INTERNAL USE ONLY
TELEPHONE SCRIPT FOR
SHAREHOLDER MEETING
OPPENHEIMER DISCOVERY FUND
Original meeting date: 8/28/00
Adjourned meeting date: 10/13/00 (10:00 a.m.)
There are six proposals shareholders are being asked to vote on. Proposal
No. 3 consists of nine (9) sub-proposals. Proposal No. 4 consists of four
(4) sub-proposals. The Fund's Board of Trustees recommends a vote in favor
of or FOR each of the proposals and sub-proposals.
Proposal No. 1: Election of Trustees.
The Fund is required to have at least two-thirds of its directors elected by
shareholders. Because the Fund has not had a shareholder meeting for some time,
the percentage of trustees of the Fund that have been elected by shareholders is
close to two-thirds, and no additional trustees/directors may be added to the
Board of the Fund unless first elected by shareholders. Therefore, shareholders
are being asked to elect directors.
Proposal No. 2: Ratification of Auditors Selection.
The Fund is not required to hold annual shareholder meetings and does not hold
such meetings. However, when a shareholder meeting is held, the Fund's selection
of independent auditors must be submitted for ratification or rejection by
shareholders at that meeting. Because the Fund is holding a shareholder meeting,
shareholders are being asked to ratify the Fund's selection of independent
auditors.
Proposal No. 3: Elimination of Certain Fundamental Investment Restrictions.
This proposal consists of nine (9) sub-proposals.
***Summary of impact of the elimination of certain fundamental investment
restrictions:
Because of recent regulatory changes, certain investment restrictions are no
longer applicable to the Fund. Certain other investment restrictions adopted by
the Fund are more restrictive than currently required, and other investment
restrictions adopted by the Fund reflect outdated industry conditions and
practices. The Fund's Manager considers many of these restrictions unnecessary
or unwarranted.
The Fund's Board finds that the proposed elimination of certain fundamental
investment restrictions of the Fund is in the best interests of shareholders.
The proposed changes are intended to provide the Fund with greater flexibility
to respond to future market developments and to increase future investment
opportunities.
The proposed changes are not expected to materially change the current risk
profile of an investment in the Fund.
The elimination of a fundamental policy does not mean that the Fund's current
principal investment policies and strategies will change. If the Fund's Manager
decides to materially change the Fund's investment policies and strategies, such
a change will be described in the Fund's prospectus.
Sub-Proposal No. 3.A.: Eliminating Limits on Investing in Other Investment
Companies.
The purpose of this proposal is to provide the Fund with the maximum flexibility
permitted by law to pursue its investment objective. As a result of recent
regulatory changes, the ability of an investment company such as the Fund to
invest in other investment companies has been increased. Consistent with current
regulatory requirements, mutual funds may enter into fund of funds arrangements,
whereby a mutual fund can invest in a number of other mutual funds.
The Fund does not currently anticipate participating in a fund of funds
arrangement. However, elimination of the Fund's current fundamental investment
restriction regarding investing in other investment companies is necessary to
permit the Fund to enter into a fund of funds arrangement in the future.
Sub-Proposal No. 3.B.: Eliminating Prohibition on Margin Purchases and Short
Sales.
It is proposed that the Fund's current fundamental investment restriction
prohibiting it from purchasing securities on margin or engaging in short sales
be eliminated. The existing restriction is not required to be a fundamental
investment restriction.
Elimination of this restriction is unlikely to affect the management of the
Fund. The 1940 Act prohibitions on margin purchases and short sales will
continue to apply to the Fund.
Sub-Proposal No. 3.C.: Eliminating Restriction on Purchasing Securities in
which Officers and Trustees of the Fund have an Interest.
The Fund is currently subject to a fundamental investment restriction
prohibiting it from purchasing the securities of an issuer if the officers of
the Fund or the Manager individually own 1/2 of 1% of such securities and
together own more than 5% of such securities. This restriction was originally
adopted to address a state requirement that is no longer applicable.
Elimination of this restriction could increase the Fund's flexibility when
choosing investments in the future.
Sub-Proposal No. 3.D.: Eliminating Restriction on Investing in Unseasoned
Issuers.
The Fund is currently subject to a fundamental investment restriction limiting
its investment in securities of issuers that have been in operation less than
three years (so-called "unseasoned issuers").
This restriction was originally adopted to address state requirement that is no
longer applicable to the Fund. Elimination of this restriction could increase
the Fund's flexibility when choosing investments in the future.
Sub-Proposal No. 3.E.: Eliminating Restriction on Investing for Purpose of
Acquiring Control.
It is proposed that the Fund's current fundamental investment restriction
prohibiting it from investing in portfolio companies for the purpose of
acquiring control be eliminated. The Fund has no intention of investing for the
purpose of acquiring control of a company, and elimination of the restriction is
not expected to have a significant impact on the Fund's investment practices or
management.
The restriction is unnecessary and may reduce possible investment opportunities
because a mutual fund might be considered to be investing for control if it
purchases a large percentage of the securities of a single issuer. Eliminating
this restriction also will give the Fund greater flexibility in exercising its
rights as a shareholder of the portfolio companies it invests in, to try to
protect its interests and those of its shareholders.
Sub-Proposal No. 3.F.: Eliminating Restriction on Investing in
Mineral-Related Leases.
The Fund is currently subject to a fundamental restriction prohibiting it from
investing in oil, gas or mineral-related programs. This restriction was
originally adopted to address state requirement that is no longer applicable to
the Fund. Elimination of this restriction could increase the Fund's flexibility
when choosing investments in the future.
The Fund will continue to be prohibited from purchasing commodities or commodity
contracts.
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Sub-Proposal No. 3.G.: Eliminating Restriction on Investing in Rights and
Warrants.
It is proposed that the Fund's fundamental investment restriction limiting its
ability to invest in rights and warrants be eliminated. This was a
state-law-mandated restriction that no longer applies to the Fund.
This restriction no longer applies to the Fund, and the Board believes that its
elimination could increase the Fund's flexibility when choosing investments in
the future.
Sub-Proposal No. 3.H.: Eliminating Restriction on Investing in Certain
Repurchase Agreements
It is proposed that the Fund's fundamental investment restriction limiting its
investments in repurchase agreements maturing in more than seven (7) days be
eliminated. Repurchase agreements maturing in more than seven (7) days are
generally considered to be illiquid securities.
The Fund believes that this restriction is unnecessary and may, in fact, reduce
possible investment opportunities.
Elimination of this restriction is not expected to have a significant impact on
the Fund's investment practices or management because the Fund remains subject
to its non-fundamental investment restriction that it will not invest more than
10% of its net assets in illiquid or restricted securities.
Sub-Proposal No. 3.I.: Eliminating Restriction on Pledging of Assets.
It is proposed that the Fund's prohibition on pledging of its assets be
eliminated.
The existing restriction is not required to be fundamental, and the Board
believes that the Fund should be provided with the maximum flexibility permitted
by law to pursue its investment objectives. The 1940 Act prohibitions on
borrowing (as reflected in the Fund's non-fundamental policy on borrowing) would
continue to apply (whereby the Fund may borrow from banks - and invest the
borrowed funds in portfolio securities - provided that the value of the Fund's
assets, less its liabilities other than borrowings, is equal to at least 300% of
all borrowings).
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PROPOSAL 4: TO APPROVE AMENDMENTS TO CERTAIN FUNDAMENTAL INVESTMENT
RESTRICTIONS OF THE FUND
This proposal consists of four (4) sub-proposals.
***Summary of Impact of Amendments.
Because of recent regulatory changes, certain investment restrictions adopted by
the Fund are more restrictive than currently required. The Fund's Board finds
that the proposed amendment of certain fundamental investment restrictions of
the Fund is in the best interests of shareholders. The proposed changes are
intended to provide the Fund with greater flexibility to respond to future
market developments and to increase future investment opportunities.
The proposed changes are not expected to materially change the current risk
profile of an investment in the Fund.
Sub-Proposal 4.A. Foreign Securities
The Board proposes that the Fund's policy on purchasing foreign securities be
changed to a non-fundamental policy that would permit the Fund to invest in
foreign unregistered offerings, including those offerings where the issuer
commits to file a registration statement within a short period and where the
issuer may already have publicly-traded stock outstanding.
The existing policy is not required to be a fundamental investment policy under
the 1940 Act and the Board recommends that shareholders approve replacement of
the current fundamental policy with a non-fundamental policy regarding ownership
of foreign securities. The purpose of this proposal is to provide the Fund with
the maximum flexibility permitted by law to pursue its investment objective and
to conform the Fund's policy in this area to one that is expected to become
standard for all Oppenheimer funds. The Board believes that standardized
policies will assist the Fund and the Manager in maintaining compliance with the
various investment restrictions to which the Oppenheimer funds are subject.
Changing the policy to a non-fundamental policy will give the Board greater
flexibility in the future in making changes to the policy without having the
Fund undergo the expense of a shareholder vote for what essentially is an
operational issue.
The Fund would retain its non-fundamental operating policy that it does not
currently intend to invest more than 25% of its total assets in foreign
securities. Currently, the Fund's investment focus is U.S. issuers. The Fund's
foreign holdings, which have generally been 10% or less of the Fund's total
assets, have typically been of issuers located in developed countries. Approval
of this proposed policy is unlikely to affect management of the Fund.
Sub-Proposal 4.B. Diversification
The Fund cannot buy securities of any one issuer if more than 5% of its total
assets would be invested in securities of that issuer or if it would then own
more than 10% of that issuer's voting securities. Currently, the policy with
respect to diversification applies to 100% of the Fund's total assets. The Board
proposes that the Fund's policy with respect to diversification be amended to
apply to 75% of the Fund's total assets. This change would be consistent with
the requirements of the 1940 Act and would promote the standardization of
fundamental investment restrictions among all the funds in the OppenheimerFunds
complex.
As amended, the policy on diversification for the Fund would remain a
fundamental policy changeable only by the vote of a majority of the outstanding
voting securities.
Sub-Proposal 4.C. Hedging Strategies
The Fund currently is subject to several fundamental investment restrictions
concerning its hedging strategies. The Board proposes that several of the Fund's
fundamental policies with respect to various hedging strategies be changed to
non-fundamental policies.
The existing policies are not required to be fundamental investment policies
under the 1940 Act. The purpose of this proposal is to provide the Fund with the
maximum flexibility permitted by law to pursue its investment objective and to
conform the Fund's policy in this area to one that is expected to become
standard for all Oppenheimer funds. The proposed non-fundamental hedging
policies are substantially similar to the Fund's current fundamental policies
with the exception of (1) expanding the types of futures that may be traded, (2)
permitting options on sector indices as well as on broadly-based indices, and
(3) removing the prohibition on writing puts.
Changing these policies to non-fundamental policies will give the Board greater
flexibility in the future in making changes to the policies without having the
Fund undergo the expense of a shareholder vote for what essentially are
operational issues.
If the Fund is permitted to trade options on sector indices, this may enable the
Fund to better hedge industry sector risks within its portfolio.
Sub-Proposal 4.D. Loans
Under its current restriction, the Fund may invest in debt securities and may
enter into repurchase agreements, which may be considered a loan, and is
permitted to lend its portfolio securities.
It is proposed that the current fundamental restriction be amended to permit the
Fund to lend its assets to affiliated investment companies (for example, other
funds in the OppenheimerFunds complex). Before an inter-fund lending arrangement
can be established, the Fund must obtain approval from the SEC. The Fund has not
yet decided to apply for such an order and there is no guarantee any such order
would be granted, even if applied for. Until the SEC has approved an inter-fund
lending application, the Fund will not engage in lending with affiliated
investment companies. As amended, the restriction on lending for the Fund would
remain a fundamental restriction changeable only by the vote of a majority of
the outstanding voting securities.
The reason for lending money to an affiliated fund is that the lending fund may
be able to obtain a higher rate of return than it could from interest rates on
alternative short-term investments. To assure that the Fund will not be
disadvantaged by making loans to affiliated funds, certain safeguards will be
implemented.
PROPOSAL 5: TO AUTHORIZE THE TRUSTEES TO ADOPT AN AMENDED AND
RESTATED DECLARATION OF TRUST
The Board of Trustees has approved and recommends that the shareholders of the
Fund authorize them to adopt and execute the Amended and Restated Declaration of
Trust. The New Declaration of Trust is a more modern form of trust instrument
for a Massachusetts business trust, such as the Fund, and going forward, will be
used as the standard Declaration of Trust for all new OppenheimerFunds
Massachusetts business trusts.
Adoption of the New Declaration of Trust will not result in any changes in the
Fund's Trustees or officers or in the investment policies and shareholder
services described in the Fund's current prospectus.
The New Declaration of Trust amends the Current Declaration of Trust in a number
of significant ways. The proxy statement summarizes some of the more significant
amendments to the Current Declaration of Trust effected by the New Declaration
of Trust.
PROPOSAL 6: TO APPROVE THE FUND'S CLASS B 12b-1 PLAN
Under the Fund's current Class B 12b-1 plan the Fund's Class B shares currently
pay to the Fund's Distributor up to 0.25% of average annual net assets as a
service fee and up to 0.75% of average annual net assets as an asset-based sales
charge. The current plan is intended to reimburse the Fund's Distributor for
certain types of expenses incurred in distributing Fund shares.
The proposed Class B 12b-1 plan is similar to the current 12b-1 plan as to the
amount of payments the Fund makes to the Distributor on an annual basis. The
difference between the current Class B 12b-1 plan and the proposed plan is that
over time, the Fund's payments under the 12b-1 plan may exceed the amount, which
the Fund might pay under the current plan. The length of time over which the
Fund's payments will continue under the proposed plan is not limited by any
reimbursement factor (as is the case under the current Class B 12b-1 Plan), and
the Fund's payments may continue for a longer period of time than under the
current plan, thus potentially increasing the amount of plan payments which, in
turn, may reduce the dividends and total return on the Fund's Class B shares.
The Board approved the replacement of the current Class B 12b-1 plan with the
proposed Class B 12b-1 plan because the Distributor may not receive full
reimbursement for its distribution-related expenses under the current plan in
certain circumstances. The Board determined that the proposed Class B 12b-1 plan
is in the best interests of the Fund and that its adoption has a reasonable
likelihood of benefiting the Fund and its Class B shareholders.
FOR ANY OTHER QUESTIONS, PLEASE CONTACT JEFFREY BURNS (3-5089), PHIL MASTERSON
(8-2486), KATE IVES (8-3331) OR KATHERINE FELD (3-0252).
