Registration No. 33-15489
File No. 811-5225
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. 48 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [ ]
Amendment No. 50 [X]
OPPENHEIMER QUEST FOR VALUE FUNDS
--------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
6803 South Tucson Way, Englewood, Colorado 80112
-------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(212) 323-0200
-------------------------------------------------------------------------------
(Registrant's Telephone Number, including Area Code)
Andrew J. Donohue, Esq.
OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
--------------------------------------------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
[ ]Immediately upon filing pursuant to paragraph (b)
[ ]On ___________pursuant to paragraph (b)
[ ]60 days after filing pursuant to paragraph (a)(1)
[X] On February 9, 2001 pursuant to paragraph (a)(1)
[ ]75 days after filing pursuant to paragraph (a)(2)
[ ]On _______________ pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ]This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
Oppenheimer
Quest Opportunity
Value Fund
Prospectus dated February 9, 2001
Oppenheimer Quest Opportunity Value Fund is a mutual fund that seeks growth
of capital as its goal. It invests in a diversifed portfolio of stocks, bonds,
and cash equivalents, but primarily focuses on stocks.
This Prospectus contains important information about the Fund's objective,
and its investment policies, strategies and risks. It also contains important
information about how to buy and sell shares of the Fund and other account
features. Please read this Prospectus carefully before you invest and keep it
for future reference about your account.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Fund's securities nor has it determined that this
Prospectus is accurtate or complete. It is a criminal offense to represent
otherwise.
CONTENTS
ABOUT THE FUND
The Fund's Investment Objective and Strategies
Main Risks of Investing in the Fund
The Fund's Past Performance
Fees and Expenses of the Fund
About the Fund's Investments
How the Fund is Managed
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Class N Shares
Class Y Shares
Special Investor Services
AccountLink
PhoneLink
OppenheimerFunds Internet Web Site
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Financial Highlights
<PAGE>
ABOUT THE FUND
The Fund's Investment Objective and Strategies
WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks growth of capital.
WHAT DOES THE FUND MAINLY INVEST IN? The Fund can invest in a variety of equity
and debt securities. The Fund normally invests mainly in common stocks of U.S.
issuers that the portfolio manager believes are undervalued in the marketplace.
The Fund can invest in common stocks and other equity securities, including debt
securities convertible into common stock, without limit. Under normal market
conditions, the Fund invests at least 50% of its total assets in common stock
and debt securities convertible into common stock. The Fund's investments are
more fully explained in "About the Fund's Investments," below.
HOW DOES THE PORTFOLIO MANAGER DECIDE WHAT SECURITIES TO BUY OR SELL? In
selecting securities for the Fund, the Fund's portfolio manager, who is employed
by the Sub-Advisor, OpCap Advisors, uses a "value" approach to investing. The
portfolio manager searches for securities of companies believed to be
undervalued in the marketplace, in relation to factors such as a company's
assets, earnings, growth potential and cash flows. This process and the
inter-relationship of the factors used may change over time and its
implementation may vary in particular cases. Currently, the selection process
includes the following techniques:
o A "bottom up" analytical approach using fundamental research to focus on
particular issuers before considering industry trends, evaluating each
issuer's characteristics, financial results and management.
o A search for securities of companies believed to be undervalued in the
marketplace and having a high return on capital, strong management
committed to shareholder value, and positive cash flows.
o Ongoing monitoring of issuers for fundamental changes in the company that
might alter the portfolio manager's initial expectations about the
security and might result in the sale of the security.
The portfolio manager allocates the Fund's investments among equity and
debt securities after assessing the relative values of these different types of
investments under prevailing market conditions. The portfolio might hold stocks,
bonds and money market instruments in different proportions at different times.
While stocks and other equity securities are normally emphasized to seek growth,
the portfolio manager might buy bonds and other fixed-income securities, instead
of stocks, when he thinks that:
o common stocks in general appear to be overvalued,
o debt securities offer meaningful capital growth opportunities relative to
common stocks, or
o it is desirable to maintain liquidity pending investment in equity
securities to seek capital growth opportunities.
WHO IS THE FUND DESIGNED FOR? The Fund is designed for investors seeking capital
appreciation over the long term. Those investors should be willing to assume the
risks of short-term share price fluctuations that are typical for a fund
focusing on stock investments. Since the Fund does not seek current income as
part of its objective, and its income level from investments will likely be
small, it is not designed for investors needing current income. Because of its
focus on long-term growth, the Fund may be appropriate for a portion of a
retirement plan investment. The Fund is not a complete investment program.
Main Risks of Investing in the Fund
All investments have risks to some degree. The Fund's investments in stocks and
bonds are subject to changes in their value from a number of factors, as
described below. There is also the risk that poor security selection by the
Sub-Advisor will cause the Fund to underperform other funds having a similar
objective. As an example, the portfolio manager's "value" approach to investing
could result in fewer Fund investments in stocks that become highly valued by
the marketplace during times of rapid market advances. This could cause the Fund
to underperform other funds that seek capital appreciation but that employ a
growth or non-value approach to investing.
RISKS OF INVESTING IN STOCKS. Stocks fluctuate in price, and their short-term
volatility at times may be great. Because the Fund normally focuses its
investments in equity securities, the value of the Fund's portfolio will be
affected by changes in the stock markets in which it invests. Market risk will
affect the Fund's net asset values per share, which will fluctuate as the values
of the Fund's portfolio securities change. A variety of factors can affect the
price of a particular stock and the prices of individual stocks do not all move
in the same direction uniformly or at the same time. Different stock markets may
behave differently from each other.
Other factors can affect a particular stock's price, such as poor earnings
reports by the issuer, loss of major customers, major litigation against the
issuer, or changes in government regulations affecting the issuer. The Fund
invests in securities of large companies. It can also buy securities of small
and medium-capitalization companies, which may have more volatile stock prices
than large companies.
Industry Focus. At times the Fund may increase the relative emphasis of its
investments in stocks of companies in a single industry. Stocks of issuers
in a particular industry may be affected by changes in economic
conditions, or by changes in government regulations, availability of basic
resources or supplies, or other events that affect that industry more than
others. To the extent that the Fund increases the emphasis of its
investments in a particular industry, its share values may fluctuate in
response to events affecting that industry.
INTEREST RATE RISK. The values of debt securities are subject to change when
prevailing interest rates change. When interest rates fall, the value of
already-issued debt securities generally rise. When interest rates rise, the
values of already-issued debt securities generally fall. The magnitude of these
fluctuations will often be greater for longer-term debt securities than
shorter-term debt securities. The Fund's share prices can go up or down when
interest rates change because of the effect of the changes on the value of the
Fund's investments in debt securities.
CREDIT RISK. Debt securities are subject to credit risk. Credit risk is the risk
that issuer of a security might not make interest and principal payments on the
security as they become due. If the issuer fails to pay interest, the Fund's
income may be reduced and if the issuer fails to repay principal, the value of
that security and of the Fund's shares might fall. While the Fund's investments
in U.S. Government securities are subject to little credit risk, the Fund's
other investments in debt securities are subject to risks of default. A
downgrade in an issuer's credit rating or other adverse news about an issue can
reduce a security's market value.
HOW RISKY IS THE FUND OVERALL? The risks described collectively form the risk
profile of the Fund, and can affect the value of the Fund's investments, its
investment performance and its price per share. Particular investments and
investment strategies also have risks. These risks mean that you can lose money
by investing in the Fund. When you redeem your shares, they may be worth more or
less than what you paid for them. There is no assurance that the Fund will
achieve its investment objective. In the short term, the stock markets can be
volatile, and the price of the Fund's shares can go up and down substantially.
The Fund's income-oriented investments may help cushion the Fund's total return
from changes in stock prices, but fixed-income securities have their own risks
and normally are not the primary emphasis of the Fund. In the OppenheimerFunds
spectrum, the Fund is more conservative than aggressive growth stock funds, but
has greater risk than investment-grade bond funds.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The Fund's Past Performance
The bar chart and table below show one measure of the risks of investing
in the Fund, by showing changes in the Fund's performance (for its Class A
shares) from year to year for the past ten calendar years and by showing how the
average annual total returns of the Fund's shares compare to those of a
broad-based market index. The Fund's past investment performance is not
necessarily an indication of how the Fund will perform in the future.
Annual Total Returns (Class A) (as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing annual total returns]
Sales charges are not included in the calculations of return in this bar chart,
and if those charges were included, the returns would be less than those shown.
During the period shown in the bar chart, the highest return (not annualized)
for a calendar quarter was _____% (____Q'____) and the lowest return (not
annualized) for a calendar quarter was _____% (___Q'___).
------------------------------------------------------------------------------
Average Annual 5 Years 10 Years
Total 1 Year (or life of class, (or life of
-------------------- if less) class,
Returns for the if less)
periods
ended December 31,
2000
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class A Shares % % %
(inception 1/3/89)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
S&P 500 Index 1 % % %(1)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class B Shares % % %
(inception 9/1/93)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class C Shares % % %
(inception 9/1/93)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class Y Shares % % %
(inception 12/16/96)
------------------------------------------------------------------------------
1. From 12/31/89.
The Fund's average annual total returns include the applicable sales charge for:
Class A, the current maximum initial sales charge of 5.75%; for Class B, the
contingent deferred sales charges of 5% (1-year), 2% (5-years) and 1% (life of
class); and for Class C, the 1% contingent deferred sales charge for the 1-year
period. There is no sales charge for Class Y shares.
The returns measure the performance of a hypothetical account and assume that
all dividends and capital gains distributions have been reinvested in additional
shares. The performance of the Fund's Class A shares is compared to the S&P 500
index, an unmanaged index of equity securities. The index performance includes
the reinvestment of income but does not reflect transaction costs. The Fund's
investments vary from securities in the index.
Fees and Expenses of the Fund
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services. Those expenses
are subtracted from the Fund's assets to calculate the Fund's net asset values
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 meant to help you understand the
fees and expenses you may pay if you buy and hold shares of the Fund. The
numbers below are based on the Fund's expenses during its fiscal year ended
October 31, 2000 except that the numbers for Class N shares, which is a new
class, are based on the Fund's anticipated expenses for Class N Shares during
the upcoming year.
Shareholder Fees (charges paid directly from your investment):
--------------------------------------------------------------------------------
Class A Shares Class B Class C Class N Class Y
Shares Shares Shares Shares
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Maximum Sales Charge
(Load) on purchases 5.75% None None None None
(as % of offering price)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as % of
the lower of the None1 5%2 1%3 1%4 None
original offering price
or redemption proceeds)
--------------------------------------------------------------------------------
1. A contingent deferred sales charge may apply to redemptions of investments of
$1 million or more ($500,000 for retirement plan accounts) of Class A shares.
See "How to Buy Shares" for details.
2. Applies to redemptions in first year after purchase. The contingent deferred
sales charge declines to 1% in the sixth year and is eliminated after that.
3. Applies to shares redeemed within 12 months of purchase.
4. Applies to shares redeemed within 18 months of retirement Plan's first
purchase.
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
--------------------------------------------------------------------------------
Class A Class B Class C Class N Class Y
Shares Shares Shares Shares Shares
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Management Fees % % % % %
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Distribution and/or Service
(12b-1) Fees % % % % %
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Other Expenses % % % % %
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total Annual Operating Expenses % % % % %
--------------------------------------------------------------------------------
The asset-based sales charge rate for Class A shares has been voluntarily
reduced from 0.25% to 0.20% of average annual net assets representing Class A
shares effective January 1, 2000, to 0.15% effective January 1, 2001and to 0.10%
effective January 1, 2002. The Board can set the rate up to 0.25% of average
annual net assets under the Distribution and Service Plan for Class A shares.
Expenses may vary in future years. "Other expenses" include transfer agent fees,
custodial expenses, and accounting and legal expenses the Fund pays.
EXAMPLES. The following examples are intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds. The
examples assume that you invest $10,000 in a class of shares of the Fund for the
time periods indicated and reinvest your dividends and distributions.
The first example assumes that you redeem all of your shares at the end of
those periods. The second example assumes that you keep your shares. Both
examples also assume that your investment has a 5% return each year and that the
class's operating expenses remain the same. Your actual costs may be higher or
lower because expenses will vary over time. Based on these assumptions your
expenses would be as follows:
--------------------------------------------------------------------------------
If shares are redeemed: 1 Year 3 Years 5 Years 10 Years1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class A Shares $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B Shares $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C Shares $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class N Shares $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class Y Shares $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
If shares are not 1 Year 3 Years 5 Years 10 Years1
redeemed:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class A Shares $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B Shares $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C Shares $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class N Shares $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class Y Shares $ $ $ $
--------------------------------------------------------------------------------
In the first example, expenses include the initial sales charge for Class A and
the applicable Class B, Class C or Class N contingent deferred sales charges. In
the second example, the Class A expenses include the sales charge, but Class B,
Class C and Class N expenses do not include the contingent deferred sales
charges. 1. Class B expenses for years 7 through 10 are based on Class A
expenses, since Class B
shares automatically convert to Class A after 6 years.
About the Fund's Investments
THE FUND'S PRINCIPAL INVESTMENT POLICIES. The allocation of the Fund's portfolio
among the different types of investments will vary over time based upon the
evaluation of economic and market trends. The Fund's portfolio might not always
include all of the different types of investments described below. The Statement
of Additional Information contains more detailed information about the Fund's
investment policies and risks.
The Manager has engaged the Sub-Advisor, OpCap Advisors, to select
securities for the Fund's portfolio. The Sub-Advisor tries to reduce risks by
carefully researching securities before they are purchased and to reduce the
Fund's exposure to 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 issuer. Also, the Fund
does not concentrate 25% or more of its assets in investments in any one
industry.
However, changes in the overall market prices of securities and the income
they pay can occur at any time. The share price of the Fund will change daily
based on changes in market prices of securities and market conditions, and in
response to other economic events.
Stock Investments. The Fund invests mainly in a diversified portfolio of common
stocks and other equity securities of issuers that may be of small, medium
or large size, to seek capital growth. Equity securities include common
stocks, preferred stocks, warrants and debt securities convertible into
common stock. They can be securities issued by domestic or foreign
companies. Although convertible securities are debt securities, in some
cases convertible securities can be considered "equity equivalents"
because of the conversion feature. Their rating must meet the Fund's
credit criteria for debt securities, described below, but has less impact
on the investment decision than in the case of other debt securities.
At times, the Fund may increase its relative emphasis on the securities of
issuers in a particular industry or group of industries, or of a
particular capitalization or a range of capitalizations, depending on the
Sub-Advisor's judgment about market and economic conditions.
Debt Securities. The Fund can also invest in debt securities, such as U.S.
Government securities, mortgage-backed securities as more fully described
below, and domestic and foreign corporate bonds, notes and debentures. The
Fund will make these investments when the portfolio manager believes they
present opportunities for seeking the Fund's objective of capital growth,
as discussed above. The Fund can also buy short-term high-quality debt
securities for liquidity pending the purchase of new investments or to
have cash to pay for redemptions of Fund shares.
The corporate debt securities the Fund buys must be "investment grade."
That means that they must either be rated at least "Baa" by Moody's Investors
Service or "BBB" by Standard & Poor's Rating Service or have comparable ratings
by other nationally-recognized rating organizations. If they are unrated
corporate debt securities, the Sub-Advisor must judge that they are comparable
to rated investment-grade securities.
o U.S. Government Securities. The Fund can invest in U.S. Government
securities that are U.S. Treasury securities and securities issued or guaranteed
by agencies or federally-chartered corporate entities referred to as
instrumentalities of the U.S. Government. They can include collateralized
mortgage obligations (CMOs) and other mortgage-related securities. U.S. Treasury
securities are backed by the full faith and credit of the U.S. Government and
are subject to little credit risk.
Some securities issued or guaranteed by agencies or instrumentalities of the
U.S. Government have different levels of credit support from the U.S.
Government. Some are supported by the full faith and credit of the U.S.
Government, such as Government National Mortgage Association pass-through
mortgage certificates (called "Ginnie Maes"). Some are supported by the
right of the issuer to borrow from the U.S. Treasury under certain
circumstances, such as Federal National Mortgage Association bonds ("Fannie
Maes"). Others are supported only by the credit of the entity that issued
them, such as Federal Home Loan Mortgage Corporation obligations ("Freddie
Macs"). These have relatively little credit risk.
o Mortgage-Related Securities. Investments in mortgage-related securities
are subject to special risks of unanticipated prepayment. The risk is that
when interest rates fall, borrowers under the mortgages that underlie a
mortgage-related security the Fund owns will prepay their mortgages more
quickly than expected, causing the issuer of the security to prepay the
principal to the Fund prior to the security's expected maturity.
Securities subject to prepayment risk, including the CMOs and other
mortgage-related securities that the Fund can buy, generally offer less
potential for gains when prevailing interest rates fall, and have greater
potential for loss when interest rates rise. The impact of prepayments on
the price of a security may be difficult to predict and may increase the
volatility of the price. Additionally, the Fund may buy mortgage-related
securities at a premium. Accelerated prepayments on those securities could
cause the Fund to lose a portion of its principal investment represented
by the premium the Fund paid.
If interest rates rise rapidly, prepayments may occur at slower rates than
expected, which could have the effect of lengthening the expected maturity
of a short- or medium-term security. That could cause its value to
fluctuate more widely in response to changes in interest rates. In turn,
this could cause the value of the Fund's shares to fluctuate more.
o Money Market Instruments. The Fund can also invest in "money market
instruments." These include U.S. Government securities and high-quality
corporate debt securities having a remaining maturity of one year or less.
They also include commercial paper, other short-term corporate debt
obligations, certificates of deposit, bankers' acceptances and repurchase
agreements. They do not generate capital growth if held to maturity.
CAN THE FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE? The Fund's Board of
Trustees can change non-fundamental investment policies without shareholder
approval, although significant changes will be described in amendments to this
Prospectus. Fundamental policies cannot be changed without the approval of a
majority of the Fund's outstanding voting shares. The Fund's investment
objective is a fundamental policy. Other investment restrictions that are
fundamental policies are listed in the Statement of Additional Information. An
investment policy is not fundamental unless this Prospectus or the Statement of
Additional Information says that it is.
OTHER INVESTMENT STRATEGIES. To seek its investment objective, the Fund can also
use the investment techniques and strategies described below. The Fund might not
always use all of them. These techniques have certain risks, although some are
designed to help reduce overall investment or market risks.
Foreign Investing. While the Fund has no limits on the amounts it can invest in
foreign securities, it normally does not expect to invest a substantial
portion of its assets in foreign securities. The Fund can buy foreign
securities that are listed on a domestic or foreign stock exchange, traded
in domestic or foreign over-the-counter markets, or represented by
American Depository Receipts. While the Fund can invest in emerging
markets, which have greater risks than developed markets, the Fund
currently does not intend to purchase securities issued by governments or
companies in emerging markets. The Fund will hold foreign currency only in
connection with buying and selling foreign securities.
o Risks of Foreign Investing. 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.
"When-Issued" and "Delayed-Delivery" Transactions. The Fund can purchase
securities on a "when-issued" basis and can purchase or sell securities on
a "delayed delivery" basis. There is a risk that the value of the security
might decline prior to the settlement date. The Fund will not commit more
than 15% of its net assets under these transactions. Between the purchase
and settlement, no payment is made for the security, and no interest
accrues to the buyer from the investment. There is a risk of loss to the
Fund if the value of the when-issued security declines prior to the
settlement date.
Investing in Small, Unseasoned Companies. The Fund can invest up to 5% of its
total assets in securities of small, unseasoned companies. These are
companies that have been in continuous operation for less than three
years, counting the operations of any predecessors. These securities may
have limited liquidity, which means that the Fund could have difficulty
selling them at an acceptable price when it wants to. Their prices may be
very volatile, especially in the short term.
Illiquid and Restricted Securities. Investments may be illiquid because they do
not have an active trading market, making it difficult to value them or
dispose of them promptly at an acceptable price. A restricted security has
a contractual restriction on its resale or cannot be sold publicly until
it is registered under the Securities Act of 1933. The Fund cannot invest
more than 15% of its net assets in illiquid or restricted securities.
Certain restricted securities that are eligible for resale to qualified
institutional purchasers may not be subject to that limit. The Manager and
Sub-Advisor monitor holdings of illiquid securities on an ongoing basis to
determine whether to sell any holdings to maintain adequate liquidity.
Portfolio Turnover. A change in the securities held by the Fund is known as
"portfolio turnover". The Fund does not expect to engage frequently in
short-term trading to try to achieve its objective. Portfolio turnover
affects brokerage costs the Fund pays. If the Fund realizes capital gains
when it sells its portfolio investments, it must generally pay those gains
out to shareholders, increasing their taxable distributions. The Financial
Highlights table below shows the Fund's portfolio turnover rates during
prior fiscal years.
Temporary Defensive Investments. In times of unstable or adverse market or
economic conditions, the Fund can invest up to 100% of its assets in
temporary defensive investments. Generally they would be short-term U.S.
Government securities and the types of money market instruments described
above. To the extent the Fund invests defensively in these securities, it
might not achieve its investment objective of capital growth.
How the Fund Is Managed
THE MANAGER. The Manager supervises the Fund's investment program 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 that states the Manager's responsibilities. The agreement sets the
fees paid by the Fund to the Manager and describes the expenses that the Fund
pays to conduct its business. The Manager became the Fund's investment advisor
November 22, 1995.
The Manager has been an investment advisor since January 1960. The Manager
(including subsidiaries) managed more than $125 billion of assets as of October
31, 2000, including other Oppenheimer funds with more than 5 million shareholder
accounts. The Manager is located at Two World Trade Center, 34th Floor, New
York, New York 10048-0203.
The Manager's Fees. Under the investment advisory agreement, the Fund pays the
Manager an advisory fee at an annual rate that declines as the Fund's
assets grow: 1.00% of the first $400 million of average annual net assets
of the Fund, 0.90% of the next $400 million, 0.85% of the next $3.2
billion, 0.80% of the next $4 billion and 0.75% of average annual net
assets in excess of $8 billion. The Fund's management fee for its last
fiscal year ended October 31, 2000 was _____% of average annual net assets
for each class of shares.
The Sub-Advisor. On November 22, 1995, the Manager retained the Sub-Advisor to
provide day-to-day portfolio management for the Fund. Prior to that date
and from the inception of the Fund, the Sub-Advisor had been the Fund's
investment advisor. The Sub-Advisor has operated as an investment advisor
to investment companies and other investors since its organization in
1980. As of December 31, 2000, the Sub-Advisor or its parent Oppenheimer
Capital advised accounts having assets in excess of $____ billion. The
Sub-Advisor is located at 1345 Avenue of the Americas, 49th Floor, New
York, New York 10105-4800.
The Manager, not the Fund, pays the Sub-Advisor an annual fee under the
Sub-Advisory Agreement between the Manager and the Sub-Advisor. The fee is
calculated as a percentage of the fee the Fund pays the Manager. The rate
is 40% of the advisory fee collected by the Manager based on the net
assets of the Fund as of November 22, 1995, and 30% of the fee collected
by the Manager on assets in excess of that amount.
The Sub-Advisor is a majority-owned subsidiary of Oppenheimer Capital.
Oppenheimer Capital is an indirect wholly-owned subsidiary of PIMCO
Advisors L.P. The general partners of PIMCO Advisors are PIMCO Partners,
G.P. and PIMCO Advisors Holdings L.P. AG has majority ownership of PIMCO
Advisors and its subsidiaries, including Oppenheimer Capital and the
Sub-Advisor.
Portfolio Manager. The portfolio manager of the Fund is Richard J. Glasebrook
II, who is employed by the Sub-Advisor. He is the person primarily
responsible for the day-to-day management of the Fund's portfolio. He is a
Managing Director of Oppenheimer Capital, the immediate parent company of
the Sub-Advisor and has been the Fund's portfolio manager since April
1991.
ABOUT YOUR ACCOUNT
How to Buy Shares
HOW DO YOU BUY SHARES? You can buy shares several ways, as described below. The
Fund's Distributor, Oppenheimer Funds Distributor, Inc., may appoint certain
servicing agents to accept purchase (and redemption) orders. The Distributor, in
its sole discretion, may reject any purchase order for the Fund's shares.
BuyingShares Through Your Dealer. You can buy shares through any dealer,
broker, or financial institution that has a sales agreement with the
Distributor. Your dealer will place your order with the Distributor on
your behalf.
BuyingShares 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 with a financial advisor before you make a purchase to be
sure that the Fund is appropriate for you.
o Paying by Federal Funds Wire. Shares purchased through the Distributor may
be paid for by Federal Funds wire. The minimum investment is $2,500.
Before sending a wire, call the Distributor's Wire Department at
1.800.525.7048 to notify the Distributor of the wire, and to receive
further instructions.
o Buying Shares Through OppenheimerFunds AccountLink. With AccountLink,
shares are purchased for your account by electronic fund transfers from
your bank account through the Automated Clearing House (ACH) system. You
can provide those instructions automatically, under an Asset Builder Plan,
described below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. Please refer to "AccountLink," below for
more details.
o Buying Shares Through 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 Asset Builder
Application and the Statement of Additional Information.
HOW MUCH MUST YOU INVEST? You can buy Fund shares with a minimum initial
investment of $1,000. You can 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, 403(b) plans, Automatic Exchange Plans and
military allotment plans, you can make initial and subsequent investments
for as little as $25. You can make additional purchases of at least $25
through AccountLink.
o Under retirement plans, such as IRAs, pension and profit-sharing plans and
401(k) plans, you can start your account with as little as $250. If your
IRA is started under an Asset Builder Plan, the $25 minimum applies.
Additional purchases may be as little as $25.
o The minimum investment requirement does not apply to 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 reinvesting distributions from unit investment
trusts that have made arrangements with the Distributor.
AT WHAT PRICE ARE SHARES SOLD? Shares are sold at their offering price, which is
the net asset value per share plus any initial sales charge that applies. The
offering price that applies to a purchase order is based on the next calculation
of the net asset value per share that is made after the Distributor receives the
purchase order at its offices in Denver, Colorado, or after any agent appointed
by the Distributor receives the order and sends it to the Distributor.
Net asset value. The Fund calculates the net asset value of each class of
shares is determined as of the close of The New York Stock Exchange, on
each day the Exchange is open for trading (referred to in this Prospectus
as a "regular business day"). The Exchange normally closes at 4:00 P.M.,
New York time, but may close earlier on some days. All references to time
in this Prospectus mean "New York time".
The net asset value per share is determined 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. To determine net asset value, the Fund's Board
of Trustees has established procedures to value the Fund's securities, in
general based on market value. The Board has adopted special procedures
for valuing illiquid and restricted securities and obligations for which
market values cannot be readily obtained. Because some foreign securities
trade in markets and exchanges that operate on weekends and U.S. holidays,
the values of some of the Fund's foreign investments may change
significantly on days when investors cannot buy or redeem Fund shares.
The offering price. To receive the offering price for a particular day, in
most cases the Distributor or its designated agent must receive your order
by the time of day The New York Stock Exchange closes that day. If your
order is received on a day when the Exchange is closed or after it has
closed, the order will receive the next offering price that is determined
after your order is received.
Buyingthrough a dealer. If you buy shares through a dealer, your dealer must
receive the order by the close of The New York Stock Exchange and transmit
it to the Distributor so that it is received before the Distributor's
close of business on a regular business day (normally 5:00 P.M.) to
receive that day's offering price. Otherwise, the order will receive the
next offering price that is determined.
<PAGE>
--------------------------------------------------------------------------------
WHAT CLASSES OF SHARES DOES THE FUND OFFER? The Fund offers investors four
different classes of shares. The different classes of shares represent
investments in the same portfolio of securities, but the classes are subject to
different expenses and will likely have different share prices. When you buy
shares, be sure to specify the class of shares. If you do not choose a class,
your investment will be made in Class A shares.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class A Shares. If you buy Class A shares, you pay an initial sales charge (on
investments up to $1 million for regular accounts or $500,000 for certain
retirement plans). The amount of that initial sales charge will vary
depending on the amount you invest. The sales charge rates are listed in
"How Can You Buy Class A Shares?" below. There is also an asset-based
sales charge on Class A shares.
--------------------------------------------------------------------------------
Class B Shares. If you buy Class B shares, you pay no sales charge at the time
of purchase, but you will pay an annual asset-based sales charge. If you
sell your shares within six years of buying them, you will normally pay a
contingent deferred sales charge. That contingent deferred sales charge
varies depending on how long you own your shares, as described in "How Can
You Buy Class B Shares?" below.
--------------------------------------------------------------------------------
Class C Shares. If you buy Class C shares, you pay no sales charge at the time
of purchase, but you will pay an annual asset-based sales charge. 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 "How Can You Buy
Class C Shares?" below.
--------------------------------------------------------------------------------
Class N Shares. Class N shares are offered only through retirement plans that
purchase $500,000 or more of Class N shares of one or more Oppenheimer
funds or that have assets of $500,000 or more or 100 or more of eligible
plan participants. Non-retirement plan investors cannot buy Class N shares
directly.
--------------------------------------------------------------------------------
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 best
suited to your needs depends on a number of factors that you should discuss with
your financial advisor. Some 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.
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 discussion below is not intended to be investment advice or a
recommendation, because each investor's financial considerations are different.
The discussion below assumes that you will purchase only one class of shares,
and not a combination of shares of different classes.
Of course, these examples are based on approximations of the effects of current
sales charges and expenses projected over time, and do not detail all of the
considerations in selecting a class of shares. You should analyze your options
carefully with your financial advisor before making that choice.
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,
compared to the effect over time of higher class-based expenses on shares
of Class B or Class C.
o Investing for the Shorter Term. While the Fund is meant to be a long-term
investment, if you have a relatively 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. That is because of the effect of the Class B contingent deferred
sales charge if you redeem within six 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 as 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.
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 less than $100,000 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
appropriate.
Are There Differences in Account Features That Matter to You? Some account
features may not be available to Class B or Class C shareholders. Other
features may not be advisable (because of the effect of the contingent
deferred sales charge) for Class B or Class C shareholders. Therefore, you
should carefully review how you plan to use your investment account before
deciding which class of shares to buy.
Additionally, the dividends payable to Class B and Class C shareholders
will be reduced by the additional expenses borne by those classes that are
not borne by Class A shares, such as the Class B and Class C asset-based
sales charge described below and in the Statement of Additional
Information. Share certificates are not available for Class B and Class C
shares, and if you are considering using your shares as collateral for a
loan, that may be a factor to consider.
How Do Share Classes Affect Payments to my Broker? A financial advisor may
receive different compensation for selling one class of shares than for
selling another class. It is important to remember that Class B, Class C
and Class N contingent deferred sales charges and asset-based sales
charges have the same purpose as the front-end sales charge on sales of
Class A shares: to compensate the Distributor for commissions and expenses
it pays to dealers and financial institutions for selling shares. The
Distributor may pay additional 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.
SPECIAL SALES CHARGE ARRANGEMENTS AND WAIVERS. Appendix C to the Statement of
Additional Information details the conditions for the waiver of sales charges
that apply in certain cases, and the special sales charge rates that apply to
purchases of shares of the Fund by certain groups, or under specified retirement
plan arrangements or in other special types of transactions. To receive a waiver
or special sales charge rate, you must advise the Distributor when purchasing
shares or the Transfer Agent when redeeming shares that the special conditions
apply.
HOW CAN YOU BUY 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 other cases, reduced
sales charges may be available, as described below or in the Statement of
Additional Information. 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 or allocated to
your dealer as concessions. The Distributor reserves the right to re-allow the
entire concessions to dealers. The current sales charge rates and concessions
paid to dealers and brokers are as follows:
--------------------------------------------------------------------------------
Front-End Front-End
Sales Charge Sales Charge Commission As
As a As a Percentage of
Amount of Purchase Percentage of Percentage of Offering Price
Offering Price Net Amount
Invested
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Less than $25,000 5.75% 6.10% 4.75%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
$25,000 or more but less than 5.50% 5.82% 4.75%
$50,000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
$50,000 or more but less than 4.75% 4.99% 4.00%
$100,000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
$100,000 or more but less than 3.75% 3.90% 3.00%
$250,000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
$250,000 or more but less than 2.50% 2.56% 2.00%
$500,000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
$500,000 or more but less than 2.00% 2.04% 1.60%
$1 million
--------------------------------------------------------------------------------
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
aggregating $1 million or more or for certain purchases by particular
types of retirement plans described in Appendix C to the Statement of
Additional Information. The Distributor pays dealers of record concessions
in an amount equal to 1.0% of purchases of $1 million or more (other than
purchases by those retirement accounts, which are not permitted in the
Fund). For those retirement plan accounts, the concessions is 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, based on the cumulative purchases during the
prior 12 months ending with the current purchase. In either case, the
commission will be paid only on purchases that were not previously subject
to a front-end sales charge and dealer concession.1 That concession will
not be paid on purchases of shares of $1 million or more (including any
right of accumulation by a retirement plan) that pays for the purchase
with the redemption of Class C shares of one or more Oppenheimer funds.
If you redeem any of those shares within an 18-month "holding period"
measured from 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. That sales
charge will be equal to 1.0% of the lesser of (1) the aggregate net asset
value of the redeemed shares at the time of redemption (excluding shares
purchased by reinvestment of dividends or capital gain distributions) or
(2) 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
purchases of Class A shares of all Oppenheimer funds you made that were
subject to the Class A contingent deferred sales charge.
Can You Reduce Class A Sales Charges? You may be eligible to buy Class A shares
at reduced sales charge rates under the Fund's "Right of Accumulation" or a
Letter of Intent, as described in "Reduced Sales Charges" in the Statement of
Additional Information.
HOW CAN YOU BUY 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 the end of the calendar month their purchase, a contingent
deferred sales charge will be deducted from the redemption proceeds. The Class B
contingent deferred sales charge is paid to compensate the Distributor for its
expenses of providing distribution-related services to the Fund in connection
with the sale of Class B shares.
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 for the Class B contingent deferred sales
charge holding period:
--------------------------------------------------------------------------------
Contingent Deferred Sales Charge on
Years Since Beginning of Month in Which Redemptions in That Year
Purchase Order was Accepted (As % of Amount Subject to Charge)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
0 - 1 5.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1 - 2 4.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2 - 3 3.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
3 - 4 3.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
4 - 5 2.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5 - 6 1.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
6 and following None
--------------------------------------------------------------------------------
In the table, a "year" is a 12-month period. In applying the sales charge, all
purchases are considered to have been made on the first regular business day of
the month in which the purchase was made.
Automatic Conversion of Class B Shares. Class B shares automatically convert to
Class A shares 72 months after you purchase them. 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 any
Class B shares you hold convert, a prorated portion of your Class B shares
that were acquired by reinvesting dividends and distributions on the
converted shares will also convert to Class A shares. For further
information on the conversion feature and its tax implications, see "Class
B Conversion" in the Statement of Additional Information.
HOW CAN YOU BUY 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 a holding period of 12 months from the end of the calendar month of their
purchase, a contingent deferred sales charge of 1.0% will be deducted from the
redemption proceeds. The Class C contingent deferred sales charge is paid to
compensate the Distributor for its expenses of providing distribution-related
services to the Fund in connection with the sale of Class C shares.
HOW CAN YOU BUY CLASS N SHARES? Class N shares are offered only through
retirement plans that purchase $500,000 or more of Class N shares of one or more
Oppenheimer funds or that have assets of $500,000 or more or 100 or more
eligible participants. Non-retirement plan investors cannot buy Class N shares
directly. Retirement plans that offer Class N shares may impose charges in plan
participant accounts including a 1% contingent deferred sales charge if you
redeem your shares within 18 months after the retirement plan first purchased
shares of the Fund or the retirement plan eliminates the Fund as an investment
option within 18 months after the Fund was selected. The procedures for buying,
selling, exchanging and 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 applicable to purchasers of those
other classes described elsewhere in this prospectus do not apply to Class N
shares. Instructions for purchasing redeeming, exchanging or transferring Class
N shares must be submitted by the plan , not by plan participants for whose
benefit the shares are held.
WHO CAN BUY CLASS Y SHARES? Class Y shares are sold at net asset value per share
without sales charge directly to certain institutional investors that have
special agreements with the Distributor for this purpose. They may include
insurance companies, registered investment companies and employee benefit plans.
For example, Massachusetts Mutual Life Insurance Company, an affiliate of the
Manager, 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 cannot buy Class Y shares
directly.
An institutional investor that buys Class Y shares for its customers'
accounts may impose charges on those accounts. The procedures for buying,
selling, exchanging and transferring the Fund's other classes of shares and the
special account features available to investors buying those other classes of
shares do not apply to Class Y shares. An exception is that the time those
orders must be received by the Distributor or its agents or by the Transfer
Agent is the same for Class Y as for other share classes. However, those
instructions must be submitted by the institutional investor, not by its
customers for whose benefit the shares are held.
DISTRIBUTION AND SERVICE (12b-1) PLANS.
Distribution and Service Plan for Class A Shares. The Fund has adopted a
Distribution and Service Plan for Class A shares. Under the plan the Fund
currently pays an asset-based sales charge to the Distributor at an annual
rate of 0.15% of average annual net assets of Class A shares the Fund (the
Board of Trustees can set this rate up to 0.25%). The Fund also pays a
service fee to the Distributor of 0.25% of the average annual net assets
of Class A shares. The Distributor currently uses all of the fee and a
portion of the asset-based sales charge to pay dealers, brokers, banks and
other financial institutions quarterly for providing personal service and
maintenance of accounts of their customers that hold Class A shares. The
Distributor pays out the portion of the asset-based sales charge equal to
0.15% of average annual net assets representing Class A shares purchased
before September 1, 1993, and 0.10% of average annual net assets
representing Class A shares purchased on or after that date.
Distribution and Service Plans for Class B, Class C and Class N Shares. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class
N shares to compensate the Distributor for its services and costs in
distributing Class B, Class C and Class N 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 and the
Fund pays the Distributor an annual asset-based sales charge of 0.25% on
class N shares. The Distributor also receives a service fee of 0.25% per
year under each plan.
The asset-based sales charge and service fees increase Class B and Class C
expenses by 1.00% and the asset-based sales charge and increases Class N
expenses by up to 0.25% of the net assets per year of the respective
class. Because these fees are paid out of the Fund's assets on an ongoing
basis, over time these fees will increase the cost of your investment and
may cost you more than other types of sales charges.
The Distributor uses the service fees to compensate dealers for providing
personal services for accounts that hold Class B, Class C or Class N
shares. The Distributor pays the 0.25% service fees to dealers in advance
for the first year after the shares are sold by the dealer. After the
shares have been held for a year, the Distributor pays the service fees to
dealers on a quarterly basis.
The Distributor currently pays a sales concession 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 sales of Class B shares is
therefore 4.00% of the purchase price. Distributor retains the Class B
asset-based sales charge.
The Distributor currently pays sales concessions of 0.75% of the purchase
price of Class C shares to dealers from its own resources at the time of
sale. Including the advance of the service fee, the total amount paid by
the Distributor to the dealer at the time of sale of Class C shares is
therefore 1.00% of the purchase price. The Distributor plans to pay the
asset-based sales charge as an ongoing commission to the dealer on Class C
shares that have been outstanding for a year or more.
The Distributor currently pays sales concessions of 1.00% of the purchase
price of Class N Shares to dealers from its own resources at the time of sale.
The Distributor retains the asset-based sales charge on Class N Shares.
Special Investor Services
ACCOUNTLINK. You can use our AccountLink feature to link your Fund account with
an account at a U.S. bank or other financial institution. It must be an
Automated Clearing House (ACH) member. AccountLink lets you:
o transmit funds electronically to purchase shares by telephone (through a
service representative or by PhoneLink) or automatically under Asset
Builder Plans, or
o have the Transfer Agent send redemption proceeds or transmit dividends and
distributions directly to your bank account. Please call the Transfer
Agent for more information.
You may purchase shares 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.
AccountLink privileges should be requested on your Application or your
dealer's settlement instructions if you buy your shares through a 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.
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.
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.
Exchanging Shares. With the OppenheimerFunds exchange privilege, described
below, you can exchange shares automatically by phone from your Fund
account to another OppenheimerFunds account you have already established
by calling the special PhoneLink number.
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.
CAN YOU SUBMIT TRANSACTION REQUESTS BY FAX? You may send requests for certain
types of account transactions to the Transfer Agent by fax (telecopier). Please
call 1.800.525.7048 for information about which transactions may be handled this
way. 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. You can obtain information about the Fund,
as well as your account balance, on the OppenheimerFunds Internet web site, at
http://www.oppenheimerfunds.com. Additionally, shareholders listed in the
account registration (and the dealer of record) may request certain account
transactions through a special section of that web site. To perform account
transactions, you must first obtain a personal identification number (PIN) by
calling the Transfer Agent at 1.800.533.3310. If you do not want to have
Internet account transaction capability for your account, please call the
Transfer Agent at 1.800.525.7048. At times, the web site may be inaccessible or
its transaction features may be unavailable.
AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The Fund has several plans that enable
you to sell shares automatically or exchange them to another OppenheimerFunds
account on a regular basis. Please call the Transfer Agent or consult the
Statement of Additional Information for details.
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 only 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, Class N, or Class Y shares. You
must be sure to ask the Distributor for this privilege when you send your
payment.
RETIREMENT PLANS. You may buy shares of the Fund for your retirement plan
account. If you participate in a plan sponsored by your employer, the plan
trustee or administrator must buy the shares for your plan account. The
Distributor also offers a number of different retirement plans that can be used
by individuals and employers can use:
Individual Retirement Accounts (IRAs). These include regular IRAs, Roth IRAs,
SIMPLE IRAs, rollover IRAs and Education IRAs. SEP-IRAs. These are Simplified
Employee Pensions Plan IRAs for small business owners or self-employed
individuals.
403(b)(7) Custodial Plans. These are tax deferred plans for employees of
eligible tax-exempt organizations, such as schools, hospitals and charitable
organizations. 401(k) Plans. These are special retirement plans for businesses.
Pension and Profit-Sharing Plans. These plans are designed for businesses and
self-employed individuals.
Please call the Distributor for OppenheimerFunds retirement plan documents,
which include applications and important plan information.
How to Sell Shares
You can sell (redeem) some or all of your shares on any regular business day.
Your shares will be sold at the next net asset value calculated after your order
is received in proper form (which means that it must comply with the procedures
described below) and is accepted by the Transfer Agent. The Fund lets you sell
your shares by writing a letter or by using the Fund's checkwriting privilege or
by telephone. You can also set up Automatic Withdrawal Plans to redeem shares on
a regular basis. 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 account, please call the
Transfer Agent first, at 1.800.525.7048, for assistance.
Certain Requests Require a Signature Guarantee. To protect you and the Fund from
fraud, the following redemption requests must be in writing and must
include a signature guarantee (although there may be other situations that
also require a signature guarantee):
o You wish to redeem $100,000 or more 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 being redeemed by someone (such as an Executor)
other than the owners
Where Can You Have Your Signature Guaranteed? The Transfer Agent will accept a
guarantee of your signature by a number of financial institutions, including:
o a U.S. bank, trust company, credit union or savings association,
o a foreign bank that has a U.S. correspondent bank,
o a U.S. registered dealer or broker in securities, municipal securities or
government securities, or
o 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.
Retirement Plan Accounts. There are special procedures to sell shares in an
OppenheimerFunds retirement plan account. Call the Transfer Agent for a
distribution request form. Special income tax withholding requirements
apply to distributions from retirement plans. You must submit a
withholding form with your redemption request to avoid delay in getting
your money and if you do not want tax withheld. If your employer holds
your retirement plan account for you in the name of the plan, you must ask
the plan trustee or administrator to request the sale of the Fund shares
in your plan account.
Sending Redemption Proceeds by Wire. While the Fund normally sends your money by
check, you can arrange to have the proceeds of the shares you sell sent by
Federal Funds wire to a bank account you designate. It must be a
commercial bank that is a member of the Federal Reserve wire system. The
minimum redemption you can have sent by wire is $2,500. There is a $10 fee
for each wire. To find out how to set up this feature on your account or
to arrange a wire, call the Transfer Agent at 1.800.852.8457.
HOWDO YOU SELL SHARES BY MAIL? Write a letter of instructions that includes: o
Your name o The Fund's name o Your Fund account number (from your account
statement) o The dollar amount or number of shares to be redeemed o Any
special payment instructions o Any share certificates for the shares you are
selling o The signatures of all registered owners exactly as the account is
registered, and o Any special documents requested by the Transfer Agent to
assure proper authorization
of the person asking to sell the 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 80217-5270 Denver, Colorado 80231
HOW DO YOU SELL SHARES BY TELEPHONE? You and your dealer representative of
record may also sell your shares by telephone. To receive the redemption price
calculated on a particular 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 account or under a share
certificate by telephone.
o To redeem shares through a service representative, call 1.800.852.8457 o To
redeem shares automatically on PhoneLink, call 1.800.533.3310
Whichever method you use, you may have a check sent to the address on the
account statement, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds sent to that bank
account.
Are There Limits On Amounts Redeemed By Telephone?
Telephone Redemptions Paid by Check. Up to $100,000 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.
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.
CAN YOU SELL SHARES THROUGH YOUR DEALER? The Distributor has made arrangements
to repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that service. If your shares are held in the
name of your dealer, you must redeem them through your dealer.
HOW DO CONTINGENT DEFERRED SALES CHARGES AFFECT REDEMPTIONS? If you purchase
shares subject to a Class A, Class B, Class C or Class N contingent deferred
sales charge and redeem any of those shares during the applicable holding period
for the class of shares, the contingent deferred sales charge will be deducted
from redemption proceeds (unless you are eligible for a waiver of that sales
charge based on the categories listed in Appendix C to the Statement of
Additional Information) and you advise the Transfer Agent of your eligibility
for the waiver. When you place your redemption request. With respects to Class N
shares, if you redeem your shares within 18 calendar months of the end of the
calendar month in which the retirement plan first purchased shares of the Fund
or the retirement plan eliminates the Fund as an investment option within 18
calendar months of the end of the calendar month in which the Fund was selected,
a 1% contingent deferred sales charge will be imposed on the plan. If the
retirement plan terminates or Class N shares of all Oppenheimer funds are
terminated as an investment option of the plan within 18 months after the plan's
first purchase of Class N shares of any Oppenheimer fund, a 1% contingent
deferred sales charge will be imposed.
A 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 net asset
value. A contingent deferred sales charge is not imposed on:
o the amount of your account value represented by an increase in net asset
value over the initial purchase price,
o shares purchased by the reinvestment of dividends or capital gains
distributions, or o shares redeemed in the special circumstances described in
Appendix C to the Statement
of Additional Information.
To determine whether a 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 the holding period that applies to the class, and
(3) shares held the longest during the holding period.
Contingent deferred sales charges are not charged when you exchange shares
of the Fund for shares of other Oppenheimer funds. However, if you exchange them
within the applicable contingent deferred sales charge holding period, the
holding period will carry over to the fund whose shares your acquire. Similarly,
if you acquire shares of this Fund by exchanging shares of another Oppenheimer
fund that are still subject to a contingent deferred sales charge holding
period, that holding period will carry over to this Fund.
How to Exchange Shares
Shares of the Fund can be purchased by exchanging shares of other Oppenheimer
funds on the same basis. 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 both funds 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 whose shares
you purchase by exchange.
o Before exchanging into a fund, you must 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. In some
cases, sales charges may be imposed on exchange transactions. For tax purposes,
exchanges of shares involve a sale 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. Please refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
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.
HOW DO YOU SUBMIT EXCHANGE REQUESTS? Exchanges may be requested in writing or by
telephone:
Written Exchange Requests. Submit an OppenheimerFunds Exchange Request form,
signed by all owners of the account. Send it to the Transfer Agent at the
address on the back cover. Exchanges of shares held under certificates
cannot be processed unless the Transfer Agent receives the certificates
with the request.
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.
ARE THERE LIMITATIONS ON EXCHANGES? 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 conforms to the
policies described above. It must be received by the close of The New York
Stock Exchange that day, which is normally 4:00 P.M. but may be earlier on
some days. However, either fund may delay the purchase of shares of the
fund you are exchanging into up to seven days if it determines it would be
disadvantaged by a same-day exchange. For example, the receipt of multiple
exchange requests from a "market timer" might require the Fund to sell
securities at a disadvantageous time and/or price.
o Because excessive trading can hurt fund performance and harm shareholders,
the Fund reserves the right to refuse any exchange request that it
believes 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
required by applicable law to do so, it may impose these changes at any
time for emergency purposes.
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
More information about the Fund's policies for buying, selling and exchanging
shares is contained in the Statement of Additional Information.
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.
Telephone transaction privileges for purchases, redemptions or exchanges may be
modified, suspended or terminated by the Fund at any time. If an account
has more than one owner, the Fund and the Transfer Agent may rely on the
instructions of any one owner. Telephone privileges apply to each owner of
the account and the dealer representative of record for the account unless
the Transfer Agent receives cancellation instructions from an owner of the
account.
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. The Transfer Agent and the Fund
will not be liable for losses or expenses arising out of telephone
instructions reasonably believed to be genuine.
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.
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.
The redemption price for shares will vary from day to day because the value of
the securities in the Fund's portfolio fluctuates. The redemption price,
which is the net asset value per share, will normally differ for each
class of shares. The redemption value of your shares may be more or less
than their original cost.
Payment for redeemed shares ordinarily is made in cash. It is forwarded by
check, or by AccountLink (as elected by the shareholder) within seven days
after the Transfer Agent receives redemption instructions in proper form.
However, under unusual circumstances determined by the Securities and
Exchange Commission, payment may be delayed or suspended. For accounts
registered in the name of a broker-dealer, payment will normally be
forwarded within three business days after redemption.
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 or certified check, or arrange with your bank
to provide telephone or written assurance to the Transfer Agent that your
purchase payment has cleared.
Involuntary redemptions of small accounts may be made by the Fund if the
account value has fallen below $500 for reasons other than the fact that
the market value of shares has dropped. In some cases involuntary
redemptions may be made to repay the Distributor for losses from the
cancellation of share purchase orders.
Sharesmay be "redeemed in kind" under unusual circumstances (such as a lack of
liquidity in the Fund's portfolio to meet redemptions). This means that
the redemption proceeds will be paid with liquid securities from the
Fund's portfolio.
"Backup withholding" of federal income tax may be applied against taxable
dividends, distributions and redemption proceeds (including exchanges) if
you fail to furnish the Fund your correct, certified Social Security or
Employer Identification Number when you sign your application, or if you
under-report your income to the Internal Revenue Service.
To avoid sending duplicate copies of materials to households, the Fund will
mail only one copy of each prospectus, annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
The consolidation of these mailings, called householding, benefits the
Fund through mailing expense.
If you want to receive multiple copies of these materials, you may call
the Transfer Agent at 1.800.525.7048. You may also notify the Transfer
Agent in writing. Individual copies of prospectuses and reports will be
sent to you within 30 days after the Transfer Agent receives your request
to stop householding.
Dividends, Capital Gains and Taxes
DIVIDENDS. The Fund intends to declare dividends separately for each class of
shares from net investment income on an annual basis, on a date selected by the
Board of Trustees. Dividends and distributions paid on Class A and Class Y
shares will generally be higher than dividends for Class B, Class C and Class N
shares, which normally have higher expenses than Class A and Class Y. The Fund
has no fixed dividend rate and cannot guarantee that it will pay any dividends
or distributions.
CAPITAL GAINS. The Fund may realize capital gains on the sale of portfolio
securities. If it does, it may make distributions out of any net short-term or
long-term capital gains in December of each year. The Fund may make supplemental
distributions of dividends and capital gains following the end of its fiscal
year. There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
WHAT ARE YOUR CHOICES FOR RECEIVING DISTRIBUTIONS? When you open your account,
specify on your application how you want to receive your dividends and
distributions. You have four options:
Reinvest All Distributions in the Fund. You can elect to reinvest all dividends
and distributions in additional shares of the Fund.
Reinvest Dividends or Capital Gains. You can elect to reinvest some
distributions (dividends, short-term capital gains or long-term capital
gains distributions) in the Fund while receiving other types of
distributions by check or having them sent to your bank account through
AccountLink.
Receive All Distributions in Cash. You can elect to receive a check for all
dividends and distributions or have them sent to your bank through
AccountLink.
Reinvest Your Distributions in Another OppenheimerFunds Account. You can
reinvest all distributions in the same class of shares of another
OppenheimerFunds account you have established.
TAXES. If your shares are not held in a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the Fund.
Distributions are subject to federal income tax and may be subject to state or
local taxes. Dividends paid from short-term capital gains and net investment
income are taxable as ordinary income. Long-term capital gains are taxable as
long-term capital gains when distributed to shareholders. It does not matter how
long you have held your shares. Whether you reinvest your distributions in
additional shares or take them in cash, the tax treatment is the same.
Every year the Fund will send you and the IRS a statement showing the
amount of any taxable distribution you received in the previous year. Any
long-term capital gains will be separately identified in the tax information the
Fund sends you after the end of the calendar year.
Avoid "Buying a Distribution". If you buy shares on or just before the
ex-dividend date or just before the Fund declares a capital gain
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.
Remember, There May be Taxes on Transactions. Because the Fund's share price
fluctuates, you may have a capital gain or loss when you sell or exchange
your shares. A capital gain or loss is the difference between the price
you paid for the shares and the price you received when you sold them. Any
capital gain is subject to capital gains tax.
Returns of Capital Can Occur. 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.
This information is only a summary of certain federal personal income tax
information about your investment. You should consult with your tax advisor
about the effect of an investment in the Fund on your particular tax situation.
<PAGE>
Financial Highlights
The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the calendar years since the Fund's inception. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by KPMG LLP, the Fund's
independent accountants, whose report, along with the Fund's financial
statements, is included in the Statement of Additional Information, which is
available on request.
<PAGE>
INFORMATION AND SERVICES
For More Information on Oppenheimer Quest Opportunity Value Fund: The following
additional information about the Fund is available without charge upon request:
STATEMENT OF ADDITIONAL INFORMATION This document includes additional
information about the Fund's investment policies, risks, and operations. It is
incorporated by reference into this Prospectus (which means it is legally part
of this Prospectus).
ANNUAL AND SEMI-ANNUAL REPORTS Additional information about the Fund's
investments and performance is available in the Fund's Annual and Semi-Annual
Reports to shareholders. The Annual Report includes a discussion of market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year.
How to Get More Information
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, and other information about the Fund or your account:
--------------------------------------------------------------------------------
By Telephone: Call OppenheimerFunds Services
toll-free: 1.800.525.7048
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
By Mail: Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
On the Internet: You can send us a request by e-mail or
read or download documents on the
OppenheimerFunds web site:
http://www.oppenheimerfunds.com
--------------------------------------------------------------------------------
You can also obtain copies of the Statement of Additional Information and other
Fund documents and reports by visiting the SEC's Public Information Room in
Washington, D.C. (Phone 1.202.942.8090) or the EDGAR database on the SEC's
Internet web site at http://www.sec.gov. Copies may be obtained upon payment of
a duplicating fee by electronic request at the SEC's e-mail address:
[email protected] or by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
No one has been authorized to provide any information about the Fund or to make
any representations about the Fund other than what is contained in this
Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a
solicitation of an offer to buy shares of the Fund, to any person in any state
or other jurisdiction where it is unlawful to make such an offer.
The Fund's shares are distributed by:
OppenheimerFunds Distributor, Inc.
SEC File No. 811-5225
PR0236.001.0200 Printed on recycled paper.
--------------------------------------------------------------------------------
Appendix to Prospectus of
Oppenheimer Quest Opportunity Value Fund
Graphic Material included in the Prospectus of Oppenheimer Quest
Opportunity Value Fund (the "Fund") under the heading "Annual Total Returns
(Class A) (as of 12/31 each year)":
A bar chart will be included in the Prospectus of the Fund depicting the
annual total returns of a hypothetical investment in Class A shares of the Fund
for the calendar years since the Fund's inception, without deducting sales
charges. Set forth below are the relevant data points that will appear on the
bar chart.
Calendar
Year Annual Total
Ended Returns
----- -------
12/31/91 %
12/31/92 %
12/31/93 %
12/31/94 %
12/31/95 %
12/31/96 %
12/31/97 %
12/31/98 %
12/31/99 %
12/31/00
<PAGE>
Oppenheimer Quest Opportunity Value Fund
--------------------------------------------------------------------------------
6803 South Tucson Way, Englewood, Colorado 80112
1.800.525.7048
Statement of Additional Information dated February 9, 2001
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated February 9, 2001. 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, or by
downloading it from the OppenheimerFunds Internet web site at
www.oppenheimerfunds.com.
Contents
Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks..
The Fund's Investment Policies.....................................
Other Investment Techniques and Strategies.........................
Investment Restrictions............................................
How the Fund is Managed ...............................................
Organization and History...........................................
Trustees and Officers..............................................
The Manager........................................................
Brokerage Policies of the Fund.........................................
Distribution and Service Plans.........................................
Performance of the Fund................................................
About Your Account
--------------------------------------------------------------------------------
How To Buy Shares......................................................
How To Sell Shares.....................................................
How To Exchange Shares.................................................
Dividends, Capital Gains and Taxes.....................................
Additional Information About the Fund..................................
Financial Information About the Fund
--------------------------------------------------------------------------------
Report of Independent Accountants......................................
Financial Statements...................................................
Appendix A: Ratings Definitions........................................ A-1
Appendix B: Corporate Industry Classifications......................... B-1
Appendix C: Special Sales Charge Arrangements and Waivers.............. C-1
--------------------------------------------------------------------------------
<PAGE>
ABOUT THE FUND
--------------------------------------------------------------------------------
Additional Information About the Fund's Investment Policies and Risks
The investment objective, the principal investment policies and the main
risks of the Fund are described in the Prospectus. This Statement of Additional
Information contains supplemental information about those policies and risks and
the types of securities that the Fund invests in. Additional information is also
provided about the Fund's investment Manager, OppenheimerFunds, Inc., and the
strategies that the Fund may use to try to achieve its objective.
The Fund's Investment Policies. The composition of the Fund's portfolio and the
techniques and strategies that the Fund's Sub-Advisor, OpCap Advisors, may use
in selecting portfolio securities will vary over time. The Fund is not required
to use all of the investment techniques and strategies described below at all
times in seeking its goal. It may use some of the special investment techniques
and strategies at some times or not at all.
In selecting securities for the Fund's portfolio, the Sub-Advisor
evaluates the merits of particular securities primarily through the exercise of
its own investment analysis. In the case of corporate issuers, that process may
include, among other things, evaluation of the issuer's historical operations,
prospects for the industry of which the issuer is part, the issuer's financial
condition, its pending product developments and business (and those of
competitors), the effect of general market and economic conditions on the
issuer's business, and legislative proposals that might affect the issuer. In
the case of foreign securities, the Sub-Advisor may also consider the conditions
of a particular country's economy in relation to the U.S. economy or other
foreign economies, general political conditions in a country or region, the
effect of taxes, the efficiencies and costs of particular markets and other
factors when evaluating the securities of issuers in a particular country.
|X| Investments in Equity Securities. The Fund does not limit its
investments in equity securities to issuers having a market capitalization of a
specified size or range, and therefore the Fund can invest in securities of
small-, mid- and large-capitalization issuers. At times, the Fund may increase
the relative emphasis of its equity investments in securities of one or more
capitalization ranges, based upon the Sub-Advisor's judgment of where the best
market opportunities are to seek the Fund's objective. At times, the market may
favor or disfavor securities of issuers of a particular capitalization range,
and securities of small-capitalization issuers may be subject to greater price
volatility in general than securities of larger companies. Therefore, if the
Fund has substantial investments in smaller-capitalization companies at times of
market volatility, the Fund's share price could fluctuate more than that of
funds focusing on larger-capitalization issuers.
|_| Value Investing. In selecting equity investments for the Fund's
portfolio, the portfolio manager currently uses a value investing style. In
using a value approach, the portfolio manager seeks stock and other equity
securities that appear to be temporarily undervalued, by various measures, such
as price/earnings ratios. This approach is subject to change and may not
necessarily be used in all cases. Value investing seeks stocks having prices
that are low in relation to their real worth or future prospects, in the hope
that the Fund will realize appreciation in the value of its holdings when other
investors realize the intrinsic value of the stock.
Using value investing requires research as to the issuer's underlying
financial condition and prospects. While there are a variety of measures that
can be used to identify these securities, the portfolio manager looks primarily
at the issuer's price/earnings ratio, which is the stock's price divided by its
earnings per share. A stock having a price/earnings ratio lower than its
historical range, or the market as a whole or that of similar companies may
offer attractive investment opportunities.
|_| Preferred Stocks. Preferred stock, unlike common stock, has a
stated dividend rate payable from the corporation's earnings. Preferred stock
dividends may be cumulative or non-cumulative, participating, or auction rate.
"Cumulative" dividend provisions require all or a portion of prior unpaid
dividends to be paid before dividends can be paid to the issuer's common stock.
If interest rates rise, the fixed dividend on preferred stocks may be less
attractive, causing the price of preferred stocks to decline. Preferred stock
may have mandatory sinking fund provisions, as well as provisions allowing calls
or redemptions prior to maturity, which can also have a negative impact on
prices when interest rates decline. Preferred stock generally has a preference
over common stock on the distribution of a corporation's assets in the event of
liquidation of the corporation. The rights of preferred stock on distribution of
a corporation's assets in the event of a liquidation are generally subordinate
to the rights associated with a corporation's debt securities. Preferred stock
may be "participating" stock, which means that it may be entitled to a dividend
exceeding the stated dividend in certain cases.
|_| Rights and Warrants. The Fund can invest up to 5% of its total
assets in warrants but no more than 2% of its total assets may be invested in
warrants that are not listed on The New York Stock Exchange or The American
Stock Exchange. Those percentage limitations are fundamental policies. Warrants
basically are options to purchase equity securities at specific prices valid for
a specific period of time. Their prices do not necessarily move parallel to the
prices of the underlying securities. Rights are similar to warrants, but
normally have a short duration and are distributed directly by the issuer to its
shareholders. Rights and warrants have no voting rights, receive no dividends
and have no rights with respect to the assets of the issuer.
|_| Convertible Securities. Convertible securities are debt securities
that are convertible into an issuer's common stock. Convertible securities rank
senior to common stock in a corporation's capital structure and therefore are
subject to less risk than common stock in case of the issuer's bankruptcy or
liquidation.
The value of a convertible security is a function of its "investment
value" and its "conversion value." If the investment value exceeds the
conversion value, the security will behave more like a debt security, and the
security's price will likely increase when interest rates fall and decrease when
interest rates rise. If the conversion value exceeds the investment value, the
security will behave more like an equity security: it will likely sell at a
premium over its conversion value, and its price will tend to fluctuate directly
with the price of the underlying security.
While some convertible securities are a form of debt security in many
cases, their conversion feature (allowing conversion into equity securities)
causes them to be regarded by the Sub-Advisor more as "equity equivalents." As a
result, the rating assigned to the security has less impact on the Sub-Advisor's
investment decision with respect to convertible securities than in the case of
non-convertible debt fixed income securities. To determine whether convertible
securities should be regarded as "equity equivalents," the Sub-Advisor may
consider the following factors:
(1) whether, at the option of the investor, the convertible security
can be exchanged for a fixed number of shares of common stock of the
issuer,
(2) whether the issuer of the convertible securities has restated its
earnings per share of common stock on a fully diluted basis
(considering the effect of conversion of the convertible securities),
and
(3) the extent to which the convertible security may be a defensive
"equity substitute," providing the ability to participate in any
appreciation in the price of the issuer's common stock.
|X| Investments in Debt Securities. The Fund can invest in a variety of
domestic and foreign debt securities, including mortgage-backed securities,
investment-grade corporate debt securities and U.S. Government securities. It
might do so to seek its objective if and at times when the portfolio manager
believes that debt securities are preferable to equity investments. The Fund can
invest in those debt securities and other high-quality short-term debt
securities including money market instruments for liquidity or defensive
purposes. Because the Fund currently emphasizes investments in equity
securities, such as stocks, it is not anticipated that under normal market
conditions more than 50% of the Fund's assets will be invested in debt
securities. Foreign debt securities are subject to the risks of foreign
investing described below. In general, domestic and foreign debt securities are
also subject to two additional types of risks: credit risk and interest rate
risk.
|_| Credit Risk. Credit risk relates to the ability of the issuer to
meet interest or principal payment obligations as they become due. In making
investments in debt securities, the Sub-Advisor may rely to some extent on the
ratings of ratings organizations or it may use its own research to evaluate a
security's creditworthiness. Investment-grade bonds are bonds rated at least
"Baa" by Moody's Investors Service, Inc., at least "BBB" by Standard & Poor's
Rating Service or Fitch Inc., or that have comparable ratings by another
nationally recognized rating organization. If securities the Fund buys are
unrated, to be considered part of the Fund's holdings of investment-grade
securities, they must be judged by the Sub-Advisor to be of comparable quality
to bonds rated as investment grade by a rating organization. The debt security
ratings definitions of the principal ratings organizations are included in
Appendix A of this Statement of Additional Information.
|_| Interest Rate Risk. Interest rate risk refers to the fluctuations
in value of debt securities resulting from the inverse relationship between
price and yield. For example, an increase in general interest rates will tend to
reduce the market value of already-issued fixed-income investments, and a
decline in general interest rates will tend to increase their value. In
addition, debt securities with longer maturities, which tend to have higher
yields, are subject to potentially greater fluctuations in value from changes in
interest rates than obligations with shorter maturities.
Fluctuations in the market value of fixed-income securities after the Fund
buys them will not affect the interest income payable on those securities
(unless the security pays interest at a variable rate pegged to interest rate
changes). However, those price fluctuations will be reflected in the valuations
of the securities, and therefore the Fund's net asset values will be affected by
those fluctuations.
|_| Mortgage-Related Securities. Mortgage-related securities are a form
of derivative investment collateralized by pools of commercial or residential
mortgages. Pools of mortgage loans are assembled as securities for sale to
investors by government agencies or entities or by private issuers. These
securities include collateralized mortgage obligations ("CMOs"), mortgage
pass-through securities, stripped mortgage pass-through securities, interests in
real estate mortgage investment conduits ("REMICs") and other real
estate-related securities.
Mortgage-related securities that are issued or guaranteed by agencies or
instrumentalities of the U.S. Government have relatively little credit risk
(depending on the nature of the issuer) but are subject to interest rate risks
and prepayment risks, as described in the Prospectus.
As with other debt securities, the prices of mortgage-related securities
tend to move inversely to changes in interest rates. The Fund can buy
mortgage-related securities that have interest rates that move inversely to
changes in general interest rates, based on a multiple of a specific index.
Although the value of a mortgage-related security may decline when interest
rates rise, the converse is not always the case.
In periods of declining interest rates, mortgages are more likely to be
prepaid. Therefore, a mortgage-related security's maturity can be shortened by
unscheduled prepayments on the underlying mortgages. Therefore, it is not
possible to predict accurately the security's yield. The principal that is
returned earlier than expected may have to be reinvested in other investments
having a lower yield than the prepaid security. Therefore, these securities may
be less effective as a means of "locking in" attractive long-term interest
rates, and they may have less potential for appreciation during periods of
declining interest rates, than conventional bonds with comparable stated
maturities.
Prepayment risks can lead to substantial fluctuations in the value of a
mortgage-related security. In turn, this can affect the value of the Fund's
shares. If a mortgage-related security has been purchased at a premium, all or
part of the premium the Fund paid may be lost if there is a decline in the
market value of the security, whether that results from interest rate changes or
prepayments on the underlying mortgages. In the case of stripped
mortgage-related securities, if they experience greater rates of prepayment than
were anticipated, the Fund may fail to recoup its initial investment on the
security.
If interest rates rise rapidly, prepayments may occur at a slower rate
than expected and the expected maturity of long-term or medium-term securities
could lengthen as a result. That would cause their value and the prices of the
Fund's share to fluctuate more widely in response to changes in interest rates.
As with other debt securities, the values of mortgage-related securities
may be affected by changes in the market's perception of the creditworthiness of
the entity issuing the securities or guaranteeing them. Their values may also be
affected by changes in government regulations and tax policies.
|_| Collateralized Mortgage Obligations. CMOs are multi-class bonds that
are backed by pools of mortgage loans or mortgage pass-through certificates.
They may be collateralized by:
(1) pass-through certificates issued or guaranteed by Ginnie Mae, Fannie Mae,
or Freddie Mac,
(2) unsecuritized mortgage loans insured by the Federal Housing Administration
or guaranteed by the Department of Veterans' Affairs,
(3) unsecuritized conventional mortgages,
(4) other mortgage-related securities,or
(5) any combination of these.
Each class of CMO, referred to as a "tranche," is issued at a specific
coupon rate and has a stated maturity or final distribution date. Principal
prepayments on the underlying mortgages may cause the CMO to be retired much
earlier than the stated maturity or final distribution date. The principal and
interest on the underlying mortgages may be allocated among the several classes
of a series of a CMO in different ways. One or more tranches may have coupon
rates that reset periodically at a specified increase over an index. These are
floating rate CMOs, and typically have a cap on the coupon rate. Inverse
floating rate CMOs have a coupon rate that moves in the reverse direction to an
applicable index. The coupon rate on these CMOs will increase as general
interest rates decrease. These are usually much more volatile than fixed rate
CMOs or floating rate CMOs.
|X| U.S. Government Securities. These are securities issued or guaranteed
by the U.S. Treasury or other U.S. Government agencies or federally-chartered
entities referred to as "instrumentalities." The obligations of U.S. Government
agencies or instrumentalities in which the Fund can invest may or may not be
guaranteed or supported by the "full faith and credit" of the United States.
"Full faith and credit" means generally that the taxing power of the U.S.
Government is pledged to the payment of interest and repayment of principal on a
security. If a security is not backed by the full faith and credit of the United
States, the owner of the security must look principally to the agency issuing
the obligation for repayment. The owner might not be able to assert a claim
against the United States if the issuing agency or instrumentality does not meet
its commitment. The Fund will invest in securities of U.S. Government agencies
and instrumentalities only if the Sub-Advisor is satisfied that the credit risk
with respect to the agency or instrumentality is minimal.
|_| U.S. Treasury Obligations. These include Treasury bills (which have
maturities of one year or less when issued), Treasury notes (which have
maturities of from one to ten years when issued), and Treasury bonds (which have
maturities of more than ten years when issued). Treasury securities are backed
by the full faith and credit of the United States as to timely payments of
interest and repayments of principal. They also can include U. S. Treasury
securities that have been "stripped" by a Federal Reserve Bank, zero-coupon U.S.
Treasury securities described below, and Treasury Inflation-Protection
Securities ("TIPS").
|_| Treasury Inflation-Protection Securities. The Fund can buy these
U.S. Treasury securities, called "TIPS," that are designed to provide an
investment vehicle that is not vulnerable to inflation. The interest rate paid
by TIPS is fixed. The principal value rises or falls semi-annually based on
changes in the published Consumer Price Index. If inflation occurs, the
principal and interest payments on TIPS are adjusted to protect investors from
inflationary loss. If deflation occurs, the principal and interest payments will
be adjusted downward, although the principal will not fall below its face amount
at maturity.
|_| Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities. These include direct obligations and mortgage-related
securities that have different levels of credit support from the government.
Some are supported by the full faith and credit of the U.S. Government, such as
Government National Mortgage Association pass-through mortgage certificates
(called "Ginnie Maes"). Some are supported by the right of the issuer to borrow
from the U.S. Treasury under certain circumstances, such as Federal National
Mortgage Association bonds ("Fannie Maes"). Others are supported only by the
credit of the entity that issued them, such as Federal Home Loan Mortgage
Corporation obligations ("Freddie Macs").
|_| U.S. Government Mortgage-Related Securities. The Fund can invest in a
variety of mortgage-related securities that are issued by U.S. Government
agencies or instrumentalities, some of which are described below.
|_| GNMA Certificates. The Government National Mortgage Association
("GNMA") is a wholly-owned corporate instrumentality of the United States within
the U.S. Department of Housing and Urban Development. GNMA's principal programs
involve its guarantees of privately-issued securities backed by pools of
mortgages. Ginnie Maes are debt securities representing an interest in one or a
pool of mortgages that are insured by the Federal Housing Administration or the
Farmers Home Administration or guaranteed by the Veterans Administration.
The Ginnie Maes in which the Fund can invest are of the "fully modified
pass-through" type. They provide that the registered holders of the Certificates
will receive timely monthly payments of the pro-rata share of the scheduled
principal payments on the underlying mortgages, whether or not those amounts are
collected by the issuers. Amounts paid include, on a pro-rata basis, any
prepayment of principal of such mortgages and interest (net of servicing and
other charges) on the aggregate unpaid principal balance of the Ginnie Mae,
whether or not the interest on the underlying mortgages has been collected by
the issuers.
The Ginnie Maes purchased by the Fund are guaranteed as to timely payment
of principal and interest by GNMA. In giving that guaranty, GNMA expects that
payments received by the issuers of Ginnie Maes on account of the mortgages
backing the Ginnie Maes will be sufficient to make the required payments of
principal of and interest on those Ginnie Maes. However, if those payments are
insufficient, the guaranty agreements between the issuers of the Certificates
and GNMA require the issuers to make advances sufficient for the payments. If
the issuers fail to make those payments, GNMA will do so.
Under Federal law, the full faith and credit of the United States is
pledged to the payment of all amounts that may be required to be paid under any
guaranty issued by GNMA as to such mortgage pools. An opinion of an Assistant
Attorney General of the United States, dated December 9, 1969, states that such
guaranties "constitute general obligations of the United States backed by its
full faith and credit." GNMA is empowered to borrow from the United States
Treasury to the extent necessary to make any payments of principal and interest
required under those guaranties.
Ginnie Maes are backed by the aggregate indebtedness secured by the
underlying FHA-insured, FMHA-insured or VA-guaranteed mortgages. Except to the
extent of payments received by the issuers on account of such mortgages, Ginnie
Maes do not constitute a liability of those issuer, nor do they evidence any
recourse against those issuers. Recourse is solely against GNMA. Holders of
Ginnie Maes (such as the Fund) have no security interest in or lien on the
underlying mortgages.
Monthly payments of principal will be made, and additional prepayments of
principal may be made, to the Fund with respect to the mortgages underlying the
Ginnie Maes held by the Fund. All of the mortgages in the pools relating to the
Ginnie Maes in the Fund are subject to prepayment without any significant
premium or penalty, at the option of the mortgagors. While the mortgages on
1-to-4-family dwellings underlying certain Ginnie Maes have a stated maturity of
up to 30 years, it has been the experience of the mortgage industry that the
average life of comparable mortgages, as a result of prepayments, refinancing
and payments from foreclosures, is considerably less.
|_| Federal Home Loan Mortgage Corporation Certificates. FHLMC, a
corporate instrumentality of the United States, issues FHLMC Certificates
representing interests in mortgage loans. FHLMC guarantees to each registered
holder of a FHLMC Certificate timely payment of the amounts representing a
holder's proportionate share in: (i) interest payments less servicing and
guarantee fees, (ii) principal prepayments and (iii) the ultimate collection of
amounts representing the holder's proportionate interest
in principal payments on the mortgage loans in the pool represented
by the FHLMC Certificate, in each case whether or not such amounts
are actually received.
The obligations of FHLMC under its guarantees are obligations solely of
FHLMC and are not backed by the full faith and credit of the United States.
|_| Federal National Mortgage Association (Fannie Mae) Certificates.
Fannie Mae, a federally-chartered and privately-owned corporation, issues Fannie
Mae Certificates which are backed by a pool of mortgage loans. Fannie Mae
guarantees to each registered holder of a Fannie Mae Certificate that the holder
will receive amounts representing the holder's proportionate interest in
scheduled principal and interest payments, and any principal prepayments, on the
mortgage loans in the pool represented by such Certificate, less servicing and
guarantee fees, and the holder's proportionate interest in the full principal
amount of any foreclosed or other liquidated mortgage loan. In each case the
guarantee applies whether or not those amounts are actually received. The
obligations of Fannie Mae under its guarantees are obligations solely of Fannie
Mae and are not backed by the full faith and credit of the United States or any
of its agencies or instrumentalities other than Fannie Mae.
|X| Money Market Instruments. The following is a brief description of the
types of money market securities the Fund can invest in. Those money market
securities are high-quality, short-term debt instruments that are issued by the
U.S. Government, corporations, banks or other entities. They may have fixed,
variable or floating interest rates.
|_| U.S. Government Securities. These include obligations issued or
guaranteed by the U.S. Government or any of its agencies or instrumentalities.
|_| Bank Obligations. The Fund can buy time deposits, certificates of
deposit and bankers' acceptances. Time deposits, other than overnight deposits,
may be subject to withdrawal penalties, and if so, they are deemed to be
"illiquid" investments.
The Fund can purchase bank obligations that are fully insured by the
Federal Deposit Insurance Corporation. The FDIC insures the deposits of member
banks up to $100,000 per account. Insured bank obligations may have a limited
market and a particular investment of this type may be deemed "illiquid" unless
the Board of Trustees of the Fund determines that a readily-available market
exists for that particular obligation, or unless the obligation is payable at
principal amount plus accrued interest on demand or within seven days after
demand.
|_| Commercial Paper. The Fund can invest in commercial paper if it is
rated within the top two rating categories of Standard & Poor's and Moody's. If
the paper is not rated, it may be purchased if issued by a company having a
credit rating of at least "AA" by Standard & Poor's or "Aa" by Moody's.
The Fund can buy commercial paper, including U.S. dollar-denominated
securities of foreign branches of U.S. banks, issued by other entities if the
commercial paper is guaranteed as to principal and interest by a bank,
government or corporation whose certificates of deposit or commercial paper may
otherwise be purchased by the Fund.
|_| Variable Amount Master Demand Notes. Master demand notes are
corporate obligations that permit the investment of fluctuating amounts by the
Fund at varying rates of interest under direct arrangements between the Fund, as
lender, and the borrower. They permit daily changes in the amounts borrowed. The
Fund has the right to increase the amount under the note at any time up to the
full amount provided by the note agreement, or to decrease the amount. The
borrower may prepay up to the full amount of the note without penalty. These
notes may or may not be backed by bank letters of credit.
Because these notes are direct lending arrangements between the lender and
borrower, it is not expected that there will be a trading market for them. There
is no secondary market for these notes, although they are redeemable (and thus
are immediately repayable by the borrower) at principal amount, plus accrued
interest, at any time. Accordingly, the Fund's right to redeem such notes is
dependent upon the ability of the borrower to pay principal and interest on
demand.
The Fund has no limitations on the type of issuer from whom these notes
will be purchased. However, in connection with such purchases and on an ongoing
basis, the Sub-Advisor will consider the earning power, cash flow and other
liquidity ratios of the issuer, and its ability to pay principal and interest on
demand, including a situation in which all holders of such notes made demand
simultaneously. Investments in master demand notes are subject to the limitation
on investments by the Fund in illiquid securities, described in the Prospectus.
The Fund does not intend that its investments in variable amount master demand
notes will exceed 5% of its total assets.
|X| Foreign Securities. The Fund can purchase equity and debt securities
issued by foreign companies or foreign governments or their agencies. "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 and their agencies and instrumentalities. Those securities may be
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 on a U.S. securities exchange or traded in the U.S.
over-the-counter markets are considered "foreign securities" for the purpose of
the Fund's investment allocations. That is because they are subject to many of
the special considerations and risks, discussed below, that apply to foreign
securities traded and held abroad.
Because the Fund can purchase securities denominated in foreign
currencies, a change in the value of a foreign currency against the U.S. dollar
could result in a change in the amount of income the Fund has available for
distribution. Because a portion of the Fund's investment income may be received
in foreign currencies, the Fund will be required to compute its income in U.S.
dollars for distribution to shareholders, and therefore the Fund will absorb the
cost of currency fluctuations. After the Fund has distributed income, subsequent
foreign currency losses may result in the Fund's having distributed more income
in a particular fiscal period than was available from investment income, which
could result in a return of capital to shareholders.
Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers. They include 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. The Fund will hold foreign currency only in connection with the
purchase or sale of foreign securities.
|_| Foreign Debt Obligations. The debt obligations of foreign
governments and their agencies and instrumentalities may or may not be supported
by the full faith and credit of the foreign government. The Fund can buy
securities issued by certain "supra-national" entities, which include entities
designated or supported by governments to promote economic reconstruction or
development, international banking organizations and related government
agencies. Examples are the International Bank for Reconstruction and Development
(commonly called the "World Bank"), the Asian Development bank and the
Inter-American Development Bank.
The governmental members of these supra-national entities are
"stockholders" that typically make capital contributions and may be committed to
make additional capital contributions if the entity is unable to repay its
borrowings. A supra-national entity's lending activities may be limited to a
percentage of its total capital, reserves and net income. There can be no
assurance that the constituent foreign governments will continue to be able or
willing to honor their capitalization commitments for those entities.
|_| Risks of Foreign Investing. Investments in foreign securities may
offer special opportunities for investing but also present special additional
risks and considerations not typically associated with investments in domestic
securities. Some of these additional risks are:
o reduction of income by foreign taxes;
o fluctuation in value of foreign investments due to changes in
currency rates orcurrency control regulations (for example, currency
blockage);
o transaction charges for currency exchange;
o lack of public information about foreign issuers;
o lack of uniform accounting, auditing and financial reporting standards
in foreign countries comparable to those applicable to domestic issuers;
o less volume on foreign exchanges than on U.S. exchanges;
o greater volatility and less liquidity on foreign markets than in the U.S.;
o less governmental regulation of foreign issuers, stock exchanges and
brokers than in the U.S.;
o greater difficulties in commencing lawsuits;
o higher brokerage commission rates than in the U.S.;
o increased risks of delays in settlement of portfolio transactions
or loss of certificates for portfolio securities;
o possibilities in some countries of expropriation, confiscatory taxation,
political,financial or social instability or adverse diplomatic
developments; and
o 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.
|_| Special Risks of Emerging Markets. Emerging and developing markets
abroad may also offer special opportunities for growth investing but have
greater risks than more developed foreign markets, such as those in Europe,
Canada, Australia, New Zealand and Japan. There may be even less liquidity in
their securities markets, and settlements of purchases and sales of securities
may be subject to additional delays. They are subject to greater risks of
limitations on the repatriation of income and profits because of currency
restrictions imposed by local governments. Those countries may also be subject
to the risk of greater political and economic instability, which can greatly
affect the volatility of prices of securities in those countries. The
Sub-Advisor will consider these factors when evaluating securities in these
markets, because the selection of those securities must be consistent with the
Fund's goal of growth of capital.
|X| 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 the year, its portfolio
turnover rate would have been 100% annually. The Fund's portfolio turnover rate
will fluctuate from year to year, but the Fund expects to have a portfolio
turnover rate less than 100% or more annually.
Increased portfolio turnover creates higher brokerage and transaction
costs for the Fund, which may reduce its overall performance. Additionally, the
realization of capital gains from selling portfolio securities may result in
distributions of taxable long-term capital gains to shareholders, since the Fund
will normally distribute all of its capital gains realized each year, to avoid
excise taxes under the Internal Revenue Code.
Other Investment Techniques and Strategies. In seeking its objective, the Fund
may from time to time use the types of investment strategies and investments
described below. It is not required to use all of these strategies at all times,
and at times may not use them.
|_| Investing in Small, Unseasoned Companies. The Fund can invest in
securities of small, unseasoned companies. These are companies that have been in
operation for less than three years, including the operations of any
predecessors. Securities of these companies may be subject to volatility in
their prices. They may have a limited trading market, which may adversely affect
the Fund's ability to dispose of them and can reduce the price the Fund might be
able to obtain for them. Other investors that own a security issued by a small,
unseasoned issuer for which there is limited liquidity might trade the security
when the Fund is attempting to dispose of its holdings of that security. In that
case the Fund might receive a lower price for its holdings than might otherwise
be obtained.
|_| "When-Issued" and "Delayed-Delivery" Transactions. The Fund can
invest in securities on a "when-issued" basis and can purchase or sell
securities on a "delayed-delivery" or "forward commitment" basis. When-issued
and delayed-delivery are terms that refer to securities whose terms and
indenture are available and for which a market exists, but which are not
available for immediate delivery.
When such transactions are negotiated, the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made. Delivery
and payment for the securities take place at a later date (generally within 45
days of the date the offer is accepted). The securities are subject to change in
value from market fluctuations during the period until settlement. The value at
delivery may be less than the purchase price. For example, changes in interest
rates in a direction other than that expected by the Sub-Advisor before
settlement will affect the value of such securities and may cause a loss to the
Fund. During the period between purchase and settlement, no payment is made by
the Fund to the issuer and no interest accrues to the Fund from the investment.
No income begins to accrue to the Fund on a when-issued security until the Fund
receives the security at settlement of the trade.
The Fund can engage in when-issued transactions to secure what the
Sub-Advisor considers to be an advantageous price and yield at the time of
entering into the obligation. When the Fund enters into a when-issued or
delayed-delivery transaction, it relies on the other party to complete the
transaction. Its failure to do so may cause the Fund to lose the opportunity to
obtain the security at a price and yield the Sub-Advisor considers to be
advantageous.
When the Fund engages in when-issued and delayed-delivery transactions, it
does so for the purpose of acquiring or selling securities consistent with its
investment objective and policies for its portfolio or for delivery pursuant to
options contracts it has entered into, and not for the purpose of investment
leverage. Although the Fund will enter into delayed-delivery or when-issued
purchase transactions to acquire securities, it may dispose of a commitment
prior to settlement. If the Fund chooses to dispose of the right to acquire a
when-issued security prior to its acquisition or to dispose of its right to
delivery or receive against a forward commitment, it may incur a gain or loss.
At the time the Fund makes the commitment to purchase or sell a security
on a when-issued or delayed-delivery basis, it records the transaction on its
books and reflects the value of the security purchased in determining the Fund's
net asset value. In a sale transaction, it records the proceeds to be received.
The Fund will identify on its books liquid assets at least equal in value to the
value of the Fund's purchase commitments until the Fund pays for the investment.
The Fund will not enter into when-issued commitments if more than 15% of the
Fund's net assets would be committed under these transactions.
When-issued and delayed-delivery transactions can be used by the Fund as a
defensive technique to hedge against anticipated changes in interest rates and
prices. For instance, in periods of rising interest rates and falling prices,
the Fund might sell securities in its portfolio on a forward commitment basis to
attempt to limit its exposure to anticipated falling prices. In periods of
falling interest rates and rising prices, the Fund might sell portfolio
securities and purchase the same or similar securities on a when-issued or
delayed-delivery basis to obtain the benefit of currently higher cash yields.
|X| Repurchase Agreements. The Fund can acquire securities subject to
repurchase agreements. It might do so for liquidity purposes to meet anticipated
redemptions of Fund shares, or pending the investment of the proceeds from sales
of Fund shares, or pending the settlement of portfolio securities transactions,
or for temporary defensive purposes.
In a repurchase transaction, the Fund buys a security from, and
simultaneously resells it to, an approved vendor for delivery on an agreed-upon
future date. The resale price exceeds the purchase price by an amount that
reflects an agreed-upon interest rate effective for the period during which the
repurchase agreement is in effect. Approved vendors include U.S. commercial
banks, U.S. branches of foreign banks, or broker-dealers that have been
designated as primary dealers in government securities. They must meet credit
requirements set by the Fund's Board of Trustees from time to time.
The majority of these transactions run from day to day, and delivery
pursuant to the resale typically occurs within one to five days of the purchase.
Repurchase agreements having a maturity beyond seven days are subject to the
Fund's limits on holding illiquid investments. There is no limit on the amount
of the Fund's net assets that may be subject to repurchase agreements having
maturities of seven days or less.
Repurchase agreements, considered "loans" under the Investment Company
Act, are 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. 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 Sub-Advisor will monitor the vendor's creditworthiness to confirm
that the vendor is financially sound and will continuously monitor the
collateral's value.
|X| Illiquid and Restricted Securities. To enable the Fund to sell its
holdings of a restricted security not registered under the Securities Act of
1933, the Fund may have to cause those securities to be registered. The expenses
of registering restricted securities may be negotiated by the Fund with the
issuer at the time the Fund buys the securities. When the Fund must arrange
registration because the Fund wishes to sell the security, a considerable period
may elapse between the time the decision is made to sell the security and the
time the security is registered so that the Fund could sell it. The Fund would
bear the risks of any downward price fluctuation during that period.
The Fund may also acquire restricted securities through private
placements. Those securities have contractual restrictions on their public
resale. Those restrictions might limit the Fund's ability to dispose of the
securities and might lower the amount the Fund could realize upon the sale.
The Fund has 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 under Rule 144A of the Securities Act of 1933, if those
securities have been determined to be liquid 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 holdings of that security may be considered to be illiquid.
|X| Loans of Portfolio Securities. The Fund can lend its portfolio
securities to certain types of eligible borrowers approved by the Board of
Trustees. It may do so to try to provide income or to raise cash or income for
liquidity purposes. These loans are limited to not more than 10% of the value of
the Fund's total assets. There are some risks in connection with securities
lending. The Fund might experience a delay in receiving additional collateral to
secure a loan, or a delay in recovery of the loaned securities. The Fund
presently does not intend to engage in loans of securities.
The Fund must receive collateral for a loan. Under current applicable
regulatory requirements (which are subject to change), on each business day the
loan collateral must be at least equal to the value of the loaned securities. It
must consist of cash, bank letters of credit, securities of the U.S. Government
or its agencies or instrumentalities, or other cash equivalents in which the
Fund is permitted to invest. To be acceptable as collateral, letters of credit
must obligate a bank to pay amounts demanded by the Fund if the demand meets the
terms of the letter. The terms of the letter of credit and the issuing bank both
must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the dividends
or interest on loaned securities. It also receives one or more of (a) negotiated
loan fees, (b) interest on securities used as collateral, and (c) interest on
any short-term debt securities purchased with such loan collateral. Either type
of interest may be shared with the borrower. The Fund may also pay reasonable
finder's, custodian and administrative fees in connection with these loans. The
terms of the Fund's loans must meet applicable tests under the Internal Revenue
Code and must permit the Fund to reacquire loaned securities on five days'
notice or in time to vote on any important matter.
Investment Restrictions
--------------------------------------------------------------------------------
|X| What Are "Fundamental Policies?" Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be changed
only by the vote of a "majority" of the Fund's outstanding voting securities.
Under the Investment Company Act, a "majority" vote is defined as the vote of
the holders of the lesser of:
|_|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 represented by proxy, or
|_| more than 50% of the outstanding shares.
The Fund's investment objective is a fundamental policy. Other policies
described in the Prospectus or this Statement of Additional Information are
"fundamental" only if they are identified as such. The Fund's Board of Trustees
can change non-fundamental policies without shareholder approval. However,
significant changes to investment policies will be described in supplements or
updates to the Prospectus or this Statement of Additional Information, as
appropriate. The Fund's most significant investment policies are described in
the Prospectus.
|X| Does the Fund Have Additional Fundamental Policies? The following
investment restrictions are fundamental policies of the Fund.
|_| The Fund cannot buy securities issued or guaranteed by any one issuer if
more than 5% of its total assets would be invested in securities of that
issuer. This limitation applies to 75% of the Fund's total assets.
|_| The Fund cannot purchase more than 10% of any class of security of any
issuer. All outstanding debt securities and all preferred stock of an
issuer is considered as one class. This restriction does not apply to
securities issued by the U.S. Government or any of its agencies or
instrumentalities.
|_| The Fund cannot concentrate its investments. That means it cannot invest
25% or more of its total assets in any industry. However, there is no
limitation on investments in U.S. Government securities. Moreover, if
deemed appropriate for seeking its investment objective, the Fund may
invest less than 25% of its total assets (valued at the time of investment)
in any one industry classification used by the Fund for investment
purposes. Under this restriction, a foreign government is considered an
"industry."
|_| The Fund cannot borrow money in excess of one third of the value of
the its total assets. The Fund can borrow only from banks and only as a
temporary measure for extraordinary or emergency purposes. The Fund will make no
additional investments while borrowings exceed 5% of the Fund's total assets.
The Fund can borrow only if it maintains a 300% ratio of assets to borrowings at
all times in the manner set forth in the Investment Company Act of 1940.
|_| The Fund cannot make loans to any person or individual. However,
portfolio securities may be loaned by the Fund within the limits set forth in
the Prospectus and Statement of Additional Information.
|_| The Fund cannot invest in real estate or real estate limited
partnerships (direct participation programs). However, the Fund can purchase
securities of issuers that engage in real estate operations and securities that
are secured by real estate or interests in real estate.
|_| The Fund cannot invest for the purpose of exercising control or
management of another company.
|_| The Fund cannot underwrite securities of other companies. A permitted
exception is in case it is deemed to be an underwriter under the Securities Act
of 1933 when reselling any securities held in its own portfolio.
|_| The Fund cannot invest in or hold securities of any issuer if officers
and Trustees of the Fund or officers and directors of its Manager or Sub-Advisor
individually beneficially own more than 1/2 of 1% of the securities of that
issuer and together own more than 5% of the securities of that issuer.
|_| The Fund cannot invest in physical commodities or physical commodity
contracts. However, the Fund may buy and sell hedging instruments to the extent
specified in its Prospectus and Statement of Additional Information from time to
time. The Fund can also buy and sell options, futures, and securities or other
instruments backed by physical commodities or whose investment return is linked
to changes in the price of physical commodities.
|_| The Fund cannot purchase warrants that would cause more than 5% of
the Fund's total assets to be invested in warrants, or more than 2% of its total
assets to be invested in warrants that are not listed on The New York Stock
Exchange or The American Stock Exchange.
|_| The Fund cannot pledge its assets, or assign or otherwise encumber
its assets in an amount in excess of 10% of the value of its net assets. It can
pledge, assign or encumber its assets only to secure borrowings that comply with
the limits set forth in the Fund's Prospectus and Statement of Additional
Information.
|_| The Fund cannot issue senior securities (as defined in the
Investment Company Act of 1940). However, the Fund can enter into repurchase
agreements, borrow money in accordance with the restrictions set forth in its
other fundamental policies and lend its portfolio securities.
|X| Does the Fund Have Any Restrictions That Are Not Fundamental? The Fund
has a number of other investment restrictions that are not fundamental policies,
which means that they can be changed by the Board of Trustees without
shareholder approval.
|_| The Fund cannot invest in interests in oil, gas or other mineral
exploration or development programs or leases.
|_| The Fund cannot make short sales or purchase securities on margin.
However, the Fund can make short-term borrowings when necessary for the
clearance of purchases of portfolio securities. Collateral arrangements in
connection with futures and options transactions are not deemed to be margin
transactions under this restriction.
Unless the Prospectus or this Statement of Additional Information states
that a percentage restriction applies on an ongoing basis, it applies only at
the time the Fund makes an investment. 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.
For purposes of the Fund's policy not to concentrate its investments as
described above, the Fund has adopted the industry classifications set forth in
Appendix B to this Statement of Additional Information. This is not a
fundamental policy.
How the Fund is Managed
Organization and History. The Fund is an open-end, diversified management
investment company. The Fund is one of three series of Oppenheimer Quest For
Value Funds (the "Trust"), an open-end management investment company organized
as a Massachusetts business trust in April 1987.
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. 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.
|X| Classes of Shares. The Board of Trustees has the power, without
shareholder approval, to divide unissued shares of the Trust into two or more
series and each series into two or more classes. The Board has done so, and the
Fund currently has five classes of shares: Class A, Class B, Class C, Class N
and Class Y. All classes invest in the same investment portfolio. Each class of
shares:
o has its own dividends and distributions,
o pays certain expenses which may be different for the different classes,
o may have a different net asset value,
o may have separate voting rights on matters in which interests of one
class are different from interests of another class, and o votes as a class on
matters that affect that class alone.
Shares are freely transferable, and each share of each class has one vote
at shareholder meetings, with fractional shares voting proportionally on matters
submitted to the vote of shareholders. Each share of the Fund represents an
interest in the Fund proportionately equal to the interest of each other share
of the same class.
The Trustees are authorized to create new series of the Trust and new
classes of shares of the Fund. The Trustees may reclassify unissued shares of
the Fund into additional series or classes of shares. The Trustees also may
divide or combine the shares of a class into a greater or lesser number of
shares without changing the proportionate beneficial interest of a shareholder
in the Fund. Shares do not have cumulative voting rights or preemptive or
subscription rights. Shares may be voted in person or by proxy at shareholder
meetings.
|X| Meetings of Shareholders. Although the Fund is not required by
Massachusetts law to hold annual meetings, it may hold shareholder meetings from
time to time on important matters. The Fund's shareholders have the right to
call a meeting to remove a Trustee or to take certain other action described in
the Declaration of Trust.
The Fund will hold meetings when required to do so by the Investment
Company Act or other applicable law. The Fund will hold a meeting when the
Trustees call a meeting or upon proper request of shareholders. If the Fund
receives a written request of the record holders of at least 25% of the
outstanding shares eligible to be voted at a meeting to call a meeting for a
specified purpose (which might include the removal of a Trustee), the Fund will
call a meeting of shareholders for that specified purpose.
Shareholders of the different classes of the Fund vote together in the
aggregate on certain matters at shareholders' meetings. Those matters include
the election of Trustees and ratification of appointment of the independent
auditors. Shareholders of a particular series or class vote separately on
proposals that affect that series or class. Shareholders of a series or class
that is not affected by a proposal are not entitled to vote on the proposal. For
example, only shareholders of a particular series vote on any material amendment
to the investment advisory agreement for that series. Only shareholders of a
particular class of a series vote on certain amendments to the Distribution
and/or Service Plans if the amendments affect only that class.
|X| Shareholder and Trustee Liability. The Trust's Declaration of Trust
contains an express disclaimer of shareholder or Trustee liability for the
Fund's obligations. It also provides for indemnification and reimbursement of
expenses out of the Fund's property for any shareholder held personally liable
for its obligations. The Declaration of Trust also states that upon request, the
Fund shall assume the defense of any claim made against a shareholder for any
act or obligation of the Fund and shall satisfy any judgment on that claim.
Massachusetts law permits a shareholder of a business trust (such as the Fund)
to be held personally liable as a "partner" under certain circumstances.
However, the risk that a Fund shareholder will incur financial loss from being
held liable as a "partner" of the Fund is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations.
The Fund's contractual arrangements state that any person doing business
with the Fund (and each shareholder of the Fund) agrees under its Declaration of
Trust to look solely to the assets of the Fund for satisfaction of any claim or
demand that may arise out of any dealings with the Fund. Additionally, the
Trustees shall have no personal liability to any such person, to the extent
permitted by law.
Trustees and Officers of the Fund. The Trustees and officers and their principal
occupations and business affiliations during the past five years are listed
below. Trustees denoted with an asterisk (*) below are deemed to be "interested
persons" of the Fund under the Investment Company Act. All of the Trustees are
also trustees, directors or managing general partners of the following
Oppenheimer funds:
Oppenheimer Quest Value Fund, Inc.,
Oppenheimer Quest For Value Funds, a series fund having the following series:
Oppenheimer Quest Small Cap Fund,
Oppenheimer Quest Balanced Value Fund, and
Oppenheimer Quest Opportunity Value Fund,
Oppenheimer Quest Global Value Fund, Inc.,
Oppenheimer Quest Capital Value Fund, Inc.,
Rochester Portfolio Series, a series fund having one series:
Limited-Term New York Muncipal Fund,
Bond Fund Series, a series fund having one series:
Oppenheimer Convertible Securities Fund,
Rochester Fund Municipals, and
Oppenheimer MidCap Fund
Ms. Macaskill and Messrs. Bishop, Darling, Donohue, Farrar, Wixted and
Zack, who are officers of the Fund, respectively hold the same offices of the
other Oppenheimer funds listed above. As of ________ ____, 2001, the Trustees
and the officers of the Fund as a group owned less than 1% of the outstanding
shares of the Fund. The foregoing statement does not reflect shares held of
record by an employee benefit plan for employees of the Manager other than
shares beneficially owned under that plan by the officers of the Fund listed
below. Ms. Macaskill and Mr. Donohue are trustees of that plan.
Bridget A. Macaskill, Chairman of the Board of Trustees and President Age: 52.
Two World Trade Center, New York, New York 10034-0203 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 Asset Management Corporation, an investment adviser subsidiary of
the Manager; Chairman and a director of Shareholder Services, Inc. (since August
1994) and Shareholder Financial Services, Inc. (since September 1995), transfer
agent subsidiaries of the Manager; President (since September 1995) and a
director (since October 1990) of Oppenheimer Acquisition Corp., the Manager's
parent holding company; 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 management subsidiary of
the Manager and of Oppenheimer Millennium Funds plc; President and a director of
other Oppenheimer funds; a director of Prudential Corporation plc (a U.K.
financial service company).
Paul Y. Clinton, Trustee, Age: 70.
39 Blossom Avenue, Osterville, Massachusetts 02655
Principal of Clinton Management Associates, a financial and venture capital
consulting firm; Trustee of Capital Cash Management Trust, Narrangansett
Tax-Free Fund, and OCC Accumulation Trust, investment companies; Director of OCC
Cash Reserves, an investment company; formerly: Director, External Affairs,
Kravco Corporation, a national real estate owner and property management
corporation; President of Essex Management Corporation, a management consulting
company; a general partner of Capital Growth Fund, a venture capital
partnership, and of Essex Limited Partnership, an investment partnership;
President of Geneve Corp., a venture capital fund; Chairman of Woodland Capital
Corp., a small business investment company; and Vice President of W.R. Grace &
Co., a manufacturing and chemical company.
Thomas W. Courtney, Trustee, Age 67.
833 Wyndemere Way, Naples, Florida 34105
Principal of Courtney Associates, Inc., a venture capital firm; Director of OCC
Cash Reserves, Inc., and Trustee of OCC Accumulation Trust and Cash Assets
Trust, both of which are open-end investment companies; former General Partner
of Trivest Venture Fund, a private venture capital fund; former President of
Investment Counseling Federated Investors, Inc., an investment advisory firm;
former President of Boston Company Institutional Investors, an investment
advisory firm; Trustee of Hawaiian Tax-Free Trust and Tax Free Trust of Arizona,
tax-exempt bond funds; Director of several privately owned corporations; former
Director of Financial Analysts Federation.
Robert G. Galli, Trustee, Age: 67.
19750 Beach Road, Jupiter, FL 33469
A Trustee or Director of other Oppenheimer funds. Formerly he held the following
positions: Vice Chairman of the Manager, OppenheimerFunds, Inc. (October 1995 -
December 1997); Executive Vice President of the Manager (December 1977 - October
1995); Executive Vice President and a director (April 1986 - October 1995) of
HarbourView Asset Management Corporation, an investment advisor subsidiary of
the Manager.
Lacy B. Herrmann, Trustee, Age: 71.
380 Madison Avenue, Suite 2300, New York, New York 10017
Chairman and Chief Executive Officer of Aquila Management Corporation, the
sponsoring organization and manager, administrator and/or sub-adviser to the
following open-end investment companies, and Chairman of the Board of Trustees
and President of each: Churchill Cash Reserves Trust, Aquila Cascadia Equity
Fund, Pacific Capital Cash Assets Trust, Pacific Capital U.S. Treasuries Cash
Assets Trust, Pacific Capital Tax-Free Cash Assets Trust, Prime Cash Fund,
Narragansett Insured Tax-Free Income Fund, Tax-Free Fund For Utah, Churchill
Tax-Free Fund of Kentucky, Tax-Free Fund of Colorado, Tax-Free Trust of Oregon,
Tax-Free Trust of Arizona, Hawaiian Tax-Free Trust, and Aquila Rocky Mountain
Equity Fund; Vice President, Director, and formerly Secretary and Treasurer of
Aquila Distributors, Inc., distributor of the above funds; President and
Chairman of the Board of Trustees of Capital Cash Management Trust ("CCMT"), and
a former officer and Trustee/Director of its predecessors; President and
Director of STCM Management Company, Inc., sponsor and adviser to CCMT;
Chairman, President and a Director of InCap Management Corporation, a fund
sub-adviser and administrator of Prime Cash Fund and Short Term Asset Reserves;
Director of OCC Cash Reserves, Inc., and Trustee of OCC Accumulation Trust, both
of which are open-end investment companies; Trustee Emeritus of Brown
University.
George Loft, Trustee, Age: 86.
51 Herrick Road, Sharon,
Connecticut 06069 Private Investor;
Director of OCC Cash Reserves, Inc., and Trustee of OCC Accumulation Trust, both
of which are open-end investment companies.
O. Leonard Darling, Vice President, Age: 58.
Two World Trade Center, New York, New York 10048-0203
Chief Investment Officer and Executive Vice President of the Manager (since
6/99); Chairman and Director of HarbourView Asset Management Corporation (since
6/99); formerly Chief Executive Officer of HarbourView Asset Management
Corporation (12/ 98-6/99); Trustee (1993 - present) of Awhtolia College -
Greece.
Andrew J. Donohue, Secretary, Age: 50.
Two World Trade Center, New York, New York 10048-0203
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President and General Counsel (since September 1993) and a director (since
January 1992) of the Distributor; Executive Vice President, General Counsel and
a director of HarbourView Asset Management Corporation, Shareholder Services,
Inc., Shareholder Financial Services, Inc. and (since September 1995)
Oppenheimer Partnership Holdings, Inc.; President and a director of Centennial
Asset Management Corporation (since September 1995); President, General Counsel
and a director of Oppenheimer Real Asset Management, Inc. (since July 1996);
General Counsel (since May 1996) and Secretary (since April 1997) of Oppenheimer
Acquisition Corp.; Vice President and a director of OppenheimerFunds
International Ltd. and Oppenheimer Millennium Funds plc (since October 1997); an
officer of other Oppenheimer funds.
Robert Bishop, Assistant Treasurer, Age: 42.
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: 35.
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.
Brian W. Wixted, Treasurer, Age: 41.
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer (since April 1999) of the Manager; Treasurer
of HarbourView Asset Management Corporation, Shareholder Services, Inc.,
Shareholder Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc.
(since April 1999); Assistant Treasurer of Oppenheimer Acquisition Corp. (since
April 1999); Assistant Secretary of Centennial Asset Management Corporation
(since April 1999); formerly Principal and Chief Operating Officer, Bankers
Trust Company - Mutual Fund Services Division (March 1995 - March 1999); Vice
President and Chief Financial Officer of CS First Boston Investment Management
Corp. (September 1991 - March 1995); and Vice President and Accounting Manager,
Merrill Lynch Asset Management (November 1987 - September 1991).
Robert G. Zack, Assistant Secretary, Age: 52.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President (since May 1985) and Associate General Counsel (since May
1981) of the Manager, Assistant Secretary of Shareholder Services, Inc. (since
May 1985), and Shareholder Financial Services, Inc. (since November 1989);
Assistant Secretary of OppenheimerFunds International Ltd. and Oppenheimer
Millennium Funds plc (since October 1997); an officer of other Oppenheimer
funds.
|X| Remuneration of Trustees. The officers of the Fund and one Trustee,
Ms. Macaskill, are affiliated with the Manager and receive no salary or fee from
the Fund. The remaining Trustees received the compensation shown below. The
compensation from the Fund was paid during its fiscal year ended October 31,
2000. The table below also shows the total compensation from all of the
Oppenheimer funds listed above, including the compensation from the Fund, and
from two other funds that are not Oppenheimer funds but for which the
Sub-Advisor acts as investment adviser. That amount represents compensation
received as a director, trustee, or member of a committee of the Board during
the calendar year 2000.
<PAGE>
--------------------------------------------------------------------------------
Total Compensation
------------------ Aggregate Retirement From all Oppenheimer
Trustee's Name Compensation Benefits Accrued Quest/Rochester
From the Fund1 as Part of Fund Funds
Expenses (10 Funds)2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Paul Y. Clinton $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Thomas W. Courtney $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Robert G. Galli $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Lacy B. Herrmann $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
George Loft $ $ $
--------------------------------------------------------------------------------
1. Aggregate compensation includes fees, deferred compensation, if any and any
retirement plan benefits accrued for a Trustee or Director.
2. For the 2000 calendar year. Each series of an investment company is
considered a separate "fund" for this purpose.
3. Total compensation for the 2000 calendar year includes compensation paid by
two funds for which the Sub-Advisor acts as investment adviser.
4. Total compensation for the 2000 calendar year received for serving as Trustee
or Director of ____ other Oppenheimer funds.
|X| Retirement Plan for Trustees. The Fund has adopted a retirement
plan that provides for payments to retired Trustees. Payments are up to 80% of
the average compensation paid during a Trustee's five years of service in which
the highest compensation was received. A Trustee must serve as Trustee for any
of the Oppenheimer Quest/Rochester/MidCap funds listed above for at least 15
years to be eligible for the maximum payment. Each Trustee's retirement benefits
will depend on the amount of the Trustee's future compensation and length of
service. Therefore the amount of those benefits cannot be determined at this
time, nor can we estimate the number of years of credited service that will be
used to determine those benefits.
|X| Deferred Compensation Plan for Trustees. 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.
|X| Major Shareholders. As of _________ _____, 2001, the only persons who
owned of record or were known by the Fund to own beneficially 5% or more of any
class of the Fund's outstanding shares were:
Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive East, Floor 3,
Jacksonville Florida 32246-6484, which owned ____________ Class C shares
(representing _____% of the Class C shares then outstanding), for the benefit of
its customers; and
Gilbane Building Co., 7 Jackson Walkway, Providence, Rhode Island
02903-3623, which owned ___________ Class Y shares (representing ______% of the
Class Y shares then outstanding). As of the date hereof, the Manager is the sole
owner of Class N shares.
The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company.
|X| Code of Ethics. The Fund, the Manager and the Distributor 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. Covered persons include persons
with knowledge of the investments and investment intentions of the Fund and
other funds advised by the Manager. The Code of Ethics does permit personnel
subject to the Code to invest in securities, including securities that may be
purchased or held by the Fund, subject to a number of restrictions and controls.
Compliance with the Code of Ethics is carefully monitored and enforced by the
Manager.
The Code of Ethics is an exhibit to the Fund's registration statement
filed with the Securities and Exchange Commission and can be reviewed and copied
at the SEC's Public Reference Room in Washington, D.C. You can obtain
information about the hours of operation of the Public Reference Room by calling
the SEC at 1.202.942.8090. The Code of Ethics can also be viewed as part of the
Fund's registration statement on the SEC's EDGAR database at the SEC's Internet
website at http://www.sec.gov. Copies may be obtained, after paying a
duplication fee, by electronic request at the following E-mail address:
[email protected]., or by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
|X| The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and Fund's parent Trust. The Manager handles the
Fund's day-to-day business, and the agreement permits the Manager to enter into
Sub-Advisory agreements with other registered investment advisers to obtain
specialized services for the Fund, as long as the Fund is not obligated to pay
any additional fees for those services. The Manager has retained the Sub-Advisor
pursuant to a separate Sub-Advisory Agreement, described below, under which the
Sub-Advisor buys and sells portfolio securities for the Fund. The portfolio
manager of the Fund is employed by the Sub-Advisor and is the person who is
principally responsible for the day-to-day management of the Fund's portfolio,
as described below.
The investment advisory agreement between the Fund and the Manager
requires the Manager, at its expense, to provide the Fund with adequate office
space, facilities and equipment. It also requires the Manager to provide and
supervise the activities of all administrative and clerical personnel required
to provide effective administration for the Fund. Those responsibilities include
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.
The Fund pays expenses not expressly assumed by the Manager under the
advisory agreement. Expenses for the Trust's three series are allocated to the
series in proportion to their net assets, unless allocations of expenses can be
made directly to a series. The advisory agreement lists examples of expenses
paid by the Fund. The major categories relate to calculation of the Fund's net
asset values per share, 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. The management fees paid by the Fund to
the Manager are calculated at the rates described in the Prospectus, which are
applied to the assets of the Fund as a whole. The fees are allocated to each
class of shares based upon the relative proportion of the Fund's net assets
represented by that class.
-------------------------------------------------------------------------------
Fees Paid to Manager to
Management Fees Paid to Calculate Fund's Net
Fiscal Year ended 10/31: OppenheimerFunds, Inc. Asset Values1
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
1998 $ $
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
1999 $ $
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
2000 $ $
-------------------------------------------------------------------------------
1. During the fiscal years ended 1997 and 1998, the Fund paid the Manager a fee
for accounting services, consisting of a base fee of $55,000 per year plus
out-of-pocket expenses. The Manager voluntarily agreed to eliminate this fee
commencing with the 1999 fiscal year.
The investment advisory agreement states that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties or
reckless disregard of its obligations and duties under the investment advisory
agreement, the Manager is not liable for any loss resulting from a good faith
error or omission on its part with respect to any of its duties under the
agreement.
The agreement permits the Manager to act as investment adviser for any
other person, firm or corporation and to use the names "Oppenheimer" and "Quest
for Value" 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 Manager may withdraw the right of the Fund
to use the names "Oppenheimer" or "Quest for Value" as part of its name.
The Sub-Advisor. The Sub-Advisor is a majority-owned subsidiary of Oppenheimer
Capital, a registered investment adviser. From the Fund's inception on April 30,
1980, until November 22, 1995, the Sub-Advisor (which was then named Quest for
Value Advisors) or the Sub-Advisor's parent served as the Fund's investment
advisor. The Sub-Advisor acts as investment adviser to other investment
companies and for individual investors.
On November 4, 1997, PIMCO Advisors L.P., a registered investment adviser
with $125 billion in assets under management through various subsidiaries and
affiliates, acquired control of Oppenheimer Capital and the Sub-Advisor. On
November 30, 1997, Oppenheimer Capital merged with a subsidiary of PIMCO
Advisors. As a result, Oppenheimer Capital and the Sub-Advisor became indirect
wholly-owned subsidiaries of PIMCO Advisors. PIMCO Advisors has two general
partners: PIMCO Partners, G.P., a California general partnership, and PIMCO
Advisors Holdings L.P. (formerly Oppenheimer Capital, L.P.), an New York Stock
Exchange-listed Delaware limited partnership of which PIMCO Partners, G.P. is
the sole general partner.
PIMCO Partners, G.P. beneficially owns or controls (through its general
partner interest in the former Oppenheimer Capital, L.P.) more than 80% of the
units of limited partnership of PIMCO Advisors. PIMCO Partners, G.P. has two
general partners. The first of these is Pacific Investment Management Company, a
wholly-owned subsidiary of Pacific Financial Asset Management Company, a direct
subsidiary of Pacific Life Insurance Company ("Pacific Life").
The managing general partner of PIMCO Partners, G.P. is PIMCO Partners
L.L.C. ("PPLLC"), a California limited liability company. PPLLC's members are
the Managing Directors (the "PIMCO Managers") of Pacific Investment Management
Company, a subsidiary of PIMCO Advisors (the "PIMCO Subpartnership"). The PIMCO
Managers are: William H. Gross, Dean S. Meiling, James F. Muzzy, William F.
Podlich, III, Brent R. Harris, John L. Hague, William S. Thompson Jr., William
C. Powers, David H. Edington, Benjamin Trosky, William R. Benz, II and Lee R.
Thomas, III.
PIMCO Advisors is governed by a Management Board, which consists of
sixteen members, pursuant to a delegation by its general partners. PIMCO
Partners G.P. has the power to designate up to nine members of the Management
Board and the PIMCO Subpartnership, of which the PIMCO Managers are the Managing
Directors, has the power to designate up to two members. In addition, PIMCO
Partners, G.P., as the controlling general partner of PIMCO Advisors, has the
power to revoke the delegation to the Management Board and exercise control of
PIMCO Advisors. As a result, Pacific Life and/or the PIMCO Managers may be
deemed to control PIMCO Advisors. Pacific Life and the PIMCO Managers disclaim
such control.
Allianz AG has majority ownership of PIMCO Advisors and its subsidiaries,
including Oppenheimer Capital and the Sub-Advisor.
|X| The Sub-Advisory Agreement. Under the Sub-Advisory Agreement between
the Manager and the Sub-Advisor, the Sub-Advisor shall regularly provide
investment advice with respect to the Fund and invest and reinvest cash,
securities and the property comprising the assets of the Fund. Under the
Sub-Advisory Agreement, the Sub-Advisor agrees not to change the portfolio
manager of the Fund without the written approval of the Manager. The Sub-Advisor
also agrees to provide assistance in the distribution and marketing of the Fund.
Under the Sub-Advisory Agreement, the Manager pays the Sub-Advisor an
annual fee in monthly installments, based on the average daily net assets of the
Fund. The fee paid to the Sub-Advisor under the Sub-Advisory agreement is paid
by the Manager, not by the Fund. The fee is equal to 40% of the investment
advisory fee collected by the Manager from the Fund based on the total net
assets of the Fund as of November 22, 1995 (the "Base Amount") plus 30% of the
investment advisory fee collected by the Manager based on the total net assets
of the Fund that exceed the Base Amount.
The Sub-Advisory Agreement states that in the absence of willful
misfeasance, bad faith, negligence or reckless disregard of its duties or
obligations, the Sub-Advisor shall not be liable to the Manager for any act or
omission in the course of or connected with rendering services under the
Sub-Advisory Agreement or for any losses that may be sustained in the purchase,
holding or sale of any security.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement and the Sub-Advisory
Agreement. One of the duties of the Sub-Advisor under the Sub-Advisory Agreement
is to arrange the portfolio transactions for the Fund. The Fund's investment
advisory agreement with the Manager and the Sub-Advisory Agreement contain
provisions relating to the employment of broker-dealers to effect the Fund's
portfolio transactions. The Manager and the Sub-Advisor are authorized to employ
broker-dealers, including "affiliated" brokers, as that term is defined in the
Investment Company Act. They may employ broker-dealers that the Manager thinks,
in its best judgment based on all relevant factors, will implement the policy of
the Fund to obtain, at reasonable expense, the "best execution" of the Fund's
portfolio transactions. "Best execution" means prompt and reliable execution at
the most favorable price obtainable.
The Manager and the Sub-Advisor need not seek competitive commission bidding.
However, they are expected to be aware of the current rates of eligible brokers
and to minimize the commissions paid to the extent consistent with the interests
and policies of the Fund as established by its Board of Trustees.
The Manager and the Sub-Advisor may select brokers (other than affiliates)
that provide brokerage and/or research services for the Fund and/or the other
accounts over which the Manager, the Sub-Advisor or their respective affiliates
have investment discretion. The concessions paid to such brokers may be higher
than another qualified broker would charge, if the Manager or Sub-Advisor, as
applicable, makes a good faith determination that the concession is fair and
reasonable in relation to the services provided. Subject to those
considerations, as a factor in selecting brokers for the Fund's portfolio
transactions, the Manager and the Sub-Advisor may also consider sales of shares
of the Fund and other investment companies for which the Manager or an affiliate
serves as investment adviser.
The Sub-Advisory Agreement permits the Sub-Advisor to enter into "soft-dollar"
arrangements through the agency of third parties to obtain services for the
Fund. Pursuant to these arrangements, the Sub-Advisor will undertake to place
brokerage business with broker-dealers who pay third parties that provide
services. Any such "soft-dollar" arrangements will be made in accordance with
policies adopted by the Board of the Trust and in compliance with applicable
law.
Brokerage Practices. Brokerage for the Fund is allocated subject to the
provisions of the investment advisory agreement and the Sub-Advisory agreement
and the procedures and rules described above. Generally, the Sub-Advisor's
portfolio traders allocate brokerage based upon recommendations from the Fund's
portfolio manager. In certain instances, portfolio managers may directly place
trades and allocate brokerage. In either case, the Sub-Advisor's executive
officers supervise the allocation of brokerage.
Transactions in securities other than those for which an exchange is the primary
market are generally done with principals or market makers. In transactions on
foreign exchanges, the Fund may be required to pay fixed brokerage commissions
and therefore would not have the benefit of negotiated commissions available in
U.S. markets. Brokerage commissions are paid primarily for transactions in
listed securities or for certain fixed-income agency transactions in the
secondary market. Otherwise brokerage commissions are paid only if it appears
likely that a better price or execution can be obtained by doing so.
The Sub-Advisor serves as investment manager to a number of clients,
including other investment companies, and may in the future act as investment
manager or advisor to others. It is the practice of the Sub-Advisor to allocate
purchase or sale transactions among the Fund and other clients whose assets it
manages in a manner it deems equitable. In making those allocations, the
Sub-Advisor considers several main factors, including the respective investment
objectives, the relative size of portfolio holdings of the same or comparable
securities, the availability of cash for investment, the size of investment
commitments generally held and the opinions of the persons responsible for
managing the portfolios of the Fund and each other client's accounts.
When orders to purchase or sell the same security on identical terms are
placed by more than one of the funds and/or other advisory accounts managed by
the Sub-Advisor or its affiliates, the transactions are generally executed as
received, although a fund or advisory account that does not direct trades to a
specific broker (these are called "free trades") usually will have its order
executed first. Orders placed by accounts that direct trades to a specific
broker will generally be executed after the free trades. All orders placed on
behalf of the Fund are considered free trades. However, having an order placed
first in the market does not necessarily guarantee the most favorable price.
Purchases are combined where possible for the purpose of negotiating brokerage
commissions. In some cases that practice might have a detrimental effect on the
price or volume of the security in a particular transaction for the Fund.
Most purchases of debt obligations are principal transactions at net
prices. Instead of using a broker for those transactions, the Fund normally
deals directly with the selling or purchasing principal or market maker unless
the Sub-Advisor determines that a better price or execution can be obtained by
using the services of a broker. Purchases of portfolio securities from
underwriters include a commission or concession paid by the issuer to the
underwriter. Purchases from dealers include a spread between the bid and asked
prices. The Fund seeks to obtain prompt execution of these orders at the most
favorable net price.
The investment advisory agreement and the Sub-Advisory agreement permit
the Manager and the Sub-Advisor to allocate brokerage for research services. The
research services provided by a particular broker may be useful only to one or
more of the advisory accounts of the Sub-Advisor and its affiliates. The
investment research received for the commissions of those other accounts may be
useful both to the Fund and one or more of the Sub-Advisor's other accounts.
Investment research may be supplied to the Sub-Advisor by a third party at the
instance of a broker through which trades are placed.
Investment research services include information and analysis on
particular companies and industries as well as market or economic trends and
portfolio strategy, market quotations for portfolio evaluations, information
systems, computer hardware and similar products and services. If a research
service also assists the Sub-Advisor in a non-research capacity (such as
bookkeeping or other administrative functions), then only the percentage or
component that provides assistance to the Sub-Advisor in the investment
decision-making process may be paid in commission dollars.
The research services provided by brokers broadens the scope and
supplements the research activities of the Sub-Advisor. That research provides
additional views and comparisons for consideration, and helps the Sub-Advisor to
obtain market information for the valuation of securities that are either held
in the Fund's portfolio or are being considered for purchase. The Sub-Advisor
provides information to the Manager and the Board about the concessions paid to
brokers furnishing such services, together with the Sub-Advisor's representation
that the amount of such concessions was reasonably related to the value or
benefit of such services.
--------------------------------------------------------------------------------
Fiscal Year Total
Ended 10/31 Brokerage
Concessions
Paid1
by the Fund
--------------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
1998 $
-------------------------------------------------------------------------
-------------------------------------------------------------------------
1999 $
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2000 $
-------------------------------------------------------------------------
1. Amounts do not include spreads or concessions on principal transactions
on a net trade basis.
2. In the fiscal year ended 10/31/00, the amount of transactions directed
to brokers for research services was $___________ and the amount of the
concessions paid to broker-dealers for those services was $__________.
Distribution and Service Plans
The Distributor. Under its General Distributor's Agreement with the Trust, the
Distributor acts as the Fund's principal underwriter in the continuous public
offering of shares of the Fund's classes of shares. The Distributor is not
obligated to sell a specific number of shares. Expenses normally attributable to
sales are borne by the Distributor.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares during the Fund's three most recent fiscal
years is shown in the table below.
--------------------------------------------------------------------------------
Fiscal Aggregate Class A Concessions Concessions Concessions
Year Front-End Front-End on Class A on Class B on Class C
Ended Sales Sales Shares Shares Shares
10/31: Charges on Charges Advanced by Advanced by Advanced by
Class A Retained by Distributor1 Distributor1 Distributor1
Shares Distributor
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1998 $ $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1999 $ $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2000 $ $ $ $ $
--------------------------------------------------------------------------------
1. The Distributor advances concession payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
--------------------------------------------------------------------------------
Class A Contingent Class B Contingent Class C Contingent
Fiscal Deferred Sales Deferred Sales Deferred Sales Charges
Year Ended Charges Retained by Charges Retained by Retained by Distributor
10/31 Distributor Distributor
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2000 $ $ $
--------------------------------------------------------------------------------
Distribution and Service Plans. The Fund has adopted Distribution and Service
Plans for Class A, Class B, Class C and Class N shares under Rule 12b-1 of the
Investment Company Act. Under those plans the Fund compensates the Distributor
for all or a portion of its costs incurred in connection with the distribution
and/or servicing of the shares of the particular class.
Under the plans, the Manager and the Distributor, in their sole
discretion, from time to time, may use their own resources (at no direct cost to
the Fund) to make payments to brokers, dealers or other financial institutions
for distribution and administrative services they perform. The Manager may use
its profits from the advisory fee it receives from the Fund. In their sole
discretion, the Distributor and the Manager may increase or decrease the amount
of payments they make from their own resources to plan recipients.
Unless a plan is terminated as described below, the plan continues in
effect from year to year but only if the Fund's Board of Trustees and its
Independent Trustees specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting called for the purpose of
voting on continuing the plan. A 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.
The Board of Trustees and the Independent Trustees must approve all
material amendments to a plan. An amendment to increase materially the amount of
payments to be made under a plan must be approved by shareholders of the class
affected by the amendment. Because Class B shares of the Fund automatically
convert into Class A shares after six years, the Fund must obtain the approval
of both Class A and Class B shareholders for a proposed material amendment to
the Class A plan that would materially increase payments under the plan. That
approval must be by a "majority" (as defined in the Investment Company Act) of
the shares of each class, voting separately by class.
While the plans are in effect, the Treasurer of the Fund shall provide
separate written reports on the plans to the Board of Trustees at least
quarterly for its review. The reports shall detail the amount of all payments
made under a plan, and the purpose for which the payments were made. Those
reports are subject to the review and approval of the Independent Trustees.
Each plan states 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 the selection and nomination process as long as the
final decision as to selection or nomination is approved by a majority of the
Independent Trustees.
Under the plans for a class, no payment will be made to any recipient in
any quarter in which the aggregate net asset value of all Fund shares of that
class held by the recipient for itself and its customers does not exceed a
minimum amount, if any, that may be set from time to time by a majority of the
Independent Trustees. The Board of Trustees has set no minimum amount of assets
to qualify for payments under the plans.
|X| Service Plans. Under the service plans, the Distributor currently uses
the fees it receives from the Fund to pay brokers, dealers and other financial
institutions (they are referred to as "recipients") for personal services and
account maintenance services they provide for their customers who hold shares of
a particular Class, A, B, C or N. The services 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. The service plans
permit compensation to the Distributor at a rate of up to 0.25% of average
annual net assets of the applicable class. The Board has set the rate at that
level. While the plans permit the Board to authorize payments to the Distributor
to reimburse itself for services under the plan, the Board has not yet done so.
The Distributor makes payments to plan recipients quarterly at an annual rate
not to exceed 0.25% of the average annual net assets consisting of shares of the
applicable class held in the accounts of the recipients or their customers.
|X| Service and Distribution Plan Fees. Under each plan, service fees and
distribution 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 plans compensate the Distributor at a flat rate for its
services and costs in distributing shares and servicing accounts, whether the
Distributor's expenses are more or less than the amounts paid by the Fund under
the plans during the period for which the fee is paid. The types of services
that recipients provide are similar to the services provided under the service
plan described above.
The plans permit the Distributor to retain both the asset-based sales
charges and the service fees or to pay recipients the service fee on a quarterly
basis, without payment in advance. However, the Distributor currently intends to
pay the service fee to recipients in advance for the first year after the shares
are purchased. After the first year shares are outstanding, the Distributor
makes service fee payments quarterly on those shares. The advance payment is
based on the net asset value of shares sold. Shares purchased by exchange do not
qualify for the advance service fee payment. If shares are redeemed during the
first year after their purchase, the recipient of the service fees on those
shares will be obligated to repay the Distributor a pro rata portion of the
advance payment of the service fee made on those shares.
Under the Class A plan, the Distributor pays a portion of the asset-based
sales charge to brokers, dealers and financial institutions and retains the
balance. As described in the Prospectus, a voluntary reduction with respect to
the asset-based sales charge became effective on January 1, 2000, and commencing
January 1, 2002 the Distributor will not retain any portion of the Class A
asset-based sales charge. The Distributor retains the asset-based sales charge
on Class B and Class N shares. The Distributor retains the asset-based sales
charge on Class C shares during the first year the shares are outstanding. It
pays the asset-based sales charge it receives on Class C shares as an ongoing
commission to the recipient on Class C shares outstanding for a year or more. If
a dealer has a special agreement with the Distributor, the Distributor will pay
the Class B, Class C and/or Class N service fee and the asset-based sales charge
to the dealer quarterly in lieu of paying the sales commissions and service fee
in advance at the time of purchase.
The asset-based sales charges on Class B, Class C and Class N shares allow
investors to buy 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 A, Class B, Class C and Class N shares. The payments are made
to the Distributor in recognition that the Distributor:
o pays sales commissions to authorized brokers and dealers at the time of
sale and pays service fees as described above,
o may finance payment of sales commissions and/or the advance of the service
fee payment to recipients under the plans, or may provide such financing
from its own resources or from the resources of an affiliate,
o employs personnel to support distribution of shares, and
o bears the costs of sales literature, advertising and prospectuses (other
than those furnished to current shareholders) and state "blue sky"
registration fees and certain other distribution expenses.
-------------------------------------------------------------------------------
Distribution Fees Paid to the Distributor in the Fiscal Year Ended 10/31/00
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class: Total Amount Retained Distributor's Distributor's
Aggregate Unreimbursed
Unreimbursed Expenses as %
Payments Expenses Under of Net Assets
Under Plan by Distributor Plan of Class
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class A Plan $ $ $ %
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class B Plan $ $ $ %
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class C Plan $ $ $ %
-------------------------------------------------------------------------------
All payments under the plans 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.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its investment performance. Those terms include "cumulative total
return," "average annual total return," "average annual total return at net
asset value" and "total return at net asset value." An explanation of how total
returns are calculated is set forth below. The charts below show the Fund's
performance as of the Fund's most recent fiscal year end. You can obtain current
performance information by calling the Fund's Transfer Agent at 1.800.525.7048
or by visiting the OppenheimerFunds Internet web site at
http://www.oppenheimerfunds.com.
The Fund's illustrations of its performance data in advertisements must
comply with rules of the Securities and Exchange Commission. Those rules
describe the types of performance data that may be used and how it is to be
calculated. In general, any advertisement by the Fund of its performance data
must include the average annual total returns for the advertised class of shares
of the Fund. Those returns must be shown 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 (or its submission for
publication).
Use of standardized performance calculations 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 the
Fund's performance information as a basis for comparison with other investments:
|_| Total 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. Your account's performance will vary from the model performance data if
your dividends are received in cash, or you buy or sell shares during the
period, or you bought your shares at a different time and price than the shares
used in the model.
|_| The Fund's performance returns do not reflect the effect of taxes on
dividends and capital gains distributions.
|_| An investment in the Fund is not insured by the FDIC or any other
government agency.
|_| The principal value of the Fund's shares and total returns are not
guaranteed and normally will fluctuate on a daily basis.
|_| When an investor's shares are redeemed, they may be worth more or less
than their original cost.
|_| Total returns for any given past period represent historical
performance information and are not, and should not be considered, a prediction
of future returns.
The performance of each class of shares is shown separately, because the
performance of each class of shares will usually be different. That is because
of the different kinds of expenses each class bears. The total returns of each
class of shares of the Fund are affected by market conditions, the quality of
the Fund's investments, the maturity of debt investments, the types of
investments the Fund holds, and its operating expenses that are allocated to the
particular class.
|X| Total Return Information. There are different types of "total returns"
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
and that the investment is redeemed at the end of the period. Because of
differences in expenses for each class of shares, the total returns for each
class are separately measured. 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 actual year-by-year performance. The
Fund uses standardized calculations for its total returns as prescribed by the
SEC. The methodology is discussed below.
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 without sales charge, as
described below). For Class B shares, payment of the applicable contingent
deferred sales charge is applied, depending on the period for which the return
is shown: 5.0% in the first year, 4.0% in the second year, 3.0% in the third and
fourth years, 2.0% in the fifth year, 1.0% in the sixth year and none
thereafter. For Class C shares, the 1% contingent deferred sales charge is
deducted for returns for the 1-year period. There is no sales charge on Class Y
shares. Class N shares are first being offered as of the date hereof;
accordingly total return information is not provided for such shares.
|_| Average Annual Total Return. 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" in the formula) to achieve an Ending Redeemable Value
("ERV" in the formula) of that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
|_| Cumulative Total Return. 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
|_| Total Returns at Net Asset Value. From time to time the Fund may
also quote a cumulative or an average annual total return "at net asset value"
(without deducting sales charges) for Class A, Class B, Class C or Class N
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 Fund's Total Returns for the Periods Ended 10/31/00
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cumulative Total Average Annual Total Returns
Class of Returns (10
Shares years or Life of
Class)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5-Year 10-Year
1-Year (or (or
life-of-class) life-of-class)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
After Without After Without After Without After Without
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class A %1 %1 % % % % %1 %1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B %2 %2 % % % % %2 %2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C %3 %3 % % % % %3 %3
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class Y %4 %4 % % %4 %4 % %
--------------------------------------------------------------------------------
1. Inception of Class A: 1/3/89
2. Inception of Class B: 9/1/93
3. Inception of Class C: 9/1/93
4. Inception of Class Y: 12/16/96
Other Performance Comparisons. The Fund compares its performance annually to
that of an appropriate broadly-based market index in its Annual Report to
shareholders. You can obtain that information by contacting the Transfer Agent
at the addresses or telephone numbers shown on the cover of this Statement of
Additional Information. The Fund may also compare its performance to that of
other investments, including other mutual funds, or use rankings of its
performance by independent ranking entities. Examples of these performance
comparisons are set forth below.
|X| Lipper Rankings. From time to time the Fund may publish the ranking of
the performance of its classes of shares by Lipper, Inc. Lipper is 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 stated fund classifications.
Lipper currently ranks the Fund's performance against all other flexible
portfolio funds. 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.
|X| Morningstar Rankings. From time to time the Fund may publish the
ranking and/or star rating of the performance of its classes of shares by
Morningstar, Inc., an independent mutual fund monitoring service. Morningstar
rates and ranks mutual funds in broad investment categories: domestic stock
funds, international stock funds, taxable bond funds and municipal bond funds.
The Fund is included among domestic stock funds.
Morningstar proprietary star historical ratings reflect risk-adjusted
total investment return. Investment return measures a fund's (or class's) 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 is measured by a
fund's (or class's) 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 a fund's category. Five stars is the
"highest" ranking (top 10% of funds in a category), 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's) 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
date of the fund (or class). Rankings are subject to change monthly.
The Fund may also compare its total return ranking to that of other funds
in its Morningstar category, in addition to its star ratings. Those total return
rankings are percentages from one percent to one hundred percent and are not
risk adjusted. For example, if a fund is in the 94th percentile, that means that
94% of the funds in the same category performed better than it did.
|X| Performance Rankings and Comparisons by Other Entities and
Publications. From time to time the Fund may include in its advertisements and
sales literature performance information about the Fund cited in newspapers and
other periodicals such as The New York Times, The Wall Street Journal, Barron's,
or similar publications. That information may include performance quotations
from other sources, including Lipper and Morningstar. The performance of the
Fund's classes of shares may be compared in publications to the performance of
various market indices or other investments, and averages, performance rankings
or other benchmarks prepared by recognized mutual fund statistical services.
Investors may also wish to compare the returns on the Fund's share classes
to the return on fixed-income investments available from banks and thrift
institutions. Those include certificates of deposit, ordinary interest-paying
checking and savings accounts, and other forms of fixed or variable time
deposits, and various other instruments such as Treasury bills. However, the
Fund's returns and share price are not guaranteed or insured by the FDIC or any
other agency and will fluctuate daily, while bank depository obligations may be
insured by the FDIC and may provide fixed rates of return. Repayment of
principal and payment of interest on Treasury securities is backed by the full
faith and credit of the U.S. Government.
From time to time, the Fund may publish rankings or ratings of the Manager
or Transfer Agent, and of the investor services provided by them to shareholders
of the Oppenheimer funds, other than performance rankings of the Oppenheimer
funds themselves. Those ratings or rankings of shareholder and investor services
by third parties may include comparisons of their services to those provided by
other mutual fund families selected by the rating or ranking services. They may
be based upon the opinions of the rating or ranking service itself, using its
research or judgment, or based upon surveys of investors, brokers, shareholders
or others.
ABOUT YOUR ACCOUNT
How to Buy Shares
Additional information is presented below about the methods that can be
used to buy shares of the Fund. Appendix C contains more information about the
special sales charge arrangements offered by the Fund, and the circumstances in
which sales charges may be reduced or waived for certain classes of investors.
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. That instruction must be received prior to the close
of The New York Stock Exchange that day. Dividends will begin to accrue on
shares purchased with the proceeds of ACH transfers on the business day after
the shares are purchased. The Exchange normally closes at 4:00 P.M., but may
close earlier on certain days. The proceeds of ACH transfers are normally
received by the Fund 3 days after the transfers are initiated. If the proceeds
of the ACH transfer are not received on a timely basis, the Distributor reserves
the right to cancel the purchase order. 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 Appendix C to this
Statement of Additional Information because the Distributor or dealer or broker
incurs little or no selling expenses.
|X| 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 for your joint accounts, or for trust or custodial
accounts on behalf of your children who are minors, and
|_|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, and
|_|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.
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. 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 reduced sales charge will apply only to current purchases. You must
request it when you buy shares.
|X| The Oppenheimer Funds. The Oppenheimer funds are those mutual funds for
which the Distributor acts as the distributor or the sub-distributor and
currently include the following:
Oppenheimer Bond Fund Oppenheimer Main Street California Municipal Fund
Oppenheimer Main Street Growth & Income Oppenheimer California Municipal Fund
Fund Oppenheimer Capital Appreciation Fund Oppenheimer Main Street Opportunity
Fund Oppenheimer Capital Income Fund Oppenheimer Main Street Small Cap Fund
Oppenheimer Capital Preservation Fund Oppenheimer MidCap Fund Oppenheimer
Capital Income Fund Oppenheimer Multiple Strategies Fund Oppenheimer Champion
Income Fund Oppenheimer Municipal Bond Fund Oppenheimer Convertible Securities
Fund Oppenheimer New York Municipal Fund Oppenheimer Developing Markets Fund
Oppenheimer New Jersey Municipal Fund Oppenheimer Disciplined Allocation Fund
Oppenheimer Pennsylvania Municipal Fund Oppenheimer Disciplined Value Fund
Oppenheimer Quest Balanced Value Fund Oppenheimer Quest Capital Value Fund,
Oppenheimer Emerging Growth Fund Inc. Oppenheimer Quest Global Value Fund,
Oppenheimer Emerging Technologies Fund Inc. Oppenheimer Discovery Fund
Oppenheimer Quest Opportunity Value Fund Oppenheimer Enterprise Fund Oppenheimer
Quest Small Cap Fund Oppenheimer Europe Fund Oppenheimer Quest Value Fund, Inc.
Oppenheimer Florida Municipal Fund Oppenheimer Real Asset Fund Oppenheimer
Global Fund Oppenheimer Senior Floating Rate Fund Oppenheimer Global Growth &
Income Fund Oppenheimer Strategic Income Fund Oppenheimer Gold & Special
Minerals Fund Oppenheimer Total Return Fund, Inc. Oppenheimer Growth Fund
Oppenheimer Trinity Core Fund Oppenheimer High Yield Fund Oppenheimer Trinity
Growth Fund Oppenheimer Insured Municipal Fund Oppenheimer Trinity Value Fund
Oppenheimer Intermediate Municipal Fund Oppenheimer U.S. Government Trust
Oppenheimer International Bond Fund Oppenheimer World Bond Fund Oppenheimer
International Growth Fund Limited-Term New York Municipal Fund Oppenheimer
International Small Company Fund Rochester Fund Municipals Oppenheimer Large Cap
Growth Fund Oppenheimer Limited-Term Government Fund
And the following money market funds:
Centennial America Fund, L. P. Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust Centennial Tax Exempt Trust
Centennial Government Trust Oppenheimer Cash Reserves
Centennial Money Market Trust Oppenheimer Money Market Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of each
of the Oppenheimer funds except the money market funds. Under certain
circumstances described in this Statement of Additional Information, redemption
proceeds of certain money market fund shares may be subject to a contingent
deferred sales charge.
|X| Letters 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 your intended purchases of
both Class A and Class B shares will determine the reduced sales charge rate for
the Class A shares purchased during that period. You can include purchases made
up to 90 days before the date of the Letter.
A Letter of Intent 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"). At the investor's request, this may 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 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. However, 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. That amount is described in "Terms of
Escrow," below (those terms may be amended by the Distributor 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 a Letter of Intent. If those terms are amended, as they may be from time to
time by the Fund, the investor agrees to be bound by the amended terms and that
those amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent period do
not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
total 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 Prospectus, the sales
charges paid will be adjusted to the lower rate. That adjustment will be made
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.
The Transfer Agent will not hold shares in escrow for purchases of shares
of the Fund and other Oppenheimer funds by OppenheimerFunds prototype 401(k)
plans under a Letter of Intent. If the intended purchase amount under a Letter
of Intent 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.
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.
|X| 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 offering price
adjusted for a $50,000 purchase). Any dividends and capital gains distributions
on the escrowed shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is completed
within the thirteen-month Letter of Intent period, the escrowed shares will be
promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the total
purchases pursuant to the Letter are less than the intended 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. That sales charge adjustment will
apply to any shares redeemed prior to the completion of the Letter. If the
difference in sales charges is not paid within twenty days after a request from
the Distributor or the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares necessary to
realize such difference in sales charges. Full and fractional shares remaining
after such redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales charge, the
sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and appoints
the Transfer Agent as attorney-in-fact to surrender for redemption any or
all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding of which
may be counted toward completion of a Letter) include:
(a) Class A shares sold with a front-end sales charge or subject to a Class A
contingent deferred sales charge,
(b) Class B shares of other Oppenheimer funds acquired subject to a contingent
deferred sales charge, and
(c) Class A or Class B shares acquired by exchange of either (1) 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 (2) 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 to buy shares directly
from a bank account, you must enclose a check (the minimum is $25) for the
initial purchase with your application. Shares purchased by Asset Builder Plan
payments from bank accounts are subject to the redemption restrictions for
recent purchases described in the Prospectus. Asset Builder Plans are available
only if your bank is an ACH member. Asset Builder Plans may not be used to buy
shares for OppenheimerFunds-sponsored qualified retirement accounts. Asset
Builder Plans also enable shareholders of Oppenheimer Cash Reserves to use their
account in that fund to make 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 debited automatically. Normally the debit will
be made two business days prior to the investment dates you selected on your
application. Neither the Distributor, the Transfer Agent nor the Fund shall be
responsible for any delays in purchasing shares that result from delays in ACH
transmissions.
Before you establish Asset Builder payments, you should obtain a
prospectus of the selected fund(s) from your financial advisor (or the
Distributor) and request an application from the Distributor. Complete the
application and return it. You may change the amount of your Asset Builder
payment or your can terminate these automatic investments at any time by writing
to the Transfer Agent. The Transfer Agent requires a reasonable period
(approximately 10 days) after receipt of your instructions to implement them.
The Fund reserves the right to amend, suspend, or discontinue offering Asset
Builder plans at any time without prior notice.
Retirement Plans. Certain types of retirement plans are entitled to purchase
shares of the Fund without sales charge or at reduced sales charge rates, as
described in Appendix C to this Statement of Additional Information. Certain
special sales charge arrangements described in that Appendix apply to retirement
plans whose records are maintained on a daily valuation basis by Merrill Lynch
Pierce Fenner & Smith, Inc. or an independent record keeper that has a contract
or special arrangement with Merrill Lynch. If on the date the plan sponsor
signed the Merrill Lynch record keeping service agreement the plan has less than
$3 million in assets (other than assets invested in money market funds) invested
in applicable investments, then the retirement plan may purchase only Class B
shares of the Oppenheimer funds. Any retirement plans in that category that
currently invest in Class B shares of the Fund will have their Class B shares
converted to Class A shares of the Fund when the plan's applicable investments
reach $5 million.
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.
Classes of Shares. Each class of shares of the Fund represents an interest in
the same portfolio of investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to a class of
shares and the dividends payable on a class of shares will be reduced by
incremental expenses borne solely by that class. Those expenses include the
asset-based sales charges to which Class A, Class B, Class C and Class N are
subject.
The availability of different classes of shares permits an investor to
choose the method of purchasing shares that is more appropriate for the
investor. That may depend on the amount of the purchase, the length of time the
investor expects to hold shares, and other relevant circumstances. Class A
shares normally are sold subject to an initial sales charge. While Class B,
Class C and Class N shares have no initial sales charge, the purpose of the
deferred sales charge and asset-based sales charge on Class B, Class C and Class
N shares is the same as that of the initial sales charge on Class A shares - to
compensate the Distributor and brokers, dealers and financial institutions that
sell shares of the Fund. A salesperson who is entitled to receive compensation
from his or her firm for selling Fund shares may receive different levels of
compensation for selling one class of shares rather than another.
The Distributor will not accept any order in the amount of $500,000 or
more for Class B shares or $1 million or more for Class C shares on behalf of a
single investor (not including dealer "street name" or omnibus accounts). That
is because generally it will be more advantageous for that investor to purchase
Class A shares of the Fund.
|X| Class B Conversion. Under current interpretations of applicable
federal income tax law by the Internal Revenue Service, the conversion of Class
B shares to Class A shares after six years is not treated as a taxable event for
the shareholder. If those laws or the IRS interpretation of those laws should
change, the automatic conversion feature may be suspended. In that event, no
further conversions of Class B shares would occur while that 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
shareholder, and absent such exchange, Class B shares might continue to be
subject to the asset-based sales charge for longer than six years.
|X| Allocation of Expenses. 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.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's share classes recognizes two types of expenses.
General expenses that do not pertain specifically to any one class are allocated
pro rata to the shares of all classes. The allocation is based on the percentage
of the Fund's total assets that is represented by the assets of each class, and
then equally to each outstanding share within a given class. Such general
expenses include management fees, legal, bookkeeping and audit fees, printing
and mailing costs of shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current shareholders, fees to unaffiliated
Trustees, custodian expenses, share issuance costs, organization and start-up
costs, interest, taxes and brokerage commissions, and non-recurring expenses,
such as litigation costs.
Other expenses that are directly attributable to a particular class are
allocated equally to each outstanding share within that class. Examples of such
expenses include distribution and service plan (12b-1) fees, transfer and
shareholder servicing agent fees and expenses, and shareholder meeting expenses
(to the extent that such expenses pertain only to a specific class).
Determination of Net Asset Values Per Share. The net asset values per share of
each class of shares of the Fund are determined as of the close of business of
The New York Stock Exchange on each day that the Exchange is open. The
calculation is done 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
Exchange normally closes at 4:00 P.M., New York time, but may close earlier on
some other days (for example, in case of weather emergencies or on days falling
before a U.S. holiday). The Exchange's most recent annual announcement (which is
subject to change) states that it will close on New Year's Day, Presidents' Day,
Martin Luther King, Jr. Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. It may also close on other days.
Dealers other than Exchange members may conduct trading in certain
securities on days on which the Exchange is closed (including weekends and U.S.
holidays) or after 4:00 P.M. on a regular business day. The Fund's net asset
values will not be calculated on those days, and the values of some of the
Fund's portfolio securities may change significantly on days when shareholders
may not purchase or redeem shares. Additionally, trading on European and Asian
stock exchanges and over-the-counter markets normally is completed before the
close of The New York Stock Exchange.
Changes in the values of securities traded on foreign exchanges or markets
as a result of events that occur after the prices of those securities are
determined, but before the close of The New York Stock Exchange, will not be
reflected in the Fund's calculation of its net asset values that day unless the
Board of Trustees determines that the event is likely to effect a material
change in the value of the security. The Manager may make that determination,
under procedures established by the Board.
|X| Securities Valuation. The Fund's Board of Trustees has established
procedures for the valuation of the Fund's securities. In general those
procedures are as follows:
|_| Equity securities traded on a U.S. securities exchange or on NASDAQ are
valued as follows:
(1) if last sale information is regularly reported, they are valued at the last
reported sale price on the principal exchange on which they are traded or
on NASDAQ, as applicable, on that day, or
(2) if last sale information is not available on a valuation date, they are
valued at the last reported sale price preceding the valuation date if it
is within the spread of the closing "bid" and "asked" prices on the
valuation date or, if not, at the closing "bid" price on the valuation
date.
|_| Equity securities traded on a foreign securities exchange
generally are valued in one of the following ways: (1) at the last sale price
available to the pricing service approved by the Board of
Trustees, or
(2) at the last sale price obtained by the Manager from the report of
the principal exchange on which the security is traded at its
last trading session on or immediately before the valuation date,
or
(3) at the mean between the "bid" and "asked" prices obtained from
the principal exchange on which the security is traded or, on the
basis of reasonable inquiry, from two market makers in the
security.
|_| Long-term debt securities having a remaining maturity in excess of
60 days are valued based on the mean between the "bid" and "asked" 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.
|_| The following securities are valued at the mean between the "bid"
and "asked" 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:
(1) debt instruments that have a maturity of more than 397 days when issued, (2)
debt instruments that had a maturity of 397 days or less when issued and have a
remaining maturity of more than 60 days, and
(3) non-money market debt instruments that had a maturity of 397 days
or less when issued and which have a remaining maturity of 60
days or less.
|_| The following securities are valued at cost, adjusted for amortization
of premiums and accretion of discounts:
(1) money market 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
(2) debt instruments held by a money market fund that have a remaining maturity
of 397 days or less.
|_| 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, a security may be priced at the mean
between the "bid" and "asked" prices provided by a single active market
maker (which in certain cases may be the "bid" price if no "asked" price
is available).
In the case of U.S. Government securities, mortgage-backed securities,
corporate bonds and foreign government securities, when last sale information is
not generally available, the Manager may use pricing services approved by the
Board of Trustees. The pricing service may use "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield, and maturity.
Other special factors may be involved (such as the tax-exempt status of the
interest paid by municipal securities). The Manager will monitor the accuracy of
the pricing services. That monitoring may include comparing prices used for
portfolio valuation to actual sales prices of selected securities.
The closing prices in the London foreign exchange market on a particular
business day that are provided to the Manager by a bank, dealer or pricing
service that the Manager has determined to be reliable are used to value foreign
currency, including forward contracts, and to convert to U.S. dollars securities
that are denominated in foreign currency.
Puts, calls, and futures are valued at the last sale 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, they shall be valued at the last sale
price on the preceding trading day if it is within the spread of the closing
"bid" and "asked" prices on the principal exchange or on NASDAQ on the valuation
date. If not, the 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 by the mean between "bid" and
"asked" prices obtained by the Manager from two active market makers. In certain
cases that may be at the "bid" price if no "asked" 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. 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.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the Prospectus. The
information below provides additional information about the procedures and
conditions for redeeming shares.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of:
|_| Class A shares purchased subject to an initial sales charge or
Class A shares on which a contingent deferred sales charge was paid, or
|_| Class B shares that were subject to the Class B contingent deferred
sales charge when redeemed.
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 in "How to Exchange Shares" below. Reinvestment
will be at the net asset value next computed after the Transfer Agent receives
the reinvestment order. The shareholder must ask the Transfer Agent for that
privilege at the time of reinvestment. This privilege does not apply to Class C
or Class Y shares. 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.
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.
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 liquid securities from the
portfolio of the Fund, in lieu of cash.
The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act. Under that rule, 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 Fund will value securities used to pay redemptions in
kind using the same method the Fund uses to value its portfolio securities
described above under "Determination of Net Asset Values Per Share." That
valuation will be made as of the time the redemption price is determined.
Involuntary Redemptions. The Fund's Board of Trustees has the right to cause the
involuntary redemption of the shares held in any account if the aggregate net
asset value of those shares is less than $500 or such lesser amount as the Board
may fix. The Board will not cause the involuntary redemption of shares in an
account if the aggregate net asset value of such shares has fallen below the
stated minimum solely as a result of market fluctuations. If the Board exercises
this right, it may also fix the requirements for any notice to be given to the
shareholders in question (not less than 30 days). The Board may alternatively
set requirements for the shareholder to increase the investment, or set other
terms and conditions so that the shares would not be involuntarily redeemed.
Transfers of Shares. A transfer of shares to a different registration is not an
event that triggers the payment of sales charges. Therefore, 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. It does not matter
whether the transfer occurs by absolute assignment, gift or bequest, as long as
it does not involve, directly or indirectly, a public sale of the shares. When
shares subject to a contingent deferred sales charge are transferred, the
transferred shares will remain subject to the contingent deferred sales charge.
It will be calculated as if the transferee shareholder had acquired the
transferred shares in the same manner and at the same time as the transferring
shareholder.
If less than all shares held in an account are transferred, and some but
not all shares in the account would be subject to a contingent deferred sales
charge if redeemed at the time of transfer, the priorities described in the
Prospectus under "How to Buy Shares" for the imposition of the Class B or Class
C contingent deferred sales charge will be followed in determining the order in
which shares are transferred.
Selling Shares by Wire. The wire of redemptions proceeds may be delayed if the
Fund's custodian bank is not open for business on a day when the Fund would
normally authorize the wire to be made, which is usually the Fund's next regular
business day following the redemption. In those circumstances, the wire will not
be transmitted until the next bank business day on which the Fund is open for
business. No dividends will be paid on the proceeds of redeemed shares awaiting
transfer by wire.
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: (1) state the reason for the
distribution; (2) state the owner's awareness of tax penalties if the
distribution is premature; and (3) conform to the requirements of the plan and
the Fund's other redemption requirements.
Participants (other than self-employed persons) in
OppenheimerFunds-sponsored pension or profit-sharing plans with shares of the
Fund held in the name of the plan or its fiduciary may not directly request
redemption of their accounts. The plan administrator or fiduciary 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 and submitted to the Transfer Agent
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, 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. Shareholders should contact their
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
an order placed by the dealer or broker. However, if the Distributor receives a
repurchase order from a dealer or broker after the close of The New York Stock
Exchange on a regular business day, it will be processed at that day's net asset
value if the order was received by the dealer or broker from its customers prior
to the time the Exchange closes. Normally, the Exchange closes at 4:00 P.M., but
may do so earlier on some days. Additionally, the order must have been
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. The signature(s) of the registered owners on the redemption
documents must be guaranteed 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
(having a value of at least $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. Payments must also be sent to the address of record for
the account and the address must not have 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 Account
Application or by signature-guaranteed instructions sent to the Transfer Agent.
Shares are normally redeemed pursuant to an Automatic Withdrawal Plan three
business days before the payment transmittal 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. The
Fund reserves the right to amend, suspend or discontinue offering these plans at
any time without prior notice. Because of the sales charge assessed on Class A
share purchases, shareholders should not make regular additional Class A share
purchases while participating in an Automatic Withdrawal Plan. Class B and Class
C shareholders should not establish withdrawal plans, because of the imposition
of the contingent deferred sales charge on such withdrawals (except where the
contingent deferred sales charge is waived as described in Appendix C below).
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions that apply to such plans, as stated below.
These provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, any amendments will automatically apply to existing
Plans.
|X| Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent 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.
Instructions should be provided on the OppenheimerFunds Application or
signature-guaranteed instructions. 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.
|X| Automatic Withdrawal Plans. Fund shares will be redeemed as necessary
to meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first. 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
these plans should not be considered as a yield or income on your investment.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan as agent for the shareholder(s) (the "Planholder") who executed the Plan
authorization and application submitted to the Transfer Agent. Neither the Fund
nor the Transfer Agent shall incur any liability to the Planholder for any
action taken or not taken by the Transfer Agent in good faith to administer the
Plan. Share 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.
Shares will be redeemed to make withdrawal payments at the net asset value
per share determined on the redemption date. Checks or AccountLink payments
representing the proceeds of Plan withdrawals will normally be transmitted three
business days prior to the date selected for receipt of the payment, according
to the choice specified in writing by the Planholder. Receipt of payment on the
date selected cannot be guaranteed.
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 after 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 to redeem all, or any part of, the
shares held under the Plan. That notice must be in proper form in accordance
with the requirements of the then-current Prospectus of the Fund. In that case,
the Transfer Agent will redeem the number of shares requested at the net asset
value per share in effect and will mail a check for the proceeds to the
Planholder.
The Planholder may terminate a Plan at any time by writing to the Transfer
Agent. The Fund may also give directions to the Transfer Agent to terminate a
Plan. The Transfer Agent will also terminate a Plan upon its receipt of evidence
satisfactory to it that the Planholder has died or is legally incapacitated.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that have
not been redeemed will be held in uncertificated form in the name of the
Planholder. The account will continue as a dividend-reinvestment, uncertificated
account unless and until proper instructions are received from the Planholder,
his or her executor or guardian, or another authorized person.
To use shares held under the Plan as collateral for a debt, the Planholder
may request issuance of a portion of the shares in certificated form. Upon
written request from the Planholder, the Transfer Agent will determine the
number of shares for which a certificate may be issued without causing the
withdrawal checks to stop. 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 Oppenheimer funds that have
a single class without a class designation are deemed "Class A" shares for this
purpose. You can obtain a current list showing which funds offer which classes
by calling the Distributor at 1-800-525-7048. o All of the Oppenheimer funds
currently offer Class A, B and 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.
Oppenheimer Main Street California Municipal Fund currently offers only
Class A and Class B shares.
o 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.
o Only certain Oppenheimer Funds currently offer Class Y shares. Class Y
shares of Oppenheimer Real Asset Fund may not be exchanged for shares of
any other Fund.
o Class M Shares of Oppenheimer Convertible Securities Fund may be exchanged
only for Class A shares of other Oppenheimer funds. They may not be
acquired by exchange of shares of any class of any other Oppenheimer funds
except Class A shares of Oppenheimer Money Market Fund or Oppenheimer Cash
Reserves acquired by exchange of Class M shares.
o Class A shares of Oppenheimer Senior Floating Rate Fund are not available
by exchange of shares of Oppenheimer Money Market Fund or Class A shares of
Oppenheimer Cash Reserves. If any Class a shares of another Oppenheimer
fund that are exchanged for Class A share of Oppenheimer Senior Floating
Rate Fund are subject to the Class A contingent deferred sales charge of
the other Oppenheimer fund at the time of exchange, the holding period for
that Class A contingent deferred sales charge will carry over to the Class
A shares of the Oppenheimer Senior Floating Rate o Fund acquired in the
exchange. The Class A shares of Oppenheimer Senior Floating Rate Fund
acquired in that exchange will be subject to the Class A Early Withdrawal
Charge of Oppenheimer Senior Floating Rate Fund if they are repurchased
before the expiration of the holding period.
o Class X shares of Limited Term New York Municipal Fund can be exchanged
only for Class B shares of other Oppenheimer funds and no exchanges may be
made to Class X shares.
o Shares of Oppenheimer Capital Preservation Fund may not be exchanged for
shares of Oppenheimer Money Market Fund, Inc., Oppenheimer Cash Reserves
or Oppenheimer Limited-Term Government Fund. Only participants in certain
retirement plans may purchase shares of Oppenheimer Capital Preservation
Fund, and only those participants may exchange shares of other Oppenheimer
funds for shares of Oppenheimer Capital Preservation Fund.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any money market fund offered by the Distributor. 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. They may also be used to purchase shares of Oppenheimer funds subject to
an early withdrawal charge or contingent deferred sales charge.
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 sales charge or contingent deferred sales
charge. 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. If requested, they
must supply proof of entitlement to this privilege.
Shares of the Fund acquired by reinvestment of dividends or distributions
from any of the other Oppenheimer funds 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.
|X| How Exchanges Affect Contingent Deferred Sales Charges. No contingent
deferred sales charge is imposed on exchanges of shares of any class purchased
subject to a contingent deferred sales charge. However, when Class A shares
acquired by exchange of Class A shares of other Oppenheimer funds purchased
subject to a Class A contingent deferred sales charge are redeemed within 18
months 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. 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 or the Class C contingent deferred sales charge will be followed
in determining the order in which the shares are exchanged. Before exchanging
shares, shareholders should take into account how the exchange may affect any
contingent deferred sales charge that might be imposed in the subsequent
redemption of remaining shares. With respect to Class N shares, if you redeem
your shares within 18 months of the retirement plan's first purchase or the
retirement plan eliminates the Fund as a plan investment option within 18 months
of selecting the Fund, a 1% contingent deferred sales charge will be imposed on
the plan. Shareholders owning shares of more than one Class must specify which
class of shares they wish to exchange.
Shareholders owning shares of more than one class must specify which class
of shares they wish to exchange.
|X| Limits on Multiple Exchange Orders. 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.
|X| Telephone Exchange Requests. When exchanging shares by telephone, a
shareholder must have an existing account in the fund to which the exchange is
to be made. Otherwise, the investors must obtain a Prospectus of that fund
before the exchange request may be submitted. When you exchange some or all of
your shares from one Fund to another, any special account feature such as an
Asset Builder Plan or Automatic Withdrawal Plan, will be switched to the new
fund account unless you tell the Transfer Agent not to do so. However, special
redemption and exchange features such as Automatic Exchange Plans and Automatic
Withdrawal Plans cannot be switched to an account in Oppenheimer Senior Floating
Rate Fund. 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.
|X| Processing 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 Fund may refuse the
request. For full or partial exchanges of an account made by telephone, any
special account features such as Asset Builder Plans and Automatic Withdrawal
Plans will be switched to the new account unless the Transfer Agent is
instructed otherwise.
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.
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks. 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
Dividends and Distributions. The Fund has no fixed dividend rate and there can
be no assurance as to the payment of any dividends or the realization of any
capital gains. The dividends and distributions paid by a class of shares will
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.
Dividends are calculated in the same manner, at the same time, and on the same
day for each class of shares. However, dividends on Class B, Class C and Class N
shares are expected to be lower than dividends on Class A and Class Y shares.
That is because of the effect of the higher asset-based sales charge on Class B,
Class C and Class N shares. Those dividends will also differ in amount as a
consequence of any difference in the net asset values of each class of shares.
Dividends, distributions and 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.
Reinvestment will be made 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. Unclaimed accounts may be subject to state escheatment
laws, and the Fund and the Transfer Agent will not be liable to shareholders or
their representatives for compliance with those laws in good faith.
Tax Status of the Fund's Dividends and Distributions. The federal tax treatment
of the Fund's dividends and capital gains distributions is briefly highlighted
in the Prospectus.
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. The amount of dividends paid by the Fund that may qualify for the
deduction is limited to the aggregate amount of qualifying dividends that the
Fund derives from 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. If it
does not, the Fund must pay an excise tax on the amounts not distributed. It is
presently anticipated that the Fund will meet those requirements. However, the
Board of Trustees and the Manager might determine in a particular year that it
would be in the best interests 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.
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). If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for federal income taxes on amounts
paid by it as dividends and distributions. The Fund qualified as a regulated
investment company in its last fiscal year. The Internal Revenue Code contains a
number of complex tests relating to qualification which the Fund might not meet
in any particular year. If it did not so qualify, the Fund would be treated for
tax purposes as an ordinary corporation and receive no tax deduction for
payments made to shareholders.
If prior distributions made by the Fund must be re-characterized as a
non-taxable return of capital at the end of the fiscal year as a result of the
effect of the Fund's investment policies, they will be identified as such in
notices sent to shareholders.
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 above. Reinvestment will be
made without sales charge at the net asset value per share in effect at the
close of business on the payable date of the dividend or distribution. To elect
this option, the shareholder must notify the Transfer Agent in writing and must
have an existing account in the fund selected for reinvestment. Otherwise the
shareholder first must obtain a prospectus for that fund and an application from
the Distributor to establish an account. Dividends and/or distributions from
shares of certain other Oppenheimer funds (other than Oppenheimer Cash Reserves)
may be invested in shares of this Fund on the same basis.
Additional Information About the Fund
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 shares of the other Oppenheimer
funds and is sub-distributor for funds managed by a subsidiary of the Manager.
The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is a
division of the Manager. It is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for paying
dividends and distributions to shareholders. It also handles shareholder
servicing and administrative functions. The Fund pays the Transfer Agent a fixed
annual maintenance fee for each shareholder account and reimburses the Transfer
Agent for its out-of-pocket expenses. It also acts as shareholder servicing
agent for the other Oppenheimer funds. Shareholders should direct inquiries
about their accounts to the Transfer Agent at the address and toll-free numbers
shown on the back cover.
|X| Shareholder Servicing Agent for Certain Shareholders. Unified
Management Corporation (1.800.346.4601) is the shareholder servicing agent for
shareholders of the Fund who were former shareholders of the AMA Family of Funds
and clients of AMA Investment Advisers, Inc. (which had been the investment
adviser of AMA Family of Funds). It is also the servicing agent for Fund
shareholders who are:
(i) former shareholders of the Unified Funds and Liquid Green Trusts,
(ii) accounts that participated or participate in a retirement plan for which
Unified Investment Advisers, Inc. or an affiliate acts as custodian or
trustee,
(iii) accounts that have a Money Manager brokerage account, and
(iv) other accounts for which Unified Management Corporation is the dealer of
record.
The Custodian. Citibank, N.A. is the custodian bank of the Fund's assets. The
custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities and handling the delivery of such securities to and from
the Fund. It will be the practice of the Fund to deal with the custodian in a
manner uninfluenced by any banking relationship the custodian may have with the
Manager and its affiliates. The Fund's cash balances with the custodian in
excess of $100,000 are not protected by Federal Deposit Insurance. Those
uninsured balances at times may be substantial.
Independent Accountants. KMPG LLP are the independent accountants of the Fund.
They audit the Fund's financial statements and perform other related audit
services. They also act as independent accountants for certain other funds
advised by the Manager and its affiliates. Prior to March 2000,
PricewaterhouseCooper LLP served as the Fund's independent accountants.
<PAGE>
Appendix A
RATINGS DEFINITIONS
Below are summaries of the rating definitions used by the nationally-recognized
rating agencies listed below. Those ratings represent the opinion of the agency
as to the credit quality of issues that they rate. The summaries below are based
upon publicly-available information provided by the rating organizations.
Moody's Investors Service, Inc.
--------------------------------------------------------------------------------
Long-Term (Taxable) Bond Ratings
Aaa: Bonds rated "Aaa" are judged to be the best quality. They carry the
smallest degree of investment risk. Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, the changes that can be expected are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds rated "Aa" are judged to be of high quality by all standards. Together
with the "Aaa" group, they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as with "Aaa" securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than that of "Aaa"
securities.
A: Bonds rated "A" possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the future.
Baa: Bonds rated "Baa" are considered medium-grade obligations; that is, they
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and have speculative
characteristics as well.
Ba: Bonds rated "Ba" are judged to have speculative elements. Their future
cannot be considered well-assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B: Bonds rated "B" generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa: Bonds rated "Caa" are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Ca: Bonds rated "Ca" represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C: Bonds rated "C" are the lowest class of rated bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Con. (...): Bonds for which the security depends on the completion of some act
or the fulfillment of some condition are rated conditionally. These bonds are
secured by (a) earnings of projects under construction, (b) earnings of projects
unseasoned in operating experience, (c) rentals that begin when facilities are
completed, or (d) payments to which some other limiting condition attaches. The
parenthetical rating denotes probable credit stature upon completion of
construction or elimination of the basis of the condition.
Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from "Aa" through "Caa." The modifier "1" indicates that the
obligation ranks in the higher end of its generic rating category; the modifier
"2" indicates a mid-range ranking; and the modifier "3" indicates a ranking in
the lower end of that generic rating category. Advanced refunded issues that are
secured by certain assets are identified with a # symbol.
Short-Term Ratings - Taxable Debt
These ratings apply to the ability of issuers to honor senior debt obligations
having an original maturity not exceeding one year:
Prime-1: Issuer has a superior ability for repayment of senior short-term debt
obligations.
Prime-2: Issuer has a strong ability for repayment of senior short-term debt
obligations. Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
Prime-3: Issuer has an acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market compositions may
be more pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require relatively
high financial leverage. Adequate alternate liquidity is maintained.
Not Prime: Issuer does not fall within any Prime rating category.
Standard & Poor's Rating Services
--------------------------------------------------------------------------------
Long-Term Credit Ratings
AAA: Bonds rated "AAA" have the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA: Bonds rated "AA" differ from the highest rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A: Bonds rated "A" are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB: Bonds rated "BBB" exhibit adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
BB, B, CCC, CC, and C
Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded as having significant
speculative characteristics. "BB" indicates the least degree of speculation, and
"C" the highest. While such obligations will likely have some quality and
protective characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions. BB: Bonds rated "BB" are less vulnerable
to nonpayment than other speculative issues. However, these face major ongoing
uncertainties or exposure to adverse business, financial, or economic conditions
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
B: Bonds rated "B" are more vulnerable to nonpayment than obligations rated
"BB", but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
CCC: Bonds rated "CCC" are currently vulnerable to nonpayment, and are dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.
CC: Bonds rated "CC" are currently highly vulnerable to nonpayment.
C: A subordinated debt or preferred stock obligation rated "C" is currently
highly vulnerable to nonpayment. The "C" rating may be used to cover a situation
where a bankruptcy petition has been filed or similar action has been taken, but
payments on this obligation are being continued. A "C" also will be assigned to
a preferred stock issue in arrears on dividends or sinking fund payments, but
that is currently paying.
D: Bonds rated "D" are in default. Payments on the obligation are not being made
on the date due even if the applicable grace period has not expired, unless
Standard and Poor's believes that such payments will be made during such grace
period. The "D" rating will also be used upon the filing of a bankruptcy
petition or the taking of a similar action if payments on an obligation are
jeopardized.
The ratings from "AA" to "CCC" may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories. The
"r" symbol is attached to the ratings of instruments with significant noncredit
risks.
Short-Term Issue Credit Ratings
--------------------------------------------------------------------------------
A-1: Obligation is rated in the highest category. The obligor's capacity to meet
its financial commitment on the obligation is strong. Within this category, a
plus (+) sign designation indicates the obligor's capacity to meet its financial
obligation is extremely strong.
A-2: Obligation is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than obligations in higher rating
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.
A-3: Obligation exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
B: Obligation is regarded as having significant speculative characteristics. The
obligor currently has the capacity to meet its financial commitment on the
obligation. However, it faces major ongoing uncertainties which could lead to
the obligor's inadequate capacity to meet its financial commitment on the
obligation.
C: Obligation is currently vulnerable to nonpayment and is dependent upon
favorable business, financial, and economic conditions for the obligor to meet
its financial commitment on the obligation.
D: Obligation is in payment default. Payments on the obligation have not been
made on the due date even if the applicable grace period has not expired, unless
Standard and Poor's believes that such payments will be made during such grace
period. The "D" rating will also be used upon the filing of a bankruptcy
petition or the taking of a similar action if payments on an obligation are
jeopardized.
Fitch, Inc.
--------------------------------------------------------------------------------
International Long-Term Credit Ratings
Investment Grade:
AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong capacity
for timely payment of financial commitments. This capacity is highly unlikely to
be adversely affected by foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very low expectation of
credit risk. They indicate a very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
A: High Credit Quality. "A" ratings denote a low expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB: Good Credit Quality. "BBB" ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
Speculative Grade:
BB: Speculative. "BB" ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time. However, business or financial alternatives may be available to allow
financial commitments to be met. Securities rated in this category are not
investment grade.
B: Highly Speculative. "B" ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met. However, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.
CCC, CC C: High Default Risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A "CC" rating indicates that default of some
kind appears probable. "C" ratings signal imminent default.
DDD, DD, and D: Default. The ratings of obligations in this category are based
on their prospects for achieving partial or full recovery in a reorganization or
liquidation of the obligor. While expected recovery values are highly
speculative and cannot be estimated with any precision, the following serve as
general guidelines. "DDD" obligations have the highest potential for recovery,
around 90%-100% of outstanding amounts and accrued interest. "DD" indicates
potential recoveries in the range of 50%-90%, and "D" the lowest recovery
potential, i.e., below 50%.
Entities rated in this category have defaulted on some or all of their
obligations. Entities rated "DDD" have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process. Entities rated "DD" and "D" are generally undergoing a formal
reorganization or liquidation process; those rated "DD" are likely to satisfy a
higher portion of their outstanding obligations, while entities rated "D" have a
poor prospect for repaying all obligations.
Plus (+) and minus (-) signs may be appended to a rating symbol to denote
relative status within the major rating categories. Plus and minus signs are not
added to the "AAA" category or to categories below "CCC," nor to short-term
ratings other than "F1" (see below).
International Short-Term Credit Ratings
F1: Highest credit quality. Strongest capacity for timely payment of financial
commitments. May have an added "+" to denote any exceptionally strong credit
feature.
F2: Good credit quality. A satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as in the case of higher
ratings.
F3: Fair credit quality. Capacity for timely payment of financial commitments is
adequate. However, near-term adverse changes could result in a reduction to
non-investment grade.
B: Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.
C: High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
D: Default. Denotes actual or imminent payment default.
--------------------------------------------------------------------------------
<PAGE>
Appendix B
--------------------------------------------------------------------------------
Industry Classifications
--------------------------------------------------------------------------------
Aerospace/Defense Food and Drug Retailers
Air Transportation Gas Utilities
Asset-Backed Health Care/Drugs
Auto Parts and Equipment Health Care/Supplies & Services
Automotive Homebuilders/Real Estate
Bank Holding Companies Hotel/Gaming
Banks Industrial Services
Beverages Information Technology
Broadcasting Insurance
Broker-Dealers Leasing & Factoring
Building Materials Leisure
Cable Television Manufacturing
Chemicals Metals/Mining
Commercial Finance Nondurable Household Goods
Communication Equipment Office Equipment
Computer Hardware Oil - Domestic
Computer Software Oil - International
Conglomerates Paper
Consumer Finance Photography
Consumer Services Publishing
Containers Railroads & Truckers
Convenience Stores Restaurants
Department Stores Savings & Loans
Diversified Financial Shipping
Diversified Media Special Purpose Financial
Drug Wholesalers Specialty Printing
Durable Household Goods Specialty Retailing
Education Steel
Electric Utilities Telecommunications - Long Distance
Electrical Equipment Telephone - Utility
Electronics Textile, Apparel & Home Furnishings
Energy Services Tobacco
Entertainment/Film Trucks and Parts
Environmental Wireless Services
Food
<PAGE>
Appendix C
OppenheimerFunds Special Sales Charge
Arrangements and Waivers
In certain cases, the initial sales charge that applies to purchases of Class A
shares1 of the Oppenheimer funds or the contingent deferred sales charge that
may apply to Class A, Class B, Class C or Class N shares may be waived.2 That is
because of the economies of sales efforts realized by OppenheimerFunds
Distributor, Inc., (referred to in this document as the "Distributor"), or by
dealers or other financial institutions that offer those shares to certain
classes of investors.
Not all waivers apply to all funds. For example, waivers relating to Retirement
Plans do not apply to Oppenheimer municipal funds, because shares of those funds
are not available for purchase by or on behalf of retirement plans. Other
waivers apply only to shareholders of certain funds.
For the purposes of some of the waivers described below and in the Prospectus
and Statement of Additional Information of the applicable Oppenheimer funds, the
term "Retirement Plan" refers to the following types of plans:
(1) plans qualified under Sections 401(a) or 401(k) of the Internal
Revenue Code,
(2) non-qualified deferred compensation plans,
(3) employee benefit plans3
(4) Group Retirement Plans4
(5) 403(b)(7) custodial plan accounts
(6) Individual Retirement Accounts ("IRAs"), including traditional IRAs,
Roth IRAs, SEP-IRAs, SARSEPs or SIMPLE plans
The interpretation of these provisions as to the applicability of a special
arrangement or waiver in a particular case is in the sole discretion of the
Distributor or the transfer agent (referred to in this document as the "Transfer
Agent") of the particular Oppenheimer fund. These waivers and special
arrangements may be amended or terminated at any time by a particular fund, the
Distributor, and/or OppenheimerFunds, Inc. (referred to in this document as the
"Manager"). Waivers that apply at the time shares are redeemed must be requested
by the shareholder and/or dealer in the redemption request.
--------------
1. Certain waivers also apply to
Class M shares of Oppenheimer
Convertible Securities Fund.
2. In the case of Oppenheimer Senior Floating Rate Fund, a continuously-offered
closed-end fund, references to contingent deferred sales charges mean the
Fund's Early Withdrawal Charges and references to "redemptions" mean
"repurchases" of shares.
3. An "employee benefit plan" means any plan or arrangement, whether or not it
is "qualified" under the Internal Revenue Code, under which Class A shares of
an Oppenheimer fund or funds are purchased by a fiduciary or other
administrator for the account of participants who are employees of a single
employer or of affiliated employers. These may include, for example, medical
savings accounts, payroll deduction plans or similar plans. The fund accounts
must be registered in the name of the fiduciary or administrator purchasing
the shares for the benefit of participants in the plan.
4. The term "Group Retirement Plan" means any qualified or non-qualified
retirement plan for employees of a corporation or 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 has made special arrangements with the Distributor and all members of
the group participating in (or who are eligible to participate in) the plan
purchase Class A shares of an Oppenheimer fund or funds through a single
investment dealer, broker or other financial institution designated by the
group. Such plans include 457 plans, SEP-IRAs, SARSEPs, SIMPLE plans and
403(b) plans other than plans for public school employees. The term "Group
Retirement Plan" also includes qualified retirement plans and non-qualified
deferred compensation plans and IRAs that purchase Class A shares of an
Oppenheimer fund or funds through a single investment dealer, broker or other
financial institution that has made special arrangements with the Distributor
enabling those plans to purchase Class A shares at net asset value but
subject to the Class A contingent deferred sales charge.
I. Applicability of Class A Contingent
Deferred Sales Charges in Certain Cases
Purchases of Class A Shares of Oppenheimer Funds That Are Not Subject to Initial
Sales Charge but May Be Subject to the Class A Contingent Deferred Sales Charge
(unless a waiver applies).
There is no initial sales charge on purchases of Class A shares of any of
the Oppenheimer funds in the cases listed below. However, these purchases may be
subject to the Class A contingent deferred sales charge if redeemed within 18
months of the end of the calendar month of their purchase, as described in the
Prospectus (unless a waiver described elsewhere in this Appendix applies to the
redemption). Additionally, on shares purchased under these waivers that are
subject to the Class A contingent deferred sales charge, the Distributor will
pay the applicable commission described in the Prospectus under "Class A
Contingent Deferred Sales Charge."2 This waiver provision applies to:
|_| Purchases of Class A shares aggregating $1 million or more.
|_| Purchases by a Retirement Plan (other than an IRA or 403(b)(7)
custodial plan) that:
(1) buys shares costing $500,000 or more, or
(2) has, at the time of purchase, 100 or more eligible employees or total plan
assets of $500,000 or more, or
(3) certifies to the Distributor that it projects to have annual plan purchases
of $200,000 or more.
|_| Purchases by an OppenheimerFunds-sponsored 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 those 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.
|_| Purchases of Class A shares by Retirement Plans that have any of the
following record-keeping arrangements:
(1) The record keeping is performed by Merrill Lynch Pierce Fenner & Smith,
Inc. ("Merrill Lynch") on a daily valuation basis for the Retirement Plan. On
the date the plan sponsor signs the record-keeping service agreement with
Merrill Lynch, the Plan must have $3 million or more of its assets invested in
(a) mutual funds, other than those advised or managed by Merrill Lynch Asset
Management, L.P. ("MLAM"), that are made available under a Service Agreement
between Merrill Lynch and the mutual fund's principal underwriter or
distributor, and (b) funds advised or managed by MLAM (the funds described in
(a) and (b) are referred to as "Applicable Investments").
(2) The record keeping for the Retirement Plan is performed on a daily
valuation basis by a 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 record keeping service agreement with Merrill Lynch, the
Plan must have $3 million or more of its assets (excluding assets invested in
money market funds) invested in Applicable Investments.
(3) The record keeping for a Retirement Plan is handled under a service
agreement with Merrill Lynch and on the date the plan sponsor signs that
agreement, the Plan has 500 or more eligible employees (as determined by the
Merrill Lynch plan conversion manager).
|_| Purchases by a Retirement Plan whose record keeper had a
cost-allocation agreement with the Transfer Agent on or before May 1,
1999.
<PAGE>
II. Waivers of Class A Sales Charges of Oppenheimer Funds
A. 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 (and no commissions are paid by the Distributor on such
purchases):
|_| The Manager or its affiliates.
|_| Present or former officers, directors, trustees and employees (and their
"immediate families") of the Fund, the Manager and its affiliates, and
retirement plans established by them for their employees. The term "immediate
family" refers to one's spouse, children, grandchildren, grandparents, parents,
parents-in-law, brothers and sisters, sons- and daughters-in-law, a sibling's
spouse, a spouse's siblings, aunts, uncles, nieces and nephews; relatives by
virtue of a remarriage (step-children, step-parents, etc.) are included.
|_| Registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose.
|_| 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.
|_| 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 which are identified as such 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).
|_| Dealers, brokers, banks or registered investment advisors 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,
bank or advisor for the purchase or sale of Fund shares.
|_| 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.
|_| "Rabbi trusts" that buy shares for their own accounts, if the purchases are
made through a broker or agent or other financial intermediary that has made
special arrangements with the Distributor for those purchases.
|_| Clients of 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.
|_| 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.
|_| Accounts for which Oppenheimer Capital (or its successor) is the investment
advisor (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.
|_| A unit investment trust that has entered into an appropriate agreement with
the Distributor.
|_| Dealers, brokers, banks, or registered investment advisers that have entered
into an agreement with the Distributor to sell shares to defined contribution
employee retirement plans for which the dealer, broker or investment adviser
provides administration services.
|-|
<PAGE>
Retirement Plans and deferred compensation plans and trusts used to fund those
plans (including, for example, plans qualified or created under sections 401(a),
401(k), 403(b) or 457 of the Internal Revenue Code), in each case if those
purchases are made through a broker, agent or other financial intermediary that
has made special arrangements with the Distributor for those purchases.
|_| A TRAC-2000 401(k) plan (sponsored by the former Quest for Value Advisors)
whose Class B or Class C shares of a Former Quest for Value Fund were exchanged
for Class A shares of that Fund due to the termination of the Class B and Class
C TRAC-2000 program on November 24, 1995.
|_| A qualified Retirement Plan 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, if that arrangement was consummated and share
purchases commenced by December 31, 1996.
B. 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 sales charges (and no commissions are paid by the Distributor on such
purchases):
|_| Shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party.
|_| 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.
|_| Shares purchased through a broker-dealer that has entered into a
special agreement with the Distributor to allow the broker's customers to
purchase and pay for shares of Oppenheimer funds using the proceeds of shares
redeemed in the prior 30 days from a mutual fund (other than a fund managed by
the Manager or any of its subsidiaries) on which an initial sales charge or
contingent deferred sales charge was paid. This waiver also applies to shares
purchased by exchange of shares of Oppenheimer Money Market Fund, Inc. that were
purchased and paid for in this manner. This waiver must be requested when the
purchase order is placed for shares of the Fund, and the Distributor may require
evidence of qualification for this waiver.
|_| Shares purchased with the proceeds of maturing principal units of any
Qualified Unit Investment Liquid Trust Series.
|_| Shares purchased by the reinvestment of loan repayments by a
participant in a Retirement Plan for which the Manager or an affiliate acts as
sponsor.
C. 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:
|_| To make Automatic Withdrawal Plan payments that are limited annually
to no more than 12% of the account value adjusted annually.
|_| Involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (please refer to "Shareholder Account
Rules and Policies," in the applicable fund Prospectus).
|_| 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.3
(5) Under a Qualified Domestic Relations Order, as defined in the Internal
Revenue Code, or, in the case of an IRA, a divorce or separation agreement
described in Section 71(b) of the Internal Revenue Code.
(6) To meet the minimum distribution requirements of the Internal Revenue
Code.
(7) To make "substantially equal periodic payments" as described in Section
72(t) of the Internal Revenue Code.
(8) For loans to participants or beneficiaries.
(9) Separation from service.4
(10) Participant-directed redemptions to purchase shares of a mutual fund
(other than a fund managed by the Manager or a subsidiary of the Manager) if the
plan has made special arrangements with the Distributor.
(11) Plan termination or "in-service distributions," if the redemption
proceeds are rolled over directly to an OppenheimerFunds-sponsored IRA.
|_| For distributions from Retirement Plans having 500 or more eligible
employees, except distributions due to termination of all of the
Oppenheimer funds as an investment option under the Plan.
|_| For distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing
this waiver.
III. Waivers of Class B, Class C and Class N Sales Charges of Oppenheimer Funds
The Class B, Class C and Class N contingent deferred sales charges will not be
applied to shares purchased in certain types of transactions or redeemed in
certain circumstances described below.
A. Waivers for Redemptions in Certain Cases.
The Class B, Class C and Class N contingent deferred sales charges will be
waived for redemptions of shares in the following cases:
|_| Shares redeemed involuntarily, as described in "Shareholder Account Rules
and Policies," in the applicable Prospectus.
|_| 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.
|_| Distributions from accounts for which the broker-dealer of record has
entered into a special agreement with the Distributor allowing this waiver.
|_| Redemptions of Class B shares 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.
|_| Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
accounts of clients of financial institutions that have entered into a special
arrangement with the Distributor for this purpose.
|_| Redemptions requested in writing by a Retirement Plan sponsor of Class C
shares of an Oppenheimer fund in amounts of $1 million or more held by the
Retirement Plan for more than one year, if the redemption proceeds are invested
in Class A shares of one or more Oppenheimer funds.
|-|
<PAGE>
Distributions from Retirement 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 in an
Oppenheimer fund.
(2) To return excess contributions made to a participant's account.
(3) To return contributions made due to a mistake of fact.
(4) To make hardship withdrawals, as defined in the plan.5
(5) To make distributions required under a Qualified Domestic Relations
Order or, in the case of an IRA, a divorce or separation agreement
described in Section 71(b) of the Internal Revenue Code.
(6) To meet the minimum distribution requirements of the Internal Revenue
Code.
(7) To make "substantially equal periodic payments" as described in
Section 72(t) of the Internal Revenue Code.
(8) For loans to participants or beneficiaries.6
(9) On account of the participant's separation from service.7
(10) Participant-directed redemptions to purchase shares of a mutual fund
(other than a fund managed by the Manager or a subsidiary of the
Manager) offered as an investment option in a Retirement Plan if the
plan has made special arrangements with the Distributor.
(11) Distributions made on account of a plan termination or "in-service"
distributions, if the redemption proceeds are rolled over directly to
an OppenheimerFunds-sponsored IRA.
(12) Distributions from Retirement Plans having 500 or more eligible
employees, but excluding distributions made because of the Plan's
elimination as investment options under the Plan of all of the
Oppenheimer funds that had been offered.
(13) For distributions from a participant's account under an Automatic
Withdrawal Plan after the participant reaches age 59 1/2 , as long as
the aggregate value of the distributions does not exceed 10% of the
account's value, adjusted annually.
(14) Redemptions of Class B shares under an Automatic Withdrawal Plan for
an account other than a Retirement Plan, if the aggregate value of the
redeemed shares does not exceed 10% of the account's value, adjusted
annually.
|_|Redemptions of Class B shares, Class C shares or Class N shares under
an Automatic Withdrawal Plan from an account other than a Retirement
Plan if the aggregate value of the redeemed shares does not exceed 10%
of the account's value annually.
B. Waivers for Shares Sold or Issued in Certain Transactions.
The contingent deferred sales charge is also waived on Class B, Class C and
Class N shares sold or issued in the following cases:
|_| Shares sold to the Manager or its affiliates.
|_| 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.
|_| Shares issued in plans of reorganization to which the Fund is a party.
|_| Shares sold to present or former officers, directors, trustees or
employees (and their "immediate families" as defined above in Section I.A.) of
the Fund, the Manager and its affiliates and retirement plans established by
them for their employees.
<PAGE>
IV. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
Funds Who Were Shareholders of Former Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers for Class A,
Class B and Class C shares described in the Prospectus or Statement of
Additional Information of the Oppenheimer funds are modified as described below
for certain persons who were shareholders of the former Quest for Value Funds.
To be eligible, those persons must have been shareholders on November 24, 1995,
when OppenheimerFunds, Inc. became the investment advisor to those former Quest
for Value Funds. Those funds include:
<PAGE>
Oppenheimer Quest Value Fund, Inc. Oppenheimer Quest Small Cap Fund
Oppenheimer Quest Balanced Value Fund Oppenheimer Quest Global Value Fund
Oppenheimer Quest Opportunity Value
Fund
These arrangements also apply to shareholders of the following funds when
they merged (were reorganized) into various Oppenheimer funds on November 24,
1995:
Quest for Value U.S. Government Quest for Value New York Tax-Exempt
Income Fund Fund
Quest for Value Investment Quality Quest for Value National Tax-Exempt
Income Fund Fund
Quest for Value Global Income Fund Quest for Value California Tax-Exempt
Fund
All of the funds listed above are referred to in this Appendix as the
"Former Quest for Value Funds." The waivers of initial and contingent deferred
sales charges described in this Appendix apply to shares of an Oppenheimer fund
that are either: |_| acquired by such shareholder pursuant to an exchange of
shares of an Oppenheimer fund
that was one of the Former Quest for Value Funds, or
|_| purchased by such shareholder by exchange of shares of another
Oppenheimer fund that were acquired pursuant to the merger of any of
the Former Quest for Value Funds into that other Oppenheimer fund on
November 24, 1995.
A. Reductions or Waivers of Class A Sales Charges.
|X| Reduced Class A Initial Sales Charge Rates for Certain Former Quest for
Value Funds Shareholders.
Purchases by Groups and Associations. The following table sets forth the initial
sales charge rates for Class A shares purchased by members of "Associations"
formed for any purpose other than the purchase of securities. The rates in the
table apply if 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.
--------------------------------------------------------------------------------
Initial Sales Initial Sales
Number of Eligible Charge as a % of Charge as a % of Commission as %
Employees or Members Offering Price Net Amount Invested of 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
--------------------------------------------------------------------------------
<PAGE>
For purchases by 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 in the applicable fund's Prospectus.
Purchases made under this arrangement qualify for the lower of either the
sales charge rate in the table based on the number of members of an Association,
or the sales charge rate that applies under the Right of Accumulation described
in the applicable fund's Prospectus and Statement of Additional Information.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations also may purchase shares for their individual or
custodial accounts at these reduced sales charge rates, upon request to the
Distributor.
|X| Waiver of Class A Sales Charges for Certain Shareholders. Class A
shares purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
|_| Shareholders 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.
|_| Shareholders who acquired shares of any Former Quest for Value Fund
by merger of any of the portfolios of the Unified Funds.
|X| 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 purchased by the following investors who were
shareholders of any Former Quest for Value Fund:
Investors who purchased Class A shares from a dealer that is or was not
permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship, under the Employee
Retirement Income Security Act of 1974 and regulations adopted under that law.
B. Class A, Class B and Class C Contingent Deferred Sales Charge Waivers.
|X| 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 an Oppenheimer fund. The
shares must have been acquired by the 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. Those shares must have been
purchased prior to March 6, 1995 in connection with:
|_| 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 value, adjusted annually, and
|_| 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.
|X| 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 an Oppenheimer fund. The shares must have been acquired by the 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
Former Quest for Value Fund merged. Those shares must have been purchased on or
after March 6, 1995, but prior to November 24, 1995:
|_| redemptions following the death or disability of the shareholder(s) (as
evidenced by a determination of total disability by the U.S. Social Security
Administration);
|_| 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 value; adjusted annually, and
|_| 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 Oppenheimer fund described in this section if the proceeds are
invested in the same Class of shares in that fund or another Oppenheimer fund
within 90 days after redemption.
V. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
Funds Who Were Shareholders of Connecticut Mutual Investment Accounts, Inc.
The initial and contingent deferred sale charge rates and waivers for Class A
and Class B shares described in the respective Prospectus (or this Appendix) of
the following Oppenheimer funds (each is referred to as a "Fund" in this
section):
o Oppenheimer U. S. Government Trust,
o Oppenheimer Bond Fund,
o Oppenheimer Disciplined Value Fund and
o Oppenheimer Disciplined Allocation Fund
are modified as described below for those Fund shareholders who were
shareholders of the following funds (referred to as the "Former Connecticut
Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the
investment adviser to the Former Connecticut Mutual Funds:
Connecticut Mutual Liquid Account Connecticut Mutual Total Return Account
Connecticut Mutual Government Securities CMIA LifeSpan Capital Appreciation
Account Account Connecticut Mutual Income Account CMIA LifeSpan Balanced Account
Connecticut Mutual Growth Account CMIA Diversified Income Account
A. Prior Class A CDSC and Class A Sales Charge Waivers.
|_| Class A Contingent Deferred Sales Charge. Certain shareholders of a
Fund and the other Former Connecticut Mutual Funds are entitled to continue to
make additional purchases of Class A shares at net asset value without a Class A
initial sales charge, but subject to the Class A contingent deferred sales
charge that was in effect prior to March 18, 1996 (the "prior Class A CDSC").
Under the prior Class A CDSC, if any of those shares are redeemed within one
year of purchase, they will be assessed a 1% contingent deferred sales charge on
an amount equal to the current market value or the original purchase price of
the shares sold, whichever is smaller (in such redemptions, any shares not
subject to the prior Class A CDSC will be redeemed first).
Those shareholders who are eligible for the prior Class A CDSC are:
(1) persons whose purchases of Class A shares of a Fund and other Former
Connecticut Mutual Funds were $500,000 prior to March 18, 1996, as a result of
direct purchases or purchases pursuant to the Fund's policies on Combined
Purchases or Rights of Accumulation, who still hold those shares in that Fund or
other Former Connecticut Mutual Funds, and
(2) persons whose intended purchases under a Statement of Intention entered into
prior to March 18, 1996, with the former general distributor of the Former
Connecticut Mutual Funds to purchase shares valued at $500,000 or more over a
13-month period entitled those persons to purchase shares at net asset value
without being subject to the Class A initial sales charge.
Any of the Class A shares of a Fund and the other Former Connecticut
Mutual Funds that were purchased at net asset value prior to March 18, 1996,
remain subject to the prior Class A CDSC, or if any additional shares are
purchased by those shareholders at net asset value pursuant to this arrangement
they will be subject to the prior Class A CDSC.
|_| Class A Sales Charge Waivers. Additional Class A shares of a Fund may
be purchased without a sales charge, by a person who was in one (or more) of the
categories below and acquired Class A shares prior to March 18, 1996, and still
holds Class A shares:
(1) any purchaser, provided the total initial amount invested in the Fund or any
one or more of the Former Connecticut Mutual Funds totaled $500,000 or more,
including investments made pursuant to the Combined Purchases, Statement of
Intention and Rights of Accumulation features available at the time of the
initial purchase and such investment is still held in one or more of the Former
Connecticut Mutual Funds or a Fund into which such Fund merged;
(2) any participant in a qualified plan, provided that the total initial amount
invested by the plan in the Fund or any one or more of the Former Connecticut
Mutual Funds totaled $500,000 or more;
(3) Directors of the Fund or any one or more of the Former Connecticut Mutual
Funds and members of their immediate families;
(4) employee benefit plans sponsored by Connecticut Mutual Financial Services,
L.L.C. ("CMFS"), the prior distributor of the Former Connecticut Mutual Funds,
and its affiliated companies;
(5) one or more members of a group of at least 1,000 persons (and persons who
are retirees from such group) engaged in a common business, profession, civic or
charitable endeavor or other activity, and the spouses and minor dependent
children of such persons, pursuant to a marketing program between CMFS and such
group; and
(6) an institution acting as a fiduciary on behalf of an individual or
individuals, if such institution was directly compensated by the individual(s)
for recommending the purchase of the shares of the Fund or any one or more of
the Former Connecticut Mutual Funds, provided the institution had an agreement
with CMFS.
Purchases of Class A shares made pursuant to (1) and (2) above may be
subject to the Class A CDSC of the Former Connecticut Mutual Funds described
above.
Additionally, Class A shares of a Fund may be purchased without a sales
charge by any holder of a variable annuity contract issued in New York State by
Connecticut Mutual Life Insurance Company through the Panorama Separate Account
which is beyond the applicable surrender charge period and which was used to
fund a qualified plan, if that holder exchanges the variable annuity contract
proceeds to buy Class A shares of the Fund.
B. Class A and Class B Contingent Deferred Sales Charge Waivers.
In addition to the waivers set forth in the Prospectus and in this Appendix,
above, the contingent deferred sales charge will be waived for redemptions of
Class A and Class B shares of a Fund and exchanges of Class A or Class B shares
of a Fund into Class A or Class B shares of a Former Connecticut Mutual Fund
provided that the Class A or Class B shares of the Fund to be redeemed or
exchanged were (i) acquired prior to March 18, 1996 or (ii) were acquired by
exchange from an Oppenheimer fund that was a Former Connecticut Mutual Fund.
Additionally, the shares of such Former Connecticut Mutual Fund must have been
purchased prior to March 18, 1996:
(1) by the estate of a deceased shareholder;
(2) upon the disability of a shareholder, as defined in Section 72(m)(7) of
the Internal Revenue Code;
(3) for retirement distributions (or loans) to participants or
beneficiaries from retirement plans qualified under Sections 401(a) or
403(b)(7)of the Code, or from IRAs, deferred compensation plans created under
Section 457 of the Code, or other employee benefit plans;
(4) as tax-free returns of excess contributions to such retirement or
employee benefit plans;
(5) in whole or in part, in connection with shares sold to any state,
county, or city, or any instrumentality, department, authority, or agency
thereof, that is prohibited by applicable investment laws from paying a sales
charge or commission in connection with the purchase of shares of any registered
investment management company;
(6) in connection with the redemption of shares of the Fund due to a
combination with another investment company by virtue of a merger, acquisition
or similar reorganization transaction;
(7) in connection with the Fund's right to involuntarily redeem or
liquidate the Fund;
(8) in connection with automatic redemptions of Class A shares and Class B
shares in certain retirement plan accounts pursuant to an Automatic Withdrawal
Plan but limited to no more than 12% of the original value annually; or
(9) as involuntary redemptions of shares by operation of law, or under
procedures set forth in the Fund's Articles of Incorporation, or as adopted by
the Board of Directors of the Fund.
VI. Special Reduced Sales Charge for Former Shareholders of Advance America
Funds, Inc.
Shareholders of Oppenheimer Municipal Bond Fund, Oppenheimer U.S. Government
Trust, Oppenheimer Strategic Income Fund and Oppenheimer Equity Income Fund who
acquired (and still hold) shares of those funds as a result of the
reorganization of series of Advance America Funds, Inc. into those Oppenheimer
funds on October 18, 1991, and who held shares of Advance America Funds, Inc. on
March 30, 1990, may purchase Class A shares of those four Oppenheimer funds at a
maximum sales charge rate of 4.50%.
VII. Sales Charge Waivers on Purchases of Class M Shares of Oppenheimer
Convertible Securities Fund
Oppenheimer Convertible Securities Fund (referred to as the "Fund" in this
section) may sell Class M shares at net asset value without any initial sales
charge to the classes of investors listed below who, prior to March 11, 1996,
owned shares of the Fund's then-existing Class A and were permitted to purchase
those shares at net asset value without sales charge:
|_| the Manager and its affiliates,
|_| present or former officers, directors, trustees and employees (and
their "immediate families" as defined in the Fund's Statement of
Additional Information) of the Fund, the Manager and its affiliates,
and retirement plans established by them or the prior investment
advisor of the Fund for their employees,
|_| registered management investment companies or separate accounts of
insurance companies that had an agreement with the Fund's prior
investment advisor or distributor for that purpose,
|_| 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,
|_| employees and registered representatives (and their spouses) of dealers
or brokers described in the preceding section or financial institutions
that have entered into sales arrangements with those dealers or brokers
(and whose identity is made known to the Distributor) or with the
Distributor, but only if the purchaser certifies to the Distributor at
the time of purchase that the purchaser meets these qualifications,
|_| dealers, brokers, or registered investment advisors that had entered into
an agreement with the Distributor or the prior distributor of the Fund
specifically providing for the use of Class M shares of the Fund in
specific investment products made available to their clients, and dealers,
brokers or registered investment advisors that had entered into an
agreement with the Distributor or prior distributor of the Fund's shares to
sell shares to defined contribution employee retirement plans for which the
dealer, broker, or investment advisor provides administrative |_| services.
<PAGE>
--------------------------------------------------------------------------------
Oppenheimer Quest Opportunity Value Fund
--------------------------------------------------------------------------------
Internet Web Site:
www.oppenheimerfunds.com
Investment Adviser
OppenheimerFunds, Inc.
6803 South Tucson Way
Engelwood, Colorado 80122
Sub-Advisor
OpCap Advisors
1345 Avenue of the Americas, 49th Floor
New York, New York 10105-4800
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1.800.525.7048
Custodian Bank
Citibank, N.A.
111 Wall Street
New York, New York 10005
Independent Accountants
KPMG LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Mayer, Brown & Platt
1675 Broadway
New York, New York
10019-5820
PX236.1201
<PAGE>
Oppenheimer
Quest Small Cap Fund
Prospectus dated February 9, 2001
Oppenheimer Quest Small Cap Fund is a
mutual fund that seeks capital
appreciation as its goal. It
emphasizes investments in common
stocks and other equity securities of
"small-cap" companies.
This Prospectus contains
important information about the Fund's
objective, and its investment
policies, strategies and risks. It
also contains important information
about how to buy and sell shares of
the Fund and other account features.
Please read this Prospectus carefully
before you invest and keep it for
future reference about your account.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Fund's securities nor has it determined that this
Prospectus is accurate or complete. It is a criminal offense to represent
otherwise.
<PAGE>
CONTENTS
ABOUT THE FUND
--------------------------------------------------------------------------------
The Fund's Investment Objective and Strategies
Main Risks of Investing in the Fund
The Fund's Past Performance
Fees and Expenses of the Fund
About the Fund's Investments
How the Fund is Managed
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Class N Shares
Special Investor Services
AccountLink
PhoneLink
OppenheimerFunds Internet Web Site
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Financial Highlights
<PAGE>
ABOUT THE FUND
The Fund's Objective and Investment Strategies
WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund's objective is to seek capital
appreciation.
WHAT DOES THE FUND MAINLY INVEST IN? The Fund invests mainly in common stocks of
U.S. issuers that have market capitalizations under $2.5 billion. These are
described as "small-cap" companies. Under normal market conditions it will
invest at least 65% of its total assets in equity securities of "small-cap"
domestic and foreign issuers. The Fund emphasizes equity securities of companies
that the portfolio managers believe are undervalued in the marketplace. These
investments are more fully explained in "About the Fund's Investments" below.
HOW DO THE PORTFOLIO MANAGERS DECIDE WHAT SECURITIES TO BUY OR SELL? In
selecting securities for purchase or sale by the Fund, the Fund's portfolio
managers, use an investment process that combines both "value" and "growth"
investment styles. A "value approach is used to search for securities of
companies believed to be undervalued in the marketplace, in relation to factors
such as a company's book value, sales, earnings, growth potential and cash
flows. A "growth" investing style encompasses a search for companies whose stock
price is expected to increase at a greater rate than the overall market. These
issuers may be entering a growth phase, marked by increases in earnings, sales,
cash flows, or other factors, which suggest that the stock may increase in value
over time. The portfolio managers construct the portfolio using quantitative
models, fundamental research about particular securities and individual
judgement. While this process and the inter-relationship of the factors used may
change over time and its implementation may vary in particular cases, in general
the selection process involves the of :
Multi-factor quantitative models:
These include a group of "top-down" models that analyze data such as relative
valuations, relative price trends, interest rates and the shape of the yield
curve. These help direct portfolio emphasis by industries and value and growth
styles. A group of "bottom up" models helps to rank stocks in a universe
typically including the 1000 stocks that follow the largest 1000 stocks in order
of market capitalization, selecting stocks for relative attractiveness by
analyzing fundamental stock and company characteristics.
Fundamental research: The portfolio managers use internal research and analysis
by other market analysts, with emphasis on current company news and
industry-related events.
Judgement: The portfolio is then continuously re-balanced by the portfolio
managers, using all of the tools described above.
The portfolio managers search for securities of companies believed to be
undervalued in the marketplace, in relation to factors such as a company's book
value, sales, earnings, growth potential and cash flows. This process and the
inter-relationship of the factors used may change over time and its
implementation may vary in particular cases. Currently, the selection process
includes the following techniques:
o A "bottom up" analytical approach using fundamental research to focus on
particular issuers before considering industry trends, by evaluating each
issuer's characteristics, financial results and management.
o A search for securities of companies believed to be undervalued and having a
high return on capital, strong management committed to shareholder value and
strong cash flows.
o Ongoing monitoring of issuers for fundamental changes in the company that
might alter the portfolio managers' initial expectations about the
security and might result in a decision to sell the security.
o A search for companies in businesses with barriers to entry that might
reduce the threat from new competitors.
WHO IS THE FUND DESIGNED FOR? The Fund is designed for investors seeking capital
appreciation in their investment over the long term. Those investors should be
willing to assume the greater risk of short-term share price fluctuations that
are typical for funds emphasizing small-cap stock investments. Since the Fund
does not seek current income and its income from investments will likely be
small, so it is not designed for investors needing investment income or
preservation of capital. Because of its focus on long-term growth, the Fund may
be appropriate for a portion of a retirement plan investment. The Fund is
intended to be a long-term investment but is not a complete investment program.
Main Risks of Investing in the Fund
All investments have risks to some degree. The Fund's investments in
stocks are subject to changes in their value from a number of factors described
below. There is also the risk that poor security selection by the Manager will
cause the Fund to underperform other funds having a similar objective. As an
example, the portfolio manager's "value" approach to investing could result in
fewer Fund investments in stocks that become highly valued by the marketplace
during times of rapid market advances. This could cause the Fund to underperform
other funds that seek capital appreciation but that employ a growth or non-value
approach to investing.
RISKS OF INVESTING IN STOCKS. Stocks fluctuate in price, and their short-term
volatility at times may be great. Because the Fund invests primarily in equity
securities of small-cap companies, the value of the Fund's portfolio will be
affected by changes in the stock markets and the special economic and other
factors that might primarily affect the prices of small-cap stocks in the
markets in which it invests. Market risk will affect the Fund's net asset values
per share, which will fluctuate as the values of the Fund's portfolio securities
change. A variety of factors can affect the price of a particular stock and the
prices of individual stocks do not all move in the same direction uniformly or
at the same time. Different stock markets may behave differently from each
other. Because the Fund can buy both foreign stocks and stocks of U.S. issuers,
it will be affected by changes in domestic and foreign stock markets.
Other factors can affect a particular stock's price, such as poor earnings
reports by the issuer, loss of major customers, major litigation against the
issuer, or changes in government regulations affecting the issuer.
Special Risks of Small-Cap Stocks. The Fund emphasizes its investments in
securities of companies having a market capitalization under $2.5 billion.
While these companies might be established businesses, generally they tend
to be newer companies. Small-cap companies may have limited product lines
or markets for their products, limited access to financial resources and
less depth in management skill than larger, more established companies.
Additionally, smaller capitalization companies may be more reliant on the
efforts of particular members of their management team, and management
changes may pose a risk to the success of the business.
Small-cap stocks may be less liquid than those of larger issuers. That
means the Fund could have greater difficulty selling a security of a
small-cap issuer at an acceptable price, especially in periods of market
volatility. That factor increases the potential for losses to the Fund.
Also, it may take a substantial period of time before the Fund realizes a
gain on an investment in a small-cap company, if it realizes any gain at
all.
Industry Focus. At times the Fund may increase the relative emphasis of its
investments in stocks of companies in a single industry. Stocks of issuers
in a particular industry may be affected by changes in economic
conditions, government regulations, availability of basic resources or
supplies, or other events that affect that industry more than others. To
the extent that the Fund is emphasizing investments in a particular
industry, its share values may fluctuate in response to events affecting
that industry.
HOW RISKY IS THE FUND OVERALL? The risks described above collectively form the
overall risk profile of the Fund, and can affect the value of the Fund's
investments, its investment performance and its price per share. Particular
investment and investment strategies also have risks. These risks mean that you
can lose money by investing in the Fund. When you redeem your shares, they may
be worth more or less than what you paid for them. There is no assurance that
the Fund will achieve its investment objective. The Fund's investments in
small-cap stocks can be volatile, especially in the short term. The price of the
Fund's shares can go up and down substantially, particularly in emerging
markets. The Fund generally does not use income-oriented investments to help
cushion the Fund's total return from changes in stock prices, except for
defensive or liquidity purposes. In the OppenheimerFunds spectrum, the Fund is
likely to experience greater price fluctuations than funds that emphasize
large-cap stocks or investment-grade bonds. It is designed for investors willing
to assume greater risks in the hope of achieving long-term capital appreciation.
--------------------------------------------------------------------------------
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
--------------------------------------------------------------------------------
The Fund's Past Performance
The bar chart and table below show one measure of the risks of investing
in the Fund, by showing changes in the Fund's performance (for its Class A
shares) from year to year for the past ten calendar years and by showing how the
average annual total returns of the Fund's shares compare to those of a
broad-based market index. The Fund's past investment performance is not
necessarily an indication of how the Fund will perform in the future.
Annual Total Returns (Class A) (as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing annual total returns]
Sales charges are not included in the calculations of return in this bar chart,
and if those charges were included, the returns would be less than those shown.
During the period shown in the bar chart, the highest return (not annualized)
for a calendar quarter was ____% (___Q'___) and the lowest return for a calendar
quarter was ____% (___Q'____).
------------------------------------------------------------------------------
Average Annual Total
Returns for the periods 1 Year 5 Years 10 Years
Ended December 31, 2000 (or life of (or life of
class, if less) class, if less)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class A Shares (inception % % %
1/3/89)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Russell 2000 Index1 % % %1
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class B Shares (inception % % %
9/1/93)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class C Shares (inception % % %
9/1/93)
------------------------------------------------------------------------------
1. From 12/31/89
The Fund's average annual total returns include the applicable sales charge for
Class A, the current maximum initial sales charge of 5.75%; for Class B, the
contingent deferred sales charges of 5% (1-year), 2% (5-years) and 1% (life of
class); and for Class C, the 1% contingent deferred sales charge for the 1-year
period.
The returns measure the performance of a hypothetical account and assume that
all dividends and capital gains distributions have been reinvested in additional
shares. The performance of the Fund's Class A shares is compared to the Russell
2000 Index, an unmanaged index of equity securities. The index performance
includes the reinvestment of income, but does not reflect transaction costs. The
Fund's investments vary from securities in the index.
Fees and Expenses of the Fund
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services. 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
the fees and expenses you may pay if you buy and hold shares of the Fund. The
numbers below are based on the Fund's expenses during its fiscal year ended
October 31, 2000 except that the numbers for Calss N shares, which is a new
class are based on the Fund's anticipated expenses for Class N Shares during the
upcoming year.
Shareholder Fees (charges paid directly from your investment):
--------------------------------------------------------------------------------
Class A Class B Class C Shares Class N Shares
Shares Shares
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Maximum Sales Charge (Load)
on purchases 5.75% None None None
(as % of offering price)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as % of the
lower of the original None1 5%2 1%3 1%4
offering price or redemption
proceeds)
--------------------------------------------------------------------------------
3. A contingent deferred sales charge may apply to redemptions of investments of
$1 million or more ($500,000 for retirement plan accounts) of Class A shares.
See "How to Buy Shares" for details.
4. Applies to redemptions in first year after purchase. The contingent deferred
sales charge declines to 1% in the sixth year and is eliminated after that.
5. Applies to shares redeemed within 12 months of purchase.
6. Applies to Shares redeemed within 18 months of retirement Plan's first
purchase.
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
------------------------------------------------------------------------
Class A Class B Class C Shares Class N Shares
Shares Shares
------------------------------------------------------------------------
------------------------------------------------------------------------
Management Fees % % % %
------------------------------------------------------------------------
------------------------------------------------------------------------
Distribution and/or Service
(12b-1) Fees % % % %
------------------------------------------------------------------------
------------------------------------------------------------------------
Other Expenses % % % %
------------------------------------------------------------------------
------------------------------------------------------------------------
Total Annual Operating % % % %
Expenses
------------------------------------------------------------------------
The asset-based sales charge rate for Class A shares has been voluntarily
reduced from 0.25% to 0.20% of average annual net assets representing Class A
shares effective January 1, 2000, to 0.15% effective January 1, 2001, and to
0.10% effective January 1, 2002. The Board can set the rate up to 0.25% of
average annual net assets under the Distribution and Service Plan for Class A
shares. Expenses may vary in future years. "Other expenses" include transfer
agent fees, custodial expenses, and accounting and legal expenses the Fund pays.
EXAMPLES. These examples are intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The examples
assume that you invest $10,000 in a class of shares of the Fund for the time
periods indicated and reinvest your dividends and distributions.
The first example assumes that you redeem all of your shares at the end of
those periods. The second example assumes that you keep your shares. Both
examples also assume that your investment has a 5% return each year and that the
class's operating expenses remain the same. Your actual costs may be higher or
lower because expenses will vary over time. Based on these assumptions your
expenses would be as follows:
--------------------------------------------------------------------------------
If shares are redeemed: 1 Year 3 Years 5 Years 10 Years1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class A Shares $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B Shares $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C Shares $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class N Shares $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
If shares are not 1 Year 3 Years 5 Years 10 Years1
redeemed:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class A Shares $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B Shares $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C Shares $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class N Shares $ $ $ $
--------------------------------------------------------------------------------
In the first example, expenses include the initial sales charge for Class A and
the applicable Class B, Class C or Class N contingent deferred sales charges. In
the second example, the Class A expenses include the sales charge, but Class B,
Class C and Class N expenses do not include the contingent deferred sales
charges.
2. Class B expenses for years 7 through 10 are based on Class A expenses, since
Class B shares automatically convert to Class A after 6 years.
About the Fund's Investments
THE FUND'S PRINCIPAL INVESTMENT POLICIES. The allocation of the Fund's portfolio
among different investments will vary over time based upon the evaluation of
economic and market trends by the Manager. The Fund's portfolio might not always
include all of the different types of investments described below. The Statement
of Additional Information contains more detailed information about the Fund's
investment policies and risks.
The Manager tries to reduce risks by carefully researching securities
before they are purchased and by reducing the Fund's exposure to market risks by
diversifying its investments. That means the Fund does not hold a substantial
percentage of the stock of any one company and does not invest too great a
percentage of its assets in any one issuer. Also, the Fund does not concentrate
25% or more of its investments in any one industry.
However, changes in the overall market prices of securities and the income
they pay can occur at any time. The share price of the Fund will change daily
based on changes in market prices of securities and market conditions, and in
response to other economic events.
SMALL-CAP STOCK INVESTMENTS. The Fund emphasizes investments in equity
securities, primarily common stocks. The portfolio managers look for stocks of
small-cap companies that they believe have been undervalued by the market. These
companies may have a low ratio of their stock price to earnings, for example.
The portfolio managers also look at the issuers' cash flows and earnings, to
measure potential for capital growth. After looking at the individual issuers in
the small-cap universe that meet these criteria, the portfolio managers may also
look at broader industry and economic trends that could affect the growth
potential of particular small-cap stocks. Current examples of industries
offering value investing opportunities among small-cap issuers include
insurance, health care, capital goods and business services. However, these
opportunities and industries may change over time.
Cyclical Opportunities. The Fund may seek to take advantage of changes in the
business cycle by investing in companies that are sensitive to those
changes if the Manager believes they are undervalued and have growth
potential. For example, when the economy is expanding, companies in the
consumer durables and technology sectors may benefit and present long-term
growth opportunities. Other cyclical industries include insurance and
forest products, for example. The Fund focuses on seeking growth over the
long term, but may seek to take tactical advantage of short-term market
movements or events affecting particular issuers or industries.
Industry Focus. At times, the Fund may increase the relative emphasis of its
investments in a particular industry or group of industries. Stocks of
issuers in a particular industry may be affected by changes in economic
conditions that affect that industry more than others, or by changes in
government regulations, availability of basic resources or supplies, or
other events. To the extent that the Fund has a greater emphasis on
investments in a particular industry or group of industries, its share
values may fluctuate in response to events affecting those industries. To
some extent that risk may be limited by the Fund's policy of not
concentrating its assets in investments in any one industry.
Other Equity Securities. While the Fund emphasizes investments in common stocks,
it can also buy preferred stocks and securities convertible into common
stock. Although they are debt securities, the Manager considers some
convertible securities to be "equity equivalents" because of the
conversion feature, and their rating has less impact on the investment
decision than in the case of other debt securities. Nevertheless,
convertible securities are subject to both "credit risk" (the risk that
the issuer will not pay interest or repay principal in a timely manner)
and "interest rate risk" (the risk that the prices of the securities will
fluctuate inversely to changes in prevailing interest rates). To the
extent that the Fund buys convertible securities (or other debt
securities) it will focus primarily on investment-grade securities, which
pose less credit risk than lower-grade debt securities.
CAN THE FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE? The Fund's Board of
Trustees can change non-fundamental investment policies without shareholder
approval, although significant changes will be described in amendments to this
Prospectus. Fundamental policies are those that cannot be changed without the
approval of a majority of the Fund's outstanding voting shares. The Fund's
investment objective is a fundamental policy. Other investment restrictions that
are fundamental policies are listed in the Statement of Additional Information.
An investment policy is not fundamental unless this Prospectus or the Statement
of Additional Information says that it is.
OTHER INVESTMENT STRATEGIES. To seek its objective, the Fund can also use the
investment techniques and strategies described below. The Fund might not always
use all of them. These techniques have certain risks, although some are designed
to help reduce investment or market risks.
Foreign Investing. The Fund can buy foreign securities that are listed on a
domestic or foreign stock exchange, traded in domestic or foreign
over-the-counter markets, or represented by American Depository Receipts.
The Fund can invest in emerging markets, which have greater risks than
developed markets, making these investments more volatile than other
foreign investments. The Fund will hold foreign currency only in
connection with buying and selling foreign securities.
Risks of Foreign Investing. While the Fund has no limits on the percentage of
its assets it can invest in foreign securities, normally it does not
expect to invest substantial amounts of its assets in foreign securities
and generally limits investments in emerging markets to not more than 5%
of its total assets. 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.
Debt Securities. The Fund can also invest in debt securities, such as U.S.
Government securities and corporate bonds and debentures. The Fund
typically does not hold significant amounts of debt securities to seek its
goal of capital appreciation. The Fund might buy short-term debt
securities for liquidity purposes pending the purchase of new investments
or to have cash to pay for redemptions of Fund shares. The Fund can invest
up to 5% of its total assets in "lower-grade" debt securities. These debt
securities (commonly known as "junk bonds") are rated below investment
grade. That means that they are rated lower than "Baa" by Moody's
Investors Service or "BBB" by Standard & Poor's Rating Service or have
comparable ratings by other nationally-recognized rating organizations or
are unrated securities assigned an equivalent rating by the Manager.
o U.S. Government Securities. The Fund's investments in U.S. Government
securities can include U.S. Treasury securities and securities issued or
guaranteed by agencies or instrumentalities of the U.S. Government. U.S.
Treasury securities are backed by the full faith and credit of the U.S.
Government and are subject to little credit risk. Securities of U.S.
Government agencies and instrumentalities are not all backed by the full
faith and credit of the U.S. Government but generally offer little credit
risk.
Money Market Instruments. The Fund can also invest in "money market
instruments." These include U.S. Government securities and high-quality
corporate debt securities having a remaining maturity of one year or less.
They include commercial paper, other short-term corporate debt
obligations, certificates of deposit, bankers' acceptances and repurchase
agreements. They would be used primarily for liquidity purposes and do not
generate capital growth if held to maturity.
Risks in Using Hedging Instruments. The Fund can use certain hedging instruments
such as options, futures and forward contracts to try to hedge investment
risks. The Fund does not currently use hedging extensively and is not
required to do so to seek its goal.
There are special risks in certain hedging strategies. The underlying
security or investment on which the hedging instrument is based, and the
hedging instrument itself, may not perform the way the Manager expected it
to perform. If that happens, the Fund's share price could decline. The
Fund has limits on the amount of particular types of hedging instruments
it can hold. However, hedging can cause the Fund to lose money on its
investments and/or increase the volatility of its share prices.
Investing in Small, Unseasoned Companies. The Fund can invest up to 5% of its
total assets in securities of small, unseasoned companies. These are
companies that have been in continuous operation for less than three
years, counting the operations of any predecessors. These securities may
have limited liquidity, so that the Fund could have difficulty selling
them at an acceptable price when it wants to. The values of these
securities may be very volatile, especially in the short term.
Illiquid and Restricted Securities. Investments may be illiquid because they do
not have active trading market, making it difficult to value them or
dispose of them promptly at an acceptable price. A restricted security has
a contractual restriction on its resale or cannot be sold publicly until
it is registered under the Securities Act of 1933. The Fund cannot invest
more than 15% of its net assets in illiquid or restricted securities.
Certain restricted securities that are eligible for resale to qualified
institutional purchasers may not be subject to that limit. The Manager and
Sub-Adviser monitor holdings of illiquid securities on an ongoing basis to
determine whether to sell any holdings to maintain adequate liquidity.
Portfolio Turnover. A change in the securities held by the Fund is known as
"portfolio turnover." The Fund does not expect to engage frequently in
short-term trading to try to achieve its objective. Although during its
last fiscal year its portfolio turnover rate exceeded 100%. Portfolio
turnover affects brokerage costs the Fund pays. If the Fund realizes
capital gains when it sells its portfolio investments, it must generally
pay those gains out to shareholders, increasing their taxable
distributions. The Financial Highlights table shows the Fund's portfolio
turnover rates during prior fiscal years.
Temporary Defensive Investments. In times of unstable or adverse market or
economic conditions, the Fund can invest up to 100% of its assets in
temporary defensive investments. Generally they would be U.S. Government
securities and the types of money market instruments described above. To
the extent the Fund invests defensively in these securities, it might not
achieve its investment objective of capital appreciation.
How the Fund Is Managed
THE MANAGER. The Manager supervises the Fund's investment program 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 that states the Manager's responsibilities. The agreement sets the
fees paid by the Fund to the Manager and describes the expenses that the Fund to
pay to conduct its business. The Manager became the Fund's investment adviser on
November 22, 1995.
The Manager has been as an investment adviser since January 1960. The
Manager (including subsidiaries) managed more than $125 billion of assets as of
October 31, 2000, including other Oppenheimer funds with more than 5 million
shareholder accounts. The Manager is located at Two World Trade Center, 34th
Floor, New York, New York 10048-0203.
The Manager's Fees. Under the investment advisory agreement, the Fund pays the
Manager an advisory fee at an annual rate that declines on additional
assets as the Fund grows: 1.00% of the first $400 million of average
annual net assets of the Fund, 0.90% of the next $400 million, and 0.85%
of average annual net assets in excess of $800 million. The Fund's
management fee for its last fiscal year ended October 31, 2000 was _____%
of average annual net assets for each class of shares.
Portfolio Managers. "The Fund's portfolio managers, Charles Albers and Mark
Zavanelli, are the persons primarily responsible for the selection of the
Fund's portfolio securities. Mr.Albers is a Senior Vice President of the
Manager and an officer and portfolio manager of other Oppenheimer funds.
Mr. Zavanelli is an Assistant Vice President of the Fund and a portfolio
manager of another Oppenheimer funds. Messrs. Albers and Zavanelli became
the Fund's portfolio managers on April 28, 2000.
Prior to joining the Manager in April 1998, Mr. Albers was a portfolio
manager at Guardian Investor Services (from 1972), the investment
management subsidiary of the Guardian Life Insurance Company. Before
joining the Manager in April 1998, Mr. Zavanelli was President of
Waterside Capital Management, a registered investment advisor (from August
1995), and a financial research analyst for Elder Research (from June
1997). Prior to that he was a manager of research services for ZPR
Investment Management, Inc., an investment advisor (from June 1992 to July
1995)."
ABOUT YOUR ACCOUNT
How to Buy Shares
HOW DO YOU BUY SHARES? You can buy shares several ways, as described below.
Fund's Distributors, OppenheimerFunds Distributor, Inc., may appoint certain
servicing agents to accept purchase (and redemption) orders. The Distributor, in
its sole discretion, may reject any purchase order for the Fund's shares.
BuyingShares Through Your Dealer. You can buy shares through any dealer, broker
or financial institution that has a sales agreement with the Distributor.
Your dealer will place your order with the Distributor on your behalf.
BuyingShares 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 with a financial advisor before you make a purchase to be
sure that the Fund is appropriate for you.
o Paying by Federal Funds Wire. Shares purchased through the Distributor may be
paid for by Federal Funds wire. The minimum investment is $2,500. Before
sending a wire, call the Distributor's Wire Department at 1.800.525.7048 to
notify the Distributor of the wire, and to receive further instructions.
o Buying Shares Through OppenheimerFunds AccountLink. With AccountLink, shares
are purchased by electronic fund transfers from your bank account through the
Automated Clearing House (ACH) system. You can provide those instructions
automatically, under an Asset Builder Plan, described below, or by telephone
instructions using OppenheimerFunds PhoneLink, also described below. Please
refer to "AccountLink," below for more details.
o Buying Shares Through 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 Asset Builder Application and the
Statement of Additional Information.
HOW MUCH MUST YOU INVEST? You can open a Fund account with a minimum initial
investment of $1,000. You can 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, 403(b) plans, Automatic Exchange Plans and
military allotment plans, you can make initial and subsequent
investments for as little as $25. Subsequent purchases of at least $25
can be made by telephone through AccountLink.
o Under retirement plans, such as IRAs, pension and profit-sharing plans and
401(k) plans, you can start your account with as little as $250. If your IRA
is started under an Asset Builder Plan, the $25 minimum applies. Additional
purchases may be as little as $25.
o The minimum investment requirement does not apply to 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 reinvesting distributions from
unit investment trusts that have made arrangements with the
Distributor.
AT WHAT PRICE ARE SHARES SOLD? Shares are sold at their offering price which is
the net asset value per share plus any initial sales charge that applies. The
offering price that applies to a purchase order is based on the next calculation
of the net asset value per share that is made after the Distributor receives the
purchase order at its offices in Denver, Colorado, or after any agent appointed
by the Distributor receives the order and sends it to the Distributor.
Net asset value The fund calculates the net asset value of each class of
shares as of the close of the New York Stock Exchange, on each day the
Exchange is open for trading (referred to in this Prospectus as a "regular
business day"). The Exchange normally closes at 4:00P.M., New York time,
but may close earlier on some days. All references to time in this
Prospectus mean "New York time".
The net asset value per share is determined 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. To determine net asset value, the Fund's Board
of Trustees has established procedures to value the Fund's securities, in
general based on market value. The Board has adopted special procedures
for valuing illiquid and restricted securities and obligations for which
market values cannot be readily obtained. Because some foreign securities
trade in markets and exchanges that operate on U.S. holidays and weekends,
the values of some of the Fund's foreign investments may change
significantly on days when investors cannot buy or redeem Fund shares.
The offering price. To receive the offering price for a particular day, in most
cases the Distributor or its designated agent must receive your order by the
time of day The New York Stock Exchange closes that day. If your order is
received on a day when the Exchange is closed or after it has closed, the order
will receive the next offering price that is determined after your order is
received.
Buying through a dealer. If you buy shares through a dealer, your dealer must
receive the order by the close of The New York Stock Exchange and transmit it to
the Distributor so that it is received before the Distributor's close of
business on a regular business day (normally 5:00 P.M.) to receive that day's
offering price. Otherwise, the order will receive the next offering price that
is determined.
<PAGE>
--------------------------------------------------------------------------------
WHAT CLASSES OF SHARES DOES THE FUND OFFER? The Fund offers investors four
different classes of shares. The different classes of shares represent
investments in the same portfolio of securities, but the classes are subject to
different expenses and will likely have different share prices. When you buy
shares, be sure to specify the class of shares. If you do not choose a class,
your investment will be made in Class A shares.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class A Shares. If you buy Class A shares, you pay an initial sales charge (on
investments up to $1 million for regular accounts or $500,000 for certain
retirement plans). The amount of that initial sales charge will vary
depending on the amount you invest. The sales charge rates are listed in
"How Can You Buy Class A Shares?" below. There is also an asset-based
sales charge on Class A shares.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B Shares. If you buy Class B shares, you pay no sales charge at the time
of purchase, but you will pay an annual asset-based sales charge. If you
sell your shares within six years of buying them, you will normally pay a
contingent deferred sales charge. That contingent deferred sales charge
varies depending on how long you own your shares, as described in "How Can
You Buy Class B Shares?" below.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C Shares. If you buy Class C shares, you pay no sales charge at the time
of purchase, but you will pay an annual asset-based sales charge. 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 "How Can You Buy
Class C Shares?" below.
--------------------------------------------------------------------------------
Class N Shares. Class N shares are offered only through retirement plans that
purchase $500,000 or more of Class N shares of one or more Oppenheimer
funds or that have assets of $500,000 or more or 100 or more of eligible
plan participants. Non-retirement plan investors cannot buy Class N shares
directly.
--------------------------------------------------------------------------------
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 best
suited to your needs depends on a number of factors that you should discuss with
your financial advisor. Some 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.
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 discussion below is not intended to be investment advice or a
recommendation, because each investor's financial considerations are different.
The discussion below assumes that you will purchase only one class of shares,
and not a combination of shares of different classes. Of course, these examples
are based on approximations of the effects of current sales charges and expenses
projected over time, and do not detail all of the considerations in selecting a
class of shares. You should analyze your options carefully with your financial
advisor before making that choice.
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,
compared to the effect over time of higher class-based expenses on shares
of Class B or Class C.
o Investing for the Shorter Term. While the Fund is meant to be a long-term
investment, if you have a relatively 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. That is because of the effect of the Class B contingent deferred
sales charge if you redeem within six 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 as 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.
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 less than $100,000 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
appropriate.
Are There Differences in Account Features That Matter to You? Some account
features may not be available to Class B or Class C shareholders. Other
features (such as Automatic Withdrawal Plans) may not be advisable
(because of the effect of the contingent deferred sales charge) for Class
B or Class C shareholders. Therefore, you should carefully review how you
plan to use your investment account before deciding which class of shares
to buy.
Additionally, the dividends payable to Class B and Class C shareholders
will be reduced by the additional expenses borne by those classes that are
not borne by Class A shares, such as the Class B and Class C asset-based
sales charge described below and in the Statement of Additional
Information. Share certificates are not available for Class B and Class C
shares, and if you are considering using your shares as collateral for a
loan, that may be a factor to consider.
How Do Share Classes Affect Payments to my Broker? A financial advisor may
receive different compensation for selling one class of shares than for
selling another class. It is important to remember that Class B, Class C
and Class N contingent deferred sales charges and asset-based sales
charges have the same purpose as the front-end sales charge on sales of
Class A shares: to compensate the Distributor for commissions and expenses
it pays to dealers and financial institutions for selling shares. The
Distributor may pay additional 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.
SPECIAL SALES CHARGE ARRANGEMENTS AND WAIVERS. Appendix C to the Statement of
Additional Information details the conditions for the waiver of sales charges
that apply in certain cases, and the special sales charge rates that apply to
purchases of shares of the Fund by certain groups, or under specified retirement
plan arrangements or in other special types of transactions.
HOW CAN YOU BUY 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 other cases, reduced
sales charges may be available, as described below or in the Statement of
Additional Information. 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 or allocated to
your dealer as concession. The Distributor reserves the right to reallow the
entire concession to dealers. The current sales charge rates and concessions
paid to dealers and brokers are as follows:
--------------------------------------------------------------------------------
Front-End Front-End Sales
Sales Charge Charge As a Commission As
As a Percentage of Net Percentage of
Amount of Purchase Percentage of Amount Invested Offering Price
Offering Price
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Less than $25,000 5.75% 6.10% 4.75%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
$25,000 or more but less than 5.50% 5.82% 4.75%
$50,000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
$50,000 or more but less than 4.75% 4.99% 4.00%
$100,000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
$100,000 or more but less than 3.75% 3.90% 3.00%
$250,000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
$250,000 or more but less than 2.50% 2.56% 2.00%
$500,000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
$500,000 or more but less than 2.00% 2.04% 1.60%
$1 million
--------------------------------------------------------------------------------
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
aggregating $1 million or more or for certain purchases by particular
types of retirement plans described in Appendix C to the Statement of
Additional Information. The Distributor pays dealers of record concessions
in an amount equal to 1.0% of purchases of $1 million or more (other than
purchases by those retirement accounts, which are not permitted in the
Fund). For those retirement plan accounts, the concession is 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. In either
case, the concession will be paid only on purchases that were not
previously subject to a front-end sales charge and dealer concession.8That
concession will not be paid on purchases of shares of $1 million or more
(including any right of accumulation) by a retirement plan that pays for
the purchase with the redemption of Class C shares of one or more
Oppenheimer funds.
If you redeem any of those shares within an 18-month "holding period"
measured from 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. That sales
charge will be equal to 1.0% of the lesser of (1) the aggregate net asset
value of the redeemed shares at the time of redemption (excluding shares
purchased by reinvestment of dividends or capital gain distributions) or
(2) 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
purchases of Class A shares of all Oppenheimer funds you made that were
subject to the Class A contingent deferred sales charge.
Can You Reduce Class A Sales Charges? You may be eligible to buy Class A shares
at reduced sales charge rates under the Fund's "Right of Accumulation" or a
Letter of Intent, as described in "Reduced Sales Charges" in the Statement of
Additional Information.
HOW CAN YOU BUY 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. The Class B contingent deferred sales
charge is paid to compensate the Distributor for its expenses of providing
distribution-related services to the Fund in connection with the sale of Class B
shares.
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 for the Class B contingent deferred sales
charge holding period:
--------------------------------------------------------------------------------
Contingent Deferred Sales Charge on
Years Since Beginning of Month in Which Redemptions in That Year
Purchase Order was Accepted (As % of Amount Subject to Charge)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
0 - 1 5.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1 - 2 4.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2 - 3 3.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
3 - 4 3.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
4 - 5 2.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5 - 6 1.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
6 and following None
--------------------------------------------------------------------------------
In the table, a "year" is a 12-month period. In applying the sales charge, all
purchases are considered to have been made on the first regular business day of
the month in which the purchase was made.
Automatic Conversion of Class B Shares. Class B shares automatically convert to
Class A shares 72 months after you purchase them. 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, a prorated portion of your Class B shares that
were acquired by the reinvestment of dividends and distributions on the
converted shares will also convert to Class A shares. For further
information on the conversion feature and its tax implications, see "Class
B Conversion" in the Statement of Additional Information.
HOW CAN YOU BUY 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. The Class C contingent deferred
sales charge is paid to compensate the Distributor for its expenses of providing
distribution-related services to the Fund in connection with the sale of Class C
shares.
HOW CAN YOU BUY CLASS N SHARES? Class N shares are offered only through
retirement plans that purchase $500,000 or more of Class N shares of one or more
Oppenheimer funds or that have assets of $500,000 or more or 100 or more
eligible participants. Non-retirement plan investors cannot buy Class N shares
directly. Retirement plans that offer Class N shares may impose charges in plan
participant accounts including a 1% contingent deferred sales charge if you
redeem your shares within 18 months after the retirement plan first purchased
shares of the Fund or the retirement plan eliminates the Fund as an investment
option within 18 months after the Fund was selected. The procedures for buying,
selling, exchanging and 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 applicable to purchasers of those
other classes described elsewhere in this prospectus do not apply to Class N
shares. Instructions for purchasing redeeming, exchanging or transferring Class
N shares must be submitted by the plan , not by plan participants for whose
benefit the shares are held.
DISTRIBUTION AND SERVICE (12B-1) PLANS.
Distribution and Service Plan for Class A Shares. The Fund has adopted a
Distribution and Service Plan for Class A shares. Under the plan the Fund
currently pays an asset-based sales charge to the Distributor at an annual
rate of 0.15% of average annual net assets of Class A shares the Fund (the
Board of Trustees can set this rate up to 0.25%). The Fund also pays a
service fee to the Distributor of 0.25% of the average annual net assets
of Class A shares. The Distributor currently uses all of the fee and a
portion of the asset-based sales charge to pay dealers, brokers, banks and
other financial institutions quarterly for providing personal service and
maintenance of accounts of their customers that hold Class A shares. The
Distributor pays out the portion of the asset-based sales charge equal to
0.15% of average annual net assets representing Class A shares purchased
before September 1, 1993, and 0.10% of average annual net assets
representing Class A shares purchased on or after that date.
Distribution and Service Plans for Class B, Class C and Class N Shares. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class
N shares to compensate the Distributor for its services and costs in
distributing Class B, Class C and Class N 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 and the
Fund pays the Distributor an annual asset-based sales charge of 0.25% on
class N shares. The Distributor also receives a service fee of 0.25% per
year under each plan.
The asset-based sales charge and service fees increase Class B and Class C
expenses by 1.00% and the asset-based sales charge and increases Class N
expenses by up to 0.25% of the net assets per year of the respective
class. Because these fees are paid out of the Fund's assets on an ongoing
basis, over time these fees will increase the cost of your investment and
may cost you more than other types of sales charges.
The Distributor uses the service fees to compensate dealers for providing
personal services for accounts that hold Class B, Class C or Class N
shares. The Distributor pays the 0.25% service fees to dealers in advance
for the first year after the shares are sold by the dealer. After the
shares have been held for a year, the Distributor pays the service fees to
dealers on a quarterly basis.
The Distributor currently pays a sales concession 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 sales of Class B shares is
therefore 4.00% of the purchase price. Distributor retains the Class B
asset-based sales charge.
The Distributor currently pays sales concessions of 0.75% of the purchase
price of Class C shares to dealers from its own resources at the time of
sale. Including the advance of the service fee, the total amount paid by
the Distributor to the dealer at the time of sale of Class C shares is
therefore 1.00% of the purchase price. The Distributor plans to pay the
asset-based sales charge as an ongoing commission to the dealer on Class C
shares that have been outstanding for a year or more.
The Distributor currently pays sales concessions of 1.00% of the purchase
price of Class N Shares to dealers from its own resources at the time of
sale. The Distributor retains the asset-based sales charge on Class N
Shares.
Special Investor Services
ACCOUNTLINK. You can use our AccountLink feature to link your Fund account with
an account at a U.S. bank or other financial institution. It must be an
Automated Clearing House (ACH) member. AccountLink lets you:
o transmit funds electronically to purchase shares by telephone (through a
service representative or by PhoneLink) or automatically under Asset
Builder Plans, or
o have the Transfer Agent send redemption proceeds or transmit dividends and
distributions directly to your bank account. Please call the Transfer Agent
for more information.
You may purchase shares 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.
AccountLink privileges should be requested on your Application or your
dealer's settlement instructions if you buy your shares through a 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.
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.
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.
Exchanging Shares. With the OppenheimerFunds exchange privilege, described
below, you can exchange shares automatically by phone from your Fund
account to another OppenheimerFunds account you have already established
by calling the special PhoneLink number.
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.
CAN YOU SUBMIT TRANSACTION REQUESTS BY FAX? You may send requests for certain
types of account transactions to the Transfer Agent by fax (telecopier). Please
call 1.800.525.7048 for information about which transactions may be handled this
way. 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. You can obtain information about the Fund,
as well as your account balance, on the OppenheimerFunds Internet web site, at
http://www.oppenheimerfunds.com. Additionally, shareholders listed in the
account registration (and the dealer of record) may request certain account
transactions through a special section of that web site. To perform account
transactions, you must first obtain a personal identification number (PIN) by
calling the Transfer Agent at 1.800.533.3310. If you do not want to have
Internet account transaction capability for your account, please call the
Transfer Agent at 1.800.525.7048. At time, the web site may be inaccessible or
its transaction features may be unavailable.
AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The Fund has several plans that enable
you to sell shares automatically or exchange them to another OppenheimerFunds
account on a regular basis. Please call the Transfer Agent or consult the
Statement of Additional Information for details.
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 only 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 and Class N shares. You must be
sure to ask the Distributor for this privilege when you send your payment.
RETIREMENT PLANS. You may buy shares of the Fund for your retirement plan
account. If you participate in a plan sponsored by your employer, the plan
trustee or administrator must buy the shares for your plan account. The
Distributor also offers a number of different retirement plans that can be used
by individuals and employers:
Individual Retirement Accounts (IRAs). These include regular IRAs, Roth IRAs,
SIMPLE IRAs, rollover IRAs and Education IRAs.
SEP-IRAs. These are Simplified Employee Pensions Plan IRAs for small business
owners or self-employed individuals.
403(b)(7) Custodial Plans. These are tax deferred plans for employees of
eligible tax-exempt organizations, such as schools, hospitals and charitable
organizations.
401(k) Plans. These are special retirement plans for businesses.
Pension and Profit-Sharing Plans. These plans are designed for businesses and
self-employed individuals.
Please call the Distributor for OppenheimerFunds retirement plan documents,
which include applications and important plan information.
How to Sell Shares
You can sell (redeem) some or all of your shares on any regular business
day. Your shares will be sold at the next net asset value calculated after your
order is received in proper form (which means that it must comply with the
procedures described below) and is accepted by the Transfer Agent. The Fund lets
you sell your shares by writing a letter or by using the Fund's checkwriting
privilege or by telephone. You can also set up Automatic Withdrawal Plans to
redeem shares on a regular basis.
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 account, please call the Transfer Agent first,
at 1.800.525.7048, for assistance.
Certain Requests Require a Signature Guarantee. To protect you and the Fund from
fraud, the following redemption requests must be in writing and must
include a signature guarantee (although there may be other situations that
also require a signature guarantee):
o You wish to redeem $100,000 or more 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 being redeemed by someone (such as an Executor) other
than the owners
Where Can You Have Your Signature Guaranteed? The Transfer Agent will accept a
guarantee of your signature by a number of financial institutions,
including:
o a U.S. bank, trust company, credit union or savings association,
o a foreign bank that has a U.S. correspondent bank,
o a U.S. registered dealer or broker in securities, municipal securities or
government securities, or by
o 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.
Retirement Plan Accounts. There are special procedures to sell shares in an
OppenheimerFunds retirement plan account. Call the Transfer Agent for a
distribution request form. Special income tax withholding requirements
apply to distributions from retirement plans. You must submit a
withholding form with your redemption request to avoid delay in getting
your money and if you do not want tax withheld. If your employer holds
your retirement plan account for you in the name of the plan, you must ask
the plan trustee or administrator to request the sale of the Fund shares
in your plan account.
Sending Redemption Proceeds by Wire. While the Fund normally sends your money by
check, you can arrange to have the proceeds of the shares you sell sent by
Federal Funds wire to a bank account you designate. It must be a
commercial bank that is a member of the Federal Reserve wire system. The
minimum redemption you can have sent by wire is $2,500. There is a $10 fee
for each wire. To find out how to set up this feature on your account or
to arrange a wire, call the Transfer Agent at 1.800.852.8457.
HOW DO YOU SELL SHARES BY MAIL? Write a letter of instructions that includes: o
Your name o The Fund's name o Your Fund account number (from your account
statement) o The dollar amount or number of shares to be redeemed o Any special
payment instructions o Any share certificates for the shares you are selling o
The signatures of all registered owners exactly as the account is registered,
and o Any special documents requested by the Transfer Agent to assure proper
authorization
of the person asking to sell the shares.
--------------------------------------------------------------------------------
Use the following address for requests by mail: Send courier or express mail
request to:
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------
OppenheimerFunds Services OppenheimerFunds Services
--------------------------------------------------------------------------------
P.O. Box 5270 10200 E Girard Avenue, Building D
Denver, Colorado 80217-5270 Denver, Colorado 80231
HOW DO YOU SELL 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 account or under a share certificate by
telephone.
|_| To redeem shares through a service representative, call 1.800.852.8457
|_| To redeem shares automatically on PhoneLink, call 1.800.533.3310
Whichever method you use, you may have a check sent to the address on the
account
statement, or, if you have linked your Fund account to your bank account on
AccountLink, you may have the proceeds sent to that bank account.
Are There Limits on Amounts Redeemed by Telephone?
Telephone Redemptions Paid by Check. Up to $100,000 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.
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.
CAN YOU SELL SHARES THROUGH YOUR DEALER? The Distributor has made arrangements
to repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that service. If your shares are held in the
name of your dealer, you must redeem them through your dealer.
HOW DO CONTINGENT DEFERRED SALES CHARGES AFFECT REDEMPTIONS? If your purchase
shares subject to a Class A, Class B, Class C or Class N contingent deferred
sales charge and redeem any of those shares during the applicable holding period
for the class of shares, the contingent deferred sales charge will be deducted
from redemption proceeds (unless you are eligible for a waiver of that sales
charge based on the categories listed in Appendix C to the Statement of
Additional Information) and you advise the Transfer Agent of your eligibility
for the waiver. With respects to Class N shares, if you redeem your shares
within 18 calendar months of the end of the calendar month in which the
retirement plan first purchased shares of the Fund or the retirement plan
eliminates the Fund as an investment option within 18 calendar months of the end
of the calendar month in which the Fund was selected, a 1% contingent deferred
sales charge will be imposed on the plan. If the retirement plan terminates or
Class N shares of all Oppenheimer funds are terminated as an investment option
of the plan within 18 months after the plan's first purchase of Class N shares
of any Oppenheimer fund, a 1% contingent deferred sales charge will be imposed.
A 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 net
asset value. A contingent deferred sales charge is not imposed on:
o the amount of your account value represented by an increase in net asset
value over the initial purchase price,
o shares purchased by the reinvestment of dividends or capital gains
distributions, or
o shares redeemed in the special circumstances described in Appendix C to the
Statement of Additional Information
To determine whether a 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
the holding period that applies to the class, and (3) shares held the longest
during the holding period.
Contingent deferred sales charges are not charged when you exchange shares
of the Fund for shares of other Oppenheimer funds. However, if you exchange them
within the applicable contingent deferred sales charge holding period, the
holding period will carry over to the fund whose shares your acquire. Similarly,
if you acquire shares of this Fund by exchanging shares of another Oppenheimer
fund that are still subject to a contingent deferred sales charge holding
period, that holding period will carry over to this Fund.
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 both funds 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 must 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. In some
cases, sales charges may be imposed on exchange transactions. For tax purposes,
exchanges of shares involve a sale 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. Please refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
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.
HOW DO YOU SUBMIT EXCHANGE REQUESTS? 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. Exchanges may be requested in writing or by telephone:
Written Exchange Requests. Submit an OppenheimerFunds Exchange Request form,
signed by all owners of the account. Send it to the Transfer Agent at the
address on the back cover. Exchanges of shares held under certificates
cannot be processed unless the Transfer Agent receives the certificates
with the request.
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.
ARE THERE LIMITATIONS ON EXCHANGES? 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 conforms to the
policies described above. It must be received by the close of The New York
Stock Exchange that day, which is normally 4:00 P.M. but may be earlier on
some days. However, either fund may delay the purchase of shares of the
fund you are exchanging into up to seven days if it determines it would be
disadvantaged by a same-day exchange. For example, the receipt of multiple
exchange requests from a "market timer" might require the Fund to sell
securities at a disadvantageous time and/or price.
o Because excessive trading can hurt fund performance and harm shareholders,
the Fund reserves the right to refuse any exchange request that it believes
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 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
More information about the Fund's policies and procedures for buying, selling
and exchanging shares is contained in the Statement of Additional Information.
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.
Telephone transaction privileges for purchases, redemptions or exchanges may be
modified, suspended or terminated by the Fund at any time. If an account
has more than one owner, the Fund and the Transfer Agent may rely on the
instructions of any one owner. Telephone privileges apply to each owner of
the account and the dealer representative of record for the account unless
the Transfer Agent receives cancellation instructions from an owner of the
account.
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. The Transfer Agent and the Fund
will not be liable for losses or expenses arising out of telephone
instructions reasonably believed to be genuine.
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.
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.
The redemption price for shares will vary from day to day because the value of
the securities in the Fund's portfolio fluctuates. The redemption price,
which is the net asset value per share, will normally differ for each
class of shares. The redemption value of your shares may be more or less
than their original cost.
Payment for redeemed shares ordinarily is made in cash. It is forwarded by check
or through AccountLink or by Federal Funds wire (as elected by the
shareholder) within seven days after the Transfer Agent receives
redemption instructions in proper form. However, under unusual
circumstances determined by the Securities and Exchange Commission,
payment may be delayed or suspended. For accounts registered in the name
of a broker-dealer, payment will normally be forwarded within three
business days after redemption.
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 or certified check, or arrange with your bank
to provide telephone or written assurance to the Transfer Agent that your
purchase payment has cleared.
Involuntary redemptions of small accounts may be made by the Fund if the account
value has fallen below $500 for reasons other than the fact that the
market value of shares has dropped. In some cases involuntary redemptions
may be made to repay the Distributor for losses from the cancellation of
share purchase orders.
Sharesmay be "redeemed in kind" under unusual circumstances (such as a lack of
liquidity in the Fund's portfolio to meet redemptions). This means that
the redemption proceeds will be paid with liquid securities from the
Fund's portfolio.
"Backup withholding" of federal income tax may be applied against taxable
dividends, distributions and redemption proceeds (including exchanges) if
you fail to furnish the Fund your correct, certified Social Security or
Employer Identification Number when you sign your application, or if you
under-report your income to the Internal Revenue Service.
To avoid sending duplicate copies of materials to households, the Fund will
mail only one copy of each prospectus, annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
The consolidation of these mailings, called householding, benefits the
Fund through mailing expense.
If you want to receive multiple copies of these materials, you may call
the Transfer Agent at 1.800.525.7048. You may also notify the Transfer
Agent in writing. Individual copies of prospectuses and reports will be
sent to you within 30 days after the Transfer Agent receives your request
to stop householding.
Dividends, Capital Gains and Taxes
DIVIDENDS. The Fund intends to declare dividends separately for each class of
shares from net investment income on an annual basis, normally in December on a
date selected by the Board of Trustees. Dividends and distributions paid on
Class A shares will generally be higher than dividends for Class B and Class C
shares, which normally have higher expenses than Class A. The Fund has no fixed
dividend rate and cannot guarantee that it will pay any dividends or
distributions.
CAPITAL GAINS. The Fund may realize capital gains on the sale of portfolio
securities. If it does, it may make distributions out of any net short-term or
long-term capital gains in December of each year. The Fund may make supplemental
distributions of dividends and capital gains following the end of its fiscal
year. There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
WHAT CHOICES DO YOU HAVE FOR RECEIVING DISTRIBUTIONS? When you open your
account, specify on your application how you want to receive your dividends and
distributions. You have four options:
Reinvest All Distributions in the Fund. You can elect to reinvest all dividends
and distributions in additional shares of the Fund.
Reinvest Dividends or Capital Gains Only. You can elect to reinvest some
distributions (dividends, short-term capital gains or long-term capital
gain distributions) in the Fund while receiving other distributions by
check or having them sent to your bank account through AccountLink.
Receive All Distributions in Cash. You can elect to receive a check for all
dividends and capital gains distributions or have them sent to your bank
through AccountLink.
Reinvest Your Distributions in Another OppenheimerFunds Account. You can
reinvest all distributions in the same class of shares of another
OppenheimerFunds account you have established.
TAXES. If your shares are not held in a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the Fund.
Distributions are subject to federal income tax and may be subject to state or
local taxes. Dividends paid from short-term capital gains and net investment
income are taxable as ordinary income. Long-term capital gains are taxable as
long-term capital gains when distributed to shareholders. It does not matter how
long you have held your shares. Whether you reinvest your distributions in
additional shares or take them in cash, the tax treatment is the same.
Every year the Fund will send you and the IRS a statement showing the
amount of any taxable distribution you received in the previous year. Any
long-term capital gains will be separately identified in the tax information the
Fund sends you after the end of the calendar year.
Avoid "Buying a Distribution". If you buy shares on or just before the
ex-dividend date or just before the Fund declares a capital gain
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.
Remember, There May be Taxes on Transactions. Because the Fund's share price
fluctuates, you may have a capital gain or loss when you sell or exchange
your shares. A capital gain or loss is the difference between the price
you paid for the shares and the price you received when you sold them. Any
capital gain is subject to capital gains tax.
Returns of Capital Can Occur. 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.
This information is only a summary of certain federal personal tax
information about your investment. You should consult with your tax adviser
about the effect of an investment in the Fund on your particular tax situation.
<PAGE>
Financial Highlights
The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the past 5 fiscal years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by KPMG LLP, the Fund's independent accountants,
whose report, along with the Fund's financial statements, is included in the
Statement of Additional Information, which is available on request.
<PAGE>
For More Information About Oppenheimer Quest Small Cap Fund:
The following additional information about the Fund is available without charge
upon request:
STATEMENT OF ADDITIONAL INFORMATION
This document includes additional information about the Fund's investment
policies, risks, and operations. It is incorporated by reference into this
Prospectus (which means it is legally part of this Prospectus).
ANNUAL AND SEMI-ANNUAL REPORTS
Additional information about the Fund's investments and performance is available
in the Fund's Annual and Semi-Annual Reports to shareholders. The Annual Report
includes a discussion of market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
How to Get More Information:
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, and other information about the Fund or your account:
--------------------------------------------------------------------------------
By Telephone: Call OppenheimerFunds Services toll-free:
1.800.525.7048
--------------------------------------------------------------------------------
By Mail: Write to:
--------------------------------------------------------------------------------
OppenheimerFunds Services
--------------------------------------------------------------------------------
P.O. Box 5270
Denver, Colorado 80217-5270
--------------------------------------------------------------------------------
On the Internet: You can read or down-load documents on the
OppenheimerFunds web site:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
http://www.oppenheimerfunds.com
--------------------------------------------------------------------------------
You can also obtain copies of the Statement of Additional Information and other
Fund documents and reports by visiting the SEC's Public Information Room in
Washington, D.C. (Phone 1.202.942.8090) or the EDGAR database on the SEC's
Internet web site at http://www.sec.gov. Copies may be obtained upon payment of
a duplicating fee by electronic request at the SEC's e-mail address:
[email protected] or by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
No one has been authorized to provide any information about the Fund or to make
any representations about the Fund other than what is contained in this
Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a
solicitation of an offer to buy shares of the Fund, to any person in any state
or other jurisdiction where it is unlawful to make such an offer.
The Fund's shares are distributed by:
OppenheimerFunds Distributor, Inc.
SEC File No. 811-5225
PR0251.001.0200 Printed on recycled paper.
<PAGE>
Appendix to Prospectus of
Oppenheimer Quest Small Cap Fund
Graphic Material included in the Prospectus of Oppenheimer Quest Small Cap
Fund (the "Fund") under the heading: "Annual Total Returns (Class A) (as of
12/31 each year)":
A bar chart will be included in the Prospectus of the Fund depicting the
annual total returns of a hypothetical investment in Class A shares of the Fund
for the past ten calendar years, without deducting sales charges. Set forth
below are the relevant data points that will appear on the bar chart.
Calendar
Year Annual Total
Ended Return
----- ------
12/31/91 %
12/31/92 %
12/31/93 %
12/31/94 %
12/31/95 %
12/31/96 %
12/31/97 %
12/31/98 %
12/31/99 %
12/31/00 %
--------------------------------------------------------------------------------
<PAGE>
Oppenheimer Quest Small Cap Fund
--------------------------------------------------------------------------------
6803 South Tucson Way, Englewood Colorado 80112
1.800.525.7048
Statement of Additional Information dated February 9, 2001
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated February 9, 2001. 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, or by
downloading it from the OppenheimerFunds Internet web site at
www.oppenheimerfunds.com.
Contents
Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks..
The Fund's Investment Policies.....................................
Other Investment Techniques and Strategies.........................
Investment Restrictions............................................
How the Fund is Managed ...............................................
Organization and History...........................................
Trustees and Officers
The Manager........................................................
Brokerage Policies of the Fund.........................................
Distribution and Service Plans.........................................
Performance of the Fund................................................
About Your Account
How To Buy Shares......................................................
How To Sell Shares.....................................................
How To Exchange Shares.................................................
Dividends, Capital Gains and Taxes
Additional Information About the Fund..................................
Financial Information About the Fund
Report of Independent Accountants......................................
Financial Statements...................................................
Appendix A: Description of Debt Security Ratings....................... A-1
Appendix B: Corporate Industry Classifications......................... B-1
Appendix C: Special Sales Charge Arrangements and Waivers.............. C-1
<PAGE>
ABOUT THE FUND
Additional Information About the Fund's Investment Policies and Risks
The investment objective, the principal investment policies and the main
risks of the Fund are described in the Prospectus. This Statement of Additional
Information contains supplemental information about those policies and risks and
the types of securities that the Fund invests in. Additional information is also
provided about the Fund's investment Manager, OppenheimerFunds, Inc., and the
strategies that the Fund may use to try to achieve its objective.
The Fund's Investment Policies. The composition of the Fund's portfolio and the
techniques and strategies that the Fund's Manager, may use in selecting
portfolio securities will vary over time. The Fund is not required to use all of
the investment techniques and strategies described below at all times in seeking
its goal. It may use some of the special investment techniques and strategies at
some times or not at all.
In selecting securities for the Fund's portfolio, the Manager evaluates
the merits of particular securities primarily through the exercise of its own
investment analysis. In the case of corporate issuers, that process may include,
among other things, evaluation of the issuer's historical operations, prospects
for the industry of which the issuer is part, the issuer's financial condition,
its pending product developments and business (and those of competitors), the
effect of general market and economic conditions on the issuer's business, and
legislative proposals that might affect the issuer. In the case of foreign
securities, the Manager may also consider the conditions of a particular
country's economy in relation to the U.S. economy or other foreign economies,
general political conditions on a country or region, the effect of taxes, the
efficiencies and costs of particular markets and other factors when evaluating
the securities of issuers in a particular country.
Investments in Equity Securities. The Fund emphasizes investments in equity
securities of small-cap companies. Equity securities include common stocks,
preferred stocks, rights and warrants, and securities convertible into common
stock. The Fund's investments primarily include stocks of companies having a
market capitalization under $2.5 billion, but the Fund can purchase securities
of issuers having a larger market capitalization.
Current income is not a criterion used to select equity securities, as the
Fund does not seek income as part of its goal. However, certain debt securities
can be selected for the Fund's portfolio for liquidity needs or for defensive
purposes (including debt securities that the Manager believes might offer some
opportunities for capital appreciation when stocks are disfavored).
Securities of newer small-cap companies might offer greater opportunities
for capital appreciation than securities of large, more established companies.
However, these securities also involve greater risks than securities of larger
companies. Securities of small-capitalization issuers may be subject to greater
price volatility in general than securities of large-cap and mid-cap companies.
Therefore, to the degree that the Fund has investments in smaller capitalization
companies at times of market volatility, the Fund's share price may fluctuate
more than that of funds focusing in larger-capitalization issuers.
|X| Value Investing. In using a value approach, the portfolio managers
seek stock and other equity securities that appear to be temporarily
undervalued, by various measures, such as price/earnings ratios. This approach
is subject to change and might not necessarily be used in all cases. Value
investing seeks stocks having prices that are low in relation to their real
worth or future prospects, in the hope that the Fund will realize appreciation
in the value of its holdings when other investors realize the intrinsic value of
the stock.
Using value investing requires research as to the issuer's underlying
financial condition and prospects. Some of the measures that can be used to
identify these securities include, among others:
? Price/Earnings ratio, which is the stock's price divided by its earnings
per share. A stock having a price/earnings ratio lower than its historical
range, or the market as a whole or that of similar companies may offer
attractive investment opportunities.
? Price/book value ratio, which is the stock price divided by the book
value of the company per share, which measures the company's stock price in
relation to its asset value.
? Dividend Yield is measured by dividing the annual dividend by the stock
price per share. ? Valuation of Assets, which compares the stock price to
the value of the company's underlying assets, including their projected
value in the marketplace and liquidation value.
|X| Growth Companies. Growth companies are those that the Manager believes
are entering into a growth cycle in their business, with the expectation that
their stock will increase in value. They may be established companies as well as
newer companies in the development stage. Growth companies may have a variety of
characteristics that in the Manager's view define them as "growth" issuers. They
may be generating or applying new technologies, new or improved distribution
techniques or new services. They may own or develop natural resources. They may
be companies that can benefit from changing consumer demands or lifestyles, or
companies that have projected earnings in excess of the average for their sector
or industry. In each case, they have prospects that the Manager believes are
favorable for the long term. The portfolio managers of the Fund look for growth
companies with strong, capable management, sound financial and accounting
policies, successful product development and marketing and other factors.
|X| Preferred Stocks. Preferred stock, unlike common stock, has a stated
dividend rate payable from the corporation's earnings. Preferred stock dividends
may be cumulative or non-cumulative. "Cumulative" dividend provisions require
all or a portion of prior unpaid dividends to be paid before dividends can be
paid on the issuer's common stock.
If interest rates rise, the fixed dividend on preferred stocks may be less
attractive, causing the price of preferred stocks to decline. Preferred stock
may have mandatory sinking fund provisions, as well as provisions allowing calls
or redemptions prior to maturity, which can also have a negative impact on
prices when interest rates decline. Preferred stock generally has a preference
over common stock on the distribution of a corporation's assets in the event of
liquidation of the corporation. The rights of preferred stock on distribution of
a corporation's assets in the event of a liquidation are generally subordinate
to the rights associated with a corporation's debt securities. Preferred stock
may be "participating" stock, which means that it may be entitled to a dividend
exceeding the stated dividend in certain cases.
|X| Rights and Warrants. The Fund can invest up to 5% of its total assets
in warrants and rights. Warrants basically are options to purchase equity
securities at specific prices valid for a specific period of time. Their prices
do not necessarily move parallel to the prices of the underlying securities.
Rights are similar to warrants, but normally have a short duration and are
distributed directly by the issuer to its shareholders. Rights and warrants have
no voting rights, receive no dividends and have no rights with respect to the
assets of the issuer.
|X| Convertible Securities. Convertible securities are debt securities
that are convertible into an issuer's common stock. Convertible securities rank
senior to common stock in a corporation's capital structure and therefore are
subject to less risk of loss than common stock in case of the issuers bankruptcy
or liquidation.
The value of a convertible security is a function of its "investment
value" and its "conversion value." If the investment value exceeds the
conversion value, the security will behave more like a debt security, and the
security's price will likely increase when interest rates fall and decrease when
interest rates rise. If the conversion value exceeds the investment value, the
security will behave more like an equity security: it will likely sell at a
premium over its conversion value, and its price will tend to fluctuate directly
with the price of the underlying security.
While convertible securities are a form of debt security, in many cases
their conversion feature (allowing conversion into equity securities) may cause
them to be regarded more as "equity equivalents." As a result, the rating
assigned to the security has less impact on the Manager's investment decision
with respect to convertible securities than in the case of non-convertible fixed
income securities. To determine whether convertible securities should be
regarded as "equity equivalents," the Manager may consider the following
factors: (1) whether, at the option of the investor, the convertible security
can be exchanged for a fixed number of shares of common stock of the issuer, (2)
whether the issuer of the convertible securities has restated its earnings per
share of common stock on a fully diluted basis (considering the effect of
conversion of the convertible securities), and (3) the extent to which the
convertible security may be a defensive "equity substitute," providing the
ability to participate in any appreciation in the price of the issuer's common
stock.
|X| Investments In Debt Securities. While the Fund does not invest for the
purpose of seeking current income, at times the portfolio managers may select
certain debt securities (besides convertible debt securities described above)
for investment by the Fund for liquidity or defensive purposes. For example,
when the stock market is volatile, or when the portfolio managers believe that
growth opportunities in stocks are not attractive, debt securities might offer
defensive opportunities and also some opportunities for capital appreciation.
These investments could include corporate bonds and notes of foreign or U.S.
companies, as well as U.S. and foreign government securities. It is not expected
that this will be a significant portfolio strategy of the Fund under normal
market conditions.
|X| Credit Risk. Debt securities are subject to credit risk. Credit risk
relates to the ability of the issuer of a debt security to make interest or
principal payments on the security as they become due. If the issuer fails to
pay interest, the Fund's income may be reduced and if the issuer fails to repay
principal, the value of that bond and of the Fund's shares may be reduced. The
Manager may rely to some extent on credit ratings by nationally recognized
rating agencies in evaluating the credit risk of securities selected for the
Fund's portfolio. It may also use its own research and analysis. Many factors
affect an issuer's ability to make timely payments, and the credit risks of a
particular security may change over time. The Fund can invest up to 5% of its
total assets in higher-yielding lower-grade debt securities (that is, securities
below investment grade).
|X| Special Risks of Lower-Grade Securities. The Fund can invest up to 5%
of its total assets in lower-grade securities. Lower-grade securities (commonly
known as "junk bonds") are rated less than "BBB" by Standard & Poor's Rating
Services or less than "Baa" by Moody's Investors Service, Inc., or have a
comparable rating from another rating organization. If unrated, a security is
considered to be below investment grade if the Manager deems it to be of
comparable quality to securities rated less than investment grade. The Fund does
not intend to invest in securities that are in default.
High yield, lower-grade securities, whether rated or unrated, often have
speculative characteristics and special risks that make them riskier investments
than investment grade securities. They may be subject to greater market
fluctuations and risk of loss of income and principal than lower yielding,
investment-grade securities. There may be less of a market for them and
therefore they may be harder to sell at an acceptable price. There is a
relatively greater possibility that the issuer's earnings may be insufficient to
make the payments of interest due on the bonds. The issuer's low
creditworthiness may increase the potential for its insolvency.
These risks mean that the Fund may not achieve the expected income from
lower-grade securities, and that the Fund's net asset value per share may be
affected by declines in value of these securities. However, the Fund's
limitations on investments in these types of securities may reduce some of the
risk, as will the Fund's policy of diversifying its investments.
|X| Interest Rate Risk. In addition to credit risks, debt securities are
subject to changes in value when prevailing interest rates change. When interest
rates fall, the values of outstanding debt securities generally rise, and the
bonds may sell for more than their face amount. When interest rates rise, the
values of outstanding debt securities generally decline, and the bonds may sell
at a discount from their face amount. The magnitude of these price changes is
generally greater for bonds with longer maturities. Therefore, when the average
maturity of the Fund's debt securities is longer, its share price may fluctuate
more when interest rates change.
|X| U.S. Government Securities. These are securities issued or guaranteed
by the U.S. Treasury or other U.S. Government agencies or federally-chartered
corporate entities referred to as "instrumentalities." The obligations of U.S.
Government agencies or instrumentalities in which the Fund may invest may or may
not be guaranteed or supported by the "full faith and credit" of the United
States. "Full faith and credit" means generally that the taxing power of the
U.S. government is pledged to the payment of interest and repayment of principal
on a security. If a security is not backed by the full faith and credit of the
United States, the owner of the security must look principally to the agency
issuing the obligation for repayment. The owner might not be able to assert a
claim against the United States if the issuing agency or instrumentality does
not meet its commitment. The Fund will invest in securities of U.S. government
agencies and instrumentalities only if the Manager is satisfied that the credit
risk with respect to such instrumentality is minimal. While U.S. Government
securities have little credit risk, prior to their maturity they are subject to
price fluctuations from changes in interest rates.
|X| Money Market Instruments. The following is a brief description of the
types of money market securities the Fund can invest in. Those money market
securities include high-quality, short-term debt instruments that are issued by
the U.S. Government, corporations, banks or other entities. They may have fixed,
variable or floating interest rates.
|X| U.S. Government Securities. These include obligations issued or
guaranteed by the U.S. Government or any of its agencies or instrumentalities.
|X| Bank Obligations. The Fund can buy time deposits, certificates of
deposit and bankers' acceptances. Time deposits, other than overnight deposits,
may be subject to withdrawal penalties and, if so, they are deemed "illiquid"
investments.
The Fund can purchase bank obligations that are fully insured by the
Federal Deposit Insurance Corporation. The FDIC insures the deposits of member
banks up to $100,000 per account. Insured bank obligations may have a limited
market and a particular investment of this type may be deemed "illiquid" unless
the Board of Trustees of the Fund determines that a readily-available market
exists for that particular obligation, or unless the obligation is payable at
principal amount plus accrued interest on demand or within seven days after
demand.
|X| Commercial Paper. The Fund can invest in commercial paper if it is
rated within the top two rating categories of Standard & Poor's and Moody's. If
the paper is not rated, it may be purchased if issued by a company having a
credit rating of at least "AA" by Standard & Poor's or "Aa" by Moody's.
The Fund can buy commercial paper, including U.S. dollar-denominated
securities of foreign branches of U.S. banks, issued by other entities if the
commercial paper is guaranteed as to principal and interest by a bank,
government or corporation whose certificates of deposit or commercial paper may
otherwise be purchased by the Fund.
|X| Variable Amount Master Demand Notes. Master demand notes are corporate
obligations that permit the investment of fluctuating amounts by the Fund at
varying rates of interest under direct arrangements between the Fund, as lender,
and the borrower. They permit daily changes in the amounts borrowed. The Fund
has the right to increase the amount under the note at any time up to the full
amount provided by the note agreement, or to decrease the amount. The borrower
may prepay up to the full amount of the note without penalty. These notes may or
may not be backed by bank letters of credit.
Because these notes are direct lending arrangements between the lender and
borrower, it is not expected that there will be a trading market for them. There
is no secondary market for these notes, although they are redeemable (and thus
are immediately repayable by the borrower) at principal amount, plus accrued
interest, at any time. Accordingly, the Fund's right to redeem such notes is
dependent upon the ability of the borrower to pay principal and interest on
demand.
The Fund has no limitations on the type of issuer from whom these notes
will be purchased. However, in connection with such purchases and on an ongoing
basis, the Manager will consider the earning power, cash flow and other
liquidity ratios of the issuer, and its ability to pay principal and interest on
demand, including a situation in which all holders of such notes made demand
simultaneously. Investments in master demand notes are subject to the limitation
on investments by the Fund in illiquid securities, described in the Prospectus.
The Fund does not intend that its investments in variable amount master demand
notes will exceed 5% of its total assets.
|X| Foreign Securities. The Fund can purchase equity and debt securities
issued by foreign companies or foreign governments or their agencies. "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 and their agencies and instrumentalities. Those securities may be
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 on a U.S. securities exchange or traded in the U.S.
over-the-counter markets are considered "foreign securities" for the purpose of
the Fund's investment allocations. That is because they are subject to some of
the special considerations and risks, discussed below, that apply to foreign
securities traded and held abroad.
Because the Fund can purchase securities denominated in foreign
currencies, a change in the value of a foreign currency against the U.S. dollar
could result in a change in the amount of income the Fund has available for
distribution. Because a portion of the Fund's investment income may be received
in foreign currencies, the Fund will be required to compute its income in U.S.
dollars for distribution to shareholders, and therefore the Fund will absorb the
cost of currency fluctuations. After the Fund has distributed income, subsequent
foreign currency losses may result in the Fund's having distributed more income
in a particular fiscal period than was available from investment income, which
could result in a return of capital to shareholders.
Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers. They include 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. The Fund will hold foreign currency only in connection with the
purchase or sale of foreign securities.
|X| Foreign Debt Obligations. The debt obligations of foreign governments
and their agencies and instrumentalities may or may not be supported by the full
faith and credit of the foreign government. The Fund can buy securities issued
by certain "supra-national" entities, which include entities designated or
supported by governments to promote economic reconstruction or development,
international banking organizations and related government agencies. Examples
are the International Bank for Reconstruction and Development (commonly called
the "World Bank"), the Asian Development bank and the Inter-American Development
Bank.
The governmental members of these supra-national entities are
"stockholders" that typically make capital contributions and may be committed to
make additional capital contributions if the entity is unable to repay its
borrowings. A supra-national entity's lending activities may be limited to a
percentage of its total capital, reserves and net income. There can be no
assurance that the constituent foreign governments will continue to be able or
willing to honor their capitalization commitments for those entities.
|X| Risks of Foreign Investing. Investments in foreign securities may
offer special opportunities for investing but also present special additional
risks and considerations not typically associated with investments in domestic
securities. Some of these additional risks are:
o reduction of income by foreign taxes;
o fluctuation in value of foreign investments due to changes in currency
rates or currency control regulations (for example, currency blockage);
o transaction charges for currency exchange;
o lack of public information about foreign issuers;
o lack of uniform accounting, auditing and financial reporting standards
in foreign countries comparable to those applicable to domestic issuers;
o less volume on foreign exchanges than on U.S. exchanges;
o greater volatility and less liquidity on foreign markets than in the
U.S.;
o less governmental regulation of foreign issuers, stock exchanges and
brokers than in the U.S.;
o greater difficulties in commencing lawsuits;
o higher brokerage commission rates than in the U.S.;
o increased risks of delays in settlement of portfolio transactions or
loss of certificates for portfolio securities;
o possibilities in some countries of expropriation, confiscatory taxation,
political, financial or social instability or adverse diplomatic
developments; and
o 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.
|X| Special Risks of Emerging Markets. Emerging and developing markets
abroad may also offer special opportunities for growth investing but have
greater risks than more developed foreign markets, such as those in Europe,
Canada, Australia, New Zealand and Japan. There may be even less liquidity in
their securities markets, and settlements of purchases and sales of securities
may be subject to additional delays. They are subject to greater risks of
limitations on the repatriation of income and profits because of currency
restrictions imposed by local governments. Those countries may also be subject
to the risk of greater political and economic instability, which can greatly
affect the volatility of prices of securities in those countries. The Manager
will consider these factors when evaluating securities in these markets. The
Fund currently limits these investments to not more than 5% of its total assets.
|X| 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 the year, its portfolio
turnover rate would have been 100% annually. The Fund's portfolio turnover rate
will fluctuate from year to year. Although, the Fund does not generally expect
to have a portfolio turnover rate of 100% or more during its past fiscal year
its portfolio turnover rate exceeded 140%. Increased portfolio turnover creates
higher brokerage and transaction costs for the Fund, which may reduce its
overall performance. Additionally, the realization of capital gains from selling
portfolio securities may result in distributions of taxable long-term capital
gains to shareholders, since the Fund will normally distribute all of its
capital gains realized each year, to avoid excise taxes under the Internal
Revenue Code.
Other Investment Techniques and Strategies. In seeking its objective, the Fund
may from time to time use the types of investment strategies and investments
described below. It is not required to use all of these strategies at all times,
and at times may not use them.
|X| Investing in Small, Unseasoned Companies. The Fund can invest in
securities of small, unseasoned companies. These are companies that have been in
operation for less than three years, including the operations of any
predecessors. Securities of these companies may be subject to volatility in
their prices. They may have a limited trading market, which may adversely affect
the Fund's ability to dispose of them and can reduce the price the Fund might be
able to obtain for them. Other investors that own a security issued by a small,
unseasoned issuer for which there is limited liquidity might trade the security
when the Fund is attempting to dispose of its holdings of that security. In that
case the Fund might receive a lower price for its holdings than might otherwise
be obtained.
|X| Investing in Other Investment Companies. The Fund can invest up to 10%
of its total assets in shares of other investment companies. It can invest up to
5% of its total assets in any one investment company (but cannot own more than
3% of the outstanding voting stock of that company). These limits do not apply
to shares acquired in a merger, consolidation, reorganization or acquisition of
another investment company. Because the Fund would be subject to its ratable
share of the other investment company's expenses, the Fund will not make these
investments unless the Manager believes that the potential investment benefits
justify the added costs and expenses.
|X| "When-Issued" and "Delayed-Delivery" Transactions. The Fund may invest
in securities on a "when-issued" basis and may purchase or sell securities on a
"delayed-delivery" or "forward commitment" basis. When-issued and
delayed-delivery are terms that refer to securities whose terms and indenture
are available and for which a market exists, but which are not available for
immediate delivery.
When these transactions are negotiated, the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made. Delivery
and payment for the securities take place at a later date (generally within 45
days of the date the offer is accepted). The securities are subject to change in
value from market fluctuations during the period until settlement. The value at
delivery may be less than the purchase price. For example, changes in interest
rates in a direction other than that expected by the Manager before settlement
will affect the value of such securities and may cause a loss to the Fund.
During the period between purchase and settlement, no payment is made by the
Fund to the issuer and no interest accrues to the Fund from the investment. No
income begins to accrue to the Fund on a when-issued security until the Fund
receives the security at the settlement of the trade.
The Fund can engage in when-issued transactions to secure what the Manager
considers to be an advantageous price and yield at the time of entering into the
obligation. When the Fund enters into a when-issued or delayed-delivery
transaction, it relies on the other party to complete the transaction. Its
failure to do so may cause the Fund to lose the opportunity to obtain the
security at a price and yield the Manager considers to be advantageous.
When the Fund engages in when-issued and delayed-delivery transactions, it
does so for the purpose of acquiring or selling securities consistent with its
investment objective and policies for its portfolio or for delivery pursuant to
options contracts it has entered into, and not for the purpose of investment
leverage. Although the Fund will enter into delayed-delivery or when-issued
purchase transactions to acquire securities, it may dispose of a commitment
prior to settlement. If the Fund chooses to dispose of the right to acquire a
when-issued security prior to its acquisition or to dispose of its right to
delivery or receive against a forward commitment, it may incur a gain or loss.
At the time the Fund makes the commitment to purchase or sell a security
on a when-issued or delayed-delivery basis, it records the transaction on its
books and reflects the value of the security purchased in determining the Fund's
net asset value. In a sale transaction, it records the proceeds to be received.
The Fund will identify on its books liquid assets at least equal in value to the
value of the Fund's purchase commitments until the Fund pays for the investment.
The Fund will not enter into when-issued commitments if more than 15% of the
Fund's net assets would be committed under these transactions.
When-issued and delayed-delivery transactions can be used by the Fund as a
defensive technique to hedge against anticipated changes in interest rates and
prices. For instance, in periods of rising interest rates and falling prices,
the Fund might sell securities in its portfolio on a forward commitment basis to
attempt to limit its exposure to anticipated falling prices. In periods of
falling interest rates and rising prices, the Fund might sell portfolio
securities and purchase the same or similar securities on a when-issued or
delayed-delivery basis to obtain the benefit of currently higher cash yields.
|X| Repurchase Agreements. The Fund can acquire securities subject to
repurchase agreements. It might do so for liquidity purposes to meet anticipated
redemptions of Fund shares, or pending the investment of the proceeds from sales
of Fund shares, or pending the settlement of portfolio securities transactions,
or for temporary defensive purposes.
In a repurchase transaction, the Fund buys a security from, and
simultaneously resells it to, an approved vendor for delivery on an agreed-upon
future date. The resale price exceeds the purchase price by an amount that
reflects an agreed-upon interest rate effective for the period during which the
repurchase agreement is in effect. Approved vendors include U.S. commercial
banks, U.S. branches of foreign banks, or broker-dealers that have been
designated as primary dealers in government securities. They must meet credit
requirements set by the Fund's Board of Trustees from time to time.
The majority of these transactions run from day to day, and delivery
pursuant to the resale typically occurs within one to five days of the purchase.
Repurchase agreements having a maturity beyond seven days are subject to the
Fund's limits on holding illiquid investments. There is no limit on the amount
of the Fund's net assets that may be subject to repurchase agreements having
maturities of seven days or less.
Repurchase agreements, considered "loans" under the Investment Company
Act, are 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. 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 Manager will monitor the vendor's creditworthiness to confirm that
the vendor is financially sound and will continuously monitor the collateral's
value.
|X| Illiquid and Restricted Securities. To enable the Fund to sell its
holdings of a restricted security not registered under the Securities Act of
1933, the Fund may have to cause those securities to be registered. The expenses
of registering restricted securities may be negotiated by the Fund with the
issuer at the time the Fund buys the securities. When the Fund must arrange
registration because the Fund wishes to sell the security, a considerable period
may elapse between the time the decision is made to sell the security and the
time the security is registered so that the Fund could sell it. The Fund would
bear the risks of any downward price fluctuation during that period.
The Fund may also acquire restricted securities through private
placements. Those securities have contractual restrictions on their public
resale. Those restrictions might limit the Fund's ability to dispose of the
securities and might lower the amount the Fund could realize upon the sale.
The Fund has 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 under Rule 144A of the Securities Act of 1933, if those
securities have been determined to be liquid 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 holdings of that security may be considered to be illiquid.
|X| Loans of Portfolio Securities. The Fund can lend its portfolio
securities to certain types of eligible borrowers approved by the Board of
Trustees. It might do so to try to provide income or to raise cash or income for
liquidity purposes. These loans are limited to not more than 10% of the value of
the Fund's total assets. There are some risks in connection with securities
lending. The Fund might experience a delay in receiving additional collateral to
secure a loan, or a delay in recovery of the loaned securities. The Fund
presently does not intend to engage in loans of securities.
The Fund must receive collateral for a loan. Under current applicable
regulatory requirements (which are subject to change), on each business day the
loan collateral must be at least equal to the value of the loaned securities. It
must consist of cash, bank letters of credit, securities of the U.S. government
or its agencies or instrumentalities, or other cash equivalents in which the
Fund is permitted to invest. To be acceptable as collateral, letters of credit
must obligate a bank to pay amounts demanded by the Fund if the demand meets the
terms of the letter. The terms of the letter of credit and the issuing bank both
must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the dividends
or interest on loaned securities. It also receives one or more of (a) negotiated
loan fees, (b) interest on securities used as collateral, and (c) interest on
any short-term debt securities purchased with such loan collateral. Either type
of interest may be shared with the borrower. The Fund may also pay reasonable
finders, custodian and administrative fees in connection with these loans. The
terms of the Fund's loans must meet applicable tests under the Internal Revenue
Code and must permit the Fund to reacquire loaned securities on five days'
notice or in time to vote on any important matter.
|X| Borrowing. As a fundamental policy, the Fund cannot borrow money
except as a temporary measure for extraordinary or emergency purposes. Loans may
not exceed 33 1/3% of the value of the Fund's total assets. Additionally, as
part of that fundamental policy, the Fund will not purchase securities at times
when loans exceed 5% of its total assets.
The Fund may borrow only from banks. Under current regulatory
requirements, borrowings can be made only to the extent that the value of the
Fund's assets, less its liabilities other than borrowings, is equal to at least
300% of all borrowings (including the proposed borrowing). If the value of the
Fund's assets fails to meet this 300% asset coverage requirement, the Fund will
reduce its bank debt within three days to meet the requirement. To do so, the
Fund might have to sell a portion of its investments at a disadvantageous time.
The Fund will pay interest on these loans, and that interest expense will
raise the overall expenses of the Fund and reduce its returns. If it does
borrow, its expenses will be greater than comparable funds that do not borrow.
Additionally, the Fund's net asset value per share might fluctuate more than
that of funds that do not borrow.
|X| Hedging. Although the Fund can use hedging instruments, it is not
obligated to use them in seeking its objective. It does not currently
contemplate using them to any significant degree. To attempt to protect against
declines in the market value of the Fund's portfolio, to permit the Fund to
retain unrealized gains in the value of portfolio securities that have
appreciated, or to facilitate selling securities for investment reasons, the
Fund could:
|_| sell futures contracts, |_| buy puts on futures or on securities, or |_|
write covered calls on securities or futures.
The Fund can use hedging to establish a position in the securities market
as a temporary substitute for purchasing particular securities. In that case the
Fund would normally seek to purchase the securities and then terminate that
hedging position. The Fund might also use this type of hedge to attempt to
protect against the possibility that its portfolio securities would not be fully
included in a rise in value of the market. To do so, the Fund could:
|_| buy futures, or
|_| buy calls on futures or on securities.
The Fund's strategy of hedging with futures and options on futures will be
incidental to the Fund's activities in the underlying cash market. The
particular hedging instruments the Fund can use are described below. The Fund
may employ new hedging instruments and strategies when they are developed, if
those investment methods are consistent with the Fund's investment objective and
are permissible under applicable regulations governing the Fund.
|X| Futures. The Fund can buy and sell futures contracts that relate to
broadly-based stock indices (these are referred to as "stock index futures"),
foreign currencies (these are referred to as "forward contracts"), and financial
futures.
A broadly-based stock index is used as the basis for trading stock index
futures. These indices may in some cases be based on stocks of issuers in a
particular industry or group of industries. A stock index assigns relative
values to the common stocks included in the index and its value fluctuates in
response to the changes in value of the underlying stocks. A stock index cannot
be purchased or sold directly. These contracts obligate the seller to deliver,
and the purchaser to take, cash to settle the futures transaction. There is no
delivery made of the underlying securities to settle the futures obligation.
Either party may also settle the transaction by entering into an offsetting
contract.
The Fund can invest a portion of its assets in commodity futures
contracts. Commodity futures may be based upon commodities within 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.
The Trustees have adopted a non-fundamental policy that the Fund may write
covered call options or write covered put options with respect to not more than
25% of the value of its net assets. Similarly, the Fund may purchase call or put
options only if, after purchase, the value of all call and put options held by
the Fund will not exceed 50% of the fund's total assets.
At any time prior to expiration of the future, the Fund may elect to close
out its position by taking an opposite position, at which time a final
determination of variation margin is made and any additional cash must be paid
by or released to the Fund. Any loss or gain on the future is then realized by
the Fund for tax purposes. All futures transactions (except forward contracts)
are effected through a clearinghouse associated with the exchange on which the
contracts are traded.
|X| Put and Call Options. The Fund can buy and sell certain kinds of put
options ("puts") and call options ("calls"). The Fund can buy and sell
exchange-traded and over-the-counter put and call options, including options on
broadly-based indices, securities, and stock index futures. The Trustees have
adopted a non-fundamental policy that the Fund may write covered call options or
write covered put options with respect to not more than 25% of the value of its
net assets. Similarly, the Fund may purchase call or put options only if, after
the purchase, the value of all call and put options held by the Fund will not
exceed 50% of the Fund's total assets.
|X| Writing Covered Call Options. The Fund can write (that is, sell)
covered calls. If the Fund sells a call option, it must be covered. For options
on securities, that means the Fund must own the security subject to the call
while the call is outstanding. For stock index options, that means the call must
be covered by segregating liquid assets to enable the Fund to satisfy its
obligations if the call is exercised.
When the Fund writes a call on a security, it receives cash (a premium).
For calls on securities, the Fund agrees to sell the underlying security to a
purchaser of a corresponding call on the same security during the call period at
a fixed exercise price regardless of market price changes during the call
period. The call period is usually not more than nine months. The exercise price
may differ from the market price of the underlying security. The Fund has the
risk of loss that the price of the underlying security may decline during the
call period. That risk may be offset to some extent by the premium the Fund
receives. If the value of the investment does not rise above the call price, it
is likely that the call will lapse without being exercised. In that case, the
Fund would keep the cash premium and the investment.
When the Fund writes a call on an index, it receives cash (a premium). If
the buyer of the call exercises it, the Fund will pay amount of cash equal to
the difference between the closing price of the call and the exercise price,
multiplied by a specified multiple that determines the total value of the call
for each point of difference. If the value of the underlying investment does not
rise above the call price, it is likely that the call will lapse without being
exercised in that case, the Fund would keep the cash premium.
If the buyer of a call on a stock index exercises it, the Fund will pay an
amount of cash equal to the difference between the closing price of the call and
the exercise price, multiplied by a specified multiple that determines the total
value of the call for each point of difference. If the value of the underlying
investment does not rise above the call price, it is likely that the call will
lapse without being exercised. In that case the Fund would keep the cash
premium.
Settlement of puts and calls on broadly-based stock indices is in cash.
Gain or loss on options on stock indices depends on changes in the index in
question (and thus on price movements in the stock market generally).
The Fund's custodian bank, 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 calls traded on exchanges or as to other acceptable escrow
securities. In that way, no margin will be required for such transactions. OCC
will release the securities on the expiration of the option or when the Fund
enters into a closing transaction.
When the Fund writes an over-the-counter ("OTC") option, it will enter into
an arrangement with a primary U.S. Government securities dealer which will
establish a formula price at which the Fund will have the absolute right to
repurchase that OTC option. The formula price will generally be based on a
multiple of the premium received for the option, plus the amount by which the
option is exercisable below the market price of the underlying security (that
is, the option is "in the money"). When the Fund writes an OTC option, it will
treat as illiquid (for purposes of its restriction on holding illiquid
securities) the mark-to-market value of any OTC option it holds, unless the
option is subject to a buy-back agreement by the executing broker.
To terminate its obligation on a call it has written, the Fund may purchase
a corresponding call in a "closing purchase transaction." The Fund will then
realize a profit or loss, depending upon whether the net of the amount of the
option transaction costs and the premium received on the call the fund wrote is
more or less than the price of the call the Fund purchases to close out the
transaction. The Fund may realize a profit if the call expires unexercised,
because the Fund will retain the premium it received when it wrote the call. Any
such profits are considered short-term capital gains for Federal income tax
purposes, as are the premiums on lapsed calls. When distributed by the Fund they
are taxable as ordinary income. If the Fund cannot effect a closing purchase
transaction due to the lack of a market, it will have to hold the escrowed
assets in escrow until the call expires or is exercised.
The Fund may also write calls on a futures contract without owning the
futures contract or securities deliverable under the contract. To do so, at the
time the call is written, the Fund must cover the call by segregating an
equivalent dollar amount of liquid assets. The Fund will segregate additional
liquid assets if the value of the segregated assets drops below 100% of the
current value of the future. Because of this segregation requirement, in no
circumstances would the Fund's receipt of an exercise notice as to that future
require the Fund to deliver a futures contract. It would simply put the Fund in
a short futures position, which is permitted by the Fund's hedging policies.
|X| Writing Put Options. The Fund can sell put options on broadly-based
stock indices or stock index futures. A put option on securities gives the
purchaser the right to sell, and the writer the obligation to buy, the
underlying investment at the exercise price during the option period. If the
Fund writes a put, the put must be covered by liquid assets identified on the
Fund's books in an amount at least equal to the exercise price of the underlying
securities. The Fund therefore foregoes the opportunity of investing the
segregated assets or writing calls against those assets.
The premium the Fund receives from writing a put represents a profit, as
long as the price of the underlying investment remains equal to or above the
exercise price of the put. However, the Fund also assumes the obligation during
the option period to settle the transaction in cash with the buyer of the put at
the exercise price, even if the value of the underlying investment falls below
the exercise price. If a put the Fund has written expires unexercised, the Fund
realizes a gain in the amount of the premium less the transaction costs
incurred. If the put is exercised, the Fund must fulfill its obligation to
settle in cash at the exercise price. That price will usually exceed the market
value of the investment at that time. In that case, the Fund might incur a loss
if it sells the underlying investment. That loss will be equal to the sum of the
sale price of the underlying investment and the premium recovered minus the sum
of the exercise price and any transaction costs the Fund incurred.
As long as the Fund's obligation as the put writer continues, it may be
assigned an exercise notice by the broker-dealer through which the put was sold.
That notice will require the Fund to settle the transaction in cash at the
exercise price. The Fund has no control over when it may be required to settle
the transaction, since it may be assigned an exercise notice at any time prior
to the termination of its obligation as the writer of the put. That obligation
terminates upon expiration of the put. It may also terminate if, before it
receives an exercise notice, the Fund effects a closing purchase transaction by
purchasing a put of the same series as it sold. Once the Fund has been assigned
an exercise notice, it cannot effect a closing purchase transaction.
The Fund may decide to effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent the underlying
security from being put. The Fund will realize a profit or loss from a closing
purchase transaction depending on whether the cost of the transaction is less or
more than the premium received from writing the put option. Any profits from
writing puts are considered short-term capital gains for Federal tax purposes,
and when distributed by the Fund, are taxable as ordinary income.
|X| Purchasing Calls and Puts. The Fund can buy 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 buys a call (other than in a
closing purchase transaction), it pays a premium. Buying a call on a security or
future gives the Fund the right to buy the underlying investment from a seller
of a corresponding call on the same investment during the call period at a fixed
exercise price. The Fund benefits only if it sells the call at a profit or if,
during the call period, the market price of the underlying investment is above
the sum of the call price plus the transaction costs and the premium paid for
the call and the Fund exercises the call. If the Fund does not exercise the call
or sell it (whether or not at a profit), the call will become worthless at its
expiration date. In that case the Fund will have paid the premium but lost the
right to purchase the underlying investment.
In the case of a purchase of a call on a stock index, if the Fund exercises
the call during the call period, a seller of a corresponding call on the same
index will pay the Fund an amount of cash to settle the call if the closing
level of the stock index 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, it pays a premium. It has the right during the
put period to require a seller of a corresponding put, upon the Fund's exercise
of its put, to buy the underlying security (in the case of puts on securities or
futures) or in the case of puts on stock indices, to deliver cash to the Fund to
settle the put if the closing level of the stock index 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.
Buying a put on a security or future enables the Fund to sell the
underlying investment to a seller of a corresponding put on the same investment
during the put period at a fixed exercise price. Buying a put on securities or
futures the Fund owns enables the Fund to attempt to protect itself during the
put period against a decline in the value of the underlying investment below the
exercise price by selling the underlying investment at the exercise price to a
seller of a corresponding put. If the market price of the underlying investment
is equal to or above the exercise price and, as a result, the put is not
exercised or resold, the put will become worthless at its expiration date. In
that case the Fund will have paid the premium but lost the right to sell the
underlying investment. However, the Fund may sell the put prior to its
expiration. That sale may or may not be at a profit.
Buying a put on an investment the Fund does not own (such as an index or
future) permits the Fund either to resell the put or to buy the underlying
investment and sell it at the exercise price. The resale price will vary
inversely to the price of the underlying investment. If the market price of the
underlying investment is above the exercise price and, as a result, the put is
not exercised, the put will become worthless on its expiration date.
When the Fund purchases a put on a stock index, 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 resell the put. 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.
|X| Buying and Selling Options on Foreign Currencies. The Fund can buy and
sell calls and puts on foreign currencies. They include puts and calls that
trade on a securities or commodities exchange or in the over-the-counter markets
or are quoted by major recognized dealers in such options. The Fund could use
these calls and puts to try to protect against declines in the dollar value of
foreign securities and increases in the dollar cost of foreign securities the
Fund wants to acquire.
If the Manager anticipates a rise in the dollar value of a foreign currency
in which securities to be acquired are denominated, the increased cost of those
securities may be partially offset by purchasing calls or writing puts on that
foreign currency. If the Manager anticipates a decline in the dollar value of a
foreign currency, the decline in the dollar value of portfolio securities
denominated in that currency might be partially offset by writing calls or
purchasing puts on that foreign currency. However, the currency rates could
fluctuate in a direction adverse to the Fund's position. The Fund will then have
incurred option premium payments and transaction costs without a corresponding
benefit.
A call the Fund writes on a foreign currency is "covered" if the Fund owns
the underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or it can do so for additional cash consideration held in a
segregated account by its custodian bank) upon conversion or exchange of other
foreign currency held in its portfolio.
|X| Risks of Hedging with Options and Futures. 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, 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. The Fund's option activities may
affect its costs.
The Fund's option activities could affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund might 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 could pay a brokerage commission each time it buys a call or put,
sells a call or put, or buys or sells an underlying investment in connection
with the exercise of a call or put. Those commissions could be higher on a
relative basis 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. Consequently, put and call options
offer large amounts of leverage. The leverage offered by trading in options
could result in the Fund's net asset value being more sensitive to changes in
the value of the underlying investment.
If a covered call written by the Fund is exercised on an investment that
has increased in value, the Fund will be required to sell the investment at the
call price. It will not be able to realize any profit if the investment has
increased in value above the call price.
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. The Fund might
experience losses if it could not close out a position because of an illiquid
market for the future or option.
There is a risk in using short hedging by selling futures or purchasing
puts on broadly-based indices or futures to attempt to protect against declines
in the value of the Fund's portfolio securities. The risk is that the prices of
the futures or the applicable index will correlate imperfectly with the behavior
of the cash prices of the Fund's securities. For example, it is possible that
while the Fund has used hedging instruments in a short hedge, the market may
advance and the value of the securities held in the Fund's portfolio might
decline. If that occurred, the Fund would lose money on the hedging instruments
and also experience a decline in the value of 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 securities will tend to move in the
same direction as the indices upon which the hedging instruments are based.
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
portfolio securities being hedged and movements in the price of the hedging
instruments, the Fund might use hedging instruments in a greater dollar amount
than the dollar amount of portfolio securities being hedged. It might do so if
the historical volatility of the prices of the portfolio securities being hedged
is more than the historical volatility of the applicable index.
The ordinary spreads between prices in the cash and futures markets are
subject to distortions, due to differences in the nature of those markets.
First, all participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market 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 market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities markets. Therefore,
increased participation by speculators in the futures market may cause temporary
price distortions.
The Fund can use hedging instruments to establish a position in the
securities markets as a temporary substitute for the purchase of individual
securities (long hedging) by buying futures and/or calls on such futures,
broadly-based indices or on securities. It is possible that when the Fund does
so the market might decline. If the Fund then concludes not to invest in
securities because of concerns that the market might decline further 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 securities purchased.
|X| 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 "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 a foreign currency. The Fund limits its exposure in foreign
currency exchange contracts in a particular foreign currency to the amount of
its assets denominated in that currency or a closely-correlated currency. The
Fund may also use "cross-hedging" where the Fund hedges against changes in
currencies other than the currency in which a security it holds is denominated.
Under a forward contract, one party agrees to purchase, and another party
agrees to sell, a specific currency at a future date. That date may be any fixed
number of days from the date of the contract agreed upon by the parties. The
transaction price is set at the time the contract is entered into. These
contracts are traded in the inter-bank market conducted directly among currency
traders (usually large commercial banks) and their customers.
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
the risk of 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.
Although forward contracts may reduce the risk of loss from a decline in the
value of the hedged currency, at the same time they limit any potential gain if
the value of the hedged currency increases.
When the Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when it anticipates receiving
dividend payments in a foreign currency, the Fund might desire to "lock-in" the
U.S. dollar price of the security or the U.S. dollar equivalent of the dividend
payments. To do so, the Fund could enter into a forward contract for the
purchase or sale of the amount of foreign currency involved in the underlying
transaction, in a fixed amount of U.S. dollars per unit of the foreign currency.
This is called a "transaction hedge." The transaction hedge will protect the
Fund against a loss from an adverse change in 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 the payments are made or
received.
The Fund could also use forward contracts to lock in the U.S. dollar value
of portfolio positions. This is called a "position hedge." When the Fund
believes that foreign currency might suffer a substantial decline against the
U.S. dollar, it could enter into a forward contract to sell an amount of that
foreign currency approximating the value of some or all of the Fund's portfolio
securities denominated in that foreign currency. When the Fund believes that the
U.S. dollar might suffer a substantial decline against a foreign currency, it
could enter into a forward contract to buy that foreign currency for a fixed
dollar amount. Alternatively, the Fund could enter into a forward contract to
sell a different foreign currency for a fixed U.S. dollar amount if the Fund
believes that the U.S. dollar value of the foreign currency to be sold pursuant
to its 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.
That is referred to as a "cross hedge."
The Fund will cover its short positions in these cases by identifying to
its Custodian bank assets having a value equal to the aggregate amount of the
Fund's commitment under forward contracts. The Fund will not enter into forward
contracts or maintain a net exposure to such contracts if the consummation of
the contracts would obligate the Fund to deliver an amount of foreign currency
in excess of the value of the Fund's portfolio securities or other assets
denominated in that currency or another currency that is the subject of the
hedge. However, to avoid excess transactions and transaction costs, the Fund may
maintain a net exposure to forward contracts in excess of the value of the
Fund's portfolio securities or other assets denominated in foreign currencies if
the excess amount is "covered" by liquid securities denominated in any currency.
The cover must be at least equal at all times to the amount of that excess.
As one alternative, the Fund may purchase a call option permitting the
Fund to purchase the amount of foreign currency being hedged by a forward sale
contract at a price no higher than the forward contract price. As another
alternative, the Fund may purchase a put option permitting the Fund to sell the
amount of foreign currency subject to a forward purchase contract at a price as
high or higher than the forward contact price.
The precise matching of the amounts under forward contracts and the value
of the securities involved generally will not be possible because the future
value of securities denominated in foreign currencies will change as a
consequence of market movements between the date the forward contract is entered
into and the date it is sold. In some cases, the Manager might decide to sell
the security and deliver foreign currency to settle the original purchase
obligation. If the market value of the security is less than the amount of
foreign currency the Fund is obligated to deliver, the Fund might have to
purchase additional foreign currency on the "spot" (that is, cash) market to
settle the security trade. If the market value of the security instead exceeds
the amount of foreign currency the Fund is obligated to deliver to settle the
trade, the Fund might have to sell on the spot market some of the foreign
currency received upon the sale of the security. There will be additional
transaction costs on the spot market in those cases.
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 to pay additional transactions costs. The use of forward
contracts in this manner might reduce the Fund's performance if there are
unanticipated changes in currency prices to a greater degree than if the Fund
had not entered into such contracts.
At or before the maturity of a forward contract requiring the Fund to sell
a currency, the Fund might sell a portfolio security and use the sale proceeds
to make delivery of the currency. In the alternative the Fund might retain the
security and offset its contractual obligation to deliver the currency by
purchasing a second contract. Under that contract the Fund will obtain, on the
same maturity date, the same amount of the currency that it is obligated to
deliver. Similarly, the Fund might 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. The gain or loss
will depend on the extent to which the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
offsetting contract.
The costs 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 brokerage fees or commissions are involved.
Because these contracts are not traded on an exchange, the Fund must evaluate
the credit and performance risk of the counterparty under each 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
will incur costs in doing so. 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 might
offer to sell a foreign currency to the Fund at one rate, while offering a
lesser rate of exchange if the Fund desires to resell that currency to the
dealer.
|X| Regulatory Aspects of Hedging Instruments. When using futures and
options on futures, the Fund is required to operate within certain guidelines
and restrictions with respect to the use of futures as established by the
Commodities Futures Trading Commission (the "CFTC"). In particular, the Fund is
exempted from registration with the CFTC as a "commodity pool operator" if the
Fund complies with the requirements of Rule 4.5 adopted by the CFTC. The Rule
does not limit the percentage of the Fund's assets that may be used for futures
margin and related options premiums for a bona fide hedging position. However,
under the Rule, the Fund must limit its aggregate initial futures margin and
related options premiums to not more than 5% of the Fund's net assets for
hedging strategies that are not considered bona fide hedging strategies under
the Rule. Under the Rule, the Fund must also use short futures and options on
futures 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 the option exchanges. The exchanges limit the maximum number of options that
may be written or held by a single investor or group of investors acting in
concert. Those limits apply 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 that the Fund may write or hold may be affected by options
written or held by other entities, including other investment companies having
the same advisor as the Fund (or an advisor that is an affiliate of the Fund's
advisor or Manager). 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.
Under the Investment Company Act, when the Fund purchases a future, it
must maintain cash or readily marketable short-term debt instruments in an
amount equal to the market value of the securities underlying the future, less
the margin deposit applicable to it. The account must be a segregated account or
accounts held by the Fund's custodian bank.
|X| Tax Aspects of Certain Hedging Instruments. Certain foreign currency
exchange contracts in which the Fund may invest are treated as "Section 1256
contracts" under the Internal Revenue Code. In general, gains or losses relating
to Section 1256 contracts are characterized as 60% long-term and 40% short-term
capital gains or losses under the Code. However, foreign currency gains or
losses arising from Section 1256 contracts that are 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," and
unrealized gains or losses are treated as though they were realized. These
contracts also may be marked-to-market for purposes of determining 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 those transactions from this marked-to-market treatment.
Certain forward contracts the Fund enters into 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 making up a
straddle is allowed only to the extent that the 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, the following gains or losses are
treated as ordinary income or loss:
(1) gains or losses attributable to fluctuations in exchange rates that
occur between the time the Fund accrues interest or other receivables or accrues
expenses or other liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities, and
(2) gains or losses attributable to fluctuations in the value of a foreign
currency between the date of acquisition of a debt security denominated in a
foreign currency or foreign currency forward contracts and the date of
disposition.
Currency gains and losses are offset against market gains and losses on
each trade before determining a net "Section 988" gain or loss under the
Internal Revenue Code for that trade, which may increase or decrease the amount
of the Fund's investment income available for distribution to its shareholders.
Investment Restrictions
|X| What Are "Fundamental Policies?" Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be changed
only by the vote of a "majority" of the Fund's outstanding voting securities.
Under the Investment Company Act, a "majority" vote is defined as the vote of
the holders of the lesser of:
? 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 represented by proxy, or
? more than 50% of the outstanding shares.
The Fund's investment objective is a fundamental policy. Other policies
described in the Prospectus or this Statement of Additional Information are
"fundamental" only if they are identified as such. The Fund's Board of Trustees
can change non-fundamental policies without shareholder approval. However,
significant changes to investment policies will be described in supplements or
updates to the Prospectus or this Statement of Additional Information, as
appropriate. The Fund's most significant investment policies are described in
the Prospectus.
|X| Does the Fund Have Additional Fundamental Policies? The following
investment restrictions are fundamental policies of the Fund.
? The Fund cannot invest more than 5% of the value of its total assets in
the securities of any one issuer. This limitation applies to 75% of the Fund's
total assets.
? The Fund cannot purchase more than 10% of any class of security of any
issuer. All outstanding debt securities and all preferred stock of an issuer are
considered as one class. This restriction does not apply to securities issued by
the U.S. government or any of its agencies or instrumentalities.
? The Fund cannot concentrate its investments. That means it cannot invest
25% or more of its total assets in any industry. If deemed appropriate for
attaining its investment objective, the Fund may invest less than but up to 25%
of its total assets in any one industry classification used by the Fund for
investment purposes. For this purpose, a foreign government is considered an
industry.
? The Fund cannot borrow money in excess of 33 1/3% of the value of the
Fund's total assets. The Fund may borrow only from banks and only as a temporary
measure for extraordinary or emergency purposes. The Fund will make no
additional investments while borrowings exceed 5% of the Fund's total assets.
The Fund can borrow only if it maintains a 300% ratio of assets to borrowings at
all times in the manner set forth in the Investment Company Act of 1940.
? The Fund cannot invest in physical commodities or physical commodity
contracts. However, the Fund may buy and sell hedging instruments to the extent
specified in its Prospectus or Statement of Additional Information from time to
time. The Fund can also buy and sell options, futures, securities or other
instruments backed by, or the investment return from which is linked to, changes
in the price of physical commodities.
? The Fund cannot invest in real estate or real estate limited
partnerships (direct participation programs). However, the Fund may purchase
securities of issuers that engage in real estate operations and securities which
are secured by real estate or interests in real estate.
? The Fund cannot underwrite securities of other companies. A permitted
exception is in case it is deemed to be an underwriter under the Securities Act
of 1933 when reselling any securities held in its own portfolio.
? The Fund cannot invest in securities of any issuer if, to the knowledge
of the Trust, officers, directors or trustees of the Trust, or the Manager who
owns more than 1/2 of 1% of the outstanding securities of such issuer together
own more than 5% of the outstanding securities of such issuer.
? The Fund cannot pledge its assets or assign or otherwise encumber its
assets in excess of 10% of its net assets. It can pledge, assign or encumber its
assets only to secure borrowings effected within the limitations set forth in
the Prospectus.
? The Fund cannot invest for the purpose of exercising control or
management of another company.
? The Fund cannot issue senior securities (as defined in the Investment
Company Act of 1940). However, the Fund can enter into any repurchase agreement,
borrow money in accordance with restrictions described above and lend its
portfolio securities.
? The Fund cannot make loans to any person or individual. However, the
Fund may loan portfolio securities within the limitations set forth in the
Prospectus.
Unless the Prospectus or this Statement of Additional Information states
that a percentage restriction applies on an ongoing basis, it applies only at
the time the Fund makes an investment. 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.
For purposes of the Fund's policy not to concentrate its investments as
described above, the Fund has adopted the industry classifications set forth in
Appendix B to this Statement of Additional Information. This is not a
fundamental policy.
|X| Does the Fund Have Any Restrictions That Are Not Fundamental? The Fund
has other investment restrictions that are not fundamental policies, which means
that they can be changed by the Board of Trustees without shareholder approval.
? The Fund cannot make short sales or purchase securities on margin.
However, the Fund can make short-term borrowings when necessary for the
clearance of purchases of portfolio securities. Collateral arrangements in
connection with futures and options are not deemed to be margin transactions
under this restriction.
? The Fund cannot invest in interests in oil, gas or other mineral
exploration or development programs or leases.
How the Fund is Managed
Organization and History. The Fund is an open-end, diversified management
investment company. The Fund is one of three series of Oppenheimer Quest For
Value Funds, an open-end management investment company organized as a
Massachusetts business trust in April 1987 (and which is referred to as the
"Trust").
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. 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.
|X| Classes of Shares. The Board of Trustees has the power, without
shareholder approval, to divide unissued shares of the Trust into two or more
series and each series 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
N. All classes invest in the same investment portfolio. Each class of shares:
o has its own dividends and distributions,
o pays certain expenses which may be different for the different classes,
o may have a different net asset value,
o may have separate voting rights on matters in which interests of one class
are different from interests of another class, and o votes as a class on
matters that affect that class alone.
Shares are freely transferable, and each share of each class has one vote
at shareholder meetings, with fractional shares voting proportionally on matters
submitted to the vote of shareholders. Each share of the Fund represents an
interest in the Fund proportionately equal to the interest of each other share
of the same class.
The Trustees are authorized to create new series of the Trust and new
classes of shares of the Fund. The Trustees may reclassify unissued shares of
the Fund into additional series or classes of shares. The Trustees also may
divide or combine the shares of a class into a greater or lesser number of
shares without changing the proportionate beneficial interest of a shareholder
in the Fund. Shares do not have cumulative voting rights or preemptive or
subscription rights. Shares may be voted in person or by proxy at shareholder
meetings.
|X| Meetings of Shareholders. Although the Fund is not required by
Massachusetts law to hold annual meetings, it may hold shareholder meetings from
time to time on important matters. The Fund's shareholders have the right to
call a meeting to remove a Trustee or to take certain other action described in
the Declaration of Trust.
The Fund will hold meetings when required to do so by the Investment
Company Act or other applicable law. The Fund will hold a meeting when the
Trustees call a meeting or upon proper request of shareholders. If the Fund
receives a written request of the record holders of at least 25% of the
outstanding shares eligible to be voted at a meeting to call a meeting for a
specified purpose (which might include the removal of a Trustee), the Fund will
call a meeting of shareholders for that specified purpose.
Shareholders of the different classes of the Fund vote together in the
aggregate on certain matters at shareholders' meetings. Those matters include
the election of Trustees and ratification of appointment of the independent
auditors. Shareholders of a particular series or class vote separately on
proposals that affect that series or class. Shareholders of a series or class
that is not affected by a proposal are not entitled to vote on the proposal. For
example, only shareholders of a particular series vote on any material amendment
to the investment advisory agreement for that series. Only shareholders of a
particular class of a series vote on certain amendments to the Distribution
and/or Service Plans if the amendments affect only that class.
|X| Shareholder and Trustee Liability. The Trust's Declaration of Trust
contains an express disclaimer of shareholder or Trustee liability for the
Fund's obligations. It also provides for indemnification and reimbursement of
expenses out of the Fund's property for any shareholder held personally liable
for its obligations. The Declaration of Trust also states that upon request, the
Fund shall assume the defense of any claim made against a shareholder for any
act or obligation of the Fund and shall satisfy any judgment on that claim.
Massachusetts law permits a shareholder of a business trust (such as the Fund)
to be held personally liable as a "partner" under certain circumstances.
However, the risk that a Fund shareholder will incur financial loss from being
held liable as a "partner" of the Fund is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations.
The Fund's contractual arrangements state that any person doing business
with the Fund (and each shareholder of the Fund) agrees under its Declaration of
Trust to look solely to the assets of the Fund for satisfaction of any claim or
demand that may arise out of any dealings with the Fund. The contracts further
state that the Trustees shall have no personal liability to any such person, to
the extent permitted by law.
Trustees and Officers of the Fund. The Trustees and officers and their principal
occupations and business affiliations during the past five years are listed
below. Trustees denoted with an asterisk (*) below are deemed to be "interested
persons" of the Fund under the Investment Company Act. All of the Trustees are
also trustees, directors or managing general partners of the following
Oppenheimer funds:
Oppenheimer Quest Value Fund, Inc., Oppenheimer Quest For Value Funds, a series
fund having the following series: Oppenheimer Quest Small Cap Value Fund,
Oppenheimer Quest Balanced Value Fund, and Oppenheimer Quest Opportunity Value
Fund, Oppenheimer Quest Global Value Fund, Inc., Oppenheimer Quest Capital Value
Fund, Inc., Rochester Portfolio Series, a series fund having one series:
Limited-Term New York Muncipal Fund, Bond Fund Series, a series fund having one
series: Oppenheimer Convertible Securities Fund, Rochester Fund Municipals, and
Oppenheimer MidCap Fund
Ms. Macaskill and Messrs. Bishop, Wixted, Darling, Donohue, Farrar and
Zack, who are officers of the Fund, respectively hold the same offices of the
other listed Oppenheimer funds. As of ________ ____, 2001, the Trustees and the
officers of the Fund as a group owned less than 1% of the outstanding shares of
the Fund. This foregoing statement does not reflect shares held of record by an
employee benefit plan for employees of the Manager other than shares
beneficially owned under that plan by the officers of the Fund listed below. Ms
Macaskill and Mr. Donohue are trustees of that plan.
Bridget A. Macaskill, Chairman of the Board of Trustees and President, Age: 52.
Two World Trade Center, New York, New York 10048-0203 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 Asset Management Corporation, an investment adviser subsidiary of
the Manager; Chairman and a director of Shareholder Services, Inc. (since August
1994) and Shareholder Financial Services, Inc. (since September 1995), transfer
agent subsidiaries of the Manager; President (since September 1995) and a
director (since October 1990) of Oppenheimer Acquisition Corp., the Manager's
parent holding company; 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 management subsidiary of
the Manager and of Oppenheimer Millennium Funds plc; President and a director of
other Oppenheimer funds; a director of Prudential Corporation plc (a U.K.
financial service company).
Paul Y. Clinton, Trustee, Age: 70.
39 Blossom Avenue, Osterville, Massachusetts 02655
Principal of Clinton Management Associates, a financial and venture capital
consulting firm; Trustee of Capital Cash Management Trust, a money-market fund
and Narragansett Tax-Free Fund, a tax-exempt bond fund; Director of OCC Cash
Reserves, Inc. and Trustee of OCC Accumulation Trust, both of which are open-end
investment companies. Formerly: Director, External Affairs, Kravco Corporation,
a national real estate owner and property management corporation; President of
Essex Management Corporation, a management consulting company; a general partner
of Capital Growth Fund, a venture capital partnership; a general partner of
Essex Limited Partnership, an investment partnership; President of Geneve Corp.,
a venture capital fund; Chairman of Woodland Capital Corp., a small business
investment company; and Vice President of W.R. Grace & Co.
Thomas W. Courtney, Trustee, Age: 67.
833 Wyndemere Way, Naples, Florida 34105
Principal of Courtney Associates, Inc. (venture capital firm); former General
Partner of Trivest Venture Fund (private venture capital fund); former President
of Investment Counseling Federated Investors, Inc.; Trustee of Cash Assets
Trust, a money market fund; Director of OCC Cash Reserves, Inc., and Trustee of
OCC Accumulation Trust, both of which are open-end investment companies; former
President of Boston Company Institutional Investors; Trustee of Hawaiian
Tax-Free Trust and Tax Free Trust of Arizona, tax-exempt bond funds; Director of
several privately owned corporations; former Director of Financial Analysts
Federation.
Robert G. Galli, Trustee, Age: 67.
19750 Beach Road, Jupiter, FL 33469
A Trustee or Director of other Oppenheimer funds. Formerly he held the following
positions: Vice Chairman of the Manager, OppenheimerFunds, Inc. (October 1995 -
December 1997); Executive Vice President of the Manager (December 1977 - October
1995); Executive Vice President and a director (April 1986 - October 1995) of
HarbourView Asset Management Corporation, an investment advisor subsidiary of
the Manager.
Lacy B. Herrmann, Trustee, Age: 71.
380 Madison Avenue, Suite 2300, New York, New York 10017
Chairman and Chief Executive Officer of Aquila Management Corporation, the
sponsoring organization and manager, administrator and/or sub-Adviser to the
following open-end investment companies, and Chairman of the Board of Trustees
and President of each: Churchill Cash Reserves Trust, Aquila Cascadia Equity
Fund, Pacific Capital Cash Assets Trust, Pacific Capital U.S. Treasuries Cash
Assets Trust, Pacific Capital Tax-Free Cash Assets Trust, Prime Cash Fund,
Narragansett Insured Tax-Free Income Fund, Tax-Free Fund For Utah, Churchill
Tax-Free Fund of Kentucky, Tax-Free Fund of Colorado, Tax-Free Trust of Oregon,
Tax-Free Trust of Arizona, Hawaiian Tax-Free Trust, and Aquila Rocky Mountain
Equity Fund; Vice President, Director, Secretary, and formerly Treasurer of
Aquila Distributors, Inc., distributor of the above funds; President and
Chairman of the Board of Trustees of Capital Cash Management Trust ("CCMT"), and
an Officer and Trustee/Director of its predecessors; President and Director of
STCM Management Company, Inc., sponsor and adviser to CCMT; Chairman, President
and a Director of InCap Management Corporation, formerly sub-adviser and
administrator of Prime Cash Fund and Short Term Asset Reserves; Director of OCC
Cash Reserves, Inc., and Trustee of OCC Accumulation Trust, both of which are
open-end investment companies; Trustee Emeritus of Brown University.
George Loft, Trustee, Age: 86.
51 Herrick Road, Sharon, Connecticut 06069
Private Investor; Director of OCC Cash Reserves, Inc., and Trustee of OCC
Accumulation Trust, both of which are open-end investment companies.
O. Leonard Darling, Vice President, Age: 58.
Two World Trade Center, New York, New York 10048-0203
Chief Investment Officer and Executive Vice President of the Manager (since
6/99); Chairman and Director of HarbourView Asset Management Corporation (since
6/99); formerly Chief Executive Officer of HarbourView Asset Management
Corporation (12/98-6/99); Trustee (1993 - present) of Awhtolia College - Greece.
Andrew J. Donohue, Secretary, Age: 50.
Two World Trade Center, New York, New York 10048-0203
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President and General Counsel (since September 1993) and a director (since
January 1992) of the Distributor; Executive Vice President, General Counsel and
a director of HarbourView Asset Management Corporation, Shareholder Services,
Inc., Shareholder Financial Services, Inc. and (since September 1995)
Oppenheimer Partnership Holdings, Inc.; President and a director of Centennial
Asset Management Corporation (since September 1995); President, General Counsel
and a director of Oppenheimer Real Asset Management, Inc. (since July 1996);
General Counsel (since May 1996) and Secretary (since April 1997) of Oppenheimer
Acquisition Corp.; Vice President and a director of OppenheimerFunds
International Ltd. and Oppenheimer Millennium Funds plc (since October 1997); an
officer of other Oppenheimer funds.
Robert Bishop, Assistant Treasurer, Age: 42.
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: 35.
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.
Brian W. Wixted, Treasurer, Age: 41.
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer (since April 1999) of the Manager; Treasurer
of HarbourView Asset Management Corporation, Shareholder Services, Inc.,
Shareholder Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc.
(since April 1999); Assistant Treasurer of Oppenheimer Acquisition Corp. (since
April 1999); Assistant Secretary of Centennial Asset Management Corporation
(since April 1999); formerly Principal and Chief Operating Officer, Bankers
Trust Company - Mutual Fund Services Division (March 1995 - March 1999); Vice
President and Chief Financial Officer of CS First Boston Investment Management
Corp. (September 1991 - March 1995); and Vice President and Accounting Manager,
Merrill Lynch Asset Management (November 1987 - September 1991).
Robert G. Zack, Assistant Secretary, Age: 52.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President (since May 1985) and Associate General Counsel (since May
1981) of the Manager, Assistant Secretary of Shareholder Services, Inc. (since
May 1985), and Shareholder Financial Services, Inc. (since November 1989);
Assistant Secretary of OppenheimerFunds International Ltd. and Oppenheimer
Millennium Funds plc (since October 1997); an officer of other Oppenheimer
funds.
|X| Remuneration of Trustees. The officers of the Fund and one Trustee,
Ms. Macaskill, are affiliated with the Manager and receive no salary or fee from
the Fund. The remaining Trustees received the compensation shown below. The
compensation from the Fund was paid during its fiscal year ended October 31,
2000. The table below also shows the total compensation from all of the
Oppenheimer funds listed above, including the compensation from the Fund, and
from two other funds that are not Oppenheimer funds but for which the Manager
acts as investment advisor. That amount represents compensation received as a
director, trustee, or member of a committee of the Board during the calendar
year 2000.
<PAGE>
--------------------------------------------------------------------------------
Total Compensation
From all Oppenheimer
Aggregate Retirement Quest/Rochester
Compensation Benefits Accrued Funds
Trustee's Name From Fund as Part of Fund (10 Funds)2
Expenses
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Paul Y. Clinton $ $ $3
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Thomas W. Courtney $ $ $3
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Robert G. Galli $ $ $4
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Lacy B. Herrmann $ $ $3
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
George Loft $ $ $3
--------------------------------------------------------------------------------
1. Aggregate compensation includes fees, deferred compensation, if any and
retirement plan benefits accrued for a Director or Trustee.
2. For the 2000 calendar year.
3. Total compensation for the 2000 calendar year includes compensation from two
funds for which the Manager acts as investment adviser.
4. Total compensation for the 2000 calendar year includes compensation received
for serving as Trustee or Director of _____ other Oppenheimer funds.
|X| Retirement Plan for Trustees. The Fund has adopted a retirement plan
that provides for payments to retired Trustees. Payments are up to 80% of the
average compensation paid during a Trustee's five years of service in which the
highest compensation was received. A Trustee must serve as Trustee for any of
the Oppenheimer Quest/Rochester/MidCap funds listed above for at least 15 years
to be eligible for the maximum payment. Each Trustee's retirement benefits will
depend on the amount of the Trustee's future compensation and length of service.
Therefore the amount of those benefits cannot be determined at this time, nor
can we estimate the number of years of credited service that will be used to
determine those benefits.
|X| Deferred Compensation Plan for Trustees. 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.
|X| Major Shareholders. As of _________ ____, 2001, the only person who
owned of record or was known by the Fund to own beneficially 5% or more of any
class of the Fund's outstanding shares was:
Merrill Lynch Pierce Fenner & Smith, Inc., 4800 Deer Lake Drive East,
Floor 3, Jacksonville, FL 32246, which owned ____________ Class C shares
(representing approximately ______% of the Class C shares then outstanding) As
of the date hereof, the manager is the sole owner of Class N shares for the
benefit of its customers.
The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company.
|X| Code of Ethics The Fund, the Manager and the Distributor 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. Covered persons include persons
with knowledge of the investments and investment intentions of the Fund and
other funds advised by the Manager. The Code of Ethics does permit personnel
subject to the Code to invest in securities, including securities that may be
purchased or held by the Fund, subject to a number of restrictions and controls.
Compliance with the Code of Ethics is carefully monitored and enforced by the
Manager.
The Code of Ethics is an exhibit to the Fund's registration statement
filed with the Securities and Exchange Commission and can be reviewed and copied
at the SEC's Public Reference Room in Washington, D.C. You can obtain
information about the hours of operation of the Public Reference Room by calling
the SEC at 1.202.942.8090. The Code of Ethics can also be viewed as part of the
Fund's registration statement on the SEC's EDGAR database at the SEC's Internet
website at http://www.sec.gov. Copies may be obtained, after paying a
duplicating fee, by electronic request at the following E-mail address:
[email protected]., or by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
|X| The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and the Fund's parent Trust. The Manager selects
securities for the Fund's portfolio and handles the Fund's day-to-day business.
The portfolio managers of the Fund are employed by the Manager and are the
persons who are principally responsible for the day to day management of the
Fund's portfolio. From November 22, 1995 to April 28, 2000, pursuant to the
terms of a Sub-Advisory Agreement with the Manager, OpCap Advisors acted as the
Manager to the Fund and in such capacity selected securities for the Fund's
portfolio.
The investment advisory agreement between the Fund and the Manager
requires the Manager, at its expense, to provide the Fund with adequate office
space, facilities and equipment. It also requires the Manager to provide and
supervise the activities of all administrative and clerical personnel required
to provide effective administration for the Fund. Those responsibilities include
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.
The Fund pays expenses not expressly assumed by the Manager under the
advisory agreement. Expenses for the Trust's three series are allocated to the
series in proportion to their net assets, unless allocations of expenses can be
made directly to a series. The advisory agreement lists examples of expenses
paid by the Fund. The major categories relate to calculation of the Fund's net
asset values per share, 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. The management fees paid by the Fund to
the Manager are calculated at the rates described in the Prospectus, which are
applied to the assets of the Fund as a whole. The fees are allocated to each
class of shares based upon the relative proportion of the Fund's net assets
represented by that class.
--------------------------------------------------------------------------------
Administrative Fees Paid
Management Fees Paid to to the Manager Under the
Fiscal Year ended 10/31: OppenheimerFunds, Inc. 1 Administrative Agreement1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1998 $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1999 $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2000 $ $
--------------------------------------------------------------------------------
1. During the fiscal years ended 1997 and 1998, the Fund paid the Manager a fee
for accounting services, consisting of a base fee of $55,000 per year plus
out-of-pocket expenses. The Manager voluntarily agreed to eliminate this fee
commencing with the 1999 fiscal year.
The investment advisory agreement states that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties or
reckless disregard of its obligations and duties under the investment advisory
agreement, the Manager is not liable for any loss resulting from a good faith
error or omission on its part with respect to any of its duties under the
agreement.
The agreement permits the Manager to act as investment advisor for any
other person, firm or corporation and to use the names "Oppenheimer" and "Quest
for Value" in connection with other investment companies for which it may act as
investment advisor or general distributor. If the Manager shall no longer act as
investment advisor to the Fund, the Manager may withdraw the right of the Fund
to use the names "Oppenheimer" or "Quest for Value" as part of its name.
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 Fund's investment advisory agreement with the
Manager contain provisions relating to the employment of broker-dealers to
effect the Fund's portfolio transactions. The Manager is authorized by the
advisory agreement to employ broker-dealers, including "affiliated" brokers, as
that term is defined in the Investment Company Act. The Manager may employ
broker-dealers that, in its best judgment based on all relevant factors, will
implement the policy of the Fund to obtain, at reasonable expense, the "best
execution" of the Fund's portfolio transactions. "Best execution" means prompt
and reliable execution at the most favorable price obtainable. The Manager need
not seek competitive concession bidding. However, the Manager is expected to be
aware of the current rates of eligible brokers and to minimize the concessions
paid to the extent consistent with the interests and policies of the Fund as
established by its Board of Trustees.
The Manager may select brokers (other than affiliates) that provide
brokerage and/or research services for the Fund and/or the other accounts over
which the Manager or their respective affiliates have investment discretion. The
concessions paid to such brokers may be higher than another qualified broker
would charge, if the Manager makes a good faith determination that the
concession is fair and reasonable in relation to the services provided. Subject
to those considerations, as a factor in selecting brokers for the Fund's
portfolio transactions, the Manager may also consider sales of shares of the
Fund and other investment companies for which the Manager or an affiliate serves
as investment advisor.
Brokerage Practices Followed by the Manager. Brokerage for the Fund is allocated
subject to the provisions of the investment advisory agreement and the
procedures and rules described above. Generally, the Manager's portfolio traders
allocate brokerage based upon recommendations from the Fund's portfolio manager.
In certain instances, portfolio managers may directly place trades and allocate
brokerage. In either case, the Manager's executive officers supervise the
allocation of brokerage.
Transactions in securities other than those for which an exchange is the primary
market are generally done with principals or market makers. In transactions on
foreign exchanges, the Fund may be required to pay fixed brokerage concessions
and therefore would not have the benefit of negotiated concessions available in
U.S. markets. Brokerage concessions are paid primarily for transactions in
listed securities or for certain fixed-income agency transactions in the
secondary market. Otherwise brokerage concessions are paid only if it appears
likely that a better price or execution can be obtained by doing so.
Other funds advised by the Manager have investment policies similar to those of
the Fund. Those other funds may purchase or sell the same securities as the Fund
at the same time as the Fund, which could affect the supply and price of the
securities. If two or more funds advised by the Manager purchase the same
security on the same day from the same dealer, the transactions under those
combined orders are averaged as to price and allocated in accordance with the
purchase or sale orders actually placed for each account.
Most purchases of debt obligations are principal transactions at net prices.
Instead of using a broker for those transactions, the Fund normally deals
directly with the selling or purchasing principal or market maker unless the
Manager determines that a better price or execution can be obtained by using the
services of a broker. Purchases of portfolio securities from underwriters
include a commission or concession paid by the issuer to the underwriter.
Purchases from dealers include a spread between the bid and asked prices. The
Fund seeks to obtain prompt execution of these orders at the most favorable net
price.
The investment advisory agreement permits the Manager to allocate brokerage for
research services. 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. The investment research received for the commissions of those other
accounts may be useful both to the Fund and one or more of the Manager's other
accounts. Investment research may be supplied to the Manager by a third party at
the instance of a broker through which trades are placed.
Investment research services include information and analysis on particular
companies and industries as well as market or economic trends and portfolio
strategy, 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 concessions dollars.
The research services provided by brokers broadens the scope and supplements the
research activities of the Manager. That research provides additional views and
comparisons for consideration, and helps the Manager to obtain market
information for the valuation of securities that are either held in the Fund's
portfolio or are being considered for purchase. The Manager provides information
to the Board about the concessions paid to brokers furnishing such services,
together with the Manager's representation that the amount of such concessions
was reasonably related to the value or benefit of such services."
-----------------------------------------------------------------------------
Fiscal Year Ended 10/31 Total Brokerage Concessions Paid1 by the
Fund
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
1998 $
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
1999 $2
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
2000 $
-----------------------------------------------------------------------------
1. Amounts do not include spreads or concessions on principal transactions
on a net trade basis.
2. In the fiscal year ended 10/31/00, the amount of transactions directed
to brokers for research services was $______________ and the amount of the
concessions paid to broker-dealers for those services was $________.
Distribution and Service Plans
The Distributor. Under its General Distributor's Agreement with the Trust, the
Distributor acts as the Fund's principal underwriter in the continuous public
offering of shares of the Fund's classes of shares. The Distributor is not
obligated to sell a specific number of shares. Expenses normally attributable to
sales are borne by the Distributor.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares during the Fund's three most recent fiscal
years is shown in the table below.
--------------------------------------------------------------------------------
Aggregate Class A Concessions Concessions Concessions
Fiscal Front-End Front-End on Class A on Class B on Class C
Year Sales Sales Shares Shares Shares
Ended Charges on Charges Advanced by Advanced by Advanced by
10/31: Class A Retained by Distributor1 Distributor1 Distributor1
Shares Distributor
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1998 $ $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1999 $ $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2000 $ $ $ $ $
--------------------------------------------------------------------------------
1. The Distributor advances concession payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
--------------------------------------------------------------------------------
Class A Contingent Class B Contingent Class C Contingent
Fiscal Deferred Sales Deferred Sales Deferred Sales Charges
Year Ended Charges Retained by Charges Retained by Retained by Distributor
10/31 Distributor Distributor
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2000 $ $ $
--------------------------------------------------------------------------------
Distribution and Service Plans. The Fund has adopted Distribution and Service
Plans for Class A, Class B, Class C and Class N shares under Rule 12b-1 of the
Investment Company Act. Under those plans the Fund compensates the Distributor
for all or a portion of its costs incurred in connection with the distribution
and/or servicing of the shares of the particular class. Each plan has been
approved by a vote of the Board of Trustees, including a majority of the
Independent Trustees1, cast in person at a meeting called for the purpose of
voting on that plan, and by shareholders of a majority of each class of shares
of the Fund.
Under the plans, the Manager and the Distributor, in their sole
discretion, from time to time, may use their own resources (at no direct cost to
the Fund) to make payments to brokers, dealers or other financial institutions
for distribution and administrative services they perform. The Manager may use
its profits from the advisory fee it receives from the Fund. In their sole
discretion, the Distributor and the Manager may increase or decrease the amount
of payments they make from their own resources to plan recipients.
Unless a plan is terminated as described below, the plan continues in
effect from year to year but only if the Fund's Board of Trustees and its
Independent Trustees specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting called for the purpose of
voting on continuing the plan. A 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.
The Board of Trustees and the Independent Trustees must approve all
material amendments to a plan. An amendment to increase materially the amount of
payments to be made under a plan must be approved by shareholders of the class
affected by the amendment. Because Class B shares of the Fund automatically
convert into Class A shares after six years, the Fund must obtain the approval
of both Class A and Class B shareholders for a proposed material amendment to
the Class A plan that would materially increase payments under the plan. That
approval must be by a "majority" (as defined in the Investment Company Act) of
the shares of each class, voting separately by class.
While the plans are in effect, the Treasurer of the Fund shall provide
separate written reports on the plans to the Board of Trustees at least
quarterly for its review. The reports shall detail the amount of all payments
made under a plan and the purpose for which the payments were made. The reports
on the Class B plan and Class C plan shall also include the Distributor's
distribution costs for that quarter and such costs for previous fiscal periods
that have been carried forward. Those reports are subject to the review and
approval of the Independent Trustees.
Each plan states 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 the selection and nomination process as long as the
final decision as to selection or nomination is approved by a majority of the
Independent Trustees.
Under the plans for a class, no payment will be made to any recipient in
any quarter in which the aggregate net asset value of all Fund shares of that
class held by the recipient for itself and its customers does not exceed a
minimum amount, if any, that may be set from time to time by a majority of the
Independent Trustees. The Board of Trustees has set no minimum amount of assets
to qualify for payments under the plans.
|X| Service Plans. Under the service plans, the Distributor currently uses
the fees it receives from the Fund to pay brokers, dealers and other financial
institutions (they are referred to as "recipients") for personal services and
account maintenance services they provide for their customers who hold shares of
a particular Class, A, B, C or N. The services 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. The service plans
permit compensation to the Distributor at a rate of up to 0.25% of average
annual net assets of the applicable class. The Board has set the rate at that
level. While the plans permit the Board to authorize payments to the Distributor
to reimburse itself for services under the plan, the Board has not yet done so.
The Distributor makes payments to plan recipients quarterly at an annual rate
not to exceed 0.25% of the average annual net assets consisting of shares of the
applicable class held in the accounts of the recipients or their customers.
|X| Service and Distribution Plan Fees. Under each plan, service fees and
distribution 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 plans compensate the Distributor at a flat rate for its
services and costs in distributing shares and servicing accounts, whether the
Distributor's expenses are more or less than the amounts paid by the Fund under
the plans during the period for which the fee is paid. The types of services
that recipients provide are similar to the services provided under the service
plan described above.
The plans permit the Distributor to retain both the asset-based sales
charges and the service fees or to pay recipients the service fee on a quarterly
basis, without payment in advance. However, the Distributor currently intends to
pay the service fee to recipients in advance for the first year after the shares
are purchased. After the first year shares are outstanding, the Distributor
makes service fee payments quarterly on those shares. The advance payment is
based on the net asset value of shares sold. Shares purchased by exchange do not
qualify for the advance service fee payment. If shares are redeemed during the
first year after their purchase, the recipient of the service fees on those
shares will be obligated to repay the Distributor a pro rata portion of the
advance payment of the service fee made on those shares.
Under the Class A plan, the Distributor pays a portion of the asset-based
sales charge to brokers, dealers and financial institutions and retains the
balance. As described in the Prospectus, a voluntary reduction with respect to
the asset-based sales charge became effective on January 1, 2000, and commencing
January 1, 2002 the Distributor will not retain any portion of the Class A
asset-based sales charge. The Distributor retains the asset-based sales charge
on Class B and Class N shares. The Distributor retains the asset-based sales
charge on Class C shares during the first year the shares are outstanding. It
pays the asset-based sales charge it receives on Class C shares as an ongoing
commission to the recipient on Class C shares outstanding for a year or more. If
a dealer has a special agreement with the Distributor, the Distributor will pay
the Class B, Class C and/or Class N service fee and the asset-based sales charge
to the dealer quarterly in lieu of paying the sales commissions and service fee
in advance at the time of purchase.
The asset-based sales charges on Class B, Class C and Class N shares allow
investors to buy 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 A, Class B, Class C and Class N shares. The payments are made
to the Distributor in recognition that the Distributor:
o pays sales commissions to authorized brokers and dealers at the time of
sale and pays service fees as described above, o may finance payment of sales
commissions and/or the advance of the service fee payment to recipients under
the plans, or may provide such financing from its own resources or from the
resources of an affiliate,
o employs personnel to support distribution of shares, and
o bears the costs of sales literature, advertising and prospectuses (other
than those furnished to current shareholders) and state "blue sky" registration
fees and certain other distribution expenses.
-------------------------------------------------------------------------------
Distribution Fees Paid to the Distributor in the Fiscal Year Ended 10/31/00
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class: Total Amount Retained Distributor's Distributor's
Payments by Distributor Aggregate Unreimbursed
Under Plan Unreimbursed Expenses as %
Expenses Under of Net Assets
Plan of Class
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class A Plan $ $ $ %
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class B Plan $ $ $ %
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class C Plan $ $ $ %
-------------------------------------------------------------------------------
All payments under the plans 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.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its investment performance. Those terms include "cumulative total
return," "average annual total return," "average annual total return at net
asset value" and "total return at net asset value." An explanation of how total
returns are calculated is set forth below. The charts below show the Fund's
performance as of the Fund's most recent fiscal year end. You can obtain current
performance information by calling the Fund's Transfer Agent at 1.800.525.7048
or by visiting the OppenheimerFunds Internet web site at
http://www.oppenheimerfunds.com.
The Fund's illustrations of its performance data in advertisements must
comply with rules of the Securities and Exchange Commission. Those rules
describe the types of performance data that may be used and how it is to be
calculated. In general, any advertisement by the Fund of its performance data
must include the average annual total returns for the advertised class of shares
of the Fund. Those returns must be shown 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 (or its submission for
publication).
Use of standardized performance calculations enable 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 the Fund's
performance information as a basis for comparison with other investments:
? Total 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. Your account's performance will vary from the model performance data if
your dividends are received in cash, or you buy or sell shares during the
period, or you bought your shares at a different time and price than the shares
used in the model.
? The Fund's performance returns do not reflect the effect of taxes on
dividends and capital gains distributions.
? An investment in the Fund is not insured by the FDIC or any other
government agency. ? The principal value of the Fund's shares and total
returns are not guaranteed and
normally will fluctuate on a daily basis.
? When an investor's shares are redeemed, they may be worth more or less
than their original cost.
? Total returns for any given past period represent historical performance
information and are not, and should not be considered, a prediction of future
returns.
The performance of each class of shares is shown separately, because the
performance of each class of shares will usually be different. That is because
of the different kinds of expenses each class bears. The total returns of each
class of shares of the Fund are affected by market conditions, the quality of
the Fund's investments, the maturity of debt investments, the types of
investments the Fund holds, and its operating expenses that are allocated to the
particular class.
|X| Total Return Information. There are different types of "total returns"
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
and that the investment is redeemed at the end of the period. Because of
differences in expenses for each class of shares, the total returns for each
class are separately measured. 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 actual year-by-year performance. The
Fund uses standardized calculations for its total returns as prescribed by the
SEC. The methodology is discussed below.
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 without sales charge, as
described below). For Class B shares, payment of the applicable contingent
deferred sales charge is applied, depending on the period for which the return
is shown: 5.0% in the first year, 4.0% in the second year, 3.0% in the third and
fourth years, 2.0% in the fifth year, 1.0% in the sixth year and none
thereafter. For Class C shares, the 1% contingent deferred sales charge is
deducted for returns for the 1-year period. Class N Shares are first being
offered as of the date hereof; accordingly total return information is not
provided for such shares.
|_| Average Annual Total Return. 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" in the formula) to achieve an Ending Redeemable Value
("ERV" in the formula) of that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
|_| Cumulative Total Return. 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
|_| Total Returns at Net Asset Value. From time to time the Fund may
also quote a cumulative or an average annual total return "at net asset value"
(without deducting sales charges) for Class A, Class B, Class C or Class N
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 Fund's Total Returns for the Periods Ended 10/31/00
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cumulative Total Average Annual Total Returns
Returns (10
Class of years or Life of
Shares Class)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5-Year 10-Year
1-Year (or (or
life-of-class) life-of-class)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
After Without After Without After Without After Without
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class A %1 %1 % % % % %1 %1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B %2 %2 % % % % %2 %2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C %3 %3 % % % % %3 %3
--------------------------------------------------------------------------------
1. Inception of Class A: 1/3/89
2. Inception of Class B: 9/1/93
3. Inception of Class C: 9/1/93
Other Performance Comparisons. The Fund compares its performance annually to
that of an appropriate broadly-based market index in its Annual Report to
shareholders. You can obtain that information by contacting the Transfer Agent
at the addresses or telephone numbers shown on the cover of this Statement of
Additional Information. The Fund may also compare its performance to that of
other investments, including other mutual funds, or use rankings of its
performance by independent ranking entities. Examples of these performance
comparisons are set forth below.
|X| Lipper Rankings. From time to time the Fund may publish the ranking of
the performance of its classes of shares by Lipper, Inc. Lipper is 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 stated fund classifications.
Lipper currently ranks the Fund's performance against all other small-cap value
funds. 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.
|X| Morningstar Rankings. From time to time the Fund may publish the
ranking and/or star rating of the performance of its classes of 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. The Fund
is ranked among domestic stock funds.
Morningstar star ratings reflect historical risk adjusted total investment
return. Investment return measures a fund's (or class's) 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 is measured by a fund's (or class's)
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 a fund's category. Five stars is the "highest" ranking (top 10%
of funds in a category), 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's) 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 date 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 rankings, 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.
|X| Performance Rankings and Comparisons by Other Entities and
Publications. From time to time the Fund may include in its advertisements and
sales literature performance information about the Fund cited in newspapers and
other periodicals such as The New York Times, The Wall Street Journal, Barron's,
or similar publications. That information may include performance quotations
from other sources, including Lipper and Morningstar. The performance of the
Fund's classes of shares may be compared in publications to the performance of
various market indices or other investments, and averages, performance rankings
or other benchmarks prepared by recognized mutual fund statistical services.
Investors may also wish to compare the returns on the Fund's share classes
to the return on fixed-income investments available from banks and thrift
institutions. Those include certificates of deposit, ordinary interest-paying
checking and savings accounts, and other forms of fixed or variable time
deposits, and various other instruments such as Treasury bills. However, the
Fund's returns and share price are not guaranteed or insured by the FDIC or any
other agency and will fluctuate daily, while bank depository obligations may be
insured by the FDIC and may provide fixed rates of return. Repayment of
principal and payment of interest on Treasury securities is backed by the full
faith and credit of the U.S. Government.
From time to time, the Fund may publish rankings or ratings of the Manager
or Transfer Agent, and of the investor services provided by them to shareholders
of the Oppenheimer funds, other than performance rankings of the Oppenheimer
funds themselves. Those ratings or rankings of shareholder and investor services
by third parties may include comparisons of their services to those provided by
other mutual fund families selected by the rating or ranking services. They may
be based upon the opinions of the rating or ranking service itself, using its
research or judgment, or based upon surveys of investors, brokers, shareholders
or others.
ABOUT YOUR ACCOUNT
How to Buy Shares
Additional information is presented below about the methods that can be used to
buy shares of the Fund. Appendix C contains more information about the special
sales charge arrangements offered by the Fund, and the circumstances in which
sales charges may be reduced or waived for certain classes of investors.
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
with 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 transfers are initiated. The Distributor
and the Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and Letters
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in Appendix C to this
Statement of Additional Information because the Distributor or dealer or broker
incurs little or no selling expenses.
|X| 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:
|X| Class A and Class B shares you purchase for your individual accounts,
or for your joint accounts, or for trust or custodial accounts on behalf
of your children who are minors, |X| 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, and |X|
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.
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. 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 reduced sales charge will apply only to current purchases. You must
request it when you buy shares.
|X| The Oppenheimer Funds. The Oppenheimer funds are those mutual funds
for which the Distributor acts as the distributor or the sub-distributor and
currently include the following:
Oppenheimer Bond Fund Oppenheimer Main Street California Municipal Fund
Oppenheimer Main Street Growth & Income Oppenheimer California Municipal Fund
Fund Oppenheimer Capital Appreciation Fund Oppenheimer Main Street Opportunity
Fund Oppenheimer Capital Income Fund Oppenheimer Main Street Small Cap Fund
Oppenheimer Capital Preservation Fund Oppenheimer MidCap Fund Oppenheimer
Champion Income Fund Oppenheimer Multiple Strategies Fund Oppenheimer
Convertible Securities Fund Oppenheimer Municipal Bond Fund Oppenheimer
Developing Markets Fund Oppenheimer New York Municipal Fund Oppenheimer
Disciplined Allocation Fund Oppenheimer New Jersey Municipal Fund Oppenheimer
Disciplined Value Fund Oppenheimer Pennsylvania Municipal Fund Oppenheimer
Discovery Fund Oppenheimer Quest Balanced Value Fund Oppenheimer Quest Capital
Value Fund, Oppenheimer Enterprise Fund Inc. Oppenheimer Quest Global Value
Fund, Oppenheimer Emerging Growth Fund Inc. Oppenheimer Emerging Technologies
Fund Oppenheimer Quest Opportunity Value Fund Oppenheimer Europe Fund
Oppenheimer Quest Small Cap Fund Oppenheimer Florida Municipal Fund Oppenheimer
Quest Value Fund, Inc. Oppenheimer Global Fund Oppenheimer Real Asset Fund
Oppenheimer Global Growth & Income Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Gold & Special Minerals Fund Oppenheimer Strategic Income Fund
Oppenheimer Growth Fund Oppenheimer Total Return Fund, Inc. Oppenheimer High
Yield Fund Oppenheimer Trinity Core Fund Oppenheimer Insured Municipal Fund
Oppenheimer Trinity Growth Fund Oppenheimer Intermediate Municipal Fund
Oppenheimer Trinity Value Fund Oppenheimer International Bond Fund Oppenheimer
U.S. Government Trust Oppenheimer International Growth Fund Oppenheimer World
Bond Fund Oppenheimer International Small Company Fund Limited-Term New York
Municipal Fund Oppenheimer Large Cap Growth Fund Rochester Fund Municipals
Oppenheimer Limited-Term Government Fund
and the following money market funds:
Centennial New York Tax Exempt Trust
Centennial America Fund, L. P. Centennial Tax Exempt Trust
Centennial California Tax Exempt Trust Oppenheimer Cash Reserves
Centennial Government Trust Oppenheimer Money Market Fund, Inc.
Centennial Money Market Trust
There is an initial sales charge on the purchase of Class A shares of each
of the Oppenheimer funds except the money market funds. Under certain
circumstances described in this Statement of Additional Information, redemption
proceeds of certain money market fund shares may be subject to a contingent
deferred sales charge.
|X| Letters 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 your intended purchases of
both Class A and Class B shares will determine the reduced sales charge rate for
the Class A shares purchased during that period. You can include purchases made
up to 90 days before the date of the Letter.
A Letter of Intent 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"). At the investor's request, this may 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 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. However, 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. That amount is described in "Terms of
Escrow," below (those terms may be amended by the Distributor 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 a Letter of Intent. If those terms are amended, as they may be from time to
time by the Fund, the investor agrees to be bound by the amended terms and that
those amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent period do
not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
total 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 Prospectus, the sales
charges paid will be adjusted to the lower rate. That adjustment will be made
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.
The Transfer Agent will not hold shares in escrow for purchases of shares
of the Fund and other Oppenheimer funds by OppenheimerFunds prototype 401(k)
plans under a Letter of Intent. If the intended purchase amount under a Letter
of Intent 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.
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.
|X| 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 offering price
adjusted for a $50,000 purchase). Any dividends and capital gains distributions
on the escrowed shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is completed
within the thirteen-month Letter of Intent period, the escrowed shares will be
promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the total
purchases pursuant to the Letter are less than the intended 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. That sales charge adjustment will
apply to any shares redeemed prior to the completion of the Letter. If the
difference in sales charges is not paid within twenty days after a request from
the Distributor or the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares necessary to
realize such difference in sales charges. Full and fractional shares remaining
after such redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales charge, the
sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for redemption any
or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include:
(a) Class A shares sold with a front-end sales charge or subject to a
Class A contingent deferred sales charge,
(b) Class B shares of other Oppenheimer funds acquired subject to a
contingent deferred sales charge, and
(c) Class A or Class B shares acquired by exchange of either (1) 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 (2) 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 to buy shares directly
from a bank account, you must enclose a check (minimum $25) for the initial
purchase with your application. Shares purchased by Asset Builder Plan payments
from bank accounts are subject to the redemption restrictions for recent
purchases described in the Prospectus. Asset Builder Plans also enable
shareholders of Oppenheimer Cash Reserves to use their fund account to make
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 Application. Neither
the Distributor, the Transfer Agent nor the Fund shall be responsible for any
delays in purchasing shares resulting from delays in ACH transmissions.
Before initiating Asset Builder payments, obtain a prospectus of the
selected fund(s) from the Distributor or your financial advisor and request an
application from the Distributor, complete it and return it. 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. The Transfer Agent
requires a reasonable period (approximately 15 days) after receipt of such
instructions to implement them. The Fund reserves the right to amend, suspend,
or discontinue offering Asset Builder plans at any time without prior notice.
Retirement Plans. Certain types of retirement plans are entitled to purchase
shares of the Fund without sales charge or at reduced sales charge rates, as
described in Appendix C to this Statement of Additional Information. Certain
special sales charge arrangements described in that Appendix apply to retirement
plans whose records are maintained on a daily valuation basis by Merrill Lynch
Pierce Fenner & Smith, Inc. or an independent record keeper that has a contract
or special arrangement with Merrill Lynch. If on the date the plan sponsor
signed the Merrill Lynch record keeping service agreement the plan has less than
$3 million in assets (other than assets invested in money market funds) invested
in applicable investments, then the retirement plan may purchase only Class B
shares of the Oppenheimer funds. Any retirement plans in that category that
currently invest in Class B shares of the Fund will have their Class B shares
converted to Class A shares of the Fund when the plan's applicable investments
reach $5 million.
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.
Classes of Shares. Each class of shares of the Fund represents an interest in
the same portfolio of investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to a class of
shares and the dividends payable on a class of shares will be reduced by
incremental expenses borne solely by that class. Those expenses include the
asset-based sales charges to which Class A, Class B, Class C and Class N are
subject.
The availability of different classes of shares permits an investor to
choose the method of purchasing shares that is more appropriate for the
investor. That may depend on the amount of the purchase, the length of time the
investor expects to hold shares, and other relevant circumstances. Class A
shares normally are sold subject to an initial sales charge. While Class B,
Class C and Class N shares have no initial sales charge, the purpose of the
deferred sales charge and asset-based sales charge on Class B, Class C and Class
N shares is the same as that of the initial sales charge on Class A shares to
compensate the Distributor and brokers, dealers and financial institutions that
sell shares of the Fund. A salesperson who is entitled to receive compensation
from his or her firm for selling Fund shares may receive different levels of
compensation for selling one class of shares rather than another.
The Distributor will not accept any order in the amount of $500,000 or
more for Class B shares or $1 million or more for Class C shares on behalf of a
single investor (not including dealer "street name" or omnibus accounts). That
is because generally it will be more advantageous for that investor to purchase
Class A shares of the Fund.
|X| Class B Conversion. Under current interpretations of applicable
federal income tax law by the Internal Revenue Service, the conversion of Class
b shares to Class A shares after six years is not treated as a taxable event for
the shareholder. If those laws or the IRS interpretation of those laws should
change, the automatic conversion feature may be suspended. In that event, no
further conversions of Class B shares would occur while that suspension remained
in effect.
|X| Allocation of Expenses. 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.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's share classes recognizes two types of expenses.
General expenses that do not pertain specifically to any one class are allocated
pro rata to the shares of all classes. The allocation is based on the percentage
of the Fund's total assets that is represented by the assets of each class, and
then equally to each outstanding share within a given class. Such general
expenses include management fees, legal, bookkeeping and audit fees, printing
and mailing costs of shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current shareholders, fees to unaffiliated
Trustees, custodian expenses, share issuance costs, organization and start-up
costs, interest, taxes and brokerage commissions, and non-recurring expenses,
such as litigation costs.
Other expenses that are directly attributable to a particular class are
allocated equally to each outstanding share within that class. Examples of such
expenses include distribution and service plan (12b-1) fees, transfer and
shareholder servicing agent fees and expenses, and shareholder meeting expenses
(to the extent that such expenses pertain only to a specific class).
Determination of Net Asset Values Per Share. The net asset values per share of
each class of shares of the Fund are determined as of the close of business of
The New York Stock Exchange on each day that the Exchange is open. The
calculation is done 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
Exchange normally closes at 4:00 P.M., New York time, but may close earlier on
some other days (for example, in case of weather emergencies or on days falling
before a holiday). The Exchange's most recent annual announcement (which is
subject to change) states that it will close on New Year's Day, Presidents' Day,
Martin Luther King, Jr. Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. It may also close on other days.
Dealers other than Exchange members may conduct trading in certain
securities on days on which the Exchange is closed (including weekends and U.S.
holidays) or after 4:00 P.M. on a regular business day. The Fund's net asset
values will not be calculated on those days, and the Fund's values of some of
the portfolio securities may change significantly on those days when
shareholders may not purchase or redeem shares. Additionally, trading on
European and Asian stock exchanges and over-the-counter markets normally is
completed before the close of The New York Stock Exchange.
Changes in the values of securities traded on foreign exchanges or markets
as a result of events that occur after the prices of those securities are
determined, but before the close of The New York Stock Exchange, will not be
reflected in the Fund's calculation of its net asset values that day unless the
Board of Trustees determines that the event is likely to effect a material
change in the value of the security. The Manager may make that determination,
under procedures established by the Board.
|X| Securities Valuation. The Fund's Board of Trustees has established
procedures for the valuation of the Fund's securities. In general those
procedures are as follows:
? Equity securities traded on a U.S. securities exchange or on NASDAQ are
valued as follows: (1) if last sale information is regularly reported, they are
valued at the last reported sale price on the principal exchange on which they
are traded or on NASDAQ, as applicable, on that day, or (2) if last sale
information is not available on a valuation date, they are valued at the last
reported sale price preceding the valuation date if it is within the spread of
the closing "bid" and "asked" prices on the valuation date or, if not, at the
closing "bid" price on the valuation date.
? Equity securities traded on a foreign securities exchange generally are
valued in one of the following ways:
(1) at the last sale price available to the pricing service approved by
the Board of Trustees, (2) at the last sale price obtained by the Manager
from the report of the principal the security is traded at its last
trading session on or immediately before the valuation date, or (3) at the
mean between the "bid" and "asked" prices obtained from the principal
exchange on which the security is traded or, on the basis of reasonable
inquiry, from two market makers in the security.
? Long-term debt securities having a remaining maturity in excess of 60
days are valued based on the mean between the "bid" and "asked" 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.
? The following securities are valued at the mean between the "bid" and
"asked" 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: (1) debt instruments that have a
maturity of more than 397 days when issued, (2) debt instruments that had a
maturity of 397 days or less when issued and have a remaining maturity of more
than 60 days, and (3) non-money market debt instruments that had a maturity of
397 days or less when issued and which have a remaining maturity of 60 days or
less.
? The following securities are valued at cost, adjusted for amortization
of premiums and accretion of discounts:
(1) money market 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 (2) debt instruments held by a money
market fund that have a remaining maturity of 397 days or less.
? 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, a security may be priced at the mean between the "bid" and
"asked" prices provided by a single active market maker (which in certain cases
may be the "bid" price if no "asked" price is available).
In the case of U.S. Government securities, mortgage-backed securities,
corporate bonds and foreign government securities, when last sale information is
not generally available, the Manager may use pricing services approved by the
Board of Trustees. The pricing service may use "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield, and maturity.
Other special factors may be involved (such as the tax-exempt status of the
interest paid by municipal securities). The Manager will monitor the accuracy of
the pricing services. That monitoring may include comparing prices used for
portfolio valuation to actual sales prices of selected securities.
The closing prices in the London foreign exchange market on a particular
business day that are provided to the Manager by a bank, dealer or pricing
service that the Manager has determined to be reliable are used to value foreign
currency, including forward contracts, and to convert to U.S. dollars securities
that are denominated in foreign currency.
Puts, calls, and futures are valued at the last sale 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, they shall be valued at the last sale
price on the preceding trading day if it is within the spread of the closing
"bid" and "asked" prices on the principal exchange or on NASDAQ on the valuation
date. If not, the 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 by the mean between "bid" and
"asked" prices obtained by the Manager from two active market makers. In certain
cases that may be at the "bid" price if no "asked" 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. 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.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the Prospectus. The
information below provides additional information about the procedures and
conditions for redeeming shares.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of:
? Class A shares purchased subject to an initial sales charge or Class A
shares on which a contingent deferred sales charge was paid, or
? Class B shares that were subject to the Class B contingent deferred
sales charge when redeemed.
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 in "How to Exchange Shares" below. Reinvestment
will be at the net asset value next computed after the Transfer Agent receives
the reinvestment order. The shareholder must ask the Transfer Agent for that
privilege at the time of reinvestment. This privilege does not apply to Class C
shares. 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.
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.
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 liquid securities from the
portfolio of the Fund, in lieu of cash.
The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act. Under that rule, 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 Fund will value securities used to pay redemptions in
kind using the same method the Fund uses to value its portfolio securities
described above under "Determination of Net Asset Values Per Share." That
valuation will be made as of the time the redemption price is determined.
Involuntary Redemptions. The Fund's Board of Trustees has the right to cause the
involuntary redemption of the shares held in any account if the aggregate net
asset value of those shares is less than $500 or such lesser amount as the Board
may fix. The Board will not cause the involuntary redemption of shares in an
account if the aggregate net asset value of such shares has fallen below the
stated minimum solely as a result of market fluctuations. If the Board exercises
this right, it may also fix the requirements for any notice to be given to the
shareholders in question (not less than 30 days). The Board may alternatively
set requirements for the shareholder to increase the investment, or set other
terms and conditions so that the shares would not be involuntarily redeemed.
Transfers of Shares. A transfer of shares to a different registration is not an
event that triggers the payment of sales charges. Therefore, 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. It does not matter
whether the transfer occurs by absolute assignment, gift or bequest, as long as
it does not involve, directly or indirectly, a public sale of the shares. When
shares subject to a contingent deferred sales charge are transferred, the
transferred shares will remain subject to the contingent deferred sales charge.
It will be calculated as if the transferee shareholder had acquired the
transferred shares in the same manner and at the same time as the transferring
shareholder.
If less than all shares held in an account are transferred, and some but
not all shares in the account would be subject to a contingent deferred sales
charge if redeemed at the time of transfer, the priorities described in the
Prospectus under "How to Buy Shares" for the imposition of the Class B or Class
C contingent deferred sales charge will be followed in determining the order in
which shares are transferred.
Selling Shares by Wire. The wire of redemption proceeds may be delayed if the
Fund's custodian bank is not open for business on a day when the Fund would
normally authorize the wire to be made, which is usually the Fund's next regular
business day following the redemption. In those circumstances, the wire will not
be transmitted until the next bank business day on which the Fund is open for
business. No dividends will be paid on the proceeds of redeemed shares awaiting
transfer by wire.
Distribution 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:
(1) state the reason for the distribution;
(2) state the owner's awareness of tax penalties if the distribution is
premature; and (3) conform to the requirements of the plan and the Fund's
other redemption requirements.
Participants (other than self-employed persons) in
OppenheimerFunds-sponsored pension or profit-sharing plans with shares of the
Fund held in the name of the plan or its fiduciary may not directly request
redemption of their accounts. The plan administrator or fiduciary 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 and submitted to the Transfer Agent
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, 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. Shareholders should contact their
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
an order placed by the dealer or broker. However, if the Distributor receives a
repurchase order from a dealer or broker after the close of The New York Stock
Exchange on a regular business day, it will be processed at that day's net asset
value if the order was received by the dealer or broker from its customers prior
to the time the Exchange closes. Normally, the Exchange closes at 4:00 P.M., but
may do so earlier on some days. Additionally, the order must have been
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. The signature(s) of the registered owners on the redemption
documents must be guaranteed 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
(having a value of at least $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. Payments must also be sent to the address of record for
the account and the address must not have 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
WithdrawalPlan payments transferred to the bank account designated on the
Account Application or by signature-guaranteed instructions sent to the Transfer
Agent. Shares are normally redeemed pursuant to an Automatic Withdrawal Plan
three business days before the payment transmittal 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. The
Fund reserves the right to amend, suspend or discontinue offering these plans at
any time without prior notice. Because of the sales charge assessed on Class A
share purchases, shareholders should not make regular additional Class A share
purchases while participating in an Automatic Withdrawal Plan. Class B and Class
C shareholders should not establish withdrawal plans, because of the imposition
of the contingent deferred sales charge on such withdrawals (except where the
contingent deferred sales charge is waived as described in Appendix C to this
Statement of Additional Information.
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions that apply to such plans, as stated below.
These provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, any amendments will automatically apply to existing
Plans.
|X| Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent 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.
Instructions should be provided on the OppenheimerFunds Application or
signature-guaranteed instructions. 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.
|X| Automatic Withdrawal Plans. Fund shares will be redeemed as necessary
to meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first. 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
these plans should not be considered as a yield or income on your investment.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan as agent for the shareholder(s) (the "Planholder") who executed the Plan
authorization and application submitted to the Transfer Agent. Neither the Fund
nor the Transfer Agent shall incur any liability to the Planholder for any
action taken or not taken by the Transfer Agent in good faith to administer the
Plan. Share 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.
Shares will be redeemed to make withdrawal payments at the net asset value
per share determined on the redemption date. Checks or AccountLink payments
representing the proceeds of Plan withdrawals will normally be transmitted three
business days prior to the date selected for receipt of the payment, according
to the choice specified in writing by the Planholder. Receipt of payment on the
date selected cannot be guaranteed.
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 after 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 to redeem all, or any part of, the
shares held under the Plan. That notice must be in proper form in accordance
with the requirements of the then-current Prospectus of the Fund. In that case,
the Transfer Agent will redeem the number of shares requested at the net asset
value per share in effect and will mail a check for the proceeds to the
Planholder.
The Planholder may terminate a Plan at any time by writing to the Transfer
Agent. The Fund may also give directions to the Transfer Agent to terminate a
Plan. The Transfer Agent will also terminate a Plan upon its receipt of evidence
satisfactory to it that the Planholder has died or is legally incapacitated.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that have
not been redeemed will be held in uncertificated form in the name of the
Planholder. The account will continue as a dividend-reinvestment, uncertificated
account unless and until proper instructions are received from the Planholder,
his or her executor or guardian, or another authorized person.
To use shares held under the Plan as collateral for a debt, the Planholder
may request issuance of a portion of the shares in certificated form. Upon
written request from the Planholder, the Transfer Agent will determine the
number of shares for which a certificate may be issued without causing the
withdrawal checks to stop. 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 Oppenheimer funds that have
a single class without a class designation are deemed "Class A" shares for this
purpose. You can obtain a current list showing which funds offer which classes
by calling the Distributor at 1.800.525.7048.
o All of the Oppenheimer funds currently offer Class A, B and 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. Oppenheimer Main Street
California Municipal Fund currently offers only Class A and Class B shares.
o 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.
o Only certain Oppenheimer Funds currently offer Class Y shares. Class Y shares
of Oppenheimer Real Asset Fund may not be exchanged for shares of any other
Fund.
o Class M Shares of Oppenheimer Convertible Securities Fund may be exchanged
only for Class A shares of other Oppenheimer funds. They may not be acquired
by exchange of shares of any class of any other Oppenheimer funds except
Class A shares of Oppenheimer Money Market Fund or Oppenheimer Cash Reserves
acquired by exchange of Class M shares.
o Class A shares of Oppenheimer Senior Floating Rate Fund are not available by
exchange of shares of Oppenheimer Money Market Fund or Class A shares of
Oppenheimer Cash Reserves. If any Class A shares of another Oppenheimer fund
that are exchanged for Class A shares of Oppenheimer Senior Floating Rate
Fund are subject to the Class A contingent deferred sales charge of the other
Oppenheimer fund at the time of exchange, the holding period for that Class A
contingent deferred sales charge will carry over to the Class A shares of the
Oppenheimer Senior Floating Rate Fund acquired in the exchange. The Class A
shares of Oppenheimer Senior Floating Rate Fund acquired in that exchange
will be subject to the Class A Early Withdrawal Charge of Oppenheimer Senior
Floating Rate Fund if they are repurchased before the expiration of the
holding period.
o Class X shares of Limited Term New York Municipal Fund can be exchanged only
for Class B shares of other Oppenheimer funds and no exchanges may be made to
Class X shares.
o Shares of Oppenheimer Capital Preservation Fund may not be exchanged for
shares of Oppenheimer Money Market Fund, Inc., Oppenheimer Cash Reserves or
Oppenheimer Limited-Term Government Fund. Only participants in certain
retirement plans may purchase shares of Oppenheimer Capital Preservation
Fund, and only those participants may exchange shares of other Oppenheimer
funds for shares of Oppenheimer Capital Preservation Fund.
Class A shares of Oppenheimer funds may be exchanged at net asset value for
shares of any money market fund offered by the Distributor. 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.
They may also be used to purchase shares of Oppenheimer funds subject to an
early withdrawal charge or contingent deferred sales charge.
|X| How Exchanges Affect Contingent Deferred Sales Charges. No contingent
deferred sales charge is imposed on exchanges of shares of any class purchased
subject to a contingent deferred sales charge. However, when Class A shares
acquired by exchange of Class A shares of other Oppenheimer funds purchased
subject to a Class A contingent deferred sales charge are redeemed within 18
months 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. 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 or the Class C contingent deferred sales charge will be followed
in determining the order in which the shares are exchanged. Before exchanging
shares, shareholders should take into account how the exchange may affect any
contingent deferred sales charge that might be imposed in the subsequent
redemption of remaining shares. With respect to Class N shares, if you redeem
your shares within 18 months of the retirement plan's first purchase or the
retirement plan eliminates the Fund as a plan investment option within 18 months
of selecting the Fund, a 1% contingent deferred sales charge will be imposed on
the plan. Shareholders owning shares of more than one class must specify which
class of shares they wish to exchange.
|X| Limits on Multiple Exchange Orders. 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.
|X| Telephone Exchange Requests. When exchanging shares by telephone, a
shareholder must have an existing account in the fund to which the exchange is
to be made. Otherwise, the investors must obtain a Prospectus of that fund
before the exchange request may be submitted. When you exchange some or all of
your shares from one fund to another, any special account features such as an
Asset Builder Plan or Automatic Withdrawal Plan, will be switched to the new
fund account unless you tell the Transfer Agent not to do so. However, special
redemption and exchange features such as Automatic Exchange Plans and Automatic
Withdrawal Plans cannot be switched to an account in Oppenheimer Senior Floating
Rate Fund. 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.
|X| Processing 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 Fund may refuse the
request. For full or partial exchanges of an account made by telephone, any
special account features such as Asset Builder Plans and Automatic Withdrawal
Plans will be switched to the new account unless the Transfer Agent is
instructed otherwise.
Dividends, Capital Gains and Taxes
Dividends and Distributions. The Fund has no fixed dividend rate and there can
be no assurance as to the payment of any dividends or the realization of any
capital gains. The dividends and distributions paid by a class of shares will
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.
Dividends are calculated in the same manner, at the same time, and on the same
day for each class of shares. However, dividends on Class B, Class C and Class N
shares are expected to be lower than dividends on Class A shares. That is
because of the effect of the higher asset-based sales charge on Class B, Class C
and Class N shares. Those dividends will also differ in amount as a consequence
of any difference in the net asset values of each class of shares.
Dividends, distributions and 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.
Reinvestment will be made 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. Unclaimed accounts may be subject to state escheatment
laws, and the Fund and the Transfer Agent will not be liable to shareholders or
their representatives for compliance with those laws in good faith.
Tax Status of the Fund's Dividends and Distributions. The federal tax treatment
of the Fund's dividends and capital gains distributions is briefly highlighted
in the Prospectus.
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. The amount of dividends paid by the Fund that may qualify for the
deduction is limited to the aggregate amount of qualifying dividends that the
Fund derives from 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. If it
does not, the Fund must pay an excise tax on the amounts not distributed. It is
presently anticipated that the Fund will meet those requirements. However, the
Board of Trustees and the Manager might determine in a particular year that it
would be in the best interests 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.
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). If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for federal income taxes on amounts
paid by it as dividends and distributions. The Fund qualified as a regulated
investment company in its last fiscal year. The Internal Revenue Code contains a
number of complex tests relating to qualification which the Fund might not meet
in any particular year. If it did not so qualify, the Fund would be treated for
tax purposes as an ordinary corporation and receive no tax deduction for
payments made to shareholders.
If prior distributions made by the Fund must be re-characterized as a
non-taxable return of capital at the end of the fiscal year as a result of the
effect of the Fund's investment policies, they will be identified as such in
notices sent to shareholders.
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 above. Reinvestment will be
made without sales charge at the net asset value per share in effect at the
close of business on the payable date of the dividend or distribution. To elect
this option, the shareholder must notify the Transfer Agent in writing and must
have an existing account in the fund selected for reinvestment. Otherwise the
shareholder first must obtain a prospectus for that fund and an application from
the Distributor to establish an account. Dividends and/or distributions from
shares of certain other Oppenheimer funds (other than Oppenheimer Cash Reserves)
may be invested in shares of this Fund on the same basis.
Additional Information About the Fund
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 shares of the other Oppenheimer
funds and is sub-distributor for funds managed by a subsidiary of the Manager.
The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is a
division of the Manager. It is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for paying
dividends and distributions to shareholders. It also handles shareholder
servicing and administrative functions. It acts on an "at-cost" basis. It also
acts as shareholder servicing agent for the other Oppenheimer funds.
Shareholders should direct inquiries about their accounts to the Transfer Agent
at the address and toll-free numbers shown on the back cover.
|X| Shareholder Servicing Agent for Certain Shareholders. Unified
Management Corporation (1.800.346.4601) is the shareholder servicing agent for
shareholders of the Fund who were former shareholders of the AMA Family of Funds
and clients of AMA Investment Advisors, Inc. (which had been the investment
advisor of AMA Family of Funds). It is also the servicing agent for Fund
shareholders who are:
(i) former shareholders of the Unified Funds and Liquid Green Trusts,
(ii) accounts that participated or participate in a retirement plan for which
Unified Investment Advisors, Inc. or an affiliate acts as custodian or trustee,
(iii) accounts that have a Money Manager brokerage account, and
(iv) other accounts for which Unified Management Corporation is the dealer of
record.
The Custodian. Citibank, N.A. is the custodian of the Fund's assets. The
custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities and handling the delivery of such securities to and from
the Fund. It will be the practice of the Fund to deal with the custodian in a
manner uninfluenced by any banking relationship the Custodian may have with the
Manager and its affiliates. The Fund's cash balances with the custodian in
excess of $100,000 are not protected by Federal deposit insurance. Those
uninsured balances at times may be substantial.
Independent Accountants. KPMG LLP are the independent accountants of the Fund.
They audit the Fund's financial statements and perform other related audit
services. They also act as independent accountants for certain other funds
advised by the Manager and its affiliates. Prior to March 2000,
PricewaterhouseCooper LLP served as the Fund's independent accountants.
<PAGE>
Appendix A
RATINGS DEFINITIONS
Below are summaries of the rating definitions used by the nationally-recognized
rating agencies listed below. Those ratings represent the opinion of the agency
as to the credit quality of issues that they rate. The summaries below are based
upon publicly-available information provided by the rating organizations.
Moody's Investors Service, Inc.
--------------------------------------------------------------------------------
Long-Term (Taxable) Bond Ratings
Aaa: Bonds rated "Aaa" are judged to be the best quality. They carry the
smallest degree of investment risk. Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, the changes that can be expected are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds rated "Aa" are judged to be of high quality by all standards. Together
with the "Aaa" group, they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as with "Aaa" securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than that of "Aaa"
securities.
A: Bonds rated "A" possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the future.
Baa: Bonds rated "Baa" are considered medium-grade obligations; that is, they
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and have speculative
characteristics as well.
Ba: Bonds rated "Ba" are judged to have speculative elements. Their future
cannot be considered well-assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B: Bonds rated "B" generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa: Bonds rated "Caa" are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Ca: Bonds rated "Ca" represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C: Bonds rated "C" are the lowest class of rated bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Con. (...): Bonds for which the security depends on the completion of some act
or the fulfillment of some condition are rated conditionally. These bonds are
secured by (a) earnings of projects under construction, (b) earnings of projects
unseasoned in operating experience, (c) rentals that begin when facilities are
completed, or (d) payments to which some other limiting condition attaches. The
parenthetical rating denotes probable credit stature upon completion of
construction or elimination of the basis of the condition.
Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from "Aa" through "Caa." The modifier "1" indicates that the
obligation ranks in the higher end of its generic rating category; the modifier
"2" indicates a mid-range ranking; and the modifier "3" indicates a ranking in
the lower end of that generic rating category. Advanced refunded issues that are
secured by certain assets are identified with a # symbol.
Short-Term Ratings - Taxable Debt
These ratings apply to the ability of issuers to honor senior debt obligations
having an original maturity not exceeding one year:
Prime-1: Issuer has a superior ability for repayment of senior short-term debt
obligations.
Prime-2: Issuer has a strong ability for repayment of senior short-term debt
obligations. Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
Prime-3: Issuer has an acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market compositions may
be more pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require relatively
high financial leverage. Adequate alternate liquidity is maintained.
Not Prime: Issuer does not fall within any Prime rating category.
Standard & Poor's Rating Services
--------------------------------------------------------------------------------
Long-Term Credit Ratings
AAA: Bonds rated "AAA" have the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA: Bonds rated "AA" differ from the highest rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A: Bonds rated "A" are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB: Bonds rated "BBB" exhibit adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
BB, B, CCC, CC, and C
Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded as having significant
speculative characteristics. "BB" indicates the least degree of speculation, and
"C" the highest. While such obligations will likely have some quality and
protective characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions. BB: Bonds rated "BB" are less vulnerable
to nonpayment than other speculative issues. However, these face major ongoing
uncertainties or exposure to adverse business, financial, or economic conditions
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
B: Bonds rated "B" are more vulnerable to nonpayment than obligations rated
"BB", but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
CCC: Bonds rated "CCC" are currently vulnerable to nonpayment, and are dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.
CC: Bonds rated "CC" are currently highly vulnerable to nonpayment.
C: A subordinated debt or preferred stock obligation rated "C" is currently
highly vulnerable to nonpayment. The "C" rating may be used to cover a situation
where a bankruptcy petition has been filed or similar action has been taken, but
payments on this obligation are being continued. A "C" also will be assigned to
a preferred stock issue in arrears on dividends or sinking fund payments, but
that is currently paying.
D: Bonds rated "D" are in default. Payments on the obligation are not being made
on the date due even if the applicable grace period has not expired, unless
Standard and Poor's believes that such payments will be made during such grace
period. The "D" rating will also be used upon the filing of a bankruptcy
petition or the taking of a similar action if payments on an obligation are
jeopardized.
The ratings from "AA" to "CCC" may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories. The
"r" symbol is attached to the ratings of instruments with significant noncredit
risks.
Short-Term Issue Credit Ratings
--------------------------------------------------------------------------------
A-1: Obligation is rated in the highest category. The obligor's capacity to meet
its financial commitment on the obligation is strong. Within this category, a
plus (+) sign designation indicates the obligor's capacity to meet its financial
obligation is extremely strong.
A-2: Obligation is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than obligations in higher rating
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.
A-3: Obligation exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
B: Obligation is regarded as having significant speculative characteristics. The
obligor currently has the capacity to meet its financial commitment on the
obligation. However, it faces major ongoing uncertainties which could lead to
the obligor's inadequate capacity to meet its financial commitment on the
obligation.
C: Obligation is currently vulnerable to nonpayment and is dependent upon
favorable business, financial, and economic conditions for the obligor to meet
its financial commitment on the obligation.
D: Obligation is in payment default. Payments on the obligation have not been
made on the due date even if the applicable grace period has not expired, unless
Standard and Poor's believes that such payments will be made during such grace
period. The "D" rating will also be used upon the filing of a bankruptcy
petition or the taking of a similar action if payments on an obligation are
jeopardized.
Fitch, Inc.
--------------------------------------------------------------------------------
International Long-Term Credit Ratings
Investment Grade:
AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong capacity
for timely payment of financial commitments. This capacity is highly unlikely to
be adversely affected by foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very low expectation of
credit risk. They indicate a very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
A: High Credit Quality. "A" ratings denote a low expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB: Good Credit Quality. "BBB" ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
Speculative Grade:
BB: Speculative. "BB" ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time. However, business or financial alternatives may be available to allow
financial commitments to be met. Securities rated in this category are not
investment grade.
B: Highly Speculative. "B" ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met. However, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.
CCC, CC C: High Default Risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A "CC" rating indicates that default of some
kind appears probable. "C" ratings signal imminent default.
DDD, DD, and D: Default. The ratings of obligations in this category are based
on their prospects for achieving partial or full recovery in a reorganization or
liquidation of the obligor. While expected recovery values are highly
speculative and cannot be estimated with any precision, the following serve as
general guidelines. "DDD" obligations have the highest potential for recovery,
around 90%-100% of outstanding amounts and accrued interest. "DD" indicates
potential recoveries in the range of 50%-90%, and "D" the lowest recovery
potential, i.e., below 50%.
Entities rated in this category have defaulted on some or all of their
obligations. Entities rated "DDD" have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process. Entities rated "DD" and "D" are generally undergoing a formal
reorganization or liquidation process; those rated "DD" are likely to satisfy a
higher portion of their outstanding obligations, while entities rated "D" have a
poor prospect for repaying all obligations.
Plus (+) and minus (-) signs may be appended to a rating symbol to denote
relative status within the major rating categories. Plus and minus signs are not
added to the "AAA" category or to categories below "CCC," nor to short-term
ratings other than "F1" (see below).
International Short-Term Credit Ratings
F1: Highest credit quality. Strongest capacity for timely payment of financial
commitments. May have an added "+" to denote any exceptionally strong credit
feature.
F2: Good credit quality. A satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as in the case of higher
ratings.
F3: Fair credit quality. Capacity for timely payment of financial commitments is
adequate. However, near-term adverse changes could result in a reduction to
non-investment grade.
B: Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.
C: High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
D: Default. Denotes actual or imminent payment default.
<PAGE>
Appendix B
--------------------------------------------------------------------------------
Industry Classifications
--------------------------------------------------------------------------------
Aerospace/Defense Food and Drug Retailers
Air Transportation Gas Utilities
Asset-Backed Health Care/Drugs
Auto Parts and Equipment Health Care/Supplies & Services
Automotive Homebuilders/Real Estate
Bank Holding Companies Hotel/Gaming
Banks Industrial Services
Beverages Information Technology
Broadcasting Insurance
Broker-Dealers Leasing & Factoring
Building Materials Leisure
Cable Television Manufacturing
Chemicals Metals/Mining
Commercial Finance Nondurable Household Goods
Communication Equipment Office Equipment
Computer Hardware Oil - Domestic
Computer Software Oil - International
Conglomerates Paper
Consumer Finance Photography
Consumer Services Publishing
Containers Railroads & Truckers
Convenience Stores Restaurants
Department Stores Savings & Loans
Diversified Financial Shipping
Diversified Media Special Purpose Financial
Drug Wholesalers Specialty Printing
Durable Household Goods Specialty Retailing
Education Steel
Electric Utilities Telecommunications - Long Distance
Electrical Equipment Telephone - Utility
Electronics Textile, Apparel & Home Furnishings
Energy Services Tobacco
Entertainment/Film Trucks and Parts
Environmental Wireless Services
Food
<PAGE>
C-17
Appendix C
OppenheimerFunds Special Sales Charge Arrangements and Waivers
In certain cases, the initial sales charge that applies to purchases of Class A
shares1 of the Oppenheimer funds or the contingent deferred sales charge that
may apply to Class A, Class B, Class C or Class N shares may be waived.2 That is
because of the economies of sales efforts realized by OppenheimerFunds
Distributor, Inc., (referred to in this document as the "Distributor"), or by
dealers or other financial institutions that offer those shares to certain
classes of investors.
Not all waivers apply to all funds. For example, waivers relating to Retirement
Plans do not apply to Oppenheimer municipal funds, because shares of those funds
are not available for purchase by or on behalf of retirement plans. Other
waivers apply only to shareholders of certain funds.
For the purposes of some of the waivers described below and in the Prospectus
and Statement of Additional Information of the applicable Oppenheimer funds, the
term "Retirement Plan" refers to the following types of plans:
(7) plans qualified under Sections 401(a) or 401(k) of the Internal Revenue
Code, (8) non-qualified deferred compensation plans, (9) employee benefit plans3
(10) Group Retirement Plans4 (11) 403(b)(7) custodial plan accounts (12)
Individual Retirement Accounts ("IRAs"), including traditional IRAs, Roth IRAs,
SEP-IRAs, SARSEPs or SIMPLE plans
The interpretation of these provisions as to the applicability of a special
arrangement or waiver in a particular case is in the sole discretion of the
Distributor or the transfer agent (referred to in this document as the "Transfer
Agent") of the particular Oppenheimer fund. These waivers and special
arrangements may be amended or terminated at any time by a particular fund, the
Distributor, and/or OppenheimerFunds, Inc. (referred to in this document as the
"Manager").
Waivers that apply at the time shares are redeemed must be requested by the
shareholder and/or dealer in the redemption request.
--------------
5. Certain waivers also apply to Class M shares of Oppenheimer Convertible
Securities Fund.
6. In the case of Oppenheimer Senior Floating Rate Fund, a continuously-offered
closed-end fund, references to contingent deferred sales charges mean the
Fund's Early Withdrawal Charges and references to "redemptions" mean
"repurchases" of shares.
7. An "employee benefit plan" means any plan or arrangement, whether or not it
is "qualified" under the Internal Revenue Code, under which Class A shares of
an Oppenheimer fund or funds are purchased by a fiduciary or other
administrator for the account of participants who are employees of a single
employer or of affiliated employers. These may include, for example, medical
savings accounts, payroll deduction plans or similar plans. The fund accounts
must be registered in the name of the fiduciary or administrator purchasing
the shares for the benefit of participants in the plan.
8. The term "Group Retirement Plan" means any qualified or non-qualified
retirement plan for employees of a corporation or 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 has made special arrangements with the Distributor and all members of
the group participating in (or who are eligible to participate in) the plan
purchase Class A shares of an Oppenheimer fund or funds through a single
investment dealer, broker or other financial institution designated by the
group. Such plans include 457 plans, SEP-IRAs, SARSEPs, SIMPLE plans and
403(b) plans other than plans for public school employees. The term "Group
Retirement Plan" also includes qualified retirement plans and non-qualified
deferred compensation plans and IRAs that purchase Class A shares of an
Oppenheimer fund or funds through a single investment dealer, broker or other
financial institution that has made special arrangements with the Distributor
enabling those plans to purchase Class A shares at net asset value but
subject to the Class A contingent deferred sales charge.
I. Applicability of Class A Contingent Deferred Sales Charges in Certain Cases
Purchases of Class A Shares of Oppenheimer Funds That Are Not Subject to Initial
Sales Charge but May Be Subject to the Class A Contingent Deferred Sales Charge
(unless a waiver applies).
There is no initial sales charge on purchases of Class A shares of any of
the Oppenheimer funds in the cases listed below. However, these purchases may be
subject to the Class A contingent deferred sales charge if redeemed within 18
months of the end of the calendar month of their purchase, as described in the
Prospectus (unless a waiver described elsewhere in this Appendix applies to the
redemption). Additionally, on shares purchased under these waivers that are
subject to the Class A contingent deferred sales charge, the Distributor will
pay the applicable commission described in the Prospectus under "Class A
Contingent Deferred Sales Charge."9 This waiver provision applies to: |_|
Purchases of Class A shares aggregating $1 million or more. |_| Purchases by a
Retirement Plan (other than an IRA or 403(b)(7) custodial plan) that: (4) buys
shares costing $500,000 or more, or (5) has, at the time of purchase, 100 or
more eligible employees or total plan assets of
$500,000 or more, or
(6) certifies to the Distributor that it projects to have annual plan
purchases of $200,000 or more.
|_| Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the purchases
are made: (3) through a broker, dealer, bank or registered investment adviser
that has made special
arrangements with the Distributor for those purchases, or
(4) 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.
|_| Purchases of Class A shares by Retirement Plans that have any of the
following record-keeping arrangements:
(4) The record keeping is performed by Merrill Lynch Pierce Fenner & Smith,
Inc. ("Merrill Lynch") on a daily valuation basis for the Retirement Plan.
On the date the plan sponsor signs the record-keeping service agreement
with Merrill Lynch, the Plan must have $3 million or more of its assets
invested in (a) mutual funds, other than those advised or managed by
Merrill Lynch Asset Management, L.P. ("MLAM"), that are made available
under a Service Agreement between Merrill Lynch and the mutual fund's
principal underwriter or distributor, and (b) funds advised or managed by
MLAM (the funds described in (a) and (b) are referred to as "Applicable
Investments").
(5) The record keeping for the Retirement Plan is performed on a daily
valuation basis by a 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 record keeping service agreement with
Merrill Lynch, the Plan must have $3 million or more of its assets
(excluding assets invested in money market funds) invested in Applicable
Investments.
(6) The record keeping for a Retirement Plan is handled under a service
agreement with Merrill Lynch and on the date the plan sponsor signs that
agreement, the Plan has 500 or more eligible employees (as determined by
the Merrill Lynch plan conversion manager).
|_| Purchases by a Retirement Plan whose record keeper had a
cost-allocation agreement with the Transfer Agent on or before May 1,
1999.
II. Waivers of Class A Sales Charges of Oppenheimer Funds
A. 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 (and no commissions are paid by the Distributor on such
purchases): |_| The Manager or its affiliates.
|_| Present or former officers, directors, trustees and employees (and
their "immediate families") of the Fund, the Manager and its
affiliates, and retirement plans established by them for their
employees. The term "immediate family" refers to one's spouse,
children, grandchildren, grandparents, parents, parents-in-law,
brothers and sisters, sons- and daughters-in-law, a sibling's spouse, a
spouse's siblings, aunts, uncles, nieces and nephews; relatives by
virtue of a remarriage (step-children, step-parents, etc.) are
included.
|_| Registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the
Distributor for that purpose.
|_| 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.
|_| 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 which are
identified as such 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).
|_| Dealers, brokers, banks or registered investment advisors 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, bank or advisor for the
purchase or sale of Fund shares.
|_| 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.
|_| "Rabbi trusts" that buy shares for their own accounts, if the purchases
are made through a broker or agent or other financial intermediary that
has made special arrangements with the Distributor for those purchases.
|_| Clients of 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.
|_| 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.
|_| Accounts for which Oppenheimer Capital (or its successor) is the
investment advisor (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.
|_| A unit investment trust that has entered into an appropriate agreement
with the Distributor.
|_| Dealers, brokers, banks, or registered investment advisers that have
entered into an agreement with the Distributor to sell shares to
defined contribution employee retirement plans for which the dealer,
broker or investment adviser provides administration services.
|-|
<PAGE>
Retirement Plans and deferred compensation plans and trusts used to fund
those plans (including, for example, plans qualified or created under
sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue Code),
in each case if those purchases are made through a broker, agent or
other financial intermediary that has made special arrangements with
the Distributor for those purchases.
|_| A TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a Former Quest for Value
Fund were exchanged for Class A shares of that Fund due to the
termination of the Class B and Class C TRAC-2000 program on November
24, 1995.
|_| A qualified Retirement Plan 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, if that
arrangement was consummated and share purchases commenced by December
31, 1996.
B. 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 sales charges (and no commissions are paid by the Distributor on such
purchases): |_| Shares issued in plans of reorganization, such as mergers, asset
acquisitions and
exchange offers, to which the Fund is a party.
|_| 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.
|_| Shares purchased through a broker-dealer that has entered into a special
agreement with the Distributor to allow the broker's customers to purchase
and pay for shares of Oppenheimer funds using the proceeds of shares
redeemed in the prior 30 days from a mutual fund (other than a fund managed
by the Manager or any of its subsidiaries) on which an initial sales charge
or contingent deferred sales charge was paid. This waiver also applies to
shares purchased by exchange of shares of Oppenheimer Money Market Fund,
Inc. that were purchased and paid for in this manner. This waiver must be
requested when the purchase order is placed for shares of the Fund, and the
Distributor may require evidence of qualification for this waiver.
|_| Shares purchased with the proceeds of maturing principal units of any
Qualified Unit Investment Liquid Trust Series.
|_| Shares purchased by the reinvestment of loan repayments by a
participant in a Retirement Plan for which the Manager or an affiliate
acts as sponsor.
C. 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: |_| To make Automatic Withdrawal Plan payments that are limited
annually to no more than
12% of the account value adjusted annually.
|_| Involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (please refer to "Shareholder Account
Rules and Policies," in the applicable fund Prospectus).
|_| For distributions from Retirement Plans, deferred compensation plans or
other employee benefit plans for any of the following purposes:
(10) 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.
(11) To return excess contributions.
(12)
<PAGE>
To return contributions made due to a mistake of fact. (13) Hardship
withdrawals, as defined in the plan.10 (14) Under a Qualified Domestic
Relations Order, as defined in the Internal Revenue Code, or, in the case
of an IRA, a divorce or separation agreement described in Section 71(b) of
the Internal Revenue Code.
(15) To meet the minimum distribution requirements of the Internal Revenue Code.
(16) To make "substantially equal periodic payments" as described in Section
72(t) of the Internal Revenue Code.
(17) For loans to participants or beneficiaries.
(18) Separation from service.11
(10) Participant-directed redemptions to purchase shares of a mutual
fund (other than a fund managed by the Manager or a subsidiary of
the Manager) if the plan has made special arrangements with the
Distributor.
(11) Plan termination or "in-service distributions," if the redemption
proceeds are rolled over directly to an OppenheimerFunds-sponsored
IRA.
|_| For distributions from Retirement Plans having 500 or more eligible
employees, except distributions due to termination of all of the
Oppenheimer funds as an investment option under the Plan.
|_| For distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing
this waiver.
III. Waivers of Class B, Class C and Class N Sales Charges of Oppenheimer Funds
The Class B, Class C and Class N contingent deferred sales charges will not be
applied to shares purchased in certain types of transactions or redeemed in
certain circumstances described below.
A. Waivers for Redemptions in Certain Cases.
The Class B, Class C and Class N contingent deferred sales charges will be
waived for redemptions of shares in the following cases: |_| Shares redeemed
involuntarily, as described in "Shareholder Account Rules and
Policies," in the applicable Prospectus.
|_| 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.
|_| Distributions from accounts for which the broker-dealer of record has
entered into a special agreement with the Distributor allowing this
waiver.
|_| Redemptions of Class B shares 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.
|_| Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
accounts of clients of financial institutions that have entered into a
special arrangement with the Distributor for this purpose.
|_| Redemptions requested in writing by a Retirement Plan sponsor of Class
C shares of an Oppenheimer fund in amounts of $1 million or more held
by the Retirement Plan for more than one year, if the redemption
proceeds are invested in Class A shares of one or more Oppenheimer
funds.
|-|
<PAGE>
Distributions from Retirement Plans or other employee benefit plans for
any of the following purposes:
(15) 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 in an Oppenheimer fund.
(16) To return excess contributions made to a participant's account.
(17) To return contributions made due to a mistake of fact.
(18) To make hardship withdrawals, as defined in the plan.12
(19) To make distributions required under a Qualified Domestic
Relations Order or, in the case of an IRA, a divorce or separation
agreement described in Section 71(b) of the Internal Revenue Code.
(20) To meet the minimum distribution requirements of the Internal Revenue Code.
(21) To make "substantially equal periodic payments" as described in Section
72(t) of the Internal Revenue Code.
(22) For loans to participants or beneficiaries.13
(23) On account of the participant's separation from service.14
(24) Participant-directed redemptions to purchase shares of a mutual
fund (other than a fund managed by the Manager or a subsidiary of
the Manager) offered as an investment option in a Retirement Plan
if the plan has made special arrangements with the Distributor.
(25) Distributions made on account of a plan termination or
"in-service" distributions, if the redemption proceeds are rolled
over directly to an OppenheimerFunds-sponsored IRA.
(26) Distributions from Retirement Plans having 500 or more eligible
employees, but excluding distributions made because of the Plan's
elimination as investment options under the Plan of all of the
Oppenheimer funds that had been offered.
(27) For distributions from a participant's account under an Automatic
Withdrawal Plan after the participant reaches age 59 1/2 , as long
as the aggregate value of the distributions does not exceed 10% of
the account's value, adjusted annually.
(28) Redemptions of Class B shares under an Automatic Withdrawal Plan
for an account other than a Retirement Plan, if the aggregate
value of the redeemed shares does not exceed 10% of the account's
value, adjusted annually.
|_|Redemptions of Class B shares, Class C shares or Class N shares under
an Automatic Withdrawal Plan from an account other than a Retirement
Plan if the aggregate value of the redeemed shares does not exceed 10%
of the account's value annually.
B. Waivers for Shares Sold or Issued in Certain Transactions.
The contingent deferred sales charge is also waived on Class B, Class C and
Class N shares sold or issued in the following cases: |_| Shares sold to the
Manager or its affiliates.
|_| 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.
|_| Shares issued in plans of reorganization to which the Fund is a party.
|_| Shares sold to present or former officers, directors, trustees or employees
(and their "immediate families" as defined above in Section I.A.) of the
Fund, the Manager and its affiliates and retirement plans established by
them for their employees.
<PAGE>
IV. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
Funds Who Were Shareholders of Former Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers for Class A,
Class B and Class C shares described in the Prospectus or Statement of
Additional Information of the Oppenheimer funds are modified as described below
for certain persons who were shareholders of the former Quest for Value Funds.
To be eligible, those persons must have been shareholders on November 24, 1995,
when OppenheimerFunds, Inc. became the investment advisor to those former Quest
for Value Funds. Those funds include:
<PAGE>
Oppenheimer Quest Value Fund, Inc. Oppenheimer Quest Small Cap
Value Fund
Oppenheimer Quest Balanced Value Fund Oppenheimer Quest Global Value
Fund
Oppenheimer Quest Opportunity Value
Fund
These arrangements also apply to shareholders of the following funds when
they merged (were reorganized) into various Oppenheimer funds on November 24,
1995:
Quest for Value U.S. Government Quest for Value New York Tax-Exempt
Income Fund Fund
Quest for Value Investment Quality Quest for Value National Tax-Exempt
Income Fund Fund
Quest for Value Global Income Fund Quest for Value California Tax-Exempt
Fund
All of the funds listed above are referred to in this Appendix as the
"Former Quest for Value Funds." The waivers of initial and contingent deferred
sales charges described in this Appendix apply to shares of an Oppenheimer fund
that are either: |_| acquired by such shareholder pursuant to an exchange of
shares of an Oppenheimer fund
that was one of the Former Quest for Value Funds, or
|_| purchased by such shareholder by exchange of shares of another
Oppenheimer fund that were acquired pursuant to the merger of any of
the Former Quest for Value Funds into that other Oppenheimer fund on
November 24, 1995.
A. Reductions or Waivers of Class A Sales Charges.
|X| Reduced Class A Initial Sales Charge Rates for Certain Former Quest for
Value Funds Shareholders.
Purchases by Groups and Associations. The following table sets forth the initial
sales charge rates for Class A shares purchased by members of "Associations"
formed for any purpose other than the purchase of securities. The rates in the
table apply if 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.
--------------------------------------------------------------------------------
Initial Sales Initial Sales
Number of Eligible Charge as a % of Charge as a % of Commission as %
Employees or Members Offering Price Net Amount Invested of 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
--------------------------------------------------------------------------------
<PAGE>
For purchases by 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 in the applicable fund's Prospectus.
Purchases made under this arrangement qualify for the lower of either the
sales charge rate in the table based on the number of members of an Association,
or the sales charge rate that applies under the Right of Accumulation described
in the applicable fund's Prospectus and Statement of Additional Information.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations also may purchase shares for their individual or
custodial accounts at these reduced sales charge rates, upon request to the
Distributor.
|X| Waiver of Class A Sales Charges for Certain Shareholders. Class A
shares purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
|_| Shareholders 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.
|_| Shareholders who acquired shares of any Former Quest for Value Fund
by merger of any of the portfolios of the Unified Funds.
|X| 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 purchased by the following investors who were
shareholders of any Former Quest for Value Fund:
Investors who purchased Class A shares from a dealer that is or was not
permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship, under the Employee
Retirement Income Security Act of 1974 and regulations adopted under that law.
B. Class A, Class B and Class C Contingent Deferred Sales Charge Waivers.
|X| 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 an Oppenheimer fund. The
shares must have been acquired by the 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. Those shares must have been
purchased prior to March 6, 1995 in connection with:
|_| 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 value, adjusted annually, and
|_| 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.
|X| 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 an Oppenheimer fund. The shares must have been acquired by the 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
Former Quest for Value Fund merged. Those shares must have been purchased on or
after March 6, 1995, but prior to November 24, 1995:
|_| redemptions following the death or disability of the shareholder(s) (as
evidenced by a determination of total disability by the U.S. Social
Security Administration);
|_| 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 value; adjusted annually, and
|_| 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 Oppenheimer fund described in this section if the proceeds are
invested in the same Class of shares in that fund or another Oppenheimer fund
within 90 days after redemption.
V. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
Funds Who Were Shareholders of Connecticut Mutual Investment Accounts, Inc.
The initial and contingent deferred sale charge rates and waivers for Class A
and Class B shares described in the respective Prospectus (or this Appendix) of
the following Oppenheimer funds (each is referred to as a "Fund" in this
section):
o Oppenheimer U. S. Government Trust,
o Oppenheimer Bond Fund,
o Oppenheimer Disciplined Value Fund and
o Oppenheimer Disciplined Allocation Fund
are modified as described below for those Fund shareholders who were
shareholders of the following funds (referred to as the "Former Connecticut
Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the
investment adviser to the Former Connecticut Mutual Funds:
Connecticut Mutual Liquid Account Connecticut Mutual Total Return Account
Connecticut Mutual Government Securities CMIA LifeSpan Capital Appreciation
Account Account Connecticut Mutual Income Account CMIA LifeSpan Balanced Account
Connecticut Mutual Growth Account CMIA Diversified Income Account
A. Prior Class A CDSC and Class A Sales Charge Waivers.
|_| Class A Contingent Deferred Sales Charge. Certain shareholders of a
Fund and the other Former Connecticut Mutual Funds are entitled to continue to
make additional purchases of Class A shares at net asset value without a Class A
initial sales charge, but subject to the Class A contingent deferred sales
charge that was in effect prior to March 18, 1996 (the "prior Class A CDSC").
Under the prior Class A CDSC, if any of those shares are redeemed within one
year of purchase, they will be assessed a 1% contingent deferred sales charge on
an amount equal to the current market value or the original purchase price of
the shares sold, whichever is smaller (in such redemptions, any shares not
subject to the prior Class A CDSC will be redeemed first).
Those shareholders who are eligible for the prior Class A CDSC are: (3)
persons whose purchases of Class A shares of a Fund and other Former Connecticut
Mutual Funds were $500,000 prior to March 18, 1996, as a result of
direct purchases or purchases pursuant to the Fund's policies on
Combined Purchases or Rights of Accumulation, who still hold those
shares in that Fund or other Former Connecticut Mutual Funds, and
(4) persons whose intended purchases under a Statement of Intention
entered into prior to March 18, 1996, with the former general
distributor of the Former Connecticut Mutual Funds to purchase shares
valued at $500,000 or more over a 13-month period entitled those
persons to purchase shares at net asset value without being subject
to the Class A initial sales charge.
Any of the Class A shares of a Fund and the other Former Connecticut
Mutual Funds that were purchased at net asset value prior to March 18, 1996,
remain subject to the prior Class A CDSC, or if any additional shares are
purchased by those shareholders at net asset value pursuant to this arrangement
they will be subject to the prior Class A CDSC.
|_| Class A Sales Charge Waivers. Additional Class A shares of a Fund may
be purchased without a sales charge, by a person who was in one (or more) of the
categories below and acquired Class A shares prior to March 18, 1996, and still
holds Class A shares: (7) any purchaser, provided the total initial amount
invested in the Fund or any one or
more of the Former Connecticut Mutual Funds totaled $500,000 or
more, including investments made pursuant to the Combined
Purchases, Statement of Intention and Rights of Accumulation
features available at the time of the initial purchase and such
investment is still held in one or more of the Former Connecticut
Mutual Funds or a Fund into which such Fund merged;
(8) any participant in a qualified plan, provided that the total
initial amount invested by the plan in the Fund or any one or more
of the Former Connecticut Mutual Funds totaled $500,000 or more;
(9) Directors of the Fund or any one or more of the Former Connecticut Mutual
Funds and members of their immediate families;
(10) employee benefit plans sponsored by Connecticut Mutual Financial Services,
L.L.C. ("CMFS"), the prior distributor of the Former Connecticut Mutual
Funds, and its affiliated companies;
(11) one or more members of a group of at least 1,000 persons (and
persons who are retirees from such group) engaged in a common
business, profession, civic or charitable endeavor or other
activity, and the spouses and minor dependent children of such
persons, pursuant to a marketing program between CMFS and such
group; and
(12) an institution acting as a fiduciary on behalf of an individual or
individuals, if such institution was directly compensated by the
individual(s) for recommending the purchase of the shares of the
Fund or any one or more of the Former Connecticut Mutual Funds,
provided the institution had an agreement with CMFS.
Purchases of Class A shares made pursuant to (1) and (2) above may be
subject to the Class A CDSC of the Former Connecticut Mutual Funds described
above.
Additionally, Class A shares of a Fund may be purchased without a sales
charge by any holder of a variable annuity contract issued in New York State by
Connecticut Mutual Life Insurance Company through the Panorama Separate Account
which is beyond the applicable surrender charge period and which was used to
fund a qualified plan, if that holder exchanges the variable annuity contract
proceeds to buy Class A shares of the Fund.
B. Class A and Class B Contingent Deferred Sales Charge Waivers.
In addition to the waivers set forth in the Prospectus and in this Appendix,
above, the contingent deferred sales charge will be waived for redemptions of
Class A and Class B shares of a Fund and exchanges of Class A or Class B shares
of a Fund into Class A or Class B shares of a Former Connecticut Mutual Fund
provided that the Class A or Class B shares of the Fund to be redeemed or
exchanged were (i) acquired prior to March 18, 1996 or (ii) were acquired by
exchange from an Oppenheimer fund that was a Former Connecticut Mutual Fund.
Additionally, the shares of such Former Connecticut Mutual Fund must have been
purchased prior to March 18, 1996:
(10) by the estate of a deceased shareholder;
(11) upon the disability of a shareholder, as defined in Section 72(m)(7) of the
Internal Revenue Code;
(12) for retirement distributions (or loans) to participants or
beneficiaries from retirement plans qualified under Sections 401(a)
or 403(b)(7)of the Code, or from IRAs, deferred compensation plans
created under Section 457 of the Code, or other employee benefit
plans;
(13) as tax-free returns of excess contributions to such retirement or employee
benefit plans;
(14) in whole or in part, in connection with shares sold to any state,
county, or city, or any instrumentality, department, authority, or
agency thereof, that is prohibited by applicable investment laws from
paying a sales charge or commission in connection with the purchase
of shares of any registered investment management company;
(15) in connection with the redemption of shares of the Fund due to a
combination with another investment company by virtue of a merger,
acquisition or similar reorganization transaction;
(16) in connection with the Fund's right to involuntarily redeem or liquidate
the Fund; (17) in connection with automatic redemptions of Class A shares and
Class B shares in
certain retirement plan accounts pursuant to an Automatic Withdrawal
Plan but limited to no more than 12% of the original value annually;
or
(18) as involuntary redemptions of shares by operation of law, or under
procedures set forth in the Fund's Articles of Incorporation, or as
adopted by the Board of Directors of the Fund.
VI. Special Reduced Sales Charge for Former Shareholders of Advance America
Funds, Inc.
Shareholders of Oppenheimer Municipal Bond Fund, Oppenheimer U.S. Government
Trust, Oppenheimer Strategic Income Fund and Oppenheimer Equity Income Fund who
acquired (and still hold) shares of those funds as a result of the
reorganization of series of Advance America Funds, Inc. into those Oppenheimer
funds on October 18, 1991, and who held shares of Advance America Funds, Inc. on
March 30, 1990, may purchase Class A shares of those four Oppenheimer funds at a
maximum sales charge rate of 4.50%.
VII. Sales Charge Waivers on Purchases of Class M Shares of Oppenheimer
Convertible Securities Fund
Oppenheimer Convertible Securities Fund (referred to as the "Fund" in this
section) may sell Class M shares at net asset value without any initial sales
charge to the classes of investors listed below who, prior to March 11, 1996,
owned shares of the Fund's then-existing Class A and were permitted to purchase
those shares at net asset value without sales charge:
|_| the Manager and its affiliates,
|_| present or former officers, directors, trustees and employees (and
their "immediate families" as defined in the Fund's Statement of
Additional Information) of the Fund, the Manager and its affiliates,
and retirement plans established by them or the prior investment
advisor of the Fund for their employees,
|_| registered management investment companies or separate accounts of
insurance companies that had an agreement with the Fund's prior
investment advisor or distributor for that purpose,
|_| 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,
|_| employees and registered representatives (and their spouses) of dealers
or brokers described in the preceding section or financial institutions
that have entered into sales arrangements with those dealers or brokers
(and whose identity is made known to the Distributor) or with the
Distributor, but only if the purchaser certifies to the Distributor at
the time of purchase that the purchaser meets these qualifications,
|_| dealers, brokers, or registered investment advisors that had entered
into an agreement with the Distributor or the prior distributor of the
Fund specifically providing for the use of Class M shares of the Fund
in specific investment products made available to their clients, and
|_| dealers, brokers or registered investment advisors that had entered
into an agreement with the Distributor or prior distributor of the
Fund's shares to sell shares to defined contribution employee
retirement plans for which the dealer, broker, or investment advisor
provides administrative services.
<PAGE>
Oppenheimer Quest Small Cap Fund
Internet Web Site:
www.oppenheimerfunds.com
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 Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1.800.525.7048
Custodian Bank
Citibank, N.A.
111 Wall Street
New York, New York 10005
Independent Accountants
KPMG LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Mayer Brown & Platt
1675 Broadway
New York, New York 10019-5820
PX251.0200
<PAGE>
Oppenheimer
Quest Balanced Value Fund
Prospectus dated February 9, 2001
Oppenheimer Quest Balanced Value Fund is a mutual fund. The Fund's primary
objective is growth of capital, and the Fund also seeks investment income.
The Fund invests primarily in equity securities, but also buys debt
securities.
This Prospectus contains important information about the Fund's
objective, and its investment policies, strategies and risks. It also
contains important information about how to buy and sell shares of the
Fund and other account features. Please read this Prospectus carefully
before you invest and keep it for future reference about your account.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Fund's securities nor has it determined that this
Prospectus is accurate or complete. It is a criminal offense to represent
otherwise.
<PAGE>
CONTENTS
ABOUT THE FUND
--------------------------------------------------------------------------------
The Fund's Investment Objectives and Strategies
Main Risks of Investing in the Fund
The Fund's Past Performance
Fees and Expenses of the Fund
About the Fund's Investments
How the Fund is Managed
ABOUT YOUR ACCOUNT
--------------------------------------------------------------------------------
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Class N Shares
Special Investor Services
AccountLink
PhoneLink
OppenheimerFunds Internet Web Site
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Financial Highlights
<PAGE>
ABOUT THE FUND
The Fund's Objectives And Investment Strategies
WHAT ARE THE FUND'S INVESTMENT OBJECTIVES? The Fund seeks a combination of
growth of capital and investment income. The Fund's primary objective is growth
of capital.
WHAT DOES THE FUND MAINLY INVEST IN? To seek growth, the Fund normally invests
mainly in common stocks of U.S. issuers that the portfolio manager believes are
undervalued in the marketplace. The Fund also invests in other equity
securities, such as preferred stock and securities convertible into common
stock. The Fund also buys corporate and government bonds, notes and other debt
securities for investment income, which can include securities below investment
grade.
Under normal market conditions, the Fund invests:
o at least 25% of its total assets in equity securities, including common
stocks and preferred stocks, and expects to have between 50% to 75% of its
total assets invested in equities, and
o at least 25% of its total assets in fixed-income senior securities.
The Fund's investments in fixed-income senior securities include bonds,
debentures, notes, participation interests in loans, convertible securities and
U.S. Government securities. These investments are more fully explained in "About
the Fund's Investments," below.
HOW DOES THE PORTFOLIO MANAGER DECIDE WHAT SECURITIES TO BUY OR SELL? In
selecting securities for the Fund, the Fund's portfolio manager, who is employed
by the Sub-Advisor, OpCap Advisors, uses a "value" approach to investing. The
portfolio manager searches primarily for securities of established companies
believed to be undervalued in the marketplace, in relation to factors such as a
company's assets, earnings, growth potential and cash flows. This process and
the inter-relationship of the factors used may change over time and its
implementation may vary in particular cases. Currently, the selection process
for equity securities includes the following techniques: o A "bottom up"
analytical approach using fundamental research to focus on particular
issuers before considering industry trends, by evaluating each issuer's
characteristics, financial results and management.
o A search for securities of established companies believed to be undervalued
and having a high return on capital, strong management committed to
shareholder value, and positive cash flows.
o Ongoing monitoring of issuers for fundamental changes in the company
that might alter the portfolio manager's initial expectations about the
security and might result in a decision to sell the security.
The portfolio manager allocates the Fund's investments among equity and
debt securities after assessing the relative values of these different types of
investments under prevailing market conditions. Within the parameters for stock
and bond investments described above under normal market conditions, the
portfolio might hold stocks, bonds and money market instruments in different
proportions at different times. The portfolio manager might increase the
relative emphasis of investments in bonds and other fixed-income securities,
instead of stocks, when he thinks that:
o common stocks in general appear to be overvalued,
o debt securities present capital growth and income opportunities relative to
common stocks because of declining interest rates or improved issuer credit
quality, or
o it is desirable to maintain liquidity pending investment in equity
securities to seek capital growth opportunities.
WHO IS THE FUND DESIGNED FOR? The Fund is designed for investors seeking capital
appreciation over the long term with the opportunity for some income. Those
investors should be willing to assume the risk of short-term share price
fluctuations that are typical for a fund emphasizing equity investments. Since
the Fund's income level will fluctuate, it is not designed for investors needing
an assured level of current income. Because of its primary focus on long-term
growth, with income as a secondary goal, the Fund may be appropriate for
moderately aggressive investors and for a portion of a retirement plan
investment. The Fund is not a complete investment program.
Main Risks of Investing in the Fund
All investments have risks to some degree. The Fund's investments in stocks and
bonds are subject to changes in their value from a number of factors, described
below. There is also the risk that poor selection by the portfolio manager will
cause the Fund to underperform other funds having a similar objective. As an
example, the portfolio manager's "value" approach to investing could result in
fewer Fund investments in stocks that become highly valued by the marketplace
during times of rapid market advances. This could cause the Fund to underperform
other funds with similar investment objectives but that employ a growth or
non-value approach to investing.
RISKS OF INVESTING IN STOCKS. Stocks fluctuate in price, and their short-term
volatility at times may be great. Because the Fund normally emphasizes
investments in common stocks and other equity securities, the value of the
Fund's portfolio will be affected by changes in the stock markets in which it
invests. Market risk will affect the Fund's net asset values per share, which
will fluctuate as the values of the Fund's portfolio securities change. A
variety of factors can affect the price of a particular stock and the prices of
individual stocks do not all move in the same direction uniformly or at the same
time. Different stock markets may behave differently from each other. Because
the Fund can buy both U.S. and foreign stocks it could be affected by changes in
domestic and foreign stock markets.
Other factors can affect a particular stock's price, such as poor earnings
reports by the issuer, loss of major customers, major litigation against the
issuer, or changes in government regulations affecting the issuer. The Fund
invests primarily in securities of large companies. It also can invest in small
and medium-capitalization companies, which may have more volatile stock prices
than large companies.
Industry Focus. At times the Fund may increase the relative emphasis of its
investments in stocks of companies in a single industry. Stocks of issuers in a
particular industry may be affected by changes in economic conditions,
government regulations, availability of basic resources or supplies, or other
events that affect that industry more than others. To the extent that the Fund
is emphasizing investments in a particular industry, its share values may
fluctuate in response to events affecting that industry.
INTEREST RATE RISK. The values of debt securities are subject to change when
prevailing interest rates change. When interest rates fall, the value of
already-issued debt securities generally rise. When interest rates rise, the
values of already-issued debt securities generally fall. The magnitude of these
fluctuations will often be greater for longer-term debt securities than
shorter-term debt securities. The Fund's share prices can go up or down when
interest rates change because of the effect of the changes on the value of the
Fund's investments in debt securities.
CREDIT RISK. Debt securities are subject to credit risk. Credit risk is the risk
that the issuer of a security might not make interest and principal payments on
the security as they become due. If the issuer fails to pay interest, the Fund's
income may be reduced and if the issuer fails to repay principal, the value of
that security and of the Fund's shares may be reduced. While the Fund's
investments in U.S. Government securities are subject to little credit risk, the
Fund's other investments in debt securities, particularly high-yield lower-grade
debt securities, are subject to risks of default. A downgrade in an issuer's
credit rating or other adverse news about an issue can reduce a security's
market value.
HOW RISKY IS THE FUND OVERALL? The risks described above collectively form the
overall risk profile of the Fund, and can affect the value of the Fund's
investments, its investment performance and its price per share. Particular
investments and investment strategies also have risks. These risks mean that you
can lose money by investing in the Fund. When you redeem your shares, they may
be worth more or less than what you paid for them. There is no assurance that
the Fund will achieve its investment objective. In the short term, stock markets
can be volatile, and the price of the Fund's shares can go up and down
substantially. The Fund's income-oriented investments may help cushion the
Fund's total return from changes in stock prices, but fixed-income securities
have their own risks that can affect their values and the income they pay. In
the OppenheimerFunds spectrum, the Fund is more conservative than funds that
invest only in growth stocks, but has greater risks than investment-grade bond
funds.
--------------------------------------------------------------------------------
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
--------------------------------------------------------------------------------
The Fund's Past Performance
The bar chart and table below show one measure of the risks of investing in the
Fund, by showing changes in the Fund's performance (for its Class A shares) from
year to year for the full calendar years since the Fund's inception and by
showing how the average annual total returns of the Fund's shares compare to
those of a broad-based market index. The Fund's past investment performance is
not necessarily an indication of how the Fund will perform in the future.
Annual Total Returns (Class A) (as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing annual total returns]
Sales charges are not included in the calculations of return in this bar chart,
and if those charges were included, the returns would be less than those shown.
During the period shown in the bar chart, the highest return (not annualized)
for a calendar quarter was _____% (___ Q'____) and the lowest return (not
annualized) for a calendar quarter was ____% (____Q'____).
------------------------------------------------------------------------------
Average Annual Total
Returns for the periods
Ended December 31, 2000 1 Year 5 Years Life of Class
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class A Shares (inception % % %
11/1/91)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
S&P 500 Index 1 % % %1
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class B Shares (inception % % %
9/1/93)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class C Shares (inception % % %
9/1/93)
------------------------------------------------------------------------------
1. From 10/31/91
The Fund's average annual total returns in the table include the applicable
sales charge for Classes A, B and C shares: for Class A, the current maximum
initial sales charge of 5.75%; for Class B, the contingent deferred sales
charges of 5% (1-year), 2% (5-years) and none (life of class); and for Class C,
the 1% contingent deferred sales charge for the 1-year period.
The returns measure the performance of a hypothetical account and assume that
all dividends and capital gains distributions have been reinvested in additional
shares. The performance of the Fund's Class A shares is compared to the S & P
500 Index, an unmanaged index of equity securities. The index performance
includes the reinvestment of income but does not reflect transaction costs. The
Fund's investments vary from securities in the index.
Fees and Expenses of the Fund
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services. Those expenses
are subtracted from the Fund's assets to calculate the Fund's net asset values
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 meant to help you understand the
fees and expenses you may pay if you buy and hold shares of the Fund. The
numbers below are based on the Fund's expenses during its fiscal year ended
October 31, 2000 except that the numbers for Class N Shares, which is a new
class, are based on the Fund's anticipated expenses for Class N Shares during
the upcoming year.
Shareholder Fees (charges paid directly from your investment):
--------------------------------------------------------------------------------
Class A Shares Class B Class C Shares Class N Shares
Shares
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Maximum Sales Charge
(Load) on purchases 5.75% None None None
(as % of offering price)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as % of
the lower of the None1 5%2 1%3 1%4
original offering price
or redemption proceeds)
--------------------------------------------------------------------------------
7. A contingent deferred sales charge may apply to redemptions of investments of
$1 million or more ($500,000 for retirement plan accounts) of Class A shares.
See "How to Buy Shares" for details.
8. Applies to redemptions in first year after purchase. The contingent deferred
sales charge declines to 1% in the sixth year and is eliminated after that.
9. Applies to shares redeemed within 12 months of purchase.
10. Applies to Shares redeemed within 18 months of retirement plan's first
purchase.
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
------------------------------------------------------------------------
Class A Class B Class C Class N Shares
hares Shares Shares
------------------------------------------------------------------------
------------------------------------------------------------------------
Management Fees % % % %
------------------------------------------------------------------------
------------------------------------------------------------------------
Distribution and/or Service
(12b-1) Fees % % % %
------------------------------------------------------------------------
------------------------------------------------------------------------
Other Expenses % % % %
------------------------------------------------------------------------
------------------------------------------------------------------------
Total Annual Operating % % % %
Expenses
------------------------------------------------------------------------
The asset-based sales charge rate for Class A shares has been voluntarily
reduced to 0.10% effective January 1, 2002. The Board can set the rate up to
0.25% of average annual net assets under the Distribution and Service Plan for
Class A shares. Expenses may vary in future years. "Other expenses" include
transfer agent fees, custodial expenses, and accounting and legal expenses the
Fund pays.
EXAMPLES. The following examples are intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds. The
examples assume that you invest $10,000 in a class of shares of the Fund for the
time periods indicated and reinvest your dividends and distributions.
The first example assumes that you redeem all of your shares at the end of
those periods. The second example assumes that you keep your shares. Both
examples also assume that your investment has a 5% return each year and that the
class's operating expenses remain the same. Your actual costs may be higher or
lower because expenses will vary over time. Based on these assumptions your
expenses would be as follows:
--------------------------------------------------------------------------------
If shares are redeemed: 1 Year 3 Years 5 Years 10 Years1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class A Shares $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B Shares $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C Shares $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class N Shares $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
If shares are not 1 Year 3 Years 5 Years 10 Years1
redeemed:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class A Shares $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B Shares $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C Shares $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class N Shares $ $ $ $
--------------------------------------------------------------------------------
In the first example, expenses include the initial sales charge for Class A and
the applicable Class B, Class C or Class N contingent deferred sales charges. In
the second example, the Class A expenses include the sales charge, but Class B,
Class C and Class N expenses do not include the contingent deferred sales
charges. 3. Class B expenses for years 7 through 10 are based on Class A
expenses, since Class B
shares automatically convert to Class A after 6 years.
About the Fund's Investments
THE FUND'S PRINCIPAL INVESTMENT POLICIES. The allocation of the Fund's portfolio
among different types of investments will vary over time based upon the
evaluation of economic and market trends by the Sub-Advisor. The Fund's
portfolio might not always include all of the different types of investments
described below. The Statement of Additional Information contains more detailed
information about the Fund's investment policies and risks.
The Manager has engaged the Sub-Advisor, OpCap Advisors, to select
securities for the Fund's portfolio. The Sub-Advisor tries to reduce risks by
carefully researching securities before they are purchased and to reduce the
Fund's exposure to market risks by diversifying its investments. That means the
Fund does not hold a substantial percentage of the stock of any one company and
does not invest too great a percentage of the Fund's assets in any one issuer.
Also, the Fund does not concentrate 25% or more of its investments in any one
industry.
However, changes in the overall market prices of securities and the income
they pay can occur at any time. The share price of the Fund will change daily
based on changes in market prices of securities and market conditions, and in
response to other economic events.
STOCK AND OTHER EQUITY INVESTMENTS. The Fund invests in equity securities for
growth opportunities as well as secondarily for income from dividends. While the
Fund does not limit its investments to issuers in a particular capitalization
range, the portfolio manager currently focuses on securities of larger
established companies.
Although they are debt securities, the Sub-Advisor considers some
convertible securities to be "equity equivalents" because of the conversion
feature, and their rating must meet the fund's credit criteria for debt
securities described below but has less impact on the investment decision than
in the case of other debt securities. Other convertible securities may behave
more like other debt securities.
DEBT SECURITIES. The Fund may invest in corporate bond obligations, as well as
government obligations and mortgage-related securities described below.
Debt securities are selected primarily for their income possibilities and
their relative emphasis in the portfolio may be greater when the stock
market is volatile. For example, when interest rates are falling, or when
the credit quality of a particular issuer is improving, the portfolio
manager might buy debt securities for their own appreciation
possibilities. The Fund has no limit on the range of maturities of the
debt securities it can buy.
The Fund can buy short-term debt securities for liquidity, for example,
pending the purchase of new investments or to have cash to pay for
redemptions of Fund shares. The Sub-Advisor does not rely solely on
ratings by rating organizations in selecting debt securities, but also
uses its own judgment to evaluate particular issues as well as business
and economic factors affecting an issuer. The debt securities the Fund
buys may be rated by nationally-recognized rating organizations or they
may be unrated securities assigned a rating by the Sub-Advisor.
The Fund's investments in debt securities, including convertible
securities, can be above or below investment grade in quality.
"Investment-grade" securities are those rated in the four highest rating
categories by Moody's Investors Service or other rating organizations, or,
if unrated, assigned a comparable rating by the Sub-Advisor. A list of the
ratings definitions of the principal ratings organizations is in Appendix
A to the Statement of Additional Information.
CAN THE FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE? The Fund's Board of
Trustees can change non-fundamental investment policies without shareholder
approval, although significant changes will be described in amendments to this
Prospectus. Fundamental policies cannot be changed without the approval of a
majority of the Fund's outstanding voting shares. The Fund's investment
objective is a fundamental policy. Other investment restrictions that are
fundamental policies are listed in the Statement of Additional Information. An
investment policy is not fundamental unless this Prospectus or the Statement of
Additional Information says that it is.
Portfolio Turnover. A change in the securities held by the Fund is known as
"portfolio turnover". The Fund can engage frequently in short-term trading to
try to achieve its objective. It may have a portfolio turnover rate in excess of
100% annually. Portfolio turnover affects brokerage costs the Fund pays. If the
Fund realizes capital gains when it sells its portfolio investments, it must
generally pay those gains out to shareholders, increasing their taxable
distributions. The Financial Highlights table shows the Fund's portfolio
turnover rates during prior fiscal years.
OTHER INVESTMENT STRATEGIES. To seek its investment objective, the Fund can also
use the investment techniques and strategies described below. The Fund might not
always use all of the different types of techniques and instruments described
below. These techniques have certain risks, although some are designed to help
reduce overall investment or market risks.
U.S. Government Securities. The Fund can invest in U.S. Government
securities that are U.S. Treasury securities and securities issued or guaranteed
by agencies or federally-chartered corporate entities referred to as
"instrumentalities" of the U.S. government. They can include collateralized
mortgage obligations (CMOs) and other mortgage-related securities. U.S. Treasury
securities are backed by the full faith and credit of the U.S. government and
are subject to little credit risk.
Some securities issued or guaranteed by agencies or instrumentalities of
the U.S. government have different levels of credit support from the U.S.
government. Some are supported by the full faith and credit of the U.S.
government, such as Government National Mortgage Association pass-through
mortgage certificates (called "Ginnie Maes"). Some are supported by the
right of the issuer to borrow from the U.S. Treasury under certain
circumstances, such as Federal National Mortgage Association bonds
("Fannie Maes"). Others are supported only by the credit of the entity
that issued them, such as Federal Home Loan Mortgage Corporation
obligations ("Freddie Macs"). These have relatively little credit risk.
Special Risks of Mortgage-Related Securities. Investments in mortgage-related
securities are subject to special risks of unanticipated prepayment. The
risk is that when interest rates fall, borrowers under the mortgages that
underlie a mortgage-related security the Fund owns will prepay their
mortgages more quickly than expected, causing the issuer of the security
to prepay the principal prior to the security's expected maturity.
Securities subject to prepayment risk, including the CMOs and other
mortgage-related securities that the Fund can buy, generally offer less
potential for gains when prevailing interest rates fall, and have greater
potential for loss when interest rates rise. The impact of prepayments on
the price of a security may be difficult to predict and may increase the
volatility of the price. Additionally, the Fund may buy mortgage-related
securities at a premium. Accelerated prepayments on those securities could
cause the Fund to lose a portion of its principal investment represented
by the premium the Fund paid.
If interest rates rise rapidly, prepayments may occur at slower rates than
expected, which could have the effect of lengthening the expected maturity
of a short or medium-term security. That could cause its value to
fluctuate more widely in response to changes in interest rates. In turn,
this could cause the value of the Fund's shares to fluctuate more.
Special Risks of Lower-Grade Securities. Because the Fund can invest as much as
25% of its total assets in securities below investment grade to seek
higher income, the Fund's credit risks are greater than those of funds
that buy only investment grade bonds. Lower-grade debt securities may be
subject to greater market fluctuations and greater risks of loss of income
and principal than higher-grade debt securities. Securities that are (or
have fallen) below investment grade entail a greater risk that the issuers
of such securities may not meet their debt obligations. However, by
limiting its investments in non-investment grade debt securities, the Fund
may reduce the effect of some of these risks on its share price and
income. Currently, the portfolio manager does not intend to buy these
securities unless they offer relatively attractive opportunities for both
income and capital appreciation.
Money Market Instruments. The Fund can also invest in "money market
instruments." These include U.S. Government securities and high-quality
corporate debt securities having a remaining maturity of one year or less.
They also include commercial paper, other short-term corporate debt
obligations, certificates of deposit, bankers' acceptances and repurchase
agreements. They do not generate capital growth if held to maturity.
Foreign Investing. The Fund can buy foreign securities that are listed on a
domestic or foreign stock exchange, traded in domestic or foreign
over-the-counter markets, or represented by American Depository Receipts.
The Fund may invest in developed markets as well as emerging markets,
which have greater risks than developed markets, although the Fund
currently does not intend to purchase securities issued by governments or
companies in emerging markets. The Fund will hold foreign currency only in
connection with buying and selling foreign securities.
While the Fund has no limits on the amounts it can invest in foreign
securities, it normally does not expect to invest substantial amounts of
its assets in foreign securities. Foreign securities offer special
investment opportunities, but 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.
"When-Issued" And "Delayed-Delivery" Transactions. The Fund can purchase
securities on a "when-issued" basis and may purchase or sell securities on
a "delayed-delivery" basis. There is a risk that the value of the security
might decline prior to the settlement date. The Fund will not commit more
than 15% of its net assets under these transactions. Between the purchase
and settlement no payment is made for the when-issued security and no
interest accrues to the buyer from the investment.
Investing in Small, Unseasoned Companies. The Fund can invest up to 5% of its
total assets in securities of small, unseasoned companies. These are
companies that have been in continuous operation for less than three
years, counting the operations of any predecessors. These securities may
have limited liquidity, which means that the Fund could have difficulty
selling them at an acceptable price when it wants to. Their prices may be
very volatile, especially in the short term.
Illiquid and Restricted Securities. Investments may be illiquid because they do
not have an active trading market, making it difficult to value them or
dispose of them promptly at an acceptable price. A restricted security is
one that has a contractual restriction on its resale or which cannot be
sold publicly until it is registered under the Securities Act of 1933. The
Fund cannot invest more than 15% of its net assets in illiquid or
restricted securities. Certain restricted securities that are eligible for
resale to qualified institutional purchasers may not be subject to that
limit. The Manager and Sub-Advisor monitor holdings of illiquid securities
on an ongoing basis to determine whether to sell any holdings to maintain
adequate liquidity.
Temporary Defensive Investments. In times of unstable or adverse market or
economic conditions, the Fund can invest up to 100% of its assets in
temporary defensive investments. Generally they would be short-term U.S.
Government securities and the types of money market instruments described
above. To the extent the Fund invests defensively in these securities, it
might not achieve its primary investment objective of capital growth.
How the Fund Is Managed
THE MANAGER. The Manager supervises the Fund's investment program and handles
its day-to-day business. The Manager carries out its duties, subject to the
policies established by the Fund's Board of Trustees, under an Investment
Advisory Agreement that states the Manager's responsibilities. The agreement
sets the fees paid by the Fund to the Manager and describes the expenses that
the Fund pays to conduct its business. The Manager became the Fund's investment
advisor on November 22, 1995.
The Manager has been an investment advisor since January 1960. The Manager
(including subsidiaries) managed more than $125 billion of assets as of October
31, 2000, including other Oppenheimer funds with more than 5 million shareholder
accounts. The Manager is located at Two World Trade Center, 34th Floor, New
York, New York 10048-0203.
The Manager's Fees. Under the Investment Advisory Agreement, the Fund pays the
Manager an advisory fee at an annual rate of 0.85% of average annual net
assets. The Fund's management fee for its last fiscal year ended October
31, 2000 was _____% of average annual net assets for each class of shares.
The Sub-Advisor. On November 22, 1995, the Manager retained the Sub-Advisor to
provide day-to-day portfolio management for the Fund. Prior to that date
and from the inception of the Fund, the Sub-Advisor had been the Fund's
investment advisor. The Sub-Advisor has operated as an investment advisor
to investment companies and other investors since its organization in
1980, and as of December 31, 2000, the Sub-Advisor or its parent
Oppenheimer Capital advised accounts having assets in excess of $_____
billion. The Sub-Advisor is located at 1345 Avenue of the Americas, 49th
Floor, New York, New York 10105-4800.
The Manager, not the Fund, pays the Sub-Advisor an annual fee under the
Sub-Advisory Agreement between the Manager and the Sub-Advisor. The fee is
calculated as a percentage of the fee the Fund pays the Manager. The rate
is 40% of the advisory fee collected by the Manager based on the net
assets of the Fund as of November 22, 1995, and 30% of the fee collected
by the Manager on assets in excess of that amount.
The Sub-Advisor is a majority-owned subsidiary of Oppenheimer Capital.
Oppenheimer Capital is an indirect wholly-owned subsidiary of PIMCO
Advisors L.P. The general partners of PIMCO Advisors are PIMCO Partners,
G.P. and PIMCO Advisors Holdings L.P. Allianz AG has majority ownership of
PIMCO Advisors and its subsidiaries, including Oppenheimer Capital and the
Sub-Advisor.
Portfolio Manager. The portfolio manager of the Fund is Colin Glinsman, who is
employed by the Sub-Advisor. He is the person primarily responsible for
the day-to-day management of the Fund's portfolio. Mr. Glinsman is a
Managing Director and the Chief Investment Officer of Oppenheimer Capital,
the immediate parent company of the Sub-Advisor. He has been the Fund's
portfolio manager since December 1992 and prior to that was a securities
analyst for Oppenheimer Capital.
About Your Account
HOW TO BUY SHARES
How Do You Buy Shares? You can buy shares several ways, as described below. The
Fund's Distributor, OppenheimerFunds Distributor Inc., may appoint certain
servicing agents to accept purchase (and redemption) orders. The
Distributor, in its sole discretion, may reject any purchase order for the
Fund's shares.
Buying Shares Through Your Dealer. You can buy shares through any dealer,
broker, or financial institution that has a sales agreement with the
Distributor. Your dealer will place your order with the Distributor on your
behalf.
BuyingShares 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 with a financial advisor before you make a purchase to be
sure that the Fund is appropriate for you.
o Paying by Federal Funds Wire. Shares purchased through the Distributor may
be paid for by Federal Funds wire. The minimum investment is $2,500.
Before sending a wire, call the Distributor's Wire Department at
1.800.525.7048 to notify the Distributor of the wire, and to receive
further instructions.
o Buying Shares Through OppenheimerFunds AccountLink. With AccountLink,
shares are purchased for your account by electronic fund transfers from
your bank account through the Automated Clearing House (ACH) system. You
can provide those instructions automatically, under an Asset Builder Plan,
described below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. Please refer to "AccountLink," below for
more details.
o Buying Shares Through 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 Asset Builder
Application and the Statement of Additional Information.
HOW MUCH MUST YOU INVEST? You can buy Fund shares with a minimum initial
investment of $1,000. You can 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, 403(b) plans, Automatic Exchange Plans and military
allotment plans, you can make initial and subsequent investments for as
little as $25. You can make additional purchases of at least $25 through
AccountLink.
o Under retirement plans, such as IRAs, pension and profit-sharing plans and
401(k) plans, you can start your account with as little as $250. If your IRA
is started under an Asset Builder Plan, the $25 minimum applies. Additional
purchases may be as little as $25.
o The minimum investment requirement does not apply to 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 reinvesting distributions from unit investment trusts
that have made arrangements with the Distributor.
AT WHAT PRICE ARE SHARES SOLD? Shares are sold at their offering price, which
is the net asset value per share plus any initial sales charge that
applies. The offering price that applies to a purchase order is based on
the next calculation of the net asset value per share that is made after
the Distributor receives the purchase order at its offices in Denver,
Colorado, or after any agent appointed by the Distributor receives the
order and sends it to the Distributor.
Net asset value. The Fund calculates the net asset value of each class of
shares as of the close of The New York Stock Exchange, on each day the
Exchange is open for trading (referred to in this Prospectus as a "regular
business day"). The Exchange normally closes at 4:00 P.M., New York time,
but may close earlier on some days. All references to time in this
Prospectus mean "New York time".
The net asset value per share is determined 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. To determine net asset value, the Fund's Board
of Trustees has established procedures to value the Fund's securities, in
general based on market value. The Board has adopted special procedures
for valuing illiquid and restricted securities and obligations for which
market values cannot be readily obtained. Because some foreign securities
trade in markets and exchanges that operate on U.S. holidays and weekends,
the values of some of the Fund's foreign investments may change
significantly on days when investors cannot buy or redeem Fund shares.
The offering price. To receive the offering price for a particular day, in
most cases the Distributor or its designated agent must receive your order
by the time of day The New York Stock Exchange closes that day. If your
order is received on a day when the Exchange is closed or after it has
closed, the order will receive the next offering price that is determined
after your order is received.
Buyingshares through a dealer. If you buy shares through a dealer, your dealer
must receive the order by the close of The New York Stock Exchange and
transmit it to the Distributor so that it is received before the
Distributor's close of business on a regular business day (normally 5:00
P.M.) to receive that day's offering price. Otherwise, the order will
receive the next offering price that is determined.
--------------------------------------------------------------------------------
WHAT CLASSES OF SHARES DOES THE FUND OFFER? When you buy shares, be sure to
specify the class of shares. If you do not choose a class, your investment will
be made in Class A shares. The Fund offers investors four different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities, but the classes are subject to different expenses and
will likely have different share prices.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class A Shares. If you buy Class A shares, you pay an initial sales charge (on
investments up to $1 million for regular accounts or $500,000 for certain
retirement plans). The amount of that initial sales charge will vary
depending on the amount you invest. The sales charge rates are listed in
"How Can You Buy Class A Shares?" below. There is also an asset-based
sales charge on Class A shares.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B Shares. If you buy Class B shares, you pay no sales charge at the time
of purchase, but you will pay an annual asset-based sales charge. If you
sell your shares within six years of buying them, you will normally pay a
contingent deferred sales charge. That contingent deferred sales charge
varies depending on how long you own your shares, as described in "How Can
You Buy Class B Shares?" below.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C Shares. If you buy Class C shares, you pay no sales charge at the time
of purchase, but you will pay an annual asset-based sales charge. 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 "How Can You Buy
Class C Shares?" below.
--------------------------------------------------------------------------------
Class N Shares. Class N shares are offered only through retirement plans that
purchase $500,000 or more of Class N shares of one or more Oppenheimer
funds or that have assets of $500,000 or more or 100 or more of eligible
plan participants. Non-retirement plan investors cannot buy Class N shares
directly.
--------------------------------------------------------------------------------
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 best
suited to your needs depends on a number of factors that you should discuss with
your financial advisor. Some 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.
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 discussion below is not intended to be investment advice or a
recommendation, because each investor's financial considerations are different.
The discussion below assumes that you will purchase only one class of shares,
and not a combination of shares of different classes. Of course, these examples
are based on approximations of the effects of current sales charges and expenses
projected over time, and do not detail all of the considerations in selecting a
class of shares. You should analyze your options carefully with your financial
advisor before making that choice.
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,
compared to the effect over time of higher class-based expenses on shares
of Class B or Class C.
o Investing for the Shorter Term. While the Fund is meant to be a long-term
investment, if you have a relatively 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. That is because of the effect of the Class B contingent deferred
sales charge if you redeem within six 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 as 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.
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 less than $100,000 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
appropriate.
Are There Differences in Account Features That Matter to You? Some account
features may not be available to Class B or Class C shareholders. Other
features may not be advisable (because of the effect of the contingent
deferred sales charge) for Class B or Class C shareholders. Therefore, you
should carefully review how you plan to use your investment account before
deciding which class of shares to buy.
Additionally, the dividends payable to Class B and Class C shareholders
will be reduced by the additional expenses borne by those classes that are
not borne by Class A shares, such as the Class B and Class C asset-based
sales charge described below and in the Statement of Additional
Information. Share certificates are not available for Class B and Class C
shares, and if you are considering using your shares as collateral for a
loan, that may be a factor to consider.
How Do Share Classes Affect Payments to my Broker? A financial advisor may
receive different compensation for selling one class of shares than for
selling another class. It is important to remember that Class B, Class C
and Class N contingent deferred sales charges and asset-based sales
charges have the same purpose as the front-end sales charge on sales of
Class A shares: to compensate the Distributor for commissions and expenses
it pays to dealers and financial institutions for selling shares. The
Distributor may pay additional 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.
SPECIAL SALES CHARGE ARRANGEMENTS AND WAIVERS. Appendix C to the Statement of
Additional Information details the conditions for the waiver of sales charges
that apply in certain cases, and the special sales charge rates that apply to
purchases of shares of the Fund by certain groups, or under specified retirement
plan arrangements or in other special types of transactions. To receive a waiver
or special sales charge rate, you must advise the Distributor when purchasing
shares or the Transfer Agent when redeeming shares that the special conditions
apply.
HOW CAN YOU BUY 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 other cases, reduced
sales charges may be available, as described below or in the Statement of
Additional Information. 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 or allocated to
your dealer as commission. The Distributor reserves the right to re-allow the
entire commission to dealers. The current sales charge rates and commissions
paid to dealers and brokers are as follows:
--------------------------------------------------------------------------------
Front-End Sales Front-End Sales
Charge As a Charge As a Commission As
Percentage of Percentage of Net Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Less than $25,000 5.75% 6.10% 4.75%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
$100,000 or more
but less than 3.75% 3.90% 3.00%
$250,000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
$250,000 or more
but less than 2.50% 2.56% 2.00%
$500,000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
$500,000 or more
but less than $1 2.00% 2.04% 1.60%
million
--------------------------------------------------------------------------------
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
aggregating $1 million or more or for certain purchases by particular
types of retirement plans described in Appendix C to the Statement of
Additional Information. The Distributor pays dealers of record concessions
in an amount equal to 1.0% of purchases of $1 million or more (other than
purchases by those retirement accounts, which are not permitted in the
Fund). For those retirement plan accounts, the concession is 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, based on the cumulative purchases during the
prior 12 months ending with the current purchase. In either case, the
concession will be paid only on purchases that were not previously subject
to a front-end sales charge and dealer concession.15 That concession will
not be paid on purchases of shares of $1 million or more (including any
right of accumulation) by retirement plans that pay for the purchase with
the redemption of Class C shares of one or more Oppenheimer funds.
If you redeem any of those shares within a 18-month "holding period"
measured from 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. That sales
charge will be equal to 1.0% of the lesser of (1) the aggregate net asset
value of the redeemed shares at the time of redemption (excluding shares
purchased by reinvestment of dividends or capital gain distributions) or
(2) 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
purchases of Class A shares of all Oppenheimer funds you made that were
subject to the Class A contingent deferred sales charge.
Can You Reduce Class A Sales Charges? You may be eligible to buy Class A
shares at reduced sales charge rates under the Fund's "Right of
Accumulation" or a Letter of Intent, as described in "Reduced Sales
Charges" in the Statement of Additional Information.
HOW CAN YOU BUY 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 the end of the calendar month of their purchase, a contingent
deferred sales charge will be deducted from the redemption proceeds. The Class B
contingent deferred sales charge is paid to compensate the Distributor for its
expenses of providing distribution-related services to the Fund in connection
with the sale of Class B shares.
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 for the Class B contingent deferred sales
charge holding period:
--------------------------------------------------------------------------------
Contingent Deferred Sales Charge on
Years Since Beginning of Month in Which Redemptions in That Year
Purchase Order was Accepted (As % of Amount Subject to Charge)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
0 - 1 5.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1 - 2 4.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2 - 3 3.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
3 - 4 3.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
4 - 5 2.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5 - 6 1.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
6 and following None
--------------------------------------------------------------------------------
In the table, a "year" is a 12-month period. In applying the sales charge, all
purchases are considered to have been made on the first regular business day of
the month in which the purchase was made.
Automatic Conversion of Class B Shares. Class B shares automatically convert to
Class A shares 72 months after you purchase them. 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 any
Class B shares you hold convert, a prorated portion of your Class B shares
that were acquired by reinvesting of dividends and distributions on the
converted shares will also convert to Class A shares. For further
information on the conversion feature and its tax implications, see "Class
B Conversion" in the Statement of Additional Information.
HOW CAN YOU BUY 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 a holding period of 12 months from the end of the calendar month of their
purchase, a contingent deferred sales charge of 1.0% will be deducted from the
redemption proceeds. The Class C contingent deferred sales charge is paid to
compensate the Distributor for its expenses of providing distribution-related
services to the Fund in connection with the sale of Class C shares.
HOW DO YOU BUY CLASS N SHARES? Class N shares are offered only through
retirement plans that purchase $500,000 or more of Class N shares of one or more
Oppenheimer funds or that have assets of $500,000 or more or 100 or more
eligible participants. Non-retirement plan investors cannot buy Class N shares
directly. Retirement plans that offer Class N shares may impose charges in plan
participant accounts including a 1% contingent deferred sales charge if you
redeem your shares within 18 months after the retirement plan first purchased
shares of the Fund or the retirement plan eliminates the Fund as an investment
option within 18 months after the Fund was selected. The procedures for buying,
selling, exchanging and 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 applicable to purchasers of those
other classes of described elsewhere in this prospectus do not apply to Class N
shares. Instructions for purchasing redeeming, exchanging or transferring Class
N shares must be submitted by the plan, not by plan participants for whose
benefit the shares are held.
DISTRIBUTION AND SERVICE (12B-1) PLANS.
Distribution and Service Plans for Class B, Class C and Class N Shares. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class
N shares to compensate the Distributor for its services and costs in
distributing Class B, Class C and Class N 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 and the
Fund pays the Distributor an annual asset-based sales charge of 0.25% on
class N shares. The Distributor also receives a service fee of 0.25% per
year under each plan.
The asset-based sales charge and service fees increase Class B and Class C
expenses by 1.00% and the asset-based sales charge and increases Class N
expenses by up to 0.25% of the net assets per year of the respective
class. Because these fees are paid out of the Fund's assets on an ongoing
basis, over time these fees will increase the cost of your investment and
may cost you more than other types of sales charges.
The Distributor uses the service fees to compensate dealers for providing
personal services for accounts that hold Class B, Class C or Class N
shares. The Distributor pays the 0.25% service fees to dealers in advance
for the first year after the shares are sold by the dealer. After the
shares have been held for a year, the Distributor pays the service fees to
dealers on a quarterly basis.
The Distributor currently pays a sales concession 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 sales of Class B shares is
therefore 4.00% of the purchase price. Distributor retains the Class B
asset-based sales charge.
The Distributor currently pays sales concessions of 0.75% of the purchase
price of Class C shares to dealers from its own resources at the time of
sale. Including the advance of the service fee, the total amount paid by
the Distributor to the dealer at the time of sale of Class C shares is
therefore 1.00% of the purchase price. The Distributor plans to pay the
asset-based sales charge as an ongoing commission to the dealer on Class C
shares that have been outstanding for a year or more.
The Distributor currently pays sales concessions of 1.00% of the purchase
price of Class N Shares to dealers from its own resources at the time of
sale. The Distributor retains the asset-based sales charge on Class N
Shares.
Special Investor Services
ACCOUNTLINK. You can use our AccountLink feature to link your Fund account with
an account at a U.S. bank or other financial institution. It must be an
Automated Clearing House (ACH) member. AccountLink lets you:
o transmit funds electronically to purchase shares by telephone (through a
service representative or by PhoneLink) or automatically under Asset
Builder Plans, or
o have the Transfer Agent send redemption proceeds or transmit dividends and
distributions directly to your bank account. Please call the Transfer Agent
for more information.
You may purchase shares 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.
AccountLink privileges should be requested on your Application or your
dealer's settlement instructions if you buy your shares through a 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.
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.
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.
Exchanging Shares. With the OppenheimerFunds exchange privilege, described
below, you can exchange shares automatically by phone from your Fund
account to another OppenheimerFunds account you have already established
by calling the special PhoneLink number.
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.
CAN YOU SUBMIT TRANSACTION REQUESTS BY FAX? You may send requests for certain
types of account transactions to the Transfer Agent by fax (telecopier). Please
call 1.800.525.7048 for information about which transactions may be handled this
way. 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. You can obtain information about the Fund,
as well as your account balance, on the OppenheimerFunds Internet web site, at
http://www.oppenheimerfunds.com. Additionally, shareholders listed in the
account registration (and the dealer of record) may request certain account
transactions through a special section of that web site. To perform account
transactions, you must first obtain a personal identification number (PIN) by
calling the Transfer Agent at 1.800.533.3310. If you do not want to have
Internet account transaction capability for your account, please call the
Transfer Agent at 1.800.525.7048. At times, the web site may be inaccessible or
its transaction features may be unavailable.
AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The Fund has several plans that enable
you to sell shares automatically or exchange them to another OppenheimerFund's
account on a regular basis. Please call the Transfer Agent or consult the
Statement of Additional Information for details.
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 only 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 and Class N shares. You must be
sure to ask the Distributor for this privilege when you send your payment.
RETIREMENT PLANS. You may buy shares of the Fund for your retirement plan
account. If you participate in a plan sponsored by your employer, the plan
trustee or administrator must buy the shares for your plan account. The
Distributor also offers a number of different retirement plans that can be used
by individuals and employers:
Individual Retirement Accounts (IRAs). These include regular IRAs, Roth IRAs,
SIMPLE IRAs, rollover IRAs and Education IRAs.
SEP-IRAs. These are Simplified Employee Pensions Plan IRAs for small business
owners or self-employed individuals.
403(b)(7) Custodial Plans. These are tax deferred plans for employees of
eligible tax-exempt organizations, such as schools, hospitals and charitable
organizations.
401(k) Plans. These are special retirement plans for businesses.
Pension and Profit-Sharing Plans. These plans are designed for businesses and
self-employed individuals.
Please call the Distributor for OppenheimerFunds retirement plan documents,
which include applications and important plan information.
How to Sell Shares
You can sell (redeem) some or all of your shares on any regular business day.
Your shares will be sold at the next net asset value calculated after your order
is received in proper form (which means it must comply with the procedures
described below) and is accepted by the Transfer Agent. The Fund lets you sell
your shares by writing a letter or by using the Fund's checkwriting privilege or
by telephone. You can also set up Automatic Withdrawal Plans to redeem shares on
a regular basis. 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 account, please call the
Transfer Agent first, at 1.800.525.7048, for assistance.
Certain Requests Require a Signature Guarantee. To protect you and the Fund from
fraud, the following redemption requests must be in writing and must
include a signature guarantee (although there may be other situations that
also require a signature guarantee):
o You wish to redeem $100,000 or more 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 being redeemed by someone (such as an Executor) other
than the owners
Where Can You Have Your Signature Guaranteed? The Transfer Agent will accept a
guarantee of your signature by a number of financial institutions,
including:
o a U.S. bank, trust company, credit union or savings association,
o a foreign bank that has a U.S. correspondent bank,
o a U.S. registered dealer or broker in securities, municipal securities or
government securities, or
o 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.
Retirement Plan Accounts. There are special procedures to sell shares in an
OppenheimerFunds retirement plan account. Call the Transfer Agent for a
distribution request form. Special income tax withholding requirements
apply to distributions from retirement plans. You must submit a
withholding form with your redemption request to avoid delay in getting
your money and if you do not want tax withheld. If your employer holds
your retirement plan account for you in the name of the plan, you must ask
the plan trustee or administrator to request the sale of the Fund shares
in your plan account.
Sending Redemption Proceeds by Wire. While the Fund normally sends your money by
check, you can arrange to have the proceeds of the shares you sell sent by
Federal Funds wire to a bank account you designate. It must be a
commercial bank that is a member of the Federal Reserve wire system. The
minimum redemption you can have sent by wire is $2,500. There is a $10 fee
for each wire. To find out how to set up this feature on your account or
to arrange a wire, call the Transfer Agent at 1.800.852.8457.
HOW DO YOU SELL SHARES BY MAIL? Write a letter of instructions that includes: o
Your name o The Fund's name o Your Fund account number (from your account
statement) o The dollar amount or number of shares to be redeemed o Any special
payment instructions o Any share certificates for the shares you are selling o
The signatures of all registered owners exactly as the account is registered,
and o Any special documents requested by the Transfer Agent to assure proper
authorization
of the person asking to sell the shares.
--------------------------------------------------------------------------------
Use the following address for requests by mail: Send courier or express mail
request to:
--------------------------------------------------------------------------------
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 Box 5270
Denver, Colorado 80217-5270 Denver, Colorado 80231
HOW DO YOU SELL SHARES BY TELEPHONE? You and your dealer representative of
record may also sell your shares by telephone. To receive the redemption price
calculated on a particular 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 account or under a share
certificate by telephone.
o To redeem shares through a service representative, call 1.800.852.8457
o To redeem shares automatically on PhoneLink, call 1.800.533.3310
Whichever method you use, you may have a check sent to the address on the
account statement, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds sent to that bank
account.
Are There Limits On Amounts Redeemed By Telephone?
Telephone Redemptions Paid by Check. Up to $100,000 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.
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.
CAN YOU SELL SHARES THROUGH YOUR DEALER? The Distributor has made arrangements
to repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that service. If your shares are held in the
name of your dealer, you must redeem them through your dealer.
HOW DO CONTINGENT DEFERRED SALES CHARGES AFFECT REDEMPTIONS? If you purchase
shares subject to a Class A, Class B, Class C or Class N contingent deferred
sales charge and redeem any of those shares during the applicable holding period
for the class of shares, the contingent deferred sales charge will be deducted
from redemption proceeds (unless you are eligible for a waiver of that sales
charge based on the categories listed in Appendix C to the Statement of
Additional Information) and you advise the Transfer Agent of your eligibility
for the waiver, when you place your redemption request. With respect to Class N
shares, if you redeem your shares within 18 calendar months of the end of the
calendar month in which the retirement plan first purchased shares of the Fund
or the retirement plan eliminates the Fund as an investment option within 18
calendar months of the end of the calendar month in which the Fund was selected,
a 1% contingent deferred sales charge will be imposed on the plan.
A 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 net asset
value. A contingent deferred sales charge is not imposed on:
o the amount of your account value represented by an increase in net asset
value over the initial purchase,
o shares purchased by the reinvestment of dividends or capital gains
distributions, or
o shares redeemed in the special circumstances described in Appendix C to the
Statement of Additional Information.
To determine whether a 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
the holding period that applies to the class, and (3) shares held the longest
during the holding period
Contingent deferred sales charges are not charged when you exchange shares
of the Fund for shares of other Oppenheimer Funds. However, if you exchange them
within the applicable contingent deferred sales charge holding period, the
holding period will carry over to the fund whose shares your acquire. Similarly,
if you acquire shares of this Fund by exchanging shares of another Oppenheimer
fund that are still subject to a contingent deferred sales charge holding
period, that holding period will carry over to this Fund.
How to Exchange Shares
Shares of the Fund can be purchased by exchanging shares of other Oppenheimer
funds on the same basis. 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 both funds 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 whose shares
you purchase by exchange.
o Before exchanging into a fund, you must 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. In some
cases, sales charges may be imposed on exchange transactions. For tax purposes,
exchanges of shares involve a sale 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. Please refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
HOW DO YOU SUBMIT EXCHANGE REQUESTS? Exchanges may be requested in writing or by
telephone:
Written Exchange Requests. Submit an OppenheimerFunds Exchange Request form,
signed by all owners of the account. Send it to the Transfer Agent at the
address on the back cover. Exchanges of shares held under certificates
cannot be processed unless the Transfer Agent receives the certificates
with the request.
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.
ARE THERE LIMITATIONS ON EXCHANGES? 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 conforms to the
policies described above. It must be received by the close of The New York
Stock Exchange that day, which is normally 4:00 P.M. but may be earlier on
some days. However, either fund may delay the purchase of shares of the
fund you are exchanging into up to seven days if it determines it would be
disadvantaged by a same-day exchange. For example, the receipt of multiple
exchange requests from a "market timer" might require the Fund to sell
securities at a disadvantageous time and/or price.
o Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange
request that it believes 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 required by applicable law to do so, it may impose these changes at
any time for emergency purposes.
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
More information about the Fund's policies and procedures for buying, selling
and exchanging shares is contained in the Statement of Additional Information.
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.
Telephone transaction privileges for purchases, redemptions or exchanges may be
modified, suspended or terminated by the Fund at any time. If an account
has more than one owner, the Fund and the Transfer Agent may rely on the
instructions of any one owner. Telephone privileges apply to each owner of
the account and the dealer representative of record for the account unless
the Transfer Agent receives cancellation instructions from an owner of the
account.
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. The Transfer Agent and the Fund
will not be liable for losses or expenses arising out of telephone
instructions reasonably believed to be genuine.
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.
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.
The redemption price for shares will vary from day to day because the value of
the securities in the Fund's portfolio fluctuates. The redemption price,
which is the net asset value per share, will normally differ for each
class of shares. The redemption value of your shares may be more or less
than their original cost.
Payment for redeemed shares ordinarily is made in cash. It is forwarded by check
or by AccountLink (as elected by the shareholder) within seven days after
the Transfer Agent receives redemption instructions in proper form.
However, under unusual circumstances determined by the Securities and
Exchange Commission, payment may be delayed or suspended. For accounts
registered in the name of a broker-dealer, payment will normally be
forwarded within three business days after redemption.
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 or certified check, or arrange with your bank
to provide telephone or written assurance to the Transfer Agent that your
purchase payment has cleared.
Involuntary redemptions of small accounts may be made by the Fund if the account
value has fallen below $500 for reasons other than the fact that the
market value of shares has dropped. In some cases involuntary redemptions
may be made to repay the Distributor for losses from the cancellation of
share purchase orders.
Sharesmay be "redeemed in kind" under unusual circumstances (such as a lack of
liquidity in the Fund's portfolio to meet redemptions). This means that
the redemption proceeds will be paid with liquid securities from the
Fund's portfolio.
"Backup withholding" of federal income tax may be applied against taxable
dividends, distributions and redemption proceeds (including exchanges) if
you fail to furnish the Fund your correct, certified Social Security or
Employer Identification Number when you sign your application, or if you
under-report your income to the Internal Revenue Service.
To avoid sending duplicate copies of materials to households, the Fund will
mail only one copy of each prospectus, annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
The consolidation of these mailings, called householding, benefits the
Fund through mailing expense.
If you want to receive multiple copies of these materials, you may call
the Transfer Agent at 1.800.525.7048. You may also notify the Transfer
Agent in writing. Individual copies of prospectuses and reports will be
sent to you within 30 days after the Transfer Agent receives your request
to stop householding.
Dividends, Capital Gains and Taxes
DIVIDENDS. The Fund intends to declare dividends separately for each class of
shares from net investment income on a quarterly basis. The Fund intends to pay
dividends to shareholders in March, June, September and December on a date
selected by the Board of Trustees. Dividends and distributions paid on Class A
shares will generally be higher than dividends for Class B, Class C and Class N
shares, which normally have higher expenses than Class A shares. The Fund has no
fixed dividend rate and cannot guarantee that it will pay any dividends or
distributions.
CAPITAL GAINS. The Fund may realize capital gains on the sale of portfolio
securities. If it does, it may make distributions out of any net short-term or
long-term capital gains in December of each year. The Fund may make supplemental
distributions of dividends and capital gains following the end of its fiscal
year. There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
WHAT ARE YOUR CHOICES FOR RECEIVING DISTRIBUTIONS? When you open your account,
specify on your application how you want to receive your dividends and
distributions. You have four options:
Reinvest All Distributions in the Fund. You can elect to reinvest all dividends
and capital gains distributions in additional shares of the Fund.
Reinvest Dividends or Capital Gains. You can elect to reinvest some
distributions (dividends, short-term capital gains or capital gains
distributions) in the Fund while receiving other types of distributions by
check or having them sent to your bank account through AccountLink.
Receive All Distributions in Cash. You can elect to receive a check for all
dividends and capital gains distributions or have them sent to your bank
through AccountLink.
Reinvest Your Distributions in Another OppenheimerFunds Account. You can
reinvest all distributions in the same class of shares of another
OppenheimerFunds account you have established.
TAXES. If your shares are not held in a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the Fund.
Distributions are subject to federal income tax and may be subject to state or
local taxes. Dividends paid from short-term capital gains and net investment
income are taxable as ordinary income. Long-term capital gains are taxable as
long-term capital gains when distributed to shareholders. It does not matter how
long you have held your shares. Whether you reinvest your distributions in
additional shares or take them in cash, the tax treatment is the same.
Every year the Fund will send you and the IRS a statement showing the
amount of any taxable distribution you received in the previous year. Any
long-term capital gains will be separately identified in the tax information the
Fund sends you after the end of the calendar year.
Avoid "Buying a Distribution". If you buy shares on or just before the
ex-dividend date or just before the Fund declares a capital gain
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.
Remember, There May be Taxes on Transactions. Because the Fund's share price
fluctuates, you may have a capital gain or loss when you sell or exchange
your shares. A capital gain or loss is the difference between the price
you paid for the shares and the price you received when you sold them. Any
capital gain is subject to capital gains tax.
Returns of Capital Can Occur. 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.
This information is only a summary of certain federal personal income tax
information about your investment. You should consult with your tax advisor
about the effect of an investment in the Fund on your particular tax situation.
Financial Highlights
The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the past five fiscal years. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by KPMG LLP, the Fund's
independent accountants, whose report, along with the Fund's financial
statements, is included in the Statement of Additional Information, which is
available on request.
<PAGE>
For More Information about Oppenheimer Quest Balanced Value Fund:
The following additional information about the Fund is available without charge
upon request:
Statement of Additional Information
This document includes additional information about the Fund's investment
policies, risks, and operations. It is incorporated by reference into this
Prospectus (which means it is legally part of this Prospectus).
Annual and Semi-Annual Reports
Additional information about the Fund's investments and performance is available
in the Fund's Annual and Semi-Annual Reports to shareholders. The Annual Report
includes a discussion of market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
--------------------------------------------------------------------------------
How to Get More Information:
--------------------------------------------------------------------------------
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, and other information about the Fund or your account: By
Telephone:
Call OppenheimerFunds Services toll-free:
1.800.525.7048
By Mail:
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
On the Internet:
You can send us a request by e-mail or read or download documents on the
OppenheimerFunds web site: http://www.oppenheimerfunds.com You can also obtain
copies of the Statement of Additional Information and other Fund documents and
reports by visiting the SEC's Public Information Room in Washington, D.C. (Phone
202.942.9080) or the EDGAR database on the SEC's Internet web site at
http://www.sec.gov. Copies may be obtained upon payment of a duplicating fee by
electronic request at the SEC's e-mail address: [email protected] or by writing
to the SEC's Public Reference Section, Washington, D.C. 20549-0102.
No one has been authorized to provide any information about the Fund or to make
any representations about the Fund other than what is contained in this
Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a
solicitation of an offer to buy shares of the Fund, to any person in any state
or other jurisdiction where it is unlawful to make such an offer.
The Fund's shares are distributed by:
OppenheimerFunds Distributor, Inc.
SEC File No. 811-5225
PR0257B.001.0200 Printed on recycled paper.
Appendix to Prospectus of
Oppenheimer Quest Balanced Value Fund
Graphic Material included in the Prospectus of Oppenheimer Quest Balanced
Value Fund: (the "Fund") "Annual Total Returns (Class A) (as of 12/31 each
year)":
A bar chart will be included in the Prospectus of the Fund depicting the
annual total returns of a hypothetical investment in Class A shares of the Fund
for each of the most recent full calendar years, since the Fund's inception,
without deducting sales charges. Set forth below are the relevant data points
that will appear on the bar chart.
Calendar Annual
Year Total
Ended Returns
----- -------
12/31/93 %
12/31/94 %
12/31/95 %
12/31/96 %
12/31/97 %
12/31/98 %
12/31/99 %
12/31/00 %
--------------------------------------------------------------------------------
<PAGE>
Oppenheimer Quest Balanced Value Fund
--------------------------------------------------------------------------------
6803 South Tucson Way, Englewood, Colorado 80112
1.800.525.7048
Statement of Additional Information dated February 9, 2001
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated February 25, 2000. 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, or
by downloading it from the OppenheimerFunds Internet web site at
www.oppenheimerfunds.com.
Contents
Page
About the Fund
--------------------------------------------------------------------------------
Additional Information About the Fund's Investment Policies and Risks..
The Fund's Investment Policies.....................................
Other Investment Techniques and Strategies.........................
Investment Restrictions............................................
How the Fund is Managed ...............................................
Organization and History...........................................
Trustees and Officers..............................................
The Manager........................................................
Brokerage Policies of the Fund.........................................
Distribution and Service Plans.........................................
Performance of the Fund................................................
About Your Account
--------------------------------------------------------------------------------
How To Buy Shares......................................................
How To Sell Shares.....................................................
How To Exchange Shares.................................................
Dividends, Capital Gains and Taxes.....................................
Additional Information About the Fund..................................
Financial Information About the Fund
--------------------------------------------------------------------------------
Report of Independent Accountants......................................
Financial Statements...................................................
Appendix A: Ratings Definitions........................................ A-1
Appendix B: Corporate Industry Classifications......................... B-1
Appendix C: Special Sales Charge Arrangements and Waivers.............. C-1
--------------------------------------------------------------------------------
<PAGE>
ABOUT THE FUND
--------------------------------------------------------------------------------
Additional Information About the Fund's Investment Policies and Risks
The investment objectives, the principal investment policies and the main
risks of the Fund are described in the Prospectus. This Statement of Additional
Information contains supplemental information about those policies and risks and
the types of securities that the Fund invests in. Additional information is also
provided about the Fund's investment Manager, OppenheimerFunds, Inc., and the
strategies that the Fund might use to try to achieve its objectives.
The Fund's Investment Policies. The composition of the Fund's portfolio and the
techniques and strategies that the Fund's Sub-Advisor, OpCap Advisors, may use
in selecting portfolio securities will vary over time. The Fund is not required
to use all of the investment techniques and strategies described below at all
times in seeking its goal. It may use some of the special investment techniques
and strategies at some times or not at all.
In selecting securities for the Fund's portfolio, the Sub-Advisor
evaluates the merits of particular securities primarily through the exercise of
its own investment analysis. In the case of corporate issuers, that process may
include, among other things, evaluation of the issuer's historical operations,
prospects for the industry of which the issuer is part, the issuer's financial
condition, its pending product developments and business (and those of
competitors), the effect of general market and economic conditions on the
issuer's business, and legislative proposals that might affect the issuer. In
the case of foreign securities, the Sub-Advisor may also consider the conditions
of a particular country's economy in relation to the U.S. economy or other
foreign economies, general political conditions in a country or region, the
effect of taxes, the efficiencies and costs of particular markets and other
factors when evaluating the securities of issuers in a particular country.
|X| Investments in Equity Securities. The Fund does not limit its
investments in equity securities to issuers having a market capitalization of a
specified size or range, and therefore the Fund can invest in securities of
small-, mid- and large-capitalization issuers. At times, the Fund may increase
the relative emphasis of its equity investments in securities of one or more
capitalization ranges, based upon the Sub-Advisor's judgment of where the best
market opportunities are to seek the Fund's objectives. At times, the market may
favor or disfavor securities of issuers of a particular capitalization range,
and securities of small-capitalization issuers may be subject to greater price
volatility in general than securities of larger companies. Therefore, if the
Fund has substantial investments in smaller-capitalization companies at times of
market volatility, the Fund's share price could fluctuate more than that of
funds focusing on larger-capitalization issuers.
|_| Value Investing. In selecting equity investments for the Fund's
portfolio, the portfolio manager currently uses a value investing style. In
using a value approach, the portfolio manager seeks stock and other equity
securities that appear to be temporarily undervalued, by various measures, such
as price/earnings ratios. This approach is subject to change and might not
necessarily be used in all cases. Value investing seeks stocks having prices
that are low in relation to their real worth or future prospects, in the hope
that the Fund will realize appreciation in the value of its holdings when other
investors realize the intrinsic value of the stock.
Using value investing requires research as to the issuer's underlying
financial condition and prospects. While there are a variety of measures that
can be used to identify these securities, the portfolio manager looks primarily
at the issuer's price/earnings ratio, which is the stock's price divided by its
earnings per share. A stock having a price/earnings ratio lower than its
historical range, or the market as a whole or that of similar companies may
offer attractive investment opportunities.
|_| Preferred Stocks. Preferred stock, unlike common stock, has a
stated dividend rate payable from the corporation's earnings. Preferred stock
dividends may be cumulative or non-cumulative, participating, or auction rate.
"Cumulative" dividend provisions require all or a portion of prior unpaid
dividends to be paid before dividends can be paid on the issuer's common stock.
If interest rates rise, the fixed dividend on preferred stocks may be less
attractive, causing the price of preferred stocks to decline. Preferred stock
may have mandatory sinking fund provisions, as well as provisions allowing calls
or redemptions prior to maturity, which can also have a negative impact on
prices when interest rates decline. Preferred stock generally has a preference
over common stock on the distribution of a corporation's assets in the event of
liquidation of the corporation. The rights of preferred stock on distribution of
a corporation's assets in the event of a liquidation are generally subordinate
to the rights associated with a corporation's debt securities. Preferred stock
may be "participating" stock, which means that it may be entitled to a dividend
exceeding the stated dividend in certain cases.
|_| Rights and Warrants. The Fund can invest up to 5% of its total
assets in warrants and rights. Warrants basically are options to purchase equity
securities at specific prices valid for a specific period of time. Their prices
do not necessarily move parallel to the prices of the underlying securities.
Rights are similar to warrants, but normally have a short duration and are
distributed directly by the issuer to its shareholders. Rights and warrants have
no voting rights, receive no dividends and have no rights with respect to the
assets of the issuer.
|_| Convertible Securities. Convertible securities are debt
securities that are convertible into an issuer's common stock. Convertible
securities rank senior to common stock in a corporation's capital structure and
therefore are subject to less risk than common stock in case of the issuer's
bankruptcy or liquidation.
The value of a convertible security is a function of its "investment
value" and its "conversion value." If the investment value exceeds the
conversion value, the security will behave more like a debt security, and the
security's price will likely increase when interest rates fall and decrease when
interest rates rise. If the conversion value exceeds the investment value, the
security will behave more like an equity security: it will likely sell at a
premium over its conversion value, and its price will tend to fluctuate directly
with the price of the underlying security.
While some convertible securities are a form of debt security in many
cases, their conversion feature (allowing conversion into equity securities) may
cause them in some cases to be regarded by the Sub-Advisor more as "equity
equivalents." As a result, the rating assigned to the security has less impact
on the Sub-Advisor's investment decision with respect to convertible securities
than in the case of non-convertible debt fixed income securities. To determine
whether convertible securities should be regarded as "equity equivalents," the
Sub-Advisor may consider the following factors: (4) whether, at the option of
the investor, the convertible security can be exchanged for
a fixed number of shares of common stock of the issuer,
(5) whether the issuer of the convertible securities has restated its
earnings per share of common stock on a fully diluted basis
(considering the effect of conversion of the convertible securities),
and
(6) the extent to which the convertible security may be a defensive "equity
substitute," providing the ability to participate in any appreciation
in the price of the issuer's common stock.
|X| Investments in Debt Securities. The Fund invests in a variety of
domestic and foreign debt securities, including corporate bonds, debentures and
other debt securities, and foreign and U.S. government securities including
mortgage-related securities, to seek investment income as part of its investment
objectives. It might invest in them also to seek capital growth or for liquidity
or defensive purposes. Although the Fund will invest at least 25% of its total
assets in fixed-income senior securities, the Fund currently emphasizes
investments in equity securities. Foreign debt securities are subject to the
risks of foreign investing described below. In general, domestic and foreign
debt securities are also subject to credit risk and interest rate risk.
|_| Credit Risk. Credit risk relates to the ability of the issuer of a
debt security to meet interest and principal payment obligations as they become
due. In making investments in debt securities, the Sub-Advisor may rely to some
extent on the ratings of ratings organizations or it may use its own research to
evaluate a security's creditworthiness. The Fund's debt investments can include
investment-grade bonds and non-investment grade bonds (commonly referred to as
"junk bonds"). Investment-grade bonds are bonds rated at least "Baa" by Moody's
Investors Service, Inc., at least "BBB" by Standard & Poor's Rating Services or
Fitch, Inc., or that have comparable ratings by another nationally recognized
rating organization. If securities the Fund buys are unrated, to be considered
part of the Fund's holdings of investment-grade securities, they must be judged
by the Sub-Advisor to be of comparable quality to bonds rated as investment
grade by a rating organization. The debt securities rating definitions of the
principal ratings organizations are included in Appendix A to this Statement of
Additional Information.
|_| Interest Rate Risk. Interest rate risk refers to the fluctuations
in value of debt securities resulting from the inverse relationship between
price and yield. For example, an increase in general interest rates will tend to
reduce the market value of already-issued fixed-income investments, and a
decline in general interest rates will tend to increase their value. In
addition, debt securities with longer maturities, which tend to have higher
yields, are subject to potentially greater fluctuations in value from changes in
interest rates than obligations with shorter maturities.
Fluctuations in the market value of fixed-income securities after the Fund
buys them will not affect the interest income payable on those securities
(unless the security pays interest at a variable rate pegged to interest rate
changes). However, those price fluctuations will be reflected in the valuations
of the securities, and therefore the Fund's net asset values will be affected by
those fluctuations.
|_| Special Risks of Lower-Grade Securities. The Fund can invest up to
25% of its total assets in lower-grade debt securities. Because lowergrade
securities tend to offer higher yields than investment-grade securities, the
Fund may invest in lowergrade securities if the Sub-Advisor is trying to achieve
greater income. In some cases, the appreciation possibilities of lower-grade
securities may be a reason they are selected for the Fund's portfolio.
"Lower-grade" debt securities are those rated below "investment grade"
which means they have a rating lower than "Baa" by Moody's or lower than "BBB"
by Standard & Poor's or Duff & Phelps, or similar ratings by other rating
organizations. If they are unrated, and are determined by the Sub-Advisor to be
of comparable quality to debt securities rated below investment grade, they are
included in determining the maximum amount of the Fund's assets that can be
invested in lower-grade securities under the 25% limitation. The Fund can invest
in securities rated as low as "Caa" by Moody's or "CCC" by Standard and Poor's,
although currently it does not intend to invest in securities in those ratings
categories.
Some of the special credit risks of lower-grade securities are discussed
in the Prospectus. There is a greater risk that the issuer may default on its
obligation to pay interest or to repay principal than in the case of investment
grade securities. The issuer's low creditworthiness may increase the potential
for its insolvency. An overall decline in values in the high yield bond market
is also more likely during a period of a general economic downturn. An economic
downturn or an increase in interest rates could severely disrupt the market for
high yield bonds, adversely affecting the values of outstanding bonds as well as
the ability of issuers to pay interest or repay principal. In the case of
foreign high yield bonds, these risks are in addition to the special risks of
foreign investing discussed in the Prospectus and in this Statement of
Additional Information.
However, the Fund's limitations on these investments may reduce some of
the risks to the Fund, as will the Fund's policy of diversifying its
investments. Additionally, to the extent they can be converted into stock,
convertible securities may be less subject to some of these risks than
non-convertible high yield bonds, since stock may be more liquid and less
affected by some of these risk factors.
While securities rated "Baa" by Moody's or "BBB" by Standard & Poor's or
Duff & Phelps are investment grade and are not regarded as junk bonds, those
securities may be subject to special risks, and have some speculative
characteristics.
|_| Mortgage-Related Securities. Mortgage-related securities are a form
of derivative investment collateralized by pools of commercial or residential
mortgages. Pools of mortgage loans are assembled as securities for sale to
investors by government agencies or entities or by private issuers. These
securities include collateralized mortgage obligations ("CMOs"), mortgage
pass-through securities, stripped mortgage pass-through securities, interests in
real estate mortgage investment conduits ("REMICs") and other real
estate-related securities.
Mortgage-related securities that are issued or guaranteed by agencies or
instrumentalities of the U.S. government have relatively little credit risk
(depending on the nature of the issuer) but are subject to interest rate risks
and prepayment risks, as described in the Prospectus.
As with other debt securities, the prices of mortgage-related securities
tend to move inversely to changes in interest rates. The Fund can buy
mortgage-related securities that have interest rates that move inversely to
changes in general interest rates, based on a multiple of a specific index.
Although the value of a mortgage-related security may decline when interest
rates rise, the converse is not always the case.
In periods of declining interest rates, mortgages are more likely to be
prepaid. Therefore, a mortgage-related security's maturity can be shortened by
unscheduled prepayments on the underlying mortgages. Therefore, it is not
possible to predict accurately the security's yield. The principal that is
returned earlier than expected may have to be reinvested in other investments
having a lower yield than the prepaid security. Therefore, these securities may
be less effective as a means of "locking in" attractive long-term interest
rates, and they may have less potential for appreciation during periods of
declining interest rates, than conventional bonds with comparable stated
maturities.
Prepayment risks can lead to substantial fluctuations in the value of a
mortgage-related security. In turn, this can affect the value of the Fund's
shares. If a mortgage-related security has been purchased at a premium, all or
part of the premium the Fund paid may be lost if there is a decline in the
market value of the security, whether that results from interest rate changes or
prepayments on the underlying mortgages. In the case of stripped
mortgage-related securities, if they experience greater rates of prepayment than
were anticipated, the Fund may fail to recoup its initial investment on the
security.
If interest rates rise rapidly, prepayments may occur at a slower rate
than expected and the expected maturity of long-term or medium-term securities
could lengthen as a result. That would cause their value and the prices of the
Fund's shares to fluctuate more widely in response to changes in interest rates.
As with other debt securities, the values of mortgage-related securities
may be affected by changes in the market's perception of the creditworthiness of
the entity issuing the securities or guaranteeing them. Their values may also be
affected by changes in government regulations and tax policies.
|_| Collateralized Mortgage Obligations. CMOs are multi-class bonds that are
backed by pools of mortgage loans or mortgage pass-through certificates.
They may be collateralized by:
(6) pass-through certificates issued or guaranteed by Ginnie Mae, Fannie Mae,
or Freddie Mac,
(7) unsecuritized mortgage loans insured by the Federal Housing Administration
or guaranteed by the Department of Veterans' Affairs,
(8) unsecuritized conventional mortgages, (9) other mortgage-related securities,
or (10) any combination of these.
Each class of CMO, referred to as a "tranche," is issued at a specific
coupon rate and has a stated maturity or final distribution date. Principal
prepayments on the underlying mortgages may cause the CMO to be retired much
earlier than the stated maturity or final distribution date. The principal and
interest on the underlying mortgages may be allocated among the several classes
of a series of a CMO in different ways. One or more tranches may have coupon
rates that reset periodically at a specified increase over an index. These are
floating rate CMOs, and typically have a cap on the coupon rate. Inverse
floating rate CMOs have a coupon rate that moves in the reverse direction to an
applicable index. The coupon rate on these CMOs will increase as general
interest rates decrease. These are usually much more volatile than fixed rate
CMOs or floating rate CMOs.
|X| U.S. Government Securities. These are securities issued or guaranteed
by the U.S. Treasury or other U.S. government agencies or federally-chartered
corporate entities referred to as "instrumentalities." The obligations of U.S.
Government agencies or instrumentalities in which the Fund may invest may or may
not be guaranteed or supported by the "full faith and credit" of the United
States. "Full faith and credit" means generally that the taxing power of the
U.S. government is pledged to the payment of interest and repayment of principal
on a security. If a security is not backed by the full faith and credit of the
United States, the owner of the security must look principally to the agency
issuing the obligation for repayment. The owner might be able to assert a claim
against the United States if the issuing agency or instrumentality does not meet
its commitment. The Fund will invest in securities of U.S. government agencies
and instrumentalities only if the Sub-Advisor is satisfied that the credit risk
with respect to such instrumentality is minimal.
|_| U.S. Treasury Obligations. These include Treasury bills (which
have maturities of one year or less when issued), Treasury notes (which have
maturities of from one to ten years when issued), and Treasury bonds (maturities
of more than ten years when issued). Treasury securities are backed by the full
faith and credit of the United States as to timely payments of interest and
repayments of principal. They also can include U. S. Treasury securities that
have been "stripped" by a Federal Reserve Bank, and zero-coupon U.S. Treasury
securities.
|_| Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities. These include direct obligations and mortgage-related
securities that have different levels of credit support from the government.
Some are supported by the full faith and credit of the U.S. Government, such as
Government National Mortgage Association pass-through mortgage certificates
(called "Ginnie Maes"). Some are supported by the right of the issuer to borrow
from the U.S. Treasury under certain circumstances, such as Federal National
Mortgage Association bonds ("Fannie Maes"). Others are supported only by the
credit of the entity that issued them, such as Federal Home Loan Mortgage
Corporation obligations ("Freddie Macs").
|_| U.S. Government Mortgage-Related Securities. The Fund can invest in a
variety of mortgage-related securities that are issued by U.S. Government
agencies or instrumentalities, some of which are described below.
|_| Zero-Coupon U.S. Government Securities. The Fund may buy zero-coupon
U.S. government securities. These will typically be U.S. Treasury Notes and
Bonds that have been stripped of their unmatured interest coupons, the coupons
themselves, or certificates representing interests in those stripped debt
obligations and coupons.
Zero-coupon securities do not make periodic interest payments and are sold
at a deep discount from their face value at maturity. The buyer recognizes a
rate of return determined by the gradual appreciation of the security, which is
redeemed at face value on a specified maturity date. This discount depends on
the time remaining until maturity, as well as prevailing interest rates, the
liquidity of the security and the credit quality of the issuer. The discount
typically decreases as the maturity date approaches.
Because zero-coupon securities pay no interest and compound semi-annually
at the rate fixed at the time of their issuance, their value is generally more
volatile than the value of other debt securities that pay interest. Their value
may fall more dramatically than the value of interest-bearing securities when
interest rates rise. When prevailing interest rates fall, zero-coupon securities
tend to rise more rapidly in value because they have a fixed rate of return.
The Fund's investment in zero-coupon securities may cause the Fund to
recognize income and make distributions to shareholders before it receives any
cash payments on the zero-coupon investment. To generate cash to satisfy those
distribution requirements, the Fund may have to sell portfolio securities that
it otherwise might have continued to hold or to use cash flows from other
sources such as the sale of Fund shares.
|X| Money Market Instruments. The following is a brief description of the
types of money market securities the Fund can invest in. Those money market
securities are high-quality, short-term debt instruments that are issued by the
U.S. government, corporations, banks or other entities. They may have fixed,
variable or floating interest rates.
|_| U.S. Government Securities. These include obligations issued or
guaranteed by the U.S. Government or any of its agencies or instrumentalities.
|_| Bank Obligations. The Fund can buy time deposits, certificates of
deposit and bankers' acceptances. Time deposits, other than overnight deposits,
may be subject to withdrawal penalties and, if so, they are deemed "illiquid"
investments.
The Fund can purchase bank obligations that are fully insured by the
Federal Deposit Insurance Corporation. The FDIC insures the deposits of member
banks up to $100,000 per account. Insured bank obligations may have a limited
market and a particular investment of this type may be deemed "illiquid" unless
the Board of Trustees of the Fund determines that a readily-available market
exists for that particular obligation, or unless the obligation is payable at
principal amount plus accrued interest on demand or within seven days after
demand.
|_| Commercial Paper. The Fund can invest in commercial paper if it
is rated within the top two rating categories of Standard & Poor's and Moody's.
If the paper is not rated, it may be purchased if issued by a company having a
credit rating of at least "AA" by Standard & Poor's or "Aa" by Moody's.
The Fund can buy commercial paper, including U.S. dollar-denominated
securities of foreign branches of U.S. banks, issued by other entities if the
commercial paper is guaranteed as to principal and interest by a bank,
government or corporation whose certificates of deposit or commercial paper may
otherwise be purchased by the Fund.
|_| Variable Amount Master Demand Notes. Master demand notes are
corporate obligations that permit the investment of fluctuating amounts by the
Fund at varying rates of interest under direct arrangements between the Fund, as
lender, and the borrower. They permit daily changes in the amounts borrowed. The
Fund has the right to increase the amount under the note at any time up to the
full amount provided by the note agreement, or to decrease the amount. The
borrower may prepay up to the full amount of the note without penalty. These
notes may or may not be backed by bank letters of credit.
Because these notes are direct lending arrangements between the lender and
borrower, it is not expected that there will be a trading market for them. There
is no secondary market for these notes, although they are redeemable (and thus
are immediately repayable by the borrower) at principal amount, plus accrued
interest, at any time. Accordingly, the Fund's right to redeem such notes is
dependent upon the ability of the borrower to pay principal and interest on
demand.
The Fund has no limitations on the type of issuer from whom these notes
will be purchased. However, in connection with such purchases and on an ongoing
basis, the Sub-Advisor will consider the earning power, cash flow and other
liquidity ratios of the issuer, and its ability to pay principal and interest on
demand, including a situation in which all holders of such notes made demand
simultaneously. Investments in master demand notes are subject to the limitation
on investments by the Fund in illiquid securities, described in the Prospectus.
The Fund does not intend that its investments in variable amount master demand
notes will exceed 5% of its total assets.
|X| 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 the year, its portfolio
turnover rate would have been 100% annually. The Fund's portfolio turnover rate
will fluctuate from year to year, and may be in excess of 100% annually.
Increased portfolio turnover creates higher brokerage and transaction costs for
the Fund, which may reduce its overall performance. Additionally, the
realization of capital gains from selling portfolio securities may result in
distributions of taxable long-term capital gains to shareholders, since the Fund
will normally distribute all of its capital gains realized each year, to avoid
excise taxes under the Internal Revenue Code.
Other Investment Techniques and Strategies. In seeking its objective, the Fund
may from time to time use the types of investment strategies and investments
described below. It is not required to use all of these strategies at all times,
and at times may not use them.
|X| Foreign Securities. The Fund may purchase equity and debt securities
issued by foreign companies or foreign governments or their agencies. "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 and their agencies and instrumentalities. Those securities may be
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 on a U.S. securities exchange or traded in the U.S.
over-the-counter markets are considered "foreign securities" for the purpose of
the Fund's investment allocations. That is because they are subject to many of
the special considerations and risks, discussed below, that apply to foreign
securities traded and held abroad.
Because the Fund can purchase securities denominated in foreign
currencies, a change in the value of a foreign currency against the U.S. dollar
could result in a change in the amount of income the Fund has available for
distribution. Because a portion of the Fund's investment income may be received
in foreign currencies, the Fund will be required to compute its income in U.S.
dollars for distribution to shareholders, and therefore the Fund will absorb the
cost of currency fluctuations. After the Fund has distributed income, subsequent
foreign currency losses may result in the Fund's having distributed more income
in a particular fiscal period than was available from investment income, which
could result in a return of capital to shareholders.
Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers. They include 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. The Fund will hold foreign currency only in connection with the
purchase or sale of foreign securities.
|_| Foreign Debt Obligations. The debt obligations of foreign
governments and their agencies and instrumentalitites may or may not be
supported by the full faith and credit of the foreign government. The Fund may
buy securities issued by certain "supra-national" entities, which include
entities designated or supported by governments to promote economic
reconstruction or development, international banking organizations and related
government agencies. Examples are the International Bank for Reconstruction and
Development (commonly called the "World Bank"), the Asian Development bank and
the Inter-American Development Bank.
The governmental members of these supra-national entities are
"stockholders" that typically make capital contributions and may be committed to
make additional capital contributions if the entity is unable to repay its
borrowings. A supra-national entity's lending activities may be limited to a
percentage of its total capital, reserves and net income. There can be no
assurance that the constituent foreign governments will continue to be able or
willing to honor their capitalization commitments for those entities.
|_| Risks of Foreign Investing. Investments in foreign securities
may offer special opportunities for investing but also present special
additional risks and considerations not typically associated with investments in
domestic securities. Some of these additional risks are:
o reduction of income by foreign taxes;
o fluctuation in value of foreign investments due to changes in currency
rates or currency control regulations (for example, currency blockage);
o transaction charges for currency exchange;
o lack of public information about foreign issuers;
o lack of uniform accounting, auditing and financial reporting standards in
foreign countries comparable to those applicable to domestic issuers;
o less volume on foreign exchanges than on U.S. exchanges;
o greater volatility and less liquidity on foreign markets than in the U.S.;
o less governmental regulation of foreign issuers, stock exchanges and
brokers than in the U.S.;
o greater difficulties in commencing lawsuits;
o higher brokerage commission rates than in the U.S.;
o increased risks of delays in settlement of portfolio transactions or loss
of certificates for portfolio securities;
o possibilities in some countries of expropriation, confiscatory taxation,
political, financial or social instability or adverse diplomatic
developments; and
o 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.
|_| Special Risks of Emerging Markets. Emerging and developing
markets abroad may also offer special opportunities for growth investing but
have greater risks than more developed foreign markets, such as those in Europe,
Canada, Australia, New Zealand and Japan. There may be even less liquidity in
their securities markets, and settlements of purchases and sales of securities
may be subject to additional delays. They are subject to greater risks of
limitations on the repatriation of income and profits because of currency
restrictions imposed by local governments. Those countries may also be subject
to the risk of greater political and economic instability, which can greatly
affect the volatility of prices of securities in those countries. The
Sub-Advisor will consider these factors when evaluating securities in these
markets, because the selection of those securities must be consistent with the
Fund's goals of growth of capital and investment income.
|X| Investing in Small, Unseasoned Companies. The Fund can invest in
securities of small, unseasoned companies. These are companies that have been in
operation for less than three years, including the operations of any
predecessors. Securities of these companies may be subject to volatility in
their prices. They may have a limited trading market, which may adversely affect
the Fund's ability to dispose of them and can reduce the price the Fund might be
able to obtain for them. Other investors that own a security issued by a small,
unseasoned issuer for which there is limited liquidity might trade the security
when the Fund is attempting to dispose of its holdings of that security. In that
case the Fund might receive a lower price for its holdings than might otherwise
be obtained.
|X| "When-Issued" and "Delayed-Delivery" Transactions. The Fund can invest
in securities on a "when-issued" basis and can purchase or sell securities on a
"delayed-delivery" or "forward commitment" basis. When-issued and
delayed-delivery are terms that refer to securities whose terms and indenture
are available and for which a market exists, but which are not available for
immediate delivery.
When such transactions are negotiated, the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made. Delivery
and payment for the securities take place at a later date (generally within 45
days of the date the offer is accepted). The securities are subject to change in
value from market fluctuations during the period until settlement. The value at
delivery may be less than the purchase price. For example, changes in interest
rates in a direction other than that expected by the Sub-Advisor before
settlement will affect the value of such securities and may cause a loss to the
Fund. During the period between purchase and settlement, no payment is made by
the Fund to the issuer and no interest accrues to the Fund from the investment.
No income begins to accrue to the Fund on a when-issued security until the Fund
receives the security at settlement of the trade.
The Fund can engage in when-issued transactions to secure what the
Sub-Advisor considers to be an advantageous price and yield at the time of
entering into the obligation. When the Fund enters into a when-issued or
delayed-delivery transaction, it relies on the other party to complete the
transaction. Its failure to do so may cause the Fund to lose the opportunity to
obtain the security at a price and yield the Sub-Advisor considers to be
advantageous.
When the Fund engages in when-issued and delayed-delivery transactions, it
does so for the purpose of acquiring or selling securities consistent with its
investment objective and policies for its portfolio or for delivery pursuant to
options contracts it has entered into, and not for the purpose of investment
leverage. Although the Fund will enter into delayed-delivery or when-issued
purchase transactions to acquire securities, it may dispose of a commitment
prior to settlement. If the Fund chooses to dispose of the right to acquire a
when-issued security prior to its acquisition or to dispose of its right to
delivery or receive against a forward commitment, it may incur a gain or loss.
At the time the Fund makes the commitment to purchase or sell a security
on a when-issued or delayed-delivery basis, it records the transaction on its
books and reflects the value of the security purchased in determining the Fund's
net asset value. In a sale transaction, it records the proceeds to be received.
The Fund will identify on its books liquid assets at least equal in value to the
value of the Fund's purchase commitments until the Fund pays for the investment.
The Fund will not enter into when-issued commitments if more than 15% of the
Fund's net assets would be committed under these transactions.
When-issued and delayed-delivery transactions can be used by the Fund as a
defensive technique to hedge against anticipated changes in interest rates and
prices. For instance, in periods of rising interest rates and falling prices,
the Fund might sell securities in its portfolio on a forward commitment basis to
attempt to limit its exposure to anticipated falling prices. In periods of
falling interest rates and rising prices, the Fund might sell portfolio
securities and purchase the same or similar securities on a when-issued or
delayed-delivery basis to obtain the benefit of currently higher cash yields.
|X| Repurchase Agreements. The Fund can acquire securities subject to
repurchase agreements. It may do so for liquidity purposes to meet anticipated
redemptions of Fund shares, or pending the investment of the proceeds from sales
of Fund shares, or pending the settlement of portfolio securities transactions.
In a repurchase transaction, the Fund buys a security from, and
simultaneously resells it to, an approved vendor for delivery on an agreed-upon
future date. The resale price exceeds the purchase price by an amount that
reflects an agreed-upon interest rate effective for the period during which the
repurchase agreement is in effect. Approved vendors include U.S. commercial
banks, U.S. branches of foreign banks, or broker-dealers that have been
designated as primary dealers in government securities. They must meet credit
requirements set by the Fund's Board of Trustees from time to time.
The majority of these transactions run from day to day, and delivery
pursuant to the resale typically occurs within one to five days of the purchase.
Repurchase agreements having a maturity beyond seven days are subject to the
Fund's limits on holding illiquid investments. There is no limit on the amount
of the Fund's net assets that may be subject to repurchase agreements having
maturities of seven days or less.
Repurchase agreements, considered "loans" under the Investment Company
Act, are 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. 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 Sub-Advisor will monitor the vendor's creditworthiness to confirm
that the vendor is financially sound and will continuously monitor the
collateral's value.
|X| Illiquid and Restricted Securities. To enable the Fund to sell its
holdings of a restricted security not registered under the Securities Act of
1933, the Fund may have to cause those securities to be registered. The expenses
of registering restricted securities may be negotiated by the Fund with the
issuer at the time the Fund buys the securities. When the Fund must arrange
registration because the Fund wishes to sell the security, a considerable period
may elapse between the time the decision is made to sell the security and the
time the security is registered so that the Fund could sell it. The Fund would
bear the risks of any downward price fluctuation during that period.
The Fund may also acquire restricted securities through private
placements. Those securities have contractual restrictions on their public
resale. Those restrictions might limit the Fund's ability to dispose of the
securities and might lower the amount the Fund could realize upon the sale.
The Fund has 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 under Rule 144A of the Securities Act of 1933, if those
securities have been determined to be liquid 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 holdings of that security may be considered to be illiquid.
|X| Participation Interests. The Fund can invest in participation
interests, subject to the Fund's limitation on investments in illiquid
investments. A participation interest is an undivided interest in a loan made by
the issuing financial institution in the proportion that the buyers
participation interest bears to the total principal amount of the loan. No more
than 5% of the Fund's net assets can be invested in participation interests of
the same borrower. The issuing financial institution may have no obligation to
the Fund other than to pay the Fund the proportionate amount of the principal
and interest payments it receives.
Participation interests are primarily dependent upon the creditworthiness
of the borrowing corporation, which is obligated to make payments of principal
and interest on the loan. There is a risk that a borrower may have difficulty
making payments. If a borrower fails to pay scheduled interest or principal
payments, the Fund could experience a reduction in its income. The value of that
participation interest might also decline, which could affect the net asset
value of the Fund's shares. If the issuing financial institution fails to
perform its obligations under the participation agreement, the Fund might incur
costs and delays in realizing payment and suffer a loss of principal and/or
interest.
|X| Loans of Portfolio Securities. The Fund can lend its portfolio
securities to certain types of eligible borrowers approved by the Board of
Trustees. It may do so to try to provide income or to raise cash for liquidity
purposes. There are some risks in connection with securities lending. The Fund
might experience a delay in receiving additional collateral to secure a loan, or
a delay in recovery of the loaned securities. The Fund presently does not intend
to engage in loans of securities.
The Fund must receive collateral for a loan. Under current applicable
regulatory requirements (which are subject to change), on each business day the
loan collateral must be at least equal to the value of the loaned securities. It
must consist of cash, bank letters of credit, securities of the U.S. government
or its agencies or instrumentalities, or other cash equivalents in which the
Fund is permitted to invest. To be acceptable as collateral, letters of credit
must obligate a bank to pay amounts demanded by the Fund if the demand meets the
terms of the letter. The terms of the letter of credit and the issuing bank both
must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the dividends
or interest on loaned securities. It also receives one or more of (a) negotiated
loan fees, (b) interest on securities used as collateral, and (c) interest on
any short-term debt securities purchased with such loan collateral. Either type
of interest may be shared with the borrower. The Fund may also pay reasonable
finder, custodian and administrative fees in connection with these loans. The
terms of the Fund's loans must meet applicable tests under the Internal Revenue
Code and must permit the Fund to reacquire loaned securities on five days'
notice or in time to vote on any important matter.
|X| Hedging. Although the Fund can use hedging instruments, it is not
obligated to use them in seeking its objectives. It does not currently
contemplate using them to any significant degree. To attempt to protect against
declines in the market value of the Fund's portfolio, to permit the Fund to
retain unrealized gains in the value of portfolio securities that have
appreciated, or to facilitate selling securities for investment reasons, the
Fund could:
|_| sell futures contracts,
|_| buy puts on such futures or on securities, or
|_| write covered calls on securities or futures. Covered calls could also
be used to increase the Fund's income, but the Sub-Advisor does not expect
to engage extensively in that practice.
The Fund can use hedging to establish a position in the securities market
as a temporary substitute for purchasing particular securities. In that case the
Fund would normally seek to purchase the securities and then terminate that
hedging position. The Fund might also use this type of hedge to attempt to
protect against the possibility that its portfolio securities would not be fully
included in a rise in value of the market. To do so, the Fund could:
|_| buy futures, or
|_| buy calls on such futures or on securities.
The Fund's strategy of hedging with futures and options on futures will be
incidental to the Fund's activities in the underlying cash market. The
particular hedging instruments the Fund can use are described below. The Fund
may employ new hedging instruments and strategies when they are developed, if
those investment methods are consistent with the Fund's investment objectives
and are permissible under applicable regulations governing the Fund.
|_| Futures. The Fund can buy and sell futures contracts that relate
to (1) broadly-based stock indices (these are referred to as "stock index
futures"), (2) foreign currencies (these are referred to as "forward
contracts"), and (3) commodities (these are referred to as "commodity futures").
A broadly-based stock index is used as the basis for trading stock index
futures. These indices may in some cases be based on stocks of issuers in a
particular industry or group of industries. A stock index assigns relative
values to the common stocks included in the index and its value fluctuates in
response to the changes in value of the underlying stocks. A stock index cannot
be purchased or sold directly. These contracts obligate the seller to deliver,
and the purchaser to take, cash to settle the futures transaction. There is no
delivery made of the underlying securities to settle the futures obligation.
Either party may also settle the transaction by entering into an offsetting
contract.
The Fund can invest a portion of its assets in commodity futures
contracts. Commodity futures may be based upon commodities within 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.
No money is paid or received by the Fund on the purchase or sale of a
future. Upon entering into a futures transaction, the Fund will be required to
deposit an initial margin payment with the futures commission merchant (the
"futures broker"). Initial margin payments will be deposited with the Fund's
custodian bank in an account registered in the futures broker's name. However,
the futures broker can gain access to that account only under specified
conditions. As the future is marked to market (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
daily.
At any time prior to expiration of the future, the Fund may elect to close
out its position by taking an opposite position, at which time a final
determination of variation margin is made and any additional cash must be paid
by or released to the Fund. Any loss or gain on the future is then realized by
the Fund for tax purposes. All futures transactions (except forward contracts)
are effected through a clearinghouse associated with the exchange on which the
contracts are traded.
|_| Put and Call Options. The Fund can buy and sell certain kinds of
put options ("puts") and call options ("calls"). The Fund can buy and sell
exchange-traded and over-the-counter put and call options, including options on
broadly-based indices, securities, foreign currencies and stock index futures.
|_| Writing Covered Call Options. The Fund can write (that is, sell)
covered calls. If the Fund sells a call option, it must be covered. For options
on securities, that means the Fund must own the security subject to the call
while the call is outstanding. For stock index options, that means the call must
be covered by segregating liquid assets to enable the Fund to satisfy its
obligations if the call is exercised. The Trustees have adopted an operating
policy that the Fund may not write covered call options (or write put options)
with respect to more than 5% of the value of the Fund's total assets.
When the Fund writes a call on a security, it receives cash (a premium).
For calls on securities, the Fund agrees to sell the underlying security to a
purchaser of a corresponding call on the same security during the call period at
a fixed exercise price regardless of market price changes during the call
period. The call period is usually not more than nine months. The exercise price
may differ from the market price of the underlying security. The Fund has the
risk of loss that the price of the underlying security may decline during the
call period. That risk may be offset to some extent by the premium the Fund
receives. If the value of the investment does not rise above the call price, it
is likely that the call will lapse without being exercised. In that case the
Fund would keep the cash premium and the investment.
When the Funds writes a call on an index, it receives cash (a premium). If
the buyer of a call on a stock index exercises it, the Fund will pay an amount
of cash equal to the difference between the closing price of the call and the
exercise price, multiplied by a specified multiple that determines the total
value of the call for each point of difference. If the value of the underlying
investment does not rise above the call price, it is likely that the call will
lapse without being exercised. In that case the Fund would keep the cash
premium.
Settlement of puts and calls on broadly-based stock indices is in cash.
Gain or loss on options on stock indices depends on changes in the index in
question (and thus on price movements in the stock market generally).
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 calls traded on exchanges or as to other acceptable escrow securities.
In that way, no margin will be required for such transactions. OCC will release
the securities on the expiration of the option or when the Fund enters into a
closing transaction.
When the Fund writes an over-the-counter ("OTC") option, it will enter
into an arrangement with a primary U.S. Government securities dealer which will
establish a formula price at which the Fund will have the absolute right to
repurchase that OTC option. The formula price will generally be based on a
multiple of the premium received for the option, plus the amount by which the
option is exercisable below the market price of the underlying security (that
is, the option is "in the money"). When the Fund writes an OTC option, it will
treat as illiquid (for purposes of its restriction on holding illiquid
securities) the mark-to-market value of any OTC option it holds, unless the
option is subject to a buy-back agreement by the executing broker.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." The Fund will
then realize a profit or loss, depending upon whether the net of the amount of
the option transaction costs and the premium received on the call the Fund wrote
is more or less than the price of the call the Fund purchases to close out the
transaction. The Fund may realize a profit if the call expires unexercised,
because the Fund will retain the premium it received when it wrote the call. Any
such profits are considered short-term capital gains for federal income tax
purposes, as are the premiums on lapsed calls. When distributed by the Fund they
are taxable as ordinary income. If the Fund cannot effect a closing purchase
transaction due to the lack of a market, it will have to hold the escrowed
assets in escrow until the call expires or is exercised.
The Fund may also write calls on a futures contract without owning the
futures contract or securities deliverable under the contract. To do so, at the
time the call is written, the Fund must cover the call by segregating an
equivalent dollar amount of liquid assets. The Fund will segregate additional
liquid assets if the value of the segregated assets drops below 100% of the
current value of the future. Because of this segregation requirement, in no
circumstances would the Fund's receipt of an exercise notice as to that future
require the Fund to deliver a futures contract. It would simply put the Fund in
a short futures position, which is permitted by the Fund's hedging policies.
|_| Writing Put Options. The Fund can sell put options on stock
indices, foreign currencies or stock index futures. A put option on securities
gives the purchaser the right to sell, and the writer the obligation to buy, the
underlying investment of the exercise price during the option period. If the
Fund writes a put, the put must be covered by liquid assets identified on the
Fund's books in an amount at least equal to the exercise price of the underlying
securities. The Fund therefore forgoes the opportunity of investing the
segregated assets or writing calls against those assets.
The premium the Fund receives from writing a put represents a profit, as
long as the price of the underlying investment remains equal to or above the
exercise price of the put. However, the Fund also assumes the obligation during
the option period to settle the transaction in cash with the buyer of the put at
the exercise price, even if the value of the underlying investment falls below
the exercise price. If a put the Fund has written expires unexercised, the Fund
realizes a gain in the amount of the premium less the transaction costs
incurred. If the put is exercised, the Fund must fulfill its obligation to
settle in cash at the exercise price. That price will usually exceed the market
value of the investment at that time. In that case, the fund might incur a loss
if it sells the underlying investment. That loss will be equal to the sum of the
sale price of the underlying investment and the premium received minus the sum
of the exercise price and any transaction costs the Fund incurred.
As long as the Fund's obligation as the put writer continues, it may be
assigned an exercise notice by the broker-dealer through which the put was sold.
That notice will require the Fund to settle the transaction in cash at the
exercise price. The Fund has no control over when it may be required to settle
the transaction, since it may be assigned an exercise notice at any time prior
to the termination of its obligation as the writer of the put. That obligation
terminates upon expiration of the put. It may also terminate if, before it
receives an exercise notice, the Fund effects a closing purchase transaction by
purchasing a put of the same series as it sold. Once the Fund has been assigned
an exercise notice, it cannot effect a closing purchase transaction.
The Fund may decide to effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent the underlying
security from being put. The Fund will realize a profit or loss from a closing
purchase transaction depending on whether the cost of the transaction is less or
more than the premium received from writing the put option. Any profits from
writing puts are considered short-term capital gains for federal tax purposes,
and when distributed by the Fund, are taxable as ordinary income.
|_| Purchasing Calls and Puts. The Fund can buy 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 buys a call (other than in a closing purchase transaction), it
pays a premium. Buying a call on a security or future gives the Fund the right
to buy the underlying investment from a seller of a corresponding call on the
same investment during the call period at a fixed exercise price. The Fund
benefits only if it sells the call at a profit or if, during the call period,
the market price of the underlying investment is above the sum of the call price
plus the transaction costs and the premium paid for the call and the Fund
exercises the call. If the Fund does not exercise the call or sell it (whether
or not at a profit), the call will become worthless at its expiration date. In
that case the Fund will have paid the premium but lost the right to purchase the
underlying investment.
In the case of a purchase of a call on a stock index, if the Fund
exercises the call during the call period, a seller of a corresponding call on
the same index will pay the Fund an amount of cash to settle the call if the
closing level of the stock index 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, it pays a premium. It has the right during the
put period to require a seller of a corresponding put, upon the Fund's exercise
of its put, to buy the underlying security (in the case of puts on securities or
futures) or in the case of puts on stock indices, to deliver cash to the Fund to
settle the put if the closing level of the stock index 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.
Buying a put on a security or future enables the Fund to sell the
underlying investment to a seller of a corresponding put on the same investment
during the put period at a fixed exercise price. Buying a put on securities or
futures the Fund owns enables the Fund to attempt to protect itself during the
put period against a decline in the value of the underlying investment below the
exercise price by selling the underlying investment at the exercise price to a
seller of a corresponding put. If the market price of the underlying investment
is equal to or above the exercise price and, as a result, the put is not
exercised or resold, the put will become worthless at its expiration date. In
that case the Fund will have paid the premium but lost the right to sell the
underlying investment. However, the Fund may sell the put prior to its
expiration. That sale may or may not be at a profit.
Buying a put on an investment the Fund does not own (such as an index or
future) permits the Fund either to resell the put or to buy the underlying
investment and sell it at the exercise price. The resale price will vary
inversely to the price of the underlying investment. If the market price of the
underlying investment is above the exercise price and, as a result, the put is
not exercised, the put will become worthless on its expiration date.
When the Fund purchases a put on a stock index, 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 resell the put. 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 may buy a call or put 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.
|_| Buying and Selling Options on Foreign Currencies. The Fund can
buy and sell calls and puts on foreign currencies. They include puts and calls
that trade on a securities or commodities exchange or in the over-the-counter
markets or are quoted by major recognized dealers in such options. The Fund
could use these calls and puts to try to protect against declines in the dollar
value of foreign securities and increases in the dollar cost of foreign
securities the Fund wants to acquire.
If the Sub-Advisor anticipates a rise in the dollar value of a foreign
currency in which securities to be acquired are denominated, the increased cost
of those securities may be partially offset by purchasing calls or writing puts
on that foreign currency. If the Sub-Advisor anticipates a decline in the dollar
value of a foreign currency, the decline in the dollar value of portfolio
securities denominated in that currency might be partially offset by writing
calls or purchasing puts on that foreign currency. However, the currency rates
could fluctuate in a direction adverse to the Fund's position. The Fund will
then have incurred option premium payments and transaction costs without a
corresponding benefit.
A call the Fund writes on a foreign currency is "covered" if the Fund owns
the underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or it can do so for additional cash consideration held in a
segregated account by its custodian bank) upon conversion or exchange of other
foreign currency held in its portfolio.
|_| Risks of Hedging with Options and Futures. 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
Sub-Advisor uses a hedging instrument at the wrong time or judges market
conditions incorrectly, hedging strategies may reduce the Fund's return. The
Fund could also experience losses if the prices of its futures and options
positions were not correlated with its other investments. The Fund's option
activities may affect its costs.
The Fund's option activities could affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund might 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 could pay a brokerage commission each time it buys a call or put,
sells a call or put, or buys or sells an underlying investment in connection
with the exercise of a call or put. Those commissions could be higher on a
relative basis 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. Consequently, put and call options
offer large amounts of leverage. The leverage offered by trading in options
could result in the Fund's net asset value being more sensitive to changes in
the value of the underlying investment.
If a covered call written by the Fund is exercised on an investment that
has increased in value, the Fund will be required to sell the investment at the
call price. It will not be able to realize any profit if the investment has
increased in value above the call price.
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. The Fund might
experience losses if it could not close out a position because of an illiquid
market for the future or option.
There is a risk in using short hedging by selling futures or purchasing
puts on broadly-based indices or futures to attempt to protect against declines
in the value of the Fund's portfolio securities. The risk is that the prices of
the futures or the applicable index will correlate imperfectly with the behavior
of the cash prices of the Fund's securities. For example, it is possible that
while the Fund has used hedging instruments in a short hedge, the market may
advance and the value of the securities held in the Fund's portfolio might
decline. If that occurred, the Fund would lose money on the hedging instruments
and also experience a decline in the value of 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 securities will tend to move in the
same direction as the indices upon which the hedging instruments are based.
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
portfolio securities being hedged and movements in the price of the hedging
instruments, the Fund might use hedging instruments in a greater dollar amount
than the dollar amount of portfolio securities being hedged. It might do so if
the historical volatility of the prices of the portfolio securities being hedged
is more than the historical volatility of the applicable index.
The ordinary spreads between prices in the cash and futures markets are
subject to distortions, due to differences in the nature of those markets.
First, all participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market 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 market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities markets. Therefore,
increased participation by speculators in the futures market may cause temporary
price distortions.
The Fund can use hedging instruments to establish a position in the
securities markets as a temporary substitute for the purchase of individual
securities (long hedging) by buying futures and/or calls on such futures,
broadly-based indices or on securities. It is possible that when the Fund does
so the market might decline. If the Fund then concludes not to invest in
securities because of concerns that the market might decline further 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 securities purchased.
|_| 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 "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 a foreign currency. The Fund limits its exposure in foreign
currency exchange contracts in a particular foreign currency to the amount of
its assets denominated in that currency or a closely-correlated currency. The
Fund may also use "cross-hedging" where the Fund hedges against changes in
currencies other than the currency in which a security it holds is denominated.
Under a forward contract, one party agrees to purchase, and another party
agrees to sell, a specific currency at a future date. That date may be any fixed
number of days from the date of the contract agreed upon by the parties. The
transaction price is set at the time the contract is entered into. These
contracts are traded in the inter-bank market conducted directly among currency
traders (usually large commercial banks) and their customers.
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
the risk of 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.
Although forward contracts may reduce the risk of loss from a decline in the
value of the hedged currency, at the same time they limit any potential gain if
the value of the hedged currency increases.
When the Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when it anticipates receiving
dividend payments in a foreign currency, the Fund might desire to "lock-in" the
U.S. dollar price of the security or the U.S. dollar equivalent of the dividend
payments. To do so, the Fund could enter into a forward contract for the
purchase or sale of the amount of foreign currency involved in the underlying
transaction, in a fixed amount of U.S. dollars per unit of the foreign currency.
This is called a "transaction hedge." The transaction hedge will protect the
Fund against a loss from an adverse change in 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 the payments are made or
received.
The Fund could also use forward contracts to lock in the U.S. dollar value
of portfolio positions. This is called a "position hedge." When the Fund
believes that foreign currency might a substantial decline against the U.S.
dollar, it could into a forward contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in that foreign currency. When the Fund believes that the
U.S. dollar might suffer a substantial decline against a foreign currency, it
could enter into a forward contract to buy that foreign currency for a fixed
dollar amount. Alternatively, the Fund could enter into a forward contract to
sell a different foreign currency for a fixed U.S. dollar amount if the Fund
believes that the U.S. dollar value of the foreign currency to be sold pursuant
to its 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.
That is referred to as a "cross hedge."
The Fund will cover its short positions in these cases by identifying to
its custodian bank assets having a value equal to the aggregate amount of the
Fund's commitment under forward contracts. The Fund will not enter into forward
contracts or maintain a net exposure to such contracts if the consummation of
the contracts would obligate the Fund to deliver an amount of foreign currency
in excess of the value of the Fund's portfolio securities or other assets
denominated in that currency or another currency that is the subject of the
hedge. However, to avoid excess transactions and transaction costs, the Fund may
maintain a net exposure to forward contracts in excess of the value of the
Fund's portfolio securities or other assets denominated in foreign currencies if
the excess amount is "covered" by liquid securities denominated in any currency.
The cover must be at least equal at all times to the amount of that excess.
As one alternative, the Fund may purchase a call option permitting the
Fund to purchase the amount of foreign currency being hedged by a forward sale
contract at a price no higher than the forward contract price. As another
alternative, the Fund may purchase a put option permitting the Fund to sell the
amount of foreign currency subject to a forward purchase contract at a price as
high or higher than the forward contact price.
The precise matching of the amounts under forward contracts and the value
of the securities involved generally will not be possible because the future
value of securities denominated in foreign currencies will change as a
consequence of market movements between the date the forward contract is entered
into and the date it is sold. In some cases, the Sub-Advisor might decide to
sell the security and deliver foreign currency to settle the original purchase
obligation. If the market value of the security is less than the amount of
foreign currency the Fund is obligated to deliver, the Fund might have to
purchase additional foreign currency on the "spot" (that is, cash) market to
settle the security trade. If the market value of the security instead exceeds
the amount of foreign currency the Fund is obligated to deliver to settle the
trade, the Fund might have to sell on the spot market some of the foreign
currency received upon the sale of the security. There will be additional
transaction costs on the spot market in those cases.
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 to pay additional transactions costs. The use of forward
contracts in this manner might reduce the Fund's performance if there are
unanticipated changes in currency prices to a greater degree than if the Fund
had not entered into such contracts.
At or before the maturity of a forward contract requiring the Fund to sell
a currency, the Fund might sell a portfolio security and use the sale proceeds
to make delivery of the currency. In the alternative the Fund might retain the
security and offset its contractual obligation to deliver the currency by
purchasing a second contract. Under that contract the Fund will obtain, on the
same maturity date, the same amount of the currency that it is obligated to
deliver. Similarly, the Fund might 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. The gain or loss
will depend on the extent to which the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
offsetting contract.
The costs 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 brokerage fees or commissions are involved.
Because these contracts are not traded on an exchange, the Fund must evaluate
the credit and performance risk of the counterparty under each 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
will incur costs in doing so. 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 might
offer to sell a foreign currency to the Fund at one rate, while offering a
lesser rate of exchange if the Fund desires to resell that currency to the
dealer.
|_| Regulatory Aspects of Hedging Instruments. When using futures and
options on futures, the Fund is required to operate within certain guidelines
and restrictions with respect to the use of futures as established by the
Commodities Futures Trading Commission (the "CFTC"). In particular, the Fund is
exempted from registration with the CFTC as a "commodity pool operator" if the
Fund complies with the requirements of Rule 4.5 adopted by the CFTC. The Rule
does not limit the percentage of the Fund's assets that may be used for futures
margin and related options premiums for a bona fide hedging position. However,
under the Rule, the Fund must limit its aggregate initial futures margin and
related options premiums to not more than 5% of the Fund's net assets for
hedging strategies that are not considered bona fide hedging strategies under
the Rule. Under the Rule, the Fund must also use short futures and options on
futures 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 the option exchanges. The exchanges limit the maximum number of options that
may be written or held by a single investor or group of investors acting in
concert. Those limits apply 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 that the Fund may write or hold may be affected by options
written or held by other entities, including other investment companies having
the same advisor as the Fund (or an advisor that is an affiliate of the Fund's
advisor or Sub-Advisor). 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.
Under the Investment Company Act, when the Fund purchases a future, it
must maintain cash or readily marketable short-term debt instruments in an
amount equal to the market value of the securities underlying the future, less
the margin deposit applicable to it. The account must be a segregated account or
accounts held by the Fund's custodian bank.
|_| Tax Aspects of Certain Hedging Instruments. Certain foreign currency
exchange contracts in which the Fund may invest are treated as "Section 1256
contracts" under the Internal Revenue Code. In general, gains or losses relating
to Section 1256 contracts are characterized as 60% long-term and 40% short-term
capital gains or losses under the Code. However, foreign currency gains or
losses arising from Section 1256 contracts that are 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," and
unrealized gains or losses are treated as though they were realized. These
contracts also may be marked-to-market for purposes of determining 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 those transactions from this marked-to-market treatment.
Certain forward contracts the Fund enters into 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 making up a
straddle is allowed only to the extent that the 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, the following gains or losses are treated
as ordinary income or loss: (1) gains or losses attributable to fluctuations in
exchange rates that occur between the
time the Fund accrues interest or other receivables or accrues expenses
or other liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities, and
(2) gains or losses attributable to fluctuations in the value of a foreign
currency between the date of acquisition of a debt security denominated
in a foreign currency or foreign currency forward contracts and the
date of disposition.
Currency gains and losses are offset against market gains and losses on
each trade before determining a net "Section 988" gain or loss under the
Internal Revenue Code for that trade, which may increase or decrease the amount
of the Fund's investment income available for distribution to its shareholders.
Investment Restrictions
--------------------------------------------------------------------------------
|X| What Are "Fundamental Policies?" Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be changed
only by the vote of a "majority" of the Fund's outstanding voting securities.
Under the Investment Company Act, a "majority" vote is defined as the vote of
the holders of the lesser of:
|_| 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 represented by proxy, or |_| more than 50% of the
outstanding shares.
The Fund's investment objectives are fundamental policies. Other policies
described in the Prospectus or this Statement of Additional Information are
"fundamental" only if they are identified as such. The Fund's Board of Trustees
can change non-fundamental policies without shareholder approval. However,
significant changes to investment policies will be described in supplements or
updates to the Prospectus or this Statement of Additional Information, as
appropriate. The Fund's most significant investment policies are described in
the Prospectus.
|X| Does the Fund Have Additional Fundamental Policies? The following investment
restrictions are fundamental policies of the Fund.
o The Fund cannot invest in physical commodities or physical
commodity contracts. However, the Fund may buy and sell hedging instruments to
the extent specified in its Prospectus and this Statement of Additional
Information from time to time. The Fund can also buy and sell options, futures,
securities or other instruments backed by, or the investment return from which
is linked to changes in the price of, physical commodities.
o The Fund cannot invest in real estate or real estate limited
partnerships (direct participation programs). However, the Fund may purchase
securities of issuers that engage in real estate operations and securities that
are secured by real estate or interests in real estate.
o The Fund cannot underwrite securities of other companies. A
permitted exception is in case it might be deemed to be an underwriter under the
Securities Act of 1933 in disposing of a security held its own portfolio.
o The Fund cannot invest in securities of any issuer if, to the
knowledge of the Trust, any officer or trustee of the Trust or any officer or
director of the Manager or Sub-Advisor owns more than 1/2 of 1% of the
outstanding securities of that issuer, and who together own more 5% of the
outstanding securities of that issuer;
o The Fund cannot pledge its assets or assign or otherwise encumber
its assets in amounts in excess of 10% of its net assets (taken at market value
at the time of pledging). The Fund can pledge, assign or encumber its assets
only to secure borrowings made within the limitations set forth in the
Prospectus or this Statement of Additional Information.
o The Fund cannot invest for the purpose of exercising control or
management of another company.
o The Fund cannot issue senior securities as defined in the
Investment Company Act of 1940. However, the Fund may enter into any repurchase
agreement; borrow money in accordance with restrictions described above, and
lend portfolio securities.
o The Fund cannot make loans to any person or individual. However,
portfolio securities may be loaned by the Fund within the limitations set forth
in the Prospectus or this Statement of Additional Information.
o The Fund cannot invest more than 5% of the value of its total
assets in the securities of any one issuer. This restriction applies to 75% of
its total assets.
o The Fund cannot purchase more than 10% of the voting securities of
any one issuer (other than the U.S. government or any of its agencies or
instrumentalities). This restriction applies to 75% of the Fund's total assets.
o The Fund cannot concentrate its investments in any particular
industry. However, if it is deemed appropriate to help the Fund attain its
investment objective, the Fund may invest up to but less than 25% of its total
assets (valued at the time of investment) in any one industry classification
used by the Fund for investment purposes. For this purpose, a foreign government
is considered to be an industry.
o The Fund cannot borrow money in excess of 33-1/3% of the value of
the Fund's total assets. The Fund may borrow only from banks and only as a
temporary measure for extraordinary or emergency purposes. The Fund will make no
additional investments while borrowings exceed 5% of the Fund's total assets.
With respect to this fundamental policy, the Fund can borrow only if it
maintains a 300% ratio of assets to borrowings at all times in the manner set
forth in the Investment Company Act.
|X| Does the Fund Have Any Restrictions That Are Not Fundamental? The Fund
has a number of other investment restrictions that are not fundamental policies,
which means that they can be changed by the Board of Trustees without
shareholder approval.
|_| The Fund cannot make short sales or purchase securities on
margin. However, the Fund can mark short-term borrowings when necessary for the
clearance of purchases of portfolio securities. Collateral arrangements in
connection with futures and options transactions are not deemed to be margin
transactions under this restriction.
|_| The Fund cannot invest in interests in oil, gas or other mineral
exploration or development programs or leases.
Unless the Prospectus or this Statement of Additional Information states
that a percentage restriction applies on an ongoing basis, it applies only at
the time the Fund makes an investment. 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.
For purposes of the Fund's policy not to concentrate its assets as described in
the Prospectus, the Fund has adopted, as a matter of non-fundamental policy, the
corporate industry classifications set forth in Appendix B to this Statement of
Additional Information. The percentage restrictions described above and in the
Prospectus apply only at the time of investment and require no action by the
Fund as a result of subsequent changes in relative values.
How the Fund is Managed
Organization and History. The Fund is an open-end, diversified management
investment company. The Fund is one of three series of Oppenheimer Quest For
Value Funds, an open-end management investment company organized as a
Massachusetts business trust in April 1987 (and which is referred to as the
"Trust").
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. 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.
|X| Classes of Shares. The Board of Trustees has the power, without
shareholder approval, to divide unissued shares of the Trust into two or more
series and each series 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
N. All classes invest in the same investment portfolio. Each class of shares:
o has its own dividends and distributions,
o pays certain expenses which may be different for the different classes,
o may have a different net asset value,
o may have separate voting rights on matters in which interests of one class
are different from interests of another class, and o votes as a class on
matters that affect that class alone.
Shares are freely transferable, and each share of each class has one vote
at shareholder meetings, with fractional shares voting proportionally on matters
submitted to the vote of shareholders. Each share of the Fund represents an
interest in the Fund proportionately equal to the interest of each other share
of the same class.
The Trustees are authorized to create new series of the Trust and new
classes of shares of the Fund. The Trustees may reclassify unissued shares of
the Fund into additional series or classes of shares. The Trustees also may
divide or combine the shares of a class into a greater or lesser number of
shares without changing the proportionate beneficial interest of a shareholder
in the Fund. Shares do not have cumulative voting rights or preemptive or
subscription rights. Shares may be voted in person or by proxy at shareholder
meetings.
|X| Meetings of Shareholders. Although the Fund is not required by
Massachusetts law to hold annual meetings, it may hold shareholder meetings from
time to time on important matters. The Fund's shareholders have the right to
call a meeting to remove a Trustee or to take certain other action described in
the Declaration of Trust.
The Fund will hold meetings when required to do so by the Investment
Company Act or other applicable law. The Fund will hold a meeting when the
Trustees call a meeting or upon proper request of shareholders. If the Fund
receives a written request of the record holders of at least 25% of the
outstanding shares eligible to be voted at a meeting to call a meeting for a
specified purpose (which might include the removal of a Trustee), the Fund will
call a meeting of shareholders for that specified purpose.
Shareholders of the different classes of the Fund vote together in the
aggregate on certain matters at shareholders' meetings. Those matters include
the election of Trustees and ratification of appointment of the independent
auditors. Shareholders of a particular series or class vote separately on
proposals that affect that series or class. Shareholders of a series or class
that is not affected by a proposal are not entitled to vote on the proposal. For
example, only shareholders of a particular series vote on any material amendment
to the investment advisory agreement for that series. Only shareholders of a
particular class of a series vote on certain amendments to the Distribution
and/or Service Plans if the amendments affect only that class.
|X| Shareholder and Trustee Liability. The Trust's Declaration of Trust
contains an express disclaimer of shareholder or Trustee liability for the
Fund's obligations. It also provides for indemnification and reimbursement of
expenses out of the Fund's property for any shareholder held personally liable
for its obligations. The Declaration of Trust also states that upon request, the
Fund shall assume the defense of any claim made against a shareholder for any
act or obligation of the Fund and shall satisfy any judgment on that claim.
Massachusetts law permits a shareholder of a business trust (such as the Fund)
to be held personally liable as a "partner" under certain circumstances.
However, the risk that a Fund shareholder will incur financial loss from being
held liable as a "partner" of the Fund is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations.
The Fund's contractual arrangements state that any person doing business
with the Fund (and each shareholder of the Fund) agrees under its Declaration of
Trust to look solely to the assets of the Fund for satisfaction of any claim or
demand that may arise out of any dealings with the Fund. Additionally, the
Trustees shall have no personal liability to any such person, to the extent
permitted by law.
Trustees and Officers of the Fund. The Trustees and officers and their principal
occupations and business affiliations during the past five years are listed
below. Trustees denoted with an asterisk (*) below are deemed to be "interested
persons" of the Fund under the Investment Company Act. All of the Trustees are
also trustees, directors or managing general partners of the following
Oppenheimer funds:
Oppenheimer Quest Value Fund, Inc., Oppenheimer Quest For Value Funds, a series
fund having the following series: Oppenheimer Quest Small Cap Value Fund,
Oppenheimer Quest Balanced Value Fund and Oppenheimer Quest Opportunity Value
Fund, Oppenheimer Quest Global Value Fund, Inc., Oppenheimer Quest Capital Value
Fund, Inc., Rochester Portfolio Series, a series fund having one series:
Limited-Term New York Municipal Fund, Bond Fund Series, a series fund having one
series: Oppenheimer Convertible Securities Fund, Rochester Fund Municipals, and
Oppenheimer MidCap Fund
Ms. Macaskill and Messrs. Bishop, Darling, Donohue, Farrar, Wixted and Zack, who
are officers of the Fund, respectively hold the same offices of the other
Oppenheimer funds listed above. As of ________ ____, 2001 the Trustees and the
officers of the Fund as a group owned less than 1% of the outstanding shares of
the Fund. The foregoing statement does not reflect shares held of record by an
employee benefit plan for employees of the Manager other than shares
beneficially owned under that plan by the officers of the Fund listed below. Ms.
Macaskill and Mr. Donohue are trustees of that plan.
Bridget A. Macaskill, Chairman of the Board of Trustees and President, Age: 52.
Two World Trade Center, New York, New York 10048-0203 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 Asset Management Corporation, an investment adviser subsidiary of
the Manager; Chairman and a director of Shareholder Services, Inc. (since August
1994) and Shareholder Financial Services, Inc. (since September 1995), transfer
agent subsidiaries of the Manager; President (since September 1995) and a
director (since October 1990) of Oppenheimer Acquisition Corp., the Manager's
parent holding company; 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 management subsidiary of
the Manager and of Oppenheimer Millennium Funds plc; President and a director of
other Oppenheimer funds; a director of Prudential Corporation plc (a U.K.
financial service company).
Paul Y. Clinton, Trustee, Age: 70.
39 Blossom Avenue, Osterville, Massachusetts 02655
Principal of Clinton Management Associates, a financial and venture capital
consulting firm; Trustee of Capital Cash Management Trust, a money-market fund
and Narragansett Tax-Free Fund, a tax-exempt bond fund; Director of OCC Cash
Reserves, Inc. and Trustee of OCC Accumulation Trust, both of which are open-end
investment companies. Formerly: Director, External Affairs, Kravco Corporation,
a national real estate owner and property management corporation; President of
Essex Management Corporation, a management consulting company; a general partner
of Capital Growth Fund, a venture capital partnership; a general partner of
Essex Limited Partnership, an investment partnership; President of Geneve Corp.,
a venture capital fund; Chairman of Woodland Capital Corp., a small business
investment company; and Vice President of W.R. Grace & Co.
Thomas W. Courtney, Trustee, Age 67.
833 Wyndemere Way, Naples, Florida 34105
Principal of Courtney Associates, Inc. (venture capital firm); former General
Partner of Trivest Venture Fund (private venture capital fund); former President
of Investment Counseling Federated Investors, Inc.; Trustee of Cash Assets
Trust, a money market fund; Director of OCC Cash Reserves, Inc., and Trustee of
OCC Accumulation Trust, both of which are open-end investment companies; former
President of Boston Company Institutional Investors; Trustee of Hawaiian
Tax-Free Trust and Tax Free Trust of Arizona, tax-exempt bond funds; Director of
several privately owned corporations; former Director of Financial Analysts
Federation.
Robert G. Galli, Trustee, Age: 67
19750 Beach Road, Jupiter, FL 33469
A Trustee or Director of other Oppenheimer funds. Formerly he held the following
positions: Vice Chairman of the Manager, OppenheimerFunds, Inc. (October 1995 -
December 1997); Executive Vice President of the Manager (December 1977 - October
1995); Executive Vice President and a director (April 1986 - October 1995) of
HarbourView Asset Management Corporation, an investment advisor subsidiary of
the Manager.
Lacy B. Herrmann, Trustee, Age: 71.
380 Madison Avenue, Suite 2300, New York, New York 10017
Chairman and Chief Executive Officer of Aquila Management Corporation, the
sponsoring organization and manager, administrator and/or sub-Adviser to the
following open-end investment companies, and Chairman of the Board of Trustees
and President of each: Churchill Cash Reserves Trust, Aquila Cascadia Equity
Fund, Pacific Capital Cash Assets Trust, Pacific Capital U.S. Treasuries Cash
Assets Trust, Pacific Capital Tax-Free Cash Assets Trust, Prime Cash Fund,
Narragansett Insured Tax-Free Income Fund, Tax-Free Fund For Utah, Churchill
Tax-Free Fund of Kentucky, Tax-Free Fund of Colorado, Tax-Free Trust of Oregon,
Tax-Free Trust of Arizona, Hawaiian Tax-Free Trust, and Aquila Rocky Mountain
Equity Fund; Vice President, Director, Secretary, and formerly Treasurer of
Aquila Distributors, Inc., distributor of the above funds; President and
Chairman of the Board of Trustees of Capital Cash Management Trust ("CCMT"), and
an Officer and Trustee/Director of its predecessors; President and Director of
STCM Management Company, Inc., sponsor and adviser to CCMT; Chairman, President
and a Director of InCap Management Corporation, formerly sub-adviser and
administrator of Prime Cash Fund and Short Term Asset Reserves; Director of OCC
Cash Reserves, Inc., and Trustee of OCC Accumulation Trust, both of which are
open-end investment companies; Trustee Emeritus of Brown University.
George Loft, Trustee, Age: 86.
51 Herrick Road, Sharon, Connecticut 06069
Private Investor; Director of OCC Cash Reserves, Inc., and Trustee of OCC
Accumulation Trust, both of which are open-end investment companies.
O. Leonard Darling, Vice President, Age: 58.
Two World Trade Center, New York, New York 10048-0203
Chief Investment Officer and Executive Vice President of the Manager (since
6/99); Chairman and Director of HarbourView Asset Management Corporation (since
6/99); formerly Chief Executive Officer of HarbourView Asset Management
Corporation (12/ 98-6/99); Trustee (1993 - present) of Awhtolia College -
Greece.
Andrew J. Donohue, Secretary, Age: 50.
Two World Trade Center, New York, New York 10048-0203
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President and General Counsel (since September 1993) and a director (since
January 1992) of the Distributor; Executive Vice President, General Counsel and
a director of HarbourView Asset Management Corporation, Shareholder Services,
Inc., Shareholder Financial Services, Inc. and (since September 1995)
Oppenheimer Partnership Holdings, Inc.; President and a director of Centennial
Asset Management Corporation (since September 1995); President, General Counsel
and a director of Oppenheimer Real Asset Management, Inc. (since July 1996);
General Counsel (since May 1996) and Secretary (since April 1997) of Oppenheimer
Acquisition Corp.; Vice President and a director of OppenheimerFunds
International Ltd. and Oppenheimer Millennium Funds plc (since October 1997); an
officer of other Oppenheimer funds.
Robert Bishop, Assistant Treasurer, Age: 42.
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: 35.
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.
Brian W. Wixted, Treasurer, Age: 41.
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer (since April 1999) of the Manager; Treasurer
of HarbourView Asset Management Corporation, Shareholder Services, Inc.,
Shareholder Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc.
(since April 1999); Assistant Treasurer of Oppenheimer Acquisition Corp. (since
April 1999); Assistant Secretary of Centennial Asset Management Corporation
(since April 1999); formerly Principal and Chief Operating Officer, Bankers
Trust Company - Mutual Fund Services Division (March 1995 - March 1999); Vice
President and Chief Financial Officer of CS First Boston Investment Management
Corp. (September 1991 - March 1995); and Vice President and Accounting Manager,
Merrill Lynch Asset Management (November 1987 - September 1991).
Robert G. Zack, Assistant Secretary, Age: 52.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President (since May 1985) and Associate General Counsel (since May
1981) of the Manager, Assistant Secretary of Shareholder Services, Inc. (since
May 1985), and Shareholder Financial Services, Inc. (since November 1989);
Assistant Secretary of OppenheimerFunds International Ltd. and Oppenheimer
Millennium Funds plc (since October 1997); an officer of other Oppenheimer
funds.
|X| Remuneration of Trustees. The officers of the Fund and one Trustee, Ms.
Macaskill, are affiliated with the Manager and receive no salary or fee from the
Fund. The remaining Trustees received the compensation shown below. The
compensation from the Fund was paid during its fiscal year ended October 31,
2000. The table below also shows the total compensation from all of the
Oppenheimer funds listed above, including the compensation from the Fund, and
from two other funds that are not Oppenheimer funds but for which the
Sub-Advisor acts as investment advisor. That amount represents compensation
received as a director, trustee, or member of a committee of the Board during
the calendar year 2000.
<PAGE>
--------------------------------------------------------------------------------
Total Compensation
------------------- From all Oppenheimer
Quest/Rochester
Aggregate Retirement Funds
Compensation Benefits Accrued (10 Funds)2
From the Fund 1 as Part of Fund
Trustee's Name Expenses
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Paul Y. Clinton $ $ $3
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Thomas W. Courtney $ $ $3
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Robert G. Galli $ $ $4
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Lacy B. Herrmann $ $ $3
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
George Loft $ $ $3
--------------------------------------------------------------------------------
4. Aggregate compensation includes fees and any retirement plan benefits for a
Director.
5. For the 2000 calendar year. Each series of an investment company is
considered a separate "fund" for this purpose.
Total Compensation for the 2000 calendar year includes compensation from two
funds for which the Sub-Advisor acts as the investment advisor.
7. Total compensation for the 2000 calendar year also includes compensation
received for serving as a Trustee or Director of ____ other Oppenheimer
funds.
|X| Retirement Plan for Trustees. The Fund has adopted a retirement plan
that provides for payments to retired Trustees. Payments are up to 80% of the
average compensation paid during a Trustee's five years of service in which the
highest compensation was received. A Trustee must serve as Trustee for any of
the Oppenheimer Quest/Rochester/MidCap funds listed above for at least 15 years
to be eligible for the maximum payment. Each Trustee's retirement benefits will
depend on the amount of the Trustee's future compensation and length of service.
Therefore the amount of those benefits cannot be determined at this time, nor
can we estimate the number of years of credited service that will be used to
determine those benefits.
|X| Deferred Compensation Plan for Trustees. 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.
|X| Major Shareholders. As of ________ ____, 2001 the only persons who owned of
record or were known by the Fund to own beneficially 5% or more of any
class of the Fund's outstanding shares were :
Merrill Lynch Pierce Fenner & Smith, Inc., 4800 Deer Lake Drive East,
Floor 3, Jacksonville, Florida 32246-6484, which owned for the benefit of its
clients ____________ Class A shares (representing ____% of the Class A shares
then outstanding);
Merrill Lynch Pierce Fenner & Smith, Inc., 4800 Deer Lake Drive East,
Floor 3, Jacksonville, Florida 32246-6484, which owned for the benefit of its
clients ____________ Class B shares (representing ______% of the Class B shares
then outstanding); and
Merrill Lynch Pierce Fenner & Smith, Inc., 4800 Deer Lake Drive East,
Floor 3, Jacksonville, Florida 32246-6484, which owned for the benefit of its
clients ____________ Class C shares (representing ______% of the Class C shares
then outstanding). As of the date hereof, the Manager is the sole owner of Class
N shares.
The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company.
|X| Code of Ethics. The Fund, the Manager and the Distributor 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. Covered persons include persons
with knowledge of the investments and investment intentions of the Fund and
other funds advised by the Manager. The Code of Ethics does permit personnel
subject to the Code to invest in securities, including securities that may be
purchased or held by the Fund, subject to a number of restrictions and controls.
Compliance with the Code of Ethics is carefully monitored and enforced by the
Manager.
The Code of Ethics is an exhibit to the Fund's registration statement
filed with the Securities and Exchange Commission and can be reviewed and copied
at the SEC's Public Reference Room in Washington, D.C. You can obtain
information about the hours of operation of the Public Reference Room by calling
the SEC at 1.202.942.8090. The Code of Ethics can also be viewed as part of the
Fund's registration statement on the SEC's EDGAR database at the SEC's Internet
website at http://www.sec.gov. Copies may be obtained, after paying a
duplication fee, by electronic request at the following E-mail address:
[email protected]., or by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
|X| The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and the Fund's parent Trust. The Manager handles
the Fund's day-to-day business, and the agreement permits the Manager to enter
into sub-advisory agreements with other registered investment advisors to obtain
specialized services for the Fund, as long as the Fund is not obligated to pay
any additional fees for those services. The Manager has retained the Sub-Advisor
pursuant to a separate Sub-Advisory Agreement, described below, under which the
Sub-Advisor buys and sells portfolio securities for the Fund. The portfolio
manager of the Fund is employed by the Sub-Advisor and is the person who is
principally responsible for the day-to-day management of the Fund's portfolio,
as described below.
The investment advisory agreement between the Fund and the Manager requires
the Manager, at its expense, to provide the Fund with adequate office space,
facilities and equipment. It also requires the Manager to provide and supervise
the activities of all administrative and clerical personnel required to provide
effective administration for the Fund. Those responsibilities include 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.
The Fund pays expenses not expressly assumed by the Manager under the
advisory agreement. Expenses for the Trust's three series are allocated to the
series in proportion to their net assets, unless allocations of expenses can be
made directly to a series. The advisory agreement lists examples of expenses
paid by the Fund. The major categories relate to calculation of the Fund's net
asset values per share, 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. The management fees paid by the Fund to
the Manager are calculated at the rates described in the Prospectus, which are
applied to the assets of the Fund as a whole. The fees are allocated to each
class of shares based upon the relative proportion of the Fund's net assets
represented by that class.
--------------------------------------------------------------------------------
Fees Paid to Manager to
Management Fees Paid to Calculate Fund's Net
Fiscal Year ended 10/31: OppenheimerFunds, Inc. Asset Values1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1998 $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1999 $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2000 $ $
--------------------------------------------------------------------------------
1. During the fiscal years ended 1997 and 1998, the Fund paid the Manager a fee
for accounting services, consisting of a base fee of $55,000 per year plus
out-of-pocket expenses. The Manager voluntarily agreed to eliminate this fee
commencing with the 1999 fiscal year.
The investment advisory agreement states that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties or
reckless disregard of its obligations and duties under the investment advisory
agreement, the Manager is not liable for any loss resulting from a good faith
error or omission on its part with respect to any of its duties under the
agreement.
The agreement permits the Manager to act as investment advisor for any other
person, firm or corporation and to use the names "Oppenheimer" and "Quest for
Value" in connection with other investment companies for which it may act as
investment advisor or general distributor. If the Manager shall no longer act as
investment advisor to the Fund, the Manager may withdraw the right of the Fund
to use the names "Oppenheimer" or "Quest for Value" as part of its name.
The Sub-Advisor. The Sub-Advisor is a majority-owned subsidiary of Oppenheimer
Capital, a registered investment advisor. From the Fund's inception on November
1, 1991 until November 22, 1995, the Sub-Advisor (which was then named Quest for
Value Advisors) or the Sub-Advisor's parent served as the Fund's investment
advisor. The Sub-Advisor acts as investment advisor to other investment
companies and for individual investors.
On November 4, 1997, PIMCO Advisors L.P., a registered investment advisor
with $125 billion in assets under management through various subsidiaries and
affiliates, acquired control of Oppenheimer Capital and the Sub-Advisor. On
November 30, 1997, Oppenheimer Capital merged with a subsidiary of PIMCO
Advisors. As a result, Oppenheimer Capital and the Sub-Advisor became indirect
wholly-owned subsidiaries of PIMCO Advisors. PIMCO Advisors has two general
partners: PIMCO Partners, G.P., a California general partnership, and PIMCO
Advisors Holdings L.P. (formerly Oppenheimer Capital, L.P.), an New York Stock
Exchange-listed Delaware limited partnership of which PIMCO Partners, G.P. is
the sole general partner.
PIMCO Partners, G.P. beneficially owns or controls (through its general
partner interest in the former Oppenheimer Capital, L.P.) more than 80% of the
units of limited partnership of PIMCO Advisors. PIMCO Partners, G.P. has two
general partners. The first of these is Pacific Investment Management Company, a
wholly-owned subsidiary of Pacific Financial Asset Management Company, a direct
subsidiary of Pacific Life Insurance Company ("Pacific Life").
The managing general partner of PIMCO Partners, G.P. is PIMCO Partners
L.L.C. ("PPLLC"), a California limited liability company. PPLLC's members are
the Managing Directors (the "PIMCO Managers") of Pacific Investment Management
Company, a subsidiary of PIMCO Advisors (the "PIMCO Subpartnership"). The PIMCO
Managers are: William H. Gross, Dean S. Meiling, James F. Muzzy, William F.
Podlich, III, Brent R. Harris, John L. Hague, William S. Thompson Jr., William
C. Powers, David H. Edington, Benjamin Trosky, William R. Benz, II and Lee R.
Thomas, III.
PIMCO Advisors is governed by a Management Board, which consists of
sixteen members, pursuant to a delegation by its general partners. PIMCO
Partners G.P. has the power to designate up to nine members of the Management
Board and the PIMCO Subpartnership, of which the PIMCO Managers are the Managing
Directors, has the power to designate up to two members. In addition, PIMCO
Partners, G.P., as the controlling general partner of PIMCO Advisors, has the
power to revoke the delegation to the Management Board and exercise control of
PIMCO Advisors. As a result, Pacific Life and/or the PIMCO Managers may be
deemed to control PIMCO Advisors. Pacific Life and the PIMCO Managers disclaim
such control.
Allianz AG has majority ownership of PIMCO Advisors and its subsidiaries,
including Oppenheimer Capital and the Sub-Advisor.
|X| The Sub-Advisory Agreement. Under the Sub-Advisory Agreement between
the Manager and the Sub-Advisor, the Sub-Advisor shall regularly provide
investment advice with respect to the Fund and invest and reinvest cash,
securities and the property comprising the assets of the Fund. Under the
Sub-Advisory Agreement, the Sub-Advisor agrees not to change the portfolio
manager of the Fund without the written approval of the Manager. The Sub-Advisor
also agrees to provide assistance in the distribution and marketing of the Fund.
Under the Sub-Advisory Agreement, the Manager pays the Sub-Advisor an
annual fee in monthly installments, based on the average daily net assets of the
Fund. The fee paid to the Sub-Advisor under the Sub-Advisory agreement is paid
by the Manager, not by the Fund. The fee is equal to 40% of the investment
advisory fee collected by the Manager from the Fund based on the total net
assets of the Fund as of November 22, 1995 (the "Base Amount") plus 30% of the
investment advisory fee collected by the Manager based on the total net assets
of the Fund that exceed the Base Amount.
The Sub-Advisory Agreement states that in the absence of willful
misfeasance, bad faith, negligence or reckless disregard of its duties or
obligations, the Sub-Advisor shall not be liable to the Manager for any act or
omission in the course of or connected with rendering services under the
Sub-Advisory Agreement or for any losses that may be sustained in the purchase,
holding or sale of any security.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement and the Sub-Advisory
Agreement. One of the duties of the Sub-Advisor under the Sub-Advisory Agreement
is to arrange the portfolio transactions for the Fund. The Fund's investment
advisory agreement with the Manager and the Sub-Advisory Agreement contain
provisions relating to the employment of broker-dealers to effect the Fund's
portfolio transactions. The Manager and the Sub-Advisor are authorized to employ
broker-dealers, including "affiliated" brokers, as that term is defined in the
Investment Company Act. They may employ broker-dealers that the Manager or the
Sub-Advisor thinks, in its best judgment based on all relevant factors, will
implement the policy of the Fund to obtain, at reasonable expense, the "best
execution" of the Fund's portfolio transactions. "Best execution" means prompt
and reliable execution at the most favorable price obtainable.
The Manager and the Sub-Advisor need not seek competitive commission
bidding. However, they are expected to be aware of the current rates of eligible
brokers and to minimize the commissions paid to the extent consistent with the
interests and policies of the Fund as established by its Board of Trustees.
The Manager and the Sub-Advisor may select brokers (other than affiliates)
that provide brokerage and/or research services for the Fund and/or the other
accounts over which the Manager, the Sub-Advisor or their respective affiliates
have investment discretion. The concessions paid to such brokers may be higher
than another qualified broker would charge, if the Manager or Sub-Advisor, as
applicable, makes a good faith determination that the concession is fair and
reasonable in relation to the services provided. Subject to those
considerations, as a factor in selecting brokers for the Fund's portfolio
transactions, the Manager and the Sub-Advisor may also consider sales of shares
of the Fund and other investment companies for which the Manager or an affiliate
serves as investment advisor.
The Sub-Advisory Agreement permits the Sub-Advisor to enter into
"soft-dollar" arrangements through the agency of third parties to obtain
services for the Fund. Pursuant to these arrangements, the Sub-Advisor will
undertake to place brokerage business with broker-dealers who pay third parties
that provide services. Any such "soft-dollar" arrangements will be made in
accordance with policies adopted by the Board of the Trust and in compliance
with applicable law.
Brokerage Practices. Brokerage for the Fund is allocated subject to the
provisions of the investment advisory agreement and the Sub-Advisory agreement
and the procedures and rules described above. Generally, the Sub-Advisor's
portfolio traders allocate brokerage based upon recommendations from the Fund's
portfolio manager. In certain instances, portfolio managers may directly place
trades and allocate brokerage. In either case, the Sub-Advisor's executive
officers supervise the allocation of brokerage.
Transactions in securities other than those for which an exchange is the
primary market are generally done with principals or market makers. In
transactions on foreign exchanges, the Fund may be required to pay fixed
brokerage commissions and therefore would not have the benefit of negotiated
commissions available in U.S. markets. Brokerage commissions are paid primarily
for transactions in listed securities or for certain fixed-income agency
transactions in the secondary market. Otherwise brokerage commissions are paid
only if it appears likely that a better price or execution can be obtained by
doing so.
The Sub-Advisor serves as investment manager to a number of clients,
including other investment companies, and may in the future act as investment
manager or advisor to others. It is the practice of the Sub-Advisor to allocate
purchase or sale transactions among the Fund and other clients whose assets it
manages in a manner it deems equitable. In making those allocations, the
Sub-Advisor considers several main factors, including the respective investment
objectives, the relative size of portfolio holdings of the same or comparable
securities, the availability of cash for investment, the size of investment
commitments generally held and the opinions of the persons responsible for
managing the portfolios of the Fund and each other client's accounts.
When orders to purchase or sell the same security on identical terms are
placed by more than one of the funds and/or other advisory accounts managed by
the Sub-Advisor or its affiliates, the transactions are generally executed as
received, although a fund or advisory account that does not direct trades to a
specific broker (these are called "free trades") usually will have its order
executed first. Orders placed by accounts that direct trades to a specific
broker will generally be executed after the free trades. All orders placed on
behalf of the Fund are considered free trades. However, having an order placed
first in the market does not necessarily guarantee the most favorable price.
Purchases are combined where possible for the purpose of negotiating brokerage
commissions. In some cases that practice might have a detrimental effect on the
price or volume of the security in a particular transaction for the Fund.
Most purchases of debt obligations are principal transactions at net prices.
Instead of using a broker for those transactions, the Fund normally deals
directly with the selling or purchasing principal or market maker unless the
Sub-Advisor determines that a better price or execution can be obtained by using
the services of a broker. Purchases of portfolio securities from underwriters
include a commission or concession paid by the issuer to the underwriter.
Purchases from dealers include a spread between the bid and asked prices. The
Fund seeks to obtain prompt execution of these orders at the most favorable net
price.
The investment advisory agreement and the Sub-Advisory agreement permit the
Manager and the Sub-Advisor to allocate brokerage for research services. The
research services provided by a particular broker may be useful only to one or
more of the advisory accounts of the Sub-Advisor and its affiliates. The
investment research received for the commissions of those other accounts may be
useful both to the Fund and one or more of the Sub-Advisor's other accounts.
Investment research may be supplied to the Sub-Advisor by a third party at the
instance of a broker through which trades are placed.
Investment research services include information and analysis on particular
companies and industries as well as market or economic trends and portfolio
strategy, market quotations for portfolio evaluations, information systems,
computer hardware and similar products and services. If a research service also
assists the Sub-Advisor in a non-research capacity (such as bookkeeping or other
administrative functions), then only the percentage or component that provides
assistance to the Sub-Advisor in the investment decision-making process may be
paid in concession dollars.
The research services provided by brokers broadens the scope and supplements
the research activities of the Sub-Advisor. That research provides additional
views and comparisons for consideration, and helps the Sub-Advisor to obtain
market information for the valuation of securities that are either held in the
Fund's portfolio or are being considered for purchase. The Sub-Advisor provides
information to the Manager and the Board about the concessions paid to brokers
furnishing such services, together with the Sub-Advisor's representation that
the amount of such concessions was reasonably related to the value or benefit of
such services.
--------------------------------------------------------------------------------
Total
Fiscal Year Brokerage
Ended 10/31 Commissions
Paid1 by
the Fund
--------------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
1998 $
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
1999 $2
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
2000 $
-----------------------------------------------------------------------------
3. Amounts do not include spreads or concessions on principal transactions on
a net trade basis.
2. In the fiscal year ended 10/31/00, the amount of transactions directed to
brokers for research services was $___________ and the amount of the
concessions paid to broker-dealers for those services was $__________.
Distribution and Service Plans
The Distributor. Under its General Distributor's Agreement with the Trust, the
Distributor acts as the Fund's principal underwriter in the continuous public
offering of shares of the Fund's classes of shares. The Distributor is not
obligated to sell a specific number of shares. Expenses normally attributable to
sales are borne by the Distributor.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares during the Fund's three most recent fiscal
years is shown in the table below.
--------------------------------------------------------------------------------
Fiscal Aggregate Class A Concessions Concessions Concessions
Year Front-End Front-End on Class A on Class B on Class C
Ended Sales Sales Shares Shares Shares
10/31: Charges on Charges Advanced by Advanced by Advanced by
Class A Retained by Distributor1 Distributor1 Distributor1
Shares Distributor
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1998 $ $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1999 $ $ $ $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2000 $ $ $ $ $
--------------------------------------------------------------------------------
2. The Distributor advances concessions payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
--------------------------------------------------------------------------------
Fiscal Class A Contingent Class B Contingent Class C Contingent
Year Ended Deferred Sales Deferred Sales Deferred Sales Charges
10/31 Charges Retained by Charges Retained by Retained by Distributor
Distributor Distributor
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2000 $ $ $
--------------------------------------------------------------------------------
Distribution and Service Plans. The Fund has adopted Distribution and Service
Plans for Class A, Class B, Class C and Class N shares under Rule 12b-1 of the
Investment Company Act. Under those plans the Fund compensates the Distributor
for all or a portion of its costs incurred in connection with the distribution
and/or servicing of the shares of the particular class.
Under the plans, the Manager and the Distributor may make payments to
affiliates and, in their sole discretion from time to time may use their own
resources (at no cost to the Fund) to make payments to brokers, dealers or other
financial institutions for distribution and administrative services they
perform. The Manager may use its profits from the advisory fee it receives from
the Fund. In their sole discretion, the Distributor and the Manager may increase
or decrease the amount of payments they make from their own resources to plan
recipients.
Unless a plan is terminated as described below, the plan continues in effect
from year to year but only if the Fund's Board of Trustees and its Independent
Trustees specifically vote annually to approve its continuance. Approval must be
by a vote cast in person at a meeting called for the purpose of voting on
continuing the plan. A 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.
The Board of Trustees and the Independent Trustees must approve all material
amendments to a plan. An amendment to increase materially the amount of payments
to be made under a plan must be approved by shareholders of the class affected
by the amendment. Because Class B shares of the Fund automatically convert into
Class A shares after six years, the Fund must obtain the approval of both Class
A and Class B shareholders for a proposed material amendment to the Class A plan
that would materially increase payments under the plan. That approval must be by
a "majority" (as defined in the Investment Company Act) of the shares of each
Class, voting separately by class.
While the plans are in effect, the Treasurer of the Fund shall provide
separate written reports on the plans to the Board of Trustees at least
quarterly for its review. The reports shall detail the amount of all payments
made under a plan, and the purpose for which the payments were made. Those
reports are subject to the review and approval of the Independent Trustees.
Each plan states 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 the selection and nomination process as long as the
final decision as to selection or nomination is approved by a majority of the
Independent Trustees.
Under the plans for a class, no payment will be made to any recipient in any
quarter in which the aggregate net asset value of all Fund shares of that class
held by the recipient for itself and its customers does not exceed a minimum
amount, if any, that may be set from time to time by a majority of the
Independent Trustees. The Board of Trustees has set no minimum amount of assets
to qualify for payments under the plans.
|X| Service Plans. Under the service plans, the Distributor currently uses
the fees it receives from the Fund to pay brokers, dealers and other financial
institutions (they are referred to as "recipients") for personal services and
account maintenance services they provide for their customers who hold shares of
a particular Class, A, B, C or N. The services 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. The service plans
permit compensation to the Distributor at a rate of up to 0.25% of average
annual net assets of the applicable class. The Board has set the rate at that
level. While the plans permit the Board to authorize payments to the Distributor
to reimburse itself for services under the plan, the Board has not yet done so.
The Distributor makes payments to plan recipients quarterly at an annual rate
not to exceed 0.25% of the average annual net assets consisting of shares of the
applicable class held in the accounts of the recipients or their customers.
|X| Service and Distribution Plan Fees. Under each plan, service fees and
distribution 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 plans compensate the Distributor at a flat rate for its
services and costs in distributing shares and servicing accounts, whether the
Distributor's expenses are more or less than the amounts paid by the Fund under
the plans during the period for which the fee is paid. The types of services
that recipients provide are similar to the services provided under the Class A
service plan, described above.
The plans permit the Distributor to retain both the asset-based sales
charges and the service fees or to pay recipients the service fee on a quarterly
basis, without payment in advance. However, the Distributor currently intends to
pay the service fee to recipients in advance for the first year after the shares
are purchased. After the first year shares are outstanding, the Distributor
makes service fee payments quarterly on those shares. The advance payment is
based on the net asset value of shares sold. Shares purchased by exchange do not
qualify for the advance service fee payment. If shares are redeemed during the
first year after their purchase, the recipient of the service fees on those
shares will be obligated to repay the Distributor a pro rata portion of the
advance payment of the service fee made on those shares.
Under the Class A plan, the Distributor pays a portion of the asset-based
sales charge to brokers, dealers and financial institutions and retains the
balance. Commencing January 1, 2002, the Distributor will not retain any portion
of the asset-based sales charge. The Distributor retains the asset-based sales
charge on Class B and Class N shares. The Distributor retains the asset-based
sales charge on Class C shares during the first year the shares are outstanding.
It pays the asset-based sales charge it receives on Class C shares as an ongoing
commission to the recipient on Class C shares outstanding for a year or more. If
a dealer has a special agreement with the Distributor, the Distributor will pay
the Class B, Class C and/or Class N service fee and the asset-based sales charge
to the dealer quarterly in lieu of paying the sales commissions and service fee
in advance at the time of purchase.
The asset-based sales charges on Class B, Class C and Class N shares allow
investors to buy 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 A, Class B, Class C and Class N shares. The payments are made
to the Distributor in recognition that the Distributor: o pays sales commissions
to authorized brokers and dealers at the time of sale and pays
service fees as described above,
o may finance payment of sales commissions and/or the advance of the
service fee payment to recipients under the plans, or may provide such
financing from its own resources or from the resources of an affiliate,
o employs personnel to support distribution of shares, and
o bears the costs of sales literature, advertising and prospectuses (other
than those furnished to current shareholders) and state "blue sky"
registration fees and certain other distribution expenses.
-------------------------------------------------------------------------------
Distribution Fees Paid to the Distributor in the Fiscal Year Ended 10/31/00
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class: Total Amount Distributor's Distributor's
Aggregate Unreimbursed
Unreimbursed Expenses as %
Payments Retained by Expenses Under of Net Assets
Under Plan Distributor Plan of Class
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class A Plan $ $ $ %
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class B Plan $ $ $ %
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class C Plan $ $ $ %
-------------------------------------------------------------------------------
All payments under the plans 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.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its investment performance. Those terms include "cumulative total
return," "average annual total return," "average annual total return at net
asset value" and "total return at net asset value." An explanation of how total
returns are calculated is set forth below. The charts below show the Fund's
performance as of the Fund's most recent fiscal year end. You can obtain current
performance information by calling the Fund's Transfer Agent at 1.800.525.7048
or by visiting the OppenheimerFunds Internet web site at
http://www.oppenheimerfunds.com.
The Fund's illustrations of its performance data in advertisements must
comply with rules of the Securities and Exchange Commission. Those rules
describe the types of performance data that may be used and how it is to be
calculated. In general, any advertisement by the Fund of its performance data
must include the average annual total returns for the advertised class of shares
of the Fund. Those returns must be shown 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 (or its submission for
publication).
Use of standardized performance calculations 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 the
Fund's performance information as a basis for comparison with other investments:
|_| Total 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. Your account's performance will vary from the model performance data if
your dividends are received in cash, or you buy or sell shares during the
period, or you bought your shares at a different time and price than the shares
used in the model.
|_| The Fund's performance returns do not reflect the effect of taxes on
dividends and capital gains distributions.
|_| An investment in the Fund is not insured by the FDIC or any other
government agency.
|_| The principal value of the Fund's shares and total returns are not
guaranteed and normally will fluctuate on a daily basis.
|_| When an investor's shares are redeemed, they may be worth more or less
than their original cost.
|_| Total returns for any given past period represent historical
performance information and are not, and should not be considered, a prediction
of future returns.
The performance of each class of shares is shown separately, because the
performance of each class of shares will usually be different. That is because
of the different kinds of expenses each class bears. The total returns of each
class of shares of the Fund are affected by market conditions, the quality of
the Fund's investments, the maturity of debt investments, the types of
investments the Fund holds, and its operating expenses that are allocated to the
particular class.
|X| Total Return Information. There are different types of "total returns"
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
and that the investment is redeemed at the end of the period. Because of
differences in expenses for each class of shares, the total returns for each
class are separately measured. 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 actual year-by-year performance. The
Fund uses standardized calculations for its total returns as prescribed by the
SEC. The methodology is discussed below.
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 without sales charge, as
described below). For Class B shares, payment of the applicable contingent
deferred sales charge is applied, depending on the period for which the return
is shown: 5.0% in the first year, 4.0% in the second year, 3.0% in the third and
fourth years, 2.0% in the fifth year, 1.0% in the sixth year and none
thereafter. For Class C shares, the 1% contingent deferred sales charge is
deducted for returns for the 1-year period. Class N shares are first being
offered as of the date hereof; accordingly total return information is not
provided.
|_| Average Annual Total Return. 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" in the formula) to achieve an Ending Redeemable Value
("ERV" in the formula) of that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
|_| Cumulative Total Return. 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
|_| Total Returns at Net Asset Value. From time to time the Fund may
also quote a cumulative or an average annual total return "at net asset value"
(without deducting sales charges) for Class A, Class B, Class C or Class N
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 Fund's Total Returns for the Periods Ended 10/31/00
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cumulative Total Average Annual Total Returns
Class of Returns (10
Shares years or Life of
Class)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5-Year 10-Year
1-Year (or (or
life-of-class) life-of-class)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
After Without After Without After Without After Without
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class A %1 %1 % % % % %1 %1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B %2 %2 % % % % %2 %2
--------------------------------------------------------------------------------
Class C %3 %3 % % % % %3 %3
--------------------------------------------------------------------------------
1. Inception of Class A: 11/1/91
2. Inception of Class B: 9/1/93
3. Inception of Class C: 9/1/93
Other Performance Comparisons. The Fund compares its performance annually to
that of an appropriate broadly-based market index in its Annual Report to
shareholders. You can obtain that information by contacting the Transfer Agent
at the addresses or telephone numbers shown on the cover of this Statement of
Additional Information. The Fund may also compare its performance to that of
other investments, including other mutual funds, or use rankings of its
performance by independent ranking entities. Examples of these performance
comparisons are set forth below.
|X| Lipper Rankings. From time to time the Fund may publish the ranking of
the performance of its classes of shares by Lipper, Inc. Lipper is 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 stated fund classifications.
Lipper currently ranks the Fund's performance against all other balanced funds.
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.
|X| Morningstar Rankings. From time to time the Fund may publish the
ranking and or star rating of the performance of its classes of 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. The Fund
is include among domestic stock funds.
Morningstar proprietary star ratings reflect historical risk-adjusted
total investment return. Investment return measures a fund's (or class's) 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 is measured by a
fund's (or class's) 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 a fund's category. Five stars is the
"highest" ranking (top 10% of funds in a category), 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's) 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
date of the fund (or class). Rankings are subject to change monthly.
The Fund may also compare its total return ranking to that of other funds
in its Morningstar category, in addition to its star ratings. Total return
rankings are percentages from one percent to one hundred percent and are not
risk adjusted. For example, if a fund is in the 94th percentile, that means that
94% of the funds in the same category performed better than it did.
|X| Performance Rankings and Comparisons by Other Entities and
Publications. From time to time the Fund may include in its advertisements and
sales literature performance information about the Fund cited in newspapers and
other periodicals such as The New York Times, The Wall Street Journal, Barron's,
or similar publications. That information may include performance quotations
from other sources, including Lipper and Morningstar. The performance of the
Fund's classes of shares may be compared in publications to the performance of
various market indices or other investments, and averages, performance rankings
or other benchmarks prepared by recognized mutual fund statistical services.
Investors may also wish to compare the returns on the Fund's share classes
to the return on fixed income investments available from banks and thrift
institutions. Those include certificates of deposit, ordinary interest-paying
checking and savings accounts, and other forms of fixed or variable time
deposits, and various other instruments such as Treasury bills. However, the
Fund's returns and share price are not guaranteed or insured by the FDIC or any
other agency and will fluctuate daily, while bank depository obligations may be
insured by the FDIC and may provide fixed rates of return. Repayment of
principal and payment of interest on Treasury securities is backed by the full
faith and credit of the U.S. government.
From time to time, the Fund may publish rankings or ratings of the Manager
or Transfer Agent, and of the investor services provided by them to shareholders
of the Oppenheimer funds, other than performance rankings of the Oppenheimer
funds themselves. Those ratings or rankings of shareholder and investor services
by third parties may include comparisons of their services to those provided by
other mutual fund families selected by the rating or ranking services. They may
be based upon the opinions of the rating or ranking service itself, using its
research or judgment, or based upon surveys of investors, brokers, shareholders
or others.
--------------------------------------------------------------------------------
ABOUT YOUR ACCOUNT
--------------------------------------------------------------------------------
How to Buy Shares
Additional information is presented below about the methods that can be used to
buy shares of the Fund. Appendix C contains more information about the special
sales charge arrangements offered by the Fund, and the circumstances in which
sales charges may be reduced or waived for certain classes of investors.
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 with 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 transfers are
initiated. The Distributor and the Fund are not responsible for any delays in
purchasing shares resulting from delays in ACH transmissions.
--------------------------------------------------------------------------------
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and Letters
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in Appendix C to this
Statement of Additional Information because the Distributor or dealer or broker
incurs little or no selling expenses.
|X| 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 for your joint accounts, or for trust or custodial
accounts on behalf of your children who are minors,
|_|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, and
|_|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.
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. 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 reduced sales charge will apply only to current purchases. You must
request it when you buy shares.
|X| The Oppenheimer Funds. The Oppenheimer funds are those mutual funds for
which the Distributor acts as the distributor or the sub-distributor and
currently include the following:
Oppenheimer Bond Fund Oppenheimer Main Street California Municipal Fund
Oppenheimer Main Street Growth & Income Oppenheimer California Municipal Fund
Fund Oppenheimer Capital Appreciation Fund Oppenheimer Main Street Opportunity
Fund Oppenheimer Capital Income Fund Oppenheimer Main Street Small Cap Fund
Oppenheimer Capital Preservation Fund Oppenheimer MidCap Fund Oppenheimer
Champion Income Fund Oppenheimer Multiple Strategies Fund Oppenheimer
Convertible Securities Fund Oppenheimer Municipal Bond Fund Oppenheimer
Developing Markets Fund Oppenheimer New York Municipal Fund Oppenheimer
Disciplined Allocation Fund Oppenheimer New Jersey Municipal Fund Oppenheimer
Disciplined Value Fund Oppenheimer Pennsylvania Municipal Fund Oppenheimer
Discovery Fund Oppenheimer Quest Balanced Value Fund
Oppenheimer Quest Capital Value Fund,
Oppenheimer Enterprise Fund Inc.
Oppenheimer Quest Global Value Fund,
Oppenheimer Emerging Growth Fund Inc.
Oppenheimer Emerging Technologies Fund Oppenheimer Quest Opportunity Value Fund
Oppenheimer Europe Fund Oppenheimer Quest Small Cap Fund Oppenheimer Florida
Municipal Fund Oppenheimer Quest Value Fund, Inc. Oppenheimer Global Fund
Oppenheimer Real Asset Fund Oppenheimer Global Growth & Income Fund Oppenheimer
Senior Floating Rate Fund Oppenheimer Gold & Special Minerals Fund Oppenheimer
Strategic Income Fund Oppenheimer Growth Fund Oppenheimer Total Return Fund,
Inc. Oppenheimer High Yield Fund Oppenheimer Trinity Core Fund Oppenheimer
Insured Municipal Fund Oppenheimer Trinity Growth Fund Oppenheimer Intermediate
Municipal Fund Oppenheimer Trinity Value Fund Oppenheimer International Bond
Fund Oppenheimer U.S. Government Trust Oppenheimer International Growth Fund
Oppenheimer World Bond Fund Oppenheimer International Small Company Fund
Limited-Term New York Municipal Fund Oppenheimer Large Cap Growth Fund Rochester
Fund Municipals Oppenheimer Limited-Term Government Fund
and the following money market funds:
Centennial New York Tax Exempt Trust
Centennial America Fund, L. P. Centennial Tax Exempt Trust
Centennial California Tax Exempt Trust Oppenheimer Cash Reserves
Centennial Government Trust Oppenheimer Money Market Fund, Inc.
Centennial Money Market Trust
There is an initial sales charge on the purchase of Class A shares of each
of the Oppenheimer funds except the money market funds. Under certain
circumstances described in this Statement of Additional Information, redemption
proceeds of certain money market fund shares may be subject to a contingent
deferred sales charge.
|X| Letters 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 your intended purchases of
both Class A and Class B shares will determine the reduced sales charge rate for
the Class A shares purchased during that period. You can include purchases made
up to 90 days before the date of the Letter.
A Letter of Intent 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"). At the investor's request, this may 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 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. However, 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. That amount is described in "Terms of
Escrow," below (those terms may be amended by the Distributor 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 a Letter of Intent. If those terms are amended, as they may be from time to
time by the Fund, the investor agrees to be bound by the amended terms and that
those amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent period do
not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
total 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 Prospectus, the sales
charges paid will be adjusted to the lower rate. That adjustment will be made
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.
The Transfer Agent will not hold shares in escrow for purchases of shares
of the Fund and other Oppenheimer funds by OppenheimerFunds prototype 401(k)
plans under a Letter of Intent. If the intended purchase amount under a Letter
of Intent 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.
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.
|_| 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 offering price
adjusted for a $50,000 purchase). Any dividends and capital gains distributions
on the escrowed shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is completed
within the thirteen-month Letter of Intent period, the escrowed shares will be
promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the total
purchases pursuant to the Letter are less than the intended 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. That sales charge adjustment will
apply to any shares redeemed prior to the completion of the Letter. If the
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.
6. The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include:
(d) Class A shares sold with a front-end sales charge or subject to a
Class A contingent deferred sales charge,
(e) Class B shares of other Oppenheimer funds acquired subject to a contingent
deferred sales charge, and
(f) Class A or Class B shares acquired by exchange of either (1) 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 (2) 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 to buy shares directly
from a bank account, you must enclose a check (minimum $25) for the initial
purchase with your application. Shares purchased by Asset Builder Plan payments
from bank accounts are subject to the redemption restrictions for recent
purchases described in the Prospectus. Asset Builder Plans also enable
shareholders of Oppenheimer Cash Reserves to use their fund account to make
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 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.
Before initiating Asset Builder payments, obtain a prospectus of the
selected fund(s) from the Distributor or your financial advisor and request an
application from the Distributor, complete it and return it. 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. The Transfer Agent
requires a reasonable period (approximately 15 days) after receipt of such
instructions to implement them. The Fund reserves the right to amend, suspend,
or discontinue offering Asset Builder plans at any time without prior notice.
Retirement Plans. Certain types of retirement plans are entitled to purchase
shares of the Fund without sales charge or at reduced sales charge rates, as
described in Appendix C to this Statement of Additional Information. Certain
special sales charge arrangements described in that Appendix apply to retirement
plans whose records are maintained on a daily valuation basis by Merrill Lynch
Pierce Fenner & Smith, Inc. or an independent record keeper that has a contract
or special arrangement with Merrill Lynch. If on the date the plan sponsor
signed the Merrill Lynch record keeping service agreement the plan has less than
$3 million in assets (other than assets invested in money market funds) invested
in applicable investments, then the retirement plan may purchase only Class B
shares of the Oppenheimer funds. Any retirement plans in that category that
currently invest in Class B shares of the Fund will have their Class B shares
converted to Class A shares of the Fund when the plan's applicable investments
reach $5 million.
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.
Classes of Shares. Each class of shares of the Fund represents an interest in
the same portfolio of investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to a class of
shares and the dividends payable on a class of shares will be reduced by
incremental expenses borne solely by that class. Those expenses include the
asset-based sales charges to which Class A, Class B, Class C and Class N are
subject.
The availability of different classes of shares permits an investor to
choose the method of purchasing shares that is more appropriate for the
investor. That may depend on the amount of the purchase, the length of time the
investor expects to hold shares, and other relevant circumstances. Class A
shares normally are sold subject to an initial sales charge. While Class B,
Class C and Class N shares have no initial sales charge, the purpose of the
deferred sales charge and asset-based sales charge on Class B, Class C and Class
N shares is the same as that of the initial sales charge on Class A shares - to
compensate the Distributor and brokers, dealers and financial institutions that
sell shares of the Fund. A salesperson who is entitled to receive compensation
from his or her firm for selling Fund shares may receive different levels of
compensation for selling one class of shares rather than another.
The Distributor will not accept any order in the amount of $500,000 or
more for Class B shares or $1 million or more for Class C shares on behalf of a
single investor (not including dealer "street name" or omnibus accounts). That
is because generally it will be more advantageous for that investor to purchase
Class A shares of the Fund.
|X| Class B Conversion. Under current interpretations of applicable
federal income tax law by the Internal Revenue Service, the conversion of Class
B shares to Class A shares after six years is not treated as a taxable event for
the shareholder. If those laws or the IRS interpretation of those laws should
change, the automatic conversion feature may be suspended. In that event, no
further conversions of Class B shares would occur while that 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 classed, without the imposition
of a sales charge or fee, such exchange could constitute a taxable event for the
shareholder, and absent such exchange, Class B shares might continue to be
subject to the asset-based sales charge for longer than six years.
|X| Allocation of Expenses. 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.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's share classes recognizes two types of expenses.
General expenses that do not pertain specifically to any one class are allocated
pro rata to the shares of all classes. The allocation is based on the percentage
of the Fund's total assets that is represented by the assets of each class, and
then equally to each outstanding share within a given class. Such general
expenses include management fees, legal, bookkeeping and audit fees, printing
and mailing costs of shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current shareholders, fees to unaffiliated
Trustees, custodian expenses, share issuance costs, organization and start-up
costs, interest, taxes and brokerage commissions, and non-recurring expenses,
such as litigation costs.
Other expenses that are directly attributable to a particular class are
allocated equally to each outstanding share within that class. Examples of such
expenses include distribution and service plan (12b-1) fees, transfer and
shareholder servicing agent fees and expenses, and shareholder meeting expenses
(to the extent that such expenses pertain only to a specific class).
Determination of Net Asset Values Per Share. The net asset values per share of
each class of shares of the Fund are determined as of the close of business of
The New York Stock Exchange on each day that the Exchange is open. The
calculation is done 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
Exchange normally closes at 4:00 P.M., New York time, but may close earlier on
some other days (for example, in case of weather emergencies or on days falling
before a U.S. holiday). The Exchange's most recent annual announcement (which is
subject to change) states that it will close on New Year's Day, Presidents' Day,
Martin Luther King, Jr. Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. It may also close on other days.
Dealers other than Exchange members may conduct trading in certain
securities on days on which the Exchange is closed (including weekends and U.S.
holidays) or after 4:00 P.M. on a regular business day. The Fund's net asset
values will not be calculated on those days, and the values of some of the
Fund's portfolio securities may change significantly on those days when
shareholders may not purchase or redeem shares. Additionally, trading on
European and Asian stock exchanges and over-the-counter markets normally is
completed before the close of The New York Stock Exchange.
Changes in the values of securities traded on foreign exchanges or markets
as a result of events that occur after the prices of those securities are
determined, but before the close of The New York Stock Exchange, will not be
reflected in the Fund's calculation of its net asset values that day unless the
Board of Trustees determines that the event is likely to effect a material
change in the value of the security. The Manager may make that determination,
under procedures established by the Board.
|X| Securities Valuation. The Fund's Board of Trustees has established
procedures for the valuation of the Fund's securities. In general those
procedures are as follows:
|_| Equity securities traded on a U.S. securities exchange or on NASDAQ are
valued as follows:
(3) if last sale information is regularly reported, they are valued at the last
reported sale price on the principal exchange on which they are traded or
on NASDAQ, as applicable, on that day, or
(4) if last sale information is not available on a valuation date, they are
valued at the last reported sale price preceding the valuation date if it
is within the spread of the closing "bid" and "asked" prices on the
valuation date or, if not, at the closing "bid" price on the valuation
date.
|_| Equity securities traded on a foreign securities exchange generally
are valued in one of the following ways: (4) at the last sale price available to
the pricing service approved by the Board of
Trustees, or
(5) at the last sale price obtained by the Manager from the report of
the principal exchange on which the security is traded at its
last trading session on or immediately before the valuation date,
or
(6) at the mean between the "bid" and "asked" prices obtained from
the principal exchange on which the security is traded or, on the
basis of reasonable inquiry, from two market makers in the
security.
|_| Long-term debt securities having a remaining maturity in excess of 60
days are valued based on the mean between the "bid" and "asked" 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.
|_| The following securities are valued at the mean between the "bid" and
"asked" 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:
(4) debt instruments that have a maturity of more than 397 days when issued, (5)
debt instruments that had a maturity of 397 days or less when issued and have a
remaining maturity of more than 60 days, and
(6) non-money market debt instruments that had a maturity of 397 days or
less when issued and which have a remaining maturity of 60 days or
less.
|_| The following securities are valued at cost, adjusted for amortization
of premiums and accretion of discounts:
(3) money market 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
(4) debt instruments held by a money market fund that have a remaining maturity
of 397 days or less.
|_| 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, a security may be priced at the mean between the "bid"
and "asked" prices provided by a single active market maker (which in certain
cases may be the "bid" price if no "asked" price is available).
In the case of U.S. Government securities, mortgage-backed securities,
corporate bonds and foreign government securities, when last sale information is
not generally available, the Manager may use pricing services approved by the
Board of Trustees. The pricing service may use "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield, and maturity.
Other special factors may be involved (such as the tax-exempt status of the
interest paid by municipal securities). The Manager will monitor the accuracy of
the pricing services. That monitoring may include comparing prices used for
portfolio valuation to actual sales prices of selected securities.
The closing prices in the London foreign exchange market on a particular
business day that are provided to the Manager by a bank, dealer or pricing
service that the Manager has determined to be reliable are used to value foreign
currency, including forward contracts, and to convert to U.S. dollars securities
that are denominated in foreign currency.
Puts, calls, and futures are valued at the last sale 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, they shall be valued at the last sale
price on the preceding trading day if it is within the spread of the closing
"bid" and "asked" prices on the principal exchange or on NASDAQ on the valuation
date. If not, the 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 by the mean between "bid" and
"asked" prices obtained by the Manager from two active market makers. In certain
cases that may be at the "bid" price if no "asked" 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. 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.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the Prospectus.
The information below provides additional information about the procedures and
conditions for redeeming shares.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of:
|_| Class A shares purchased subject to an initial sales charge or Class A
shares on which a contingent deferred sales charge was paid, or
|_| Class B shares that were subject to the Class B contingent deferred
sales charge when redeemed.
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 in "How to Exchange Shares" below. Reinvestment
will be at the net asset value next computed after the Transfer Agent receives
the reinvestment order. The shareholder must ask the Transfer Agent for that
privilege at the time of reinvestment. This privilege does not apply to Class C
shares. 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.
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.
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 liquid securities from the
portfolio of the Fund, in lieu of cash.
The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act. Under that rule, 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 Fund will value securities used to pay redemptions in
kind using the same method the Fund uses to value its portfolio securities
described above under "Determination of Net Asset Values Per Share." That
valuation will be made as of the time the redemption price is determined.
Involuntary Redemptions. The Fund's Board of Trustees has the right to cause the
involuntary redemption of the shares held in any account if the aggregate net
asset value of those shares is less than $500 or such lesser amount as the Board
may fix. The Board will not cause the involuntary redemption of shares in an
account if the aggregate net asset value of such shares has fallen below the
stated minimum solely as a result of market fluctuations. If the Board exercises
this right, it may also fix the requirements for any notice to be given to the
shareholders in question (not less than 30 days). The Board may alternatively
set requirements for the shareholder to increase the investment, or set other
terms and conditions so that the shares would not be involuntarily redeemed.
Transfers of Shares. A transfer of shares to a different registration is not an
event that triggers the payment of sales charges. Therefore, 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. It does not matter
whether the transfer occurs by absolute assignment, gift or bequest, as long as
it does not involve, directly or indirectly, a public sale of the shares. When
shares subject to a contingent deferred sales charge are transferred, the
transferred shares will remain subject to the contingent deferred sales charge.
It will be calculated as if the transferee shareholder had acquired the
transferred shares in the same manner and at the same time as the transferring
shareholder.
If less than all shares held in an account are transferred, and some but
not all shares in the account would be subject to a contingent deferred sales
charge if redeemed at the time of transfer, the priorities described in the
Prospectus under "How to Buy Shares" for the imposition of the Class B or Class
C contingent deferred sales charge will be followed in determining the order in
which shares are transferred.
Selling Shares by Wire. The wire of redemption proceeds may be delayed if the
Fund's custodian bank is not open for business on a day when the Fund would
normally authorize the wire to be made, which is usually the Fund's next regular
business day following the redemption. In those circumstances, the wire will not
be transmitted until the next bank business day on which the Fund is open for
business. No dividends will be paid on the proceeds of redeemed shares awaiting
transfer by wire.
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: (4) state the reason for the
distribution; (5) state the owner's awareness of tax penalties if the
distribution is premature; and (6) conform to the requirements of the plan and
the Fund's other redemption requirements.
Participants (other than self-employed persons) in
OppenheimerFunds-sponsored pension or profit-sharing plans with shares of the
Fund held in the name of the plan or its fiduciary may not directly request
redemption of their accounts. The plan administrator or fiduciary 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 and submitted to the Transfer Agent
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, 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. Shareholders should contact their
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
an order placed by the dealer or broker. However, if the Distributor receives a
repurchase order from a dealer or broker after the close of The New York Stock
Exchange on a regular business day, it will be processed at that day's net asset
value if the order was received by the dealer or broker from its customers prior
to the time the Exchange closes. Normally, the Exchange closes at 4:00 P.M., but
may do so earlier on some days. Additionally, the order must have been
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. The signature(s) of the registered owners on the redemption
documents must be guaranteed 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
(having a value of at least $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. Payments must also be sent to the address of record for
the account and the address must not have 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 Account
Application or by signature-guaranteed instructions sent to the Transfer Agent.
Shares are normally redeemed pursuant to an Automatic Withdrawal Plan three
business days before the payment transmittal 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. The
Fund reserves the right to amend, suspend or discontinue offering these plans at
any time without prior notice. Because of the sales charge assessed on Class A
share purchases, shareholders should not make regular additional Class A share
purchases while participating in an Automatic Withdrawal Plan. Class B and Class
C shareholders should not establish withdrawal plans, because of the imposition
of the contingent deferred sales charge on such withdrawals (except where the
contingent deferred sales charge is waived as described in Appendix C below).
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions that apply to such plans, as stated below.
These provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, any amendments will automatically apply to existing
Plans.
|X| Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent 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.
Instructions should be provided on the OppenheimerFunds Application or
signature-guaranteed instructions. 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.
|X| Automatic Withdrawal Plans. Fund shares will be redeemed as necessary
to meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first. 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
these plans should not be considered as a yield or income on your investment.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan as agent for the shareholder(s) (the "Planholder") who executed the Plan
authorization and application submitted to the Transfer Agent. Neither the Fund
nor the Transfer Agent shall incur any liability to the Planholder for any
action taken or not taken by the Transfer Agent in good faith to administer the
Plan. Share 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.
Shares will be redeemed to make withdrawal payments at the net asset value
per share determined on the redemption date. Checks or AccountLink payments
representing the proceeds of Plan withdrawals will normally be transmitted three
business days prior to the date selected for receipt of the payment, according
to the choice specified in writing by the Planholder. Receipt of payment on the
date selected cannot be guaranteed.
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 after 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 to redeem all, or any part of, the
shares held under the Plan. That notice must be in proper form in accordance
with the requirements of the then-current Prospectus of the Fund. In that case,
the Transfer Agent will redeem the number of shares requested at the net asset
value per share in effect and will mail a check for the proceeds to the
Planholder.
The Planholder may terminate a Plan at any time by writing to the Transfer
Agent. The Fund may also give directions to the Transfer Agent to terminate a
Plan. The Transfer Agent will also terminate a Plan upon its receipt of evidence
satisfactory to it that the Planholder has died or is legally incapacitated.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that have
not been redeemed will be held in uncertificated form in the name of the
Planholder. The account will continue as a dividend-reinvestment, uncertificated
account unless and until proper instructions are received from the Planholder,
his or her executor or guardian, or another authorized person.
To use shares held under the Plan as collateral for a debt, the Planholder
may request issuance of a portion of the shares in certificated form. Upon
written request from the Planholder, the Transfer Agent will determine the
number of shares for which a certificate may be issued without causing the
withdrawal checks to stop. 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 Oppenheimer funds that have
a single class without a class designation are deemed "Class A" shares for this
purpose. You can obtain a current list showing which funds offer which classes
by calling the Distributor at 1.800.525.7048. o All of the Oppenheimer funds
currently offer Class A, B and 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.
Oppenheimer Main Street California Municipal Fund currently offers only
Class A and Class B shares.
o 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.
o Only certain Oppenheimer Funds currently offer Class Y shares. Class Y
shares of Oppenheimer Real Asset Fund may not be exchanged for shares of
any other Fund.
o Class M Shares of Oppenheimer Convertible Securities Fund may be exchanged
only for Class A shares of other Oppenheimer funds. They may not be
acquired by exchange of shares of any class of any other Oppenheimer funds
except Class A shares of Oppenheimer Money Market Fund or Oppenheimer Cash
Reserves acquired by exchange of Class M shares.
o Class A shares of Oppenheimer Senior Floating Rate Fund are not available
by exchange of shares of Oppenheimer Money Market Fund or Class A shares of
Oppenheimer Cash Reserves. If any Class a shares of another Oppenheimer
fund that are exchanged for Class A share of Oppenheimer Senior Floating
Rate Fund are subject to the Class A contingent deferred sales charge of
the other Oppenheimer fund at the time of exchange, the holding period for
that Class A contingent deferred sales charge will carry over to the Class
A shares of the Oppenheimer Senior Floating Rate o Fund acquired in the
exchange. The Class A shares of Oppenheimer Senior Floating rate fund
acquired in that exchange will be subject to the class A Early Withdrawal
Charge of Oppenheimer Senior Floating Rate Fund if they are repurchased
before the expiration of the holding period.
o Class X shares of Limited Term New York Municipal Fund can be exchanged
only for Class B shares of other Oppenheimer funds and no exchanges may be
made to Class X shares.
o Shares of Oppenheimer Capital Preservation Fund may not be exchanged for
shares of Oppenheimer Money Market Fund, Inc., Oppenheimer Cash Reserves
or Oppenheimer Limited-Term Government Fund. Only participants in certain
retirement plans may purchase shares of Oppenheimer Capital Preservation
Fund, and only those participants may exchange shares of other Oppenheimer
funds for shares of Oppenheimer Capital Preservation Fund.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any money market fund offered by the Distributor. Shares of any
money market fund purchased without a sales charge may be exchanged for shares
of Oppenheimer funds offered with a sale charge upon payment of the sales
charge. They may also be used to purchase shares of Oppenheimer funds subject to
an early withdrawal charge or contingent deferred sales charge.
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 sales charge or contingent deferred sales
charge. 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. If requested, they
must supply proof of entitlement to this privilege.
Shares of the Fund acquired by reinvestment of dividends or distributions
from any of the other Oppenheimer funds 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.
|X| How Exchanges Affect Contingent Deferred Sales Charges. No contingent
deferred sales charge is imposed on exchanges of shares of any class purchased
subject to a contingent deferred sales charge. However, when Class A shares
acquired by exchange of Class A shares of other Oppenheimer funds purchased
subject to a Class A contingent deferred sales charge are redeemed within 18
months 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. 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 or the Class C contingent deferred sales charge will be followed
in determining the order in which the shares are exchanged. Before exchanging
shares, shareholders should take into account how the exchange may affect 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, Class C or
Class N shares. With respects to Class N shares, if you redeem your shares
within 18 months of the retirement plan's first purchase or the retirement plan
eliminates the Fund as a plan investment option within 18 months of selecting
the Fund, a 1% contingent deferred sales charge will be imposed on the plan.
Shareholders owning shares of more than one class must specify which class of
shares they wish to exchange.
|X| Limits on Multiple Exchange Orders. 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.
|X| Telephone Exchange Requests. When exchanging shares by telephone, a
shareholder must have an existing account in the fund to which the exchange is
to be made. Otherwise, the investors must obtain a Prospectus of that fund
before the exchange request may be submitted. When you exchange some or all of
your shares from one fund to another any special account feature such as an
Asset Builder Plan or Automatic Withdrawal Plan will be switched to the new fund
account unless your tell the Transfer Agent not to do so. 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.
|X| Processing 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 Fund may refuse the
request. For full or partial exchanges of an account made by telephone, any
special account features such as Asset Builder Plans and Automatic Withdrawal
Plans will be switched to the new account unless the Transfer Agent is
instructed otherwise.
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.
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks. 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
Dividends and Distributions. The Fund has no fixed dividend rate and there can
be no assurance as to the payment of any dividends or the realization of any
capital gains. The dividends and distributions paid by a class of shares will
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.
Dividends are calculated in the same manner, at the same time, and on the same
day for each class of shares. However, dividends on Class B, Class C and Class N
shares are expected to be lower than dividends on Class A shares. That is
because of the effect of the higher asset-based sales charge on Class B, Class C
and Class N shares. Those dividends will also differ in amount as a consequence
of any difference in the net asset values of each class of shares.
Dividends, distributions and 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.
Reinvestment will be made 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. Unclaimed accounts may be subject to state escheatment
laws, and the Fund and the Transfer Agent will not be liable to shareholders or
their representatives for compliance with those laws in good faith.
Tax Status of the Fund's Dividends and Distributions. The Federal tax treatment
of the Fund's dividends and capital gains distributions is briefly highlighted
in the Prospectus.
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. The amount of dividends paid by the Fund that may qualify for the
deduction is limited to the aggregate amount of qualifying dividends that the
Fund derives from 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. If it
does not, the Fund must pay an excise tax on the amounts not distributed. It is
presently anticipated that the Fund will meet those requirements. However, the
Board of Trustees and the Manager might determine in a particular year that it
would be in the best interests 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.
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). If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for federal income taxes on amounts
paid by it as dividends and distributions. The Fund qualified as a regulated
investment company in its last fiscal year. The Internal Revenue Code contains a
number of complex tests relating to qualification which the Fund might not meet
in any particular year. If it did not so qualify, the Fund would be treated for
tax purposes as an ordinary corporation and receive no tax deduction for
payments made to shareholders.
If prior distributions made by the Fund must be re-characterized as a
non-taxable return of capital at the end of the fiscal year as a result of the
effect of the Fund's investment policies, they will be identified as such in
notices sent to shareholders.
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 above. Reinvestment will be
made without sales charge at the net asset value per share in effect at the
close of business on the payable date of the dividend or distribution. To elect
this option, the shareholder must notify the Transfer Agent in writing and must
have an existing account in the fund selected for reinvestment. Otherwise the
shareholder first must obtain a prospectus for that fund and an application from
the Distributor to establish an account. Dividends and/or distributions from
shares of certain other Oppenheimer funds (other than Oppenheimer Cash Reserves)
may be invested in shares of this Fund on the same basis.
Additional Information About the Fund
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 shares of the other Oppenheimer
funds and is sub-distributor for funds managed by a subsidiary of the Manager.
The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is a
division of the Manager. It is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for paying
dividends and distributions to shareholders. It also handles shareholder
servicing and administrative functions. The Fund pays the Transfer Agent a fixed
annual maintenance fee for each shareholder account and reimburses the Transfer
Agent for its out-of-pocket expenses. It also acts as shareholder servicing
agent for the other Oppenheimer funds. Shareholders should direct inquiries
about their accounts to the Transfer Agent at the address and toll-free numbers
shown on the back cover.
|X| Shareholder Servicing Agent for Certain Shareholders. Unified
Management Corporation (1.800.346.4601) is the shareholder servicing agent for
shareholders of the Fund who were former shareholders of the AMA Family of Funds
and clients of AMA Investment Advisors, Inc. (which had been the investment
advisor of AMA Family of Funds). It is also the servicing agent for Fund
shareholders who are:
(v) former shareholders of the Unified Funds and Liquid Green Trusts,
(vi) accounts that participated or participate in a retirement plan for which
Unified Investment Advisors, Inc. or an affiliate acts as custodian or
trustee,
(vii) accounts that have a Money Manager brokerage account, and
(viii) other accounts for which Unified Management Corporation is the dealer of
record.
The Custodian. Citibank, N.A. is the custodian bank of the Fund's assets. The
custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities and handling the delivery of such securities to and from
the Fund. It will be the practice of the Fund to deal with the custodian in a
manner uninfluenced by any banking relationship the custodian may have with the
Manager and its affiliates. The Fund's cash balances with the custodian in
excess of $100,000 are not protected by Federal Deposit Insurance. Those
uninsured balances at times may be substantial.
Independent Accountants. KPMG LLP are the independent accountants of the Fund.
They audit the Fund's financial statements and perform other related audit
services. They also act as independent accountants for certain other funds
advised by the Manager and its affiliates. Prior to March 2000,
PricewaterhouseCoopers LLP served as the Fund's independent accountants.
<PAGE>
Appendix A
RATINGS DEFINITIONS
Below are summaries of the rating definitions used by the nationally-recognized
rating agencies listed below. Those ratings represent the opinion of the agency
as to the credit quality of issues that they rate. The summaries below are based
upon publicly-available information provided by the rating organizations.
Moody's Investors Service, Inc.
--------------------------------------------------------------------------------
Long-Term (Taxable) Bond Ratings
Aaa: Bonds rated "Aaa" are judged to be the best quality. They carry the
smallest degree of investment risk. Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, the changes that can be expected are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds rated "Aa" are judged to be of high quality by all standards. Together
with the "Aaa" group, they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as with "Aaa" securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than that of "Aaa"
securities.
A: Bonds rated "A" possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the future.
Baa: Bonds rated "Baa" are considered medium-grade obligations; that is, they
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and have speculative
characteristics as well.
Ba: Bonds rated "Ba" are judged to have speculative elements. Their future
cannot be considered well-assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B: Bonds rated "B" generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa: Bonds rated "Caa" are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Ca: Bonds rated "Ca" represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C: Bonds rated "C" are the lowest class of rated bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Con. (...): Bonds for which the security depends on the completion of some act
or the fulfillment of some condition are rated conditionally. These bonds are
secured by (a) earnings of projects under construction, (b) earnings of projects
unseasoned in operating experience, (c) rentals that begin when facilities are
completed, or (d) payments to which some other limiting condition attaches. The
parenthetical rating denotes probable credit stature upon completion of
construction or elimination of the basis of the condition.
Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from "Aa" through "Caa." The modifier "1" indicates that the
obligation ranks in the higher end of its generic rating category; the modifier
"2" indicates a mid-range ranking; and the modifier "3" indicates a ranking in
the lower end of that generic rating category. Advanced refunded issues that are
secured by certain assets are identified with a # symbol.
Short-Term Ratings - Taxable Debt
These ratings apply to the ability of issuers to honor senior debt obligations
having an original maturity not exceeding one year:
Prime-1: Issuer has a superior ability for repayment of senior short-term debt
obligations.
Prime-2: Issuer has a strong ability for repayment of senior short-term debt
obligations. Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
Prime-3: Issuer has an acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market compositions may
be more pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require relatively
high financial leverage. Adequate alternate liquidity is maintained.
Not Prime: Issuer does not fall within any Prime rating category.
Standard & Poor's Rating Services
--------------------------------------------------------------------------------
Long-Term Credit Ratings
AAA: Bonds rated "AAA" have the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA: Bonds rated "AA" differ from the highest rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A: Bonds rated "A" are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB: Bonds rated "BBB" exhibit adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
BB, B, CCC, CC, and C
Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded as having significant
speculative characteristics. "BB" indicates the least degree of speculation, and
"C" the highest. While such obligations will likely have some quality and
protective characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions. BB: Bonds rated "BB" are less vulnerable
to nonpayment than other speculative issues. However, these face major ongoing
uncertainties or exposure to adverse business, financial, or economic conditions
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
B: Bonds rated "B" are more vulnerable to nonpayment than obligations rated
"BB", but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
CCC: Bonds rated "CCC" are currently vulnerable to nonpayment, and are dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.
CC: Bonds rated "CC" are currently highly vulnerable to nonpayment.
C: A subordinated debt or preferred stock obligation rated "C" is currently
highly vulnerable to nonpayment. The "C" rating may be used to cover a situation
where a bankruptcy petition has been filed or similar action has been taken, but
payments on this obligation are being continued. A "C" also will be assigned to
a preferred stock issue in arrears on dividends or sinking fund payments, but
that is currently paying.
D: Bonds rated "D" are in default. Payments on the obligation are not being made
on the date due even if the applicable grace period has not expired, unless
Standard and Poor's believes that such payments will be made during such grace
period. The "D" rating will also be used upon the filing of a bankruptcy
petition or the taking of a similar action if payments on an obligation are
jeopardized.
The ratings from "AA" to "CCC" may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories. The
"r" symbol is attached to the ratings of instruments with significant noncredit
risks.
Short-Term Issue Credit Ratings
--------------------------------------------------------------------------------
A-1: Obligation is rated in the highest category. The obligor's capacity to meet
its financial commitment on the obligation is strong. Within this category, a
plus (+) sign designation indicates the obligor's capacity to meet its financial
obligation is extremely strong.
A-2: Obligation is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than obligations in higher rating
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.
A-3: Obligation exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
B: Obligation is regarded as having significant speculative characteristics. The
obligor currently has the capacity to meet its financial commitment on the
obligation. However, it faces major ongoing uncertainties which could lead to
the obligor's inadequate capacity to meet its financial commitment on the
obligation.
C: Obligation is currently vulnerable to nonpayment and is dependent upon
favorable business, financial, and economic conditions for the obligor to meet
its financial commitment on the obligation.
D: Obligation is in payment default. Payments on the obligation have not been
made on the due date even if the applicable grace period has not expired, unless
Standard and Poor's believes that such payments will be made during such grace
period. The "D" rating will also be used upon the filing of a bankruptcy
petition or the taking of a similar action if payments on an obligation are
jeopardized.
Fitch, Inc.
--------------------------------------------------------------------------------
International Long-Term Credit Ratings
Investment Grade:
AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong capacity
for timely payment of financial commitments. This capacity is highly unlikely to
be adversely affected by foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very low expectation of
credit risk. They indicate a very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
A: High Credit Quality. "A" ratings denote a low expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB: Good Credit Quality. "BBB" ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
Speculative Grade:
BB: Speculative. "BB" ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time. However, business or financial alternatives may be available to allow
financial commitments to be met. Securities rated in this category are not
investment grade.
B: Highly Speculative. "B" ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met. However, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.
CCC, CC C: High Default Risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A "CC" rating indicates that default of some
kind appears probable. "C" ratings signal imminent default.
DDD, DD, and D: Default. The ratings of obligations in this category are based
on their prospects for achieving partial or full recovery in a reorganization or
liquidation of the obligor. While expected recovery values are highly
speculative and cannot be estimated with any precision, the following serve as
general guidelines. "DDD" obligations have the highest potential for recovery,
around 90%-100% of outstanding amounts and accrued interest. "DD" indicates
potential recoveries in the range of 50%-90%, and "D" the lowest recovery
potential, i.e., below 50%.
Entities rated in this category have defaulted on some or all of their
obligations. Entities rated "DDD" have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process. Entities rated "DD" and "D" are generally undergoing a formal
reorganization or liquidation process; those rated "DD" are likely to satisfy a
higher portion of their outstanding obligations, while entities rated "D" have a
poor prospect for repaying all obligations.
Plus (+) and minus (-) signs may be appended to a rating symbol to denote
relative status within the major rating categories. Plus and minus signs are not
added to the "AAA" category or to categories below "CCC," nor to short-term
ratings other than "F1" (see below).
International Short-Term Credit Ratings
F1: Highest credit quality. Strongest capacity for timely payment of financial
commitments. May have an added "+" to denote any exceptionally strong credit
feature.
F2: Good credit quality. A satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as in the case of higher
ratings.
F3: Fair credit quality. Capacity for timely payment of financial commitments is
adequate. However, near-term adverse changes could result in a reduction to
non-investment grade.
B: Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.
C: High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
D: Default. Denotes actual or imminent payment default.
<PAGE>
--------------------------------------------------------------------------------
B-1
Appendix B
--------------------------------------------------------------------------------
Industry Classifications
--------------------------------------------------------------------------------
Aerospace/Defense Food and Drug Retailers
Air Transportation Gas Utilities
Asset-Backed Health Care/Drugs
Auto Parts and Equipment Health Care/Supplies & Services
Automotive Homebuilders/Real Estate
Bank Holding Companies Hotel/Gaming
Banks Industrial Services
Beverages Information Technology
Broadcasting Insurance
Broker-Dealers Leasing & Factoring
Building Materials Leisure
Cable Television Manufacturing
Chemicals Metals/Mining
Commercial Finance Nondurable Household Goods
Communication Equipment Office Equipment
Computer Hardware Oil - Domestic
Computer Software Oil - International
Conglomerates Paper
Consumer Finance Photography
Consumer Services Publishing
Containers Railroads & Truckers
Convenience Stores Restaurants
Department Stores Savings & Loans
Diversified Financial Shipping
Diversified Media Special Purpose Financial
Drug Wholesalers Specialty Printing
Durable Household Goods Specialty Retailing
Education Steel
Electric Utilities Telecommunications - Long Distance
Electrical Equipment Telephone - Utility
Electronics Textile, Apparel & Home Furnishings
Energy Services Tobacco
Entertainment/Film Trucks and Parts
Environmental Wireless Services
Food
<PAGE>
Appendix C
OppenheimerFunds Special Sales Charge Arrangements and Waivers
In certain cases, the initial sales charge that applies to purchases of Class A
shares1 of the Oppenheimer funds or the contingent deferred sales charge that
may apply to Class A, Class B, Class C or Class N shares may be waived.2 That is
because of the economies of sales efforts realized by OppenheimerFunds
Distributor, Inc., (referred to in this document as the "Distributor"), or by
dealers or other financial institutions that offer those shares to certain
classes of investors.
Not all waivers apply to all funds. For example, waivers relating to Retirement
Plans do not apply to Oppenheimer municipal funds, because shares of those funds
are not available for purchase by or on behalf of retirement plans. Other
waivers apply only to shareholders of certain funds.
For the purposes of some of the waivers described below and in the Prospectus
and Statement of Additional Information of the applicable Oppenheimer funds, the
term "Retirement Plan" refers to the following types of plans:
(13) plans qualified under Sections 401(a) or 401(k) of the Internal Revenue
Code, (14) non-qualified deferred compensation plans, (15) employee benefit
plans3 (16) Group Retirement Plans4 (17) 403(b)(7) custodial plan accounts (18)
Individual Retirement Accounts ("IRAs"), including traditional IRAs, Roth IRAs,
SEP-IRAs, SARSEPs or SIMPLE plans
The interpretation of these provisions as to the applicability of a special
arrangement or waiver in a particular case is in the sole discretion of the
Distributor or the transfer agent (referred to in this document as the "Transfer
Agent") of the particular Oppenheimer fund. These waivers and special
arrangements may be amended or terminated at any time by a particular fund, the
Distributor, and/or OppenheimerFunds, Inc. (referred to in this document as the
"Manager").
Waivers that apply at the time shares are redeemed must be requested by the
shareholder and/or dealer in the redemption request.
--------------
9. Certain waivers also apply to Class M shares of Oppenheimer Convertible
Securities Fund.
10.In the case of Oppenheimer Senior Floating Rate Fund, a continuously-offered
closed-end fund, references to contingent deferred sales charges mean the
Fund's Early Withdrawal Charges and references to "redemptions" mean
"repurchases" of shares.
11.An "employee benefit plan" means any plan or arrangement, whether or not it
is "qualified" under the Internal Revenue Code, under which Class A shares of
an Oppenheimer fund or funds are purchased by a fiduciary or other
administrator for the account of participants who are employees of a single
employer or of affiliated employers. These may include, for example, medical
savings accounts, payroll deduction plans or similar plans. The fund accounts
must be registered in the name of the fiduciary or administrator purchasing
the shares for the benefit of participants in the plan.
12.The term "Group Retirement Plan" means any qualified or non-qualified
retirement plan for employees of a corporation or 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 has made special arrangements with the Distributor and all members of
the group participating in (or who are eligible to participate in) the plan
purchase Class A shares of an Oppenheimer fund or funds through a single
investment dealer, broker or other financial institution designated by the
group. Such plans include 457 plans, SEP-IRAs, SARSEPs, SIMPLE plans and
403(b) plans other than plans for public school employees. The term "Group
Retirement Plan" also includes qualified retirement plans and non-qualified
deferred compensation plans and IRAs that purchase Class A shares of an
Oppenheimer fund or funds through a single investment dealer, broker or other
financial institution that has made special arrangements with the Distributor
enabling those plans to purchase Class A shares at net asset value but
subject to the Class A contingent deferred sales charge.
I. Applicability of Class A Contingent Deferred Sales Charges in Certain Cases
Purchases of Class A Shares of Oppenheimer Funds That Are Not Subject to Initial
Sales Charge but May Be Subject to the Class A Contingent Deferred Sales Charge
(unless a waiver applies).
There is no initial sales charge on purchases of Class A shares of any of
the Oppenheimer funds in the cases listed below. However, these purchases may be
subject to the Class A contingent deferred sales charge if redeemed within 18
months of the end of the calendar month of their purchase, as described in the
Prospectus (unless a waiver described elsewhere in this Appendix applies to the
redemption). Additionally, on shares purchased under these waivers that are
subject to the Class A contingent deferred sales charge, the Distributor will
pay the applicable commission described in the Prospectus under "Class A
Contingent Deferred Sales Charge."16 This waiver provision applies to: |_|
Purchases of Class A shares aggregating $1 million or more. |_| Purchases by a
Retirement Plan (other than an IRA or 403(b)(7) custodial plan) that: (7) buys
shares costing $500,000 or more, or (8) has, at the time of purchase, 100 or
more eligible employees or total plan assets of
$500,000 or more, or
(9) certifies to the Distributor that it projects to have annual plan
purchases of $200,000 or more.
|_| Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the purchases
are made:
(5) through a broker, dealer, bank or registered investment adviser that has
made special arrangements with the Distributor for those purchases, or
(6) 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.
|_| Purchases of Class A shares by Retirement Plans that have any of the
following record-keeping arrangements:
(7) The record keeping is performed by Merrill Lynch Pierce Fenner & Smith,
Inc. ("Merrill Lynch") on a daily valuation basis for the Retirement Plan.
On the date the plan sponsor signs the record-keeping service agreement
with Merrill Lynch, the Plan must have $3 million or more of its assets
invested in (a) mutual funds, other than those advised or managed by
Merrill Lynch Asset Management, L.P. ("MLAM"), that are made available
under a Service Agreement between Merrill Lynch and the mutual fund's
principal underwriter or distributor, and (b) funds advised or managed by
MLAM (the funds described in (a) and (b) are referred to as "Applicable
Investments").
(8) The record keeping for the Retirement Plan is performed on a daily
valuation basis by a 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 record
keeping service agreement with Merrill Lynch, the Plan must have
$3 million or more of its assets (excluding assets invested in
money market funds) invested in Applicable Investments.
(9) The record keeping for a Retirement Plan is handled under a
service agreement with Merrill Lynch and on the date the plan
sponsor signs that agreement, the Plan has 500 or more eligible
employees (as determined by the Merrill Lynch plan conversion
manager).
|_| Purchases by a Retirement Plan whose record keeper had a
cost-allocation agreement with the Transfer Agent on or before May 1,
1999.
II. Waivers of Class A Sales Charges of Oppenheimer Funds
A. 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 (and no commissions are paid by the Distributor on such
purchases): |_| The Manager or its affiliates.
|_| Present or former officers, directors, trustees and employees (and
their "immediate families") of the Fund, the Manager and its
affiliates, and retirement plans established by them for their
employees. The term "immediate family" refers to one's spouse,
children, grandchildren, grandparents, parents, parents-in-law,
brothers and sisters, sons- and daughters-in-law, a sibling's spouse, a
spouse's siblings, aunts, uncles, nieces and nephews; relatives by
virtue of a remarriage (step-children, step-parents, etc.) are
included.
|_| Registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the
Distributor for that purpose.
|_| 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.
|_| 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 which are
identified as such 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).
|_| Dealers, brokers, banks or registered investment advisors 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, bank or advisor for the
purchase or sale of Fund shares.
|_| 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.
|_| "Rabbi trusts" that buy shares for their own accounts, if the purchases
are made through a broker or agent or other financial intermediary that
has made special arrangements with the Distributor for those purchases.
|_| Clients of 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.
|_| 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.
|_| Accounts for which Oppenheimer Capital (or its successor) is the
investment advisor (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.
|_| A unit investment trust that has entered into an appropriate agreement
with the Distributor.
|_| Dealers, brokers, banks, or registered investment advisers that have
entered into an agreement with the Distributor to sell shares to
defined contribution employee retirement plans for which the dealer,
broker or investment adviser provides administration services.
|-|
<PAGE>
Retirement Plans and deferred compensation plans and trusts used to fund
those plans (including, for example, plans qualified or created under
sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue Code),
in each case if those purchases are made through a broker, agent or
other financial intermediary that has made special arrangements with
the Distributor for those purchases.
|_| A TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a Former Quest for Value
Fund were exchanged for Class A shares of that Fund due to the
termination of the Class B and Class C TRAC-2000 program on November
24, 1995.
|_| A qualified Retirement Plan 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, if that
arrangement was consummated and share purchases commenced by December
31, 1996.
B. 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 sales charges (and no commissions are paid by the Distributor on such
purchases): |_| Shares issued in plans of reorganization, such as mergers, asset
acquisitions and
exchange offers, to which the Fund is a party.
|_| 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.
|_| Shares purchased through a broker-dealer that has entered into a special
agreement with the Distributor to allow the broker's customers to purchase
and pay for shares of Oppenheimer funds using the proceeds of shares
redeemed in the prior 30 days from a mutual fund (other than a fund managed
by the Manager or any of its subsidiaries) on which an initial sales charge
or contingent deferred sales charge was paid. This waiver also applies to
shares purchased by exchange of shares of Oppenheimer Money Market Fund,
Inc. that were purchased and paid for in this manner. This waiver must be
requested when the purchase order is placed for shares of the Fund, and the
Distributor may require evidence of qualification for this waiver.
|_| Shares purchased with the proceeds of maturing principal units of any
Qualified Unit Investment Liquid Trust Series.
|_| Shares purchased by the reinvestment of loan repayments by a
participant in a Retirement Plan for which the Manager or an affiliate
acts as sponsor.
C. 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: |_| To make Automatic Withdrawal Plan payments that are limited
annually to no more than
12% of the account value adjusted annually.
|_| Involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (please refer to "Shareholder Account
Rules and Policies," in the applicable fund Prospectus).
|_| For distributions from Retirement Plans, deferred compensation plans or
other employee benefit plans for any of the following purposes:
(19) 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.
(20) To return excess contributions.
(21) To return contributions made due to a mistake of fact.
<PAGE>
(22) Hardship withdrawals, as defined in the plan.17
(23) Under a Qualified Domestic Relations Order, as defined in the Internal
Revenue Code, or, in the case of an IRA, a divorce or separation agreement
described in Section 71(b) of the Internal Revenue Code.
(24) To meet the minimum distribution requirements of the Internal Revenue Code.
(25) To make "substantially equal periodic payments" as described in Section
72(t) of the Internal Revenue Code.
(26) For loans to participants or beneficiaries.
(27) Separation from service.18
(10) Participant-directed redemptions to purchase shares of a mutual
fund (other than a fund managed by the Manager or a subsidiary of
the Manager) if the plan has made special arrangements with the
Distributor.
(11) Plan termination or "in-service distributions," if the redemption
proceeds are rolled over directly to an OppenheimerFunds-sponsored
IRA.
|_| For distributions from Retirement Plans having 500 or more eligible
employees, except distributions due to termination of all of the
Oppenheimer funds as an investment option under the Plan.
|_| For distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing
this waiver.
III. Waivers of Class B, Class C and Class N Sales Charges of Oppenheimer Funds
The Class B, Class C and Class N contingent deferred sales charges will not be
applied to shares purchased in certain types of transactions or redeemed in
certain circumstances described below.
A. Waivers for Redemptions in Certain Cases.
The Class B, Class C and Class N contingent deferred sales charges will be
waived for redemptions of shares in the following cases: |_| Shares redeemed
involuntarily, as described in "Shareholder Account Rules and
Policies," in the applicable Prospectus.
|_| 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.
|_| Distributions from accounts for which the broker-dealer of record has
entered into a special agreement with the Distributor allowing this
waiver.
|_| Redemptions of Class B shares 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.
|_| Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
accounts of clients of financial institutions that have entered into a
special arrangement with the Distributor for this purpose.
|_| Redemptions requested in writing by a Retirement Plan sponsor of Class
C shares of an Oppenheimer fund in amounts of $1 million or more held
by the Retirement Plan for more than one year, if the redemption
proceeds are invested in Class A shares of one or more Oppenheimer
funds.
|_| Distributions from Retirement Plans or other employee benefit plans for
any of the following purposes:
(29) 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 in an Oppenheimer fund.
(30) To return excess contributions made to a participant's account.
(31) To return contributions made due to a mistake of fact.
(32) To make hardship withdrawals, as defined in the plan.19
(33) To make distributions required under a Qualified Domestic
Relations Order or, in the case of an IRA, a divorce or separation
agreement described in Section 71(b) of the Internal Revenue Code
(34) To meet the minimum distribution requirements of the Internal Revenue Code
(35) To make "substantially equal periodic payments" as described in Section
72(t) of the Internal Revenue Code.
(36) For loans to participants or beneficiaries.20
(37) On account of the participant's separation from service.21
(38) Participant-directed redemptions to purchase shares of a mutual
fund (other than a fund managed by the Manager or a subsidiary of
the Manager) offered as an investment option in a Retirement Plan
if the plan has made special arrangements with the Distributor.
(39) Distributions made on account of a plan termination or
"in-service" distributions, if the redemption proceeds are rolled
over directly to an OppenheimerFunds-sponsored IRA.
(40) Distributions from Retirement Plans having 500 or more eligible
employees, but excluding distributions made because of the Plan's
elimination as investment options under the Plan of all of the
Oppenheimer funds that had been offered.
(41) For distributions from a participant's account under an Automatic
Withdrawal Plan after the participant reaches age 59 1/2 , as long
as the aggregate value of the distributions does not exceed 10% of
the account's value, adjusted annually.
Redemptions of Class B shares under an Automatic Withdrawal Plan for an
account other than a Retirement Plan, if the aggregate value of
the redeemed shares does not exceed 10% of the account's value,
adjusted annually.
|_|Redemptions of Class B shares, Class C shares or Class N shares under
an Automatic Withdrawal Plan from an account other than a Retirement
Plan if the aggregate value of the redeemed shares does not exceed 10%
of the account's value annually.
B. Waivers for Shares Sold or Issued in Certain Transactions.
The contingent deferred sales charge is also waived on Class B, Class C and
Class N shares sold or issued in the following cases: |_| Shares sold to the
Manager or its affiliates.
|_| 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.
|_| Shares issued in plans of reorganization to which the Fund is a party.
|_| Shares sold to present or former officers, directors, trustees or employees
(and their "immediate families" as defined above in Section I.A.) of the
Fund, the Manager and its affiliates and retirement plans established by
them for their employees.
<PAGE>
IV. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
Funds Who Were Shareholders of Former Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers for Class A,
Class B and Class C shares described in the Prospectus or Statement of
Additional Information of the Oppenheimer funds are modified as described below
for certain persons who were shareholders of the former Quest for Value Funds.
To be eligible, those persons must have been shareholders on November 24, 1995,
when OppenheimerFunds, Inc. became the investment advisor to those former Quest
for Value Funds. Those funds include:
<PAGE>
Oppenheimer Quest Value Fund, Inc. Oppenheimer Quest Small Cap Value
Fund
Oppenheimer Quest Balanced Value Oppenheimer Quest Global Value Fund
Fund
Oppenheimer Quest Opportunity Value
Fund
These arrangements also apply to shareholders of the following funds when
they merged (were reorganized) into various Oppenheimer funds on November 24,
1995:
Quest for Value U.S. Government Quest for Value New York Tax-Exempt
Income Fund Fund
Quest for Value Investment Quality Quest for Value National Tax-Exempt
Income Fund Fund
Quest for Value Global Income Fund Quest for Value California Tax-Exempt
Fund
All of the funds listed above are referred to in this Appendix as the
"Former Quest for Value Funds." The waivers of initial and contingent deferred
sales charges described in this Appendix apply to shares of an Oppenheimer fund
that are either: |_| acquired by such shareholder pursuant to an exchange of
shares of an Oppenheimer fund
that was one of the Former Quest for Value Funds, or
|_| purchased by such shareholder by exchange of shares of another
Oppenheimer fund that were acquired pursuant to the merger of any of
the Former Quest for Value Funds into that other Oppenheimer fund on
November 24, 1995.
A. Reductions or Waivers of Class A Sales Charges.
|X| Reduced Class A Initial Sales Charge Rates for Certain Former Quest for
Value Funds Shareholders.
Purchases by Groups and Associations. The following table sets forth the initial
sales charge rates for Class A shares purchased by members of "Associations"
formed for any purpose other than the purchase of securities. The rates in the
table apply if 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.
--------------------------------------------------------------------------------
Initial Sales Initial Sales
Number of Eligible Charge as a % of Charge as a % of Commission as %
Employees or Members Offering Price Net Amount Invested of 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
--------------------------------------------------------------------------------
<PAGE>
For purchases by 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 in the applicable fund's Prospectus.
Purchases made under this arrangement qualify for the lower of either the
sales charge rate in the table based on the number of members of an Association,
or the sales charge rate that applies under the Right of Accumulation described
in the applicable fund's Prospectus and Statement of Additional Information.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations also may purchase shares for their individual or
custodial accounts at these reduced sales charge rates, upon request to the
Distributor.
|X| Waiver of Class A Sales Charges for Certain Shareholders. Class A
shares purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
|_| Shareholders 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.
|_| Shareholders who acquired shares of any Former Quest for Value Fund
by merger of any of the portfolios of the Unified Funds.
|X| 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 purchased by the following investors who were
shareholders of any Former Quest for Value Fund:
Investors who purchased Class A shares from a dealer that is or was not
permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship, under the Employee
Retirement Income Security Act of 1974 and regulations adopted under that law.
B. Class A, Class B and Class C Contingent Deferred Sales Charge Waivers.
|X| 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 an Oppenheimer fund. The
shares must have been acquired by the 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. Those shares must have been
purchased prior to March 6, 1995 in connection with:
|_| 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 value, adjusted annually, and
|_| 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.
|X| 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 an Oppenheimer fund. The shares must have been acquired by the 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
Former Quest for Value Fund merged. Those shares must have been purchased on or
after March 6, 1995, but prior to November 24, 1995:
|_| redemptions following the death or disability of the shareholder(s) (as
evidenced by a determination of total disability by the U.S. Social
Security Administration);
|_| 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 value; adjusted annually, and
|_| 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 Oppenheimer fund described in this section if the proceeds are
invested in the same Class of shares in that fund or another Oppenheimer fund
within 90 days after redemption.
V. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
Funds Who Were Shareholders of Connecticut Mutual Investment Accounts, Inc.
The initial and contingent deferred sale charge rates and waivers for Class A
and Class B shares described in the respective Prospectus (or this Appendix) of
the following Oppenheimer funds (each is referred to as a "Fund" in this
section):
o Oppenheimer U. S. Government Trust,
o Oppenheimer Bond Fund,
o Oppenheimer Disciplined Value Fund and
o Oppenheimer Disciplined Allocation Fund
are modified as described below for those Fund shareholders who were
shareholders of the following funds (referred to as the "Former Connecticut
Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the
investment adviser to the Former Connecticut Mutual Funds:
Connecticut Mutual Liquid Account Connecticut Mutual Total Return Account
Connecticut Mutual Government Securities CMIA LifeSpan Capital Appreciation
Account Account Connecticut Mutual Income Account CMIA LifeSpan Balanced Account
Connecticut Mutual Growth Account CMIA Diversified Income Account
A. Prior Class A CDSC and Class A Sales Charge Waivers.
|_| Class A Contingent Deferred Sales Charge. Certain shareholders of a
Fund and the other Former Connecticut Mutual Funds are entitled to continue to
make additional purchases of Class A shares at net asset value without a Class A
initial sales charge, but subject to the Class A contingent deferred sales
charge that was in effect prior to March 18, 1996 (the "prior Class A CDSC").
Under the prior Class A CDSC, if any of those shares are redeemed within one
year of purchase, they will be assessed a 1% contingent deferred sales charge on
an amount equal to the current market value or the original purchase price of
the shares sold, whichever is smaller (in such redemptions, any shares not
subject to the prior Class A CDSC will be redeemed first).
Those shareholders who are eligible for the prior Class A CDSC are: (5)
persons whose purchases of Class A shares of a Fund and other Former Connecticut
Mutual Funds were $500,000 prior to March 18, 1996, as a result of
direct purchases or purchases pursuant to the Fund's policies on
Combined Purchases or Rights of Accumulation, who still hold those
shares in that Fund or other Former Connecticut Mutual Funds, and
(6) persons whose intended purchases under a Statement of Intention
entered into prior to March 18, 1996, with the former general
distributor of the Former Connecticut Mutual Funds to purchase shares
valued at $500,000 or more over a 13-month period entitled those
persons to purchase shares at net asset value without being subject
to the Class A initial sales charge.
Any of the Class A shares of a Fund and the other Former Connecticut
Mutual Funds that were purchased at net asset value prior to March 18, 1996,
remain subject to the prior Class A CDSC, or if any additional shares are
purchased by those shareholders at net asset value pursuant to this arrangement
they will be subject to the prior Class A CDSC.
|_| Class A Sales Charge Waivers. Additional Class A shares of a Fund may
be purchased without a sales charge, by a person who was in one (or more) of the
categories below and acquired Class A shares prior to March 18, 1996, and still
holds Class A shares: (13) any purchaser, provided the total initial amount
invested in the Fund or any one or
more of the Former Connecticut Mutual Funds totaled $500,000 or
more, including investments made pursuant to the Combined
Purchases, Statement of Intention and Rights of Accumulation
features available at the time of the initial purchase and such
investment is still held in one or more of the Former Connecticut
Mutual Funds or a Fund into which such Fund merged;
(14) any participant in a qualified plan, provided that the total
initial amount invested by the plan in the Fund or any one or more
of the Former Connecticut Mutual Funds totaled $500,000 or more;
(15) Directors of the Fund or any one or more of the Former Connecticut Mutual
Funds and members of their immediate families;
(16) employee benefit plans sponsored by Connecticut Mutual Financial Services,
L.L.C. ("CMFS"), the prior distributor of the Former Connecticut Mutual
Funds, and its affiliated companies;
(17) one or more members of a group of at least 1,000 persons (and
persons who are retirees from such group) engaged in a common
business, profession, civic or charitable endeavor or other
activity, and the spouses and minor dependent children of such
persons, pursuant to a marketing program between CMFS and such
group; and
(18) an institution acting as a fiduciary on behalf of an individual or
individuals, if such institution was directly compensated by the
individual(s) for recommending the purchase of the shares of the
Fund or any one or more of the Former Connecticut Mutual Funds,
provided the institution had an agreement with CMFS.
Purchases of Class A shares made pursuant to (1) and (2) above may be
subject to the Class A CDSC of the Former Connecticut Mutual Funds described
above.
Additionally, Class A shares of a Fund may be purchased without a sales
charge by any holder of a variable annuity contract issued in New York State by
Connecticut Mutual Life Insurance Company through the Panorama Separate Account
which is beyond the applicable surrender charge period and which was used to
fund a qualified plan, if that holder exchanges the variable annuity contract
proceeds to buy Class A shares of the Fund.
B. Class A and Class B Contingent Deferred Sales Charge Waivers.
In addition to the waivers set forth in the Prospectus and in this Appendix,
above, the contingent deferred sales charge will be waived for redemptions of
Class A and Class B shares of a Fund and exchanges of Class A or Class B shares
of a Fund into Class A or Class B shares of a Former Connecticut Mutual Fund
provided that the Class A or Class B shares of the Fund to be redeemed or
exchanged were (i) acquired prior to March 18, 1996 or (ii) were acquired by
exchange from an Oppenheimer fund that was a Former Connecticut Mutual Fund.
Additionally, the shares of such Former Connecticut Mutual Fund must have been
purchased prior to March 18, 1996:
(19) by the estate of a deceased shareholder;
(20) upon the disability of a shareholder, as defined in Section 72(m)(7) of the
Internal Revenue Code;
(21) for retirement distributions (or loans) to participants or
beneficiaries from retirement plans qualified under Sections 401(a)
or 403(b)(7)of the Code, or from IRAs, deferred compensation plans
created under Section 457 of the Code, or other employee benefit
plans;
(22) as tax-free returns of excess contributions to such retirement or employee
benefit plans;
(23) in whole or in part, in connection with shares sold to any state,
county, or city, or any instrumentality, department, authority, or
agency thereof, that is prohibited by applicable investment laws from
paying a sales charge or commission in connection with the purchase
of shares of any registered investment management company;
(24) in connection with the redemption of shares of the Fund due to a
combination with another investment company by virtue of a merger,
acquisition or similar reorganization transaction;
(25) in connection with the Fund's right to involuntarily redeem or liquidate
the Fund; (26) in connection with automatic redemptions of Class A shares and
Class B shares in
certain retirement plan accounts pursuant to an Automatic Withdrawal
Plan but limited to no more than 12% of the original value annually;
or
(27) as involuntary redemptions of shares by operation of law, or under
procedures set forth in the Fund's Articles of Incorporation, or as
adopted by the Board of Directors of the Fund.
VI. Special Reduced Sales Charge for Former Shareholders of
Advance America Funds, Inc.
Shareholders of Oppenheimer Municipal Bond Fund, Oppenheimer U.S. Government
Trust, Oppenheimer Strategic Income Fund and Oppenheimer Equity Income Fund who
acquired (and still hold) shares of those funds as a result of the
reorganization of series of Advance America Funds, Inc. into those Oppenheimer
funds on October 18, 1991, and who held shares of Advance America Funds, Inc. on
March 30, 1990, may purchase Class A shares of those four Oppenheimer funds at a
maximum sales charge rate of 4.50%.
VII. Sales Charge Waivers on Purchases of Class M Shares of
Oppenheimer Convertible Securities Fund
Oppenheimer Convertible Securities Fund (referred to as the "Fund" in this
section) may sell Class M shares at net asset value without any initial sales
charge to the classes of investors listed below who, prior to March 11, 1996,
owned shares of the Fund's then-existing Class A and were permitted to purchase
those shares at net asset value without sales charge:
|_| the Manager and its affiliates,
|_| present or former officers, directors, trustees and employees (and
their "immediate families" as defined in the Fund's Statement of
Additional Information) of the Fund, the Manager and its affiliates,
and retirement plans established by them or the prior investment
advisor of the Fund for their employees,
|_| registered management investment companies or separate accounts of
insurance companies that had an agreement with the Fund's prior
investment advisor or distributor for that purpose,
|_| 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,
|_| employees and registered representatives (and their spouses) of dealers
or brokers described in the preceding section or financial institutions
that have entered into sales arrangements with those dealers or brokers
(and whose identity is made known to the Distributor) or with the
Distributor, but only if the purchaser certifies to the Distributor at
the time of purchase that the purchaser meets these qualifications,
|_| dealers, brokers, or registered investment advisors that had entered
into an agreement with the Distributor or the prior distributor of the
Fund specifically providing for the use of Class M shares of the Fund
in specific investment products made available to their clients, and
|_| dealers, brokers or registered investment advisors that had entered
into an agreement with the Distributor or prior distributor of the
Fund's shares to sell shares to defined contribution employee
retirement plans for which the dealer, broker, or investment advisor
provides administrative services.
<PAGE>
Oppenheimer Quest Balanced Value Fund
Internet Web Site:
www.oppenheimerfunds.com
Investment Advisor
6803 South Tucson Way
Engelwood, Colorado 80112
Sub-Advisor
OpCap Advisors
1345 Avenue of the Americas, 49th Floor
New York, New York 10105-4800
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1.800.525.7048
Custodian Bank
Citibank, N.A.
111 Wall Street
New York, New York 10005
Independent Accountants
KPMG LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Mayer Brown & Platt
1675 Broadway
New York, New York 10019-5820
PX257.0200
--------
1 No concessions will be paid on sales of Class A shares purchased with the
redemption proceeds of shares of another 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 2 However, that commission will not be paid on
purchases of shares in amounts of $1 million or more (including any right of
accumulation) by a Retirement Plan that pays for the purchase with the
redemption proceeds of Class C shares of one or more Oppenheimer funds held by
the Plan for more than one year.
3 This provision does not apply to IRAs.
4 This provision does not apply to 403(b)(7) custodial plans if the participant
is less than age 55, nor to IRAs.
5 This provision does not apply to IRAs.
6 This provision does not apply to loans from 403(b)(7) custodial plans. 7 This
provision does not apply to 403(b)(7) custodial plans if the participant is less
than age 55, nor to IRAs.
8 No concession will be paid on sales of Class A shares purchased with the
redemption proceeds of shares of another 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 Oppenheimer funds are added as an
investment option under that plan. 9 However, that commission will not be paid
on purchases of shares in amounts of $1 million or more (including any right of
accumulation) by a Retirement Plan that pays for the purchase with the
redemption proceeds of Class C shares of one or more Oppenheimer funds held by
the Plan for more than one year.
10 This provision does not apply to IRAs.
11 This provision does not apply to 403(b)(7) custodial plans if the participant
is less than age 55, nor to IRAs.
12 This provision does not apply to IRAs.
13 This provision does not apply to loans from 403(b)(7) custodial plans. 14
This provision does not apply to 403(b)(7) custodial plans if the participant is
less than age 55, nor to IRAs.
15 No concession will be paid on sales of Class A shares purchased with the
redemption proceeds of shares of another 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 Oppenheimer funds are added as an
investment option under that plan. 16 However, that commission will not be paid
on purchases of shares in amounts of $1 million or more (including any right of
accumulation) by a Retirement Plan that pays for the purchase with the
redemption proceeds of Class C shares of one or more Oppenheimer funds held by
the Plan for more than one year.
17 This provision does not apply to IRAs.
18 This provision does not apply to 403(b)(7) custodial plans if the participant
is less than age 55, nor to IRAs.
19 This provision does not apply to IRAs.
20 This provision does not apply to loans from 403(b)(7) custodial plans. 21
This provision does not apply to 403(b)(7) custodial plans if the participant is
less than age 55, nor to IRAs.
<PAGE>
OPPENHEIMER QUEST FOR VALUE FUNDS
FORM N-1A
PART C
OTHER INFORMATION
Item 23. Exhibits
(a) (i) Declaration of Trust dated 4/17/87: Previously filed with Registrant's
Post-Effective Amendment No. 33, 6/23/95, and refiled with Registrant's
Post-Effective Amendment No. 36, 2/9/96, pursuant to Item 102 of Regulation
S-T, and incorporated herein by reference.
(ii) Amendment No. 1 to Declaration of Trust dated 4/11/88: Previously filed on
4/14/88, and incorporated herein by reference.
(iii)Amendment No. 2 to Declaration of Trust dated 4/18/88: Previously filed on
4/20/88, and incorporated herein by reference.
(iv) Amendment to Declaration of Trust dated 10/19/88: Previously filed with
Post-Effective Amendment No. 36, 2/9/96, and incorporated herein by
reference.
(v) Amendment to Declaration of Trust dated 9/12/95: Previously filed with
Post-Effective Amendment No. 36, 2/9/95, and incorporated herein by
reference.
(vi) Amendment to Declaration of Trust dated 11/22/95: Previously filed with
Post-Effective Amendment No. 36, 2/9/95, and incorporated herein by
reference.
(vii)Amendment to Declaration of Trust dated 10/16/96: Previously filed with
Registrant's Post-Effective Amendment No. 37, 10/16/96, and incorporated
herein by reference.
(viii) Amendment to Declaration of Trust dated 4/30/98: Previously filed with
Registrant's Post-Effective Amendment No. 43, 12/21/98, and incorporated
herein by reference.
(ix) Form of Amendment to Declaration of Trust: To be Filed by Amendment.
(b) (i) By-Laws of the Fund: Previously filed with Registrant's Post-Effective
Amendment No. 33, 6/23/95, and refiled with Post-Effective Amendment No.
36, 2/9/96, pursuant to Item 102 of Regulation S-T, and incorporated herein
by reference.
(ii) Amendment No. 1 to By-Laws dated 2/4/97: Previously filed with Registrant's
Post-Effective Amendment No. 41, 11/21/97, and incorporated herein by
reference.
(iii)Amendment No. 2 to By-Laws dated 7/22/98: Previously filed with
Registrant's Post-Effective Amendment No. 43, 12/21/98, and incorporated
herein by reference.
(c) (i) Specimen Class A Share Certificate for Oppenheimer Quest Small Cap Fund
("Small Cap Fund"): Previously filed with Registrant's Post-Effective
Amendment No. 41, 11/21/97, and incorporated herein by reference.
(ii) Specimen Class B Share Certificate for Small Cap Fund: Previously filed
with Registrant's Post-Effective Amendment No. 41, 11/21/97, and
incorporated herein by reference.
(iii)Specimen Class C Share Certificate for Small Cap Fund: Previously filed
with Registrant's Post-Effective Amendment No. 41, 11/21/97, and
incorporated herein by reference.
(iv) Specimen Class A Share Certificate for Oppenheimer Quest Balanced Value
Fund ("Balanced Value Fund"): Previously filed with Registrant's
Post-Effective Amendment No. 37, 10/16/96, and incorporated herein by
reference.
(v) Specimen Class B Share Certificate for Balanced Value Fund: Previously
filed with Registrant's Post-Effective Amendment No. 37, 10/16/96, and
incorporated herein by reference.
(vi) Specimen Class C Share Certificate for Balanced Value Fund: Previously
filed with Registrant's Post-Effective Amendment No. 37, 10/16/96, and
incorporated herein by reference.
(vii)Specimen Class Y Share Certificate for Balanced Value Fund: Previously
filed with Post-Effective Amendment No.46 2/28/00 and incorporated herein
by reference..
(viii) Specimen Class A Share Certificate for Oppenheimer Quest Opportunity
Value Fund ("Opportunity Value Fund"): Previously filed with Registrant's
Post-Effective Amendment No. 37, 10/16/96, and incorporated herein by
reference.
(ix) Specimen Class B Share Certificate for Opportunity Value Fund: Previously
filed with Registrant's Post-Effective Amendment No. 37, 10/16/96, and
incorporated herein by reference.
(x) Specimen Class C Share Certificate for Opportunity Value Fund: Previously
filed with Registrant's Post-Effective Amendment No. 37, 10/16/96, and
incorporated herein by reference.
(xi) Specimen Class Y Share Certificate for Opportunity Value Fund: Previously
filed with Registrant's Post-Effective Amendment No. 37, 10/16/96, and
incorporated herein by reference.
(xii)Specimen Class N Shares Certificate for Balanced Value Fund: Filed
herewith.
(xiii) Specimen Class N Shares Certificate for Small Cap Fund: Filed herewith.
(xiv)Specimen Class N Shares Certificate for Opportunity Value Fund: Filed
herewith.
(d) (i) Investment Advisory Agreement dated 5/27/97: Previously filed with
Registrant's Post-Effective Amendment No. 41, 11/21/97, and incorporated
herein by reference.
(ii) Amendment to Investment Advisory Agreement dated 10/22/97: Previously filed
with Registrant's Post-Effective Amendment No. 41, 11/21/97, and
incorporated herein by reference.
(iii)Subadvisory Agreement with respect to Small Cap Fund dated 3/10/00: To be
Filed by Amendment.
(iv) Subadvisory Agreement with respect to Balanced Value Fund dated 3/10/00: To
be Filed by Amendment.
(v) Subadvisory Agreement with respect to Opportunity Value Fund dated 3/10/00:
To be Filed by Amendement.
(e) (i) General Distributor's Agreement dated 11/22/95: Previously filed with
Registrant's Post-Effective Amendment No. 36, 2/9/96, and incorporated
herein by reference.
(ii) Form of Dealer Agreement of OppenheimerFunds Distributor, Inc.: Filed with
Post-Effective Amendment No. 14 of Oppenheimer Main Street Funds, Inc.
(Reg. No. 33-17850), 9/30/94, and incorporated herein by reference.
(iii)Form of OppenheimerFunds Distributor, Inc. Broker Agreement: Filed with
Post-Effective Amendment No. 14 of Oppenheimer Main Street Funds, Inc.
(Reg. No. 33-17850), 9/30/94, and incorporated herein by reference.
(iv) Form of OppenheimerFunds Distributor, Inc. Agency Agreement: Filed with
Post-Effective Amendment No. 14 of Oppenheimer Main Street Funds, Inc.
(Reg. No. 33-17850), 9/30/94, and incorporated herein by reference.
(v) Broker Agreement between OppenheimerFunds, Inc. and Newbridge Securities
dated 10/1/86: Previously filed with Post-Effective Amendment No. 25 of
Oppenheimer Special Fund (Reg. No. 2-45272), 11/1/86, refiled with
Post-Effective Amendment No. 45 of Oppenheimer Special Fund, (Reg. No
2-45272), 8/22/94, pursuant to Item 102 of Regulation S-T, and incorporated
herein by reference.
(f) (i) Form of Deferred Compensation Plan for Disinterested
Trustees/Directors: Previously filed with Registrant's Post-Effective
Amendment No. 43, 12/21/98, and incorporated herein by reference.
(ii) Form of Individual Retirement Account Trust Agreement: Previously filed as
Exhibit 14 of Post-Effective Amendment No. 21 of Oppenheimer U.S.
Government Trust (Reg. No. 2-76645), 8/25/93, and incorporated herein by
reference.
(iii)Form of prototype Standardized and Non-Standardized Profit-Sharing Plan
and Money Purchase Pension Plan for self-employed persons and corporations:
Previously filed with Post-Effective Amendment No. 15 to the Registration
Statement of Oppenheimer Mortgage Income Fund (Reg. No. 33-6614), 1/20/95,
and incorporated herein by reference.
(iv) Form of Tax-Sheltered Retirement Plan and Custody Agreement for employees
of public schools and tax-exempt organizations: Previously filed with
Post-Effective Amendment No. 47 to the Registration Statement of
Oppenheimer Growth Fund (Reg. No. 2-45272), 10/21/94, and incorporated
herein by reference.
(v) Form of Simplified Employee Pension IRA: Previously filed with
Post-Effective Amendment No. 42 to the Registration Statement of
Oppenheimer Equity Income Fund (Reg. No. 2-33043), 10/28/94, and
incorporated herein by reference.
(vi) Form of SAR-SEP Simplified Employee Pension IRA: Previously filed with
Post-Effective Amendment No. 36 to Oppenheimer Equity Income Fund (Reg. No.
2-33043), 10/28/94, and incorporated herein by reference.
(vii)Form of Prototype 401(k) plan: Previously filed with Post-Effective
Amendment No. 7 to the Registration Statement of Oppenheimer Strategic
Income & Growth Fund (33-47378), 9/28/95, and incorporated herein by
reference.
(viii) Retirement Plan for Non-Interested Trustees or Directors: Previously
filed with Registrant's Post-Effective Amendment No. 43, 12/21/98, and
incorporated herein by reference.
(g) (i) Custody Agreement dated 10/19/89: Previously filed as Exhibit 8 to
Post-Effective Amendment No. 6, and refiled with Post-Effective Amendment
No. 36, 2/9/96, pursuant to Item 102 of Regulation S-T, and incorporated
herein by reference.
(ii) Foreign Custody Agreement between Citibank, N.A. and OppenheimerFunds, Inc.
dated 9/14/98: Previously filed with Registrant's Post-Effective Amendment
No. 43, 12/21/98, and incorporated herein by reference.
(h) Not applicable.
(i) Opinion and Consent of Counsel dated 7/12/91: Previously filed with
Registrant's Post-Effective Amendment No. 33 to Registrant's Registration
Statement, 6/23/95, and incorporated herein by reference.
(j) Independent Auditors Consent and Report: To be Filed by Amendment.
(k) Not applicable.
(l) Investment Letter from OppenheimerFunds, Inc. to Registrant: Previously
filed with Registrant's Post-Effective Amendment No. 33, 6/23/95, and
incorporated herein by reference.
(m) (i) Amended and Restated Distribution and Service Plan and Agreement dated
2/3/98 with respect to Class A shares of Balanced Value Fund: Previously
filed with Registrant's Post-Effective Amendment No. 43, 12/21/98, and
incorporated herein by reference
(ii) Amended and Restated Distribution and Service Plan and Agreement dated
2/3/98 with respect to Class A shares of Opportunity Value Fund: Previously
filed with Registrant's Post-Effective Amendment No. 43, 12/21/98, and
incorporated herein by reference.
(iii)Amended and Restated Distribution and Service Plan Agreement dated 2/3/98
with respect to Class A shares of Small Cap Fund: Previously filed with
Registrant's Post-Effective Amendment No. 43, 12/21/98, and incorporated
herein by reference.
(iv) Amended and Restated Distribution and Service Plan and Agreement dated
2/3/98 with respect to Class B shares of Balanced Value Fund: Previously
filed with Registrant's Post-Effective Amendment No. 43, 12/21/98, and
incorporated herein by reference.
(v) Amended and Restated Distribution and Service Plan and Agreement dated
2/3/98 with respect to Class B shares of Opportunity Value Fund: Previously
filed with Registrant's Post-Effective Amendment No. 43, 12/21/98, and
incorporated herein by reference.
(vi) Amended and Restated Distribution and Service Plan and Agreement dated
2/3/98 with respect to Class B shares of Small Cap Fund: Previously filed
with Registrant's Post-Effective Amendment No. 43, 12/21/98, and
incorporated herein by reference.
(vii)Amended and Restated Distribution and Service Plan and Agreement dated
2/3/98 with respect to Class C shares of Balanced Value Fund: Previously
filed with Registrant's Post-Effective Amendment No. 43, 12/21/98, and
incorporated herein by reference.
(viii) Amended and Restated Distribution and Service Plan and Agreement dated
2/3/98 with respect to Class C shares of Opportunity Value Fund: Previously
filed with Registrant's Post-Effective Amendment No. 43, 12/21/98, and
incorporated herein by reference.
(ix) Amended and Restated Distribution and Service Plan and Agreement dated
2/3/98 with respect to Class C shares of Small Cap Fund: Previously filed
with Registrant's Post-Effective Amendment No. 43, 12/21/98, and
incorporated herein by reference.
(x) Form of Distribution and Service Plan and Agreement with respect to Class N
Shares of Balanced Value Fund: To be Filed by Amendment.
(xi) Form of Distribution and Service Plan and Agreement with respect to Class N
Shares of Opportunity Value Fund: To be Filed by Amendment.
(xii)Form of Distribution and Service Plan and Agreement with respect to Class
N Shares of Small Cap Fund: To be Filed by Amendment.
(n) Oppenheimer Funds Multiple Class Plan under Rule 18f-3 updated through
8/22/00: Previously filed with Post-Effective Amendment No. 62 to the
Registration Statement of Oppenheimer Money Market Fund (Reg. No. 2-4988),
11/20/00, and incorporated herein by reference.
-- Powers of Attorney (including Certified Board resolutions): Previously
filed with Registrant's Post-Effective Amendment No. 35, 11/24/95, and
incorporated herein by reference.
-- Power of Attorney (including Certified Board resolution) for Robert G.
Galli: Previously filed with Registrant's Post-Effective Amendment No. 43,
12/21/98, and incorporated herein by reference.
(o) Power of Attorney (including Certified Board resolution) for Brian W.
Wixted:
Previously filed with Post-Effective Amendment No. 5 to the Registration
Statement of Oppenheimer Quest Capital Value Fund, Inc. (Registration No.
333-16881), 2/22/00, and incorporated herein by reference.
(p) Amended and Restated Code of Ethics of the OppenheimerFunds dated 3/1/00
under Rule 17j-1 of the Investment Company Act of 1940: Filed with the
Initial Registration Statement of Oppenheimer Emerging Growth Fund (Reg.
No. 333-44176), 8/21/00 and incorporated herein by reference.
Item 24. Persons Controlled by or Under Common Control with the Fund
None.
Item 25. Indemnification
Reference is made to the provisions of Article Seven of Registrant's
Articles of Amendment and Restatement filed as Exhibit 23(a) to this
Registration Statement, and incorporated herein by reference.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a trustee, officer or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person, Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
Item 26. Business and Other Connections of the Investment Adviser
(a) OppenheimerFunds, Inc. is the investment adviser of the Registrant; it and
certain subsidiaries and affiliates act in the same capacity to other investment
companies, including without limitation those described in Parts A and B hereof
and listed in Item 26(b) below.
(a)(i) The directors and executive officers of OpCap Advisors, their positions
and their other business affiliations and business experience for the past two
years are listed in Item 26(b) below.
(b) There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each officer and
director of OppenheimerFunds, Inc. is, or at any time during the past two fiscal
years has been, engaged for his/her own account or in the capacity of director,
officer, employee, partner or trustee.
Name and Current Position Other Business and Connections
with OppenheimerFunds, Inc. During the Past Two Years
Amy Adamshick,
Vice President Scudder Kemper Investments (July 1998 - May 2000)
Charles E. Albers,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds (since
April 1998); a Chartered Financial Analyst.
Edward Amberger,
Assistant Vice President None.
Janette Aprilante,
Assistant Vice President None.
Victor Babin,
Senior Vice President None.
Bruce L. Bartlett,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
George Batejan,
Executive Vice President/
Chief Information Officer Formerly Senior Vice President (until May 1998).
Kevin Baum,
Assistant Vice President None.
Connie Bechtolt,
Assistant Vice President None.
Kathleen Beichert,
Vice President None.
Rajeev Bhaman,
Vice President None.
Mark Binning
Assistant Vice President None.
Robert J. Bishop,
Vice President Vice President of Mutual Fund
Accounting (since May 1996); an officer of
other Oppenheimer funds.
John R. Blomfield,
Vice President None.
Chad Boll,
Assistant Vice President None
Scott Brooks,
Vice President None.
Jeffrey Burns,
Vice President, Assistant Counsel Stradley, Ronen
Stevens and Young, LLP (February
1998-September 1999).
Bruce Burroughs,
Vice President
Adele Campbell, Assistant Vice President & Assistant Treasurer: Rochester
Division Formerly, Assistant Vice President of Rochester Fund Services, Inc.
Michael A. Carbuto,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of Centennial Asset Management
Corporation.
John Cardillo,
Assistant Vice President None.
Elisa Chrysanthis
Assistant Vice President None.
H.C. Digby Clements,
Vice President: Rochester Division None.
O. Leonard Darling, Vice Chairman, Executive Vice President and Chief Investment
Officer and Director Chairman of the Board and a director (since June 1999) and
Senior Managing Director (since December 1998) of HarbourView Asset Management
Corporation; a director (since March 2000) of OFI Private Investments, Inc.;
Trustee (1993) of Awhtolia College - Greece; formerly Chief Executive Officer of
HarbourView Asset Management Corporation (December 1998 - June 1999).
John Davis
Assistant Vice President EAB Financial (April 1998-February 1999).
Robert A. Densen,
Senior Vice President None.
Ruggero de'Rossi Vice President Formerly, Chief Strategist at ING Barings (July
1998 - March 2000).
Sheri Devereux,
Vice President None.
Max Dietshe
Vice President Deloitte & Touche LLP (1989-1999).
Craig P. Dinsell
Executive Vice President None.
Steven Dombrower
Vice President
John Doney,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Executive Vice President (since September 1993) and
a director (since January 1992) of the Distributor; Executive Vice President,
General Counsel (since September 1995) and a director (since August 1994) of
HarbourView Asset Management Corporation, Shareholder Services, Inc.,
Shareholder Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc.,
of OFI Private Investments, Inc. (since March 2000), and of PIMCO Trust Company
(since May 2000); President and a director of Centennial Asset Management
Corporation (since September 1995) and of Oppenheimer Real Asset Management,
Inc. (since July 1996); Vice President and a director (since September 1997) of
OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc; a
director (since April 2000) of OppenheimerFunds Legacy Program, a charitable
trust program established by the Manager; General Counsel (since May 1996) and
Secretary (since April 1997) of Oppenheimer Acquisition Corp.; an officer of
other Oppenheimer funds.
Bruce Dunbar,
Vice President None.
John Eiler
Vice President None.
Daniel Engstrom,
Assistant Vice President None.
Armond Erpf
Assistant Vice President None.
George Evans,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Edward N. Everett,
Assistant Vice President None.
George Fahey,
Vice President None.
Leslie A. Falconio,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds (since
6/99).
Scott Farrar,
Vice President Assistant Treasurer of Oppenheimer
Millennium Funds plc (since October 1997);
an officer of other Oppenheimer funds.
Katherine P. Feld, Vice President, Senior Counsel and Secretary Vice President
and Secretary of the Distributor; Secretary and Director of Centennial Asset
Management Corporation; Vice President and Secretary of Oppenheimer Real Asset
Management, Inc.; Secretary of HarbourView Asset Management Corporation,
Oppenheimer Partnership Holdings, Inc., Shareholder Financial Services, Inc. and
Shareholder Services, Inc.
Ronald H. Fielding, Senior Vice President; Chairman: Rochester Division An
officer, Director and/or portfolio manager of certain Oppenheimer funds;
presently he holds the following other positions: Director (since 1995) of ICI
Mutual Insurance Company; Governor (since 1994) of St. John's College; Director
(since 1994 - present) of International Museum of Photography at George Eastman
House..
David Foxhoven, Assistant Vice President Formerly Manager, Banking Operations
Department (July 1996 - November 1998).
Colleen Franca,
Assistant Vice President None.
Crystal French
Vice President None.
Dan Gangemi,
Vice President None.
Subrata Ghose Assistant Vice President Formerly, Equity Analyst at Fidelity
Investments (1995 - March 2000).
Charles Gilbert,
Assistant Vice President None.
Alan Gilston,
Vice President None.
Jill Glazerman,
Vice President None.
Paul Goldenberg, Vice President Formerly, President of Advantageware (September
1992 - September 1999).
Mikhail Goldverg
Assistant Vice President None.
Laura Granger, Vice President Formerly, Portfolio Manager at Fortis Advisors
(July 1998-October 2000).
Jeremy Griffiths, Executive Vice President, Chief Financial Officer and Director
Chief Financial Officer, Treasurer and director of Oppenheimer Acquisition
Corp.; Executive Vice President of HarbourView Asset Management Corporation;
President. Chief Executive Officer and director of PIMCO Trust Company; director
of OppenheimerFunds, Legacy Program (charitable trust program); Vice President
of OFI Private Investments, Inc. and a Member and Fellow of the Institute of
Chartered Accountants.
Robert Grill,
Senior Vice President None.
Robert Guy,
Senior Vice President None.
Robert Haley,
Assistant Vice President None.
Kelly Haney,
Assistant Vice President None.
Thomas B. Hayes,
Vice President None.
Dennis Hess,
Assistant Vice President None.
Dorothy Hirshman,
Assistant Vice President None
Merryl Hoffman,
Vice President and
Senior Counsel None
Merrell Hora,
Assistant Vice President None.
Scott T. Huebl,
Vice President None.
Margaret Hui
Assistant Vice President Formerly Vice President -
Syndications of Sanwa Bank California
(January 1998 - September 1999).
James Hyland,
Assistant Vice President Formerly Manager of Customer
Research for Prudential Investments
(February 1998 - July 1999).
David Hyun,
Vice President Formerly portfolio manager,
technology analyst and research associate at
Fred Alger Management, Inc. (August 1993 -
June 2000).
Steve Ilnitzki, Senior Vice President Formerly Vice President of Product
Management at Ameritrade (until March 2000).
Kathleen T. Ives,
Vice President None.
William Jaume, Vice President Senior Vice President (since April 2000) of
HarbourView Asset Management Corporation.
Frank Jennings,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Andrew Jordan,
Assistant Vice President None.
Deborah Kaback, Vice President and Senior Counsel Senior Vice President and
Deputy General Counsel of Oppenheimer Capital (April 1989-November 1999).
Lewis Kamman Vice President Senior Consultant for Bell Atlantic Network
Integration, Inc. (June 1997-December 1998).
Jennifer Kane
Assistant Vice President None.
Lynn Oberist Keeshan
Senior Vice President Formerly (until March 1999)
Vice President, Business Development and
Treasury at Liz Claiborne, Inc.
Thomas W. Keffer,
Senior Vice President None.
Erica Klein,
Assistant Vice President None.
Walter Konops,
Assistant Vice President None.
Avram Kornberg,
Senior Vice President None.
Jimmy Kourkoulakos,
Assistant Vice President. None.
John Kowalik,
Senior Vice President An officer and/or portfolio
manager for certain OppenheimerFunds.
Joseph Krist,
Assistant Vice President None.
Christopher Leavy
Senior Vice President Vice President and Portfolio
Manager at Morgan Stanley Investment
Management (1997-September 2000) and an
Analyst and Portfolio Manager at Crestar
Asset Management (1995-1997).
Michael Levine,
Vice President None.
Shanquan Li,
Vice President None.
Mitchell J. Lindauer,
Vice President and Assistant
General Counsel None.
Malissa Lischin Assistant Vice President Formerly Associate Manager, Investment
Management Analyst at Prudential (1996 - March 2000).
David Mabry,
Vice President None.
Bridget Macaskill, Chairman, Chief Executive Officer and Director President,
Chief Executive Officer and a director (since March 2000) of OFI Private
Investments, Inc., an investment adviser subsidiary of the Manager; Chairman and
a director of Shareholder Services, Inc. (since August 1994) and Shareholder
Financial Services, Inc. (since September 1995), transfer agent subsidiaries of
the Manager; President (since September 1995) and a director (since October
1990) of Oppenheimer Acquisition Corp., the Manager's parent holding company;
President (since September 1995) and a director (since November 1989) of
Oppenheimer Partnership Holdings, Inc., a holding company subsidiary of the
Manager; President and a director (since October 1997) of OppenheimerFunds
International Ltd., an offshore fund management subsidiary of the Manager and of
Oppenheimer Millennium Funds plc; a director of HarbourView Asset Management
Corporation (since July 1991) and of Oppenheimer Real Asset Management, Inc.
(since July 1996), investment adviser subsidiaries of the Manager; a director
(since April 2000) of OppenheimerFunds Legacy Program, a charitable trust
program established by the Manager; a director of Prudential Corporation plc (a
U.K. financial service company); President and a trustee of other Oppenheimer
funds; formerly President of the Manager (June 1991 - August 2000).
Steve Macchia,
Vice President None.
Marianne Manzolillo,
Assistant Vice President Formerly, Vice President for
DLJ High Yield Research Department (February
1993 - July 2000).
Luann Mascia,
Vice President None.
Philip T. Masterson,
Vice President None.
Loretta McCarthy,
Executive Vice President None.
Lisa Migan,
Assistant Vice President None.
Andrew J. Mika
Senior Vice President Formerly a Second Vice
President for Guardian Investments (June
1990 - October 1999).
Joy Milan
Assistant Vice President None.
Denis R. Molleur,
Vice President and
Senior Counsel None.
Nikolaos Monoyios,
Vice President A Vice President and/or portfolio
manager of certain Oppenheimer funds.
John Murphy,
President, Chief Operating
Officer and Director President of MassMutual
Institutional Funds and the MML Series Funds
until September 2000.
Kenneth Nadler,
Vice President None.
David Negri,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Ray Olson,
Assistant Vice President None.
Gina M. Palmieri,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds (since
June 1999).
Frank Pavlak, Vice President Formerly. Branch Chief of Investment Company
Examinations at U.S. Securities and Exchange Commission (January 1981 - December
1998).
James Phillips
Assistant Vice President None.
David Pellegrino
Vice President None.
Jane Putnam,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Michael Quinn,
Assistant Vice President None.
Heather Rabinowitz,
Assistant Vice President None.
Julie Radtke,
Vice President None.
Thomas Reedy,
Vice President Vice President (since April 1999)
of HarbourView Asset Management Corporation;
an officer and/or portfolio manager of
certain Oppenheimer funds.
John Reinhardt,
Vice President: Rochester Division None
David Robertson,
Senior Vice President Formerly, Director of Sales
and Marketing for Schroder Investment
Management of North America (March 1998 -
March 2000).
Jeffrey Rosen,
Vice President None.
Marci Rossell, Vice President and Corporate Economist Economist with Federal
Reserve Bank of Dallas (April 1996 - March 1999).
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Lawrence Rudnick,
Assistant Vice President None.
James Ruff,
Executive Vice President President and director of the
Distributor; Vice President (since March
2000) of OFI Private Investments, Inc.
Andrew Ruotolo Executive Vice President President and director of Shareholder
Services, Inc.; formerly Chief Operations Officer for American International
Group (August 1997-September 1999).
Rohit Sah,
Assistant Vice President None.
Valerie Sanders,
Vice President None.
Kenneth Schlupp Assistant Vice President Assistant Vice President (since March
2000) of OFI Private Investments, Inc.
Jeff Schneider, Vice President Formerly (until May 1999) Director, Personal
Decisions International.
Ellen Schoenfeld,
Vice President None.
Brooke Schulte,
Assistant Vice President None.
Allan Sedmak
Assistant Vice President None.
Jennifer Sexton,
Vice President None.
Martha Shapiro,
Assistant Vice President None.
Connie Song,
Assistant Vice President None.
Richard Soper,
Vice President None.
Keith Spencer,
Vice President None.
Cathleen Stahl, Vice President Assistant Vice President & Manager of Women &
Investing Program
Richard A. Stein, Vice President: Rochester Division Assistant Vice President
(since 1995) of Rochester Capitol Advisors, L.P.
Arthur Steinmetz,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Jayne Stevlingson,
Vice President None.
Gregg Stitt,
Assistant Vice President None.
John Stoma,
Senior Vice President None.
Deborah Sullivan, Assistant Vice President, Assistant Counsel Formerly,
Associate General Counsel, Chief Compliance Officer, Corporate Secretary and
Vice President of Winmill & Co. Inc. (formerly Bull & Bear Group, Inc.), CEF
Advisers, Inc. (formerly Bull & Bear Advisers, Inc.), Investor Service Center,
Inc. and Midas Management Corporation (November 1997 - March 2000).
Kevin Surrett, Assistant Vice President Assistant Vice President of Product
Development At Evergreen Investor Services, Inc. (June 1995 - May 1999).
Michael Sussman,
Assistant Vice President None.
James C. Swain,
Vice Chairman of the Board Chairman, CEO and
Trustee, Director or Managing Partner of the
Denver-based Oppenheimer Funds; formerly,
President and Director of Centennial Asset
Management Corporation and Chairman of the
Board of Shareholder Services, Inc.
Susan Switzer,
Assistant Vice President None.
Anthony A. Tanner,
Vice President: Rochester Division None.
James Taylor,
Assistant Vice President None.
Paul Temple, Vice President Formerly (until May 2000) Director of Product
Development at Prudential.
Angela Uttaro,
Assistant Vice President None.
Mark Vandehey,
Vice President None.
Maureen VanNorstrand,
Assistant Vice President None.
Annette Von Brandis,
Assistant Vice President None.
Phillip Vottiero, Vice President Chief Financial officer for the Sovlink Group
(April 1996 - June 1999).
Sloan Walker
Vice President
Teresa Ward,
Vice President None.
Jerry Webman, Senior Vice President Senior Investment Officer, Director of Fixed
Income.
Barry Weiss,
Assistant Vice President Fitch IBCA (1996 - January 2000)
Christine Wells,
Vice President None.
Joseph Welsh,
Assistant Vice President None.
Catherine White,
Assistant Vice President Formerly, Assistant Vice
President with Gruntal & Co. LLC (September
1998 - October 2000); member of the American
Society of Pension Actuaries (ASPA) since
1995.
William L. Wilby,
Senior Vice President Senior Investment Officer,
Director of International Equities; Senior
Vice President of HarbourView Asset
Management Corporation.
Donna Winn, Senior Vice President Vice President (since March 2000) of OFI
Private Investments, Inc.
Philip Witkower, Senior Vice President Formerly Vice President of Prudential
Investments (1993 - November 2000)
Brian W. Wixted, Senior Vice President and Treasurer Treasurer (since March
1999) of HarbourView Asset Management Corporation, Shareholder Services, Inc.,
Oppenheimer Real Asset Management Corporation, Shareholder Financial Services,
Inc. and Oppenheimer Partnership Holdings, Inc., of OFI Private Investments,
Inc. (since March 2000) and of OppenheimerFunds International Ltd. and
Oppenheimer Millennium Funds plc (since May 2000); Treasurer and Chief Financial
Officer (since May 2000) of PIMCO Trust Company; Assistant Treasurer (since
March 1999) of Oppenheimer Acquisition Corp. and of Centennial Asset Management
Corporation; an officer of other Oppenheimer funds; formerly Principal and Chief
Operating Officer, Bankers Trust Company - Mutual Fund Services Division (March
1995 - March 1999).
Carol Wolf, Senior Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; serves on the Board of Chinese Children Adoption
International Parents Council, Supporters of Children, and the Advisory Board of
Denver Children's Hospital Oncology Department.
Kurt Wolfgruber SeniorVice President Senior Investment Officer, Director of
Domestic Equities; member of the Investment Product Review Committee and the
Executive Committee of HarbourView Asset Management Corporation; formerly (until
April 2000) a Managing Director and Portfolio Manager at J.P. Morgan Investment
Management, Inc.
Caleb Wong, Vice President An officer and/or portfolio manager of certain
Oppenheimer funds (since June 1999) .
Robert G. Zack, Senior Vice President and Assistant Secretary, Associate General
Counsel Assistant Secretary of Shareholder Services, Inc. (since May 1985),
Shareholder Financial Services, Inc. (since November 1989), OppenheimerFunds
International Ltd. and Oppenheimer Millennium Funds plc (since October 1997); an
officer of other Oppenheimer funds.
Jill Zachman,
Assistant Vice President:
Rochester Division None.
Neal Zamore, Vice President Director e-Commerce; formerly (until May 2000) Vice
President at GE Capital.
Mark Zavanelli,
Assistant Vice President None.
Arthur J. Zimmer,
Senior Vice President Senior Vice President (since
April 1999) of HarbourView Asset Management
Corporation; Vice President of Centennial
Asset Management Corporation; an officer
and/or portfolio manager of certain
Oppenheimer funds.
Susan Zimmerman,
Vice President None.
The Oppenheimer Funds include the New York-based Oppenheimer Funds, the
Denver-based Oppenheimer Funds and the Oppenheimer Quest /Rochester Funds, as
set forth below:
New York-based Oppenheimer Funds
Oppenheimer California Municipal Fund Oppenheimer Capital Appreciation Fund
Oppenheimer Capital Preservation Fund Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund Oppenheimer Emerging Growth Fund Oppenheimer Emerging
Technologies Fund Oppenheimer Enterprise Fund Oppenheimer Europe Fund
Oppenheimer Global Fund Oppenheimer Global Growth & Income Fund Oppenheimer Gold
& Special Minerals Fund Oppenheimer Growth Fund Oppenheimer International Growth
Fund Oppenheimer International Small Company Fund Oppenheimer Large Cap Growth
Fund Oppenheimer Money Market Fund, Inc. Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund Oppenheimer New York Municipal Fund Oppenheimer
Series Fund, Inc. Oppenheimer Trinity Core Fund Oppenheimer Trinity Growth Fund
Oppenheimer Trinity Value Fund Oppenheimer U.S. Government Trust Oppenheimer
World Bond Fund
Quest/Rochester Funds
Limited Term New York Municipal Fund
Oppenheimer Convertible Securities Fund
Oppenheimer MidCap Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals
Denver-based Oppenheimer Funds
------------------------------
Centennial America Fund, L.P. Centennial California Tax Exempt Trust Centennial
Government Trust Centennial Money Market Trust Centennial New York Tax Exempt
Trust Centennial Tax Exempt Trust Oppenheimer Cash Reserves Oppenheimer Champion
Income Fund Oppenheimer Capital Income Fund Oppenheimer High Yield Fund
Oppenheimer Integrity Funds Oppenheimer International Bond Fund Oppenheimer
Limited-Term Government Fund Oppenheimer Main Street Opportunity Fund
Oppenheimer Main Street Small Cap Fund Oppenheimer Main Street Funds, Inc.
Oppenheimer Municipal Fund Oppenheimer Real Asset Fund Oppenheimer Senior
Floating Rate Fund Oppenheimer Strategic Income Fund Oppenheimer Total Return
Fund, Inc. Oppenheimer Variable Account Funds Panorama Series Fund, Inc.
The address of OppenheimerFunds, Inc., the New York-based Oppenheimer Funds, the
Quest Funds, OppenheimerFunds Distributor, Inc., HarbourView Asset Management
Corp., Oppenheimer Partnership Holdings, Inc., and Oppenheimer Acquisition Corp.
is Two World Trade Center, New York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder Financial
Services, Inc., Shareholder Services, Inc., OppenheimerFunds Services,
Centennial Asset Management Corporation, Centennial Capital Corp., and
Oppenheimer Real Asset Management, Inc. is 6803 South Tucson Way, Englewood,
Colorado 80112.
The address of the Rochester-based funds is 350 Linden Oaks, Rochester, New York
14625-2807.
Name & Current Position Other Business and Connections
with OpCap Advisors During the Past Two Years
Mark Degenhart,
Vice President and Portfolio Manager
Linda S. Ferrante, Portfolio Manager Managing Director of Oppenheimer Capital.
John Giusio,
Vice President and Portfolio Manager Vice President of Oppenheimer Capital.
Richard J. Glasebrook, II,
Vice President and Portfolio Manager Managing Director of Oppenheimer Capital.
Colin Glinsman,
Vice President and Portfolio Manager Managing Director of Oppenheimer Capital.
Louis Goldstein, Vice President and Portfolio Manager Senior Vice President of
Oppenheimer Capital.
Matthew Greenwald, Portfolio Manager Senior Vice President of Oppenheimer
Capital.
Alan Gutmann, Vice President and Portfolio Manager Senior Vice President of
Oppenheimer Capital.
Benjamin Gutstein, Vice President and Portfolio Manager Assistant Vice President
of Oppenheimer Capital.
Vikki Y. Hanges, Vice President and Portfolio Manager Senior Vice President of
Oppenheimer Capital.
Francis A. LeCates, Jr., Director of Research Managing Director of Oppenheimer
Capital.
Elisa A. Mazen, Vice President and Portfolio Manager Senior Vice President of
Oppenheimer Capital International Division.
Timothy McCormack, Vice President
and Portfolio Manager Senior Vice President of Oppenheimer Capital; formerly
Assistant Vice President of Oppenheimer Capital.
Susan Murphy,
President of an affiliate President of OCC Cash
Management Services Division and Oppenheimer
Capital Trust Company; Managing Director of
Oppenheimer Capital.
Eric Retzlaff,
Senior Vice President Senior Vice President of Oppenheimer Capital.
Anthony Orlando,
Treasurer and Chief Financial
Officer
Frank Poli, Secretary Chief Legal Officer of PIMCO Advisors, L.P.; Secretary of
Oppenheimer Capital
Kenneth M. Poovey, Chief Executive Officer Chief Executive Officer of
Oppenheimer Capital; Chief Operating Officer of PIMCO Advisors, L.P.
Elliot Weiss,
Vice President Vice President of Oppenheimer Capital.
The address of OpCap Advisors is 1345 Avenue of the Americas, 49th Floor, New
York, New York 10105-4800.
For information as to the business, profession, vocation or employment of a
substantial nature of the officers of OpCap Advisors and Oppenheimer Capital,
reference is made to their respective Forms ADV filed under the Investment
Advisers Act of 1940, which are incorporated herein by reference.
Item 27. Principal Underwriter
(a) OppenheimerFunds Distributor, Inc. is the Distributor of the Registrant's
shares. It is also the Distributor of each of the other registered open-end
investment companies for which OppenheimerFunds, Inc. is the investment adviser,
as described in Part A and B of this Registration Statement and listed in Item
26(b) above (except Oppenheimer Multi-Sector Income Trust and Panorama Series
Fund, Inc.) and for MassMutual Institutional Funds.
(b) The directors and officers of the Registrant's principal underwriter are:
Name & Principal Positions & Offices Positions & Offices
Business Address with Underwriter with Registrant
Jason Bach Vice President None
31 Raquel Drive
Marietta, GA 30064
William Beardsley (2) Vice President None
Peter Beebe Vice President None
876 Foxdale Avenue
Winnetka, IL 60093
Douglas S. Blankenship Vice President None
17011 Woodbank
Spring, TX 77379
Kevin Brosmith Senior Vice President None.
856 West Fullerton
Chicago, IL 60614
Susan Burton(2) Vice President None
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
William Coughlin Vice President None
1730 N. Clark Street
#3203
Chicago, IL 60614
Jeff Damia(2) Vice President None
Stephen Demetrovits(2) Vice President None
Christopher DeSimone Vice President None
5105 Aldrich Avenue South
Minneapolis, MN 55419
Michael Dickson Vice President None
21 Trinity Avenue
Glastonburg, CT 06033
Joseph DiMauro Vice President None
244 McKinley Avenue
Grosse Pointe Farms, MI 48236
Steven Dombrowser Vice President None
Andrew John Donohue(2) Executive Vice Secretary
President and Director
G. Patrick Dougherty (2) Vice President None
Cliff Dunteman Vice President None
940 Wedgewood Drive
Crystal Lake, IL 60014
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
35 Crown Terrace
Yardley, PA 19067
George Fahey Vice President None
9 Townview Ct.
Flemington, NJ 08822
Eric Fallon Vice President None
10 Worth Circle
Newton, MA 02158
Katherine P. Feld(2) Vice President and None
Corporate Secretary
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding(3) Vice President None
Brian Flahive Assistant Vice President None
John ("J") Fortuna(2) Vice President None
Ronald R. Foster Senior Vice President None
11339 Avant Lane
Cincinnati, OH 45249
Victoria Friece(1) Assistant Vice President None
Luiggino Galleto Vice President None
10302 Riesling Court
Charlotte, NC 28277
Michelle Gans Vice President None
18771 The Pines
Eden Prairie, MN 55347
L. Daniel Garrity Vice President None
27 Covington Road
Avondale Estates, GA 30002
Lucio Giliberti Vice President None
6 Cyndi Court
Flemington, NJ 08822
Ralph Grant(2) Senior Vice President/ None
National Sales Manager
Michael Guman Vice President None
3913 Pleasent Avenue
Allentown, PA 18103
Tonya Hammet Assistant Vice President None
Webb Heidinger Vice President None
90 Gates Street
Portsmouth, NH 03801
Phillip Hemery Vice President None
184 Park Avenue
Rochester, NY 14607
Edward Hrybenko (2) Vice President None
Brian Husch(2) Vice President None
Richard L. Hymes(2) Assistant Vice President None
Byron Ingram(1) Assistant Vice President None
Kathleen T. Ives(1) Vice President None
Eric K. Johnson Vice President None
28 Oxford Avenue
Mill Valley, CA 94941
Mark D. Johnson Vice President None
409 Sundowner Ridge Court
Wildwood, MO 63011
Elyse Jurman Vice President None
1194 Hillsboro Mile, #51
Hillsboro Beach, FL 33062
John Kavanaugh Vice President None
2 Cervantes Blvd., Apt. #301
San Francisco, CA 94123
Brian G. Kelly Vice President None
60 Larkspur Road
Fairfield, CT 06430
Michael Keogh(2) Vice President None
Lisa Klassen(1) Assistant Vice President None
Richard Klein Senior Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Brent Krantz Vice President None
2609 SW 149th Place
Seattle, WA 98166
Oren Lane Vice President None
5286 Timber Bend Drive
Brighton, MI 48116
Dawn Lind Vice President None
21 Meadow Lane
Rockville Centre, NY 11570
James Loehle Vice President None
30 Wesley Hill Lane
Warwick, NY 10990
John Lynch (2) Vice President None
Michael Magee(2) Vice President None
Steve Manns Vice President None
1941 W. Wolfram Street
Chicago, IL 60657
Todd Marion Vice President None
3 St. Marks Place
Cold Spring Harbor, NY 11724
LuAnn Mascia(2) Assistant Vice President None
Theresa-Marie Maynier Vice President None
2421 Charlotte Drive
Charlotte, NC 28203
Anthony Mazzariello Vice President None
704 Beaver Road
Leetsdale, PA 15056
John McDonough Vice President None
3812 Leland Street
Chevy Chase, MD 20815
Kent McGowan Vice President None
18424 12th Avenue West
Lynnwood, WA 98037
Laura Mulhall(2) Senior Vice President None
Charles Murray Vice President None
18 Spring Lake Drive
Far Hills, NJ 07931
Wendy Murray Vice President None
32 Carolin Road
Upper Montclair, NJ 07043
Denise-Marie Nakamura Vice President None
4111 Colony Plaza
Newport Beach, CA 92660
John Nesnay Vice President None
9511 S. Hackberry Street
Highlands Ranch, CO 80126
Kevin Neznek(2) Vice President None
Chad V. Noel Vice President None
2408 Eagleridge Drive
Henderson, NV 89014
Raymond Olson(1) Assistant Vice President None
& Treasurer
Alan Panzer Assistant Vice President None
925 Canterbury Road, Apt. #848
Atlanta, GA 30324
Kevin Parchinski Vice President None
8409 West 116th Terrace
Overland Park, KS 66210
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Brian Perkes Vice President None
8734 Shady Shore Drive
Frisco, TX 75034
Charles K. Pettit Vice President None
22 Fall Meadow Drive
Pittsford, NY 14534
Bill Presutti(2) Vice President None
Steve Puckett Vice President None
5297 Soledad Mountain Road
San Diego, CA 92109
Elaine Puleo(2) Senior Vice President None
Christopher Quinson Vice President None
Minnie Ra Vice President None
100 Dolores Street, #203
Carmel, CA 93923
Dustin Raring Vice President None
184 South Ulster
Denver, CO 80220
Michael Raso Vice President None
16 N. Chatsworth Ave.
Apt. 301
Larchmont, NY 10538
Douglas Rentschler Vice President None
677 Middlesex Road
Grosse Pointe Park, MI 48230
Michelle Simone Richter(2) Assistant Vice President None
Ruxandra Risko(2) Vice President None
David Robertson(2) Senior Vice President, None
Director of Variable
Accounts
Kenneth Rosenson Vice President None
26966 W. Malibu
Cove Colony Drive
Malibu, CA 90265
James Ruff(2) President & Director None
William Rylander (2) Vice President None
Alfredo Scalzo Vice President None
9616 Lale Chase Island Way
Tampa, FL 33626
Michael Sciortino Vice President None
785 Beau Chene Drive
Mandeville, LA 70471
Eric Sharp Vice President None
862 McNeill Circle
Woodland, CA 95695
Kristen Sims (2) Vice President None
Douglas Smith Vice President None
808 South 194th Street
Seattle,WA 98148
David Sturgis Vice President None
81 Surrey Lane
Boxford, MA 01921
Brian Summe Vice President None
239 N. Colony Drive
Edgewood, KY 41017
Michael Sussman(2) Vice President None
Andrew Sweeny Vice President None
5967 Bayberry Drive
Cincinnati, OH 45242
George Sweeney Senior Vice President None
5 Smokehouse Lane
Hummelstown, PA 17036
Scott McGregor Tatum Vice President None
704 Inwood
Southlake, TX 76092
Martin Telles(2) Senior Vice President None
David G. Thomas Vice President None
2200 North Wilson Blvd.
Suite 102-176
Arlington, VA 22201
Tanya Valency (2) Assistant Vice President None
Mark Vandehey(1) Vice President None
Brian Villec (2) Vice President None
Andrea Walsh(1) Vice President None
Suzanne Walters(1) Assistant Vice President None
Michael Weigner Vice President None
5722 Harborside Drive
Tampa, FL 33615
Donn Weise Vice President None
3249 Earlmar Drive
Los Angeles, CA 90064
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
Philip Witkower Senior Vice President None
Cary Wozniak Vice President None
18808 Bravata Court
San Diego, CA 92128
Gregor Yuska(2) Vice President None
(1)6803 South Tucson Way, Englewood, CO 80112
(2)Two World Trade Center, New York, NY 10048
(3)350 Linden Oaks, Rochester, NY 14623
(c) Not applicable.
Item 28. Location of Accounts and Records
The accounts, books and other documents required to be maintained by Registrant
pursuant to Section 31(a) of the Investment Company Act of 1940 and rules
promulgated thereunder are in the possession of OppenheimerFunds, Inc. at its
offices at 6803 South Tucson Way, Englewood, Colorado 80112.
Item 29. Management Services
Not applicable
Item 30. Undertakings
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York and State of New York on the 1st day of December, 2000.
OPPENHEIMER QUEST FOR VALUE FUNDS
By: /s/ Bridget A. Macaskill*
Bridget A. Macaskill, Chairman of the Board and President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities on
the dates indicated:
Signatures Title Date
/s/ Bridget A Macaskill* Chairman of the Board, December 1, 2000
---------------------------- President (Chief Executive
Bridget A. Macaskill Officer) and Trustee
/s/ Brian W. Wixted* Treasurer (and Chief
----------------------------Financial and Accounting December 1, 2000
Brian W. Wixted Officer)
/s/ Paul Y. Clinton* Trustee December 1, 2000
-------------------------------------
Paul Y. Clinton
/s/ Thomas W. Courtney* Trustee December 1, 2000
-------------------------------------
Thomas W. Courtney
/s/ Robert G. Galli*
-----------------------------Trustee December 1, 2000
Robert G. Galli
/s/ Lacy B. Herrmann* Trustee December 1, 2000
-------------------------------------
Lacy B. Herrmann
/s/ George Loft* Trustee December 1, 2000
-------------------------------------
George Loft
*By /s/ Robert G. Zack
----------------------------------- December 1, 2000
Robert G. Zack, Attorney-in-fact
<PAGE>
OPPENHEIMER QUEST FOR VALUE FUNDS
EXHIBIT INDEX
Exhibit No. Description
23 (c) (xii) Specimen Class N Share Certificate for Quest Balanced Value Fund
23 (c) (xiii)Specimen Class N Share Certificate for Quest Small Cap Fund
23 (c) (xiv) Specimen Class N Share Certificate for Quest Opportunity Value Fund
partc_00b
