIAN OF PORTFOLIO SECURITIES
The Bank of New York
One Wall Street
New York, New York 10015
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
LEGAL COUNSEL
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
PX500.198
